April Antitrust Bulletin

April 18, 2012

FTC Orders Divestiture in Consummated Hospital Acquisition

On March 22, the Federal Trade Commission (FTC) ruled ProMedica Health System’s August 2010 acquisition of rival St. Luke’s Hospital was anticompetitive and “likely to substantially lessen competition and increase prices for general acute-care inpatient hospital services and inpatient obstetric services sold to commercial health plans in the Toledo, Ohio area.” ProMedica had consummated its acquisition of St. Luke’s, but did so under a hold-separate agreement designed to preserve the hospital as an independent competitor during the FTC’s investigation into potential anticompetitive effects of the transaction. As previously reported, the FTC ultimately challenged the transaction. In its recent ruling, the FTC rejected ProMedica’s claim that St. Luke’s was operating at a financial loss and could not remain competitive absent the transaction, determined that the acquisition would lead to higher prices for consumers and ordered ProMedica to sell St. Luke’s to an FTC-approved buyer within 180 days. This case is yet another reminder that the FTC is continuing to aggressively investigate and challenge hospital mergers in what it views to be concentrated markets.

DG Competition Publishes Manual of Procedures for Application of EU Competition Laws

In March 2012, the European Commission’s Directorate-General for Competition (DG Competition) published a manual of procedures for the application of Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), the EU’s core competition laws. DG Competition is primarily responsible for enforcing Articles 101 and 102 TFEU, and the manual is intended to serve as a practical working tool that can provide non-binding guidance to staff on how to conduct an antitrust investigation. Topics covered by the manual include cooperation with competition authorities in other countries, sector inquiries, dealing with leniency applications, access to files and confidentiality, remedies and fines, and guidance letters. The manual will be updated regularly to reflect new experience gained in applying the EU competition laws.

ECJ Addresses Below-Cost Pricing Issues

On March 27, the Court of Justice of the European Union (ECJ) issued a ruling concerning below-cost pricing by a dominant company. The ECJ distinguished between average total costs attributed to the activity concerned and average incremental costs pertaining to that activity, and confirmed that a dominant firm will not violate EU competition law if it sells below total cost so long as it charges above its incremental cost. Abuse of dominance requires a showing that the company intended to eliminate a competitor from the market as a result of its pricing strategies. Additional information is available in our April 2012 EU Competition Law Compliance Update.

For more information, please contact the lawyers in the Antitrust & Trade Regulation Department at McGuireWoods.