DISSENTING STATEMENT OF COMMISSIONER ORSON SWINDLE

IN THE MATTER OF

COLUMBIA/HCA HEALTHCARE CORPORATION

DOCKET NOS. 9256, C-3472, C-3505, C-3538, C-3544


Application of our Prior Approval Policy Statement has led the Commission to replace the prior approval provision in each of these five orders with a requirement that Columbia/HCA provide us with prior notification of certain acquisitions. Supplanting prior approval is the correct result: there is no credible risk in any of these cases that Columbia/HCA will attempt the same or approximately the same transaction that triggered the Commission's original enforcement concern, and there is nothing to rebut the presumption in each case that setting aside the prior approval requirement is in the public interest. Moreover, replacing prior approval with prior notification is warranted, since each of these matters involves a credible risk that Columbia/HCA could make anticompetitive acquisitions that fall below Hart-Scott-Rodino thresholds.

Nevertheless, I have dissented because the Commission here has imposed the wrong prior notification requirement for the wrong reasons. In a long line of order modifications pursuant to the Prior Approval Policy Statement, the Commission has been consistent in either simply vacating the prior approval clause or replacing it with a prior notification mechanism that comprises a 30-day initial period and a 20-day second period. In the present matters, however, the Commission has chosen to lengthen the second period in each of these orders to 30 days. I disagree with the decision to impose on Columbia/HCA a greater burden than other respondents have borne, and to do so for reasons that appear to smack of retribution.

I have searched these five orders in vain for any basis for treating Columbia/HCA differently from the many previous respondents that have asked the Commission to set aside or modify a prior approval requirement. The orders summarily announce the length of the notification periods but do not themselves venture any explanation for the disparate treatment accorded Columbia/HCA. Such an obvious departure from consistent agency practice without any explanation could be judged arbitrary and capricious. Perhaps in an effort to save these orders from just such a condemnation, my fellow Commissioners have offered a statement to rationalize what they have done.(1) With all due respect, I find their statement unpersuasive.

My colleagues quote the Prior Approval Policy Statement to the effect that the Commission "reserves its equitable power to fashion remedies needed to protect the public interest, including by ordering limited prior approval and/or notification in certain limited circumstances."(2) The quoted passage plainly announces that the Commission has not forsworn its power to prescribe prior approval or prior notification requirements in appropriate circumstances. It is not a declaration that the Commission is liberated from every agency's obligation to treat parties before it fairly and evenhandedly. With the clearly disparate treatment of Columbia/HCA, however, the latter message is what observers are likely to take from the Commission's action.(3)

The penultimate paragraph of the majority's statement may disclose what motivated the Commission to impose a 30-day second period on Columbia/HCA. I agree with my colleagues that "there is a credible risk that Columbia/HCA would engage in future anticompetitive acquisitions covered by the Orders that would not be subject to the reporting requirements of Section 7A of the Clayton Act . . ."(4) But this observation establishes merely that the Commission should retain a prior notification requirement. It by no means furnishes a basis for treating Columbia/HCA more harshly than other respondents.

This paragraph then arrives at the nub of my colleagues' argument: ". . . Columbia/HCA's earlier conduct suggests a reckless disregard with respect to satisfying obligations in Commission orders."(5) After referencing the civil penalty that Columbia/HCA paid for violating certain divestiture obligations under two of these orders, they conclude: "Given this history, it is both prudent and consistent with our policy to require additional review time."(6) This conclusion is a non sequitur.

There is no question that Columbia/HCA recently paid a $2.5 million civil penalty for alleged order violations. Although my colleagues evidently found that penalty acceptable, I questioned whether it was sufficient in light of Columbia/HCA's "prolonged and pronounced disregard for the requirements of two Commission divestiture orders and the Utah Hold Separate Agreement."(7) I continue to believe that Columbia/HCA committed serious infractions and deserved a civil penalty even larger than what we obtained. But the civil penalty case was our opportunity to levy sanctions for Columbia/HCA's order violations, and that opportunity is gone. I do not see what bearing that misconduct has on the entirely unrelated question of how much time we need to review future acquisitions. If the Commission has based its decision to lengthen the second waiting period on its reaction to respondent's previous behavior, then I would suggest that such a decision is not only arbitrary but punitive. The public may find this perception inescapable.

