Merger Reviews Likely to Address More Expansive—and Possibly New—Theories of Harm
Previously, as a member of the Republican-controlled Federal Trade Commission (“FTC”), Commissioner Rebecca Kelly Slaughter chided both the FTC Staff and her fellow Commissioners for, in her estimation, a failure to consider expansive theories of harm in their merger review process. For example, in dissenting from the approval of a merger in the pharmaceutical industry, Commissioner Slaughter explained:
Vigorous enforcement of the antitrust laws helps protect and promote the competitive environment that supports strong incentives for research and development and leads to greater innovation. Innovation also helps lead to better outcomes for consumers in the form of lower prices, higher quality, and more choices. Thus, it is essential to scrutinize closely whether a merger is likely to diminish innovation competition by incentivizing the merged firm to curtail its innovative efforts, including investment in research and development, below the level that would prevail in the absence of the merger.
Now, as Acting Chair firmly in control of the FTC, and with a majority of like-minded Commissioners looming once vacancies are filled by the Biden administration, Commissioner Slaughter appears intent on ensuring that future merger reviews address expansive, and perhaps additional, theories of harm. The recent announcement of the creation of a multilateral working group to build a new approach to pharmaceutical mergers is a step in that direction. Among other things, this new working group has been tasked with coming up with “fresh approaches that fully analyze and address the varied competitive concerns that these mergers and acquisitions raise,” giving consideration to the following questions:
How can current theories of harm be expanded and refreshed?
What is the full range of a pharmaceutical merger’s effects on innovation?
In merger review, how should conduct such as price fixing, reverse payments, and other regulatory abuses be considered?
What evidence would be needed to challenge a transaction based on any new or expanded theories of harm?
What types of remedies would work in the cases to which those theories are applied?
What has been learned about the scope of assets and characteristics of firms that make successful divestiture buyers?
As the spotlight on consolidation in the health care industry continues to shine, it is fair to expect that the product of this new working group will be extrapolated to all types of health care transactions.