FTC Submits Amicus Brief On Antitrust Standards Regarding Bundling Arrangements

The Federal Trade Commission submitted a friend-of-the-court brief in the U.S. District Court for the Central District of California, providing clarity on the legal standards that apply in antitrust cases involving exclusive-dealing and bundling arrangements, both of which have the potential to negatively impact competition.

The Commission has filed a document in response to a motion by Medtronic Inc., a medical device manufacturer, to dismiss antitrust claims made by Applied Medical Resources Corp., another medical device company. In the document, the FTC urges the district court to reject Medtronic’s legal arguments and incorrect statements. The Commission does not express an opinion on the accuracy of Applied Medical’s allegations or their ability to provide legal relief.

Applied Medical has filed a complaint against Medtronic, alleging anti-competitive behavior in the advanced bipolar energy device market. The accusation involves exclusive-dealing agreements with group purchasing organizations (GPUs) that hospitals use to purchase surgical equipment and other products.

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Medtronic is accused of allegedly becoming the exclusive supplier of advanced bipolar devices for GPOs through certain arrangements. Furthermore, Medtronic is accused of entering into anticompetitive bundling agreements that provide favorable terms on other surgical devices offered by Medtronic to hospitals that also purchase Medtronic’s advanced bipolar energy devices. Applied Medical has claimed that both of these arrangements are anticompetitive.

The FTC’s amicus brief provides a detailed analysis of Medtronic’s flawed arguments regarding the application of the wrong legal standards to assess the lawfulness of their exclusive-dealing and bundling arrangements. According to the FTC, the central issue in evaluating an exclusive dealing arrangement, based on Supreme Court precedent, is the arrangement’s impact on competition. Formal distinctions, such as the duration of a written contract, do not have decisive weight.

Labels alone should not determine the evaluation of potentially anticompetitive packaging. As the brief explains, plaintiffs in antitrust cases who challenge bundled “discounts” are not usually claiming that a defendant’s prices are too low. The defendant’s “discount” may be a subjective term that does not result in any consumer receiving a lower price.

The Commission has requested that the district court dismiss Medtronic’s arguments, as they have significant implications for antitrust enforcement in the healthcare sector and beyond.