On December 18, 2023, the Federal Trade Commission (FTC) and Department of Justice (DOJ) issued new federal Merger Guidelines. These Guidelines will likely result in greater scrutiny of health care transactions.
Providers of all types of services in patients’ homes have already seen the fallout from the Guidelines in the form of increased review of UnitedHealth Optum’s acquisition of Amedisys. This review is likely to result in a requirement that Amedisys must divest one hundred locations in order to complete the acquisition.
Guideline 8 is certainly important to the home services industry. It says that “a firm that engages in an anti-competitive pattern or strategy of multiple acquisitions in the same or related business lines” may violate antitrust laws. Under this Guideline, a series of acquisitions will be evaluated as part of a trend or overall pattern or strategy of serial acquisitions by acquiring firms. These reviews will include looking at patterns or strategies of growth through acquisitions by looking at both firms’ history and current or future strategic incentives.
The Guidelines reflect concerns about “roll-ups” by private equity and other companies in the healthcare industry. These “roll-ups” may be suspect because they may harm competition when considered together.
Competitors who wish to acquire or merge with others may claim that the transaction will result in procompetitive efficiencies. The 2023 Guidelines say that no credit will be given to vague or speculative claims, nor will enforcers credit benefits outside relevant markets that will not prevent a lessening of competition in such markets.
Rather, claims of procompetitive benefits will be evaluated based on these factors:
This means that the parties to transactions that they claim will produce efficiencies must identify Benefits with sufficient detail very early in the transaction to rebut presumptions of harm.
Finally, the industry may be affected by the so-called “falling firm defense.” When a party to a transaction is experiencing severe financial difficulties, the parties may claim in defense of the acquisition or merger that it is not anticompetitive because a party will otherwise go out of business.
There are, of course, many unanswered questions about the new Guidelines. It is unclear, for example whether they will be adopted by the Courts. Providers that intend to pursue mergers and acquisitions in the future should pay attention to further developments as they unfold.
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©2024 Elizabeth E. Hogue, Esq. All rights reserved.
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