Ventilator Maker’s 2012 Merger Spurs Query From FTC Official (1)

A member of the U.S. Federal Trade Commission says the agency should review its 2012 decision to approve the acquisition of a small ventilator company by medical-device maker Covidien Ltd., a deal that may have stymied a government effort to produce the machines.

FTC Commissioner Rebecca Kelly Slaughter, a Democrat at the Republican-controlled commission, said Monday she wants to know more about what the companies disclosed to the agency when the FTC granted antitrust approval of the merger without an in-depth investigation.

The New York Times on Sunday reported that U.S. health officials, worried about a shortage of ventilators over a decade ago, contracted with a small California device maker, Newport Medical Instruments Inc., to produce inexpensive, easy-to-use machines to add to the national stockpile. Newport planned to sell the devices for about a third of the price that other companies were charging. Covidien, which also made ventilators, agreed to buy Newport for $108 million, and then sought to get out of the contract, according to the Times. The government agreed to cancel the agreement.

The failure of the project to produce ventilators now raises questions about whether Covidien bought Newport in order to block competition from a rival product and protect its own ventilator business and whether the transaction received the appropriate scrutiny from federal antitrust officials.

Antitrust enforcers are paying increasing attention to whether companies are buying emerging rivals as a way to eliminate emerging threats to their businesses, sometimes by shutting them down. FTC Chairman Joe Simons said in February the agency would investigate small acquisitions by the biggest U.S. technology companies to determine if the deals were anticompetitive.

For more: Google, Apple Among Tech Firms Facing Probe of Small Deals

Medtronic Plc, which later bought Covidien in 2014, denies the Newport deal shut down a competitor. Spokesman Ben Petok said Covidien and Newport weren’t direct competitors, and Medtronic continues to sell Newport ventilators today. Petok also said the government canceled the ventilator contract when both parties concluded there were technical issues that prevented Newport from completing the project and obtaining regulatory clearance.

Medtronic is now ramping up production of ventilators, including in collaboration with Elon Musk’s Tesla Inc.

While in-depth merger investigations can last a year or longer, the FTC approved Covidien’s purchase of Newport a month after it was announced under a fast-track process known as “early termination.” FTC spokeswoman Cathy MacFarlane declined to comment.

Slaughter, who is one member of the five-member FTC, said she wants to know what information the agency analyzed when it made that decision.

“When we get new information that causes us to question our original analysis, then we should absolutely go back and take a second look to find out whether there’s something we should have done differently or better,” she said.

(Updates with Medtronic comment in sixth paragraph)

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David McLaughlin in Washington at dmclaughlin9@bloomberg.net

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Sara Forden at sforden@bloomberg.net

Paula Dwyer

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