[Federal Register Volume 87, Number 122 (Monday, June 27, 2022)]
[Notices]
[Pages 38153-38158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-13584]


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FEDERAL TRADE COMMISSION

[File No. 211 0140]


JAB/SAGE Veterinary; Analysis of Agreement Containing Consent 
Orders To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis of Proposed Consent Orders to Aid Public Comment 
describes both the allegations in the complaint and the terms of the 
consent orders--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before July 27, 2022.

ADDRESSES: Interested parties may file comments online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Please write: ``JAB/SAGE 
Veterinary; File No. 211 0140'' on your comment and file your comment 
online at https://www.regulations.gov by following the instructions on 
the web-based form. If you prefer to file your comment on paper, please 
mail your comment to the following address: Federal Trade Commission, 
Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610, 
(Annex D), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Mike Barnett (202-326-2362), Bureau of 
Competition, Federal Trade Commission, 400 7th Street SW, Washington, 
DC 20024.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 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 of Agreement Containing Consent Orders 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 website at 
this web address: https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before July 27, 2022. 
Write ``JAB/SAGE Veterinary; File No. 211 0140'' on your comment. Your 
comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the https://www.regulations.gov website.
    Due to protective actions in response to the COVID-19 pandemic and 
the agency's heightened security screening, postal mail addressed to 
the Commission will be delayed. We strongly encourage you to submit 
your comments online through the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``JAB/SAGE 
Veterinary; File No. 211 0140'' on your comment and on the envelope, 
and mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610, (Annex D), Washington, DC 20580.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure your comment does not include any sensitive or confidential 
information. In particular, your comment should not include sensitive 
personal information, such as your or anyone else's Social Security 
number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure your comment does not include 
sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 
16 CFR 4.10(a)(2)--including competitively sensitive information such 
as costs, sales statistics, inventories, formulas, patterns, devices, 
manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on https://www.regulations.gov--as legally required by FTC 
Rule 4.9(b)--we cannot redact or remove your comment from that website, 
unless you submit a confidentiality request that meets the

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requirements for such treatment under FTC Rule 4.9(c), and the General 
Counsel grants that request.
    Visit the FTC website at https://www.ftc.gov to read this document 
and the news release describing this matter. The FTC Act and other laws 
the Commission administers permit the collection of public comments to 
consider and use in this proceeding, as appropriate. The Commission 
will consider all timely and responsive public comments it receives on 
or before July 27, 2022. For information on the Commission's privacy 
policy, including routine uses permitted by the Privacy Act, see 
https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') with JAB Consumer Partners SCA SICAR (``JAB''), the owner 
of Compassion-First Pet Hospitals and NVA Parent Inc. (collectively, 
``Compassion-First/NVA''), and SAGE Veterinary Partners, LLC 
(``SAGE''), which is designed to remedy the anticompetitive effects 
that would result from Compassion First/NVA's proposed acquisition of 
SAGE.
    Pursuant to an Equity Purchase Agreement dated June 14, 2021, 
Compassion-First/NVA proposes to acquire SAGE for approximately $1.1 
billion (the ``Acquisition''). Both parties provide specialty and 
emergency veterinary services in clinics located in the United States. 
The Commission alleges in its Complaint that the Acquisition, if 
consummated, would violate Section 7 of the Clayton Act, as amended, 15 
U.S.C. 8, and Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. 45, by lessening competition in the markets for 
certain specialty and emergency veterinary services in three different 
localities in the United States. The Consent Agreement, which contains 
the proposed Decision and Order (``D&O'') and Order to Maintain Assets, 
will remedy the alleged violations by preserving the competition that 
would otherwise be eliminated by the Acquisition. Specifically, under 
the terms of the D&O, Compassion-First/NVA is required to divest six 
clinics to United Veterinary Care, LLC (``UVC''), an operator of 
specialty and emergency veterinary clinics elsewhere in the country. In 
order to protect robust future competition in markets trending towards 
increased consolidation, including due to acquisitions by JAB that may 
or may not be reportable under the Hart-Scott-Rodino Premerger 
Notification Act (``HSR''), the D&O provides for (1) a statewide prior 
approval by the parties in Texas and California for acquisitions 
proximate to existing and future NVA emergency and specialty clinics, 
and (2) a nationwide prior notice for proposed acquisitions proximate 
to existing and future NVA emergency and specialty clinics.
    The Consent Agreement with the proposed D&O and the Order to 
Maintain Assets has been placed on the public record for thirty days 
for receipt of comments from interested persons. Comments received 
during this period will become part of the public record. After thirty 
days, the Commission will review the D&O as well as any comments 
received, and decide whether it should withdraw, modify, or make the 
D&O final. The Commission is issuing the Order to Maintain Assets when 
the Consent Agreement is placed on the public record.

