Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Agencies’ joint CON laws statement oversteps, Commissioner Brill says, (Jan 12, 2016)

By Greg Hammond, J.D.

While the FTC and Department of Justice Antitrust Division sent comments to South Carolina Governor Nikki Haley on January 11, advocating for the repeal of South Carolina’s certificate-of-need (CON) laws, FTC Commissioner Julie Brill issued a separate, dissenting statement, claiming that the agencies lacked sufficient relevant information to opine on the non-competition-related public policy goals of the CON laws.

CON laws were created with the goals of reducing health care costs and improving access to care, according to the joint statement. Contrary to these goals, however, “it is now apparent that CON laws can prevent the efficient functioning of health care markets in several ways,” the agencies claim. Specifically: (1) CON laws can create barriers to entry and expansion, limit consumer choice, and stifle innovation; (2) incumbent firms can use CON laws to thwart or delay entry of expansion by new or existing competitors; (3) CON laws can deny consumers the benefit of an effective remedy following the consummation of an anticompetitive merger; and (4) evidence does not suggest that CON laws have generally succeeded in controlling costs or improving quality.

While South Carolina House Bill 3250 would narrow the application of, and ultimately repeal, the state’s CON program, the FTC and Antitrust Division are concerned that the interim provisions would preserve or exacerbate extant provider market power, which could be anticompetitive on balance and could persist well past the repeal of the CON program in January 2018. The agencies consequently suggest that South Carolina repeal its CON laws.

Dissenting statement. FTC Commissioner Julie Brill issued a dissenting statement, arguing that although the joint statement appropriately describes how competition can encourage providers to reduce prices, increase efficiency, or improve clinical quality, the agencies do not “possess sufficient relevant information to opine on non-competition-related public policy goals of the CON laws.” Instead, “[t]he FTC should advise South Carolina policy makers based on our area of expertise—competition—and not overstep our collective knowledge,” Brill wrote.

She also noted that “empirical evidence on the success or failure of CON laws to obtain their numerous objectives—in South Carolina or elsewhere—is limited, and we lack evidence on the broader impact of CON law repeal. In particular, the Agencies have not done or cited an analysis of the effect of South Carolina’s CON laws and whether they fail to meet such policy goals.”

Brill suggests that the South Carolina legislature continue to examine whether its CON laws are measurably meeting identifiable policy objectives and consider less drastic means to modify the CON laws so that they operate in less restrictive ways.

“South Carolina may be able to improve the competitive landscape that may be currently affected by the CON laws, and at the same time continue to achieve some of the other policy goals that the CON laws are designed to achieve,” Brill concluded.

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