In this Special Report, we highlight notable trends in antitrust litigation involving health care providers over the past two and a half years. Our complimentary update identifies the types of cases filed against providers, who is filing them, case results and currently pending cases to watch.
Katharine O’Connor focuses her practice on complex antitrust litigation, government investigations, defending mergers and acquisitions before antitrust enforcement agencies, and counseling clients on antitrust compliance issues. She has experience representing clients in a wide array of industries, including health care, manufacturing, food and finance. Read Katharine O’Connor's full bio.
The two current commissioners of the Federal Trade Commission (FTC) approved another final order and consent agreement with a trade association, this time with the National Association of Animal Breeders, Inc. (NAAB).
- NAAB is a non-profit corporation of approximately 24 member businesses that compete to sell dairy cattle semen to US dairy farms for artificial insemination of dairy cows. Together, the NAAB membership accounts for more than 90 percent of sales to US farms.
- In 2006, NAAB entered into an agreement with the United States Department of Agriculture (USDA) to develop genomic testing of dairy bulls to predict a bull’s ability to pass along commercially important traits to its daughters, like high milk yield.
- The new technology, called Genomic Predicted Transmitting Ability (GPTA) was developed by mid-2008.
- In late 2008, NAAB implemented rules limiting access to the GPTA technology. Specifically, (1) only a NAAB member could obtain a dairy bull’s GPTA; and (2) the NAAB member obtaining a GPTA must have some ownership interest in the dairy bull.
District Judge Walter H. Rice of the Southern District of Ohio granted three pretrial motions brought by the Defendants on the eve of trial in The Medical Center at Elizabeth Place, LLC v. Premier Health Partners, et al., Case No. 3:12-cv-26, 2017 WL 3433131 (S.D. Ohio Aug. 9, 2017), and denied as moot eleven remaining pretrial motions. Judge Rice dismissed the entire case with prejudice because he ruled the contracts that Plaintiff, a competitor hospital, challenged should be analyzed under the rule of reason, but Plaintiff had failed to plead a rule of reason case. Plaintiff’s decision not to do so doomed the case to failure.
- Judge Rice’s key decision related to the Defendants’ pretrial challenge of District Judge Black’s (who was previously assigned to the case) order holding that the per se rule applied.
- The Defendants include four hospital systems in the Dayton, Ohio area that formed the Premier joint venture. The hospitals “are owned, controlled and operated independently” but “their income streams are consolidated, and Premier manages many of their business functions, including the negotiation of each hospital’s managed care contracts with insurers.” 2017 WL 3433131, at *13.
- The Plaintiff challenged two types of agreements Premier negotiated on behalf of the hospitals: (1) agreements with insurance companies (payers) that included a “rate-for-volume clause”—that is, a provision wherein payers agreed to give Premier the option to terminate or renegotiate rates should the payers add other hospitals to their network; and (2) non-compete agreements with physicians in which physicians agreed to refer patients internally.
The two current commissioners of the Federal Trade Commission (FTC) approved a final order and consent agreement with the American Guild of Organists (AGO) after a public comment period of two months. The FTC alleged that the AGO violated Section 5 of the Federal Trade Commission Act by agreeing to restrain competition among its organist and choral conductor members. Under the terms of the settlement, the AGO agreed to make certain changes to its rules and policies.
- The AGO represents approximately 15,000 member organists and choral directors in 300 chapters in the United States and abroad.
- The FTC initiated an inquiry into the AGO’s practices in late 2015 after receiving complaints from consumers and organists regarding guild rules.
- Specifically, the AGO’s rules required a customer seeking to hire a musician who was not dedicated as the “incumbent musician” in a particular area to pay both the “incumbent musician” in the area as well as the hired musician. The AGO’s Code of Ethics stated that members should “protect themselves” through contracts that secured fees even when not performing.
- Also, the AGO published compensation schedules and formulas, instructing its membership to use the formulas to determine pricing in their region.
- Finally, the AGO’s rules prohibited a member from soliciting employment from an organization already employing an “incumbent musician.”
