Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Dialysis company DaVita divests New Jersey, Texas clinics to appease FTC concerns over proposed merger with competitor Renal Ventures, (Mar 28, 2017)

By Jody Coultas, J.D.

To settle FTC chargers that DaVita, Inc.’s $358 million acquisition of competitor Renal Ventures Management, LLC, would be anticompetitive, DaVita has agreed to divest its ownership interest in seven clinics to PDA-GMF Holdco, LLC. The FTC had alleged that allowing DaVita, the second-largest provider of outpatient dialysis services in the U.S., and Renal Ventures, the seventh-largest, to merge would have significant anticompetitive effects in certain parts of New Jersey and Dallas (In the Matter of DaVita Inc., FTC File No. 151 0204).

Many end stage renal disease patients are very ill, making it difficult for them to travel too far from their home for treatment. As a result, competition between dialysis clinics usually happens at the local level. DaVita and Renal Ventures clinics compete directly with each other in the New Jersey and Dallas markets at issue, and the merger would represent either a merger to monopoly or a reduction of competitors from three to two, according to the FTC’s analysis.

The FTC alleged that the merger would reduce quality and lead to higher prices for dialysis patients, and further alleged that new entry of competing dialysis in these seven markets was not likely because the markets did not have sufficient available kidney specialists to support new competition.

Under the terms of the proposed settlement, DaVita must obtain agreements from the medical director of each divested clinic to continue providing physician services after it transfers ownership to PDA-GMF Holdco; obtain consent from the relevant landlords to transfer leases for the facilities to the buyer; and provide the buyer an opportunity to interview and hire employees from the divested clinics. DaVita is also barred from contracting with the medical directors of the seven clinics for three years, and it must provide transition services for up to 24 months. The FTC may appoint a monitor to ensure compliance.

The FTC will publish the consent package in the Federal Register shortly, and the agreement will be subject to public comment until April 27, 2017.

Companies: DaVita, Inc.; Renal Ventures Management, LLC

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