AHA Supports Antitrust Laws, Urges Congress Pass SMARTER Act
By - The American Hospital Association (AHA) is actively urging Congress this week to pass the freshly crafted Standard Merger and Acquisition Reviews Through Equal Rights Act of 2015 (the SMARTER Act, S. 2102 / H.R. 2745).
This bill, an amendment to the Clayton Act and the FTC Act, is “narrowly crafted to accomplish one important outcome: to ensure that all proposed transactions face the same enforcement process and standard of review regardless of whether the Federal Trade Commission or the Antitrust Division of the Department of Justice reviews the transaction,” the AHA stated yesterday to the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights. “[T]he bill removes a deterrent to hospital integration and realignment, which is essential for success in the changing health care landscape,” the organization added.
All transacting parties need to face a unified enforcement process and standard of review, the AHA maintained. Such should not be dependent on whether the proposed transaction is reviewed by the FTC or the Department of Justice (DOJ), the organization added.
“The agencies’ authority to enforce Section 7 of the Clayton Act is uniform, and the processes followed by and the standards of review applicable to each agency’s enforcement actions should be as well,” the AHA continued. “S. 2102 accomplishes this goal and ensures both the FTC and DOJ will rely exclusively on the federal court system to determine the competitiveness of a transaction, ensuring transacting parties, including hospitals, receive a full hearing on the merits.”
Selected highlights of yesterday’s Subcommittee testimony
Numerous pieces of testimony were delivered yesterday during a Subcommittee on Antitrust, Competition Policy and Consumer Rights hearing in Washington, DC.
Senator Patrick Leahy (D-Vt.) confirmed “serious concerns” within a member statement to the Subcommittee about how the proposed legislation may impact the FTC’s independent antitrust enforcement authority. “The legislation being discussed today would fundamentally change the FTC’s authority to protect consumers against harmful mergers before they are completed,” confirmed Senator Leahy. These issues require careful upcoming attention and keen review, he said.
Senator Leahy pinpointed two primary changes likely to materialize if the SMARTER Act is passed. Firstly, such a bill “would alter the standard used by courts when the FTC seeks a preliminary injunction against a transaction before completion,” he claimed. “I am deeply concerned that a change in statutory language would call into question decades of precedent, causing confusion and unpredictability,” he said. “Moreover, a change could send an unintended signal to federal courts that Congress intends the standard for the FTC to obtain an injunction to be lowered, and am therefore skeptical of such a proposal.”
Secondly, the SMARTER ACT would ban the FTC from exercising its administrative adjudication authority to dispute merger transactions prior to their completion, he said. “The FTC’s independent adjudication function is a core component of the Commission’s statutory structure, and reflects its nature as an expert agency,” stated Senator Leahy. “Removing this authority in the context of unconsummated mergers undermines the Commission’s ability to protect consumers before harm has occurred."
Stated Deborah A. Garza, Partner at Covington & Burlington, LLP and Former Chair of the Antitrust Modernization Commission before the Subcommittee, “This legislation is needed because it is important to maintain consensus about the value of a strong antitrust enforcement regime. A perception of unequal or unfair treatment undermines that consensus.”
The SMARTER ACT is actually quite simple, Garza explained. "A merger should not be treated differently depending on which antitrust enforcement agency – DOJ or the FTC – happens to review it," she noted. Deciding upon regulatory outcomes via a mere "flip of the merger agency coin," she says, is not the most advantageous option.
Other highlights from Subcommittee testimony, including that of Jonathan M. Jacobson, Partner at Wilson Sonsini Goodrich & Rosati, PC, and Former Commissioner of the Antitrust Modernization Commission, maintained the legislation was too broadly drafted and demands further clarification. “In representing merging parties, I have often found that who the staff lawyers are may make a big difference in both timing and getting the deal through at all – and there are considerable variances in the various merger ‘shops’ at the DOJ just as there are at the FTC,” Jacobson stated, in adherence to Garza’s view of the statutory change as both “unnecessary and potentially harmful.”
“[Stripping] the FTC of the ability to conduct administrative litigation for pre-consummation merger challenges would do very little to assist merging parties while imposing substantial limitations on the FTC’s ability to pursue its mission in appropriate cases,” maintained Jacobson. “I therefore would respectfully urge the Senate to reject this aspect of the proposed legislation.”
