United States, et al. v. Harvard Pilgrim Health Care, Inc., et al.; Proposed Final Judgment and Competitive Impact Statement
| Citation | 85 FR 86948 |
| Published date | 31 December 2020 |
| Record Number | 2020-28905 |
| Section | Notices |
| Court | Antitrust Division |
Federal Register, Volume 85 Issue 251 (Thursday, December 31, 2020)
[Federal Register Volume 85, Number 251 (Thursday, December 31, 2020)]
[Notices]
[Pages 86948-86965]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28905]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States, et al. v. Harvard Pilgrim Health Care, Inc., et
al.; Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement have been filed with the
United States District Court for the District of New Hampshire in
United States and State of New Hampshire vs. Harvard Pilgrim Health
Care, Inc. and Health Plan Holdings, Inc., Civil Action No. 1:20-cv-
01183. On December 14, 2020, the United States filed a Complaint
alleging that the proposed merger of Harvard Pilgrim Health Care, Inc.
and Health Plan Holdings, Inc. (f/k/a Tufts Health Plan, Inc.) would
violate Section 7 of the Clayton Act, 15 U.S.C. 18. The proposed Final
Judgment, filed at the same time as the Complaint, requires Health Plan
Holdings to divest its New Hampshire subsidiary, Tufts Health Freedom
Plans, Inc., along with certain tangible and intangible assets.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection on the Antitrust
Division's website at http://www.justice.gov/atr and at the Office of
the Clerk of the United States District Court for the District of New
Hampshire. Copies of these materials may be obtained from the Antitrust
Division upon request and payment of the copying fee set by Department
of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's website,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be directed to Eric D. Welsh,
Chief, Healthcare and Consumer Products Section, Antitrust Division,
Department of Justice, 450 Fifth Street NW, Suite
[[Page 86949]]
4100, Washington, DC 20530 (telephone: 202-598-8681).
Suzanne Morris,
Chief, Premerger and Division Statistics, Antitrust Division.
United States District Court for the District of New Hampshire
United States of America and State of New Hampshire, Plaintiffs, vs.
Harvard Pilgrim Health Care, Inc. and Health Plan Holdings, Inc.,
Defendants.
Civil Action No.: 1:20-cv-01183-JL
Judge Joseph N. Laplante
Complaint
The United States of America and the State of New Hampshire bring
this civil antitrust action to block the proposed merger of Harvard
Pilgrim Health Care and Health Plan Holdings (f/k/a Tufts Health Plan).
The combination of Harvard Pilgrim and Health Plan Holdings--two of the
largest suppliers of health insurance in New Hampshire for certain
employers purchasing group coverage for their employees--into one firm
would likely lead to higher prices, lower quality, and reduced choice
for consumers of commercial group health insurance in New Hampshire. To
prevent this harm to consumers, the United States and the State of New
Hampshire seek an injunction to stop the proposed merger. Plaintiffs
allege as follows:
I. Introduction
1. Health insurance is an integral part of the American healthcare
system. Americans collectively spend trillions of dollars on healthcare
each year, and the cost of healthcare impacts almost every American.
Consumers depend on health insurance to secure affordable access to
doctors and hospitals and to protect themselves from the risk of
medical expenses that could be financially devastating.
2. Half of all Americans obtain health insurance coverage through
their employers. Employers purchase group health insurance plans for
their employees from insurance companies such as Harvard Pilgrim and
Health Plan Holdings. Competition between insurance companies like
Harvard Pilgrim and Health Plan Holdings ensures that employers can
purchase high-quality group health insurance plans for their employees
at affordable prices.
3. Harvard Pilgrim sells commercial group health insurance plans to
small and large employer groups in New Hampshire. Health Plan Holdings
sells commercial group health insurance plans to small and large
employer groups in New Hampshire through Tufts Health Freedom Plan,
Inc. (``Tufts Freedom'').
4. In New Hampshire, Harvard Pilgrim and Tufts Freedom are two of
the three top companies offering commercial group health insurance
plans to (1) private small group employers with up to 50 full-time
eligible employees (``small groups'') and (2) private large group
employers with between 51 and 99 full-time eligible employees, a
segment of commercial large group health insurance referred to as
community rated by class or ``CRC'' by Defendants and others in the
industry (``CRC groups''). Competition between Harvard Pilgrim and
Tufts Freedom has resulted in lower premiums, richer (i.e., more robust
and comprehensive) plan benefits, and better service for small groups
and CRC groups in New Hampshire.
5. Combining Harvard Pilgrim and Health Plan Holdings into one firm
would eliminate this competition, likely raising the price and reducing
the quality of commercial health insurance sold to small groups and to
CRC groups in New Hampshire.
6. As a result, the proposed transaction is likely to substantially
lessen competition for commercial health insurance sold to small groups
and to CRC groups, in violation of Section 7 of the Clayton Act, 15
U.S.C. 18. The Court, therefore, should enjoin this transaction.
II. Defendants and the Transaction
7. Harvard Pilgrim sells commercial group health insurance to small
and large employer groups in four states: New Hampshire, Massachusetts,
Connecticut, and Maine. Harvard Pilgrim's annual revenue in 2019 was
approximately $3 billion, and it has over one million members.
8. Health Plan Holdings sells commercial group health insurance to
small and large employer groups in New Hampshire through Tufts Freedom,
which until September 2020 was a joint venture with the Granite
Healthcare consortium consisting of several large New Hampshire health
systems and now is solely owned by Health Plan Holdings. It also sells
commercial group health insurance in Massachusetts and Rhode Island.
Health Plan Holdings' annual revenue in 2019 was over $5.5 billion, and
it has over one million members.
9. Defendants have agreed to a ``merger of equals,'' which was
memorialized in a Combination Agreement dated August 9, 2019 (the
``Transaction'').
III. Jurisdiction and Venue
10. This Court has subject-matter jurisdiction under Section 15 of
the Clayton Act, 15 U.S.C. 25, and 28 U.S.C. 1331, 1337(a), and 1345.
11. The State of New Hampshire brings this action in its sovereign
capacity as parens patriae on behalf of and to protect the health and
general welfare of its citizens and the general economy of the State
under Section 16 of the Clayton Act, 15 U.S.C. 26 and under N.H. Rev.
Stat. Ann. 356:4-a & 4-b, seeking injunctive and other relief from
Defendants' violation of Section 7 of the Clayton Act, 15 U.S.C. 18 and
state antitrust law.
12. Defendants are engaged in activities that substantially affect
interstate commerce. Defendants sell health insurance and
administrative services for which employers and consumers remit
payments across state lines, and Defendants otherwise participate in
interstate commerce.
13. Venue is proper under Section 12 of the Clayton Act, 15 U.S.C.
22, and under 28 U.S.C. 1391(b) and (c).
14. This Court has personal jurisdiction over each Defendant.
Harvard Pilgrim is headquartered in Wellesley, Massachusetts and
transacts business in this district. Health Plan Holdings is
headquartered in Watertown, Massachusetts and transacts business in
this district. Both Harvard Pilgrim and Health Plan Holdings have
consented to personal jurisdiction and the acceptance of service of
process in this district for purposes of this matter. The Transaction
would also have effects on employers and consumers in this district.
IV. The Relevant Markets
15. Commercial group health insurance is sold by health insurance
companies to employers to provide health insurance coverage to their
employees and their employees' families. Employers cover at least a
portion of the cost of the insurance for their employees, making it a
cost-effective way for employees, and their families, to obtain health
insurance.
16. Insurers offering commercial group health insurance plans to
employers try to make them attractive by competing on price, product
design, customer service, care management, wellness programs, and
reputation. Insurers also compete based on the breadth of their network
of healthcare providers, including doctors and hospitals, as employers
seek an insurance plan that offers in-network access to medical
providers that are close to where their employees live and
[[Page 86950]]
work. An insurer's ability to compete on price depends largely on
medical costs, which are impacted significantly by the discounts the
insurer obtains from medical providers.
17. In New Hampshire, Harvard Pilgrim and Health Plan Holdings
compete vigorously with one another in the sale of commercial health
insurance to small groups and to CRC groups.
18. The Transaction is likely to harm competition in two health
insurance markets in New Hampshire: (1) The sale of commercial group
health insurance to small groups and (2) the sale of commercial group
health insurance to CRC groups. For both of these markets, employers
tend to be local, with the majority of their employees based in New
Hampshire, although some employers offer insurance to employees in
multiple states. Competition to win small groups and CRC groups in New
Hampshire is primarily driven by which insurer offers the lowest rates.
Small groups and CRC groups, as defined in this complaint, do not
include governmental employers (e.g., municipalities, school districts)
in New Hampshire with fewer than 100 employees, as historically almost
all those employers have purchased health insurance through a trust
instead of directly from an insurer.
A. Commercial Health Insurance Sold to Small Groups
19. The sale of commercial health insurance to small groups in New
Hampshire is a relevant antitrust product market in which to analyze
the effects of the Transaction. New Hampshire Insurance Department
regulations define a ``small group'' as an employer with 50 or fewer
full-time eligible employees. For small groups, health plans are
typically fully insured, which means that the employer pays a premium
to the insurance company and in return the company covers the
employees' healthcare costs. Small groups tend to be local in nature,
requiring a strong local provider network.
20. The commercial health insurance plans offered to small groups
are governed by the New Hampshire Insurance Department and cannot be
substituted with plans offered to New Hampshire employers with 51 or
more full-time eligible employees, defined by statute as ``large
group.'' Harvard Pilgrim and Health Plan Holdings also differentiate
small group accounts separately from large group accounts internally
and offer different pricing for small group accounts compared to large
group accounts.
21. New Hampshire law does not require that an insurer offer a
small group product statewide and therefore permits an insurer to offer
small group plans only in certain counties. Accordingly, despite the
fact that state law does not allow insurers to charge different prices
for the same small group plans based on location, insurers can offer a
more expensive set of small group plans in one part of the state, and a
less expensive set of different small group plans in another part of
the state. This allows insurers to charge different prices for
different products to small groups based on where employees live and
work. The Transaction is likely to substantially lessen competition for
the sale of commercial health insurance to small groups in all seven of
New Hampshire's Core Based Statistical Areas (``CBSA''): (1) The
Manchester-Nashua CBSA, (2) the Concord CBSA, (3) the Laconia CBSA, (4)
the Keene CBSA, (5) the Berlin CBSA, (6) the New Hampshire counties
(Grafton and Sullivan) of the Lebanon NH-VT CBSA, and (7) the New
Hampshire counties (Rockingham and Strafford) of the Boston-Cambridge-
Newton MA-NH CBSA.
22. Each of these seven CBSAs is a relevant geographic market. A
hypothetical monopolist over the sale of commercial health insurance to
small groups in each of these markets would impose a small but
significant and non-transitory increase in price, or SSNIP. A small
group employer, faced with a significant price increase, cannot defeat
the price increase by purchasing a large group product for which it is
ineligible. This price increase would not be defeated by substitution
outside the relevant market or by arbitrage (meaning a small group
trying to repurchase insurance through another employer group).
B. Commercial Health Insurance Sold to CRC Groups
23. The sale of commercial health insurance to CRC groups is a
relevant antitrust product market. In New Hampshire, employers with
between 51 and 99 full-time eligible employees represent a distinct
segment of large group and are referred to as CRC employers (or CRC
groups). CRC groups have different needs and make different buying
decisions than small groups or even larger employers. Harvard Pilgrim
and Tufts Freedom employ different sales strategies for this segment
than they do for other types of employers.
24. For CRC groups, similar to small groups, health plans are
typically fully insured, which means that the employer pays a premium
to the insurance company and in return the company covers the
employees' healthcare costs. Insurers, including Harvard Pilgrim and
Tufts Freedom, differentiate employers with 51 to 99 full-time eligible
employees from other large group employers, and refer to these
employers as the CRC segment. As with small groups, CRC groups also
tend to be more local in nature than other large group employers,
requiring a strong local provider network, as opposed to large group
employers with more than 100 full-time eligible employees, which tend
to require strong national provider networks.
25. Insurers offering commercial health insurance to CRC groups in
New Hampshire can charge different prices to different employers. Group
health plans for CRC groups, in contrast to larger group employers, are
typically (although not exclusively) community rated by class, meaning
that, when setting rates for CRC groups, the insurer first establishes
a base rate determined by the medical costs of a class of similar
groups, rather than upon the medical costs of the individual group
seeking the plan. The insurer then uses this base rate, along with the
individual employer's medical costs, to negotiate rates with the
specific CRC group.
