[Federal Register Volume 60, Number 149 (Thursday, August 3, 1995)]
[Notices]
[Pages 39747-39751]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19112]
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FEDERAL TRADE COMMISSION
[File No. 941-0076]
Local Health System, Inc., et al; Proposed Consent Agreement With
Analysis To Aid Public Comment
AGENCY: Federal trade commission.
ACTION: Proposed consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
prohibit the merger of the two largest hospitals in St. Clair County,
Michigan and would require the hospitals, for a limited time, to notify
the Commission or obtain Commission approval before acquiring certain
hospital assets in the Port Huron, Michigan area.
DATES: Comments must be received on or before October 2, 1995.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., NW, Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT:Phillip L. Broyles, Cleveland Regional
Office, Federal Trade Commission, 668 Euclid Avenue, Suite 520-A,
Cleveland, OH 44114. (216) 522-4207.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and section 2.34 of
the Commission's rules of practice (16 CFR 2.34), notice is hereby
given that the following consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of sixty (60) days. Public comment is invited. Such
comments or views will be considered by the Commission and will be
available for inspection and copying at its principal office in
accordance with Sec. 4.9(b)(6)(ii) of the Commission's rules of
practice (16 CFR 4.9(b)(6)(ii)).
[File No. 941-0076]
Agreement Containing Consent Order
In the matter of LOCAL HEALTH SYSTEM, INC., a corporation, BLUE
WATER HEALTH SERVICES CORP., a corporation, and MERCY HEALTH
SERVICES, a corporation.
The Federal Trade Commission (``Commission''), having initiated an
investigation of the proposed acquisition by Local Health System, Inc.
(``Local Health''), of certain assets of Mercy Hospital Port Huron
(``Mercy-Port Huron'') from Mercy Health Services (``Mercy Health''),
and of certain assets of Port Huron Hospital from Blue Water Health
Services Corporation (``Blue Water Health''), and
[[Page 39748]]
it now appearing that Local Health, Mercy Health and Blue Water Health,
hereinafter sometimes referred to as ``Proposed Respondents,'' are
willing to enter into an agreement containing an order to cease and
desist from making certain acquisitions, and providing for other
relief:
It is hereby agreed by and between Proposed Respondents, by their
duly authorized officers and attorneys, and counsel for the Commission
that:
1. Proposed Respondent Local Health is a corporation organized,
existing and doing business under and by virtue of the laws of the
State of Delaware, with its office and principal place of business
located at 1001 Kearney Street, Port Huron, Michigan 48060.
2. Proposed Respondent Mercy Health is a corporation organized,
existing and doing business under and by virtue of the laws of the
State of Michigan, with its office and principal place of business
located at 34605 Twelve Mile Road, Farmington, Hills, Michigan 48331.
3. Proposed Respondent Blue Water Health is a corporation
organized, existing and doing business under and by virtue of the laws
of the State of Michigan, with its office and principal place of
business located at 1001 Kearney Street, Port Huron, Michigan 48060.
4. Proposed Respondents admit all the jurisdictional facts set
forth in the draft of complaint.
5. Proposed Respondents waive:
a. Any further procedural steps;
b. The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
c. All rights to seek judicial review or otherwise to challenge or
contest the validity of the Order entered pursuant to this agreement;
and
d. Any claim under the Equal Access to Justice Act.
6. This agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
agreement is accepted by the Commission it, together with the draft of
complaint contemplated thereby, will be placed on the public record for
a period of sixty (60) days and information in respect thereto publicly
released. The Commission thereafter may either withdraw its acceptance
of this agreement and so notify the Proposed Respondents, in which
event it will take such action as it may consider appropriate, or issue
and serve its complaint (in such form as the circumstances may require)
and decision, in disposition of the proceeding.
7. This agreement is for settlement purposes only and does not
constitute an admission by Proposed Respondents that the law has been
violated as alleged in the draft of complaint, or that the facts as
alleged in the draft complaint, other than jurisdictional facts, are
true.
8. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Sec. 2.34 of the Commission's
rules, the Commission may, without further notice to the Proposed
Respondents, (1) issue its complaint corresponding in form and
substance with the draft of complaint and its decision containing the
following Order to cease and desist in disposition of the proceeding
and (2) make information public with respect thereto. When so entered,
the Order to cease and desist shall have the same force and effect and
may be altered, modified or set aside in the same manner and within the
same time provided by statute for other orders. The Order shall become
final upon service. Delivery by the U.S. Postal Service of the
complaint and decision containing the agreed-to Order to Proposed
Respondents' addresses as stated in this agreement shall constitute
service. Proposed Respondents waive any right they may have to any
other manner of service. The complaint may be used in construing the
terms of the Order, and no agreement, understanding, representation, or
interpretation not contained in the Order or the agreement may be used
to very or contradict the terms of the Order.
9. Proposed Respondents have read the proposed complaint and Order
contemplated hereby. Proposed Respondents understand that once the
Order has been issued, they will be required to file one or more
compliance reports showing that they have fully complied with the
Order. Proposed Respondents further understand that they may be liable
for civil penalties in the amount provided by law for each violation of
the Order after it becomes final.
Order
I
It is ordered that, as used in this Order, the following
definitions shall apply:
A. Local Health means Local Health System, Inc., its predecessors,
subsidiaries, divisions, and groups and affiliates controlled by Local
Health System, Inc.; their directors, officers, employees, agents, and
representatives; and their successors and assigns.
B. Mercy Health means Mercy Health Services, its predecessors,
subsidiaries, divisions, and groups and affiliates controlled by Mercy
Health Services; their directors, officers, employees, agents, and
representatives; and their successors and assigns.
C. Blue Water Health means Blue Water Health Services Corporation,
its predecessors, subsidiaries, divisions, and groups and affiliates
controlled by Blue Water Health Services Corporation; their directors,
officers, employees, agents, and representatives; and their successors
and assigns.
D. Respondents means Local Health, Mercy Health and Blue Water
Health, collectively and individually.
E. The Acquisition means the proposed acquisition of Port Huron
Hospital and Mercy Hospital Port Huron by Local Health pursuant to the
Memorandum of Understanding dated January 19, 1994.
F. Acute care hospital means a health facility, other than a
federally owned facility, having a duly organized governing body with
overall administrative and professional responsibility, and an
organized medical staff, that provides 24-hour inpatient care, as well
as outpatient services, and having as a primary function the provision
of inpatient services for medical diagnosis, treatment and care of
physically injured or sick persons with short-term or episodic health
problems or infirmities.
G. To operate an acute care hospital means to own, lease, manage or
otherwise control or direct the operations of an acute care hospital,
directly or indirectly.
H. Affiliate means any entity whose management and policies are
controlled in any way, directly or indirectly, by the person with which
it is affiliated.
I. Person means any natural person, partnership, corporation,
company, association, trust, joint venture or other business or legal
entity, including any governmental agency.
J. Greater Port Huron means the area consisting of the cities of
Port Huron, Marysville, Kimball Township, Port Huron Township and Fort
Gratiot, Michigan.
K. Commission means the Federal Trade Commission.
II
It is further ordered that, unless they have already done so,
Respondents shall, no later than seven (7) days after the date this
Order becomes final: (1) Terminate any agreement that provides for or
contemplates the Acquisition; (2) return or destroy all documents
containing or recording confidential
[[Page 39749]]
information provided to Respondents by any other person in connection
with negotiations or agreements relating to the Acquisition; and (3)
recover from any other person or have such other person destroy all
documents containing or recording confidential information provided by
Respondents to such other person in connection with negotiations or
agreements relating to the Acquisition.
