80 FR 60902 - Wright Medical Group, Inc. and Tornier N.V.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

Federal Register Volume 80, Issue 195 (October 8, 2015)

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 draft complaint and the terms of the consent order-- embodied in the consent agreement--that would settle these allegations.

[Federal Register Volume 80, Number 195 (Thursday, October 8, 2015)]
[Notices]
[Pages 60902-60905]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-25604]


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FEDERAL TRADE COMMISSION

[File No. 151 0018]


Wright Medical Group, Inc. and Tornier N.V.; Analysis To Aid 
Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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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 draft 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 October 30, 2015.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/wrighttornierconsent online or on paper, 
by following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Wright Medical Group, 
Inc. and Tornier N.V.--Consent Agreement; File No. 151 0018'' on your 
comment and file your comment online at https://ftcpublic.commentworks.com/ftc/wrighttornierconsent by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, write ``Wright Medical Group, Inc. and Tornier N.V.--Consent 
Agreement; File No. 151 0018'' 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.

FOR FURTHER INFORMATION CONTACT: Aylin M. Skroejer (202-326-2459), 
Bureau of Competition, 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 consent order to cease and desist, having been

[[Page 60903]]

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 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 Home Page (for September 30, 2015), on the World Wide Web, 
at http://www.ftc.gov/os/actions.shtm.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before October 30, 
2015. Write ``Wright Medical Group, Inc. and Tornier N.V.--Consent 
Agreement; File No. 151 0018'' 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 public 
Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a 
matter of discretion, the Commission tries to remove individuals' home 
contact information from comments before placing them on the Commission 
Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone'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 that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which . . . is privileged or confidential,'' as discussed in 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). In particular, do not include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ 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), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/wrighttornierconsent by following the instructions on the web-based 
form. If this Notice appears at http://www.regulations.gov/#!home, you 
also may file a comment through that Web site.
    If you file your comment on paper, write ``Wright Medical Group, 
Inc. and Tornier N.V.--Consent Agreement; File No. 151 0018'' 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.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. 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 October 30, 2015. You can find more 
information, including routine uses permitted by the Privacy Act, in 
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Order To Aid Public Comment

Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order (``Consent 
Agreement'') from Wright Medical Group, Inc. (``Wright'') and Tornier 
N.V. (``Tornier'') designed to remedy the anticompetitive effects 
resulting from the proposed merger of Wright and Tornier. Under the 
terms of the proposed Decision and Order (``Order'') contained in the 
Consent Agreement, the parties are required to divest to Integra 
Lifesciences Corporation (``Integra'') all of Tornier's rights and 
assets related to the following reconstructive joint markets: (1) Total 
ankle replacements; (2) total silastic big toe joint replacements; and 
(3) total silastic toe joint replacements for the second through fifth 
``lesser'' toes.
    The proposed Consent Agreement has been placed on the public record 
for thirty days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission will again review the Consent 
Agreement and the comments received, and decide whether it should 
withdraw from the Consent Agreement, modify it, or make it final.
    Pursuant to an Agreement and Plan of Merger dated October 27, 2014, 
Wright and Tornier propose to merge in an all-stock transaction valued 
at approximately $3.3 billion (the ``Proposed Merger''). The 
Commission's Complaint alleges that the Proposed Merger, 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 total silastic toe joint 
replacements. The proposed Consent Agreement will remedy the alleged 
violations by preserving the competition that otherwise would be lost 
in these markets as a result of the Proposed Merger.

The Parties

    Headquartered in Memphis, Tennessee, Wright is a global orthopedic 
company that divides its business into three categories: foot and ankle 
hardware; upper extremity reconstructive devices; and biologics 
products.
    Tornier is a global medical device company based in Amsterdam, the 
Netherlands, with U.S. operations headquartered in Bloomington, 
Minnesota. Tornier's U.S. products include those for the upper 
extremity joints; lower extremity joints; sports medicine; and 
biologics.

The Relevant Products and Structure of the Markets

I. Total Ankle Replacements
    Total ankle replacements are used to treat end-stage ankle 
arthritis, which develops when cartilage on the bones of the ankle 
joint wears away and causes bone-on-bone grinding down of the joint