26. The Defendants target CRC groups directly through their sales
efforts. For example, Tufts Freedom has focused its large group sales
efforts on CRC groups since it began selling commercial health
insurance in New Hampshire, and Harvard Pilgrim tracks CRC groups
separately from other large group accounts. In addition, both Harvard
Pilgrim and Tufts Freedom utilize specific pricing strategies for CRC
groups. The Defendants have formulated these specific pricing
strategies because CRC groups in New Hampshire are generally more price
sensitive than large group employers with more than 100 full-time
eligible employees.
27. As with commercial health insurance sold to small groups, New
Hampshire law does not require that an insurer offer a CRC group
product statewide and therefore permits an insurer to offer CRC plans
only in certain counties. Accordingly, insurers can offer more
expensive plans to CRC groups in one part of the state and less
expensive plans in another part of the state. This allows insurers to
charge different prices for different products to CRC groups based on
where employees live and work. The Transaction is likely to
substantially lessen competition for the sale of commercial health
insurance to CRC groups in six separate CBSAs in New Hampshire: (1) The
Manchester-Nashua CBSA, (2) the Concord CBSA,
[[Page 86951]]
(3) the Laconia CBSA, (4) the Keene CBSA, (5) the New Hampshire
counties (Grafton and Sullivan) of the Lebanon NH-VT CBSA, and (6) the
New Hampshire counties (Rockingham and Strafford) of the Boston-
Cambridge-Newton MA-NH CBSA.
28. Each of these six CBSAs is a relevant geographic market. A
hypothetical monopolist over the sale of commercial health insurance to
CRC groups in each of these markets would impose a small but
significant and non-transitory increase in price or SSNIP. This price
increase would not be defeated by substitution outside the relevant
market or by arbitrage.
V. The Transaction Is Presumptively Illegal
29. Mergers that significantly increase concentration in already
concentrated markets are presumptively anticompetitive and therefore
presumptively unlawful.
30. To measure market concentration, courts often use the
Herfindahl-Hirschman Index (``HHI''). HHI is an accepted measure of
market concentration. It is calculated by squaring the market share of
each firm competing in the market and then summing the resulting
numbers. For example, for a market consisting of four firms with shares
of 30 percent, 30 percent, 20 percent, and 20 percent, the HHI is 2,600
(30\2\ + 30\2\ + 20\2\ + 20\2\ = 2,600). The HHI recognizes the
relative size distribution of the firms in a market, ranging from 0 in
markets with no concentration to 10,000 in markets where one firm has
100 percent market share. See Horizontal Merger Guidelines Sec. 5.3.
Courts have found that mergers that increase the HHI by more than 200
and result in an HHI above 2,500 in any relevant market or line of
commerce are presumed to be anticompetitive.
A. The Relevant Markets Are Highly Concentrated and the Transaction
Would Significantly Increase Their Concentration
31. In the small group market, based upon 2018 data, the combined
market shares for Harvard Pilgrim and Tufts Freedom would range from
over 45% to over 60% in each of the seven CBSAs. The Transaction would
reduce the number of small group health insurers from four to three,
with the two largest insurers--Anthem and the merged Harvard Pilgrim/
Tufts Freedom--possessing over 95% share in each of the seven CBSAs.
The Transaction would result in an HHI increase ranging from over 350
points to over 1,600 points with post-transaction HHIs of between 4,500
points and 7,500 points for commercial health insurance sold to small
groups in New Hampshire. Thus, the Transaction is presumptively
unlawful.
32. For the CRC group market, based upon 2018 data, the combined
market shares for Harvard Pilgrim and Tufts Freedom would range from
more than 40% to over 65% in each of the six CBSAs. The Transaction
would reduce the number of CRC group health insurers from four to
three, with the two largest insurers--Anthem and the merged Harvard
Pilgrim/Tufts Freedom--possessing over 95% share in each of the six
CBSAs. The Transaction would result in an HHI increase ranging from
over 200 to over 2,000 points in the CRC group market with post-
transaction HHIs of just under 5,000 to almost 7,000 for CRC groups in
New Hampshire. Thus, the Transaction is presumptively unlawful.
B. The Transaction Likely Would Harm Consumers in New Hampshire
33. Harvard Pilgrim and Tufts Freedom are particularly close
competitors for commercial health insurance sold to small groups and
CRC groups in New Hampshire with competition between the two insurers
more robust for certain types of groups than the market shares would
predict. This is in part because Harvard Pilgrim and Tufts Freedom--two
strong local health insurers that have not built national provider
networks--are more attractive to small groups and CRC groups with
higher percentages of employees resident in New Hampshire. Similarly,
because Harvard Pilgrim and Tufts Freedom have priced aggressively, the
two appeal to small groups and CRC groups that have greater price
sensitivity.
34. Tufts Freedom's entry into New Hampshire in 2016 was backed by
its Granite Healthcare provider partners, which formed the core of
Tufts Freedom's provider network and extended it substantially below-
market rates, enabling it to price aggressively. Using a combination of
competitive pricing and a strong provider network, Tufts Freedom
significantly grew its small group market share throughout New
Hampshire after entering the state in 2016, with its share reaching
almost 20% by 2019. Tufts Freedom achieved much of this growth at the
expense of Harvard Pilgrim. As a result, and as Harvard Pilgrim
recognized, the New Hampshire small group market became a three-player
market, consisting of Harvard Pilgrim, Tufts Freedom, and Anthem.
35. Tufts Freedom's aggressive pricing and growth caused Harvard
Pilgrim to respond by significantly lowering prices and improving plan
features to be more competitive with Tufts Freedom. This response
included a strategy of targeting its competitors' ``sweet spots,''
meaning lowering its rates on plans that competed with the most popular
offerings of its competitors. Tufts Freedom observed this competitive
reaction and in turn responded by announcing lower than expected rate
increases. The Transaction would eliminate this fierce competition
between Harvard Pilgrim and Tufts Freedom and its resulting benefits to
consumers in New Hampshire.
36. Direct competition between Harvard Pilgrim and Tufts Freedom in
New Hampshire also has benefitted CRC groups. Again, Tufts Freedom
entered New Hampshire pursuing a targeted pricing strategy that allowed
it to gain market share. Harvard Pilgrim reacted to this competitive
pressure resulting in lower health insurance prices for CRC groups.
37. In addition to this price competition, New Hampshire consumers
also have benefitted from competition between Harvard Pilgrim and Tufts
Freedom on plan features and quality of service for commercial health
insurance sold to CRC groups. For example, in 2019, Harvard Pilgrim
developed four new no-coinsurance plans, which limited out-of-pocket
expenses to insureds and offered different features, with the express
purpose of making them more attractive to the insureds. Just this year,
Tufts Freedom offered consumers a novel telehealth option that included
zero copayment in fully insured plans in order to drive innovation
around this new emerging platform.
38. Harvard Pilgrim and Tufts Freedom have engaged in head-to-head
competition on price, plan features, and quality of service in the sale
of commercial health insurance to small groups and to CRC groups in New
Hampshire. Eliminating this competition would likely result in higher
prices, lower quality, and less customer choice in the sale of
commercial health insurance to small groups and to CRC groups in New
Hampshire.
VI. Absence of Countervailing Factors
39. Other firms are unlikely to enter or expand into the relevant
markets in a manner that would be timely, likely, or sufficient to
replace the competition that would be lost as a result of the
Transaction.
40. Each of the relevant markets is characterized by high barriers
to entry, including state licensing and regulatory
[[Page 86952]]
requirements, the cost of developing a comprehensive provider network
where employees live and work, the inability of insurers without
significant membership to obtain competitive discounts from providers,
and the development of sufficient business to permit the spreading of
risk.
41. The Transaction will not result in verifiable, transaction-
specific efficiencies in the relevant markets sufficient to reverse the
Transaction's likely anticompetitive effects.
VII. Violation Alleged
42. Plaintiffs allege and incorporate paragraphs 1 through 41 as if
set forth fully herein.
43. Unless enjoined, the Transaction is likely to substantially
lessen competition in the relevant markets, in violation of Section 7
of the Clayton Act, 15 U.S.C. 18.
44. Among other things, the Transaction would:
(a) Eliminate present and future competition between Harvard
Pilgrim and Health Plan Holdings in New Hampshire;
(b) likely cause prices for commercial health insurance sold to
small groups and to CRC groups in New Hampshire to be higher than they
would be otherwise; and
(c) likely reduce quality, service, choice, and innovation for
commercial health insurance sold to small groups and to CRC groups in
New Hampshire.
VIII. Request for Relief
45. Plaintiffs request that:
(a) The Transaction be adjudged to violate Section 7 of the Clayton
Act, 15 U.S.C. 18;
(b) the Court permanently enjoin and restrain Defendants from
entering into the Transaction contemplated in the Combination
Agreement;
(c) Plaintiffs be awarded the costs of this action, including
attorneys' fees to the State of New Hampshire; and
(d) Plaintiffs be awarded any other relief that the Court deems
just and proper.
Dated: December 14, 2020.
Respectfully submitted,
For Plaintiff United States of America:
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Makan Delrahim,
Assistant Attorney General for Antitrust.
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Michael Murray,
Principal Deputy Assistant, Attorney General.
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Kathleen S. O'Neill,
Acting Deputy Assistant, Attorney General.
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Eric D. Welsh,
Chief, Healthcare and Consumer Products Section.
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Jill C. Maguire,
Assistant Chief, Healthcare and Consumer Products Section.
For the Plaintiff State of New Hampshire.
By its attorney,
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Gordon J. MacDonald,
Attorney General of New Hampshire.
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Brandon H. Garod, NH Bar #21164,
Senior Assistant Attorney General.
Consumer Protection and Antitrust Bureau,New Hampshire Department of
Justice, Office of Attorney General, 33 Capitol Street, Concord, NH
03301, Phone: (603) 271-1217, [email protected].
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Jennifer Foley, NH Bar #10519,
Assistant Attorney General.
Consumer Protection and Antitrust Bureau, New Hampshire Department
of Justice, Office of Attorney General, 33 Capitol Street, Concord,
NH 03301, Phone: (603) 271-7987 [email protected].
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Scott W. Murray,
United States Attorney.
By:--------------------------------------------------------------------
Michael McCormack,
Assistant U.S. Attorney, NH Bar. #16470.
United States Attorney's Office,53 Pleasant Street, Concord, NH
03301, Tel: (603) 225-1552, Email: [email protected].
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Catherine R. Reilly
Garrett Liskey
Justin Dempsey
Jeremy Evans
Chris S. Hong
Barry Joyce
John P. Lohrer
Natalie Melada
David M. S
Brandon Storm
Attorneys for the United States.
U.S. Department of Justice, Antitrust Division, 450 5th Street, NW,
Suite 4100, Washington, D.C. 20530, Tel.: (202) 598-2744, Email:
[email protected]
United States District Court for the District of New Hampshire
United States of America and State of New Hampshire, Plaintiffs,
vs. Harvard Pilgrim Health Care, INC., and Health Plan Holdings,
INC., Defendants.
Civil Action No. 1:20-cv-01183-JL
Judge Joseph N. Laplante
[Proposed] Final Judgment
Whereas, Plaintiffs, United States of America and the State of New
Hampshire, filed their Complaint on December 14, 2020;
And whereas, Plaintiffs and Defendants, Harvard Pilgrim Health
Care, Inc. and Health Plan Holdings, Inc. (f/k/a Tufts Health Plan,
Inc.), have consented to entry of this Final Judgment without the
taking of testimony, without trial or adjudication of any issue of fact
or law, and without this Final Judgment constituting any evidence
against or admission by any party regarding any issue of fact or law;
And whereas, Defendants agree to make a divestiture to remedy the
loss of competition alleged in the Complaint;
And whereas, Defendants represent that the divestiture and other
relief required by this Final Judgment can and will be made and that
Defendants will not later raise a claim of hardship or difficulty as
grounds for asking the Court to modify any provision of this Final
Judgment;
And whereas, the resolution of the interests of the State of New
Hampshire through its Consumer Protection and Antitrust Bureau pursuant
to Section 7 of the Clayton Act and the state antitrust law, N.H. Rev.
Stat. Ann. Ch. 356, does not impact the jurisdiction or authority of
the New Hampshire Insurance Department to pursue any interest
authorized by law.
Now therefore, it is ordered, adjudged, and decreed:
I. Jurisdiction
The Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against Defendants under Section 7 of the Clayton
Act, as amended (15 U.S.C. 18).
