During this session, Partners Ashley Fischer and Krist Werling discussed the current environment of antitrust review of healthcare private equity transactions, including the JAB Consumer Products consent order issued by the Federal Trade Commission (FTC) this summer, and what parties should keep in mind when planning for transactions to avoid deal pitfalls.
Session panelists included:
- Ashley Fischer, Partner, McDermott Will & Emery
- Krist Werling, Partner, McDermott Will & Emery
Top takeaways included:
- There is heightened antitrust scrutiny with an increased focus on private equity transactions and transactions in the healthcare industry. FTC Chair Lina Khan and the Head of the US Department of Justice’s Antitrust Division Jonathan Kanter, as well as their lieutenants, have recently made several comments reflecting their opinions that healthcare private equity should focus on short-term profits and saddle businesses with debt and that the private equity model is fundamentally at odds with the competition. The antitrust statutes are designed to protect a free and open marketplace, and the agencies believe that if there is sufficient market competition, there will be lower prices and better quality and access for consumers and patients.
- This summer, the FTC issued a consent order against JAB designed to prevent the private equity firm from further consolidating veterinary clinics. The FTC concluded that there were market concentration issues with JAB’s proposed transactions as they involved veterinary clinics in several geographies where there were only a few competitors to begin with. As a remedy to such antitrust concerns, the FTC required that JAB divest clinics in several geographies. Notably, the consent order also imposed prior notice and prior approval provisions obligating JAB to provide the agency with prior notice of additional veterinary acquisitions moving forward regardless of the size of such in certain areas and obtain its affirmative consent to acquisitions in other areas regardless of the size of such proposed transactions.
- Early termination of review periods for Hart-Scott-Rodino Act filings is still unavailable to parties, and there have been increased instances of protracted agency review periods. Whether a transaction will require divestiture or result in a prior notice and prior consent requirement on a party will depend on the nature of the company/platform, its past conduct and history of acquisitions, and the competitive landscape in the specific geographies at play. Accordingly, transactions involving buyers that have little to no market overlap with the target business or in geographies where there are no market concentration issues are less likely to be of concern to antitrust agencies. Parties with market overlap should begin planning an antitrust analysis as soon as possible.