FTC Chair Lina Khan to crack down on ‘below radar’ deals
Federal Trade Commission (FTC) Chair Lina Khan is focused on avoiding monopolies in several industries, but healthcare is a priority on the agency’s target list.
“We all know health care is not like buying a toaster. It really can be life or death for people, and so that’s why this is a particular area of focus for us,” Khan said at the Oliver Wyman Health Summit in Chicago Monday.
The agency under Khan’s leadership has been more focused on challenging M&A activity in healthcare and tech. Notably the agency challenged pharma giant Amgen’s (AMGN) acquisition of biotech Horizon Therapeutics (HZNP). The deal has been allowed to go through and will close later this year. Similarly, the agency challenged Microsoft’s (MSFT) acquisition of Activision Blizzard (ATVI), only to ultimately back down.
But Khan told the audience in Chicago she continues to learn from industry consolidation, which has taken place over the last several years.
The FTC’s retrospective data, she said, showed that “below the radar” deals—less than $100 million in value—that don’t have to be reported to the FTC and have contributed to market consolidation.The agency found that major tech companies, for example, closed several hundred such deals.
“We have, in certain instances, just seen blind spots. Where we’ve seen a whole set of deals that are below our radar, that are kind of slowly and incrementally consolidating a market, and then five years in, 10 years in, you have two players, three players that have come to dominate,” Khan said.
That’s why in a proposed change, the FTC is now looking at collecting more data on the lower value deals. The FTC wants to gather information on past smaller deals in addition to other relevant M&A activity that could better inform the agency about the acquiring company’s activity.
“It’s definitely a challenge. It’s also something Congress is looking at in terms of potential legislation,” Khan said.
She noted that in healthcare in particular, the consolidation of hospitals and provider groups has not shown any benefit in price and competition for patients.
“We think that some of the consolidation that we’ve seen across the board has had very negative effects. We’ve seen increased prices without any resulting improvements in quality or efficiency,” Khan said.
She wants to avoid the mistakes of the past, when the FTC took a more hands off approach to activity in the early 2000s, when it assumed the market would self-correct.
“Two decades on, we’re realizing that wasn’t just wrong but in some cases it was the opposite. Because of these network effects and these economies of scale, markets can be much more quick to tip, and that actually requires government to be more vigilant and ensure that in layers where you can envision competition, that we’re actually acting vigorously to protect it,” Khan said.
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