FTC Settles “Roll-Up” Case With Private Equity Firm

As part of a flurry of activity in anticipation of the imminent change in administration, the Federal Trade Commission announced a unanimous approval of a consent order settling its enforcement action against Welsh Carson, the private equity backer of U.S. Anesthesia Partners (“USAP”). Outgoing FTC leadership heralded the settlement as novel enforcement of the new Merger Guidelines and a win against private equity, whereas potential future FTC Chair, Commissioner Andrew Ferguson, characterized the result as a straightforward application of well-established antitrust law.

Welsh Carson had been accused of engaging in anticompetitive acquisitions of anesthesia practices through its portfolio company.  Initially, the FTC sued both Welsh Carson and USAP in federal court, but after Welsh Carson was dismissed on procedural grounds, the FTC threatened the private equity firm with an administrative complaint under Section 5 of the FTC Act on grounds that by serially acquiring previously independent anesthesia practices, Welsh Carson harmed competition for anesthesia services.  According to the FTC, by “rolling up” independent practices, Welsh Carson was able to increase the prices charged by each practice to match the highest rate that any of the practices garnered, thus harming consumers.

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FTC and DOJ Issue New Antitrust Guidelines for Business Activities Affecting Workers

The FTC and DOJ Antitrust Division issued joint Antitrust Guidelines for Business Activities Affecting Workers purporting to explain how both the FTC and DOJ assess whether business practices affecting workers violate the antitrust laws. The new guidance is intended to replace the 2016 Antitrust Guidance for Human Resource Professionals and focuses on activity affecting competition in labor markets. In particular, the guidance stresses that agreements between businesses not to hire each other’s workers or agreements to fix wages, including by use of a third-party algorithm, may constitute criminal violations of the antitrust laws. It also discusses other types of business practices that can carry antitrust risk, such as information sharing, non-compete agreements, and non-disclosure agreements. The agencies periodically issue non-binding guidance such as this one which is intended as readable, practical guidance that will assist businesses in complying with the existing antitrust laws.

The impact of the new guidance is unclear given the timing of the release and how it was passed by the FTC. The issuance comes just days before President-elect Trump is set to take office, and the FTC voted to issue the new guidance by a partisan 3-2 vote. In particular, current FTC Commissioner Andrew Ferguson, who President-elect Trump plans to appoint the new Chair of the FTC, issued a dissent taking the position that “the Biden-Harris FTC announcing its views on how to comply with the antitrust laws in the future is a senseless waste of Commission resources” because “the Biden-Harris FTC has no future.” Fellow Republican Commissioner Melissa Holyoak joined in the dissent. It is possible that the newly constituted Commission under the new Trump Administration could withdraw this guidance and return to the 2016 Antitrust Guidance until it has the time to issue guidance reflecting the new Commission’s enforcement position.

Large No-Poach Class Settlement Gets Preliminary Approval in District of Connecticut

A putative class of aerospace workers recently obtained preliminary approval of large settlements with several government contracting firms in antitrust litigation in the U.S. District Court for the District of Connecticut. The nine named plaintiffs are current and former employees of Pratt & Whitney, which is now a division of RTX Corp. (formerly Raytheon Technologies Corporation). Pratt & Whitney manufactures jet engines for commercial and military aircraft. The other five defendants are suppliers of engineering services to Pratt & Whitney.

In their class action complaint, the plaintiffs alleged that the defendants conspired to restrict the recruitment and hiring of each other’s employees in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Such agreements are commonly referred to as no-poach agreements. Specifically, the plaintiffs alleged that there were three types of illegal no-poach agreements: (1) an agreement between Pratt & Whitney and the engineering services firm defendants not to recruit or hire each other’s employees, which Pratt & Whitney primarily enforced; (2) an agreement that Pratt & Whitney would not hire from the engineering services firms without their prior written approval; and (3) additional bilateral agreements between certain firms and Pratt & Whitney limiting Pratt & Whitney’s ability to recruit and hire employees from that firm. Plaintiffs argued that this conspiracy restrained competition in the labor market for aerospace workers and suppressed employees’ compensation.

In order to obtain dismissal of the case with prejudice and an exchange of releases, Pratt & Whitney has agreed to pay $34 million into a settlement fund for the benefit of the class. Similarly, the engineering services firm defendants have agreed to pay $26.5 million into a similar fund. A hearing has been set for May 7, 2025 to determine final approval of the settlement after any objections or opt-outs from class members.

FTC Reaches Record $5.6M “Gun-Jumping” Settlement Related To Oil Deal

It is extremely rare to see the Federal Trade Commission (“FTC”) pursue an enforcement action under the Hart-Scott-Rodino Act (“HSR Act”) for illegal pre-merger coordination, better known as “gun jumping.” Nonetheless, the FTC recently announced that certain crude oil producers will pay a record $5.6 million civil fine to settle allegations that they engaged in impermissible pre-merger conduct in violation of the HSR Act.

