ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
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Effecting M&A Diligence When Competitors Are Involved

by , and | May 31, 2024 | , , ,

Increased scrutiny of the healthcare industry from antitrust agencies such as the Federal Trade Commission and US Department of Justice emphasize the necessity of compliance measures to mitigate antitrust risk that can negatively impact the closing of transactions. This article explores the critical role of clean team agreements (CTAs) in managing anti­trust risks during the due diligence process of healthcare transactions. The paper provides a comprehensive analysis of how CTAs can be structured to securely handle competitively sensitive information, ensuring that such documents are only accessed by designated personnel under strict guidelines. Through a variety of hy­pothetical scenarios, the article demonstrates the application of CTAs in situations involving direct competitors, labor competition, and different geographic markets. These examples underscore the importance of tailoring CTAs to the specific com­petitive dynamics and regulatory environments of each transaction, ensuring both legal compliance and transactional efficiency in the healthcare sector.

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Heard at the 2023 Spring Meeting: Part 1

by , , , , , , , and | Apr 3, 2023 | , , , ,

The American Bar Association’s Antitrust Law Section recently held its annual Spring Meeting in Washington, DC, featuring updates from federal, state, and international antitrust enforcers and in-depth commentary on leading antitrust issues facing the business community today. This post recaps key takeaways from the first portion of the Spring Meeting.

CIVIL ENFORCEMENT AND MERGER REVIEW: US DEPARTMENT OF JUSTICE (DOJ) PRIORITIES

  • Aggressive Enforcement by Any Other Name: DOJ Antitrust Division Deputy Assistant Attorney General Hetal Doshi characterized DOJ’s enforcement posture as “not aggressive enforcement, just enforcement,” but nevertheless opined that the Department’s past practice of erring on the side of under-enforcement has “ill-served” the public.
  • Whole-of-Government Means Whole-of-Government: The Division’s Deputy Assistant Attorneys General Maggie Goodlander and Michael Kades highlighted that various federal statutes other than the antitrust laws confer the power to act to preserve competition. They emphasized DOJ’s intent to pursue sweeping enforcement priorities to execute President Biden’s recent executive order calling for a whole-of-government approach to protecting competition, including by working in conjunction with other federal agencies like the Departments of Defense, Transportation, and Agriculture.
  • Enforcement Priorities Include Technical Violations of HSR Act, Spoliation, Gun-Jumping: Deputy Assistant Attorney General Goodlander emphasized DOJ’s intent to pursue vigorously violations of the HSR Act, including failures to make required premerger notification filings, failures to provide all Item 4 documents, and “gun-jumping” caused by concerted action prior to the satisfaction of the HSR Act’s waiting period. Goodlander also commented on DOJ’s intent to scrutinize merging parties’ conduct during the due diligence phase to investigate whether parties are using due diligence to conceal and accomplish anticompetitive conduct. Other DOJ officials further emphasized that DOJ and the Federal Trade Commission (FTC) are working to ensure that the agencies’ investigations are not harmed by the use of third-party ephemeral communication platforms and to penalize spoliation of evidence contained in such messaging applications.
  • Hostility Toward Freely Granted Divestitures in Merger Investigations: Deputy Assistant Attorneys General Doshi and Andrew Forman conveyed the high bar merging parties face when they offer structural or behavioral remedies, including divestitures, to resolve or head off a DOJ challenge to a merger or acquisition. Doshi and Forman pointed to instances where divestitures and/or carveouts offered in merger transactions have failed and “the American people bear the risk” of anticompetitive harms and asserted that “the idea that a divestiture can cure the feared antitrust issues can’t rest on our hopes of what might happen in the future after the deal and divestiture closes.”
  • Consent Decrees Face Much Stricter Scrutiny: Deputy Assistant Attorneys General Forman, Goodlander, and Kades emphasized the “exacting standard” that must be applied when DOJ is considering entering into a consent decree to resolve a merger challenge. According to the Department officials, the antitrust laws prohibit mergers that may substantially lessen competition, which means that for a consent decree to resolve antitrust concerns, it must eliminate the possibility that a merger could cause harm—an “extremely high bar.”
  • Updated Merger Guidelines to Focus on Relevant [...]