II. The Relevant Markets and Market Structures

    The relevant lines of commerce in which to analyze the Acquisition 
are individual specialty veterinary services and emergency veterinary 
services. Specialty veterinary services are required in cases where a 
general practitioner veterinarian does not have the expertise or 
equipment necessary to treat the sick or injured animal. General 
practitioner veterinarians commonly refer such cases to a specialist, 
typically a doctor of veterinary medicine who is board-certified in the 
relevant specialty. Individual veterinary specialties include internal 
medicine, neurology, medical oncology, critical care, ophthalmology, 
and surgery. Emergency veterinary services are those used in acute 
situations where a general practice veterinarian is not available or, 
in some cases, not trained or equipped to treat the patient's medical 
problem.
    The relevant areas for the provision of specialty and emergency 
veterinary services are local in nature, delineated by the distance and 
time that pet owners travel to receive treatment. The distance and time 
customers travel for specialty services are highly dependent on local 
factors, such as the proximity of a clinic offering the required 
specialty service, appointment availability, population density, 
demographics, traffic patterns, or specific local geographic 
impediments like large bodies of water or other geographic impediments.
    The Acquisition is likely to result in consumer harm in markets for 
the provision of the following services in the following localities:
    a. internal medicine, neurology, medical oncology, critical care, 
and surgery veterinary specialty services and emergency veterinary 
services in and around Austin, Texas;
    b. internal medicine, neurology, ophthalmology, and surgery 
veterinary specialty services and emergency veterinary services in and 
around San Francisco, California; and
    c. internal medicine, medical oncology, and surgery veterinary 
specialty services in addition to emergency veterinary services in the 
area in and between Oakland, Berkeley, and Concord, California.
    All of these relevant markets are currently highly concentrated, 
and the Acquisition would substantially increase concentration in each 
market. In some cases, the combined firm would be the only provider 
following the transaction. In other markets, consumers would only have 
one remaining alternative to the combined firm following the 
transaction.

III. Entry

    Entry into the relevant markets would not be timely, likely, or 
sufficient in magnitude, character, and scope to deter or counteract 
the anticompetitive effects of the Acquisition. For de novo entrants, 
obtaining financing to build a new specialty or emergency veterinary 
facility and acquiring or leasing necessary equipment can be expensive 
and time consuming. The investment is risky for specialists that do not 
have established practices and bases of referrals in the area. Further, 
to become a licensed veterinary specialist requires extensive education 
and training, significantly beyond that required to become a general 
practitioner veterinarian. Consequently, veterinary specialists are 
often in short supply, and recruiting them to move to a new area 
frequently takes more than two years, making timely expansion by 
existing specialty clinics particularly difficult.

IV. Effects of the Acquisition

    The Acquisition, if consummated, may substantially lessen 
competition in each of the relevant markets by eliminating close, head-
to-head competition between Compassion-First/NVA and SAGE for the 
provision of specialty and emergency veterinary services. In some 
markets, the Acquisition will result in a merger to monopoly. The 
Acquisition increases the likelihood that Compassion First will 
unilaterally exercise market power and cause customers to pay higher

[[Page 38155]]

prices for, or receive lower quality, relevant services.

