This week, the Commission announced that it blocked a hospital merger in Utah and New Jersey and ordered an oil and gas divestiture in Michigan. The FTC also issued a policy statement on exclusionary rebates and fees in prescription drug pricing and submitted a report to Congress on combatting online harms through innovation. Commissioner Noah Joshua Phillips issued a dissenting statement regarding the FTC’s report to Congress, and Commissioner Christine Wilson questioned whether the FTC’s Fuel Rating Rule under the Petroleum Marketing Practices Act is necessary. These stories and more after the jump.
Monday, June 13, 2022
FTC Internal Operations: Public Forum
- The Commission announced that it will host another listening forum on the effects of mergers and acquisitions involving a broad range of market participants on June 21, 2022. FTC Chair Lina Khan and Commissioners Noah Joshua Phillips, Rebecca Kelly Slaughter, Christine Wilson, and Alvaro Bedoya are expected to attend. This forum is the fifth in a series of public forums will supplement the agencies’ recent request for comments on merger enforcement guidelines. Unlike past forums in this series that were in collaboration with the Department of Justice Antitrust Division, the upcoming listening forum will not be limited to a specific industry or labor market. Registration is required to submit a public comment at the listening forum.
Tuesday, June 14, 2022
Bureau of Competition: Health Care & Pharmacy
- FTC Bureau of Competition Director Holly Vedova issued a statement regarding the announcement that RWJBarnabas Health and Saint Peter’s Healthcare System abandoned their proposed merger. In her statement, Director Vedova noted that the transaction would have resulted in higher prices and lower quality of care in Middlesex County, New Jersey because the rival hospital systems would have a combined share of 50 percent of inpatient acute care services in Middlesex County. Significantly, the statement emphasizes that “this is the third time the Commission has filed a complaint to block an anticompetitive hospital merger so far in 2022.” On June 2, 2022, the FTC had issued an administrative complaint to block the transaction.
Bureau of Competition: Oil & Gas Industry
- The Commission filed a consent agreement, draft complaint, and proposed decision and order against ARKO Corporation (“ARKO”) and its subsidiaries GPM Southeast, LLC, and GPM Petroleum, LLC (collectively, “GPM”) over allegations that its $94 million acquisition of 60 Express Stop gas stations from Corrigan Oil Company (“Corrigan”) violated Section 7 of the Clayton Act and Section 5 of the FTC Act. The proposed order remedies the acquisition’s likely anticompetitive effects by requiring ARKO and GM to return to Corrigan 5 gas stations in Michigan that had been included in the acquisition. It requires the parties to amend the noncompete obligation in their asset purchase agreement to apply only to fuel retail businesses GPM acquired in the transaction (excluding the 5 locations subject to divestiture) and limit the noncompete agreement’s terms to no longer than 3 years in duration and no more than 3 miles from each Express Stop location. Importantly, the order also prohibits ARKO and GPM from entering or enforcing any noncompete agreement (1) related to acquisitions of a fuel retail business that restrict competition around a retail fuel business that GPM already owns or operates, as opposed to the acquired retail fuel business, and (2) notify third parties subject to similar noncompete agreements of GPM’s obligations under the order. In response, FTC Chair Lina Khan issued a statement, which Commissioners Alvaro Bedoya and Rebecca Kelly Slaughter joined. Chair Khan emphasized this acquisition involved “illegitimate, overboard agreements not to compete” and that “the Commission will scrutinize contract terms in merger agreements that impede fair competition.”
Bureau of Consumer Protection: Oil & Gas Industry
- The FTC approved a Federal Register Notice seeking comment on a proposed exemption to the Fuel Rating Rule, which the Commission promulgated under the Petroleum Marketing Practices Act (“PMPA”). The Fuel Rating Rule details the label color scheme, shape, size, textual content, and font type/point size, and requires companies apply for an exemption to the Rule. According to the Notice, the FTC has granted at least seven other exemptions to this Rule since 1979. Commissioner Christine Wilson issued a concurring statement on the Federal Register Notice to question whether Fuel Rating Rule’s stringent requirements were necessary to satisfy the PMPA’s mandate. Commissioner Wilson has made similar comments in the past, such as in response to the Commission’s Energy Labeling Rule.
