FTC Imposes Record $12 Million Penalty for HSR Act Violation
On July 13, 2026, the Federal Trade Commission (FTC) announced a proposed settlement imposing $12 million in combined civil penalties against Edwards Lifesciences Corp. (Edwards) and Genesis MedTech Group Limited (Genesis) for alleged violations of the Hart-Scott-Rodino (HSR) Act. The FTC alleges that Edwards and Genesis intentionally structured Edwards' acquisition of JC Medical, Inc., a Genesis subsidiary, to circumvent premerger notification requirements. The $10 million penalty against Edwards and $2 million against Genesis represent the largest civil penalty ever obtained for failure to make a required HSR filing.
Background
The HSR Act requires parties to certain transactions exceeding applicable size-of-transaction thresholds to make a premerger notification filing and observe a statutory waiting period before closing. On July 22, 2024, Edwards acquired JC Medical from Genesis for $115 million, plus contingent milestone payments, and concurrently agreed to a $25 million investment in nonvoting shares of Genesis. Individually, the $115 million acquisition of JC Medical fell below the then-applicable $119.5 million threshold, and the nonvoting equity investment in Genesis would not ordinarily be aggregated with the voting securities acquisition. The transactions closed without the parties making HSR filings.
The FTC alleges the $25 million nonvoting investment was "intended to be additional compensation to Genesis for the sale of JC Medical" and that the structure was designed to keep the price below the reporting threshold. Internal documents reportedly included an email describing the structure as "below the threshold! Intentional[.]" The FTC invoked Rule 801.90, which disregards any transaction or device entered into for the purpose of avoiding HSR obligations.
The competitive context is significant: JC Medical was developing a transcatheter aortic valve replacement device for aortic regurgitation (TAVR-AR), one of only two such devices then in U.S. clinical trials. One day after acquiring JC Medical, Edwards announced its intention to acquire the other, larger competitor, JenaValve, which was later blocked by the FTC.
Under the proposed final judgment, Edwards must also provide 30 days' advance written notification to the FTC before acquiring any interest in a TAVR-AR-related firm for five years and implement an antitrust compliance program.
Legal Significance
This action is significant on multiple dimensions. First, the $12 million record penalty signals the agencies will impose financially meaningful sanctions for HSR violations. Second, invocation of Rule 801.90 is rare; the only other civil penalty case using the anti-evasion rule was in 2019, where Canon and Toshiba agreed to a $5 million penalty ($2.5M each) in relation to Canon's $6.1B acquisition of Toshiba Medical Systems Corporation. This latest action is a signal that the antitrust agencies are paying closer attention to creative structures designed to avoid a filing. Third, both buyers and sellers face liability. Genesis's $2 million penalty confirms real sell-side exposure. Fourth, the enforcement action grew from the FTC's investigation of a separate transaction, highlighting the risk that one merger investigation can expose prior unreported deals or other violations.
Key Takeaways
- Substance over form. The FTC looked past the formal characterization of the nonvoting equity investment to assess whether it constituted additional consideration. Structuring payments as nonvoting equity or side arrangements will not insulate parties from HSR obligations if the substance exceeds reporting thresholds.
- Record penalties for avoidance. Rule 801.90 allows agencies to disregard evasive structures and assess penalties based on the transaction's substance. The consequences of a finding of avoidance can be severe.
- Internal documents are critical evidence. Communications referencing structuring around the HSR threshold, even casual references, can establish the intent behind a deal structure.
- Sellers face independent liability. Sellers should independently assess their filing obligations and risk of a violation of Rule 801.90.
- Investigations of one deal can expose issues with prior deals. Companies with active M&A programs should assume their full transaction history may come under review.
For more information on the FTC's record HSR Act penalty and risks associated with avoiding premerger notification requirements, please contact Jeetander Dulani, Nicci Warr, Scott Claassen, Jack Roberts or the Stinson LLP contact with whom you regularly work.