V. The Proposed Decision and Order

    The proposed D&O remedies the Acquisition's anticompetitive effects 
in each market by requiring the parties to divest six facilities \1\ to 
UVC. The divestitures will preserve competition between the divested 
clinics and the combined firm's clinics. UVC is a qualified acquirer of 
the divested assets because it has experience acquiring, integrating, 
and operating specialty and emergency veterinary clinics. UVC does not 
currently operate or have plans to operate any specialty and emergency 
veterinary clinics in the relevant markets.
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    \1\ The divested clinics include (1) SAGE's Central Texas 
Veterinary Specialty & Emergency Hospital (North, South, and Round 
Rock facilities) in Austin, Texas; and (2) Compassion-First/NVA's 
North Peninsula Veterinary Emergency Clinic (San Mateo), PETS 
Referral Center (Berkeley), and Solano-Napa Pet Emergency Clinic 
(Fairfield) in and around San Francisco, Berkeley, Oakland, and 
Concord, California. The divestitures include all assets, including 
equipment and intellectual property, necessary to compete 
effectively in each relevant market.
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    The D&O requires the divestiture of all regulatory permits and 
approvals, confidential business information, including customer 
information, and other assets associated with providing specialty and 
emergency veterinary care at the divested clinics. To ensure the 
divestiture is successful, the D&O also requires Compassion-First/NVA 
and SAGE to secure all third-party consents, assignments, releases, and 
waivers necessary to conduct business at the divested clinics.
    The D&O also requires Compassion-First/NVA and SAGE to provide 
reasonable financial incentives to certain employees to encourage them 
to stay in their current positions. Such incentives may include 
guaranteed retention bonuses for specialty veterinarians at divestiture 
clinics. These incentives will encourage veterinarians to continue 
working at the divestiture clinics, which will ensure that UVC is able 
to continue operating the clinics in a competitive manner.
    Finally, the D&O contains other provisions to ensure that the 
divestitures are successful. For example, Compassion-First/NVA will be 
required to provide transitional services for a period of up to one 
year to ensure UVC continues to operate the divested clinics 
effectively as it implements its own quality care, billing, and supply 
systems.
    Additionally, because of the growing trend towards consolidation in 
specialty and emergency veterinary services markets across the country, 
as well as the likelihood of future acquisitions by JAB in these 
markets, many of which may be non-HSR reportable, the D&O includes (1) 
a statewide prior approval by the parties in Texas and California for 
acquisitions proximate to existing and future NVA emergency and 
specialty clinics, and (2) a nationwide prior notice for proposed 
acquisitions proximate to existing and future NVA emergency and 
specialty clinics. These provisions are effective for ten years. UVC 
will also be required to obtain prior approval from the Commission 
before transferring any of the divested assets to any buyer for a full 
ten years after UVC acquires the divestiture assets, except in the case 
of a sale of all or substantially all of UVC's business.
    The Commission will appoint Dr. Michael Cavanaugh, DVM, to act as 
an independent Monitor to oversee the Respondents' compliance with the 
requirements of the Order, and to keep the Commission informed about 
the status of the transfer of the divested clinics to UVC. The D&O 
requires Compassion-First/NVA and SAGE to divest the clinics no later 
than ten business days after the consummation of the Acquisition.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement. It is not intended to constitute an official 
interpretation of the Consent Agreement or to modify its terms in any 
way.

    By direction of the Commission.
April J. Tabor,
Secretary.

Statement of Chair Lina M. Khan Joined by Commissioner Rebecca Kelly 
Slaughter and Commissioner Alvaro M. Bedoya

