Washington, D.C. — Following news that a federal Judge in Chicago has rejected the Trump administration Federal Trade Commission’s suit to block GTCR’s acquisition of medical device coatings maker Surmodics, the American Economic Liberties Project released the following statement.

“This was the right case to bring for the FTC to protect competition in the medical device industry — and showed good instincts to take on private equity,” said Lee Hepner, Senior Legal Counsel at the American Economic Liberties Project. “Judge Cummings made the wrong call based on incomplete evidence. GTCR–Surmodics is a classic ‘Litigating the Fix’ case, where the companies only offered to divest assets after the FTC filed its complaint. That kind of after-the-fact fix denies the agency a fair chance to vet the proposal and forces judges with no market experience into the improper role of central planner. The FTC and its staff was right to oppose it, and we encourage them to appeal it. This is a deal that will harm hospitals, doctors, and ultimately patients that benefit from competition, lower costs, and ongoing innovation in the medical device industry.”

“Litigating the fix” (LTF) refers to a strategy where merging parties ask trial courts to evaluate their proposed merger based not on the detailed merger agreement they submitted to federal agencies pursuant to the Hart-Scott-Rodino (HSR) Act, but on adjustments the parties propose as a voluntary “fix” to address anticompetitive aspects of their original deal. Often, the parties ask courts to revive “fixes” that federal antitrust enforcers have already considered and rejected. The LTF trend has overwhelmed the capacity of agencies and courts to adequately evaluate deals, even as “empirical evidence has increasingly cast doubt on [the] effectiveness” of the resulting fixes. LTF invokes a higher probability of false negatives, meaning anticompetitive conduct is often mistakenly deemed legal. Accordingly, scholars have proposed reforming this practice with a “Fix It or Forget It” policy to streamline the evaluation process and limit remedies to those that meaningfully address competition concerns. Such a policy would prevent “an endless round of negotiations, modifications, brokering, and back and forth between [agencies] and the parties” and limit the role of judges to evaluating transactions in their entirety under applicable law.

Learn more about Economic Liberties here. 

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.