FTC and DOJ Issue Annual HSR Report Detailing Merger Review
On Wednesday (September 17), the Federal Trade Commission (FTC) and the Department of Justice’s Antitrust Division (Division) (collectively, Agencies) issued their Hart-Scott-Rodino (HSR) Report for fiscal year 2024.
The report summarizes the Agencies’ enforcement efforts and provides fiscal year 2024 data on the Premerger Notification Program, most notably with respect to transactions reported under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).1
Here are some highlights, including some specifically relating to the healthcare sector.
- There were 2,031 transactions (1,973 as adjusted) reported under the HSR Act during the 2024 fiscal year.2
The Agencies undertook 32 merger enforcement actions.
- Of those 32, 18 involved FTC enforcement initiatives.
- In 12 of those 18, the parties abandoned or restructured their transactions as a result of antitrust concerns raised during the investigation.
- In six others, the FTC initiated administrative or federal court litigation.
- The Division took enforcement action against 14 transactions. In 12, the parties abandoned them in the face of questions from the Division. Two were restructured after the Division raised concerns about the threat they posed to competition.
- The number of transactions reported in fiscal year 2024 increased from fiscal year 2023, while remaining generally in line with the number of reported transactions over the past decade.
- Of the 1,973 (as adjusted) transactions reported in fiscal year 2024, the FTC issued 30 second requests and the Division issued 29 (approximately 3% of all reported transactions, with the incidence of second requests substantially increasing as the size of the transactions substantially increased).
- Transactions involving health services accounted for approximately 3% of the reported transactions.
- Of the 33 acquired entities characterized as providing ambulatory healthcare services, second requests were issued by the FTC in two instances.
- Of the 24 acquired entities characterized as hospitals, second requests were also issued by the FTC in two instances.
- The Division did not open an investigation with respect to any of the acquired health services entities.
- Of the 25 acquiring entities characterized as providing ambulatory healthcare services, no second requests were issued by the FTC and no investigations were opened by the Division.
- Of the 27 acquiring entities characterized as hospitals, second requests were issued by the FTC in three instances.
The Report includes a section describing the enforcement activities of the FTC and the Division during the 2024 fiscal year.
With respect to the FTC and healthcare, the Report highlights the following:
In November 2023, it sued to block John Muir Health’s proposed acquisition of San Ramon Regional Medical Center. According to the FTC’s complaint, the acquisition would have eliminated head-to- head competition between John Muir and San Ramon, driving up healthcare costs in the relevant California geographic market. John Muir announced the termination of the transaction in December 2023.
In January 2024, it sued to block Novant Health from acquiring two North Carolina hospitals from Community Health Systems. The complaint alleged that the proposed merger would allow Novant to control nearly 65% of the market for inpatient general acute care services in the Lake Norman area, leading to higher prices and reduced quality and innovation. Following a district court decision denying the FTC’s request for a preliminary injunction, the U.S. Court of Appeals for the Fourth Circuit reversed the district court and granted an injunction. Shortly thereafter, the parties abandoned their transaction.
With respect to the Division, the Report describes UnitedHealth Group’s abandoning in July 2024, its proposed acquisition of the physician group, Stewardship
Health. This transaction raised questions about quality of care, cost of care, and working conditions for doctors, nurses, and other healthcare providers.
The Report also discusses certain instances in which parties were required to pay civil penalties on account of having failed to timely file their HSR Form. In one instance, the acquiring party was alleged to have illegally “jumped the gun” by exercising operational control over aspects of the to-be-acquired entity while the proposed acquisition was still under antitrust review by the Division.
2025 and Beyond
At this time, it is of course impossible to predict with any degree of certainty what the landscape will be going forward insofar as the volume of mergers, acquisitions and HSR filings will be — and the current fiscal year has not yet ended.
The reconstituted FTC under the chairmanship of Andrew Ferguson is expected to take a bit of a different approach to merger enforcement. This may involve, among other things, somewhat less aggressive enforcement and a greater willingness to entertain remedies as opposed to blocking transactions. That said, it seems clear that very active enforcement will continue. Chairman Ferguson has made statements to that effect and the Commission has left in place both the 2023 Merger Guidelines, which expand the range of mergers that may be challenged, and the new HSR Form, which requires parties to produce much more detailed information in their initial filings, which may lead to increased scrutiny.
Moreover, and significantly, Gail Slater, the Assistant Attorney General who now heads up the Division, has stated that enforcement in the healthcare sector will be a top priority.
It can be expected that healthcare mergers and acquisitions will continue to be closely scrutinized and subject to vigorous enforcement.
[1] Under the HSR Act, parties to certain mergers and acquisitions are required to notify the Agencies via the submission of an HSR form and observe a waiting period before closing the proposed transaction. The waiting period is usually 30 days. Whether a particular transaction is subject to these requirements depends upon the size of the transaction and the size of the parties. If either the FTC or the Division determines during the waiting period that further inquiry is required, it is authorized to request additional information and documents from the parties to the transaction. This is referred to as a “second request” and it extends the waiting period and triggers a much more intensive investigation.
[2] The total number of reported transactions (2,031) was adjusted to account for: (1) incomplete submissions; (2) transactions pursuant to certain exemption provisions; (3) transactions that were found to be non-reportable; and (4) transactions withdrawn before the statutory waiting period began
