FTC, DOJ ask for public input in antitrust ‘overhaul’
Federal antitrust agencies asked for input in how to bolster merger oversight, the Federal Trade Commission and Justice Department announced Tuesday.
The regulatory “overhaul” will address how markets are defined in merger analyses to factor in non-price related consequences, the breadth of the oversight, the separation of the vertical and horizontal guidelines, the presumption that vertical mergers are beneficial and worker-specific impacts of mergers, among other issues. Both the horizontal and vertical merger guidelines need to be updated to reflect the latest transaction trends and market imbalances, healthcare experts said.
“Evidence suggests that many Americans historically have lost out, with diminished opportunity, higher prices, lower wages, and lagging innovation. A lack of competition also appears to have left segments of our economy more brittle, as consolidated supply and reduced investment in capacity can render us less resilient in the face of shocks,” FTC Chair Lina Khan said in prepared remarks.
The Biden administration has vowed to stop proposed mergers that would stunt competition, in part, by increasing the FTC and DOJ’s budgets, adjusting the standards for permissible mergers, barring the use of non-compete clauses and bolstering retrospective merger analyses.
The FTC has asked several of the major insurers for data on hospital acquisition of physicians as the healthcare sector continues to vertically consolidate. It is also reworking its vertical merger guidelines, which are expected to bolster an enforcement area where regulators have historically had limited success.
About 90% of acute-care markets in metro areas are highly concentrated, lawmakers have said, noting that many hospitals amass market power through small transactions that skirt regulatory review. Most hospital mergers raise prices and stunt quality, research shows.
But as fewer horizontal targets remain, insurers, providers, pharmacies and other stakeholders continue to join forces. The regulatory agencies have struggled to keep up, experts said.
The guidelines’ bifurcation of horizontal and vertical analysis could limit regulatory oversight, Assistant Attorney General Jonathan Kanter said in a statement.
“Does the framing of horizontal versus vertical analysis itself narrow us to a two-dimensional view of modern markets that are often multi-dimensional? How should the guidelines account for these those market realities,” he said. “The antitrust division shares the FTC’s substantive concerns regarding vertical merger guidelines, which overstate the potential efficiencies of vertical mergers and fail to identify important relevant theories of harm.”
Regulators need more information on consolidation’s affects on the labor market, Khan said. Health system consolidation has depressed wages, a 2019 working paper suggests.
Annual wage growth was 1.1 percentage point slower for skilled nonhealth professionals in concentrated acute-care markets (social workers, claims adjusters, insurance personnel, HR professionals) and 1.7 percentage points slower for nursing and pharmacy workers, their analysis of 84 hospital mergers from 2000 to 2010 revealed.
“Are there factors beyond wages, salaries, and financial compensation that the guidelines should consider when determining anticompetitive effects? And when a merger is expected to generate cost savings through layoffs or reduction of capacity, should the guidelines treat this elimination of jobs or capacity as cognizable ‘efficiencies,'” Khan said in a statement.
The comment period closes March 21. Regulators will release a draft of the updated guidelines, aiming to finalize them by the end of the year.