[[Page 60904]]

surface. Patients with end-stage ankle arthritis experience pain and 
swelling at the ankle along with difficulty walking. Total ankle 
replacements reduce the pain while maintaining the motion at the ankle 
joint. They replace damaged bone and cartilage with a metal tibial 
tray, a metal talar dome, and a polyethylene bearing. 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, Tornier, and Stryker Corporation (``Stryker'') are the only 
significant suppliers in the U.S. market for total ankle replacements, 
accounting for 44%, 19%, and 31% of 2014 sales, respectively. Wright 
and Tornier are each other's closest competitor. These companies both 
offer fixed bearing technologies and the only options for revision 
surgeries, i.e., surgeries to redo a prior total ankle replacement 
procedure. The other leading supplier, Stryker, supplies the only 
mobile bearing system in the United States, making it a more distant 
competitor to Wright and Tornier. The only other U.S. supplier of total 
ankle replacements, Zimmer Holdings, Inc. (``Zimmer'') offers a 
technology that typically is used only in specialized cases. Zimmer 
maintains a fringe position in the market.
II. Total Silastic Toe Joint Replacements
    Total big toe joint replacements treat severe cases of hallux 
rigidus, an arthritic condition in the first metatarsophalangeal 
(``MTP'') joint of the big toe. Pain and inflammation at the first MTP 
joint restricts movement of the big toe and leads to difficulty 
walking. Total big toe joint replacements relieve pain and preserve 
motion in the big toe.
    There are two types of total big toe joint replacements: Metal and 
silastic. Total silastic big toe joint replacements are a distinct 
antitrust market. Surgeons that favor total silastic big toe joint 
replacements over metal implants do so for the silastic implants' 
flexibility and longevity. The silastic implants are also significantly 
less expensive than total metal big toe joint replacements. Physicians 
and patients do not view total silastic and total metal big toe joint 
replacements as reasonably interchangeable. A small but significant 
increase in the price of total silastic big toe joint replacements 
would not cause physicians or patients to switch to other products or 
therapies.
    The U.S. market for total silastic big toe joint replacements is 
highly concentrated. Wright and Tornier are the only significant 
suppliers of the product, accounting for approximately 60% and 38% of 
the market, respectively. The next closest competitor to Wright and 
Tornier--Sgarlato Med LLC--accounts for a nominal share of the market.
    Although more rare than in the big toes, severe arthritis also 
occurs in the MTP joints of the lesser toes. Physicians and patients 
who use total silastic lesser toe joint replacements would not switch 
to any other product or procedure in response to a small but 
significant increase in the price of the total silastic toe joint 
implants. Wright, Tornier, and OsteoMed supply total silastic lesser 
toe joint replacements in the United States, and Wright and Tornier are 
each other's closest competitor. The Proposed Merger would result in a 
combined market share of approximately 76%.
    The relevant geographic market for total ankle replacements and 
total silastic toe joint replacements is the United States. These 
products are medical devices regulated by the U.S. Food and Drug 
Administration (``FDA''). Medical devices sold outside of the United 
States, but not approved for sale in the United States, do not provide 
viable competitive alternatives for U.S. consumers.

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 Merger. To enter or 
effectively expand in any of the relevant markets 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 spans several years.

Competitive Effects of the Merger

    The Proposed Merger would likely result in significant competitive 
harm to consumers in the markets for total ankle replacements and total 
silastic toe joint replacements. As particularly close substitutes in 
each relevant market, Wright and Tornier 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 Merger likely would allow the combined firm 
to exercise market power unilaterally, resulting in less innovation and 
higher prices for consumers.

The Consent Agreement

    The Consent Agreement eliminates the competitive concerns raised by 
the Proposed Merger by requiring the parties to divest to Integra 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 total silastic toe joint replacements. The 
divestitures will maintain the competition that currently exists in 
each of the relevant markets.
    Integra is well positioned to restore the competition that 
otherwise would be lost through the Proposed Merger. Headquartered in 
Plainsboro, New Jersey, Integra 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. Integra's lower extremity product portfolio is also 
highly complementary to Tornier's total ankle replacements and total 
silastic toe joint replacements.
    The Order requires Tornier to divest all U.S. assets and rights 
related to the relevant products, including intellectual property, 
manufacturing technology, and existing inventory. In order to ensure 
continuity of supply, the Order requires that the parties supply 
Integra with total ankle replacements for up to three years and total 
silastic toe joint replacements for up to one year while Integra 
transitions to independent manufacturing and works to obtain FDA 
approval.
    To ensure that the divestitures are successful, the Order requires 
the parties to enter into a transitional services agreement with 
Integra to assist the company in establishing its manufacturing 
capabilities and securing all necessary FDA approvals. Further, the 
Order requires that the parties transfer all confidential business 
information to Integra, as well as provide access to employees who 
possess or are able to identify such information. Integra 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 Integra no later than ten days after the

[[Page 60905]]

Proposed Merger is consummated. If the Commission determines that 
Integra 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 Integra 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 Quantic Regulatory 
Services, LLC 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 Integra.
    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.
Donald S. Clark,
Secretary.
[FR Doc. 2015-25604 Filed 10-7-15; 8:45 am]
 BILLING CODE 6750-01-P