    In June 2021, JAB Consumer Partners SCA SICAR (``JAB'') proposed to 
buy SAGE Veterinary Partners, LLC (``SAGE''). JAB is a $55 billion 
private equity fund whose investments span a host of consumer-facing 
businesses, from Keurig, Dr. Pepper, and Panera Bread to Krispy Kreme 
and Bally.\1\ In recent years, JAB has expanded into pet care and pet 
health services. JAB's proposed transaction here would combine its 
existing holdings of Compassion-First Pet Hospitals and National 
Veterinary Associates (``NVA'') with SAGE to form an entity that 
controls nearly 100 specialty and emergency clinics throughout the 
country. After conducting a thorough investigation here, the Commission 
determined it had reason to believe this deal--JAB's proposed 
acquisition of SAGE--was illegal, alleging in its complaint the deal 
would have enabled the firm to establish a dominant position in key 
markets for specialty and emergency veterinary services in California 
and Texas.
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    \1\ JAB Holding Co., Annual Report, at 4 (2021), https://www.jabholco.com/documents/2/JAB_Holding_Company_S.%C3%A0.r.l.-Annual_Report_2021.pdf.
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    This is not the first time that JAB and its entities have proposed 
a deal the Commission alleged was unlawful. In 2020, the FTC brought an 
action against an earlier acquisition by JAB's entities when JAB first 
acquired NVA.\2\ In the complaint issued in that action, the FTC 
alleged that JAB's combined ownership of Compassion-First Pet and NVA 
violated the antitrust laws and ordered JAB to divest three clinics. 
The entities before us have repeatedly proposed acquisitions that the 
Commission has had reason to believe would violate the antitrust laws.
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    \2\ Press Release, Fed. Trade Comm'n, FTC Requires Veterinary 
Service Providers Compassion First and National Veterinary 
Associates to Divest Assets in Three Local Markets (Feb. 14, 2020), 
https://www.ftc.gov/newsevents/news/press-releases/2020/02/ftc-requires-veterinary-service-providers-compassion-first-national-veterinaryassociates-divest.
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    As is routine in Commission actions, the FTC's proposed relief 
would require a host of divestitures in both states. Critically, 
however, the proposed order here goes further, addressing not only the 
allegedly unlawful aspects of this specific acquisition but also 
establishing key safeguards against future dealmaking that may also 
prove unlawful. These extra protections are warranted given that this 
is the second Commission consent order against JAB, the rapid pace of 
JAB/NVA's ongoing acquisitions of veterinary clinics throughout the 
country, and the ongoing consolidation in the industry.\3\
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    \3\ Ross Kelly, Pandemic Hastens Ongoing Trend in Veterinary 
Consolidation, VINNEWS (Dec. 30, 2021) (``Frenetic merger activity 
among veterinary hospitals in 2021 has lifted the market share of 
corporate consolidators in the United States to close to 50% of all 
companion animal practice revenue by at least one estimate, as the 
pandemic spurs demand for pet-care services.''), https://news.vin.com/default.aspx?pid=210&Id=10652228. This rapid 
consolidation is happening worldwide and gaining the attention of 
antitrust enforcers in other countries, too. Ross Kelly, Competition 
Watchdog Bares Teeth Again in Veterinary Realm, VINNEWS (May 4, 
2022), https://news.vin.com/default.aspx?pid=210&catId=620&Id=10922952 (noting recent U.K. 
Competition and Markets Authority challenges to veterinary mergers 
there).
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    Because the deal may illegally lessen competition in three local 
markets in California and Texas--in and around Austin, Texas; San 
Francisco, California; and the East Bay--the FTC's proposed order would 
require JAB to divest clinics in these markets. This

