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Medical device company Zimmer Holdings, Inc. has agreed to divest U.S. rights and assets related to unicondylar knee implants, total elbow implants, and bone cement in order to settle FTC charges that its proposed $13.35 billion acquisition of Biomet Inc. is anticompetitive.

Under the proposed settlement, the merged company will divest Zimmer’s U.S. ZUK unicondylar knee implant rights and assets to London-based Smith & Nephew, and Biomet’s U.S. Discovery Total Elbow implant and Cobalt Bone Cement rights and assets to Vista, California-based DJO Global, Inc.

According to a complaint filed by the FTC, Zimmer and Biomet are two of the only three substantial competitors in the U.S. markets for unicondylar knee implants and total elbow implants, and two of only four significant competitors in the U.S. market for bone cement. By eliminating competition between the companies, and reducing the number of competitors for the sale of each relevant orthopedic product, the merger as proposed would increase the likelihood that Zimmer would unilaterally exercise market power in these markets, resulting in lower levels of quality and service and higher prices.

The proposed order requires Zimmer to divest to Smith & Nephew the U.S. intellectual property, manufacturing technology, and existing inventory relating to its unicondylar knee implant, and to provide transitional services to help them establish manufacturing capabilities and secure necessary FDA approvals.

The proposed order requires Biomet to divest to DJO the U.S. intellectual property, manufacturing technology, and existing inventory relating to its total elbow implant and bone cement products, and it facilitates DJO’s hiring of the Biomet sales representatives and other staff who work with these products.

The proposed order allows the Commission to appoint a monitor to oversee the merging parties’ compliance with their obligations under the settlement agreement, and it requires Zimmer and Biomet to divest their U.S. assets and rights to the divested products within 10 days after the acquisition becomes final, or on the date the order becomes final, whichever is earlier. Further details about the divestitures are set forth in the analysis to aid public comment for this matter.

Staff cooperated with antitrust agencies investigating the proposed acquisition in Europe and Japan, working closely with their staff to analyze the proposed transaction and potential remedies.

The Commission vote to issue the complaint and accept the proposed consent order for public comment was 5-0. The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through July 24, 2015, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000 per day.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.