Home Health & Hospice Week

New finalized merger guidance from the feds may have softened a bit from its proposed form, but it will still give potential deals a higher hurdle to clear for regulatory approval.

On Dec. 18, 2023, the Department of Justice and the Federal Trade Commission jointly released new U.S. Merger Guidelines. The new Guidelines, although not legally binding, reflect the more in-depth scrutiny recently shown by the agencies during merger and acquisition assessments. They replace previous merger guidelines, including the July 2023 proposed version, and were effective immediately.

The federal government continues to ramp up regulations surrounding healthcare transactions and it’s expected more will go under review now that the Guidelines are final, say ECG Management Consultants in online analysis of the document.

Affected parties had plenty of criticisms of the proposed Guidelines. For example, “serious flaws” in the policy include “a structural presumption that is arbitrarily low and potentially fatal to beneficial transactions,” the American Hospital Association notes in an article.

The final version fixes some of the problems from the draft. “One of the areas of greatest concern regarding the July draft Guidelines was the notion that the agencies were setting out hard and fast rules against certain types of mergers, for example by stating guidelines as ‘mergers should not …,’” attorneys with law firm Crowell note in online analysis. “The final 2023 Guidelines soften that language — to ‘mergers may violate the law when they …’ and make clear in numerous ways that the Agencies’ theories of harm may be rebutted by the merging parties’ evidence,” the lawyers say.

Highlight: “The most notable changes from the draft Guidelines include … removal of draft guideline 6, which would have established a structural presumption that a vertical merger is illegal based on market shares,” say attorneys with law firm Wilmer Hale. “Market shares are now an element of a more holistic analysis of vertical mergers,” the lawyers say in online analysis.

Another important change is “inclusion of a detailed section on analytical, economic and evidentiary tools in merger analysis in the body of the Guidelines,” the Wilmer Hale attorneys point out. “This was split across multiple annexes in the draft Guidelines.”

Feds Get Tough

Perhaps most importantly, “the Revised Guidelines represent a significant milestone in the Biden Administration’s efforts to strengthen antitrust enforcement,” observe attorneys Benjamin Dryden, Richard Flannery, Elizabeth Haas, and Diane Hazel with law firm Foley & Lardner. “The Revised Guidelines send a strong message that the Agencies will use the antitrust laws aggressively to police merger activity,” Dryden, Flannery, Haas, and Hazel warn in online analysis.

The Guidelines’ release “coincides with the [FTC and DOJ’s] aggressive enforcement rhetoric, substantial increases in their funding, and pending Hart-Scott-Rodino (HSR) Act premerger notification requirements that are likely to substantially increase burdens on filing parties,” highlight attorneys with law firm Morgan Lewis. “The Guidelines apply to all transactions and all industries, but the agencies have indicated that they are especially interested in the life sciences, healthcare, technology, and private equity sectors,” they add in online analysis.

Watch for: The Guidelines’ nonbinding aspect is important. “While courts have often relied on the Merger Guidelines, they have not always done so and, indeed, both the DOJ and the FTC have lost several merger cases in the last few years,” the Morgan Lewis attorneys point out.

In other words, keep an eye on “how courts view them in future challenges to mergers,” the AHA says.

“In addition, it is possible that a future administration would replace the Guidelines, as has happened in the past,” say the Morgan Lewis lawyers. So stay tuned after the election this fall.

Note: The Guideline specifics are at www.justice.gov/ d9/2023-12/2023 Merger Guidelines.pdf.