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EU Competition Commissioner Vestager Nominated for a Second Term – a Tale of Two Hats

What Happened:

On 10 September 2019, European Commission President-elect Ursula von der Leyen nominated Margrethe Vestager as Competition Commissioner for a second consecutive term. As part of a structural shake-up of the Commission, involving the institution of eight Vice-Presidents, three of whom will be “Executive Vice Presidents”, she will additionally serve as “Executive Vice President for a Europe fit for the Digital Age”. As head of the competition portfolio Ms. Vestager will be supported by DG-Comp. As chief coordinator of the digital portfolio she will be supported by the Commission’s Secretariat-General. With respect to the latter role in particular, Ms. Vestager will be charged with ensuring that “Europe fully grasps the potential of the digital age and strengthens its industry and innovation capacity” and will be responsible for specific initiatives including new laws governing digital platforms and a potential tax on digital companies. Subject to European Parliament consent, which is expected to be given, she will carry out this dual rule until 2024.

What This Means:

Ms. Vestager’s mission as Competition Commissioner will be based on the following priority actions:

  1. Strengthening competition enforcement in all sectors: this tenet focuses on improving case detection, expediting investigations and facilitating cooperation with and between EU national competition authorities, including global cooperation among competition authorities.
  2. Evaluate and review Europe’s competition rules: this will cover antitrust regulations that are due to expire during her mandate (e.g. the Verticals Block Exemption Regulation (Reg. 330/2010), the ongoing review of the merger control rules and the review of State aid rules and guidance.
  3. Use of the sector inquiry instrument in new and emerging markets: in the context of new and emerging markets, sector inquiries will be carried out in markets that the Commission believes are not working as well as they should, and that breaches of the antitrust rules might be a contributory factor. Ms. Vestager already presided over the Commission’s sector inquiry into the e-commerce sector in 2015.
  4. Develop tools and policies to address the distortive effects linked to state-owned companies or subsidized companies from outside the EU but operating in the EU.

While it is somewhat unusual for a Competition Commissioner to be re-elected for a second term, her re-nomination serves as a testament to widespread appreciation for her unwavering commitment to ensuring consumer welfare. That being said, and against the Commissioner’s mandate to secure enhanced global cooperation amongst competition authorities, the move will likely raise eyebrows on Capitol Hill. This is principally because of Ms. Vestager’s alleged crusade against many of the biggest U.S. tech companies, a path likely to be pursued during the Commissioner’s second term in office. Indeed, her mandate over rule-making related to the digital economy could also give her increased influence over global tech regulation. Furthermore, her mission appears to be heavily influenced by the fall-out of the failed Alstom/Siemens railway merger. It will be interesting to see, for example, what role, if any, industrial policy will play under the EU Merger Regulation going forward. With Ms. Vestager’s focus [...]

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Drug Testing Company Settles FTC Case Alleging Invitation to Collude

The FTC has entered into a final settlement with Drug Testing Compliance Group LLC (DTC Group) by order issued January 21, 2016, resolving an administrative case that alleged DTC Group had invited a competitor to collude with respect to customer allocation in violation of §5 of the Federal Trade Commission Act.

Specifically, the FTC complaint alleged that the president of DTC Group, an Idaho-based compliance company servicing the trucking industry, approached an unnamed direct competitor to complain about the competitor’s acquisition of a DTC Group customer.  This allegedly led to a meeting, wherein the DTC Group president proposed to the principals of the competitor that the two companies agree not to solicit or compete for each other’s customers, and that they abide by a “first call wins” approach to customers.  Allegedly the DTC Group president explained that this arrangement would allow each company to sell its services without fearing that its rival would later undercut with a lower price offer.  This alleged conduct ran afoul of the §5 prohibition on “unfair methods of competition in or affecting commerce” even without any proof or allegation that the competitor accepted the invitation.  Indeed, there exists legal precedent under which the FTC can pursue an action for such conduct even without a demonstration of market power on the part of the respondent.

