Venable partner Lisa Jose Fales was quoted in an April 22, 2014 Law360 article on the antitrust implications of the Sixth Circuit’s refusal to allow ProMedica Health System Inc. to merge with rival Ohio hospital St. Luke's Hospital. The ruling reinforces the Federal Trade Commission’s (FTC) approach to hospital mergers with the court saying the FTC was right on the law and the facts.
The court was especially critical of ProMedica’s “Hail-Mary pass” of defending the merger based on St. Luke’s financial difficulties. The “weakened competitor” or “flailing firm” defense requires parties in a merger to show the target would go out of business without a merger, thus weakening competition one way or another. “A failing firm defense is a very difficult defense to sustain ... and it's certainly one that the FTC looks with a jaundiced eye on, and the flailing firm defense even more so,” said Fales. “You're asking for a weakened financial condition to save what is otherwise an anti-competitive merger, and there are things hospitals can do far short of a merger to address that.”
The court was especially critical of ProMedica’s “Hail-Mary pass” of defending the merger based on St. Luke’s financial difficulties. The “weakened competitor” or “flailing firm” defense requires parties in a merger to show the target would go out of business without a merger, thus weakening competition one way or another. “A failing firm defense is a very difficult defense to sustain ... and it's certainly one that the FTC looks with a jaundiced eye on, and the flailing firm defense even more so,” said Fales. “You're asking for a weakened financial condition to save what is otherwise an anti-competitive merger, and there are things hospitals can do far short of a merger to address that.”