II. Definitions
As used in this Final Judgment:
A. ``Harvard Pilgrim'' means Defendant Harvard Pilgrim Health Care,
Inc., a Massachusetts nonprofit corporation with its headquarters in
Wellesley, Massachusetts, its successors and assigns, and its
subsidiaries, divisions, groups, affiliates, partnerships, and joint
ventures, and their directors, officers, managers, agents, and
employees.
B. ``Health Plan Holdings'' means Defendant Health Plan Holdings,
Inc. (f/k/a Tufts Health Plan, Inc.), a Massachusetts nonprofit
corporation with its headquarters in Watertown, Massachusetts, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and their directors,
officers, managers, agents, and employees.
C. ``Tufts Health Freedom Plan'' means Tufts Health Freedom Plans,
Inc., its successors and assigns, and its subsidiaries, divisions,
groups, affiliates, partnerships, and joint
[[Page 86953]]
ventures, and their directors, officers, managers, agents, and
employees.
D. ``Acquirer'' means UnitedHealth Group, Inc. or another entity
approved by the United States of America in its sole discretion to whom
Defendants divest the Divestiture Assets.
E. ``CRC'' means community rating by class, which refers to the
sale of commercial group health insurance to private employers with
between 51 and 99 full-time eligible employees.
F. ``Divestiture Assets'' means:
1. All Healthcare Provider Contracts;
2. All of Defendants' rights, title, and interests in and to all
property and assets, tangible and intangible, wherever located, of
Tufts Health Freedom Plan, including:
a. All licenses, permits, certifications, approvals, consents,
registrations, waivers, and authorizations issued or granted by any
governmental organization, and all pending applications or renewals;
b. All real property interests, including leases; and
c. All contracts, other than Healthcare Provider Contracts, to
which Tufts Health Freedom Plan is a party, including contractual
rights, membership, customer contracts, and all other agreements,
commitments, and understandings.
3. All current and historical member records for the health plans
that Tufts Health Freedom Plan offers or has offered, including contact
information, claims information, clinical information, all underlying
electronic data, and all files that contain any current or historical
member records for those health plans;
4. All provider-furnished data related to members of health plans
that Tufts Health Freedom Plan offers or has offered and all files that
contain any provider-furnished data related to those health plans; and
5. An exclusive license to use the ``Tufts Health Freedom,''
``Tufts Health Freedom Insurance Company,'' and ``Tufts Health Freedom
Plan(s)'' brand names, and all associated trademarks, service marks,
and service names, in New Hampshire from the date on which the
Divestiture Assets are divested to Acquirer through December 31, 2021.
G. ``Granite Healthcare'' means Granite Healthcare Asset Holding
Company, LLC, its subsidiaries, divisions, groups, affiliates,
partnerships, and joint ventures as of July 1, 2020, and their members,
directors, officers, managers, agents, and employees. Its members
include Catholic Medical Center, Concord Hospital, Southern New
Hampshire Health System, Wentworth-Douglass Hospital, and Delta Dental
Plan of New Hampshire, Inc. d/b/a Northeast Delta Dental.
H. ``Granite Healthcare Provider Contracts'' means the contracts
with Catholic Medical Center, Concord Hospital, Southern New Hampshire
Health System, and Wentworth-Douglass Hospital, and any other hospitals
that had an ownership interest in Granite Healthcare as of July 1,
2020, to which Tufts Health Freedom Plan is a signatory.
I. ``Healthcare Provider Contracts'' means contracts with
healthcare providers to which Tufts Health Freedom Plan is a signatory,
including the Granite Healthcare Provider Contracts.
J. ``Including'' means including but not limited to.
K. ``Recruitment Period'' means the period of 60 calendar days from
the date on which the Divestiture Assets are divested to Acquirer.
L. ``Regulatory Approvals'' means any approvals or clearances
pursuant to Health Plan Holdings' November 16, 2020 Form A filed with
the Massachusetts Division of Insurance that are required for the
proposed combination of Health Plan Holdings and Harvard Pilgrim to
proceed.
M. ``Relevant Personnel'' means every employee of Health Plan
Holdings based in or assigned to New Hampshire in calendar year 2020
who (1) holds the title of President; Senior Executive Assistant;
Public Policy Manager; Small and Large Group Account Executive; Senior
Account Executive; Sales and Account Associate; Small Group Account
Manager; Key Account Manager; Large Group Account Manager; Senior
Manager, Strategic Marketing; Senior Provider Group Manager; or Small
Group Account Manager; and (2) has responsibility for Small Group or
CRC for Tufts Health Freedom Plan. The United States, in its sole
discretion, will resolve any disagreement regarding which employees are
Relevant Personnel.
N. ``Run-out Services'' means services that are customarily
provided following an operational transfer of health insurance plans
and that require Defendants' ongoing support, including claims
processing, claims reporting, administrative support, and routine
investigations necessary for claims processing.
O. ``Small Group'' means the sale of commercial group health
insurance to private employers with between 1 and 50 full-time eligible
employees.
P. ``United'' means UnitedHealth Group, Inc., a Delaware
corporation with its headquarters in Minnetonka, Minnesota, its
successors and assigns, and its subsidiaries, including its subsidiary
United Healthcare Services, Inc., divisions, groups, affiliates,
partnerships, and joint ventures, and their directors, officers,
managers, agents, and employees.
III. Applicability
A. This Final Judgment applies to Harvard Pilgrim and Health Plan
Holdings, as defined above, and all other persons in active concert or
participation with any Defendant who receive actual notice of this
Final Judgment.
B. If, prior to complying with Section IV and Section V of this
Final Judgment, Defendants sell or otherwise dispose of all or
substantially all of their assets or of business units that include the
Divestiture Assets, Defendants must require any purchaser to be bound
by the provisions of this Final Judgment. Defendants need not obtain
such an agreement from Acquirer.
IV. Divestiture
A. Defendants are ordered and directed, within 30 calendar days
after the Court's entry of the Asset Preservation Stipulation and Order
(``Stipulation and Order'') in this matter, to divest the Divestiture
Assets in a manner consistent with this Final Judgment to United or to
another Acquirer acceptable to the United States, in its sole
discretion, after consultation with the State of New Hampshire.
B. If Defendants have not received all Regulatory Approvals within
30 calendar days after the Court's entry of the Stipulation and Order
in this matter, the time period under Paragraph IV.A will be extended
until 5 calendar days after all Regulatory Approvals are received. This
extension allowed for securing Regulatory Approvals shall be no longer
than 60 calendar days past the time period provided in Paragraph IV.A,
unless the United States, in its sole discretion, consents to an
additional extension.
C. Defendants must use their best efforts to divest the Divestiture
Assets as expeditiously as possible and may not take any action to
impede the permitting, operation, or divestiture of the Divestiture
Assets.
D. Unless the United States otherwise consents in writing,
divestiture pursuant to this Final Judgment must include the entire
Divestiture Assets, and must be accomplished in such a way as to
satisfy the United States, in its sole discretion, that the Divestiture
Assets can and will be used by Acquirer as part of a viable, ongoing
business to
[[Page 86954]]
compete effectively in Small Group and CRC in New Hampshire and that
the divestiture to Acquirer will remedy the competitive harm alleged in
the Complaint.
E. The divestiture must be made to an Acquirer that, in the United
States' sole judgment, after consultation with the State of New
Hampshire, has the intent and capability (including the necessary
managerial, operational, technical, and financial capability) to
compete effectively in Small Group and CRC in New Hampshire.
F. The divestiture must be accomplished so as to satisfy the United
States, in its sole discretion, after consultation with the State of
New Hampshire, that none of the terms of any agreement between Acquirer
and Defendants gives Defendants the ability unreasonably to raise
Acquirer's costs, to lower Acquirer's efficiency, or otherwise to
interfere in the ability of Acquirer to compete effectively in Small
Group and CRC in New Hampshire.
G. Defendants must permit Acquirer to have reasonable access to
personnel and access, subject to customary confidentiality assurances,
to any and all financial, operational, or other documents and
information regarding the Divestiture Assets customarily provided as
part of a due diligence process.
H. In the event Defendants are attempting to divest the Divestiture
Assets to an Acquirer other than United, Defendants promptly must make
known, by usual and customary means, the availability of the
Divestiture Assets. Defendants must inform any person making an inquiry
regarding a possible purchase of the Divestiture Assets that the
Divestiture Assets are being divested in accordance with this Final
Judgment and must provide that person with a copy of this Final
Judgment. Defendants must offer to furnish and promptly provide to all
prospective Acquirers, subject to customary confidentiality assurances,
all information and documents relating to the Divestiture Assets that
are customarily provided in a due-diligence process, including all
information and documents provided to United; provided, however, that
Defendants need not provide information or documents subject to the
attorney-client privilege or work-product doctrine. Defendants must
make all information and documents available to the United States at
the same time that the information and documents are made available to
any other person.
I. Defendants must cooperate with and assist Acquirer in
identifying Relevant Personnel and, at the option of Acquirer, in
hiring any Relevant Personnel, including:
1. No later than five business days following the filing of the
Complaint in this matter, Defendants must provide to Acquirer and
Plaintiffs, a list of all Relevant Personnel.
2. Following the filing of the Complaint in this matter, within
seven business days following receipt of a request by Acquirer or the
United States, Defendants must provide to Acquirer and Plaintiffs,
additional information related to Relevant Personnel, including name,
job title, reporting relationships, past experience, responsibilities,
training and educational history, relevant certifications, job
performance evaluations. Defendants must also provide to Acquirer
current, recent, and accrued compensation and benefits, including most
recent bonuses paid, aggregate annual compensation, current target or
guaranteed bonus, if any, any retention agreement or incentives, and
any other payments due, compensation or benefits accrued, or promises
made to Relevant Personnel. If Defendants are barred by any applicable
laws from providing any of this information, Defendants must provide,
within seven business days following receipt of the request, the
requested information to the full extent permitted by law and also must
provide a written explanation of Defendants' inability to provide the
remaining information, including specifically identifying the
provisions of the applicable laws.
3. At the request of Acquirer, Defendants must promptly make
Relevant Personnel available for private interviews with Acquirer
during normal business hours at a mutually agreeable location.
4. Defendants must not interfere with any effort by Acquirer to
employ any Relevant Personnel. Interference includes offering to
increase the compensation or benefits of Relevant Personnel unless the
offer is part of a company-wide increase in compensation or benefits
granted that was announced prior to May 1, 2020, or has been approved
by the United States, in its sole discretion. Defendants' obligations
under this Paragraph I.4. will expire after the Recruitment Period.
5. For Relevant Personnel who elect employment with Acquirer during
the Recruitment Period, Defendants must waive all non-compete and non-
disclosure agreements; vest and pay to the Relevant Personnel (or to
Acquirer for payment to the employee) on a prorated basis any bonuses,
incentives, other salary, benefits, or other compensation fully or
partially accrued at the time of the transfer of the employee to
Acquirer; vest any unvested pension and other equity rights; and
provide all other benefits that those Relevant Personnel otherwise
would have been provided had the Relevant Personnel continued
employment with Defendants, including any retention bonuses or
payments. Defendants may maintain reasonable restrictions on disclosure
by Relevant Personnel of Defendants' proprietary non-public information
that is unrelated to the Divestiture Assets and not otherwise required
to be disclosed by this Final Judgment.
6. Acquirer's right to hire Relevant Personnel under Paragraph
IV.I. lasts throughout the duration of the Recruitment Period.
7. For a period of one year from the date on which the Divestiture
Assets are divested to Acquirer, Defendants may not solicit to rehire
Relevant Personnel who were hired by Acquirer during the Recruitment
Period, unless (a) an individual is terminated or laid off by Acquirer
or (b) Acquirer agrees in writing that Defendants may solicit to rehire
that individual. Nothing in this Paragraph prohibits Defendants from
advertising employment openings using general solicitations or
advertisements and rehiring Relevant Personnel who apply for an
employment opening through a general solicitation or advertisement.
J. Defendants must warrant to Acquirer that (1) the Divestiture
Assets will be operational and without material defect on the date of
their transfer to Acquirer; (2) there are no material defects in any
permits pertaining to the operation of the Divestiture Assets; and (3)
Defendants have disclosed all encumbrances on any part of the
Divestiture Assets, including on intangible property. Following the
sale of the Divestiture Assets, Defendants must not undertake, directly
or indirectly, challenges to any permits pertaining to the operation of
the Divestiture Assets.