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DOJ Signals Heightened Scrutiny on Information Exchanges and Competitor Collaborations

by , , and | Feb 15, 2023 | ,

WHAT HAPPENED

On February 3, 2023, the US Department of Justice’s (DOJ) Antitrust Division announced the withdrawal of three policy statements related to antitrust enforcement in healthcare. Although the withdrawn statements focus on healthcare, DOJ’s decision to withdraw these statements will have broad impacts across industries.

The three policy statements, issued in 1993, 1996, and 2011, relate to competitor collaboration and information sharing, and established “safety zones” of activities shielded from antitrust scrutiny. The 1996 Statements of Antitrust Enforcement in Health Care (1996 Statements) were revised and expanded upon the 1993 Statements. Though ostensibly related to healthcare, the guidance has been relied upon by all industries and understood to cover all manner of competitively sensitive information. Two of the safety zones most often relied on by companies relate to competitor exchanges of price and cost information, and competitor joint purchasing arrangements.

Information Exchanges

The safety zone on information exchanges (Statement 6 of the 1996 Statements) stated that, in general, the agencies would not challenge an exchange of price or cost information (e.g., employee compensation) if the following three conditions were met:

  1. The exchange is managed by a third party (e.g., a trade association or consultant).
  2. The information is more than three months old.
  3. The exchange has five or more participants contributing data, and no individual participant’s data represents more than 25% of any statistic; and no individual participant’s data can be identified.

Companies have relied on this safety zone in conducting surveys and benchmarking related to pricing, supply costs, and salaries. These surveys have served as critical compliance tools. Organizations exempt from federal income tax often use surveys to demonstrate fair market value compensation to safeguard against claims of private inurement and private benefit. Similarly, healthcare companies routinely use benchmarking studies to demonstrate fair market value compensation for compliance with fraud and abuse laws.

Group Purchasing Organizations

The safety zone on joint purchasing arrangements (Statement 7 of the 1996 Statements) stated that, in general, the agencies would not challenge joint purchasing arrangements (e.g., group purchasing organizations (GPOs)) if the following two conditions were met:

  1. The purchases account for less than 35% of the total sales of the purchased product or service.
  2. The cost of the products or services purchased jointly accounts for less than 20% of the participants’ revenues.

DOJ cited changes in the healthcare landscape as the rationale for withdrawing these policy statements, specifically indicating that the statements were “overly permissive” on information sharing. In a speech the day before DOJ’s announcement, Principal Deputy Assistant Attorney General (DAAG) Doha Mekki stated that the safety zone factors “do not consider the realities of a transformed industry” and “understate the antitrust risks of competitors sharing competitively sensitive information.” DAAG Mekki explained that:

  • Information exchanges managed by third parties can have the same anticompetitive effects—and the use of a third party enhances anticompetitive effects.
  • New algorithms and AI learning increase the competitive value of historical information (more [...]

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European Commission and National Authorities Take a Stand Against Excessive Pricing by the Pharmaceutical Industry

by and | May 17, 2021 | , , ,

The European Commission and national competition authorities (NCAs) are very actively fighting a number of anticompetitive practices in the pharmaceutical industry. Enforcing the prohibition against excessive pricing has become a particular area of focus for competition authorities in Europe.

The European approach to excessive pricing differs from that followed in the United States, where excessive pricing does not amount to a violation of antitrust laws.

In the European Union (and the United Kingdom, for now), dominant businesses are not allowed to directly nor indirectly impose unfair purchase or selling prices. The Court of Justice of the European Union (CJEU) has established a two-pronged test for use in investigating excessive pricing. It must be determined i) whether the difference between costs actually incurred and the price actually charged is excessive, and, if yes, ii) whether or not a price has been imposed that is either unfair in itself or when compared to competing products.