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type of relief is a staple of the FTC's merger enforcement program: the 
agency identifies specific local markets where the merging parties have 
overlapping assets and where the deal would therefore most directly 
reduce competition, and it requires the merging companies to divest 
those overlapping assets to a separate buyer.
    This proposed order, however, has two additional key protections. 
First, if JAB seeks to buy a specialty or emergency veterinary clinic 
located within 25 miles of any JAB clinic anywhere in California or 
Texas in the next 10 years, JAB will first have to seek the FTC's 
affirmative approval for the purchase. By covering all future 
acquisitions within a short driving distance of clinics that JAB 
already owns in California and Texas, the order establishes heightened 
protections that extend beyond the specific local markets at issue in 
this transaction. Moreover, the heightened protections will cover not 
just overlaps with clinics that JAB owns today, but also with any 
clinics that JAB subsequently owns in California and Texas--a feature 
of the order that helps future-proof the relief.
    Second, the order will require JAB to provide 30-day advance 
written notice before JAB (including its relevant operating companies, 
Compassion-First Pet Hospitals and National Veterinary Associates) 
attempts to acquire a specialty or emergency veterinary clinic within 
25 miles of a JAB clinic anywhere in the United States that JAB owns 
now or in the future. This provision--the first of its kind in a 
Commission order--ensures that the FTC will have advance notice of any 
unreported purchases that would ordinarily escape our review, providing 
the agency with the opportunity to investigate those transactions 
before they are consummated.
    These prior approval and nationwide prior notice provisions are one 
way that the FTC can more closely monitor the potentially unlawful 
dealmaking activities of companies like JAB/NVA that have repeatedly 
attempted acquisitions the Commission alleged were unlawful. As we 
explained last year when we reinitiated the agency's use of prior 
approval and prior notice, the Commission must use all of its tools and 
authorities to protect Americans from potentially unlawful deals--and 
prior approval provisions in particular can help deter anticompetitive 
deals and conserve scarce FTC resources.\4\ Indeed, the prior notice 
provision in the earlier order involving JAB has had a beneficial 
effect. And just recently, for example, the FTC conditioned a merger in 
gasoline markets, in which one of the parties explicitly sought to 
``try to take over'' the Utah gasoline marketplace, with a prior 
approval requirement designed to thwart any such future efforts by the 
parties to acquire market power and raise gas prices for the America 
public.\5\
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    \4\ Fed. Trade Comm'n, Statement of the Commission on Use of 
Prior Approval Provisions in Merger Orders, https://www.ftc.gov/system/files/documents/public_statements/1597894/p859900priorapprovalstatement.pdf.
    \5\ Press Release, Fed. Trade Comm'n, FTC Requires ENCAP to Sell 
Off EP Energy Corp.'s Entire Utah Oil Business amid Concerns that 
Deal would Increase Pain at the Pump (Mar. 25, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/03/ftc-requires-encap-sell-ep-energy-corps-entire-utah-oil-business-amid-concerns-deal-would-increase.
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    Provisions like the ones in this matter will also allow the FTC to 
better address stealth roll-ups by private equity firms like JAB/NVA 
and serial acquisitions by other corporations. Antitrust enforcers must 
be attentive to how private equity firms' business models may in some 
instances distort incentives in ways that strip productive capacity, 
degrade the quality of goods and services, and hinder competition.\6\ 
Private equity firms' playbook for purchasing or investing in companies 
can include tactics such as leveraged buyouts, which saddle businesses 
with debt and shift the burden of financial risk in ways that can 
undermine long-term health and competitive viability.\7\ While private 
equity firms can support capacity expansion and upgrades, firms that 
seek to strip and flip assets over a relatively short period of time 
are focused on increasing margins over the short-term, which can 
incentivize unfair or deceptive practices and the hollowing out of 
productive capacity. Meanwhile, serial acquisitions or ``buy-and-buy'' 
tactics can be used by private equity firms and other corporations to 
roll up sectors, enabling them to accrue market power and reduce 
incentives to compete, potentially leading to increased prices and 
degraded quality.\8\
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    \6\ See, e.g., Eileen Appelbaum & Rosemary Batt, Private Equity 
At Work: When Wall Street Manages Main Street (2014).
    \7\ Id.
    \8\ Statement of Commissioner Rohit Chopra Regarding Private 
Equity Roll-ups and the Hart-Scott Rodino Annual Report to Congress 
(July 8, 2020), https://www.ftc.gov/system/files/documents/public_statements/1577783/p110014hsrannualreportchoprastatement.pdf.
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    Private equity firms have been particularly active in health care, 
including anesthesiology, emergency medicine, hospice care, air 
ambulances, and opioid treatment centers. A focus on short-term profits 
in the health care context can incentivize practices that may reduce 
quality of care, increase costs for patients and payors, and generate 
appalling patient outcomes.\9\ Research and reporting suggests these 
effects are especially pronounced in specialty practices, such as elder 
care and disability care facilities. Research has shown that private 
equity ownership of elder care facilities is correlated with increased 
deaths at those nursing homes, potentially owing to cost-cutting 
measures like staffing reductions.\10\ In another case, as one firm 
consolidated ownership of group homes for people with disabilities, 
media reporting revealed repeated failed inspections, overworked staff, 
and even deaths.\11\
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    \9\ Richard M. Scheffler et al., Soaring Private Equity 
Investment in the Healthcare Sector: Consolidation Accelerated, 
Competition Undermined, and Patients at Risk, Petris Ctr. on Health 
Care Mkts. and Consumer Welfare 2 (May 18, 2021), https://publichealth.berkeley.edu/wp-content/uploads/2021/05/Private-Equity-I-Healthcare-Report-FINAL.pdf. See also Melea Atkins, The Impact of 
Private Equity on Nursing Home Care: Recommendations for 
Policymakers, ROOSEVELT INST. 2 (Apr. 2021), https://rooseveltinstitute.org/wp-content/uploads/2021/04/RI_NursingHomesandPE_IssueBrief_202104.pdf.
    \10\ Atul Gupta et al., Does Private Equity Investment in 
Healthcare Benefit Patients? Evidence from Nursing Homes 2 (Nat'l 
Bureau of Econ. Rsch., Working Paper No. 28474, 2021), https://www.nber.org/system/files/working_papers/w28474/w28474.pdf.
    \11\ Kendall Taggart et al., The Private Equity Giant KKR Bought 
Hundreds of Homes for People With Disabilities. Some Vulnerable 
Residents Suffered Abuse And Neglect., BuzzFeed News (Apr. 25, 
2022), https://www.buzzfeednews.com/article/kendalltaggart/kkr-brightspring-disability-private-equity-abuse.
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    Commissioners Phillips and Wilson take issue with the scope of the 
prior approval and prior notice in our proposed order, arguing that 
these heightened protections are not warranted because this acquisition 
by JAB raises no special concern, and that consolidation at a national 
level is ``irrelevant'' and ``not inherently concerning.'' \12\ But 
this critique is belied by both market realities and prevailing law. 
For one, JAB has been rapidly acquiring veterinary clinics throughout 
the country, and it would be unwise for enforcers to ignore how private 
equity funds in particular can be incentivized to engage in roll-up 
strategies. The law also grants the FTC discretion to order fencing-in 
relief, particularly when confronting a repeat offender.\13\ Moreover, 
the statement that

