This is a reminder to consider substantive antitrust issues even
when transactions do not require a U.S. Hart-Scott-Rodino (HSR)
filing; for example, when the purchase price is less than the
current lowest HSR threshold of US$75.9 million.1
Transactions not subject to HSR are still prohibited under
Section 7 of the Clayton Act if "the effect of such
acquisition may be substantially to lessen competition."
Mergers and acquisitions may also raise concerns under the Sherman
Act, as Section 1 bars any agreement that unreasonably restrains
competition and Section 2 prohibits the intentional acquisition of
A federal court decision earlier this year, Federal Trade
Commission v. St. Luke's Health System, underscores the
point. The court ordered the unwinding and full divestiture of St.
Luke's Health System, Ltd.'s acquisition of Saltzer Medical
Group, more than a year after the deal closed. The parties had not
been required to make an HSR filing because the $16 million
transaction was far below the $75.9 million threshold.
The court found that the acquisition violated Clayton Act
Section 7 and the Idaho Competition Act. The court's conclusion
flowed in large part from its acceptance of the small geographic
market defined by the FTC—the city of Nampa, Idaho. The
relevant product market was primary physician services.
In the market so defined, the court considered the
Herfindahl-Hirschman Index (HHI), a measure of market
concentration. The Federal Trade Commission (FTC) and the
Department of Justice (DOJ) generally consider markets highly
concentrated when the HHI exceeds 2,500 and transactions that
increase HHI by more than 200 points in highly concentrated markets
are presumptively considered anticompetitive. The pre-acquisition
HHI in the St. Luke's case was 4,612 and the post-transaction
HHI was 6,219, an increase of 1,607 in the relevant market.
Moreover, according to the FTC, the combined St. Luke's/Saltzer
entity would create a substantial risk of anticompetitive price
increases, raising costs for consumers by using its dominant market
share to negotiate higher reimbursements with health plans and
charge common services at higher hospital billing rates than those
charged by Saltzer previously as a non-hospital based medical
provider. Prior to the acquisition of Saltzer, evidence showed St.
Luke's had used acquisitions of other independent physician
groups to gain greater bargaining leverage with health
The case is not unique—the FTC and DOJ do not hesitate to
challenge small, non-reportable transactions when they raise the
risk of anticompetitive conduct, so it is important to review
antitrust and competition issues posed by a transaction even when
no HSR filing is required.
Every deal requires at least a short examination of the
potential antitrust risk to be obtained from both parties. If
possible, buyers should negotiate purchase prices or other terms
that provide for the seller to share the risk of a
post-consummation antitrust challenge. Caution is also advised in
written communications concerning the anticipated market impacts of
1 Threshold dollar amounts are subject to annual adjustment
based on the change in gross national product.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
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