The Federal Trade Commission (FTC) has curbed DaVita’s expansion in Utah, ordering the kidney-care giant to divest three dialysis clinics along with other new restrictions, including a 10-year requirement to obtain a prior approval for any future acquisitions within the State.
The regulator’s proposed order, released Monday, follows an investigation into last month’s proposed acquisition of the University of Utah’s dialysis business, which aimed to place 18 dialysis clinics in Utah under the wing of DaVita.
The FTC argued in its complaint (PDF) that there are only three providers of outpatient dialysis services in the greater Provo, Utah area, with DaVita and the University of Utah operating seven of the eight clinics in total.
As new entrants to this market are unlikely, the proposed acquisition “would eliminate real, direct and substantial competition between DaVita and the University in the market for outpatient dialysis services in the relevant field, thereby increasing the capacity of the merged entity to unilaterally raise prices for outpatient dialysis services. dialysis services and reduce incentives to improve service or quality in the affected market, ”the FTC wrote in its complaint.
“DaVita has a habit of trying to buy competing dialysis clinics in an industry that is already very concentrated, in large part due to the acquisition activity of DaVita and other large dialysis clinic chains.” Competition Bureau director Holly Vedova said in the FTC statement. announcement. “This is a great concern, and is compounded by the fact that the limited number of nephrologists available to work in clinics creates an opportunity for anti-competitive restrictions on work.”
RELATED: DaVita, Ex-CEO Charged In Alleged Scam To Suppress Competition
Under the proposed consent order for public comment, DaVita is required to sell three of the Provo clinics to Sanderling Renal Services, which currently does not operate a dialysis center in Utah, and to provide up to one year of transition services.
The proposed order also prohibits DaVita from enforcing non-compete agreements with doctors at the University of Utah, prohibiting Sanderling from soliciting DaVita employees and directly soliciting patients who receive services from the three. clinics sold for a period of two years.
The FTC’s decision marks the return of the regulator’s pre-approval policy, which was repealed in 1995.
According to a policy statement released on Monday, acquiring companies will now need to receive regulatory approval when they reach a deal in a market where prejudice has been reportedly suffered in the previous 10 years.
“The FTC shouldn’t have to waste precious time and resources investigating clearly anti-competitive deals that should have died in the boardroom,” Vedova said in a statement. “The reestablishment of the long-standing pre-approval policy is forcing acquiring companies to think twice before embarking on a buying spree because the FTC may just say no.”
RELATED: FTC Backlog Delays Regulatory Review of Beaumont-Spectrum Merger, Systems Says
The FTC said it would assess “a number of factors” such as market concentration and the parties’ acquisition history when determining the scope of a pre-approval provision, noting that such restrictions could be imposed over areas larger than a single relevant market.
This will be the case with DaVita, which the FTC says has “a habit of fueling market consolidation for these vital services.” Under the proposed order, the company will have to seek pre-approval from the regulator before acquiring a dialysis clinic anywhere in the state of Utah in the next 10 years.
The proposed order was unanimously approved by the five FTC commissioners. Commissioner Christine Wilson wrote in a concurring statement that the order’s pre-approval, non-compete and no-poaching provisions are appropriate both broadly and in the context of an act of July charge in which DaVita was accused of making deals with competitors not to hire employees.
This week’s action and the reinstatement of pre-approval is a clear sign of the regulator’s stronger stance on mergers and acquisitions.
Over the summer, President Joe Biden ordered the FTC and other government agencies to review their guidelines for mergers in healthcare and other sectors. The FTC has generally remained silent since, but has warned companies to be cautious about moving forward with planned mergers as the regulator weaves its way through a “tidal wave” of pending deals.