The settlement agreement prohibits DTC Group from communicating with competitors about pricing or rates, though public posting of rates is permitted.  DTC Group is further prohibited from soliciting, entering into, or maintaining an agreement with any competitor to divide markets, allocate customers or fix prices.  DTC Group is additionally prohibited from urging any competitor to raise, fix or maintain prices, or to limit or reduce service.  The settlement requires DTC Group to report to FTC as to its compliance for the next 20 years.  Based on publicly available information, there has been no apparent action taken against the unnamed competitor with respect to these allegations.

Of note for corporate counsel, there was no allegation in the case that DTC Group and its competitor had actually entered an agreement – rather, the underlying allegation was simply that DTC Group had invited a competitor to enter a customer allocation agreement.  While it is unclear from the publicly-released materials how the FTC was alerted to this alleged invitation, this is an important reminder to companies that invitations to competitors to collude can result in legal action even if no further communications occur on the subject.  Such overtures further provide an approached competitor with the opportunity to gain a competitive advantage by reporting the approaching company to the FTC.




FTC and Pennsylvania Attorney General Challenge Health System Combination

The Federal Trade Commission (FTC) and Pennsylvania Attorney General (AG) have challenged the proposed combination of The Penn State Hershey Medical Center (Hershey) and PinnacleHealth System (Pinnacle) in Harrisburg, Pennsylvania. The FTC complaint alleges that the combination would create a dominant provider, reduce the number of competing health systems in the area from three to two, and result in a 64 percent share of the market for general acute care inpatient hospital services.

Hospitals and health systems pursuing mergers with a competitor should be mindful of the antitrust enforcement climate in health care and incorporate antitrust due diligence into their early transaction planning. Moreover, this case highlights that providers seeking to proactively alleviate the potential anticompetitive effects of a transaction should anticipate continued skepticism by the FTC of claims of procompetitive efficiencies and its dismissal of the merging parties’ newly negotiated, post-closing pricing agreements with payors.

Summary of Administrative Complaint

Parties and Transaction

Hershey is a nonprofit healthcare system headquartered in Hershey, Pennsylvania, about 15 miles west of Harrisburg. The system has two hospitals in the Harrisburg area: the Milton S. Hershey Medical Center, an academic medical center affiliated with the Pennsylvania State University College of Medicine, and the Penn State Hershey Children’s Hospital, the only children’s hospital in the Harrisburg area.  Hershey has 551 licensed beds and employs 804 physicians offering the full range of general acute care services.  In its 2014 fiscal year, Hersey generated $1.4 billion in revenue and discharged approximately 29,000 patients.

Pinnacle is nonprofit healthcare system headquartered in Harrisburg. Pinnacle’s system includes three hospitals in the Harrisburg area: PinnacleHealth Harrisburg Hospital, PinnacleHealth Community General Osteopathic Hospital, and PinnacleHealth West Shore Hospital. The system has 662 licensed beds divided among the three hospitals. In its 2014 fiscal year, Pinnacle generated $850 million in revenue and discharged more than 35,000 patients.

Pursuant to a letter of intent executed in June 2014, the parties would create a new legal entity to become the sole member of both health systems. The parties would have equal representation on the board of directors of the new entity.

Relevant Markets

The FTC complaint alleges that the appropriate scope within which to evaluate the proposed transaction is the market for general acute care (GAC) inpatient hospital services in a four-county area around Harrisburg. This alleged product market encompasses a broad cluster of medical and surgical diagnostic and treatment services that require an overnight in-hospital stay. Although the effect on competition could be analyzed for each affected medical procedure or treatment, the FTC considered the cluster of services as a whole because it considers the services to be “offered to patients under similar competitive conditions, by similar market participants.”

The FTC limited the geographic market to an area which includes Dauphin, Cumberland, Perry and Lebanon Counties. These four counties, according to the FTC, are “the area in which consumers can practicably find alternative providers of [GAC services].” Consequently, hospitals located outside of this area [...]

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Essential Health Transaction Planning for Providers in Today’s Antitrust Enforcement Climate

by Ashley McKinney Fischer and Stephen Wu

Federal antitrust enforcement agencies continue to challenge transactions in the health industry that they view as anticompetitive. This newsletter provides an update on recent public comments by government officials overseeing antitrust enforcement in the health industry and outlines some of the key steps that parties to certain types of transactions with potential competitive implications in the health industry should take to position themselves for defending against a government review.

Read more here.




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