III
It is further ordered that, for a period of three (3) years from
the date this Order becomes final, no Respondent shall, without prior
approval of the Commission, directly or indirectly, through
subsidiaries, partnerships or otherwise:
A. Acquire any majority or other controlling stock, share capital,
equity or other interest in any other Respondent that operates any
acute care hospital facility in Greater Port Huron;
B. Acquire a majority of any assets of any acute care hospital
facility operated by any other Respondent in Greater Port Huron;
C. Enter into any agreement or other arrangement to obtain direct
or indirect ownership, management or control of any acute care hospital
facility operated by any other Respondent in Greater Port Huron,
including but not limited to, a lease of or management contract for any
such acute care hospital facility, or an agreement to replace an acute
care hospital facility operated by another person with an acute care
hospital to be operated by any Respondent;
D. Acquire or otherwise obtain the right to designate, directly or
indirectly, a majority of the directors or trustees of any acute care
hospital facility operated by any other Respondent in Greater Port
Huron; or
E. Permit any acute care hospital it operates in Greater Port Huron
to be acquired (by stock acquisition, asset acquisition, lease,
management contract, establishment of a replacement facility, right to
designate directors or trustees or otherwise) by any other Respondent
that operated, or will operate immediately following such acquisition,
any other acute care hospital in Greater Port Huron.
IV
It is further ordered that, for a period of ten (10) years from the
date this Order becomes final, no Respondent shall, without providing
advance written notification to the Commission, directly or indirectly,
through subsidiaries, partnerships, or otherwise:
A. Acquire any stock, share capital, equity or other interest in
any person who operates any acute care hospital facility in Greater
Port Huron;
B. Acquire any assets of any acute care hospital facility in
Greater Port Huron;
C. Enter into any agreement or other arrangement to obtain direct
or indirect ownership, management or control of any acute care hospital
facility or any part thereof in Greater Port Huron, including but not
limited to, a lease of or management contract for any such acute care
hospital facility, or an agreement to replace an acute care hospital
facility operated by another person with an acute care hospital
facility to be operated by any Respondent;
D. Acquire or otherwise obtain the right to designate, directly or
indirectly, directors or trustees of any acute care hospital facility
in Greater Port Huron; or
E. Permit any acute care hospital it operates in Greater Port Huron
to be acquired (in whole or in part, by stock acquisition, asset
acquisition, lease, management contract, establishment of a replacement
facility, right to designate directors or trustees, or otherwise) by
any person who operates, or will operate immediately following such
acquisition, any other acute care hospital in Greater Port Huron.
Said notification shall be given on the Notification and Report
Form set forth in the appendix to part 803 of title 16 of the Code of
Federal Regulations as amended (hereinafter referred to as ``the
Notification''), and shall be prepared and transmitted in accordance
with the requirements of that part, except that no filing fee will be
required for any such notification, notification need not be made to
the United States Department of Justice, and notification is required
only of Respondents and not of any other party to the transaction.
Respondents shall provide the Notification to the Commission at least
thirty days prior to acquiring any such interest (hereinafter referred
to as the ``first waiting period''). If, within the first waiting
period, representatives of the Commission make a written request for
additional information, Respondents shall not consummate the
acquisition until twenty days after substantially complying with such
request for additional information. Early termination of the waiting
periods in this paragraph may be requested and, where appropriate,
granted in the same manner as is applicable under the requirements and
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
15 U.S.C. 18a.
Provided, however, that prior notification shall not be required by
this Paragraph IV of this Order for:
1. The establishment by a Respondent of a new acute care hospital
facility that is a replacement for that Repondent's existing acute care
hospital facility;
2. The establishment by a Respondent of a new acute care hospital
that is not a replacement for any other acute care hospital facility in
Greater Port Huron;
3. Any transaction otherwise subject to this Paragraph IV of this
Order if the fair market value of (or, in the case of a purchase
acquisition, the consideration paid for) the acute care hospital
facility or part thereof to be acquired does not exceed one million
dollars ($1,000,000);
4. Any transaction otherwise subject to this Paragraph IV of this
Order if the acquisition is pursuant to a joint venture which is to
engage in no activities other than the provision of the following
services: Laundry; data processing; joint ownership and management of
inventory; materials management; billing and collection; dietary;
industrial engineering management; printing; security; records
management; laboratory testing; support services for charitable
foundations; or personnel education, testing or training; or
5. Notification is required to be made, and has been made, pursuant
to Section 7A of the Clayton Act, 15 U.S.C. 18a, or prior approval by
the Commission is required, and has been granted pursuant to Paragraph
III of this Order.
