[Federal Register: September 19, 2007 (Volume 72, Number 181)]
[Notices]
[Page 53585-53587]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19se07-87]
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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: consentagreement@ftc.gov.
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 http://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.
[[Page 53587]]
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