Substance Over Form: The FTC’s $12 Million HSR Evasion Penalty and What It Signals for Dealmakers

Background: The Edwards-JC Medical Transaction

Edwards Lifesciences, a California-based medical device company, acquired JC Medical, a developer of transcatheter aortic valve replacement devices for aortic regurgitation (“TAVR-AR”) from Singapore-based Genesis Medtech in 2024. At the time, the HSR filing threshold stood at $119.5 million. According to the FTC’s complaint, Edwards structured the transaction so that the upfront purchase price of $115 million fell just below that threshold, with additional “milestone payments” deferred to a later date. Edwards simultaneously made a $25 million investment in Genesis itself.

The FTC alleged that this structure was not coincidental. The government claimed Edwards was concerned that HSR review would delay closing and, critically, complicate a separate and far larger transaction. Just one day after completing the JC Medical purchase, Edwards moved to acquire JenaValve Technology for $945 million. JenaValve was, at the time, the only other company in the United States with a TAVR-AR device in clinical trials. Had both deals closed, Edwards would have controlled the only two TAVR-AR devices under active US development.

The FTC challenged the JenaValve acquisition in 2025, and a DC federal judge granted a preliminary injunction blocking that deal in January 2026. The newer complaint and settlement, announced in July 2026, addressed the JC Medical deal itself, specifically, the alleged use of milestone-payment structuring to avoid a required HSR filing.

The Anti-Evasion Rule: 16 C.F.R. § 801.90

The legal basis for the FTC’s enforcement action is the HSR Act’s long-standing anti-circumvention provision. Under 16 C.F.R. § 801.90, any device “entered into or employed for the purpose of avoiding the obligation to comply with the requirements of the act shall be disregarded, and the obligation to comply shall be determined by applying the act and these rules to the substance of the transaction.” In other words, the agencies assess whether a filing was required based on the economic substance of the deal, not the form in which it was papered.

The government’s complaint made the application of Rule 801.90 explicit: “if parties structure a transaction ‘for the purpose of avoiding’ the HSR Act’s requirements, then determining whether an HSR notification should have been filed is based on an analysis of the ‘substance of the transaction,’ as opposed to the form of the avoidance scheme.”

The Settlement Terms

Under the consent agreement, Edwards will pay $10 million and Genesis will pay $2 million, for a combined penalty of $12 million. In addition, Edwards agreed not to acquire any ownership interest in a company that sells or is in clinical trials for TAVR-AR devices in the United States without first notifying the FTC. Edwards did not admit wrongdoing, stating that it “complied with the requirements of the law” but concluded that resolving the matter was “the best path forward.”

FTC Chairman Andrew Ferguson signaled the agency’s posture in stark terms: “Companies that try to sneak deals through without lawful FTC review should take notice. The FTC will be vigilant in enforcing the requirements of the Hart-Scott-Rodino Act and we will not hesitate to seek penalties for its violation.”

The Broader Context: The FTC’s Push Against Non-Traditional Deal Structures

The Edwards enforcement action does not exist in isolation. It reflects a broader agency agenda to address what the FTC views as a growing universe of transaction structures that achieve the competitive effects of an acquisition while sidestepping HSR’s traditional triggers.

The FTC has identified two major categories of concern beyond the milestone-payment structuring at issue in Edwards: convertible securities and acqui-hires.

Convertible Securities: Some parties have structured deals as cash payments for non-voting, convertible securities, effectively deferring the acquisition of actual control until a post-HSR conversion event. While certain HSR rules already apply to foreclose these arrangements, the FTC has signaled that it views the existing framework as insufficient. The agencies have also warned that any recapitalization of the target company during the pendency of HSR review could constitute gun-jumping by reducing the target’s independence.

Acqui-Hires: Also concerning to regulators is the growing trend of technology companies using non-exclusive licensing-plus-hiring arrangements to achieve the economic substance of an acquisition without purchasing voting securities or assets that would trigger HSR. The legal basis for this approach lies in a long-standing FTC informal interpretation holding that non-exclusive licenses are not “assets” for HSR purposes, unlike exclusive licenses, which clearly constitute covered assets. The rationale is that non-exclusive licenses were historically viewed as lacking competitive significance because the grantor retains rights and can license others.

Regulatory Reform on the Horizon

These enforcement and structural concerns are playing out against the backdrop of active HSR rulemaking. The FTC’s 2025 Updated Form, which introduced sweeping new disclosure requirements including transaction rationale narratives and competition descriptions, was vacated by the Eastern District of Texas in February 2026 for exceeding the agencies’ authority and failing cost-benefit analysis. The Fifth Circuit denied a stay and the agencies reverted to the pre-2025 form.

In March 2026, the FTC and DOJ issued a new Request for Information soliciting comment on, among other things, whether the Updated Form helped identify anticompetitive mergers more efficiently, what safe harbors or materiality thresholds should apply, and how to address non-traditional transaction structures. The comment period closed in May 2026, and the FTC has committed to a new Notice of Proposed Rulemaking by the end of 2026.

The agencies have also signaled interest in tightening the “solely for investment” exemption for minority stakes, questioning what ownership thresholds (e.g., 5%, 10%, 25%) should trigger filing obligations when accompanied by board seats, veto rights, or other governance protections that confer outsized competitive influence.

Practical Implications for Clients

The Edwards settlement and the FTC’s broader posture carry several practical takeaways for dealmakers and their counsel:

Milestone and earnout structures will face heightened scrutiny. Any transaction in which the upfront consideration falls near or just below the HSR filing threshold should be assumed to attract agency attention. Practitioners should assess whether the economic substance of the deal, inclusive of milestone payments, exceeds the applicable threshold and, if so, should comply with HSR filing requirements rather than risk application of Rule 801.90..

The anti-avoidance rule has real teeth. The $12 million penalty demonstrates that the FTC is prepared to pursue substantial monetary sanctions, not merely injunctive relief, for what it views as evasion of filing obligations.

Non-traditional structures are in the crosshairs. Companies contemplating convertible security arrangements, acqui-hires, or licensing-plus-hiring deals should assume that the FTC is actively examining whether these structures constitute de facto acquisitions.

Sequential deal strategies carry elevated risk. The Edwards matter illustrates that the agencies will scrutinize not only individual transactions but the broader deal strategy into which they fit. Clients pursuing multiple acquisitions in the same competitive space should ensure that each transaction independently satisfies HSR obligations regardless of how any individual deal is structured.

Conclusion

The Edwards settlement sends an unmistakable signal: the FTC under Chairman Ferguson intends to enforce the HSR Act’s anti-evasion provisions vigorously, and it has the tools to impose meaningful financial consequences on parties who, in the agency’s view, structure transactions to avoid premerger review. At the same time, the agency is moving on multiple regulatory fronts to close perceived structural gaps in the HSR framework that have enabled parties to achieve acquisition-like outcomes without triggering traditional filing obligations. Dealmakers should take this moment as an opportunity to reassess transaction structures, filing strategies, and compliance protocols in light of a rapidly evolving enforcement landscape.