V
It is further ordered that, for a period of ten (10) years from the
date this order becomes final, Respondents shall not permit all or any
substantial part of any acute care hospital they operate in Greater
Port Huron to be acquired (in whole or in part, stock acquisition,
asset acquisition, lease, management contract, establishment of a
replacement facility, right to designate directors or trustees or
otherwise) by any other person unless the acquiring person fields with
the Commission, prior to the closing of such acquisition, a written
agreement to be bound by the provisions of this Order, which agreement
Respondents shall require as a condition precedent to the acquisition.
VI
It is further ordered that:
A. Within sixty (60) days of the date this Order becomes final,
each Respondent shall file a verified written report with the
Commission setting forth in detail the manner and form in which it has
complied and is complying with Paragraph II of this order; and
[[Page 39750]]
B. One (1) year from the date this Order becomes final, annually
for the next nine (9) years on the anniversary of the date this Order
becomes final, and at such other times as the Commission may require,
each Respondent shall file a verified written report with the
Commission setting forth in detail the manner and form in which it has
complied and is complying with Paragraphs III, IV and V of this Order.
VII
It is further ordered that Respondents shall notify the Commission
at least thirty (30) days prior to any proposed change in the corporate
Respondents that may affect compliance obligations arising out of the
Order, such as dissolution, assignment, sale resulting in the emergence
of a successor corporation, or the creation or dissolution of
subsidiaries.
VIII
It is further ordered that, for the purpose of determining or
securing compliance with this Order, upon reasonable notice to
Respondents, Respondents shall permit, for a period of ten (10) years
from the date this Order becomes final, any duly authorized
representative of the Commission:
A. Reasonable access, during office hours and in the presence of
counsel, to inspect and copy all books, ledgers, accounts,
correspondence, memoranda and other records and documents in the
possession or under the control of Respondents relating to any matters
contained in this Order; and
B. Upon five days' notice to Respondents and without restraint or
interference from them, to interview officers, directors, or employees
of Respondents, who may have counsel present.
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission (``the Commission'') has accepted,
subject to final approval, an agreement containing a proposed consent
order from Local Health System, Inc. (``Local Health''), Blue Water
Health Services Corp. (``Blue Water Health'') and Mercy Health Services
(``Mercy Health''). The proposed consent order has been placed on the
public record for sixty (60) days for reception of comments by
interested persons. Comments received during this period will become
part of the public record. After sixty (60) days, the Commission will
again review the agreement and the comments received and will decide
whether it should withdraw from the agreement or make final the
agreement's proposed order.
The Commission's investigation of this matter concerns the
acquisition of Port Huron Hospital, a general acute care hospital owned
and operated by Blue Water Health, and Mercy Hospital-Port Huron
(``Mercy Hospital''), a general acute care hospital owned and operated
by Mercy Health, by Local Health. Port Huron Hospital and Mercy
Hospital are the only general acute care hospitals in Port Huron,
Michigan. In its administrative complaint, the Commission alleges,
among other things, that the market for acute care inpatient hospital
services in greater Port Huron is highly concentrated and would become
substantially more concentrated as a result of the acquisitions. The
Commission also alleges that it has reason to believe that the
acquisitions would have anticompetitive effects and would violate
section 7 of the Clayton Act. The agreement containing consent order
would, if finally accepted by the Commission, settle charges that the
acquisitions may substantially lessen competition in the delivery of
acute care inpatient hospital services in greater Port Huron.
The order, accepted for public comment, contains provisions
requiring Local Health, Blue Water Health and Mercy Health to terminate
any and all agreements that provide for the acquisition of Port Huron
Hospital and Mercy Hospital by Local Health.
For a period of three years from the date the order becomes final,
the order prohibits Local Health, Blue Water Health and Mercy Health
from acquiring, without prior Commission approval, a majority or
controlling share of stock or other interests in, each other; or a
majority of the assets of any acute care hospital facility operated in
Greater Port Huron by either of the other companies named in the order.
