After running the table in the Supreme Court with a unanimous decision, which we covered, and then convincing a district court judge in Georgia to halt further consolidation of Phoebe Putney Health System (“Phoebe Putney”) and Palmyra Medical Center (“Palmyra”), the Federal Trade Commission (“FTC”) recently agreed to settle its antitrust challenge of Phoebe Putney’s acquisition of Palmyra without requiring divesture or any other remedial relief.
After succeeding in the courts, why did the FTC agree to walk away essentially empty handed?
Before the FTC’s favorable rulings, a district court had dismissed the FTC’s attempt to enjoin the acquisition, which the U.S. Court of Appeals for the Eleventh Circuit affirmed. Phoebe Putney then completed its acquisition of Palmyra, and the Georgia Department of Community Health (“DCH”) revoked the two existing separate licenses and granted Phoebe Putney a new, single license covering the combined hospitals.
Issues with undoing the license granted to Phoebe Putney, or getting a new license, effectively prevent divestiture, according to the FTC. The FTC determined that the DCH lacks the ability to revoke the combined hospital license granted to Phoebe Putney. The FTC also determined that the DCH could not grant a new license necessary to establish a competing hospital in the area at issue because, among other reasons, an applicant could not prove “unmet need” as required by Georgia law. Due to these “legal and practical challenges,” the FTC concluded that it could not obtain divestiture and decided to forego it as a remedy.
What does this mean going forward? It is hard to predict. The FTC’s emphasis of its decision as “highly unusual” and “acceptable” only “under the unique circumstances presented” by “this case” suggests that it does not view this settlement as a sea change in merger enforcement. But, it is likely the FTC will use this experience to argue in the future that preliminary injunctive relief is necessary to avoid this situation and preserve an effective remedy pending the outcome of a trial.
