[Federal Register Volume 85, Number 217 (Monday, November 9, 2020)]
[Notices]
[Pages 71340-71343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24813]


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FEDERAL TRADE COMMISSION

[File No. 201-0014]


Stryker and Wright Medical; Analysis of Consent Orders To Aid 
Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis to Aid Public Comment describes both the 
allegations in the complaint and the terms of the consent order--
embodied in the consent agreement--that would settle these allegations.

DATES: Comments must be received on or before December 9, 2020.

ADDRESSES: Interested parties may file comments online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write: ``Stryker and Wright 
Medical; File No. 201 0014'' on your comment, and file your comment 
online at https://www.regulations.gov by following the instructions on 
the web-based form. If you prefer to file your comment on paper, please 
mail your

[[Page 71341]]

comment to the following address: Federal Trade Commission, Office of 
the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), 
Washington, DC 20580; or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024.

FOR FURTHER INFORMATION CONTACT: Jonathan Ripa (202-326-2230), Bureau 
of Competition, Federal Trade Commission, 600 Pennsylvania Avenue NW, 
Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis of Agreement Containing Consent Orders to Aid Public 
Comment describes the terms of the consent agreement and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC website at 
this web address: https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before December 9, 
2020. Write ``Stryker and Wright Medical; File No. 201 0014'' on your 
comment. Your comment--including your name and your state--will be 
placed on the public record of this proceeding, including, to the 
extent practicable, on the https://www.regulations.gov website.
    Due to the public health emergency in response to the COVID-19 
outbreak and the agency's heightened security screening, postal mail 
addressed to the Commission will be subject to delay. We strongly 
encourage you to submit your comments online through the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``Stryker and 
Wright Medical; File No. 201 0014'' on your comment and on the 
envelope, and mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex D), Washington, DC 20580; or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure that your comment does not include any sensitive or 
confidential information. In particular, your comment should not 
include sensitive personal information, such as your or anyone else's 
Social Security number; date of birth; driver's license number or other 
state identification number, or foreign country equivalent; passport 
number; financial account number; or credit or debit card number. You 
are also solely responsible for making sure your comment does not 
include sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 
16 CFR 4.10(a)(2)--including in particular competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on https://www.regulations.gov--as legally required by FTC 
Rule 4.9(b)--we cannot redact or remove your comment from that website, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC website at http://www.ftc.gov to read this Notice and 
the news release describing this matter. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding, as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before December 9, 2020. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Stryker Corporation (``Stryker'') designed to remedy 
the anticompetitive effects resulting from Stryker's proposed 
acquisition of Wright Medical Group N.V. (``Wright''). The proposed 
Decision and Order (``Order'') contained in the Consent Agreement 
requires Stryker to divest all rights and assets related to its total 
ankle replacement and finger joint implant businesses to DJO Global, 
Inc. (``DJO'').
    The proposed Consent Agreement has been placed on the public record 
for thirty days for receipt of comments from interested persons. 
Comments received during this period will become part of the public 
record. After thirty days, the Commission will review the comments 
received and decide whether it should withdraw, modify, or make the 
Consent Agreement final.
    Under the terms of the Purchase Agreement dated November 4, 2019, 
Stryker will acquire all of the outstanding shares of Wright for a 
total equity value of approximately $4 billion (``the Acquisition''). 
The Commission's Complaint alleges that the proposed Acquisition, if 
consummated, would violate Section 7 of the Clayton Act, as amended, 15 
U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. 45, by substantially lessening competition in the 
U.S. markets for total ankle replacements and finger joint implants. 
The proposed Consent Agreement would remedy the alleged violations by 
preserving the competition that otherwise would be lost in these 
markets as a result of the proposed Acquisition.

II. The Parties

    Stryker is a global medical device company based in Kalamazoo, 
Michigan. Stryker organizes its business operations into three 
segments: Orthopedics; medical and surgical; and neurotechnology and 
spine.
    Headquartered in Amsterdam, the Netherlands, Wright is a global 
medical device company focused on extremities

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and biologics products. Wright divides its business into four 
categories: Upper extremities; lower extremities; biologics products; 
and sports medicine.

III. The Relevant Products and Market Structures

a. Total Ankle Replacements

    Total ankle replacements are used to treat end-stage ankle 
arthritis, in which the cartilage on the tibia (shin), talus (top of 
the foot), and fibula (calf) bones that form the ankle joint has worn 
away to create bone-on-bone grinding. Patients with end-stage ankle 
arthritis--typically aged fifty and older--experience severe pain and 
swelling of the ankle along with difficulty walking. Total ankle 
replacements reduce pain while maintaining, and even increasing, ankle 
motion. In a total ankle replacement procedure, a surgeon removes 
damaged portions of bone and cartilage and replaces it with a three-
piece system. A metal tibial tray, a metal talar dome, and a plastic 
insert (polyethylene bearing) mimic the cartilage in the joint. In a 
fixed bearing total ankle replacement, the polyethylene bearing is 
locked to the tibial component, while in a mobile bearing system it 
moves independently. Physicians and their patients would not switch to 
an alternative product or therapy in response to a small but 
significant increase in the price of total ankle replacements.
    Wright and Stryker are the first and third-largest suppliers in the 
United States, respectively, of total ankle replacements, while Integra 
LifeSciences (``Integra'') is the second-largest supplier. Exactech, 
Inc. and Zimmer Biomet also supply total ankle replacement products but 
have only small shares of the U.S. ankle replacement market. Together, 
Stryker and Wright would account for approximately 75 percent of the 
market.