K. Defendants must make best efforts to assist Acquirer to obtain
all necessary licenses, registrations, and permits to operate the
Divestiture Assets. Until Acquirer obtains the necessary licenses,
registrations, and permits, Defendants must provide Acquirer with the
benefit of Defendants' licenses, registrations, and permits to the full
extent permissible by law.
L. Defendants must make best efforts to transition customers from
the Health Plan Holdings operating platform to Acquirer's operating
platform beginning July 1, 2021, and ending by December 31, 2021.
[[Page 86955]]
M. At the option of Acquirer, and subject to approval by the United
States, in its sole discretion, on or before the date on which the
Divestiture Assets are divested to Acquirer, Defendants must enter into
one or more agreements to provide transition services for a period
ending no later than December 31, 2021, or, if Acquirer is not United,
for a period of one year from the date of divestiture, on terms and
conditions reasonably related to market conditions and must fully
perform the duties and obligations of such agreements. The transition
services to be provided by Defendants to Acquirer under such agreements
must encompass all services necessary for the Acquirer to operate the
Divestiture Assets, including: (1) Providing the operational platform
and systems infrastructure to run the Divestiture Assets, including
appropriate hardware and software; (2) preparing regulatory plan
submissions, including filing and securing regulatory approval, for
product, rate, and other required submissions; (3) handling member
services and enrollment, the processing and administration of claims,
routine investigations, and member appeals and grievances; (4)
providing and preparing claims reports; (5) performing accounting and
billing, finance support, and payment integrity maintenance; (6)
providing care management services; (7) providing regulatory
compliance; (8) processing vendor costs; (9) providing benefits
configuration; (10) providing broker and employer services; (11)
handling provider services and appeals; (12) processing provider
demographic, contract, and fee schedules updates; (13) maintaining
coordination of benefits programs; (14) providing underwriting support
services; and (15) making personnel available to assist Acquirer with
operational questions and issues. Any amendments to or modifications of
any provision of a transition services agreement are subject to
approval by the United States, in its sole discretion. Acquirer may
terminate a transition services agreement, or any portion of a
transition services agreement, without cost or penalty at any time upon
commercially reasonable notice. The employee(s) of Defendants tasked
with providing transition services must not share any competitively
sensitive information of Acquirer with any other employee of
Defendants, unless such sharing is for the sole purpose of providing
transition services to Acquirer.
N. At the option of Acquirer, and subject to approval by the United
States in its sole discretion, on or before the date on which the
Divestiture Assets are divested to Acquirer, Defendants must enter into
one or more agreements to provide Run-out Services to Acquirer from the
date of each customer's transition to Acquirer's operating platform to
June 30, 2022. At Acquirer's option, after written notice to the United
States, Defendants must extend any contract for Run-out Services for a
total of up to an additional 90 days. Defendants must provide Run-out
Services on terms and conditions reasonably related to market
conditions. Any amendments to or modifications of any provision of a
Run-out Services agreement are subject to approval by the United
States, in its sole discretion. Acquirer may terminate a Run-out
Services agreement, or any portion of a Run-out Services agreement,
without cost or penalty at any time upon commercially reasonable
notice. The employee(s) of Defendants tasked with providing Run-out
Services must not share any competitively sensitive information of
Acquirer with any other employee of Defendants, unless such sharing is
for the sole purpose of providing Run-out Services to Acquirer.
O. Except for Healthcare Provider Contracts, Defendants must make
any required notifications and use best efforts to obtain all necessary
consents of the contracting party to the change of control of Tufts
Health Freedom Plan to Acquirer. Defendants must not interfere with any
negotiations between Acquirer and a contracting party.
P. Defendants warrant that as of the date on which the Divestiture
Assets are divested to Acquirer, the Granite Healthcare Provider
Contracts have not expired or terminated, will run through at least
December 31, 2021, and will be on the same rates and terms that were in
effect as of October 1, 2020, except for any increase in rates that is
(a) no greater than a rate increase imposed on Health Plan Holdings
between October 1, 2020 and April 1, 2021, and (b) reasonably related
to market conditions.
Q. Defendants must make best efforts and must cooperate with and
assist Acquirer to ensure that Acquirer will retain all of the
Healthcare Provider Contracts. Best efforts includes the following:
1. For Healthcare Provider Contracts with Tufts Health Freedom
Plan's fifteen largest healthcare providers in New Hampshire, as
measured by Tufts Health Freedom Plan's 2019 claims volume, that do not
require notification of a change in ownership or control of Tufts
Health Freedom Plan, Defendants must ensure that as of the date on
which the Divestiture Assets are divested to Acquirer, the contracts
have not expired or terminated and include the same rates and terms
that were in effect as of October 1, 2020, except for any increase in
rates that is (a) no greater than a rate increase imposed on Health
Plan Holdings between October 1, 2020 and April 1, 2021, and (b)
reasonably related to market conditions.
2. For all Healthcare Provider Contracts that require a provider's
consent to a change in ownership or control of Tufts Health Freedom
Plan, or that allow a provider to terminate the contract upon notice of
a change in ownership or control, Defendants must notify each such
provider of the change in ownership or control within 30 calendar days
of entering into an agreement to divest the Divestiture Assets to
Acquirer. Except for Healthcare Provider Contracts for which the time
to exercise any termination rights has expired without the provider
terminating the contract or giving Defendants written notice of an
intent to terminate, Defendants must use best efforts to obtain any
necessary consent to a change in ownership or control or written
acknowledgment that a provider will not terminate because of a change
in ownership or control.
3. For any Healthcare Provider Contract that is terminated or for
which a provider gives written notice of its intent to terminate within
90 days from the date on which the Divestiture Assets are divested to
Acquirer, at Acquirer's request, Defendants must assist Acquirer to
secure a new contract with that provider as expeditiously as possible
by sharing information with Acquirer concerning the history of the
provider's participation in the Tufts Health Freedom Plan, including
the performance of the contract and any material disputes relating to
the contract, and assisting Acquirer in developing strategies to retain
or bring the provider in-network and on the same rates and terms that
were in effect as of October 1, 2020, except for any increase in rates
that is (a) no greater than a rate increase imposed on Health Plan
Holdings between October 1, 2020 and April 1, 2021, and (b) reasonably
related to market conditions.
4. If a provider terminates or gives written notice of its intent
to terminate any Healthcare Provider Contract within 90 days from the
date on which the Divestiture Assets are divested to Acquirer and
Acquirer is unable to secure a contract with the provider before the
contract terminates, and either (1) the provider is one of Tufts Health
Freedom Plan's fifteen largest healthcare providers in New Hampshire,
as measured by Tufts Health Freedom Plan's 2019 claims volume, or (2)
the termination would result in Tufts
[[Page 86956]]
Health Freedom Plan not meeting provider network adequacy standards
required by applicable law or regulation, at Acquirer's request,
Defendants must, to the full extent permitted by the terms of
Defendants' provider contracts, immediately enter into a rental, lease,
or similar contract to provide Acquirer with in-network access to the
relevant healthcare provider(s) for a period of 12 months from the date
on which the Divestiture Assets are divested to Acquirer. Defendants
may charge Acquirer no more than Defendants' costs paid to the relevant
healthcare provider(s), without adding any mark-up, for the provision
of such rental, lease, or similar contract.
5. For all Healthcare Provider Contracts that will expire between
the filing of the Complaint in this matter and 90 days after the date
on which the Divestiture Assets are divested to Acquirer, Defendants
must use best efforts to expeditiously renew each contract to avoid a
termination and out-of-network status for that provider, on the same
rates and terms that were in effect as of October 1, 2020, except for
any increase in rates that is (a) no greater than a rate increase
imposed on Health Plan Holdings between October 1, 2020 and April 1,
2021, and (b) reasonably related to market conditions.
R. From the date on which the Divestiture Assets are divested to
Acquirer through December 31, 2021, Defendants must not sell any
commercial health insurance products in New Hampshire that use the
``Tufts Health'' or ``Tufts Health Plan'' brand(s) (and all associated
trademarks, service marks, and service names). This Paragraph does not
prohibit Defendants from using the ``Tufts Health'' or ``Tufts Health
Plan'' brand(s) for group retiree plans, Medicaid plans, or Medicare
plans in New Hampshire.
S. Beginning on the date on which the Divestiture Assets are
divested to Acquirer, Defendants must not use the terms ``Health
Freedom Plan(s),'' ``Freedom,'' and/or ``Freedom Plan(s)'' for any
business name or to identify, market, or promote any products or
services in New Hampshire.
T. If any term of an agreement between Defendants and Acquirer to
effectuate the divestiture required by this Final Judgment varies from
a term of this Final Judgment, to the extent that Defendants cannot
fully comply with both, this Final Judgment determines Defendants'
obligations.
V. Appointment of Divestiture Trustee
A. If Defendants have not divested the Divestiture Assets within
the period specified in Paragraphs IV.A. and IV.B., Defendants must
immediately notify Plaintiffs of that fact in writing. Upon application
of the United States, the Court will appoint a divestiture trustee
selected by the United States and approved by the Court to effect the
divestiture of the Divestiture Assets.
B. After the appointment of a divestiture trustee by the Court,
only the divestiture trustee will have the right to sell the
Divestiture Assets. The divestiture trustee will have the power and
authority to accomplish the divestiture to an Acquirer acceptable to
the United States, in its sole discretion, after consultation with the
State of New Hampshire, at a price and on terms as are then obtainable
upon reasonable effort by the divestiture trustee, subject to the
provisions of Sections IV, V, and VI of this Final Judgment, and will
have other powers as the Court deems appropriate. The divestiture
trustee must sell the Divestiture Assets as quickly as possible.
C. Defendants may not object to a sale by the divestiture trustee
on any ground other than malfeasance by the divestiture trustee.
Objections by Defendants must be conveyed in writing to Plaintiffs and
the divestiture trustee within ten calendar days after the divestiture
trustee has provided the notice of proposed divestiture required under
Section VI.
D. The divestiture trustee will serve at the cost and expense of
Defendants pursuant to a written agreement, on terms and conditions,
including confidentiality requirements and conflict of interest
certifications, that are approved by the United States.
E. The divestiture trustee may hire at the cost and expense of
Defendants any agents or consultants, including, but not limited to,
investment bankers, attorneys, and accountants, that are reasonably
necessary in the divestiture trustee's judgment to assist with the
divestiture trustee's duties. These agents or consultants will be
accountable solely to the divestiture trustee and will serve on terms
and conditions, including terms and conditions governing
confidentiality requirements and conflict-of-interest certifications,
that are approved by the United States.
F. The compensation of the divestiture trustee and agents or
consultants hired by the divestiture trustee must be reasonable in
light of the value of the Divestiture Assets and based on a fee
arrangement that provides the divestiture trustee with incentives based
on the price and terms of the divestiture and the speed with which it
is accomplished. If the divestiture trustee and Defendants are unable
to reach agreement on the divestiture trustee's compensation or other
terms and conditions of engagement within 14 calendar days of the
appointment of the divestiture trustee by the Court, the United States
may, in its sole discretion, take appropriate action, including by
making a recommendation to the Court. Within three business days of
hiring an agent or consultant, the divestiture trustee must provide
written notice of the hiring and rate of compensation to Defendants and
the United States.
G. The divestiture trustee must account for all monies derived from
the sale of the Divestiture Assets sold by the divestiture trustee and
all costs and expenses incurred. Within 30 calendar days of the date of
the sale of the Divestiture Assets, the divestiture trustee must submit
that accounting to the Court for approval. After approval by the Court
of the divestiture trustee's accounting, including fees for unpaid
services and those of agents or consultants hired by the divestiture
trustee, all remaining money must be paid to Defendants and the trust
will then be terminated.
H. Defendants must use their best efforts to assist the divestiture
trustee to accomplish the required divestiture. Subject to reasonable
protection for trade secrets, other confidential research, development,
or commercial information, or any applicable privileges, Defendants
must provide the divestiture trustee and agents or consultants retained
by the divestiture trustee with full and complete access to all
personnel, books, records, and facilities of the Divestiture Assets.
Defendants also must provide or develop financial and other information
relevant to the Divestiture Assets that the divestiture trustee may
reasonably request. Defendants may not take any action to interfere
with or to impede the divestiture trustee's accomplishment of the
divestiture.
I. The divestiture trustee must maintain complete records of all
efforts made to sell the Divestiture Assets, including by filing
monthly reports with Plaintiffs setting forth the divestiture trustee's
efforts to accomplish the divestiture ordered by this Final Judgment.
