October 19, 2018

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AT&T/Time Warner Merger Approval Will Spur Vertical Mergers in Health Care

Tuesday’s decision by Judge Richard Leon of the U.S. District Court for the District of Columbia categorically approving the merger of AT&T and Time Warner, without imposing any conditions or limitations and rejecting granting a stay for appeal purposes, will, unless blocked if there is an appeal, open the way for a series of pending vertical merger deals.

A “vertical merger” is a merger of two companies that do not compete and that are at different levels of the product or service-provision process. Such mergers do not reduce the number of competitors in a given market and, by producing efficiencies, generally have been considered productive and far less economically threatening than horizontal mergers among competitors. Indeed the Department of Justice (DoJ) had not challenged such a merger since the early 1970s. In challenging AT&T, DoJ argued that economic harm was threatened by the purported ability of the acquiring company to control downstream access to product and thus cause raised prices to consumers.  Judge Leon rejected DoJ’s arguments in all regards.

The communications industry has been patiently awaiting the outcome of the case. But that isn’t the only economic sector that is going to see energetic activity. The health care sector stands right beside it, and we expect to see vertical merger action there too.

There are many major deals in the wings and, especially in the health care space, a number of them involve potential vertical relationships. As health care costs continue to rise and both public and private payers move towards value-based and other models, vertical integration is expected to become more attractive.

©2018 Epstein Becker & Green, P.C. All rights reserved.

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About this Author

Stuart Gerson, Health Care Attorney, Epstein Becker Law Firm
Member of the Firm

STUART M. GERSON is a Member of the Firm in the Litigation and Health Care & Life Sciences practices, in the firm's Washington, DC, and New York offices. Much of Mr. Gerson's practice has been centered on providing representation to clients in the health care industry (including insurers, hospitals, pharmaceutical manufacturers, managed care providers, and private equity funds, among others). He has extensive experience litigating cases involving the cybersecurity of health care information, trade secrets, and other confidential data as well as civil...

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