b. Finger Joint Implants

    Finger joint implants are used to treat advanced osteoarthritis and 
are implanted into a patient's proximal interphalangeal joints or 
metacarpophalangeal joints through a surgical procedure to replace 
damaged bone and cartilage. Arthritis is a gradual, progressive 
condition typically treated in stages. Physicians seek to use the least 
invasive treatment option possible to meet each patient's needs, using 
finger joint implants only when all other options have failed. 
Physicians and their patients would not switch to an alternative 
product or therapy in response to a small but significant increase in 
the price of finger joint implants.
    Stryker and Wright are two of only three significant suppliers for 
finger joint implants in the United States. Integra is the leading 
supplier while Stryker and Wright are the second and third-largest 
suppliers, respectively. BioPro Implants (``BioPro'') is the only other 
supplier of finger joint implants in the United States but has a very 
small share of the U.S. finger joint implant market. The combined 
Stryker and Wright would have a market share in the United States in 
excess of 50 percent.

III. The Relevant Geographic Markets

    The United States is the relevant geographic market in which to 
assess the competitive effects of the proposed Acquisition. Total ankle 
replacements and finger joint implants are medical devices regulated by 
the U.S. Food and Drug Administration (``FDA''). As such, total ankle 
replacements and finger joint implants sold outside the United States, 
but not approved for sale in the United States, do not provide viable 
competitive alternatives for U.S. consumers.

IV. Competitive Effects of the Acquisition

    The proposed Acquisition would likely result in substantial 
competitive harm to consumers in the markets for total ankle 
replacements and finger joint implants. As suppliers of close 
substitutes in each relevant market, Stryker and Wright respond 
directly to competition from each other with improved products, better 
service, and lower prices. By eliminating this direct and substantial 
head-to-head competition, the proposed Acquisition likely would allow 
the combined firm to exercise market power unilaterally, resulting in 
less innovation and higher prices for consumers.

V. Entry Conditions

    Entry in the relevant markets would not be timely, likely, or 
sufficient in magnitude, character, and scope to deter or counteract 
the anticompetitive effects of the proposed Acquisition. To enter or 
effectively expand in either relevant market successfully, a supplier 
would need to design and manufacture an effective product, obtain FDA 
approval, and develop clinical history supporting the long-term 
efficacy of its product. The new entrant or expanding firm would also 
need to develop and foster product loyalty and establish a nationwide 
sales network capable of marketing the product and providing on-site 
service at hospitals nationwide. Establishing a track record for 
quality, service, and consistency is difficult, expensive, and 
typically requires several years.

VI. The Consent Agreement

    The Consent Agreement eliminates the competitive concerns raised by 
the proposed Acquisition by requiring the parties to divest to DJO 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. The divestitures will maintain 
the competition that currently exists in each of the relevant markets.
    DJO is well positioned to restore the competition that otherwise 
would be lost through the proposed Acquisition. Headquartered in Vista, 
California, DJO is a global medical device company that has experience 
manufacturing, marketing, and distributing orthopedic devices in the 
United States, and a track record for quality, service, and 
consistency. DJO's lower and upper extremity product portfolio is also 
highly complementary to Stryker's total ankle replacements and finger 
joint implants.
    The Order requires Stryker to divest all assets related to the 
divested businesses other than real property and tangible personal 
property. The divested assets include all inventory, contracts, 
permits, intellectual property (``IP''), and business information 
related to Stryker's total ankle replacement and finger joint implant 
products. Certain IP, which Stryker uses for both the divested products 
as well as retained products, will be retained by Stryker and licensed 
to DJO.
    To ensure continuity for customers, the Order requires that Stryker 
supply DJO with transition assistance sufficient to efficiently 
transfer the total ankle replacement and finger joint implant assets to 
DJO and to assist DJO in operating the assets and business, in all 
material respects, in the manner in which Stryker did prior to the 
proposed Acquisition. Until DJO obtains FDA approval to become the 
legal manufacturer of the products, Stryker will act as an intermediary 
supplier for DJO. Further, the Order requires that the parties transfer 
all confidential business information to DJO, as well as provide access 
to employees who possess or are able to identify such information. DJO 
also will have the right to interview and offer employment to employees 
associated with the relevant products.
    The parties must accomplish these divestitures and relinquish their 
rights to DJO no later than ten days after the proposed Acquisition is 
consummated.

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If the Commission determines that DJO is not an acceptable acquirer, or 
that the manner of the divestitures is not acceptable, the proposed 
Order requires the parties to unwind the sale of rights to DJO and then 
divest the products to a Commission-approved acquirer within six months 
of the date the Order becomes final. The proposed Order further allows 
the Commission to appoint a trustee in the event the parties fail to 
divest the products as required.
    The Order also requires the parties to appoint Justin Menezes, from 
Mazars, as interim monitor to ensure the parties comply with the 
obligations pursuant to the Consent Agreement and to keep the 
Commission informed about the status of the transfer of the assets and 
rights to DJO.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement, and it is not intended to constitute an official 
interpretation of the proposed Order or to modify its terms in any way.

    By direction of the Commission.
April J. Tabor,
Acting Secretary.
[FR Doc. 2020-24813 Filed 11-6-20; 8:45 am]
BILLING CODE 6750-01-P