Clinics ink settlement with FTC

Clinics ink settlement with FTC

01:00 AM EDT on Saturday, September 8, 2007
Journal staff report

Two area dialysis clinic operators — American Renal Associates and Fresenius Medical Care Holdings — have signed consent orders with the Federal Trade Commission settling charges that they unlawfully tried to restrain competition.

The FTC alleged that ARA paid Fresenius to close clinics near competing ARA clinics in Rhode Island and Massachusetts. The order also settles charges that ARA’s proposed acquisition of two other Fresenius clinics, in the Warwick/Cranston area, would violate the FTC Act.

According to the FTC, agreements to pay a competitor to exit a market, such as the one allegedly negotiated between ARA and Fresenius, are illegal. Similarly, the acquisition as originally proposed would have eliminated direct competition between ARA and Fresenius clinics, and resulted in ARA operating the only dialysis clinics in the Warwick/Cranston area. The parties terminated their agreement containing the offending provisions after FTC staff raised antitrust concerns.

The consent order prohibits ARA and Fresenius from agreeing with any clinic operator to close clinics or otherwise allocate dialysis markets, territories or customers, and requires ARA to notify the FTC before acquiring any dialysis clinic assets in the Warwick/Cranston area.

(The FTC said a consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.)

The commission voted, 5 to 0, on Thursday to issue the complaint and consent order. The order, disclosed yesterday by the FTC, will be subject to public comment for 30 days, until Oct. 9, after which the commission will decide whether to make it final.

In a statement, Joseph Carlucci, chief executive officer of ARA, said, “ARA is committed to the State of Rhode Island and the patients of Rhode Island. We are happy to follow the guidelines established in the consent agreement with the FTC. The terms outlined in the agreement are entirely consistent with standard ARA business philosophy. The most important aspect is that patients are not inconvenienced and continue to receive the highest quality care possible.”

Officers from Fresenius, based in Lexington, Mass., could not be reached for comment.

“This case reinforces the long-standing and basic principle that a naked agreement to eliminate competition between rivals constitutes a violation of the antitrust laws,” Jeffrey Schmidt, director of the FTC’s Bureau of Competition, said in a statement.

“The FTC’s action announced today will prevent a recurrence of the conduct alleged here, and preserve the benefits of competition — lower prices and higher service levels — for dialysis patients in the affected areas.”

According to the FTC, the parties entered into an asset purchase agreement on Aug. 3, 2005, under which ARA proposed to purchase five Rhode Island dialysis clinics from Fresenius. The agreement also required Fresenius to close an additional three clinics — two in Rhode Island and one in Fall River. The parties terminated the asset purchase agreement on March 13, 2006, after FTC staff raised antitrust concerns.

The FTC’s complaint alleges two separate violations of antitrust laws. The commission charges that the agreement between ARA and Fresenius to close three Fresenius clinics was an agreement to eliminate competition in the affected areas of East Providence, North Providence and Fall River. The effect of this elimination of competition would have been an increase in ARA’s ability to raise prices in these areas and to reduce ARA’s incentives to improve service and quality.

Also, commission charged that ARA’s proposed acquisition of two Fresenius clinics in Warwick would substantially reduce competition for outpatient dialysis services in the Warwick/Cranston area. The complaint alleges that the market for outpatient dialysis services in the Warwick/Cranston area is highly concentrated, with ARA and Fresenius the only two providers, and that the transaction as originally proposed would have resulted in a monopoly for ARA. According to the FTC, entry by a competing firm was unlikely to be timely or sufficient to offset the likely anticompetitive effects of the transaction.

Under the consent order, ARA and Fresenius are prohibited from agreeing with any dialysis clinic operator to close any clinic or otherwise allocate any dialysis market, territory, or customer. Also, the order requires ARA to notify the FTC of its intention to acquire any dialysis clinic assets in the Warwick/Cranston area. The Commission included the prior notice requirement because it believes that ARA may remain interested in expanding in Warwick/Cranston.

The FTC said the order will expire in 10 years.

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