In practice, competition authorities have historically been wary of prosecuting excessive pricing, partly because they do not want to act like price regulators, and partly because it can be difficult for an authority to establish that a price is excessive. In the last couple of years, however, the Commission and several NCAs have overcome their reticence.

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Expect More Criminal Enforcement & What You Can Do to Minimize Your Risk

by and | Apr 16, 2021 | ,

OVERVIEW

Antitrust cartel and related collusive scheme enforcement is poised to increase. Several factors support this: (1) the Antitrust Division (the Division) has a 10% budget increase for Fiscal Year (FY) 2021; (2) proposed legislation that would increase its budget by $300 million; (3) Democratic administrations have traditionally been more aggressive in enforcing antitrust laws; (4) according to the US Department of Justice (DOJ), last year the Division opened the most grand jury investigations in almost 20 years and by the end of 2020 had the most open grand jury investigations in a decade; (5) increased coordination with international law enforcement agencies, including the Division recently signing a number of cross-border agreements, maintaining active memberships in multilateral organizations dedicated to cross-border antitrust enforcement cooperation and a DOJ official recently noting they have been working at strengthening their relationships with international law enforcement agencies during the pandemic and they expect this to benefit international coordination on investigations and (6) as pandemic limitations on in-person investigative tactics subside (including search warrants and knock and talk interviews, among others), expect a return to overt tactics related to open grand jury investigations.

Historically, cartel enforcement has increased following economic downturns and substantial federal stimulus packages. For example, after the 2008 financial crisis and the 2009 Recovery Act, the DOJ filed 60% more criminal cases than in prior years. We expect this trend to continue in the wake of the unprecedented government stimulus packages passed in 2020 and 2021 and additional potential government spending on infrastructure. In addition to the increased resources, the Division has stepped up its criminal enforcement program with the creation and recent expansion of the Procurement Collusion Strike Force (PCSF), the expansion of criminal investigations and prosecutions into labor markets, higher expectations for corporate cooperators and new potential benefits for corporate entities with compliance programs addressing antitrust violations.

Below we discuss the sectors most likely to be implicated by increased criminal antitrust enforcement, the PCSF and what steps can be taken to prepare and minimize risk in this environment.

EXPECTED INDUSTRY FOCUS

Based on the trends described above and our recent experience at the DOJ, we expect antitrust criminal enforcement to focus in at least the following industries:

  • Healthcare – The DOJ remains active in this sector with its ongoing generics investigations and prosecutions and other cases relating to market allocation and labor markets. In fact, all of the charged labor market cases thus far have been in the healthcare industry. The DOJ has stated that investigations and prosecutions for violations in the healthcare sector remain its top focus and stimulus spending will likely serve to increase the DOJ’s attention to healthcare markets. Although healthcare compliance policies have often focused on other fraud and abuse issues, such as the Anti-Kickback Statute and Stark Law, compliance with antitrust laws – including for human resources – is now more critical than ever. In addition, the recently signed Competitive Health Insurance Reform Act significantly narrows the exemption [...]

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CA SB 977 Would Expand AG Review of Healthcare Transactions

by | Jun 5, 2020 |

California Senate Bill (SB) 977, if passed, would broaden the type of healthcare transactions that require California Attorney General (AG) review and approval. SB 977 would require that a healthcare system, private equity group or hedge fund provide written notice to, and obtain the written consent of, the AG prior to any acquisition of or affiliation with a healthcare facility or provider.

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FTC and DOJ Issue Joint Antitrust Statement Regarding COVID-19 and Competition in Labor Markets

by and | Apr 14, 2020 |

The COVID-19 pandemic has placed additional stressors on labor markets, particularly for healthcare workers and essential employees. While recognizing that employers, recruiters and staffing agencies may need—and be allowed to—cooperate in unprecedented ways to address current needs, on April 13, 2020, the US Department of Justice and US Federal Trade Commission issued a joint statement reinforcing their vigilance against collusion or anticompetitive conduct in labor markets and their willingness to pursue criminal and civil actions against violators.

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