Bureau of Consumer Protection: Deception in the Lending Industry
- The FTC announced it was sending 26,698 checks totaling more than $970,000 to consumers who were harmed by an allegedly deceptive payday lending scheme. These refunds relate to a complaint the FTC filed in May 2020 for a permanent injunction after it obtained a temporary restraining order barring Harvest Moon Financial, Gentle Breeze Online, and Green Stream Lending from deceptively advertising that borrowers could repay payday loans after a fixed number of payments. In January 2021, the parties settled; the resulting order banned defendants permanently from the lending industry and required them to deem nearly all outstanding debt as paid in full and pay a monetary judgment of $114.3 million. This case predates the FTC’s loss of its ability to obtain equitable monetary relief in federal court for consumers following an April 22, 2021 Supreme Court decision.
FTC Internal Operations: Public Workshop
- The FTC and the DOJ concluded the first day of their two-day virtual public workshop on reexamining antitrust enforcement in the pharmaceutical industry. The workshop is the culmination of the Multilateral Pharmaceutical Merger Task Force that was formed in March 2021. The Task Force included staff from the FTC and DOJ, Offices of State Attorneys General, Canada’s Competition Bureau, the European Commission Directorate General for Competition, and the U.K.’s Competition and Markets Authority. In their introductory remarks, FTC Chair Lina Khan and Assistant Attorney General Jonathan Kanter emphasized acquisitions of potential pharmaceutical competitors, illegal bundling, and how competition affects the quality of patient care. Commissioner Rebecca Kelly Slaughter delivered the keynote address to highlight the Task Force’s intergovernmental results. Her address also focused on how anticompetitive conduct affects clinical research and development in the pharmaceutical industry. Thomas DeMatteo, Counsel to the Assistant Attorney General in the DOJ Antitrust Division, moderated the first panel on concentration levels in the pharmaceutical sector. The panelists – Patricia Danzon (Wharton School of the University of Pennsylvania), Diana Moss (American Antitrust Institute), and Rena Conti (Boston University Questrom School of Business) – discussed approaches to market definition, research on the impact of settling pharmaceutical merger through divestiture, and concentration in the generics market. Concluding the first day, Malinda Lee of the California Attorney General’s Office moderated a second panel on remedies in pharmaceutical mergers. The panelists – Synda Mark (FTC), Youenn Beaudouin (European Commission Directorate General for Competition), Barak Richman and Arti Rai (Duke University School of Law), and Robin Feldman (University of California, Hastings College of the Law) – debated potential ways to strengthen review of pharmaceutical merger and improve the effectiveness of remedies, such as conduct remedies, targeting evergreening and product hopping, supporting scientists and innovation, and independent monitors. Interestingly, Synda Mark underscored the FTC’s focus on labor market consolidation in the Commission’s review of merger in the pharmaceutical industry.
Wednesday, June 15, 2022
FTC Internal Operations: Public Workshop
- The FTC and the DOJ concluded the second day of their two-day virtual public workshop on reexamining antitrust enforcement in the pharmaceutical industry. Viola Chen, an economic advisor to Commissioner Rebecca Kelly Slaughter and a staff economist in Antitrust II in the FTC’s Bureau of Economics, opened the program, and two panels followed her introductory remarks. Riccardo Ferrari, Assistant Director of Economics at the U.K. Competition and Markets Authority, moderated the first panel, which was an assessment of innovation aspects in pharmaceutical mergers. The panelists – Caroline Holland (FTC), Paul Csiszár and Camille Vardon (European Commission Directorate-General for Competition), Elie Yoo (U.K. Competition and Markets Authority), and Carmine Ornaghi (University of South Hampton) – compared how U.S., E.C., and U.K. agencies assess innovation competition, including specific analytical frameworks used for review of pharmaceutical merger. Next, David Lawrence, Policy Director for the DOJ Antitrust Division, led a discussion on prior bad acts as factors in pharmaceutical merger reviews with panelists Gwendolyn Cooley (Wisconsin Attorney General’s Office), Michael Carrier (Rutgers Law School), Scott Hemphill (NYU School of Law), and Raksha Kopparam (Washington Center for Equitable Growth). The panel identified factors that regulators should consider in review of pharmaceutical merger, including firm size, history of prior anticompetitive conduct, and cross-market effects that increase bargaining leverage. David Lawrence also reiterated the FTC’s Synda Mark’s comments from the prior day on U.S. regulatory concerns with labor market consolidation in pharmaceutical merger review.