- The FTC’s complaint alleged that these actions restrained competition by encouraging a fixed pricing schedule between and among the AGO’s membership, and by preventing members from freely seeking or accepting employment. It also alleged that the AGO’s rules and guidelines likely raised prices for consumers seeking to employ organists for special occasions, as well as the organizations that employed organists.
- The settlement requires the AGO to change its rules and Code of Ethics, and mandates that each chapter of the AGO certify compliance in order to remain in the organization. In particular, the AGO no longer can publicize or endorse any standardized or suggested prices or interfere with any member’s ability to seek work as an organist or choral conductor.
The Federal Trade Commission (FTC) is composed of five Commissioners each with terms of seven years. The Commissioners are appointed by the President with the advice and consent of the Senate. At any given time, no more than three Commissioners may be members of the same political party. Currently, Acting Chairman Ohlhausen (R) and Commissioner McSweeny (D) are the only FTC Commissioners. President Trump, therefore, can nominate two republican Commissioners and a democrat or independent commissioner. On May 9, United States Senate Minority Leader Charles Schumer (D-NY) formally recommended to President Donald Trump that Rohit Chopra fill the empty Democratic FTC Commissioner position. It is not clear how President Trump will proceed following the recommendation. Prior presidents have typically relied on recommendations from opposition leaders when deciding on a nominee for a minority commissioner.
WHO IS ROHIT CHOPRA?
- Chopra is a Harvard University (BA) and Wharton School (MBA) graduate who has focused his career on consumer protection; specifically, advocacy for student loan forgiveness and better student loan servicing, and criticism of for-profit universities.
- Chopra was one of the initial employees of the Consumer Financial Protection Bureau (CFPB), founded in July 2010 and proposed in 2007 by Elizabeth Warren (D-MA) in response to the Great Recession. There, Chopra served as Assistant Director and Student Loan Ombudsman, where he worked to improve student loan servicing and sued ITT Tech and Corinthian Colleges Inc. for consumer fraud.
- In 2015, Chopra became a Senior Fellow at progressive think tank the Center for American Progress.
- He then joined the Obama Administration as Special Advisor to the Secretary of Education, after having been critical of the Obama Administration’s work on student loan issues while at the CFPB. In particular, he encouraged the Secretary of Education to combat data showing that student loan debt doubled under the Obama Administration and the amount of student loans in default continued to increase.
- Currently, Chopra serves as a Senior Fellow of the Consumer Federation of America, a non-profit consumer protection organization founded in 1968.
WHAT THIS MEANS?
- If appointed, Chopra would be a non-lawyer FTC Commissioner without significant experience in antitrust issues, having worked solely in the consumer protection arena.
- Chopra would replace former FTC Chairman Edith Ramirez, another progressive, who resigned her position effective February 10, 2017.
On Monday, October 3, 2016, Hillary Clinton issued a statement on her website titled “Hillary Clinton’s Vision for an Economy Where our Businesses, our Workers, and Our Consumers Grow and Prosper Together.”
Unlike President Barack Obama, former Secretary Clinton had not issued a clear policy statement on her antitrust position before Monday. She had, however, penned one short op-ed piece for Quartz, and had made some general statements on the campaign trail regarding the problems of industry consolidation. It was unclear from these prior statements whether a Clinton administration would mean any change in the current state of affairs at Department of Justice (DOJ) Antitrust Division and the Federal Trade Commission (FTC). The current administration has challenged a higher percentage of mergers than any administration since before Reagan’s, but it has not significantly altered the law regarding what mergers are considered actionable.
In her Quartz op-ed, Secretary Clinton stated that “we need to fix [the system],” and decried the concentrated markets in the pharmaceutical, airline and telecommunications industries. But Secretary Clinton gave only two concrete examples of how she would “take on the fight” against “large corporations.” Continue Reading Antitrust Enforcement under a Clinton Administration: Status Quo or Significant Change?
