In a press release announcing the withdrawal, the FTC calls the statements “outdated,” arguing that they “no longer serve their intended purpose of providing accurate guidance to market participants.” Unfortunately, the FTC did not explain what was “outdated” about the prior statements or why those statements did not provide accurate guidance to participants. Nor did the FTC issue a new set of policies to fill the advisory gap. Instead, the FTC advises the public to consider the “Commission’s extensive record of enforcement actions, policy statements, and competition advocacy in health care” as sources of more up-to-date guidance on health care competition matters.
The FTC’s announcement comes five months after the Department of Justice (DOJ)’s decision to rescind these same statements1 in February 2023.
FTC announcement signals lack of clarity in how antitrust agencies will review information exchanges
The FTC’s announcement makes clear that the agency is now on the same page as DOJ regarding how it will enforce the antitrust laws with respect to information exchanges. Left unclear, however, is what the agencies’ current enforcement policy is. The now-rescinded 1996 policy statement outlined that a “reasonable” exchange of information among competitors would exist in a “safety zone,” meaning that the agencies would not consider the exchange to be illegal under the antitrust laws if:
- the exchange is managed by a third-party, like a trade association;
- the information provided by participants is more than three months old; and
- at least five participants provide the data underlying each statistic shared, no single provider’s data contributes more than 25% of the “weight” of any statistic shared, and the shared statistics are sufficiently aggregated that no participant can discern the data of any other participant.
In short, since the publication of this policy statement in 1996, the antitrust agencies generally considered information exchanges legal so long as they were anonymized (by a third party), the information was historical, and the information was aggregated. While the policy statements at issue are focused on the health care industry, the decision to withdraw has impacts beyond health care, since antitrust practitioners have relied upon the guidance in other industries as well.
In withdrawing the policy statement governing information exchanges, there is currently no guidance from the agencies on what kind of information exchanges they would consider presumptively legal (if any). On July 19, 2023—days after the FTC announced its decision to rescind the policy statements—the FTC and DOJ (the Agencies) finally published their long-awaited revised draft merger guidelines (the 2023 Draft Merger Guidelines), which address mergers across markets and are not tailored to any particular industry. The 2023 Draft Merger Guidelines mention information exchanges in the context of the Agencies’ merger review process, and cite “information sharing arrangements” as a factor the agencies will consider when assessing “market transparency.” “Market transparency” is included in the 2023 Revised Merger Guidelines as a “secondary factor” the agencies will analyze when determining whether a “merger may meaningfully increase the risk of coordination, even absent the primary risk factors.”2 The revised guidelines state that “[i]nformation sharing arrangements among market participants, such as public exchange of information through announcements or private exchanges through trade associations or publications, increase market transparency. Regular monitoring of one another’s prices or customers can indicate that the terms offered to customers are relatively transparent.” Notably, the 2023 Draft Merger Guidelines do not offer any distinguishing characteristics for what the agencies may consider a “reasonable” exchange of information among competitors in the context of a merger review. And, since the draft guidelines are limited to merger considerations, they do not provide any insight on how the Agencies will assess the legality of information exchanges outside of the merger context.
While the antitrust agencies cannot unilaterally change the law as applied by the courts—and exchanges of aggregated data are in many cases pro-competitive—the elimination of this safe harbor could meaningfully change the risk calculus for companies involved in the exchange of aggregated data. Among other things, it will result in increased uncertainty as to how to structure information exchanges so as to minimize the risk of the information exchange. The decision will affect all industries that utilize information-sharing exchanges, such as real estate, advertising, meatpacking, and transportation.
It is important to note that the agencies’ policy position cannot make unlawful compulsory disclosure of rate information, such as disclosures required under the transparency rules governing hospitals and health care plans.
FTC joins DOJ in rejection of automatic safe harbors for certain health care transactions
The FTC’s withdrawal of the policy statements is particularly significant since the FTC is typically the antitrust agency that reviews proposed provider mergers and joint ventures. Should the agency no longer follow the guidance provided in the withdrawn guidance, it could lead to the elimination of a safe harbor for hospital mergers where one of the hospitals has less than 100 beds and an inpatient census of less than 40 patients. In addition, the withdrawn guidance also provided a safe harbor for group purchasing organizations (GPOs) where (1) its purchases account for less than 35 percent of the total sales of the products or services relevant market; and (2) the cost of the products or services purchased jointly accounts for less than 20 percent of the revenues from all products or services sold by each competing participant in the GPO. The decision to withdraw the policy statements also indicates that regulators will likely treat this safe harbor with skepticism. The fact that the 2023 Revised Merger Guidelines do not include any health care-specific safe harbors does not disabuse us of this notion.
Looking Ahead
The agencies’ decision to withdraw the policy statements does not change the law and does not determine what is, or is not, legal. That is left to the courts. The withdrawn policy statements, however, were often viewed as informational, if not influential, by judges, and both agencies’ affirmative withdrawal may be something that a judge considers in analyzing the legality of health care mergers or joint ventures, joint purchasing agreements, or information exchanges.
These developments have created heightened risk and uncertainty across industries. You should contact experienced antitrust counsel if you have any questions about how these changed policies, particularly the information exchange policies, may affect your business.
Authored by Chuck Loughlin, Justin Bernick, Lauren Battaglia, Ilana Kattan, and Jill Ottenberg.
References
1 The FTC’s July 2023 announcement states that it has rescinded the Department of Justice and Federal Trade Commission “Statements of Antitrust Enforcement Policy in Health Care” (August 1996) as well as the agencies’ “Statement of Antitrust Enforcement policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program” (20 October 2011). In February 2023, DOJ announced the rescission of these two policies as well as a prior version of the 1996 Statements of Antitrust Enforcement that was published in 1993. DOJ’s decision was similarly based on the agency’s assessment of the policy statements as “outdated” with no further explanation.
2 The 2023 Draft Merger Guidelines state that the Agencies will presume that post-merger market conditions are susceptible to coordinated interaction if any of the three primary factors are present: (1) a highly concentrated market; (2) prior actual or attempted attempts to coordinate; and (3) elimination of a maverick firm with a disruptive presence in a market. U.S. Department of Justice and Federal Trade Commission, Merger Guidelines (July 19, 2023) at 9-10.
