Stryker to divest all assets related to its total ankle replacements and finger joint implant products to resolve agency concerns over its proposed $4 billion acquisition of Wright Medical Group. Commissioner Chopra expresses concerns over monitor independence.
In order to resolve FTC competition concerns over its proposed $4 billion acquisition of Wright Medical Group N.V., Stryker Corp. has agreed to divest all assets related to its total ankle replacements and finger joint implant products. In a complaint issued today, the FTC alleged that the combination of the medical device companies would likely have harmed competition in the U.S. markets for total ankle replacements and finger joint arthroplasty implants. According to the FTC, without the divestitures, a combined Stryker-Wright would have been able to unilaterally exercise market power; (2) research and development would have been reduced; and (3) customers would have faced higher prices (In the Matter of Stryker Corp., FTC Dkt. C-4728, File No. 201 0014).
The FTC explains that Wright and Stryker are the first and third-largest suppliers in the United States, respectively, of total ankle replacements, while Integra LifeSciences is the second-largest supplier. Integra is the leading U.S. supplier of finger joint implants, while Stryker and Wright are the second and third-largest suppliers, respectively. Total ankle replacements are used to treat end-stage ankle arthritis, and finger joint implants are used to treat advanced osteoarthritis.
Settlement terms. Under the terms of the proposed FTC consent order, parties are required to divest to DJO Global, Inc. all of the rights and assets needed for it to become an independent, viable, and effective competitor in the U.S. markets for total ankle replacements and finger joint implants. DJO is well positioned to restore the competition that otherwise would be lost through the proposed acquisition, according to the agency. The settlement called for the appointment of a monitor to ensure compliance with its terms.
Commissioner Chopra’s concerns with monitors. The vote to issue the complaint and accept the proposed consent order for public comment was unanimous. However, Commissioner Rohit Chopra issued a statement, expressing "concerns regarding the lack of adequate protections against independent monitor conflicts of interest in FTC orders." He questioned the Commission’s practice of having the party alleged to have engaged in a law violation propose a monitor. Chopra suggested that having a monitor, such as an employee of global advisory business Mazars, LLC in this case, self-report conflicts of interest, may not be adequate. He pointed to the fact that the monitor was "employed by a large firm that offers a wide array of consulting and compliance-related services to companies like the targets in this matter."
Attorneys: Jonathan W. Ripa for the FTC. Clifford H. Aronson (Skadden, Arps, Slate, Meagher & Flom LLP) for Stryker Corp., Michael S. McFalls (Ropes & Gray LLP) for Wright Medical Group N.V.
Companies: Stryker Corp.; Wright Medical Group N.V.; DJO Global, Inc.; Integra LifeSciences; Mazars LLC
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