For a period of ten years from the date the order becomes final,
the order prohibits Local Health, Blue Water Health and Mercy Health
from acquiring, without providing the Commission prior written notice,
stock or assets of, or interests in any general acute care hospital
facility in Greater Port Huron. If the Commission requests additional
information regarding any acquisition for which prior notice is
required, the order prohibits Local Health, Blue Water Health and Mercy
Health from completing the acquisition until twenty days after they
have provided substantially all of the information requested by the
Commission.
The purpose of this analysis is to facilitate public comment on the
proposed order, and it is not intended to constitute an official
interpretation of the agreement and proposed order or to modify in any
way their terms.
Donald S. Clark,
Secretary.
Dissenting Statement of Commissioner Mary L. Azcuenaga in Local Health
System, Inc., File 941-0076
Not having found reason to believe that the proposed merger of Port
Huron Hospital and Mercy Hospital would be unlawful, I do not support
the proposed complaint and consent order.
Concurring Statement of Commissioner Roscoe B. Starek, III
In the Matter of Local Health System, Inc., et al., File No. 941
0076.
In deciding whether to vote for acceptance of the agreement
containing consent order negotiated by the staff, I have evaluated with
particular care the prior approval and prior notice provisions of the
proposed order. The prior approval provisions (para. III) requires each
respondent, for three years, to obtain the Commission's approval before
entering into any transaction that in essence would renew the Port
Huron Hospital/Mercy Hospital merger that gave rise to this case. Under
the prior notice requirement (para. IV), a respondent must furnish
notice to the Commission--largely along the lines of the Hart-Scott-
Rodino premerger notification program--in advance of certain
acquisitions and other transactions involving acute care hospitals in
``Greater Port Huron'' (an area consisting of five Michigan cities).
I have previously expressed my serious reservations about imposing
a prior approval requirement on parties that have abandoned a
challenged transaction.\1\ Those reservations rest primarily on two
foundations. The first is the moral neutrality of mergers and
acquisitions--and therefore the dubious appropriateness of prior
approval as a form of ``merger probation.'' The second is the
superfluity--if not the downright excessiveness--of imposing a prior
approval requirement on parties that will have to observe the notice
and waiting requirements of section 7A of the Clayton Act \2\ if they
wish to undertake the same (or another competitively questionable)
transaction in the future. Indeed, even when future acquisitions are
likely to be competitively troublesome but not reportable pursuant to
Section 7A, I
[[Page 39751]]
would favor a prior notice-and-wait obligation--rather than a prior
approval power--with regard to those transactions.\3\
\1\ See, e.g., ``Reinventing Antitrust Enforcement? Antitrust at
the FTC in 1995 and Beyond,'' Remarks of Commissioner Roscoe B.
Starek, III, Marina del Rey, California (Feb. 24, 1995).
\2\ 15 U.S.C. 18a.
\3\ ``Reinventing Antitrust Enforcement? Antitrust at the FTC in
1995 and Beyond,'' supra note 1, at 21-22.
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Despite my general inclination to believe a broad prior approval
provision unwarranted when the parties have abandoned their planned
transaction (as they did here), acceptance of a narrowly tailored prior
approval provision is appropriate in the special circumstances of this
case, Paragraph III of the proposed order merely requires respondents
to seek prior Commission approval, over a three-year period, for
essentially the same transaction that the Commission challenged in the
first place. Given that a renewed Port Huron/Mercy consolidation would
be likely to raise the same antitrust concerns, this narrow prior
approval requirement is neither punitive nor redundant.
I also find acceptable the proposed order's 10-year prior
notification requirement. This provision pertains only to (1)
transactions in the narrowly defined ``Greater Port Huron'' that (2)
exceed $1 million yet (3) would not be reportable pursuant to Section
7A.\4\ Where the Commission finds reason to believe that an acquisition
would violate section 7, I consider it appropriate to require the
respondent for some period of time to notify the Commission in advance
of any proposed significant acquisitions in the relevant market that
are not reportable under section 7A. That is all that Paragraph IV
provides.
\4\ The third and fifth provisos to Paragraph IV, respectively,
set forth the latter two limitations on the prior notification
requirement.
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[FR Doc. 95-19112 Filed 8-2-95; 8:45 am]
BILLING CODE 6750-01-M