Home Health & Hospice Week

It is crucial that providers understand the latest Merger Guidelines, as they offer insight into the Department of Justice and Federal Trade Commission’s inner workings and decision-making processes on antitrust rules.

Background: When a merger or acquisition transaction is proposed that raises concerns, it is the joint responsibility of the DOJ and FTC to examine the evidence to determine if the transaction may substantially lessen competition or create a monopoly. The Guidelines — or analytical frameworks, as they are referred to — are a non-binding statement of the procedures and enforcement practices the agencies typically utilize when assessing mergers and acquisitions.

“The Guidelines identify the types of mergers where, in the view of the agencies, there is a presumption of unlawfulness,” explain attorneys with law firm Morgan Lewis. “However, merging parties can and do use evidence — before the agencies or in court — to rebut the presumption by showing why the specific merger is not anticompetitive,” they say in online analysis of the new policy.

The Guidelines do not predetermine enforcement action but identify the factors the agencies consider during an investigation, including the types of transactions most likely to be scrutinized more closely and possibly disputed. They also communicate details such as how the agencies apply the Guidelines; rebuttal evidence considered to refute an inference of potential harm under the guidelines; and some of the analytical, economic, and evidentiary tools they use to define the relevant market and evaluate competition risk.

Know this: The Guidelines are not comprehensive and they are not mutually exclusive of each other. That means the agencies can look at a single transaction and determine it has multiple effects or raises concerns in multiple ways.

There are 11 Merger Guidelines. Guidelines 1-6 describe distinct frameworks the agencies use to identify that a merger raises concerns when they raise a presumption of illegality when they:

1. Significantly Increase Concentration in a Highly Concentrated Market. The presumption is that a merger between competitors that significantly increases concentration and creates or further consolidates a highly concentrated market may substantially lessen competition.

2. Eliminate Substantial Competition. The agencies examine whether competition between the merging parties is substantial since their merger will essentially eliminate any competition between them.

3. Increase the Risk of Coordination. The agencies examine whether a merger increases the risk of anticompetitive coordination. A market that is highly concentrated or has seen prior anticompetitive coordination is inherently vulnerable and it will be inferred, subject to rebuttal evidence, that the merger may substantially lessen competition. In a not highly concentrated market, the agencies investigate whether facts suggest a greater risk of coordination than market structure alone would suggest. Firms can coordinate across any or all dimensions of competition, such as price, product features, customers, wages, benefits, or geography.

4. Eliminate a Potential Entrant in a Concentrated Market. The agencies examine whether, in a concentrated market, a merger would eliminate a potential entrant or eliminate current competitive pressure from a perceived potential entrant.

5. Create a Firm That May Limit Access to Products or Services That Its Rivals Use to Compete. The agencies examine the extent to which the merger creates a risk that the merged firm will limit rivals’ access, gain or increase access to competitively sensitive information, or deter rivals from investing in the market.

6. Entrench or Extend a Dominant Position. The agencies examine whether one of the merging firms already has a dominant position that the merger may reinforce, thereby tending to create a monopoly; and whether the merger may extend that dominant position to substantially lessen competition or tend to create a monopoly in another market.

Remaining Guidelines 7-11 explain how the FTC and DOJ apply the first 6 Guidelines in specific settings.

Caution: The agencies state that the Guidelines offer transparency into their internal processes. However, when determining if a merger is actually unlawful, they will continue to make decisions based on the law and the facts applicable in each case.

Takeaway: It is important to remember that the new Guidelines are not binding (see related story, p. 85); not all inclusive; instructive; and should be carefully reviewed along with the in-depth discussions and illustrative examples provided.

Review the Guidelines to help you gain a deeper understanding of how the agencies analyze, investigate, and potentially prosecute questionable mergers and acquisitions, experts advise.

Note: See more on Guidelines 7-11 in a future issue of HHHW by AAPC.