With minimal fanfare on a quiet summer Friday afternoon, the Federal Trade Commission (FTC) did what many have been expecting it to do for several months: it officially withdrew from two healthcare antitrust enforcement policy statements (the Statements) it co-authored with the Department of Justice Antitrust Division (DOJ) in 1996 and 2011.[1] The DOJ had already withdrawn from these two Statements, plus one other Statement, on February 3, 2023.[2] One might ask what took the FTC so long. The better question, though, is now that these Statements have officially met their demise, what do we do? More specifically, are past arrangements that were permissible under the Statements now illegal? The agencies have offered nothing to replace the now-withdrawn Statements. While the law certainly has not changed, the absence of clear cut guidance in the form of the Statements makes traversing the antitrust landscape increasingly difficult for clients and counsel. In this article, we offer perspective on the Statements, what their withdrawal means in practical terms, and where we go from here.
What Were the Statements?
In September, 1993, the FTC and DOJ jointly issued the first of the Statements, officially titled Health Care Antitrust Statements of Enforcement Policy.[3] The Statements announced federal regulators’ antitrust enforcement policy covering six key areas in health care: (1) hospital mergers; (2) hospital joint ventures involving high-technology or other expensive medical equipment; (3) physicians’ provision of information to purchasers of health care services; (4) hospital participation in exchange of price and cost information; (5) health care providers’ joint purchasing arrangements; and (6) physician network joint ventures. The Statements arrived at a time of massive change in health care when providers, payors, and lawyers struggled to adjust to the brave new world of managed care and its alphabet-soup array of arrangements such as IPAs, PHOs, and MSOs. The Statements were well received by lawyers and clients because they were relatively easy to understand, announced bright-line guardrails, and most important, contained “safety zones.” In the “safety zones,” the regulators announced that if the conduct at issue fell within certain parameters (usually narrow and conservative), the conduct would not be challenged, “absent extraordinary circumstances.” Even if conduct fell outside the “safety zones,” regulators reminded us that the conduct might not necessarily be anticompetitive and that other factors might lead to the conclusion that the arrangement was procompetitive. At the same time, the FTC and DOJ also committed to issuing expedited DOJ business review letters and FTC advisory opinions to guide market participants regarding specific arrangements raising potential antitrust concerns.
The public certainly embraced these initiatives. Dozens of business review letters and advisory opinions were issued throughout the 1990s and early 2000s.[4] The FTC revised and expanded the Statements in 1994, superseding the 1993 guidance. Then, in 1996, as the agencies gained more experience with different arrangements in healthcare, they expanded the Statements to nine topics.[5]
In 2011, following the arrival of another acronym, ACO (Accountable Care Organization), the agencies issued additional guidance, Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program.[6]
What Was the Information Sharing Safety Zone?
While the number of business review letters and advisory opinions declined over time, the Statements were still on the books. Practitioners also consulted the Statements for guidance outside of health care, including group purchasing arrangements and benchmarking activities. Statements Five and Six, which addressed collective provision of fee-related information and provider participation in exchanges of price and cost information, were often used outside of health care and for many years helped frame information sharing arrangements within and across various industries. The DOJ and FTC encouraged the application of the safety zone, such as when it incorporated it into their 2016 Guidance For Human Resource Professionals and echoed the criteria in their Competitor Collaboration Guidelines.[7]
In 2014, the FTC described and broadly applied the safety zone in the general guidance posted on its “Competition Matters” website, stating:
[T]the antitrust agencies have identified a “safety zone” within which data exchanges are highly unlikely to raise substantial concerns. In general, the agencies will not challenge a data exchange 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.[8]
The Statements, including the information sharing safety zone, were widely followed but were not the law, were never intended to be a substitute for the plain language of the principal antitrust statutes (the Sherman Act, the Clayton Act, and the FTC Act), and they did not replace decades of case law. The law was still the law. Nevertheless, the Statements did help reduce uncertainty and gave market participants useful tools to make sound decisions regarding the potential antitrust implications of their arrangements.
What Changed?