The reports must include the name, address, and telephone number of
each person who, during the preceding month, made an offer to acquire,
expressed an interest in acquiring, entered into negotiations to
acquire, or was contacted or made an inquiry about acquiring any
interest in the Divestiture Assets and must describe in detail each
contact with any such person.
J. If the divestiture trustee has not accomplished the divestiture
ordered by
[[Page 86957]]
this Final Judgment within six months of appointment, the divestiture
trustee must promptly provide Plaintiffs with a report setting forth:
(1) The divestiture trustee's efforts to accomplish the required
divestiture; (2) the reasons, in the divestiture trustee's judgment,
why the required divestiture has not been accomplished; and (3) the
divestiture trustee's recommendations for completing the divestiture.
Following receipt of that report, the United States may make additional
recommendations consistent with the purpose of the trust to the Court.
The Court thereafter may enter such orders as it deems appropriate to
carry out the purpose of this Final Judgment, which may include
extending the trust and the term of the divestiture trustee's
appointment by a period requested by the United States.
K. The divestiture trustee will serve until divestiture of all
Divestiture Assets is completed or for a term otherwise ordered by the
Court.
L. If the United States determines that the divestiture trustee is
not acting diligently or in a reasonably cost-effective manner, the
United States may recommend that the Court appoint a substitute
divestiture trustee.
VI. Notice of Proposed Divestiture
A. Within two business days following execution of a definitive
divestiture agreement with a proposed Acquirer other than United,
Defendants or the divestiture trustee, whichever is then responsible
for effecting the divestiture, must notify Plaintiffs of a proposed
divestiture required by this Final Judgment. If the divestiture trustee
is responsible for completing the divestiture, the divestiture trustee
also must notify Defendants. The notice must set forth the details of
the proposed divestiture and list the name, address, and telephone
number of each person not previously identified who offered or
expressed an interest in or desire to acquire any ownership interest in
the Divestiture Assets.
B. Within 15 calendar days of receipt by the United States of this
notice, the United States, in its sole discretion, may request from
Defendants, the proposed Acquirer, other third parties, or the
divestiture trustee additional information concerning the proposed
divestiture, the proposed Acquirer, and other prospective Acquirers.
Defendants and the divestiture trustee must furnish the additional
information requested within 15 calendar days of the receipt of the
request unless the United States provides written agreement to a
different period.
C. Within 45 calendar days after receipt of the notice required by
Paragraph VI.A. or within 20 calendar days after the United States has
been provided the additional information requested pursuant to
Paragraph VI.B., whichever is later, the United States will provide
written notice to Defendants and any divestiture trustee that states
whether or not the United States, in its sole discretion, after
consultation with the State of New Hampshire, objects to Acquirer or
any other aspect of the proposed divestiture. Without written notice
that the United States does not object, a divestiture may not be
consummated. If the United States provides written notice that it does
not object, the divestiture may be consummated, subject only to
Defendants' limited right to object to the sale under Paragraph V.C. of
this Final Judgment. Upon objection by Defendants pursuant to Paragraph
V.C., a divestiture by the divestiture trustee may not be consummated
unless approved by the Court.
D. No information or documents obtained pursuant to this Section VI
may be divulged by Plaintiffs to any person other than an authorized
representative of the executive branch of the United States or an
authorized representative of the State of New Hampshire, except in the
course of legal proceedings to which the United States is a party,
including grand-jury proceedings, for the purpose of evaluating a
proposed Acquirer or securing compliance with this Final Judgment, or
as otherwise required by law.
E. In the event of a request by a third party for disclosure of
information under the Freedom of Information Act, 5 U.S.C. 552, the
Antitrust Division will act in accordance with that statute, and the
Department of Justice regulations at 28 CFR part 16, including the
provision on confidential commercial information, at 28 CFR 16.7.
Persons submitting information to the Antitrust Division should
designate the confidential commercial information portions of all
applicable documents and information under 28 CFR 16.7. Designations of
confidentiality expire ten years after submission, ``unless the
submitter requests and provides justification for a longer designation
period.'' See 28 CFR 16.7(b).
F. If at the time that a person furnishes information or documents
to the United States or the State of New Hampshire pursuant to this
Section VI, that person represents and identifies in writing
information or documents for which a claim of protection may be
asserted under Rule 26(c)(1)(G) of the Federal Rules of Civil
Procedure, and marks each pertinent page of such material, ``Subject to
claim of protection under Rule 26(c)(1)(G) of the Federal Rules of
Civil Procedure,'' the United States and the State of New Hampshire
must give that person ten calendar days' notice before divulging the
material in any legal proceeding (other than a grand-jury proceeding).
VII. Financing
Defendants may not finance all or any part of Acquirer's purchase
of all or part of the Divestiture Assets made pursuant this Final
Judgment.
VIII. Asset Preservation Obligations
Until the divestiture required by this Final Judgment has been
accomplished, Defendants must take all steps necessary to comply with
the Stipulation and Order entered by the Court. Defendants must take no
action that would jeopardize the divestiture ordered by the Court.
IX. Affidavits
A. Within 20 calendar days of the filing of the Complaint in this
matter, and every 30 calendar days thereafter until the divestiture
required by this Final Judgment has been completed, Defendant Health
Plan Holdings must deliver to Plaintiffs an affidavit, signed by its
Chief Financial Officer and Chief Legal Officer, describing the fact
and manner of Defendants' compliance with this Final Judgment. The
United States, in its sole discretion, may approve different
signatories for the affidavits.
B. Each affidavit must include: (1) The name, address, and
telephone number of each person who, during the preceding 30 calendar
days, made an offer to acquire, expressed an interest in acquiring,
entered into negotiations to acquire, or was contacted or made an
inquiry about acquiring, an interest in the Divestiture Assets and
describe in detail each contact with such persons during that period;
(2) a description of the efforts Defendants have taken to solicit
buyers for and complete the sale of the Divestiture Assets and to
provide required information to prospective Acquirers; and (3) a
description of any limitations placed by Defendants on information
provided to prospective Acquirers. Objection by the United States to
information provided by Defendants to prospective Acquirers must be
made within 14 calendar days of receipt of the affidavit.
C. Defendants must keep all records of any efforts made to divest
the Divestiture Assets until one year after the divestiture has been
completed.
D. Within 20 calendar days of the filing of the Complaint in this
matter, Defendant Health Plan Holdings also
[[Page 86958]]
must deliver to Plaintiffs an affidavit that describes in reasonable
detail all actions Defendants have taken and all steps Defendants have
implemented on an ongoing basis to comply with Section VIII of this
Final Judgment. The United States, in its sole discretion, may approve
different signatories for the affidavits.
E. If Defendants make any changes to the efforts and actions
outlined in any earlier affidavits provided pursuant to Paragraph
IX.D., Defendants must, within 15 calendar days after any change is
implemented, deliver to Plaintiffs an affidavit describing those
changes.
F. Defendants must keep all records of any efforts made to preserve
the Divestiture Assets until one year after the divestiture has been
completed.
X. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment or of related orders such as the Stipulation and Order
or of determining whether this Final Judgment should be modified or
vacated, upon written request of an authorized representative of the
Assistant Attorney General for the Antitrust Division, and reasonable
notice to Defendants, Defendants must permit, from time to time and
subject to legally recognized privileges, authorized representatives,
including agents retained by the United States:
1. To have access during Defendants' office hours to inspect and
copy, or at the option of the United States, to require Defendants to
provide electronic copies of all books, ledgers, accounts, records,
data, and documents in the possession, custody, or control of
Defendants relating to any matters contained in this Final Judgment;
and
2. to interview, either informally or on the record, Defendants'
officers, employees, or agents, who may have their individual counsel
present, regarding such matters. The interviews must be subject to the
reasonable convenience of the interviewee and without restraint or
interference by Defendants.
B. Upon the written request of an authorized representative of the
Assistant Attorney General for the Antitrust Division, Defendants must
submit written reports or respond to written interrogatories, under
oath if requested, relating to any of the matters contained in this
Final Judgment.
C. No information or documents obtained by the United States
pursuant to this Section X may be divulged by Plaintiffs to any person
other than an authorized representative of the executive branch of the
United States or an authorized representative of the State of New
Hampshire, except in the course of legal proceedings to which the
United States is a party, including grand jury proceedings, for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. In the event of a request by a third party for disclosure of
information under the Freedom of Information Act, 5 U.S.C. 552, the
Antitrust Division will act in accordance with that statute, and the
Department of Justice regulations at 28 CFR part 16, including the
provision on confidential commercial information, at 28 CFR 16.7.
Defendants submitting information to the Antitrust Division should
designate the confidential commercial information portions of all
applicable documents and information under 28 CFR 16.7. Designations of
confidentiality expire ten years after submission, ``unless the
submitter requests and provides justification for a longer designation
period.'' See 28 CFR 16.7(b).
E. If at the time that Defendants furnish information or documents
to the United States pursuant to this Section X, Defendants represent
and identify in writing information or documents for which a claim of
protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules
of Civil Procedure, and Defendants mark each pertinent page of such
material, ``Subject to claim of protection under Rule 26(c)(1)(G) of
the Federal Rules of Civil Procedure,'' the United States must give
Defendants ten calendar days' notice before divulging the material in
any legal proceeding (other than a grand jury proceeding).
XI. No Reacquisition
Defendants may not reacquire any part of or any interest in the
Divestiture Assets during the term of this Final Judgment.
XII. Retention of Jurisdiction
The Court retains jurisdiction to enable any party to this Final
Judgment to apply to the Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
XIII. Enforcement of Final Judgment
A. The United States retains and reserves all rights to enforce the
provisions of this Final Judgment, including the right to seek an order
of contempt from the Court. Defendants agree that in a civil contempt
action, a motion to show cause, or a similar action brought by the
United States regarding an alleged violation of this Final Judgment,
the United States may establish a violation of this Final Judgment and
the appropriateness of a remedy therefor by a preponderance of the
evidence, and Defendants waive any argument that a different standard
of proof should apply.
B. This Final Judgment should be interpreted to give full effect to
the procompetitive purposes of the antitrust laws and to restore the
competition Plaintiffs alleged was harmed by the challenged conduct.
Defendants agree that they may be held in contempt of, and that the
Court may enforce, any provision of this Final Judgment that, as
interpreted by the Court in light of these procompetitive principles
and applying ordinary tools of interpretation, is stated specifically
and in reasonable detail, whether or not it is clear and unambiguous on
its face. In any such interpretation, the terms of this Final Judgment
should not be construed against either party as the drafter.
C. In an enforcement proceeding in which the Court finds that
Defendants have violated this Final Judgment, the United States may
apply to the Court for a one-time extension of this Final Judgment,
together with other relief that may be appropriate. In connection with
a successful effort by the United States to enforce this Final Judgment
against a Defendant, whether litigated or resolved before litigation,
that Defendant agrees to reimburse the United States for the fees and
expenses of its attorneys, as well as all other costs including
experts' fees, incurred in connection with that enforcement effort,
including in the investigation of the potential violation.
D. For a period of four years following the expiration of this
Final Judgment, if the United States has evidence that a Defendant
violated this Final Judgment before it expired, the United States may
file an action against that Defendant in this Court requesting that the
Court order: (1) Defendant to comply with the terms of this Final
Judgment for an additional term of at least four years following the
filing of the enforcement action; (2) all appropriate contempt
remedies; (3) additional relief needed to ensure the Defendant complies
with the terms of this Final Judgment; and (4) fees or expenses as
called for by this Section XIII.
XIV. Expiration of Final Judgment
Unless the Court grants an extension, this Final Judgment will
expire ten years from the date of its entry, except that after five
years from the date of its entry, this Final Judgment may be terminated
upon notice by the United
[[Page 86959]]
States to the Court and Defendants the divestiture has been completed
and that the continuation of this Final Judgment is no longer necessary
or in the public interest.
XV. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including by making available to the
public copies of this Final Judgment and the Competitive Impact
Statement, public comments thereon, and the United States' response to
comments. Based upon the record before the Court, which includes the
Competitive Impact Statement and any comments and response to comments
filed with the Court, entry of this Final Judgment is in the public
interest.
Date:------------------------------------------------------------------
[Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16]
-----------------------------------------------------------------------
United States District Judge
United States District Court for the District of New Hampshire
United States of Americaand State of New Hampshire, Plaintiffs,
vs. Harvard Pilgrim Health Care, INC. and Health Plan Holdings,
INC., Defendants.
