On February 3, 2023, the U.S. Department of Justice’s Antitrust Division (DOJ) announced the withdrawal of three well-established policy statements that have provided key guidance concerning antitrust enforcement in the healthcare industry—and for information sharing among competitors more broadly. In a speech covering the announcement, Principal Deputy Assistant Attorney General Doha Mekki made clear the DOJ was eliminating these policy statements rather than revising them, the effect of which is to remove safe harbors that the healthcare industry has long relied upon in the context of hospital mergers, coordinated activities involving healthcare services, and the sharing of reimbursement rates and similar information. These policy statements also have provided businesses across other industries guidance regarding information sharing best practices. The withdrawal of this guidance underscores antitrust enforcers’ recent efforts to curtail what the DOJ described as “overly permissive” guidance regarding antitrust enforcement—a move that has the potential to impact any industry engaged in the exchange of competitively sensitive information.
THE HEALTHCARE POLICY STATEMENTS AND “SAFETY ZONES”
In 1993, 1996, and 2011, the DOJ and the Federal Trade Commission (FTC) jointly issued several policy statements for the healthcare industry. These statements established a “safety zone” for hospital mergers involving the purchase of small hospitals to assist small, rural hospitals to merge and expand services without fear of antitrust scrutiny. They also provided guidance and safety zones on matters such as joint purchasing arrangements among providers, joint ventures to purchase and operate costly healthcare equipment, and collaboration by Medicare providers through accountable care organizations.
Particularly significantly, the statements also provided guidance on how competitors in the healthcare industry may share factual information regarding fees and reimbursement rates. The statements established a safety zone for such information sharing provided that (1) the data collection is managed by a third party; (2) the data shared is aged, i.e., at least three months old; (3) the data is aggregated so that it does not allow recipients to identify prices applicable to any individual participant; and (4) at least five participants report data and no individual participant’s data represents more than 25% of the data set.
While these policy statements were geared toward the healthcare industry, they have provided guidance to businesses in other industries as well, especially in the context of sharing competitively sensitive information. For example, in a 2016 guidance document, the DOJ and FTC echoed rules of thumb for sharing aggregated competitively sensitive information in the context of wages, explaining that such information sharing may be lawful where the data is managed by a neutral third party, relatively old, aggregated and anonymous, and sufficiently numerous so that competitors cannot link information to one another.
Thus, on the whole, it became generally accepted that information sharing conducted in accordance with the healthcare statements would not come under the scrutiny of the antitrust enforcers, regardless of industry.
THE DOJ’S REASONING FOR THE WITHDRAWAL
In the recent speech, the DOJ indicated that it withdrew the policy statements to “ensure that enforcement efforts reflect modern market realities,” including the fact that the “healthcare landscape has changed significantly.” The DOJ further explained that the healthcare statements were “overly permissive” regarding information sharing, were drafted at a time when information was exchanged “in manilla envelopes and through fax machines,” and “no longer serve their intended purposes of providing encompassing guidance to the public on relevant healthcare competition issues.”
In particular, the DOJ emphasized new realities of the healthcare industry, including increased reliance on machine learning and artificial intelligence in healthcare, increasingly multi-sided markets, and increased consolidation and vertical integration.
The DOJ further determined that “concerning anticompetitive conduct can satisfy many if not all of the safety zone’s factors” and that safety zones have been misinterpreted and misapplied in “contexts or industries that were never contemplated by the guidance.” Rather than relying on the healthcare statement safety zones, the DOJ now will be taking a “case-by-case enforcement approach” to “better evaluate” conduct and mergers that might harm competition.
The FTC, which also has federal antitrust enforcement powers and jointly issued the policy statements with the DOJ, has not yet indicated whether it also will withdraw from the policy statements. However, given the agency has departed from other longstanding antitrust guidance under the agency’s current leadership, it is likely that the FTC will follow suit. Notably, both agencies are taking a “whole-of-government approach” in working with executive branch agencies to partner on competition enforcement. The FTC itself recently announced its intent to ban most employee non-compete agreements.
The recent speech underscores the DOJ’s skepticism of “safeguards” that historically protected information exchanges. For example, the DOJ now has signaled increased scrutiny of information exchanges involving third-party intermediaries, which the DOJ believes can have the same anticompetitive effect as direct information exchanges. The DOJ also may scrutinize the exchange of more aged pricing data due to the advent of machine learning and pricing algorithms, which may increase the competitive value of stale data. As a result, businesses should conduct a case-by-case evaluation of whether the information-sharing or other conduct in question is likely to create anticompetitive effects, particularly in light of new market realities, such as data analytics.
Further, the DOJ has made clear that it will not limit its analysis of anticompetitive information exchanges to Section 1 of the Sherman Act, which prohibits contracts in restraint of trade and is the typical enforcement mechanism for information exchanges. Instead, the DOJ plans to more closely scrutinize mergers within any industry that has a history of coordination or collusion. In these cases, the DOJ warned that “merging parties will face an uphill battle convincing [the DOJ] that post-merger coordination or collusion is unlikely – even when mergers fall below the structural presumption.” And if one of the merging parties has previously engaged in anticompetitive information sharing, the scrutiny will be even greater. Such parties should be aware that if evidence of criminal conduct (e.g., naked price fixing) is uncovered during such a merger investigation, the reviewing agency may report it to the DOJ Antitrust Division’s criminal prosecutors or other law enforcement authorities.
And it does not appear that the agencies are done changing their antitrust guidance. Both federal antitrust agencies have departed from or announced the intent to overhaul other published antitrust guidance, such as merger review guidelines, in recent months. Further, in her speech, Principal Deputy Mekki stated that “[t]he Division will continue to revisit out-of-date guidance that no longer provides transparency concerning how the Division presently evaluates potentially anticompetitive conduct.” This statement is not limited to information-sharing guidance, suggesting that more federal antitrust policies and safe harbors may be withdrawn. For example, in 2000, the DOJ and the FTC jointly issued guidance on competitor collaborations which set forth “Antitrust Safety Zones” that were “designed to provide participants in a competitor collaboration with a degree of certainty in those situations in which anticompetitive effects are so unlikely that the Agencies presume the arrangements to be lawful without inquiring into particular circumstances.” It remains to be seen whether these safety zones withstand the agencies’ ongoing review.
Importantly, however, the withdrawal of the healthcare antitrust policy statements or other guidance does not change underlying antitrust caselaw addressing the conduct covered by the guidelines. The agencies previously have acknowledged that they do not have the unilateral right to change existing caselaw interpreting the Sherman Act and other antitrust laws, and that their guidelines are not intended to be a “restatement” of existing law, but rather a statement of their enforcement posture. Hence, it is even more important now to obtain competent advice on applicability of the existing antitrust caselaw and extant guidance to particular practices.