A Medical Device Daily

Two dialysis clinic operators are under a consent order with the Federal Trade Commission (FTC) after the two companies negotiated a deal that the agency says violates antitrust laws.

The FTC reported a consent order settling charges that American Renal Associates (ARA; Beverly, Massachusetts) and Fresenius Medical Care Holdings (Bad Homburg, Germany) unlawfully restrained competition in violation of Section 5 of the FTC Act when ARA paid Fresenius to close clinics located 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 August 2005, in the Warwick/Cranston area of Rhode Island, would violate Section 7 of the Clayton Act.

According to the FTC, agreements to pay a competitor to exit a market, such as the one 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 companies terminated their agreement in March 2006 after FTC staff raised antitrust concerns, the agency noted.

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 it acquires any dialysis clinic assets in the Warwick/Cranston area. The order will expire in 10 years.

"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," said Jeffrey Schmidt, director of the FTC's Bureau of Competition. "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."

The FTC charges that the agreement between ARA and Fresenius to close three Fresenius clinics was a naked agreement to eliminate competition in the affected areas (East Providence and North Providence, Rhode Island, and Fall River, Massachusetts). The effect of this elimination of competition would have boosted ARA's ability to raise prices in these areas and to reduce its incentives to improve service and quality, the agency said. Neither party offered a plausible pro-competitive justification for the clinic closing agreement, according to the FTC.

The FTC also charges that ARA's proposed acquisition of two Fresenius clinics in Warwick, Rhode Island 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 deal. The result of the transaction as proposed, therefore, would likely be higher prices and reduced incentives to improve service in the Warwick/Cranston area, the FTC said.

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

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