FTC intervenes to correct Medtronic’s ‘erroneous assertions’ in antitrust case

Dive Brief:

The Federal Trade Commission has intervened in a legal case to correct what it called “erroneous assertions and mistaken legal points” made by Medtronic.
In an amicus brief filed Monday, the FTC rebuts aspects of Medtronic’s defense against accusations made by Applied Medical Resources in an antitrust case.
The FTC has taken no position on the accuracy of the allegations but filed the brief because it said Medtronic made “wrong” arguments with “broad implications for antitrust enforcement” in its filing to dismiss Applied’s claims.

Dive Insight:

Applied Medical filed a lawsuit against Medtronic earlier this year. The manufacturer of bipolar energy devices accused Medtronic of conspiring to bundle devices for cutting tissue and sealing vessels “in a way that is unhealthy for competition, hospitals, and patients in need of medical treatment.” Medtronic called the claims “baseless” and moved to dismiss the case.

The argument for dismissing the case caught the attention of the FTC. In its amicus brief, the FTC accuses Medtronic of relying on “artificial distinctions and flawed proposed pleading standards” and takes apart five arguments made by the medtech company in its defense against Applied.

One plank of Medtronic’s argument is that it cannot have substantially foreclosed competition because its group purchasing agreements last three years, at most, a duration the company called “relatively short.” The FTC said Medtronic’s premise “is wrong.”

“Exclusive contracts can harm competition even when they are short-term, and three years is not necessarily a ‘short duration’ for an exclusive contract,” the FTC wrote. “Indeed, courts often rule that three-year exclusive contracts can be illegal.”

The FTC also tackled Medtronic’s claim that Applied is faulting it for offering prices that are “too low.” The FTC said Medtronic’s “assertion misunderstands the economic theory of a bundling claim.” The objection is against an alleged price differential between customers that buy the full bundle and customers that only purchase certain products from a manufacturer.

“Such conditional pricing is far more suspect than an across-the-board price cut,” the FTC wrote. “Indeed, conditional pricing need not result in any consumer getting a lower price.”

The FTC has taken no position on whether Applied’s allegations “are accurate or state a claim” and hasn’t commented on the case-specific arguments Medtronic made in its movement to dismiss the claims.