[Federal Register Volume 72, Number 181 (Wednesday, September 19, 2007)]
[Notices]
[Pages 53585-53587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-18378]



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FEDERAL TRADE COMMISSION

[File No. 051 0234]


American Renal Associates, Inc.; Analysis of Agreement Containing 
Consent Order to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before October 9, 2007.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``American Renal Associates, File No. 051 
0234,'' to facilitate the organization of comments. A comment filed in 
paper form should include this reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission/Office of the Secretary, Room 135-H, 600 
Pennsylvania Avenue, NW, Washington, D.C. 20580. Comments containing 
confidential material must be filed in paper form, must be clearly 
labeled ``Confidential,'' and must comply with Commission Rule 4.9(c). 
16 CFR 4.9(c) (2005).\1\ The FTC is requesting that any comment filed 
in paper form be sent by courier or overnight service, if possible, 
because U.S. postal mail in the Washington area and at the Commission 
is subject to delay due to heightened security precautions. Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form as part of or as an attachment to email messages 
directed to the following email box: [email protected].
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC website, to the extent 
practicable, at www.ftc.gov. As a matter of discretion, the FTC makes 
every effort to remove home contact information for individuals from 
the public comments it receives before placing those comments on the 
FTC website. More information, including routine uses permitted by the 
Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Martha Oppenheim (202) 326-2941, 
Bureau of Competition, Room NJ-7264, 600 Pennsylvania Avenue, NW, 
Washington, D.C. 20580.
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned 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 thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for September 7, 2007), on the World Wide Web, at http://www.ftc.gov/os/2007/09/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, N.W., Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order (``Consent 
Agreement'') from American Renal Associates, Inc., and affiliates 
including, but not limited to, ARA-East Providence Dialysis LLC, ARA-
Johnston Dialysis LLC, ARA-Fall River Dialysis LLC, and Dialysis Center 
of West Warwick LLC; and Fresenius Medical Care Holdings, Inc. and 
affiliates, including Renal Care Group, Inc. and Bio-Medical 
Applications of Rhode Island, Inc. Under the terms of the Consent 
Agreement, ARA and Fresenius are prohibited from agreeing with other 
dialysis clinic operators to close any clinics, or allocate any 
dialysis service markets. ARA is further required to notify the 
Commission of acquisitions of dialysis clinic assets in the Warwick/
Cranston, Rhode Island, area.
    The Consent Agreement has been placed on the public record for 30 
days to solicit comments from interested persons. Comments received 
during this period will become part of the public record. After 30 
days, the Commission will again review the Consent Agreement and the 
comments received, and will decide whether it should withdraw from the 
Consent Agreement or make it final.
    Pursuant to an Asset Purchase Agreement dated August 3, 2005, ARA 
proposed to acquire five Fresenius clinics in the Providence, Rhode 
Island/Fall River, Massachusetts area, and pay Fresenius to close 
another three competing clinics, for approximately $4.4 million. ARA's 
agreement to pay Fresenius to close its clinics is a per se violation 
of the antitrust laws. In addition, the Commission's Complaint alleges, 
as summarized below, that the Asset Purchase Agreement, if consummated, 
would violate Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. Sec.  45, and Section 7 of the Clayton Act, as 
amended, 15 U.S.C. Sec.  18, by reducing dialysis capacity; allocating 
dialysis customers, territories, or markets; and lessening competition 
in the market for the provision of outpatient dialysis services in the 
Warwick/Cranston area.

II. The Parties

    American Renal Associates, Inc., which is headquartered in Danvers, 
Massachusetts, operates 65 dialysis centers in 15 states and the 
District of Columbia. ARA is the sixth-largest provider of outpatient 
dialysis services in the United States, serving 2,300 dialysis 
patients, with 2004 revenues exceeding $80 million. In 2005, ARA owned 
six clinics in Rhode Island, which were located in Cranston, East 
Providence, Johnston, Pawtucket, Providence, and Tiverton, and one in 
nearby Fall River, Massachusetts.
    Fresenius Medical Care Holdings, Inc. is a corporation organized, 
existing, and doing business under and by virtue of the laws of the 
State of New York, with its principal place of business located at 95 
Hayden Avenue, Lexington, Massachusetts 02420-9192. Fresenius is the 
parent of entities that are parties to the Consent Agreement, including 
Renal

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Care Group, Inc. and Bio-Medical Applications of Rhode Island, Inc.

III. The Asset Purchase Agreement

    ARA and Fresenius entered into an Asset Purchase Agreement dated 
August 3, 2005, under which Fresenius agreed to sell five clinics 
located in Rhode Island--the Wakefield, Westerly, Woonsocket, Warwick, 
and West Warwick clinics--to ARA for $2,759,000. The agreement also 
required Fresenius to close its clinics in East Providence and North 
Providence, Rhode Island, and in Fall River, Massachusetts, in exchange 
for ARA's payment of $1,641,000. The parties terminated this agreement 
on March 13, 2006, after the FTC staff raised antitrust concerns.