Civil Action No.:1:20-cv-01183-JL
Judge Joseph N. Laplante
Competitive Impact Statement
The United States of America, under Section 2(b) of the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16(b)-(h) (the ``APPA'' or
``Tunney Act''), files this Competitive Impact Statement relating to
the proposed Final Judgment submitted for entry in this civil antitrust
proceeding.
I. Nature and Purpose of the Proceeding
On August 9, 2019, Defendants Harvard Pilgrim and Health Plan
Holdings (f/k/a Tufts Health Plan) agreed to a ``merger of equals''
(the ``Transaction''). The United States, along with the State of New
Hampshire, filed a civil antitrust complaint on December 14, 2020,
seeking to enjoin the proposed Transaction. The Complaint alleges that
the likely effect of the Transaction would be to substantially lessen
competition in (1) the sale of commercial group health insurance to
private employers with up to 50 full-time eligible employees (``small
groups'') in all seven New Hampshire Core Based Statistical Areas
(``CBSAs''), and (2) the sale of commercial group health insurance to
private employers with between 51 and 99 full-time eligible employees
(``CRC groups'') in six New Hampshire CBSAs, in violation of Section 7
of the Clayton Act, 15 U.S.C. 18.
At the same time the Complaint was filed, the United States filed
an Asset Preservation Stipulation and Order (``Stipulation and Order'')
and proposed Final Judgment, which are designed to remedy the loss of
competition alleged in the Complaint. Under the proposed Final
Judgment, which is explained more fully below, Defendants are required
to divest Health Plan Holdings' New Hampshire subsidiary, Tufts Health
Freedom Plans, Inc. (``Tufts Freedom''). The United States has approved
UnitedHealth Group, Inc. (``United'') as the acquirer of Tufts Freedom.
Under the terms of the Stipulation and Order, Defendants will take
certain steps to ensure that Tufts Freedom is operated as a
competitively independent, economically viable, and ongoing business
concern, which will remain independent and uninfluenced by Defendants,
and that competition is maintained during the pendency of the required
divestiture.
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment will terminate this action, except that the
Court will retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. Decription of the Events Giving Rise to the Alleged Violation
A. Defendants and the Proposed Transaction
Harvard Pilgrim is a nonprofit corporation organized and existing
under the laws of the Commonwealth of Massachusetts with its
headquarters in Wellesley, Massachusetts. Harvard Pilgrim sells
commercial group health insurance plans to small and large employer
groups in New Hampshire, Massachusetts, Connecticut, and Maine. Harvard
Pilgrim's annual revenue in 2019 was approximately $3 billion, with the
vast majority of this revenue coming from commercial insurance
products, and it has over one million members across all its insurance
products.
Health Plan Holdings is a nonprofit corporation organized and
existing under the laws of the Commonwealth of Massachusetts with its
headquarters in Watertown, Massachusetts. Prior to October 7, 2020,
Health Plan Holdings was known as Tufts Health Plan, Inc. Health Plan
Holdings sells commercial group health insurance plans to small and
large employer groups in New Hampshire, Massachusetts, and Rhode
Island. In New Hampshire, Health Plan Holdings sells health insurance
through Tufts Freedom. Tufts Freedom was a joint venture with Granite
Healthcare, a consortium of New Hampshire hospitals, until September
2020, when Health Plan Holdings purchased the hospitals' interests and
became the sole owner. Health Plan Holdings' annual revenue in 2019 was
over $5.5 billion, with roughly one-third of this revenue coming from
commercial insurance products, and it has over one million members
across all its insurance products.
On August 9, 2019, Defendants entered into an agreement entitled
``Combination Agreement'' pursuant to which Health Plan Holdings will
acquire Harvard Pilgrim. No money is exchanging hands and Defendants
have described the transaction as a ``merger of equals.''
B. The Competitive Effects of the Transaction
Health insurance companies sell commercial group health insurance
to employers so employers can provide their employees and their
employees' families with health insurance coverage. Harvard Pilgrim and
Health Plan Holdings are two of the largest suppliers of commercial
health insurance in New Hampshire to employers with less than 100
employees. Harvard Pilgrim and Health Plan Holdings compete vigorously
with one another in the sale of commercial health insurance to these
employers. As alleged in the Complaint, combining Harvard Pilgrim and
Health Plan Holdings into one firm would likely lead to higher prices,
lower quality, and reduced choice in New Hampshire.
1. The Relevant Markets
(a) Commercial Health Insurance Sold to Small Groups
As alleged in the Complaint, the sale of commercial health
insurance to small groups is a relevant antitrust product market in
which to analyze the effects of the Transaction. New Hampshire
Insurance Department regulations define a ``small group'' as an
employer with 50 or fewer full-time eligible employees. See N.H. Rev.
Stat. Ann. Sec. 420-G:2, XVI. For small groups, health plans are
typically fully insured, which means that the employer pays a premium
to the insurance company and in return the company covers the
employees' healthcare costs. Small groups tend to be local in nature,
requiring a strong local provider
[[Page 86960]]
network of doctors and hospitals that are contracted to provide medical
care to the group's employees. The relevant market for small groups
alleged in the Complaint does not include governmental employers (e.g.,
municipalities, school districts) in New Hampshire with 50 or fewer
employees, as historically almost all of these employers have purchased
health insurance through a multi-employer trust instead of directly
from an insurer.
The commercial health insurance plans offered to small groups are
governed by the New Hampshire Insurance Department. The small group
plans cannot be substituted with plans offered to New Hampshire
employers with 51 or more full-time eligible employees, defined by
statute in New Hampshire as ``large group.'' Harvard Pilgrim and Health
Plan Holdings also differentiate small group accounts separately from
large group accounts internally and offer different pricing for small
group products compared to large group products.
New Hampshire law does not require that an insurer offer a small
group product statewide and instead permits an insurer to offer small
group plans only in certain counties. Accordingly, despite the fact
that state law does not allow insurers to charge different prices for
the same small group plans based on location, insurers can offer a more
expensive set of small group plans in one part of the state, and a less
expensive set of different small group plans in another part of the
state. This allows insurers to charge different prices for different
products to small groups based on where employees live and work.
There are seven Core Based Statistical Areas (CBSA) in New
Hampshire: (1) The Manchester-Nashua CBSA, (2) the Concord CBSA, (3)
the Laconia CBSA, (4) the Keene CBSA, (5) the Berlin CBSA, (6) the New
Hampshire counties (Grafton and Sullivan) of the Lebanon NH-VT CBSA,
and (7) the New Hampshire counties (Rockingham and Strafford) of the
Boston-Cambridge-Newton MA-NH CBSA. As alleged in the Complaint, the
Transaction is likely to substantially lessen competition for the sale
of commercial health insurance to small groups in all seven of New
Hampshire's CBSAs.
Each of these seven CBSAs is a relevant geographic market. A
hypothetical monopolist over the sale of commercial health insurance to
small groups in each of these markets would impose a small but
significant and non-transitory increase in price (e.g. five percent). A
small group employer, faced with a significant price increase, cannot
defeat the price increase by purchasing a large group product for which
it is ineligible. This price increase also would not be defeated by
substitution outside the relevant market or by a small group employer
trying to repurchase insurance through another employer group (i.e.
arbitrage).
(b) Commercial Health Insurance Sold to CRC Groups
As alleged in the Complaint, the sale of commercial health
insurance to CRC groups is a relevant antitrust product market. In New
Hampshire, employers with between 51 and 99 full-time eligible
employees represent a distinct segment of large group and are referred
to as CRC employers (or CRC groups). CRC groups have different needs
and make different buying decisions than small groups or even larger
employers. Harvard Pilgrim and Tufts Freedom employ different sales
strategies for this segment than they do for other types of employers.
Similar to small groups, CRC group health plans are typically fully
insured, which means that the employer pays a premium to the insurance
company and in return the company covers the employees' healthcare
costs. Insurers offering commercial health insurance in New Hampshire,
including Harvard Pilgrim and Tufts Freedom, differentiate employers
with 51 to 99 full-time eligible employees from other large group
employers, and refer to these employers as the CRC segment. As with
small groups, CRC groups also tend to be more local in nature than
other large group employers, requiring a strong local provider network,
as opposed to large group employers with 100 or more full-time eligible
employees, which, due to a more geographically dispersed employee base,
are more likely to require strong national provider networks. As with
small groups, the relevant market for CRC groups alleged in the
Complaint does not include governmental employers (e.g.,
municipalities, school districts) in New Hampshire with 51-99
employees, as historically almost all of these employers have purchased
health insurance through a multi-employer trust instead of directly
from an insurer.
Group health plans for CRC groups, in contrast to larger group
employers, are typically (although not exclusively) community rated by
class, meaning that, when setting rates for CRC groups, the insurer
first establishes a base rate determined by the medical costs of a
class of similar groups, rather than upon the medical costs of the
individual group seeking the plan. The insurer then uses this base
rate, along with the individual employer's medical costs, to negotiate
rates with the specific CRC group.
Defendants target CRC groups directly through their sales efforts.
For example, Tufts Freedom has focused its large group sales efforts on
CRC groups since it began selling commercial health insurance in New
Hampshire, while Harvard Pilgrim tracks CRC groups separately from
other large group accounts. In addition, both Harvard Pilgrim and Tufts
Freedom utilize specific pricing strategies for CRC groups. Defendants
have formulated these specific pricing strategies because CRC groups in
New Hampshire are generally more price sensitive than large group
employers with 100 or more full-time eligible employees.
Unlike commercial health insurance sold to small groups, insurers
offering commercial health insurance to CRC groups in New Hampshire can
charge different prices to different employers. Thus, insurers may
charge different prices to CRC groups based on where employees live and
work. The Transaction is likely to substantially lessen competition for
the sale of commercial health insurance to CRC groups in six separate
CBSAs in New Hampshire: (1) the Manchester-Nashua CBSA, (2) the Concord
CBSA, (3) the Laconia CBSA, (4) the Keene CBSA, (5) the New Hampshire
counties (Grafton and Sullivan) of the Lebanon NH-VT CBSA, and (6) the
New Hampshire counties (Rockingham and Strafford) of the Boston-
Cambridge-Newton MA-NH CBSA.
As alleged in the Complaint, each of these six CBSAs is a relevant
geographic market. A hypothetical monopolist over the sale of
commercial health insurance to CRC groups in each of these markets
would impose a small but significant (e.g., five percent) and non-
transitory increase in price. This price increase would not be defeated
by substitution outside the relevant market or by arbitrage.
2. The Transaction Would Result in Large Combined Market Shares
Harvard Pilgrim and Tufts Freedom are two of the largest providers
of small group and CRC group insurance in New Hampshire. The
Transaction would result in a substantial increase in concentration of
insurers that compete to offer commercial health insurance to small
groups and CRC groups in New Hampshire.
The Supreme Court has held that mergers that significantly increase
concentration in already concentrated markets are presumptively
anticompetitive and therefore
[[Page 86961]]
presumptively unlawful. To measure market concentration, courts often
use the Herfindahl-Hirschman Index (``HHI'') as described in the
Horizontal Merger Guidelines. HHIs range from 0 in markets with no
concentration to 10,000 in markets where one firm has a 100% market
share. According to the Horizontal Merger Guidelines, mergers that
increase the HHI by more than 200 and result in an HHI above 2,500 in
any market are presumed to be anticompetitive and, therefore, unlawful.
The Complaint alleges that the Transaction is presumptively
unlawful in the small group market. Based upon 2018 data, the combined
market shares for Harvard Pilgrim and Tufts Freedom range from over 45%
to over 60% in each of the seven CBSAs. As alleged in the Complaint,
the Transaction would reduce the number of small group health insurers
from four to three, with the two largest insurers--Anthem Blue Cross
and Blue Shield (``Anthem'') and the merged Harvard Pilgrim/Tufts
Freedom--possessing over 95% share in each of the seven CBSAs. The
result is highly concentrated markets with HHIs of between 4,500 and
7,500 and increases in HHIs from over 350 to over 1,600.
As alleged in the Complaint, the Transaction is also presumptively
unlawful in the CRC group market. Based upon 2018 data, the combined
market shares for Harvard Pilgrim and Tufts Freedom range from more
than 40% to over 65% in each of the six CBSAs. Similar to the small
group market, the Transaction would reduce the number of CRC group
health insurers from four to three, with the two largest insurers--
Anthem and the merged Harvard Pilgrim/Tufts Freedom--possessing over
95% share in each of the six CBSAs. The result is highly concentrated
markets with HHIs of between just under 5,000 to almost 7,000 and
increases in HHIs from over 200 to over 2,000.
