Despite Otto Bock HealthCare GmbH’s closing on its acquisition of FIH Group Holdings (Freedom Innovations) transaction on September 22, 2017, on December 20, 2017, the Federal Trade Commission (the “Commission”) filed an administrative complaint challenging the merger of the two top prosthetics manufacturers following a unanimous vote by the Commission. Administrative complaints are issued by the Commission when it “has reason to believe that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.” The Otto Bock—Freedom Innovations transaction was not Hart-Scott-Rodino (“HSR”) reportable. However, the Commission alleged in a statement that the merger of these two top microprocessor knee manufacturers “harmed competition in the U.S. market for microprocessor prosthetic knees by eliminating head-to-head competition between the two companies, removing a significant and disruptive competitor, and entrenching Otto Bock’s position as the dominant supplier.”
The Commission alleges that because it can take two or more years for an existing manufacturer to develop a microprocessor, it is unlikely that new entrants or expansions into the microprocessor knee market will happen quickly enough to offset the alleged harm by the recent merger. The Commission acknowledged that Otto Bock has taken steps to preserve Freedom Innovations’ business, assets and personnel during the pending review.
In addition to seeking review by an administrative law judge, the Commission has authorized staff to pursue any necessary injunctive relief in federal court.
This case is an important reminder and but one recent example that even non-HSR reportable deals can attract antitrust scrutiny, and that such scrutiny can result in post-closing antitrust enforcement. On December 21, 2017, the U.S. Department of Justice Antitrust Division reached a proposed settlement with TransDigm Group Inc., that requires TransDigm to sell the airline passenger safety restraint businesses it acquired from Takata in February 2017. That deal was also not reportable under HSR. And on December 18, 2017, the USDOJ and Parker-Hannifin Corporation reached a proposed settlement that requires Parker-Hannifin to divest the Facet aviation fuel filtration business, including the aviation fuel filtration assets it acquired from CLARCOR, Inc. in February 2017. This challenge came after the HSR waiting period for the transaction expired without a second request for information or other challenge from the USDOJ. Again, non-HSR reportable deals and even those deals that have gone through the HSR process, are not immune to continued post-closing scrutiny by antitrust authorities.