FTC wades into Medtronic bipolar energy case

Commission says that medical device maker’s arguments have broad implications for antitrust enforcement | Dispute concerns alleged exclusive-dealing and bundling arrangements.

The US Federal Trade Commission (FTC) has filed a friend-of-the-court (amicus) brief in a case that  relates to medical device manufacturer Medtronic Inc.’s motion to dismiss antitrust claims filed by another medical device company, Applied Medical Resources

The Commission issued the brief at the US District Court for the Central District of California this week, seeking to clarify legal standards that apply in antitrust cases involving exclusive-dealing and bundling arrangements.

In its brief, the FTC urges the district court to reject Medtronic’s “incorrect legal points and erroneous assertions”, but adds that it takes no position on whether Applied Medical’s allegations are accurate or state a claim on which relief may be granted.

Background

Applied Medical has accused Medtronic of illegally blocking competition in the market for advanced bipolar energy devices, a type of surgical equipment used in hospitals.

Medtronic is accused of creating exclusive-dealing arrangements with group purchasing organisations (GPOs), through which hospitals buy surgical equipment and other products.

These arrangements have allegedly made Medtronic the sole supplier of advanced bipolar devices for GPOs. Medtronic is also accused of entering anticompetitive bundling agreements that provide favourable terms on other surgical devices supplied by Medtronic to hospitals that also buy Medtronic’s advanced bipolar energy devices. Applied Medical has alleged that both arrangements are anticompetitive.

Flawed arguments

As detailed in the FTC’s amicus brief, Medtronic has allegedly made several flawed arguments that would apply the wrong legal standards when assessing whether Medtronic’s exclusive-dealing and bundling arrangements are unlawful.

Specifically, the FTC argues that contrary to Medtronic’s arguments, the core issue in assessing an exclusive dealing arrangement under Supreme Court precedent is the arrangement’s “practical effect” on competition.

Mere labels should not control the assessment of potentially anticompetitive bundling, argued the FTC.

As the brief explains, antitrust plaintiffs who challenge bundled “discounts” are not typically complaining that a defendant’s prices are too low. A defendant’s “discount” may be a self-serving description that enables no consumer to receive a lower price, said the FTC.

The Commission has urged the district court to reject Medtronic’s arguments, arguing they have broad implications for antitrust enforcement in the health care sector and beyond.

The Commission vote approving the filing of the amicus brief was 3-0.

Did you enjoy reading this story?  Sign up to our free daily newsletters and get stories sent like this straight to your inbox