Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: European Commission investigates Zimmer acquisition of Biomet, (Oct 3, 2014)

By Linda O’Brien, J.D., LL.M.

The European Commission (EC) announced today that it has opened an in-depth investigation to assess whether the proposed acquisition of Biomet Inc. (Biomet) by Zimmer Holdings Inc. (Zimmer) (both based in the United States) is in line with the European Union (EU) Merger Regulation.

The Commission has concerns that the transaction may lead to less innovation and choice and to higher prices in these sectors. The EC was notified of the transaction in June 2014 and now has until February 16, 2015, to make a decision.

Zimmer is in the business of designing, developing, manufacturing and marketing orthopaedics, reconstructive, spinal and trauma devices, biologics, dental implants and related surgical products. Biomet is also active in orthopaedic and other medical devices and related products.

The EC’s initial market investigation indicated that the proposed acquisition may substantially lessen competition in the markets for hip, knee, elbow and shoulder implants, as well as for other products, such as bone cement, bone cement accessories and a surgical tool called pulse lavage. The transaction would combine two leading designers and manufacturers of orthopaedic implants, with significant market power in a large number of European countries.

At this stage, the EC has concerns that the remaining competitors in many of the markets may not be able to exert a sufficiently strong competitive constraint on the merged entity. In addition, orthopaedic implants and the ancillary products markets are characterized by relatively high barriers to entry, as product track records are considered a prerequisite by hospitals, who are the main purchasers. The Commission is concerned that the removal of an important competitor may have a negative impact on the level of innovation, leading to a reduction of choice and potentially on the level of prices for the orthopaedic implants and other products concerned.

The EC will now investigate the proposed acquisition in-depth to determine whether these initial concerns are confirmed or not. The Commission will in particular examine questions such as how close competitors the parties are, the position of the competitors on the markets, the role of procurement processes in each EEA country, the barriers to entry and expansion from one geographic area to another, and the plans of Zimmer and Biomet after the merger.

Commission Vice President in charge of competition policy Joaquín Almunia said, “Maintaining competition in these medical sectors is essential, as competition is a driver of innovation, quality and price,” said Joaquín Almunia, Commission Vice President in charge of competition policy. “The proposed acquisition would remove a leading competitor for orthopaedic implants and ancillary products from a number of markets across Europe. These markets are already concentrated and the Commission needs to make sure that effective competition is maintained to prevent harm to patients and taxpayers."

Companies: Biomet Inc.; Zimmer Holdings Inc.

News: AcquisitionsMergers Antitrust