FTC orders artificial limb maker Ottobock to undo and divest its knee acquisition

After two years, the Federal Trade Commission has ordered the German prosthetics company Ottobock to roll back its acquisition of Freedom Innovations, saying the merger of the two manufacturers would weaken competition in the market for computer-controlled prosthetic knees.

The FTC first challenged the deal in December 2017, which had closed the September prior, saying it would eliminate head-to-head competition and entrench Ottobock and its North American arm as the dominant suppliers of microprocessor-equipped knees. These devices adjust the stiffness and movement of the joint to better match a person’s gait and provide more stability, typically for people with above-the-knee amputations.

The commission’s final order means that Ottobock will have to divest the assets obtained from Freedom Innovations and its corporate owner, FIH Group Holdings, and sell them to an FTC-approved buyer.

First launched in 1997, Ottobock's C-Leg
was the first microprocessor-equipped
prosthetic knee. (Image: Ottobock)

“The Commission is committed to ensuring competitive markets for the benefit of consumers, and there will be times when it has to act after a merger has been consummated,” FTC Chairman Joseph Simons said in a statement. “The goal is always to restore the lost competition.”

Though Ottobock had taken steps to integrate Freedom Innovations’ work after the closure of the deal, it later agreed to a “Hold Separate and Asset Maintenance Agreement” with the FTC—which effectively set aside the latter company’s personnel and intellectual property in case it needed to be split, pending the commission’s ruling.

One of the factors in the FTC’s decision was the amount of time necessary for competitors to develop a new rival product—the commission said it largely takes over two years to develop a microprocessor knee, even when building on previously available technology. That delay would not be able to offset the anticompetitive effects of the merger.

Ottobock had previously been considering an IPO, but not before 2020, according to company comments in a German newspaper reported by Reuters this past January.