IV. The Complaint

A. Agreement Between Competitors to Close Clinics

    The Commission's complaint charges that first and foremost, the 
agreement between Fresenius and ARA--competitors in the provision of 
outpatient dialysis services--to close three Fresenius clinics was a 
horizontal agreement to eliminate competition and to reduce dialysis 
capacity in the three affected areas. Each of the Fresenius clinics to 
be closed was located close to a competing ARA outpatient dialysis 
clinic. The parties memorialized their agreement in a written contract, 
listing each Fresenius clinic to be closed and the specific amount of 
money to be paid by ARA for closing each clinic, and allocating each 
amount to the ARA clinic closest to the clinic to be closed. The 
parties further agreed that Fresenius would not reopen any outpatient 
dialysis clinics within 10 to 12 miles of the closed facilities for at 
least five years, and would attempt to enforce the non-compete 
provisions of its agreements with the medical directors of the closed 
facilities for ARA's benefit, preventing those physicians from serving 
as medical directors for any potential new entrant.
    Agreements to pay a competitor to exit a market, such as the one 
negotiated by ARA and Fresenius, are per se unlawful. Indeed, the 
parties offered no competitive justification for their conduct, and it 
is unlikely that there is any plausible justification for such an 
agreement. Such a naked restraint, like a market division agreement or 
price fixing, is a per se violation of the antitrust laws.

B. Agreement to Eliminate Competition by Acquiring Clinics

    The Commission also charges that ARA's proposed acquisition of 
Fresenius's two Warwick, Rhode Island, facilities would have 
substantially reduced competition for outpatient dialysis services by 
eliminating competition between these Warwick clinics and ARA's nearby 
Cranston, Rhode Island, clinic. Outpatient dialysis services is the 
relevant product market in which to assess the effects of the clinic 
acquisition portion of the asset purchase agreement. End stage renal 
disease (ESRD) is a chronic disease characterized by a near total loss 
of function of the kidneys, which in healthy people remove toxins and 
excess fluid from the blood. ESRD may be treated through dialysis, a 
process whereby a person's blood is filtered by machines that act as 
artificial kidneys. Most ESRD patients receive dialysis treatments in 
an outpatient dialysis clinic three times per week, in sessions lasting 
between three and five hours. The only alternative to outpatient 
dialysis treatments for ESRD patients is a kidney transplant. However, 
the wait-time for donor kidneys--during which ESRD patients must 
receive dialysis treatments--can exceed five years. Additionally, many 
ESRD patients are not viable transplant candidates. As a result, many 
ESRD patients have no alternative to ongoing dialysis treatments.
    The Commission's complaint also alleges that the relevant 
geographic market in which to assess the competitive effects of the 
clinic acquisition portion of the asset purchase agreement is the 
Cranston and Warwick area in Rhode Island. The relevant geographic 
market for the provision of outpatient dialysis services is defined by 
the distance ESRD patients are willing and able to travel to receive 
dialysis treatments, and is thus local in nature. Because ESRD patients 
often suffer from multiple health problems and may require assistance 
traveling to and from the dialysis clinic, and because of the high 
frequency of treatments, these patients are unwilling and unable to 
travel long distances for dialysis treatment. The time and distance a 
patient will travel in a particular location are significantly affected 
by local traffic patterns; whether an area is urban, suburban, or 
rural; local geography; and a patient's proximity to the nearest 
dialysis clinic. The size and dimensions of relevant geographic markets 
are also influenced by a variety of other factors including population 
density, roads, geographic features, and political boundaries.
    With respect to the clinic acquisition portion of the asset 
purchase agreement, the Commission's complaint alleges that the market 
for outpatient dialysis services in the Warwick/Cranston area is highly 
concentrated. The market has only two dialysis providers, ARA and 
Fresenius, and the transaction as originally proposed would result in a 
monopoly in the Warwick/Cranston area. The evidence shows that health 
plans and other private payers who pay for dialysis services used by 
their members benefit from direct competition between ARA and Fresenius 
when negotiating the rates of the dialysis provider. As a result, the 
proposed combination likely would result in higher prices and reduced 
incentives to improve service or quality in the Warwick/Cranston 
outpatient dialysis services market defined in the complaint. Also, the 
complaint alleges that in this market, entry on a level sufficient to 
deter or counteract the likely anticompetitive effects of the proposed 
transaction is not likely to occur in a timely manner. The primary 
barrier to entry is the difficulty associated with locating 
nephrologists with established patient pools who are willing and able 
to serve as medical directors. Federal law requires each dialysis 
clinic to have a physician medical director. As a practical matter, 
having a nephrologist serve as medical director is essential to the 
success of a clinic because medial directors are the primary source of 
referrals.

V. The Consent Agreement

    The proposed relief in this case is narrowly tailored to address 
both the agreement to close clinics and the attempted acquisition of 
clinics in the Warwick/Cranston area. The order would prohibit ARA and 
Fresenius for ten years from agreeing with any person to close a 
dialysis clinic, or allocate any dialysis customer, territory, or 
market. The consent order also would require ARA to give the Commission 
prior notice before acquiring any interest in a dialysis clinic in the 
Warwick/Cranston area because there is a risk that ARA remains 
interested in expanding in the area, but any such further acquisition 
likely would fall below Hart-Scott-Rodino Act premerger notification 
thresholds.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement, and it is not intended to constitute an official 
interpretation of the proposed Decision and Order, or to modify its 
terms in any way.

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    By direction of the Commission.

Donald S. Clark,
Secretary.
[FR Doc. E7-18378 Filed 9-18-07: 8:45 am]
BILLING CODE 6750-01-S