From an antitrust perspective, the Biden administration hit the ground running. In June 2021, President Biden named 32-year old Lina Khan as Chair of the Federal Trade Commission. Ms. Khan is a noted critic of “Big Tech.”[9] Soon after Ms. Khan’s appointment, in July 2021, President Biden issued an Executive Order on Competition, which announced a “whole-of-government” approach to more aggressive antitrust enforcement.[10] A few weeks later, President Biden nominated Jonathan Kanter as head of the Antitrust Division of the Department of Justice.[11] Mr. Kanter is another critic of “Big Tech” and he and Ms. Khan are aligned in many of their views about robust antitrust enforcement. As the record over the last two years demonstrates, neither agency is afraid to litigate cases, and neither agency shows any signs of backing down, even when they lose.[12] Outside of court, long-standing policies and practices have been scrapped or significantly revised.[13] The message is clear: the “old” way of doing things no longer suffices.
After 30 years, it was time to take a hard look at the Statements and consider revisions. Instead, the agencies opted to kill the Statements without proposing any replacements. As the DOJ said on February 3, 2023:
After careful review and consideration, the division has determined that the withdrawal of the three statements is the best course of action for promoting competition and transparency. Over the past three decades since this guidance was first released, the healthcare landscape changed significantly. As a result, the statements are overly permissive on certain subjects such as information sharing, and no longer serve their intended purposes of providing encompassing guidance to the public on relevant healthcare competition issues in today’s environment. Withdrawal therefore best serves the interest of transparency with respect to the Antitrust Division’s enforcement policy in healthcare markets. Recent enforcement actions and competition advocacy in healthcare provide guidance to the public, and a case-by-case enforcement approach will allow the Division to better evaluate mergers and conduct in healthcare markets that may harm competition.[14]
The FTC’s July 14, 2023 announcement was similar:
The FTC has determined that the withdrawal of the two statements is the best course of action for promoting fair competition in health care markets. Much of the statements are outdated and no longer reflect market realities in this important sector of the economy. The Commission’s withdrawal follows the Department of Justice’s decision to rescind the same statements in February 2023.
Given the profound changes in these markets over the last 30 years, the statements no longer serve their intended purpose of providing accurate guidance to market participants. Rather, the Commission’s extensive record of enforcement actions, policy statements, and competition advocacy in health care provide more up-to-date guidance to the public. The Commission will continue its enforcement by evaluating on a case-by-case basis mergers and conduct in health care markets that affect consumers.
In making its enforcement decisions, the Commission will rely on general principles of antitrust enforcement and competition policy for all markets, including markets related to the provision of health care products and services.[15]
What Now?
In the face of uncertainty, here are our key takeaways:
- The law has not changed. The FTC and DOJ do not have the power to change statutory language or the way it is applied. The Sherman Act, the Clayton Act, and the FTC Act remain unchanged.
- Conduct that was permissible under the now-withdrawn Statements did not suddenly become illegal but parties should take a fresh look at their arrangements. Due to the passage of time and personnel changes, it is possible, for example, that an information-sharing arrangement that was devised years ago under the 1996 Statements has lost some of its original antitrust “strength.” Considering the withdrawal of the Statements, now is an excellent time for parties to revisit their processes and procedures to ensure they remain antitrust compliant. While this will involve some expense, investments made now to ensure ongoing antitrust compliance will pale in comparison to the cost of an investigation or litigation. To quote Benjamin Franklin, “an ounce of prevention is worth a pound of cure.”
- The essential elements of the Statements may still provide valid starting points for developing an antitrust-compliant policy. Principal Deputy Assistant Attorney General Doha Mekki’s remarks on February 2, 2023, focused on information exchanges which are common in many industries, not just healthcare. While these arrangements can be fertile ground for antitrust problems because they often involve competitors and extremely sensitive information, DOJ did not say that all information exchanges are impermissible. Rather, the enforcers will no longer categorically “bless” these arrangements via “safety zones” just because certain steps were followed. But the steps themselves – such as aggregating data; using historical instead of future data; and involving a third party to manage the data – are still well worth considering as organizations develop antitrust compliant processes. Again, this is where experienced antitrust counsel will be beneficial to clients. There may not be a “one size fits all” answer, as might have appeared during the time of the Statements, but there is most likely an answer.
