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THE LATEST: FTC Announces New Model Timing Agreement for Merger Investigations

  • On August 7, the FTC published a new Model Timing Agreement. Timing agreements are agreements between FTC staff and merging parties that outline the FTC’s expected timing for various events in order for it to conduct an orderly investigation during a Second Request.
  • The FTC expects the Model Timing Agreement to be used as drafted (or in a similar form) for all transactions that receive a Second Request. The FTC has used timing agreements frequently in the past, as has the DOJ, but the FTC has now published a model, which means this is likely to become the standard practice moving forward.
  • Parties are not required to enter into a timing agreement. However, in practicality, if parties do not agree to the timing agreement, the agency will proceed as if it must be in court to block the deal within 30 days of compliance. Therefore, it will prepare for litigation and will not consider settlement options or engage with the parties on the issues in the same way it would if the agency had more time under a timing agreement.
  • Some highlights of the new Model Timing Agreement are provided below (Note: All days listed refer to calendar days):
    • Parties must provide 30 days’ notice before certifying substantial compliance, and such notice cannot be provided until at least 10 days after signing the timing agreement.
    • Parties cannot close a proposed transaction until a specified time period after substantial compliance with the Second Request. The model indicates this will be 60 days in less complex matters or 90 days in more complex matters, but could be longer than 90 days in “matters involving particularly complicated industries.”
    • Parties must provide 30 days’ notice before consummating the proposed transaction and cannot provide notice more than 40 days before the date on which they have a good faith basis to believe they will have cleared other closing conditions and will be able to complete the transaction, absent an FTC action to block the transaction.
    • The agreement includes a stipulated Temporary Restraining Order (TRO) which will be entered in the event of a challenge. The TRO prevents the parties from consummating the transaction until after five days following a ruling on a motion for preliminary injunction.
    • The timing agreement contains other timing-related provisions such as for document productions and investigational hearings as part of the FTC’s investigation.
  • Though the Model Timing Agreement does not affect the statutory expiration of the HSR waiting period, it commits the parties not to consummate the transaction for a much longer period and, therefore, effectively extends the waiting period far longer than the 30 days specified under the HSR Act.
  • The 40-day notice required before the closing date means that if there is another condition in the way of closing, such as an ongoing investigation before the European Commission or in China, the parties cannot provide their notice of the anticipated closing date to the FTC. The FTC will [...]

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District Court Grants Temporary Restraining Order in Phoebe Putney Litigation

by Carrie Amezcua

The next step of the on-going Phoebe Putney litigation is completed.  On Wednesday, April 15, the district court for the Middle District of Georgia granted the Federal Trade Commission’s (FTC) motion for a Temporary Restraining Order (TRO) in Federal Trade Commission v. Phoebe Putney Health System, Inc., No. 1:11-cv-58 (M.D. Ga.).  In its order, the court stated that the FTC "carried its burden of persuasion to establish the need for the imposition of the ‘extraordinary and drastic remedy’ of a TRO pending the outcome of the court’s decision on the [Preliminary Injunction] Motion."  The TRO prohibits Phoebe Putney Memorial Inc. from taking further steps to consolidate with Palmyra Park Hospital.  Further, the court stated "In response to Plaintiff’s request that the Court order Defendants to refrain from instituting any price changes, the Court ordered that Defendants are prohibited from making any price changes to existing contracts; however, said prohibition does not extend to the formation of any new contracts."  Richard A. Feinstein, Director of the FTC’s Bureau of Competition issued a brief statement on the district court’s ruling saying "We are pleased that the Court has issued a Temporary Restraining Order prohibiting any further steps to consolidate the two hospitals in Albany, and prohibiting any price changes to existing health-plan contracts, pending our Motion for Preliminary Injunction." 

The district court had granted a TRO the FTC filed in 2011 to stop the acquisition, but dissolved that TRO upon the district court’s finding that the transaction was exempt under the state action immunity doctrine.  The 11th Circuit affirmed, but in February of this year, the Supreme Court reversed holding that Georgia’s enabling statute did not clearly articulate an affirmatively expressed policy for displacing competition.    

The district court’s grant of the TRO is another victory for the FTC in this long litigation.  Now that the Supreme Court ruled the transaction is not exempt from the antitrust laws, the hospitals will have to defend what the FTC calls a merger to monopoly.  The TRO will stay in place until a hearing on the motion for Preliminary Injunction, which is scheduled for June 14, 2013.  The FTC has a successful track record in getting preliminary injunctions granted in hospital mergers, so it would not be surprising if the district court also granted the Motion for Preliminary Injunction.  This case is further evidence of the high priority the FTC places on challenging health care mergers it views as anticompetitive and shows the FTC is willing to commit resources over an extended period of time to challenge such mergers.

The administrative hearing is scheduled to begin July 15, 2013.  More information on the district court and adjudicative proceedings can be found at https://www.ftc.gov/os/caselist/1110067/index.shtm and https://www.ftc.gov/os/adjpro/d9348/index.shtm.

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