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The Federal Trade Commission has made changes to a rule meant to improve its ability to detect illegal mergers and acquisitions before they happen, by requiring healthcare companies to provide more information to regulators.
The additional information the final rule requires is necessary, the FTC said, to determine which deals require an in-depth antitrust investigation, including through the issuance of Second Requests.
Voting unanimously, the agency finalized changes to the premerger notification form and associated instructions, as well as the premerger notification rules implementing the Hart-Scott-Rodino (HSR) Act.
In large part, the alterations were spurred by changes in corporate structure and deal-making, as well as market realities in the ways businesses compete. The FTC claimed these changes have created or exposed information gaps that prevent the agency, and the U.S. Department of Justice, from conducting a thorough antitrust assessment.
The final rule also will reduce the current burden on third parties, including small businesses, that the agencies routinely rely upon to fill in existing information gaps, the FTC said.
“Premerger review is a critical task for the antitrust agencies and to do it well, we need information about each deal’s potential antitrust risk,” said Shaoul Sussman, associate director for litigation of the FTC’s Bureau of Competition. “This rulemaking is a much needed update to address changes in the marketplace that have undermined the agencies’ ability to detect and prevent illegal mergers, while at the same time creating a more efficient review process.”
WHAT’S THE IMPACT
Under the HSR Act, parties to certain mergers and acquisitions are required to submit premerger notification forms that disclose certain information about their proposed deal and business operations. The agencies use this information to conduct a premerger assessment in the short time allowed under the HSR Act, which is typically 30 days.
According to the FTC, the HSR Act was intended to improve federal merger enforcement by requiring parties to notify the agencies of their proposed acquisition, then wait a short period of time to permit the agencies to bring a lawsuit to stop an illegal merger prior to its completion. The FTC called mandatory premerger review a “key feature” of U.S. merger law.
The final rule updates the HSR form, which the agencies have relied on for more than 45 years to screen proposed mergers in advance and identify those that may violate the antitrust laws.
According to the FTC, the agencies identified critical gaps in the information provided in the form that, over time, have impeded the detection of mergers that may violate antitrust laws. The final rule requires filers to provide information that is readily available to them about their business operations to allow the agencies to effectively screen reportable transactions.
Other key reforms include additional transaction documents from the supervisor of each merging party’s deal team, as well as a small set of high-level business plans related to competition; a description of the business lines of each filer to reveal existing areas of competition between the merging firms and supply relationships; and disclosure of investors in the buyer, including those with management rights.
The final rule will be effective 90 days after it is published in the Federal Register. The FTC’s Premerger Notification Office (PNO) will be working to provide future compliance guidance in advance of the final rule’s effective date. Compliance guidance information will be shared on the PNO’s website in the coming weeks, the FTC said.
THE LARGER TREND
The pressures to transform healthcare delivery systems are being met with competing pressures from the federal antitrust regulatory agencies, which have taken a more aggressive stance against healthcare M&A activity, said Kaufman Hall in a July report.
But as the focus of transactions moves from scale to strategy, the value proposition for new partnership models is intensifying.
“Transformation of the current healthcare system is a given; the models that will enable that transformation and bring greater value to patients and communities are now taking shape,” the Kaufman Hall analysts wrote.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
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