Thursday, June 16, 2022
FTC Internal Operations: Open Commission Meeting
- The FTC held an open commission meeting and adopted a new policy statement on rebates and fees in exchange for excluding lower-cost prescription drug prices. The statement targets exclusionary rebates and fees paid by drug manufacturers to pharmacy benefit managers and other intermediaries. According to the FTC, these rebates and fees favor high-cost drugs to generate large rebates and fees, which are not always shared with patients. In the statement, the Commission argues that such rebate and fee practices may violate Sections 1 and 2 of the Sherman Act, Section 3 of the Clayton Act, or Section 5 of the FTC Act. It also outlines how paying or accepting rebates or fees in exchange for excluding lower-cost drugs may violate Section 2(c) of the Robinson Patman Act, which prohibits payments to agents, representatives, and intermediaries who represent another party’s interest in connection with the purchase or sale of goods. This new policy statement illustrates that the FTC is focused on promoting competition from lower-cost drugs, especially when generics and biosimilars have been excluded or disfavored on formularies. FTC Chair Lina Khan issued remarks that highlighted the FTC’s authority to target anticompetitive rebates as a form of commercial bribery, which constitutes an unfair method of competition under Section 5 of the FTC Act and violates Section 2(c) of the Robinson-Patman Act. Commissioner Alvaro Bedoya’s statement similarly explained how rebates function as illegal kickbacks. Commissioner Rebecca Kelly Slaughter issued a statement that focused on pharmaceutical pricing and the FTC’s authority under Section 6(b) of the FTC Act to conduct wide-ranging studies that do not have a specific law enforcement purpose. Commissioner Christine Wilson also prepared a written statement and delivered oral remarks at the open commission meeting. Commissioner Wilson thanked Chair Khan for facilitating a collaborative drafting process for this policy statement and underscored the importance of Section 2(c) of the Robinson-Patman Act to protect competition and consumers.
- The FTC submitted a report to Congress on combatting online harms through innovation. The report’s key conclusion is that governments, platforms, and others must exercise great caution in either mandating the use of, or over-relying on, AI tools because AI datasets are not robust or accurate enough to avoid false positives or false negatives and algorithms may be designed based on mistaken outcomes that need constant adjustment. It recommends human intervention and monitoring of the use and decisions of AI tools, transparency about how AI-based tools are used to filter content, accountability for AI data practices and results, diversity in teams that build AI-based tools, increased user tools to control personal exposure to harmful content, and a range of interventions available to limit the impact or “viral spread” of “certain harmful content.” Commissioner Rebecca Kelly Slaughter issued a statement that highlighted the harms involved with “unfettered” data collection. Commissioner Christine Wilson issued a statement and delivered oral remarks that expressed concern over the “swift labeling of ideas as ‘misinformation’” because it could “stymie the development of new theories, research and ideas.” Commissioner Noah Joshua Phillips issued a dissenting statement to criticize the thoroughness of the report and its underlying research.
Bureau of Competition: Health Care & Pharmacy
- FTC Bureau of Competition Director Holly Vedova issued a statement regarding the announcement that HCA Healthcare and Steward Health Care System abandoned their proposed merger. In her statement, Director Vedova argued that the transaction would have combined the second and fourth largest healthcare systems in two local markets in Utah, resulting in higher prices and lower quality of care. Significantly, the statement emphasizes that “for the second time in a week, parties who proposed anticompetitive hospital merger have called off their deal after the FTC filed a complaint to block the deal.” On June 2, 2022, the FTC had issued an administrative complaint to block the transaction.