In what will undoubtedly be seen by all interested parties as a significant setback in the Federal Trade Commission’s active opposition to potentially anticompetitive healthcare collaborations, the FTC voted unanimously on Wednesday to dismiss its challenge to Cabell Huntington Hospital’s acquisition of St. Mary’s Medical Center – two hospitals serving patients in the Huntington area of West Virginia. While the FTC continues to believe that the merger will result in significant anticompetitive harm, it chose to abandon the fight in light of the recent passage of West Virginia Senate Bill 597 (SB 597).
For parties considering a merger or other transaction, the civil penalties for failing to comply with the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) are about to increase significantly.
On June 29, 2016, the Federal Trade Commission announced that the maximum civil penalty for noncompliance with the premerger filing requirements of the HSR Act will increase from $16,000 per day to $40,000 per day, effective August 1, 2016. The current maximum penalty of $16,000 per day has been in place since 2009. Prior to 2009, the maximum penalty was $11,000 per day.
The UK people have voted to leave the European Union. Although there is no constitutional duty to leave the Union as a result, politically this is likely going to happen. Change will not be immediate and happen over time.
Companies are well advised to react quickly to assess the impact Brexit might have on their business and current commercial decisions involving the UK if they have not already done so.
On June 9, 2016, the Antitrust Division of the United States Department of Justice (“DoJ”) filed a complaint against the Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas Health Care System (“CHS”) in the United States District Court for the Western District of North Carolina. (United States of America and State of North Carolina v. Charlotte Mecklenburg Hospital Authority). The complaint accuses CHS of using “contract restrictions that prohibit commercial health insurers in the Charlotte area from offering patients financial benefits to use less expensive healthcare services offered by CHS’s competitors.” (Complaint, Preamble) In effect, the complaint is attacking a type of widely used contracting provision in which acute care hospital systems seek to prohibit insurance company payors from using “steering” restrictions, which would otherwise be used to steer their insured patients to lower cost healthcare providers, including lower-cost hospitals, in exchange for lower premiums in so-called “narrow network” insurance plans. The complaint then alleges that CHS has an approximately 50% share of the market for acute inpatient hospital care in the Charlotte metropolitan area, allegedly conferring market power on CHS.
The FTC just suffered a major setback in its concerted efforts to challenge the ever growing number of consolidations in the healthcare industry, failing to secure a preliminary injunction to block a hospital merger in central Pennsylvania. In a decisive and strongly-worded opinion, the Honorable John Jones III of the Middle District of Pennsylvania concluded that (1) the FTC had fatally alleged an unrealistically narrow geographic market; and (2) the merger was likely to benefit (not harm) consumers, in part by allowing the merged entity to remain competitive in the new healthcare environment which “virtually compels” consolidations. Federal Trade Commission et al. v. Penn State Hershey Med. Ctr. et al., Case No. 1:15-cv-02362 (May 9, 2016, M.D. Penn).
An appeal court in Frankfurt has asked the European Court of Justice to clarify the application of the competition rules to online sales. The Frankfurt court made its request in the context of a dispute between a leader in beauty products with an extensive portfolio of beauty brands and its German distributor. The supplier of beauty products operates a selective distribution system in Germany to manage how its products are sold and has taken its distributor to court for selling products over online platforms, such as Amazon.com and eBay. The Frankfurt court is seeking guidance from the European Court of Justice on whether a supplier can prohibit its distributor from selling its goods on online marketplaces, regardless of whether the distributor has met the criteria of the selective distribution system. This question is highly topical in the EU and particularly in Germany, where the German competition authority and the courts have recently taken divergent positions. The German competition authority has issued rulings prohibiting suppliers of branded goods from restricting internet sales by retailers and, in particular, over third party platforms such as eBay and Amazon.com. These rulings have been in contradiction with the stance taken by the German courts, such as the Higher Regional Court of Frankfurt, which recently decided that a branded manufacturer acted lawfully when banning its authorized retailers within its selective distribution system from selling its products on online marketplaces. According to the Higher Regional Court, a manufacturer has a legitimate interest in ensuring that its branded products are perceived as high-quality products sold with the requisite level of sales advice and a manufacturer is, therefore, free in principle to decide under which conditions its products are sold, provided that these conditions are necessary to meet its quality standards. It is expected that the European Court of Justice will issue its ruling on this issue within the next 15 months or so.
Since 2010, China’s State Administration for Industry and Commerce (SAIC) and the State Council Legislative Affairs Office (SCLAO) have been revising China’s Anti-Unfair Competition Law of 1993 (AUCL). This February the SCLAO released a draft revision of the AUCL for public comment. In general, the AUCL is broad, covering unfair trade practices that relate to intellectual property rights, anti-corruption and antitrust. Click here for the unofficial translation of the draft revision of the AUCL. Various organizations such as the American Chamber of Commerce, Beijing and American Bar Association will be submitting comments on behalf of companies and law firms, as well as other interested parties. Continue Reading
The late Justice Antonin Scalia was not the biggest fan of antitrust law. As he famously quipped during his Senate confirmation hearing: “In law school, I never understood [antitrust law]. I later found out, in reading the writings of those who now do understand it, that I should not have understood it because it did not make any sense then.” Continue Reading
1. Higher Thresholds For HSR Filings
On January 21, 2016, the Federal Trade Commission announced revised, higher thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The filing thresholds are revised annually, based on the change in gross national product and will be effective thirty days after publication in the Federal Register. Publication is expected within one week, so the new thresholds will likely become effective in late February 2016. Acquisitions that have not closed by the effective date will be subject to the new thresholds. Continue Reading
Plaintiffs and appellants, the disfavored purchasers in a Robinson-Patman Act case, were twenty-eight retail pharmacies who alleged that the pharmaceutical manufacturer defendants had charged them higher prices than those charged since the early 1990s to the favored purchasers, who typically received discounts and rebates. The favored purchasers included HMOs and pharmacy benefit managers, who manage benefits for insurers and HMOs. Plaintiffs claimed that the price differentials harmed their ability to compete, causing them to lose customers to the favored purchasers. After years of discovery, the district court granted summary judgment and dismissed plaintiffs’ Robinson-Patman Act claims (15 U.S.C. sections 13(a), (d), and (f), 15 and 26) for failure to prove competitive or antitrust injury. The court of appeals affirmed. Cash & Henderson Drugs, Inc. v. Johnson & Johnson, 799 F.3d 202 (2d Cir. 2015). Continue Reading