Since President Obama announced Judge Merrick Garland’s nomination to the Supreme Court of the United States last Wednesday, March 16, 2016, many have opined on his qualifications as well as the political fight about his confirmation this election year. A few articles have noted Judge Garland’s academic background—that he taught Advanced Antitrust at his alma mater, Harvard Law School, while working in private practice in the 1980s. During that time, Judge Garland also published articles in the Yale Law Journal and Harvard Law Review on antitrust issues.
Although his time as an antitrust academic ended nearly 30 years ago, Judge Garland’s articles remain relevant and continue to be cited by the courts and legal academics. For example, his article, Antitrust and State Action: Economic Efficiency and the Political Process, 96 Yale L.J. 486 (1986), was cited by Justice Kennedy in North Carolina State Board of Dental Examiners v. FTC, 135 S. Ct. 1101 (2015), in February 2015. In Antitrust and State Action, Judge Garland argued that courts and legal theorists should not rely on antitrust principles of economic efficiency to justify interference with state regulations and should not permit preemption of state regulations except where state governments delegate market regulation to private parties. 96 Yale L.J. at 487-88. The Supreme Court cited Judge Garland’s article in recognizing this limited exception to state immunity. N.C. State Bd. of Dental Examiners, 135 S. Ct. at 1111.
Since his appointment to the U.S. Court of Appeals for the District of Columbia Circuit in 1997, Judge Garland has been on several panels deciding antitrust cases, but has not authored any opinions. The panel decisions, however, can give us some insight as to how he may decide antitrust issues if his nomination is successful:
- In In re Rail Freight Fuel Surcharge Antitrust Litigation, 725 F.3d 244 (D.C. Cir. 2013), the court vacated class certification in a price-fixing case and remanded to the district court for consideration under Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). In particular, the D.C. Circuit was concerned that Plaintiff’s damages model yielded false positive results, which, “if accurate,  would shred the plaintiffs’ case for certification” because “[c]ommon questions of fact cannot predominate where there exists no reliable means of proving classwide injury in fact.” In re Rail Freight, 725 F.3d at 252-53.
- The court held interlocutory review under Rule 23(f) was not appropriate where defendant’s challenges to class certification—that plaintiffs lacked antitrust standing—was a merits question unrelated to the Rule 23 factors. In re Lorazepam & Clorazepate Antitrust Litig., 289 F.3d 98, 107-09 (D.C. Cir. 2002).
- In Andrix Phamaceuticals, Inc. v. Biovail Corp. Int’l, 256 F.3d 799 (D.C. Cir. 2001), the court held that the district court erred in dismissing with prejudice defendant’s counterclaim based on lack of antitrust injury or standing where the defendant could have amended its counterclaim to allege a cause of action. In that case, plaintiff had an agreement with a third-party that contained “allegedly anticompetitive provisions, including [plaintiff’s] pledge to continue to . . . forestall other applicants from receiving final FDA approval . . .[, which] could reasonably be viewed as an attempt to allocate market share and preserve monopolistic conditions.” at 811. Thus, the agreement could have caused defendant’s injury by delaying entry into the market.
Judge Garland’s earlier antitrust cases included: (i) granting the FTC’s emergency motion to enjoin the merger of baby food manufacturers H.J. Heinz Company and Milnot Holding Corporation; (ii) affirming dismissal of an “essential facilities” claim because plaintiffs were not competitors of defendant; and (iii) affirming dismissal of a group boycott claim brought by a doctor against seven defendants because the plaintiff failed to present evidence tending to exclude the possibility that the alleged conspirators acted based on legitimate rather than anticompetitive reasons. FTC v. Heinz, H.J. Co., Case No. 00-5362, 2000 WL 1741320 (D.C. Cir. Nov. 8, 2000); Thomas v. Network Sols., Inc., 176 F.3d 500 (D.C. Cir. 1999); Ostrzenski v. Columbia Hosp. for Women Found, Inc., 158 F.3d 1289 (D.C. Cir. 1998).
In sum, these decisions reflect a measured application of the law that is neither pro-plaintiff nor pro-defendant. Judge Garland’s understanding of economic theory underlying antitrust law can, as shown in Rail Freight, benefit antitrust defendants faced with class certification motions that hinge on plaintiffs’ experts flawed analyses.