Tag: antitrust guidance

Antitrust Enforcers’ “Second Listening” Forum On Merger Reform Highlights Issues In The Healthcare Industry

In March of this year the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) jointly announced a series of “listening forums” that would help gather real world input from participants in key industry segments on possible reforms to the antitrust regulations pertaining to mergers and acquisitions.1 Co-led by DOJ Deputy Assistant Attorney General (“DAAG”) Doha Mekke and FTC Chairperson Lina Khan, the second of the four announced forums, focusing on healthcare, was held on April 14, 2022. 2  In addition to DAAG Mekki and Chairperson Khan, the program included eight panelists that provided perspectives from nurses, doctors, patients, pharmacists and small businesses. 3

DAAG Mekki started off the discussion by reaffirming the antitrust enforcement agencies’ collective commitment that “healthcare markets remain competitive” because it “is essential to our livelihood or the livelihood of the nation.” Mekki referenced ongoing work by the agencies in the healthcare field, including recent DOJ enforcement actions. 4

The healthcare panelists highlighted several ongoing issues in the industry, such as the adverse impact of care due to post-merger hospital staff downsizing that was tied to merger-specific efficiencies, reduced options to tertiary care, higher healthcare costs for patients, and unfair competition in the pharmaceutical and small business markets, and other impacts in the research and labor markets.

Chairperson Khan indicated that the comments resonated with the concerns that the FTC had in the hospital, pharmacy benefits management, and pharmacy industries. Ms. Khan also suggested a renewed interest in examining the potential anticompetitive effects of vertical integration in addition to horizontal mergers and acquisitions, which is consistent with the FTC’s position when it indicated that it wanted to revisit this issue while withdrawing the Vertical Merger Guidelines in 2021. Khan also reaffirmed the importance of examining anticompetitive effects in the labor market. All of these issues, according to Khan, are important in assessing how the antitrust laws can be used to improve the quality of healthcare for patients.

The forum ended with some of the more than two hundred public comments, most of which echoed similar concerns raised by the panelists in addition to concerns such as disparities in hospital-physician group contracting situations and racial disparities in access to healthcare as a result of healthcare system mergers.

Once again, all signs point toward an unprecedented time in antitrust enforcement in the healthcare industry. Accordingly, it is important that healthcare companies revisit, revise, and implement best practices with regard to their respective antitrust compliance programs. A proactive, as opposed to a reactive, approach would provide companies the best risk management strategy. It is also important to engage antitrust counsel early in potential transactions to assess how the antitrust agencies may view the deal.

The DOJ and FTC Listening Forums continue with Media and Entertainment, which was held on April 27, 2022, and the final one on Technology, which will be held on May 12, 2022. Click here to download the alert. 

FOOTNOTES

1    “Forums to focus on markets commonly impacted by mergers: food and agriculture, health care, media and entertainment, and technology,” March 17, 2022, available at: https://www.ftc.gov/news-events/news/press-releases/2022/03/ftc-justice-department-launch-listening-forums-firsthand-effects-mergers-acquisitions

2   See “Antitrust Enforcers’ First ‘Listening Forum’ On Merger Reform Highlights Ongoing Concerns in the Food and Agriculture Industry” May 9, 2022, available at: https://www.polsinelli.com/intelligence/antitrust-forum-highlights-concerns-in-food-and-ag

3 Full transcript of forum available at: https://www.ftc.gov/system/files/ftc_gov/pdf/FTC-DOJ-Listening-Forum-%20Health-Care-Transcript.pdf. It should be noted that Assistant Attorney General Jonathan Kanter did make an appearance at the end of the session, reiterating the importance of this forum.

4    See “DOJ Faces Two Strikeouts in First Health Care Wage-Fixing and ‘No Poach’ Prosecutions,” April 20, 2022, available at: https://www.polsinelli.com/intelligence/doj-faces-two-strikeouts-in-first-health-care

© Polsinelli PC, Polsinelli LLP in California
Article By Arindam Kar with Polsinelli PC.
For more articles about antitrust law, visit the NLR Antitrust law section.

DOJ, FTC Announce New Antitrust Guidance for Recruiting and Hiring; Criminal Enforcement Possible

handcuffs, criminal enforcementMany companies—and the HR professionals and other executives who worked for them—have found out the hard way that business-to-business agreements on compensation and recruiting can violate the antitrust laws and bring huge corporate and personal penalties.

Last week, the Federal Trade Commission (FTC) and the Department of Justice Antitrust Division (DOJ) jointly issued antitrust guidance for anyone who deals with recruiting and compensation. The guidance is written for HR professionals, not antitrust experts. It avoids jargon and applies antitrust basics in plain English. It expands on those basics by providing short and direct answers to real-life questions.

The guidance comes in the wake of several actions in recent years by the federal antitrust agencies against so-called “no-poaching” or “wage-fixing” agreements entered by companies competing for the same talent. It announces that DOJ will prosecute criminally some antitrust violations in this space. While the new guidance is explicitly aimed at HR professionals, senior executives should understand it as well.

The guidance starts with the basics: The antitrust laws establish the rules for a competitive marketplace, including how competitors interact with each other. From an antitrust perspective, firms that compete to recruit or retain employees are competitors, even if they do not compete when selling products or services. Therefore, agreements among employers not to recruit certain employees (no-poaching) or not to compete on various terms of compensation (wage-fixing) can violate the antitrust laws.

To be illegal, these agreements need not be explicit or formal. Evidence of exchanges of information on compensation, recruiting, or similar topics followed by parallel behavior can lead to an inference of agreement. Intent to lower a company’s labor costs is no defense. Also, there is no “non-profit” defense: while they might not compete to sell services, non-profits are considered competitors for the staff they hire.

The potential costs of antitrust violations are huge: fines by the agencies; treble damages for injured actual or potential employees; and intrusive regulation of basic company operations from consent decrees and judgments. In addition, the DOJ used this guidance to announce that it will now prosecute criminally any naked wage-fixing or no-poaching agreements. According to DOJ, these naked agreements—“separate from or not reasonably necessary to a larger legitimate collaboration between the employers”—harm competition in the same irredeemable way as hardcore price-fixing cartels. So now, any executives involved in such agreements—whether HR professionals or not—face personal consequences, including threats of potential jail time.

Even unsuccessful attempts to reach an anticompetitive agreement on these topics can be illegal in the eyes of the regulators. As the guidance makes clear, so-called “invitations to collude” have been and will continue to be pursued by the FTC as actions that might violate the Federal Trade Commission Act.

Some of these information exchanges and agreements do not automatically violate the antitrust laws and there is nothing in this new guidance that suggests otherwise. If the agreements are reasonably necessary to an actual or potential joint venture or merger, legitimate benchmarking activity, or other collaboration that might help consumers, their net effect on competition would need to be judged. In prior actions, the agencies also have recognized as legitimate certain no-poaching clauses in agreements with consultants and recruiting agencies. Even such common uses as employment or severance agreements might not run afoul of the antitrust law’s prohibitions.

The guidance does not—and really cannot—go into all the detail necessary to determine when any particular effort will pass antitrust muster. It does refer readers to the earlier Health Care Guidelines but those helpful tips relate only to information exchanges. The guidance also provides links to the many prior civil actions taken by the agencies on these types of matters. It is accompanied by a two-sided index card entitled Antitrust Red Flags for Employment Practices that could be part of an effective compliance program.

ARTICLE BY Steven J. Cernak of Schiff Hardin LLP

© 2016 Schiff Hardin LLP