FTC Imposes Record $12 Million in Fines for HSR Avoidance Scheme

The FTC announced a settlement on July 13, 2026, settling charges that Edwards Lifesciences Corp. and Genesis MedTech Group violated the HSR Act in connection with Edwards’ acquisition of medical device maker JC Medical from Genesis. The $12 million penalty is the largest ever imposed for failure to make a required HSR filing and is split between the two companies, with Edwards paying $10 million and Genesis paying $2 million.

Background: The Hart-Scott-Rodino Act of 1976

The HSR Act gives the antitrust enforcement agencies the ability to review transactions meeting certain jurisdictional thresholds before they close by requiring the deal parties to submit premerger notifications to both the FTC and the Antitrust Division of the U.S. Department of Justice (DOJ). HSR filings require parties to disclose basic information about the transaction and their businesses and include certain transaction-related documents created by the companies to evaluate the transaction. After filing, the parties then must observe a statutory waiting period to allow the FTC and DOJ time to determine whether to (i) allow the waiting period to expire, (ii) launch an in-depth investigation that tolls the waiting period, or (iii) initiate an enforcement action against the deal. 

The HSR rules specifically bar “devices for avoidance,” which are schemes and arrangements “entered into or employed for the purpose of avoiding the obligation to comply with the requirements of the act.” In such cases, the FTC will look past the deal’s ostensible structure to its underlying substance to determine whether an HSR filing should have been made. Parties adopting such schemes expose themselves to the potential for lengthy investigation, public enforcement action, and substantial penalties of up to $53,088 per day of ongoing violation.

The Edwards-Genesis Transaction and Alleged Disguised Consideration

According to the FTC’s complaint, in July 2024 Edwards acquired JC Medical without an HSR filing and, one day later, attempted to acquire JC Medical’s only competitor, JenaValve Technology Inc. The FTC successfully sued to block the acquisition of JenaValve, arguing that because Edwards already owned JenaValve’s only competitor, the transaction would essentially lead to a monopoly in the market for the development of certain kinds of transcatheter aortic valve devices.  

The FTC alleges Edwards was concerned that HSR Act review would significantly delay closing on the JC Medical acquisition, particularly given its concurrent negotiations to acquire JenaValve. According to the FTC, Edwards and Genesis agreed that Edwards would pay Genesis $115 million upfront for JC Medical (plus small milestone payments), an amount that fell just short of the $119.5 million minimum threshold then in effect for HSR to apply to the acquisition. 

At the same time, Edwards also allegedly agreed to a contemporaneous $25 million investment in Genesis. According to the complaint, instead of being a separate bona fide investment transaction, a large portion of the $25 million was intended as consideration for the acquisition of JC Medical. The FTC cites various pieces of evidence suggesting the parties understood the transaction structure to be a way to reduce the JC Medical acquisition price below the applicable HSR threshold and thus avoid an HSR filing.

FTC Enforcement Action and Settlement

In addition to extracting the largest-ever fine for failure to make a required HSR filing, the settlement also requires Edwards to give the FTC advance written notice of any potential future acquisitions involving the same product area as the JC Medical acquisition during the final judgment’s five-year term. It also requires that Edwards implement a comprehensive company-wide antitrust compliance and training program, which includes designation of an “Antitrust Compliance Officer.” 

In notable contrast to most HSR Act enforcement actions, both parties to this matter (buyer and seller) are subject to enforcement penalties for their roles in carrying out the alleged evasive scheme. Liability for HSR violations typically belong to a buyer who made an acquisition without having first observed the applicable requirements. However, this case signals the FTC will continue to also take action against sellers who participate in alleged HSR avoidance schemes.

Key Takeaways for M&A Parties

1. Novel or nonstandard deal structures are permissible, so long as they have legitimate business justification (i.e., the structure serves a real business purpose other than avoiding an HSR filing obligation).
    
2. Parties involved in merger or acquisition transactions are free to negotiate deal values that fall below the HSR minimum threshold so that HSR does not apply. They are also free to acquire instruments that are not subject to HSR requirements (e.g., nonvoting stock or warrants). However, they should not devise ways to achieve HSR-reportable acquisitions without making HSR filings.
   
   For example, parties that do the following may risk enforcement action:
    
   1. Attempting to disguise consideration or mask its transfer
   2. Staging one reportable acquisition over multiple non-reportable steps without solid non-HSR related justifications for doing so
       
3. Consider involving experienced HSR counsel early in your negotiations. The HSR rules and interpretations, together with relevant enforcement precedents, can be complex when it comes to issues like the treatment of deal consideration, aggregation of multiple acquisitions, and related party transactions. Solid HSR guidance can help deal parties avoid missteps and potential serious liability.