[[Page 38157]]

consolidation at a national level should play no role in our analysis 
is also at odds with governing Supreme Court precedent, which states 
that assessing general industry trends is a basic component of merger 
analysis.\14\ Ignoring this mandate raises rule of law concerns.
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    \12\ Concurring Statement of Commissioners Noah Joshua Phillips 
and Christine S. Wilson, JAB Consumer Partners SCA SICAR/SAGE 
Veterinary Partners, LLC (Comm'n File No. 2110140) (June 9, 2022).
    \13\ Telebrands Corp. v. F.T.C., 457 F.3d 354, 358 (4th Cir. 
2006) (noting that evidence of prior violations supports stronger 
relief). FTC orders ``may prohibit not only the further use of the 
precise practice found to have existed in the past, but also, the 
future use of related and similar practices.'' Carter Prods., Inc. 
v. F.T.C., 323 F.2d 523, 532-33 (5th Cir. 1963) (internal quotation 
marks and citation omitted). The Commission has wide discretion to 
fashion a remedy appropriate to the unlawful practices found. Jacob 
Siegel Co. v. F.T.C., 327 U.S. 608, 612-13 (1946); accord Fed. Trade 
Comm'n v. Cement Inst., 333 U.S. 683, 726 (1948); Carter Prods., 
Inc. v. F.T.C., 323 F.2d 523, 532-33 (5th Cir. 1963).
    \14\ See, e.g., Brown Shoe Co. v. United States, 370 U.S. 294, 
322 (1962) (``Congress indicated plainly that a merger had to be 
functionally viewed, in the context of its particular industry. That 
is, whether the consolidation was to take place in an industry that 
was fragmented, rather than concentrated, that had seen a recent 
trend toward domination by a few leaders, or had remained fairly 
consistent in its distribution of market shares among the 
participating companies . . . all were aspects, varying in 
importance with the merger under consideration, which would properly 
be taken into account.''). See id. at 332-33 (``Another important 
factor to consider is the trend toward concentration in the 
industry. . . [R]emaining vigor cannot immunize a merger if the 
trend in that industry is toward oligopoly.''). Id. at 344-45 
(``Other factors to be considered in evaluating the probable effects 
of a merger in the relevant market lend additional support to the 
District Court's conclusion that this merger may substantially 
lessen competition. One such factor is the history of tendency 
toward concentration in the industry.'').
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    Strategic use of prior notice and prior approval provisions is one 
way that the Commission can better track and prevent unlawful 
acquisitions by private equity firms and other corporations. Our 
revision of the merger guidelines provides an additional opportunity to 
ensure our tools reflect current market realities, including the 
expanding role of private equity in our economy.\15\ In the meantime, 
we will continue to use our existing authorities to fully protect 
Americans from unlawful transactions.
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    \15\ Press Release, Fed. Trade Comm'n, Federal Trade Commission 
and Justice Department Seek to Strengthen Enforcement Against 
Illegal Mergers (Jan. 18, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/01/federal-trade-commission-justice-department-seek-strengthen-enforcement-against-illegal-mergers. See 
also Regulations.gov, Request for Information on Merger Enforcement, 
FTC-2022-0003 (Jan. 18, 2022), https://www.regulations.gov/document/FTC-2022-0003-0001.
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Concurring Statement of Commissioners Noah Joshua Phillips and 
Christine S. Wilson

