The Federal Trade Commission recently filed a friend-of-the-court (amicus) brief in the U.S. District Court for the Central District of California, clarifying legal standards that apply in antitrust cases involving exclusive-dealing and bundling arrangements, both of which can harm competition. The Commission’s filing relates to medical device manufacturer Medtronic Inc.’s motion to dismiss antitrust claims filed by another medical device company, Applied Medical Resources Corp. In its brief, the FTC urges the district court to reject Medtronic’s incorrect legal points and erroneous assertions. The Commission takes no position on whether Applied Medical’s allegations are accurate or state a claim on which relief may be granted.
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 organizations (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 favorable 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 anti-competitive.
As detailed in the FTC’s amicus brief, Medtronic has 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. Formalistic distinctions, such as around the duration of a written contract, are not dispositive. Mere labels should likewise not control the assessment of potentially anticompetitive bundling. 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.
The Commission has urged the district court to reject Medtronic’s arguments, as 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.
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