Pre-Merger Investigation of Medtronic Acquisition
In one of the first Hart-Scott-Rodino filings since the August 2010 adoption of the government’s new Horizontal Merger Guidelines, the Federal Trade Commission (FTC) gave an early termination to its review of Medtronic, Inc.’s acquisition of Osteotech, Inc. The companies compete against a number of firms in the sale of bone-grafting products to hospitals and doctors, both in the United States and internationally.
Fredrikson & Byron PA, counsel on the acquisition for Medtronic, and Medtronic’s internal acquisition counsel, retained Analysis Group to conduct an antitrust investigation of the proposed acquisition and submit a report to be filed with the FTC. At issue was whether the combined firm had the potential to reduce competition in the relevant products through either unilateral or coordinated market effects.
Following the prescribed format for analyzing anticompetitive effects from horizontal mergers, affiliates Stanley Ornstein and Robert Sherwin conducted an investigation of the bone-grafting products industry using public sources and information gathered with assistance from personnel in Medtronic’s Marketing, Product Development, and Accounting departments.
Dr. Ornstein and Mr. Sherwin concluded that the planned acquisition had little if any likelihood of reducing competition because of strong substitutes among the relevant products, low pre- and post-acquisition market concentration in such a broad market (when properly measured), a strong record of new entrants into the market, competition based on product innovation as well as price, and market conditions post-acquisition that would be incompatible with anticompetitive behavior. Analysis Group’s unilateral-effects investigation concluded that neither of the two firms behaved as the other’s most effective competitor in any narrowly defined product space.