I am also troubled by another aspect of the majority's decision to extend the second period to 30 days. Each of our newly-modified orders ends with a proviso exempting transactions subject to Hart-Scott-Rodino from the order's prior notification requirement. In other words, an acquisition large enough to be reportable under Hart-Scott-Rodino will be subject to the 20-day second waiting period prescribed by that statute,(8) but a covered acquisition too small to meet Hart-Scott-Rodino thresholds will be subject to the 30-day second period mandated by the Commission's orders. The practical effect of this action is to place an entire class of smaller acquisitions under a greater burden than is borne by larger acquisitions. Although smaller acquisitions, of course, sometimes may be more problematic than large acquisitions from an antitrust point of view, I do not believe this justifies imposing a greater burden on smaller transactions.

I return to whether punishment of Columbia/HCA underlies (or will be perceived to underlie) the Commission's decision. If it does not, then the Commission should explain either why Columbia/HCA alone has earned a 30-day second period -- a result that on its face looks arbitrary and capricious -- or whether it is moving toward imposing a 30-day second period in all future cases. No one has sought to announce a new 30-day period of general applicability, and so it boils down to how the Commission treats this particular respondent. Because Columbia/HCA's prior order violations have no demonstrable bearing on the appropriate length of the second waiting period, I dissent from the Commission's unjustified handling of this respondent.


Endnotes

(1) 1 Statement of Chairman Robert Pitofsky and Commissioners Sheila F. Anthony and Mozelle W. Thompson in the Matter of Columbia/HCA Healthcare Corp., Docket Nos. C-3472, C-3505, C-3538, C-3544 and 9256.

(2)Id. at 1.

(3) My colleagues' attempted analogy to collusion cases in the health care industry also fails to supply the missing justification for lengthening the second period in the present cases to 30 days. The Commission's recent consent agreements in M.D. Physicians of Southwest Louisiana, Inc. (File No. 941 0095) and Mesa County Physicians Independent Practice Association, Inc. (Docket No. 9284) contained 30-day second notification periods. In those cases, however, the Commission found it necessary to reserve enough time to satisfy itself that newly-constituted horizontal arrangements among physicians would not lead to a return to the collusion that those cases targeted. I do not know how those two cases, arising from substantial evidence of collusive behavior, supply the Commission with a reason to increase the time it will spend scrutinizing some hospital merger that Columbia/HCA might undertake in, say, Augusta, Charlotte County, or Salt Lake City -- hospital markets with which the Commission is already thoroughly familiar and thus should need less time for review. In addition, although the skeletal nature of the initial notification in M.D. Physicians and Mesa County Physicians might counsel in favor of lengthening the second period to 30 days, no such consideration is present here: any initial notification provided by Columbia/HCA should contain the level of detail that one normally encounters in an acquiring firm's Hart-Scott-Rodino filing.

In a case that involves not only collusion but also merger issues -- and thus is more analogous than M.D. Physicians or Mesa County Physicians to the present matter -- the Commission has just announced acceptance of a proposed order that requires only a 20-day second notification period. Commonwealth Land Title Insurance Company (File No. 981 0127). I do not understand how my colleagues can square the relief in Commonwealth with what they have done to Columbia/HCA.

(4)Statement of Chairman Pitofsky and Commissioners Anthony and Thompson at 2.

(5)Id.

(6)Id.

(7) Statement of Commissioner Orson Swindle in Columbia/HCA Healthcare Corporation, File No. 961 0013 (available at http://www.ftc.gov/os/9807/9610013.os.htm).

(8) Moreover, for a cash tender offer, the Hart-Scott- Rodino second waiting period is reduced to 10 days. 15 U.S.C. 18a(e)(2).