    The proposed consent order announced today settles the Commission's 
allegations that the proposed acquisition of SAGE Veterinary Partners, 
LLC (``SAGE'') by JAB Consumer Partners SCA SICAR (``JAB''), the owner 
of Compassion-First Pet Hospitals and NVA Parent Inc. (collectively, 
``Compassion-First/NVA''), may substantially lessen competition for 
individual specialty veterinary services and emergency veterinary 
services in three local markets: (i) Austin, TX; (ii) in and around San 
Francisco, CA; and (iii) in and between Oakland, Berkeley, and Concord, 
CA. The proposed divestiture resolves all competitive overlaps between 
Compassion-First/NVA and SAGE in the alleged relevant markets.
    Because it does so, we voted to accept this proposed consent order 
for public comment. But we write separately to object to the 
Complaint's invocation of rhetoric unrelated to competition and the 
order's apparent predication of remedies upon both that rhetoric and 
the majority's evident distaste for private equity as a business model, 
instead of the facts uncovered in the investigation.
    The Complaint alleges a ``growing trend towards consolidation in 
the emergency and specialty veterinary services markets across the 
United States in recent years by large chains''.\1\ That allegation, 
and Chair Khan's concurrently-released statement regarding private 
equity as a business model,\2\ are the apparent bases for imposing 
broad prior approval and prior notice requirements on the parties.\3\ 
Even though we found competitive problems in just the three local 
markets discussed above, we are imposing prior approval requirements 
across California and Texas, and prior notice requirements across the 
entire United States.
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    \1\ Complaint, In re JAB Consumer Partners SCA SICAR/SAGE 
Veterinary Partners, LLC, File No. 2110140, paragraph 9 (June 2, 
2022).
    \2\ Commissioners Bedoya and Slaughter join the Chair in her 
statement.
    \3\ The parties are in the best position to evaluate whether the 
benefits of a transaction and the certainty of a consent order 
outweigh the costs. So, we do not necessarily oppose consents on the 
grounds that they include provisions that are unnecessary, overly 
broad, and counterproductive.
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    The ``growing trend'' allegation, in isolation, is not an 
appropriate basis for incremental remedies. First, our investigation 
revealed that the relevant competition occurs at the local level, 
driven by the distance and time that pet owners are willing to travel 
to obtain each relevant veterinary service. That is why the Complaint 
pleads local markets and the divestitures are designed to resolve 
overlaps in three specific local areas--two across the Bay Bridge from 
one another. For competition purposes, there is no national antitrust 
market for emergency and specialty veterinary services. To the extent 
there is consolidation on a national level, based on what the 
Commission pleads in the Complaint, it is irrelevant.\4\ It is also not 
inherently concerning. Our review of the evidence makes clear that the 
bulk of emergency and specialty veterinary clinics nationwide are 
independent, with larger ``aggregators'' like JAB and SAGE collectively 
controlling a minority of clinics. Post-acquisition, JAB will hold 
fewer than 100 clinics nationwide, a competitively meaningless share of 
the purported national market. Cf. U.S. v. Von's Grocery Co. 384 U.S. 
270 (1966). Second, we have seen no evidence that such a trend, if it 
exists, is bad for purposes of competition. That is, there are no 
discernible anticompetitive effects.
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    \4\ Chair Khan's statement argues that our critique here is 
belied by ``market realities.'' According to the Complaint and the 
Analysis of Agreement Containing Consent Orders to Aid Public 
Comment voted on by this Commission, however, the reality of 
competition in the markets in question is that it is local.
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    While untethered to any impact on competition, the allegation of 
the purported trend in nationwide consolidation appears to form the 
sole basis in the Complaint for imposing out-of-market prior approval 
and prior notice requirements. Chair Khan's statement also argues that 
the fact that JAB is a private equity firm requires additional 
remediation, but neither the Complaint nor the Analysis of Agreement 
Containing Consent Orders to Aid Public Comment--nor, in our view, the 
evidence uncovered in the investigation--indicate any reason why this 
fact about JAB makes this or any other private equity transaction more 
likely to raise competition concerns.\5\ Imposing heightened legal 
obligations on disfavored groups--including private equity--because of 
who they are rather than what they have done raises rule of law 
concerns.
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    \5\ Chair Khan's statement points to buyouts by private equity 
firms that ``saddle businesses with debt.'' Public companies also 
sometimes choose to finance operations and acquisitions with debt. 
See e.g., Frances Yoon, The World's Appetite for Debt Is Smashing 
Records, Wall St. J. (Nov. 30, 2020), https://www.wsj.com/articles/the-world-is-bingeing-on-debtand-smashing-records-11606732203. See 
also Franco Modigliani & Merton H. Miller, The Cost of Capital, 
Corporation Finance and The Theory of Investment, 48 a.m. Econ. Rev 
261 (1958).
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    The parties are subject to statewide prior approval in Texas and 
California and nationwide prior notice. The Commission's Prior Approval 
Policy Statement (``Prior Approval Policy'') contemplates that the 
Commission might impose a prior approval requirement that covers 
product or geographic markets beyond the relevant