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New HSR Form Effective February 10, 2025

Earlier today, the FTC published its final rule changing the premerger notification requirements under the Hart-Scott-Rodino Act (HSR Act), making the effective date for using the new HSR Form February 10, 2025. The publication comes roughly a month after the FTC voted unanimously to issue a final rule making significant changes to the premerger notification process. Parties to certain mergers and acquisitions that are required to submit premerger notification forms may use the current HSR Form until February 10, 2025.

According to today’s press release, the premerger notification office (PNO) will publish a detailed overview of the HSR Form changes and will invite practitioners to submit questions of broad applicability and PNO staff will post answer to the website. As we previewed in our alert, front-loading the preparation of premerger notification materials will be critical to ensuring timely submission of the required materials under the new rule.

DOJ Argues in Cert Petition That Agreements Between Competitors That Have Vertical Aspects Should be Judged Under Per Se Standard

Seeking to revive a criminal antitrust conviction, the DOJ last week filed its reply brief in support of a petition for certiorari asking the Supreme Court to hear its appeal of a Fourth Circuit decision overturning a 2022 bid-rigging conviction.  In the brief, the DOJ argued that the Fourth Circuit erred when it ruled that only purely horizontal agreements qualify as per se violations of the antitrust laws.   

The defendant, Brent Brewbaker, was an executive of an aluminum parts supplier, Contech.  The government alleged that Brewbaker submitted losing bids to the North Carolina Department of Transportation in an effort to help a downstream customer of Contech, Pomona Pipe Products, win the bid.  Brewbaker was convicted of bid-rigging, in violation of Section 1 of the Sherman Act, and fraud.  The Fourth Circuit upheld the fraud conviction but overturned the Sherman Act one, ruling that because it was not purely horizontal, the agreement between Contech and Pomona should have been reviewed under the rule of reason rather than the per se rule. 

The DOJ argued that the indictment alleged that Contech and Pomona were direct competitors in that they had submitted competing bids for aluminum structure projects, and the fact that the agreement also had a vertical component did not mean that per se treatment was unavailable.  The DOJ argued further that the Fourth Circuit’s decision conflicted with two Supreme Court cases, United States v. Socony-Vacuum Oil Co. and Palmer v. BRG of Georgia, where the Court held that agreements among competitors were per se unlawful even though those competitors also had vertical relationships. 

Environmental Initiatives Are Not Exempt from Antitrust Enforcement, FTC Says

At the American Bar Association’s recent antitrust meeting in Washington, D.C., the Federal Trade Commission (FTC) Office of Policy and Coordination’s Deputy Assistant Director Synda Mark cautioned companies seeking to collaborate on environmental initiatives that they are not exempt from antitrust enforcement. Mark commented during a panel discussion that antitrust officials will not “turn a blind eye” to anticompetitive conduct, despite corporate promises of the environmental benefits of collaborative conduct, noting that the FTC works only to prevent economic harms and that environmental justice goals do not “seep into the antitrust analysis.” Read the full Alert on the Duane Morris website.

FTC Announces Crackdown on Deceptive AI Claims and Schemes

As part of its ongoing enforcement efforts against allegedly deceptive and misleading uses of artificial intelligence, the Federal Trade Commission (FTC) disclosed five new enforcement actions on September 25, 2024, against companies across various industries that either allegedly made fraudulent claims about their AI resources or offered AI services that could be used in misleading or deceptive ways. Read the full Alert on the Duane Morris website.

Federal Court Stops the FTC Noncompete Rule from Being Enforced or Taking Effect

On August 20, 2024, the United States District Court for the Northern District of Texas, in the Ryan lawsuit, struck down a final Federal Trade Commission (FTC) rule―which was set to go into effect on September 4, 2024, and ban noncompetition agreements for virtually all U.S. workers―holding that the rule shall not be enforced by the FTC or take effect as to any workers or employers. Read the full Alert on the Duane Morris website. 

Understanding the Health Insurance Reimbursement Price-Fixing MDL Formation

I recently reported that Multiplan and certain insurers in its network were accused of being a “cartel” that has agreed to underprice out-of-network reimbursement paid to providers in the Multiplan network in violation of federal antitrust laws. in the matter styled Live Well Chiropractic PLLC, et al. v. Multiplan, Inc., et al., (D. IL Civ. No. 1:24-cv–3680).  That antitrust action, along with six other similar actions, were consolidated for pre-trial proceedings by the Joint Panel on Multi-District Litigation (JPML) into a multi-district litigation in the Northern District of Illinois before The Honorable Matthew Kennelly.  See JPML Transfer Order.

To read the full text of this post by partner Seth Goldberg, please visit the Duane Morris Health Law Blog.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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