3. The Transaction Would Eliminate Head-to-Head Competition Between Two
Close Competitors
As alleged in the Complaint, Harvard Pilgrim and Tufts Freedom are
particularly close competitors for commercial health insurance sold to
small groups and CRC groups in New Hampshire. The competition between
the two insurers is more robust for certain types of groups than the
market shares would predict. This is in part because Harvard Pilgrim
and Tufts Freedom--two strong local health insurers that have not built
national provider networks--are more attractive to small groups and CRC
groups with higher percentages of employees residing in New Hampshire.
Similarly, because Harvard Pilgrim and Tufts Freedom have priced
aggressively, the two appeal to small groups and CRC groups that have
greater price sensitivity.
Harvard Pilgrim and Tufts Freedom have engaged in head-to-head
competition on price, plan features, and quality of service in the sale
of commercial health insurance to small groups and to CRC groups in New
Hampshire. For example, as the Complaint alleges, upon entering the New
Hampshire market in 2016, Tufts Freedom priced aggressively, and gained
significant market share, largely at the expense of Harvard Pilgrim.
Additionally, in 2019, Harvard Pilgrim developed four new no-
coinsurance plans, which limited out-of-pocket expenses to members and
offered different features, with the express purpose of making them
more attractive to members. Just this year, Tufts Freedom offered
consumers a novel telehealth option that included zero copayment in
fully insured plans in order to drive innovation around this emerging
platform. Eliminating competition between Harvard Pilgrim and Tufts
Freedom would likely result in higher prices, lower quality, less
innovation, and less customer choice in the sale of commercial health
insurance to small groups and to CRC groups in New Hampshire.
4. Difficulty of Entry or Expansion
As alleged in the Complaint, new entry and expansion by competitors
will likely neither be timely nor sufficient in scope to prevent the
likely anticompetitive effects of the proposed Transaction. Barriers to
entry and expansion include state licensing and regulatory
requirements, the cost of developing a comprehensive provider network
where employees live and work, the inability of insurers without
significant membership to obtain competitive discounts from providers,
and the development of sufficient business to permit the spreading of
risk.
The Complaint also alleges that the anticompetitive effects of the
proposed Transaction are not likely to be eliminated by any
efficiencies the proposed Transaction may achieve.
III. Explanation of the Proposed Final Judgment
The relief required by the proposed Final Judgment will remedy the
loss of competition alleged in the Complaint by establishing an
independent and economically viable competitor in the markets for the
sale of commercial group health insurance to small groups and CRC
groups in New Hampshire. Paragraph IV.A of the Proposed Final Judgment
requires Defendants, within 30 days after entry of the Stipulation and
Order by the Court, to divest Tufts Freedom, Health Plan Holdings' New
Hampshire subsidiary, to United, or an alternative acquirer, acceptable
to the United States, in its sole discretion, after consultation with
the State of New Hampshire (``Acquirer''). Paragraph IV.B allows for
this 30-day period to be extended until 5 calendar days after Harvard
Pilgrim and Health Plan Holdings receive the required regulatory
approvals from the Massachusetts Division of Insurance. Any extension
for securing regulatory approvals shall be no longer than 60 calendar
days after the 30-day time period provided in Paragraph IV.A, unless
the United States, in its sole discretion, consents to an additional
extension. Defendants must take all reasonable steps necessary to
accomplish the divestiture quickly and must cooperate with Acquirer.
A. Divestiture Assets
The proposed Final Judgment requires Defendants to divest all
assets and rights that an Acquirer needs to compete against Defendants
and other commercial health insurers in New Hampshire for the sale of
commercial group health insurance to small groups and CRC groups. The
Divestiture Assets, which are defined in Paragraph II.F of the proposed
Final Judgment, include all tangible and intangible assets of Tufts
Freedom, including insurance licenses and real property interests, such
as leases, membership, and customer contracts; all contracts with
healthcare providers to which Tufts Freedom is a signatory; all current
and historical member records for the health plans that Tufts Freedom
offers or has offered, all underlying electronic data, and all files
that contain any current or historical member records for those health
plans; and all provider-furnished data related to members of health
plans that Tufts Freedom offers or has offered and all files that
contain any provider-furnished data related to those health plans.
The Divestiture Assets also include an exclusive license for
Acquirer to use the ``Tufts Health Freedom,'' ``Tufts Health Freedom
Insurance Company,'' and ``Tufts Health Freedom Plan(s)'' brand names,
and all associated trademarks, service marks, and service names, in New
Hampshire from the date on which the Divestiture Assets are divested to
Acquirer through December 31, 2021. This license will assist Acquirer
in
[[Page 86962]]
maintaining plan membership during the period immediately after the
divestiture. Related to the license included in the Divestiture Assets,
Paragraphs IV.R and IV.S of the proposed Final Judgment prohibit
Defendants from selling commercial health insurance products in New
Hampshire that use the ``Tufts Health'' or ``Tufts Health Plan''
brand(s) through December 31, 2021, and prohibit Defendants from using
the terms ``Health Freedom Plan(s),'' ``Freedom,'' or ``Freedom
Plan(s)'' for any business name or to identify, market, or promote any
products or services in New Hampshire. This prohibition will protect
against consumer confusion between Defendants' commercial health
insurance plans and Tufts Freedom's commercial health insurance plans.
B. Hiring of Personnel
The proposed Final Judgment contains provisions intended to
facilitate Acquirer's efforts to hire certain employees of Health Plan
Holdings who have responsibilities for the Tufts Freedom business.
These provisions will help ensure that Acquirer will be able to retain
qualified employees to operate Tufts Freedom. Paragraph IV.I of the
proposed Final Judgment requires Defendants to assist Acquirer in
identifying and hiring employees based in New Hampshire or assigned to
New Hampshire business and to make them available for interviews. It
also provides that Defendants must not interfere with any negotiations
by Acquirer to hire these employees. In addition, for employees who
elect employment with Acquirer, Defendants must waive all non-compete
and non-disclosure agreements; vest and pay (or provide to Acquirer for
payment to the employee) on a prorated basis any bonuses, incentives,
other salary, benefits, or other compensation fully or partially
accrued at the time of the transfer of the employee to Acquirer; vest
any unvested pension and other equity rights; and provide all other
benefits that those employees otherwise would have been provided had
they continued employment with Defendants, including any retention
bonuses or payments. Paragraph IV.I further provides that Defendants
may not solicit to rehire any employees who elect employment with
Acquirer, unless an employee is terminated or laid off by Acquirer or
Acquirer agrees in writing that Defendants may solicit to rehire that
individual. The non-solicitation period runs for 12 months from the
date of the divestiture.
C. Transition and Run-Out Services
The proposed Final Judgment also contains several provisions to
facilitate the transition of the Divestiture Assets to Acquirer. These
provisions will facilitate a smooth transition for Tufts Freedom
members from Health Plan Holdings to Acquirer so that Acquirer can
compete effectively in the markets for health insurance sold to small
groups and CRC groups in New Hampshire. For example, Paragraph IV.L of
the proposed Final Judgment requires Defendants to make best efforts to
transition customers from the Health Plan Holdings operating platform
to Acquirer's operating platform beginning July 1, 2021, and ending by
December 31, 2021. This transition will not begin until July 2021 in
order to give Acquirer enough time to prepare its own operating
platform for the Tufts Freedom business. In addition, Paragraph IV.M
requires Defendants, at Acquirer's option, to enter into one or more
agreements to provide transition services to Acquirer for a period
running until December 31, 2021, or if Acquirer is not United, one year
from the date of the divestiture. Transition services must encompass
all services necessary for Acquirer to operate the Divestiture Assets.
Among other things, the proposed Final Judgment allows Health Plan
Holdings to provide the operational platform and systems infrastructure
to run the Divestiture Assets, prepare regulatory filings, and handle
member services for Acquirer for a time-limited period. Acquirer may
terminate a transition services agreement, or any portion of it,
without cost or penalty at any time upon commercially reasonable
notice. Paragraph IV.M also provides that employees of Defendants
tasked with supporting this agreement must not share any competitively
sensitive information of Acquirer with any other employee of
Defendants, unless such sharing is for the sole purpose of providing
transition services to Acquirer.
Paragraph IV.N of the proposed Final Judgment further requires
Defendants, at Acquirer's option, to provide Run-out Services to
Acquirer to cover the period from the date of a customer's transition
to Acquirer's operating platform, until June 30, 2022, and at
Acquirer's option, for up to an additional 90 days. Run-out Services
are services that are customarily provided to an acquirer by a seller
following an operational transfer of a health insurance plan. Run-out
services include, among other things, claims processing, claims
reporting, administrative support, and routine investigations necessary
for claims processing. These services are provided by a seller of an
insurance plan for a period of time after an operational transfer
because the services relate to claims that were incurred prior to the
transfer but have not been resolved. For example, a claim that occurred
during the transition period might not be processed or investigated
until after the transition period has ended. Requiring Defendants to
provide these Run-out Services will help to smooth the transfer of the
Divestiture Assets to Acquirer and ensure that Acquirer can immediately
and successfully operate Tufts Freedom. The United States, in its sole
discretion, may approve one or more extensions of Run-out Services.
Acquirer may terminate a Run-out Services agreement, or any portion of
it, without cost or penalty at any time upon commercially reasonable
notice. Paragraph IV.N also provides that employees of Defendants
tasked with supporting this agreement must not share any competitively
sensitive information of Acquirer with any other employee of
Defendants, unless such sharing is for the sole purpose of providing
Run-out Services to Acquirer.
D. Healthcare Provider Contracts
An insurer's ability to compete on price depends largely on medical
costs, which are impacted significantly by the discounts the insurer
obtains from healthcare providers through its contracts with those
providers. The proposed Final Judgment contains several provisions to
help ensure that Tufts Freedom will maintain contracts with New
Hampshire healthcare providers at competitive rates following the
divestiture. Keeping contracts with local providers at competitive
rates will better position Tufts Freedom to be competitive in the small
group and CRC group markets in New Hampshire.
1. Contracts With Granite Healthcare Providers
Paragraph IV.P of the proposed Final Judgment requires that
Defendants warrant that as of the date of divestiture, Tufts Freedom's
contracts with Catholic Medical Center, Concord Hospital, Southern New
Hampshire Health System, and Wentworth-Douglass Hospital, and any other
hospitals that had an ownership interest in Granite Healthcare as of
July 1, 2020, have not expired or terminated, will run through at least
December 31, 2021, and will be on the same rates and terms that were in
effect as of October 1, 2020, subject to certain permitted rate
increases.
[[Page 86963]]
2. Contracts With Other Healthcare Providers
Paragraph IV.Q of the proposed Final Judgment requires that
Defendants make best efforts and cooperate with and assist Acquirer to
ensure that, following the divestiture, Acquirer will retain Tufts
Freedom's current contracts with healthcare providers in New Hampshire.
Defendants' obligations under Paragraphs IV.Q.1-5 of the proposed Final
Judgment vary depending upon whether a Healthcare Provider Contract
includes change in control provisions, terminates, or expires.
(a) Healthcare Provider Contracts Without Change in Control Provisions
Some Healthcare Provider Contracts have no requirement that Tufts
Freedom notify the provider of a change in ownership or control of
Tufts Freedom and do not include provisions allowing the provider to
terminate the contract in the event of a change in ownership or
control. Under Paragraph IV.Q.1, Defendants must make best efforts to
ensure that contracts with Tufts Freedom's fifteen largest providers in
New Hampshire (as measured by 2019 claims volume) that do not require a
notice of change in ownership or control (1) have not expired or
terminated and (2) include the same rates and terms that were in effect
as of October 1, 2020, subject to certain permitted rate increases.
(b) Healthcare Provider Contracts With Change in Control Provisions
Other Healthcare Provider Contracts require the provider's consent
to a change in Tufts Freedom's ownership or control, or allow the
provider to terminate the contract upon notice of a change in ownership
or control. Paragraph IV.Q.2 of the proposed Final Judgment requires
Defendants to notify those providers of the change in ownership or
control within 30 calendar days of entering into an agreement to divest
the Divestiture Assets to Acquirer. Paragraph IV.Q.2 further requires
Defendants to use best efforts to obtain consent to the change in
ownership or control from these providers or written acknowledgement
that the provider will not terminate its contract with Tufts Freedom
because of the change in ownership or control. The preceding
requirement does not apply in the event that a provider's deadline to
exercise any termination rights has already expired without the
provider terminating the contract or giving Defendants written notice
of an intent to terminate.
