FTC marks revived ‘prior approval’ merger stance with proposed limits on DaVita

DaVita was cited for its planned acquisition of the University of Utah Health’s dialysis clinics, which the FTC claimed would likely have created a monopoly in the greater Provo, Utah, area. Under the FTC’s proposed order, DaVita must seek approval from the agency before acquiring any new ownership interest in a dialysis clinic anywhere in Utah for a period of 10 years.

The restriction comes under the agency’s prior approval policy statement issued Monday. The policy restores an old tool previously utilized by the FTC, which in July rescinded a 1995 policy statement that did away with the practice as one of the first moves under new Chair Lina Khan.

“The FTC should not have to waste valuable time and resources investigating clearly anticompetitive deals that should have died in the boardroom,” said Holly Vedova, director of the Bureau of Competition, in a press release. “Restoring the long-standing prior approval policy forces acquisitive firms to think twice before going on a buying binge because the FTC can simply say no.”

The 10-year limit on future transactions affecting relevant markets represents the minimum possible under the FTC’s reinstated policy. The nature of the transaction, level of market concentration, degree of premerger market power, parties’ history of acquisitiveness, and evidence of anticompetitive dynamics will all be weighed as factors in determining the restrictions the agency hands down.

In the case of DaVita, Vedova stated the company “has a history of attempting to buy up competing dialysis clinics in an industry that is already highly concentrated.” In addition to the proposed restriction on future mergers in the area, the FTC’s order would require DaVita to divest three Provo-area dialysis clinics to Sanderling Renal Services, provide transition services for up to one year, and prohibit the company from entering or enforcing noncompete agreements and other employee restrictions.

The FTC voted 5-0 to accept the proposed consent order, even though the vote to approve Monday’s policy statement was 3-2. Commissioner Christine Wilson, one of the two dissenting votes on the latter, in a statement noted “credible risk that DaVita will attempt to acquire additional dialysis facilities in the same general area in which divestiture has been ordered” as reason for her support of the consent order.

“[T]o be clear, my vote in favor of this consent should not be construed as support for the liberal use of prior approval provisions foreshadowed by the Commission’s majority when it rescinded the 1995 Policy,” she stated.