Judge OKs vertical merger despite rare challenge from DOJ to prevent “anticompetitive” practices

In a rare case of the Department of Justice bringing a lawsuit to block a proposed vertical merger and stop “anticompetitive” practices, a DC judge has given two healthcare companies — United and Change Healthcare — the green light to combine forces.

The Biden administration has shown a broader agenda of addressing antitrust in healthcare, so the DOJ complaint comes as no surprise, according to Kevin Hahm, partner at Hunton Andrews Kurth.

“The fact that DOJ brought this case is not surprising given Biden’s public statements and Executive Order calling for more robust antitrust enforcement, as well as the public statements by current leadership at both agencies,” Hahm said via email. “The DOJ has suffered recent losses in some criminal cases including a price-fixing, wage-fixing and no-poach, and it is notable that prosecuting wage-fixing and no-poach as criminal violations is a departure from prior policy of pursuing these types of cases as civil violations.”

Hahm pointed out that this is one of only a few vertical mergers challenged by the DOJ. “This was the second litigated vertical merger challenge by DOJ after AT&T/Time Warner, and before that case, it had been over 40 years since a vertical merger challenge had been litigated (vs. settled via consent decree),” Hahm said.

On Monday, US District Judge Carl Nichols issued an order denying the DOJ’s request to block the proposed merger between the two healthcare companies, which will result in the combination of Change Healthcare and Optum Insight, a part of UnitedHealth Group.

Nashville, TN-based Change Healthcare provides analytics and data to providers and payers to improve workflows and clinical decision making, according to the company’s website.

“Change’s technologies save United’s rivals tens of billions of dollars each year and reduce healthcare costs for American families,” according to the DOJ in their initial complaint.

The government charged in February that the merger would allow anticompetitive data sharing that would unfairly give United an advantage over its competitors.

“United’s proposed acquisition of Change, with its rivals’ competitively sensitive data, would allow United to co-opt its rival insurers’ innovations and their competitive strategies and reduce their incentives to pursue those innovations and strategies in the first place,” the DOJ said .

“The proposed acquisition would also allow United to use its control over Change’s technologies to disadvantage its health insurance rivals by raising their costs and denying or delaying their access to innovations and quality improvements to products and services supplied by Change,” the DOJ continued in the complaint.

United has purchased more than 35 healthcare companies over the last 10 years. Although representatives from United did not immediately respond to a request for comment, Change Healthcare issued a statement celebrating the judge’s decision. “We are pleased that the US District Court for the District of Columbia has approved the combination of Optum Insight and Change Healthcare, and we are looking forward to working to complete the merger,” Change Healthcare said in a statement.

Although the case was a rare instance for the DOJ cracking down on alleged antitrust practices, Hahm says this won’t be the last instance. And the DOJ could choose to appeal the case.

“But in the meantime, I wouldn’t anticipate the DOJ (or FTC) backing off from investigating certain types of vertical mergers,” Hahm said.

Representatives for UnitedHealth did not immediately respond to requests for comment.

Photo: AndreyPopov, Getty Images

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