(c) Healthcare Provider Contracts That Terminate
The proposed Final Judgment places additional obligations on
Defendants if a healthcare provider terminates or gives notice of an
intent to terminate within 90 days from the date of the divestiture.
Paragraph IV.Q.3 requires Defendants to assist Acquirer, at Acquirer's
request, to secure new contracts with those terminating healthcare
providers. The assistance required includes sharing information with
Acquirer concerning the history of the provider's participation in
Tufts Freedom and aiding Acquirer in developing strategies to retain or
bring the provider in-network, on the same rates and terms that were in
effect as of October 1, 2020, subject to certain permitted increases.
Paragraph IV.Q.4 further requires that if the terminating provider is
one of Tufts Freedom's fifteen largest healthcare providers in New
Hampshire (as measured by 2019 claims volume), or the termination would
result in Tufts Freedom not meeting provider network adequacy standards
required by applicable law or regulation, at Acquirer's request,
Defendants must enter into a rental, lease, or similar contract to
provide Acquirer with in-network access to the relevant healthcare
provider(s) for a period of 12 months from the date of the divestiture.
(d) Expiring Healthcare Provider Contracts
Finally, Paragraph IV.Q.5 of the proposed Final Judgment requires
Defendants to use best efforts to renew all Healthcare Provider
Contracts that will expire between the filing of the Complaint in this
matter and 90 days after the date of the divestiture, on the same rates
and terms that were in effect as of October 1, 2020, subject to certain
permitted rate increases.
E. Divestiture Trustee
If Defendants do not accomplish the divestiture within the period
prescribed in Paragraphs IV.A and IV.B of the proposed Final Judgment,
Section V of the proposed Final Judgment provides that the Court will
appoint a divestiture trustee selected by the United States to effect
the divestiture. If a divestiture trustee is appointed, the proposed
Final Judgment provides that Defendants will pay all costs and expenses
of the trustee. The divestiture trustee's commission will be structured
so as to provide an incentive for the trustee based on the price
obtained and the speed with which the divestiture is accomplished.
After the divestiture trustee's appointment becomes effective, the
trustee will provide monthly reports to the United States and the state
of New Hampshire setting forth his or her efforts to accomplish the
divestiture. If the divestiture has not been accomplished within six
months of the divestiture trustee's appointment, the United States may
make recommendations to the Court, which will enter such orders as
appropriate, in order to carry out the purpose of the Final Judgment,
including by extending the trust or the term of the divestiture
trustee's appointment.
F. Compliance
The proposed Final Judgment also contains provisions designed to
promote compliance and make enforcement of the Final Judgment as
effective as possible. Paragraph XIII.A provides that the United States
retains and reserves all rights to enforce the Final Judgment,
including the right to seek an order of contempt from the Court. Under
the terms of this paragraph, Defendants have agreed that in any civil
contempt action, any motion to show cause, or any similar action
brought by the United States regarding an alleged violation of the
Final Judgment, the United States may establish the violation and the
appropriateness of any remedy by a preponderance of the evidence and
that Defendants have waived any argument that a different standard of
proof should apply. This provision aligns the standard for compliance
with the Final Judgment with the standard of proof that applies to the
underlying offense that the Final Judgment addresses.
Paragraph XIII.B of the proposed Final Judgment provides additional
clarification regarding the interpretation of the provisions of the
proposed Final Judgment. The proposed Final Judgment is intended to
remedy the loss of competition the United States alleges would
otherwise be harmed by the transaction. Defendants agree that they will
abide by the proposed Final Judgment, and that they may be held in
contempt of this Court for failing to comply with any provision of the
proposed Final Judgment that is stated specifically and in reasonable
detail, as interpreted in light of this procompetitive purpose.
Paragraph XIII.C of the proposed Final Judgment provides that if
the Court finds in an enforcement proceeding that a Defendant has
violated the Final Judgment, the United States may apply to the Court
for a one-time extension of the Final Judgment, together with such
other relief as may be appropriate. In addition, to compensate American
taxpayers for any costs associated with
[[Page 86964]]
investigating and enforcing violations of the Final Judgment, Paragraph
XIII.C provides that in any successful effort by the United States to
enforce the Final Judgment against a Defendant, whether litigated or
resolved before litigation, that Defendant will reimburse the United
States for attorneys' fees, experts' fees, and other costs incurred in
connection with any effort to enforce the Final Judgment, including the
investigation of the potential violation.
Paragraph XIII.D of the proposed Final Judgment states that the
United States may file an action against a Defendant for violating the
Final Judgment for up to four years after the Final Judgment has
expired or been terminated. This provision is meant to address
circumstances such as when evidence that a violation of the Final
Judgment occurred during the term of the Final Judgment is not
discovered until after the Final Judgment has expired or been
terminated or when there is not sufficient time for the United States
to complete an investigation of an alleged violation until after the
Final Judgment has expired or been terminated. This provision,
therefore, makes clear that, for four years after the Final Judgment
has expired or been terminated, the United States may still challenge a
violation that occurred during the term of the Final Judgment.
Finally, Section XIV of the proposed Final Judgment provides that
the Final Judgment will expire ten years from the date of its entry,
except that after five years from the date of its entry, the Final
Judgment may be terminated upon notice by the United States to the
Court and Defendants that the divestiture has been completed and that
continuation of the Final Judgment is no longer necessary or in the
public interest.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment neither impairs
nor assists the bringing of any private antitrust damage action. Under
the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 16(a), the
proposed Final Judgment has no prima facie effect in any subsequent
private lawsuit that may be brought against Defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least 60 days preceding the
effective date of the proposed Final Judgment within which any person
may submit to the United States written comments regarding the proposed
Final Judgment. Any person who wishes to comment should do so within 60
days of the date of publication of this Competitive Impact Statement in
the Federal Register, or the last date of publication in a newspaper of
the summary of this Competitive Impact Statement, whichever is later.
All comments received during this period will be considered by the U.S.
Department of Justice, which remains free to withdraw its consent to
the proposed Final Judgment at any time before the Court's entry of the
Final Judgment. The comments and the response of the United States will
be filed with the Court. In addition, comments and the United States'
response will be published in the Federal Register unless the Court
agrees that the United States instead may publish them on the U.S.
Department of Justice, Antitrust Division's internet website.
Written comments should be submitted to: Eric D. Welsh, Chief,
Healthcare and Consumer Products Section, Antitrust Division, U.S.
Department of Justice, 450 Fifth Street, NW, Suite 4100, Washington, DC
20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
As an alternative to the proposed Final Judgment, the United States
considered a full trial on the merits against Defendants. The United
States could have continued the litigation and sought preliminary and
permanent injunctions against the combination of Harvard Pilgrim and
Health Plan Holdings. The United States is satisfied, however, that the
divestiture of assets described in the proposed Final Judgment will
remedy the anticompetitive effects alleged in the Complaint, preserving
competition for the sale of commercial health insurance to small groups
and CRC groups in each of the geographic markets alleged in the
Complaint. Thus, the proposed Final Judgment achieves all or
substantially all of the relief the United States would have obtained
through litigation, but avoids the time, expense, and uncertainty of a
full trial on the merits of the Complaint.
VII. Standard of Review Under the APPA for the Proposed Final Judgment
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a 60-day comment period, after which the Court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the Court, in accordance with the statute as amended in 2004, is
required to consider:
(A) The competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous, and any other
competitive considerations bearing upon the adequacy of such judgment
that the court deems necessary to a determination of whether the
consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and individuals
alleging specific injury from the violations set forth in the complaint
including consideration of the public benefit, if any, to be derived
from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory
factors, the Court's inquiry is necessarily a limited one as the
government is entitled to ``broad discretion to settle with the
defendant within the reaches of the public interest.'' United States v.
Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); United States v.
U.S. Airways Grp., Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014)
(explaining that the ``court's inquiry is limited'' in Tunney Act
settlements); United States v. InBev N.V./S.A., No. 08-1965 (JR), 2009
U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that a
court's review of a consent judgment is limited and only inquires
``into whether the government's determination that the proposed
remedies will cure the
[[Page 86965]]
antitrust violations alleged in the complaint was reasonable, and
whether the mechanism to enforce the final judgment are clear and
manageable'').
As the U.S. Court of Appeals for the District of Columbia Circuit
has held, under the APPA a court considers, among other things, the
relationship between the remedy secured and the specific allegations in
the government's complaint, whether the proposed Final Judgment is
sufficiently clear, whether its enforcement mechanisms are sufficient,
and whether it may positively harm third parties. See Microsoft, 56
F.3d at 1458-62. With respect to the adequacy of the relief secured by
the proposed Final Judgment, a court may not ``make de novo
determination of facts and issues.'' United States v. W. Elec. Co., 993
F.2d 1572, 1577 (D.C. Cir. 1993) (quotation marks omitted); see also
Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 F.
Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 F.
Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, at
*3. Instead, ``[t]he balancing of competing social and political
interests affected by a proposed antitrust consent decree must be left,
in the first instance, to the discretion of the Attorney General.'' W.
Elec. Co., 993 F.2d at 1577 (quotation marks omitted). ``The court
should bear in mind the flexibility of the public interest inquiry: the
court's function is not to determine whether the resulting array of
rights and liabilities is one that will best serve society, but only to
confirm that the resulting settlement is within the reaches of the
public interest.'' Microsoft, 56 F.3d at 1460 (quotation marks
omitted); see also United States v. Deutsche Telekom AG, No. 19-2232
(TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). More demanding
requirements would ``have enormous practical consequences for the
government's ability to negotiate future settlements,'' contrary to
congressional intent. Id. at 1456. ``The Tunney Act was not intended to
create a disincentive to the use of the consent decree.'' Id.
The United States' predictions about the efficacy of the remedy are
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at
1461 (recognizing courts should give ``due respect to the Justice
Department's . . . view of the nature of its case''); United States v.
Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 2016) (``In
evaluating objections to settlement agreements under the Tunney Act, a
court must be mindful that [t]he government need not prove that the
settlements will perfectly remedy the alleged antitrust harms[;] it
need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.'') (internal
citations omitted); United States v. Republic Servs., Inc., 723 F.
Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review to
which the government's proposed remedy is accorded''); United States v.
Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A
district court must accord due respect to the government's prediction
as to the effect of proposed remedies, its perception of the market
structure, and its view of the nature of the case.''). The ultimate
question is whether ``the remedies [obtained by the Final Judgment are]
so inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest.''' Microsoft, 56 F.3d at 1461 (quoting
W. Elec. Co., 900 F.2d at 309).
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its complaint, and does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways,
38 F. Supp. 3d at 75 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``[T]he
`public interest' is not to be measured by comparing the violations
alleged in the complaint against those the court believes could have,
or even should have, been alleged''). Because the ``court's authority
to review the decree depends entirely on the government's exercising
its prosecutorial discretion by bringing a case in the first place,''
it follows that ``the court is only authorized to review the decree
itself,'' and not to ``effectively redraft the complaint'' to inquire
into other matters that the United States did not pursue. Microsoft, 56
F.3d at 1459-60.
In its 2004 amendments to the APPA, Congress made clear its intent
to preserve the practical benefits of using consent judgments proposed
by the United States in antitrust enforcement, Public Law 108-237 Sec.
221, and added the unambiguous instruction that ``[n]othing in this
section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2); see also U.S. Airways, 38 F. Supp. 3d
at 76 (indicating that a court is not required to hold an evidentiary
hearing or to permit intervenors as part of its review under the Tunney
Act). This language explicitly wrote into the statute what Congress
intended when it first enacted the Tunney Act in 1974. As Senator
Tunney explained: ``[t]he court is nowhere compelled to go to trial or
to engage in extended proceedings which might have the effect of
vitiating the benefits of prompt and less costly settlement through the
consent decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of
Sen. Tunney). ``A court can make its public interest determination
based on the competitive impact statement and response to public
comments alone.'' U.S. Airways, 38 F. Supp. 3d at 76 (citing Enova
Corp., 107 F. Supp. 2d at 17).
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: December 23, 2020.
Respectfully submitted,
Catherine R. Reilly,
U.S. Department of Justice, Antitrust Division, Healthcare and Consumer
Products Section, 450 Fifth Street, NW, Suite 4100, Washington, DC
20530, [email protected].
[FR Doc. 2020-28905 Filed 12-30-20; 8:45 am]
BILLING CODE 4410-11-P