[[Page 38158]]

ones affected by the merger.\6\ Most of the bases for imposing out-of-
market remedies are not met here--for example, if ``the relevant market 
alleged is already concentrated or has seen significant consolidation 
in the previous ten years'' (emphasis added).\7\ The Complaint does not 
allege that the three relevant geographic markets here have seen 
significant consolidation.
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    \6\ Statement of the Commission on Use of Prior Approval 
Provisions in Merger Orders (Oct. 25, 2021), https://www.ftc.gov/system/files/documents/public_statements/1597894/p859900priorapprovalstatement.pdf (hereinafter ``Prior Approval 
Policy''). But see Dissenting Statement of Commissioners Christine 
S. Wilson and Noah Joshua Phillips Regarding the Statement of the 
Commission on Use of Prior Approval Provisions in Merger Orders 
(Oct. 29, 2021), https://www.ftc.gov/system/files/documents/public_statements/1598095/wilson_phillips_prior_approval_dissentingstatement102921.pdf.
    \7\ Prior Approval Policy, p. 2.
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    The Chair also justifies the broad prior approval provision because 
JAB previously acquired clinics and entered into a related consent 
order. In that prior matter, JAB approached the Commission with a 
proposed acquisition and worked with it to resolve competitive 
overlaps, small parts of a much larger transaction.\8\ That process 
enabled the FTC to ensure that overlapping assets were divested to an 
acceptable buyer, which is critical to maintaining competition.\9\ The 
effect of imposing broader prior approval requirements because of such 
settlements will be to deter not mergers, but settlements. It will 
deter parties from submitting for agency review the complete set of 
assets subject to the deal, instead ``fixing it first'': selling what 
they want to whom they want. The Commission has traditionally eschewed 
this approach because it reduces our ability to ensure the robustness 
of the divestiture and the quality of the buyer and because, without a 
consent order, there is no accountability should parties fail to meet 
their obligations. Fix-it-first transactions remove Commission 
oversight and increase the likelihood that competition will not be 
preserved and that consumers will be harmed.
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    \8\ See Press Release, FTC Requires Veterinary Service Providers 
Compassion First and National Veterinary Associates to Divest Assets 
in Three Local Markets (Feb. 14, 2020), https://www.ftc.gov/news-events/news/press-releases/2020/02/ftc-requires-veterinary-service-providers-compassion-first-national-veterinary-associates-divest 
(The FTC required divestiture of 3 out of over 70 clinics operated 
by the parties).
    \9\ See e.g., The FTC's Merger Remedies 2006-2012: A Report of 
the Bureaus of Competition and Economics (Jan. 2017), https://www.ftc.gov/system/files/documents/reports/ftcs-merger-remedies-2006-2012-report-bureaus-competition-economics/p143100_ftc_merger_remedies_2006-2012.pdf.
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    As we warned when the Commission (actually, two sitting 
Commissioners and a zombie vote) issued the ill-advised Prior Approval 
Policy, the broad and subjective factors enunciated in that policy lack 
limiting principles and are almost certain to lead to the routine 
imposition of prior approval provisions on geographic and product 
markets beyond those at issue in any given merger. We acknowledge that 
there are cases where the evidence supports the imposition of these 
more onerous remedies.\10\ This does not appear to be one of those 
cases.
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    \10\ Decision, In re DaVita Inc./Total Rental Care, Inc., File 
No. 2110013 (Oct. 25, 2021) https://www.ftc.gov/system/files/documents/cases/davita_order_9_24_final.pdf (DaVita was subject to a 
statewide prior provision, requiring prior approval from the 
Commission before acquiring any new ownership interest in a dialysis 
clinic in Utah.).
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    We encourage comments during the public comment period regarding 
the statewide prior approval and nationwide prior notice provisions 
that appear in today's consent order. In addition, we encourage 
comments on the implications of the agency's apparent shift to an 
approach that incentivizes fix-it-firsts.

[FR Doc. 2022-13584 Filed 6-24-22; 8:45 am]
BILLING CODE 6750-01-P