- Make sure the policies and processes your organization uses to achieve antitrust compliance reflect today’s market realities. Speaking of the massive changes in the health care industry, Principal Deputy Assistant Attorney General Mekki warned in her February 2023 speech that “[g]iven these changes and the outdated nature of many statements reflected in these [Statements], we are no longer confident that the documents fully reflect market realities, the risk of serious competitive harm, or the full scope of liability under the antitrust laws.”[16] Almost every industry has seen massive changes over the last 30 years, and some (like social media) did not even exist 30 years ago. A sound antitrust compliance program will not only be tailored to the specific industry involved, but will be regularly refreshed to account for changes.
What’s Next?
Besides the withdrawal of the Statements, summer 2023 has been an exceptionally busy time on the antitrust front, with significant changes to the HSR premerger notification process and the horizontal merger guidelines looming.[17] We continue to expect further announcements from the enforcers about their views.
[1]https://www.ftc.gov/news-events/news/press-releases/2023/07/federal-trade-commission-withdraws-health-care-enforcement-policy-statements.
[2]https://www.justice.gov/opa/pr/justice-department-withdraws-outdated-enforcement-policy-statements. The day before the February 3, 2023 announcement, Principal Deputy Assistant Attorney General Doha Mekki of the DOJ Antitrust Division gave a speech in which she stated ”. . . the Division will withdraw these three statements concerning the health care industry. At this time, the Division does not have immediate plans to replace them.” https://www.justice.gov/opa/speech/principal-deputy-assistant-attorney-general-doha-mekki-antitrust-division-delivers-0.
[3] https://www.justice.gov/archive/atr/public/press_releases/1993/211661.htm.
[4] See, e.g., https://www.justice.gov/atr/business-reviews; https://www.ftc.gov/legal-library/browse/advisory-opinions.
[5] https://www.ftc.gov/legal-library/browse/statements-antitrust-enforcement-policy-health-care.
[6] https://www.ftc.gov/advice-guidance/competition-guidance/industry-guidance/competition-health-care-marketplace/accountable-care-organizations.
[7] See U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidance For Human Resource Professionals (Oct. 2016), at 5, https://www.justice.gov/atr/file/903511/download; U.S. Dep’t of Justice, Department of Justice and Fed. Trade Comm’n, Antitrust Guidelines for Collaborations Among Competitors (Apr. 2000), at 15-16, https://www.ftc.gov/sites/default/files/documents/public_events/joint-venture-hearings-antitrust-guidelines-collaboration-among-competitors/ftcdojguidelines-2.pdf.
[8] https://www.ftc.gov/enforcement/competition-matters/2014/12/information-exchange-be-reasonable.
[9] https://www.nytimes.com/2021/06/15/technology/lina-khan-ftc.html.
[10] https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.
[11] https://www.nytimes.com/2021/07/20/business/kanter-doj-antitrust.html.
[12] https://www.reuters.com/legal/us-keeps-losing-antitrust-court-battles-few-expect-pullback-2022-10-04/;
[13] See, e.g., https://www.ftc.gov/enforcement/competition-matters/2021/08/reforming-pre-filing-process-companies-considering-consolidation-change-treatment-debt (altering decades-old practice concerning the treatment of debt under the Hart-Scott-Rodino Act); https://www.ftc.gov/news-events/news/press-releases/2021/07/ftc-rescinds-2015-policy-limited-its-enforcement-ability-under-ftc-act (Section 5 of the FTC Act prohibits unfair methods of competition even if they are outside the ambit of the Sherman or Clayton Acts).
[14] https://www.justice.gov/opa/pr/justice-department-withdraws-outdated-enforcement-policy-statements.
[15] https://www.ftc.gov/news-events/news/press-releases/2023/07/federal-trade-commission-withdraws-health-care-enforcement-policy-statements.
[16] https://www.justice.gov/opa/speech/principal-deputy-assistant-attorney-general-doha-mekki-antitrust-division-delivers-0.
[17] https://www.ftc.gov/news-events/news/press-releases/2023/06/ftc-doj-propose-changes-hsr-form-more-effective-efficient-merger-review; https://www.ftc.gov/news-events/news/press-releases/2023/07/ftc-doj-seek-comment-draft-merger-guidelines.
