FTC Proposes Merger Review Changes that Could Impact Healthcare Deals
The changes would require entities involved in healthcare deals and other mergers to submit additional information for competition reviews.
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- The Federal Trade Commission (FTC) and the US Department of Justice (DOJ) have proposed changes to the premerger review process to allow more effective screenings of healthcare deals for competition issues.
The proposed changes apply to the premerger notification form and the premerger notification rules implementing the Hart-Scott-Rodino (HSR) Act. The HSR Act requires merger and acquisition parties to submit a premerger notification to FTC and the Antitrust Division of the DOJ. Parties must complete HSR forms and wait a specified time before finalizing their deal, usually 30 days.
“Much has changed in the 45 years since the HSR Act was passed. Deal volume, for example, has soared. Transactions are increasingly complex, in both deal structure and potential competitive impact. Investment vehicles have also changed, alongside major transformations in how firms do business,” FTC Chair Lina Khan and Commissioners Rebecca Kelly Slaughter and Alvaro Bedoya wrote in a statement.
“The HSR form, meanwhile, has largely stayed the same. Against the backdrop of these vast changes, the information currently collected by the HSR form is insufficient for our teams to determine, in the initial 30 days, whether a proposed deal may violate the antitrust laws. Our staff are put in the position of expending significant time and effort to develop even a basic understanding of key facts.”
The proposed changes will allow the agencies to review proposed transactions more effectively and efficiently by requiring entities involved in a merger or acquisition to provide additional information. During the initial competition review, FTC and DOJ can identify transactions that require an in-depth investigation, in which they determine if a deal would violate antitrust laws.
If the changes are finalized, organizations would have to submit details about transaction rationale and information about investment vehicles or corporate relationships. Additionally, parties must provide projected revenue streams, transactional analyses, and internal documents describing market conditions and the structure of involved entities.
The proposals would also require parties to submit information on products and services in horizontal and non-horizontal business relationships and details on previous acquisitions.
In addition, the changes include mandates required by the Merger Filing Fee Modernization Act of 2022 that direct FTC and DOJ to collect information on subsidies received from foreign entities that are strategic or economic threats to the United States.
Public comments on the proposal are due by August 28, 2023.
While the changes seek to promote competition, they could lead to additional hurdles for healthcare organizations looking to merge. Hospital trade organizations, including the American Hospital Association (AHA), have been vocal about FTC’s antitrust enforcement regarding healthcare mergers.
Recently, AHA filed a friend-of-the-court brief, calling FTC’s enforcement practices used Illumina Inc. v FTC unconstitutional.
Healthcare merger and acquisition activity has persisted in 2023, despite increased antitrust scrutiny and other struggles, including high interest rates and recession fears. A report from PricewaterhouseCoopers (PwC) found that while deal volumes fell slightly from 2022, the number of deals so far in 2023 is nearly twice the levels seen from 2018 through 2020.
