Faced with a vote of no confidence from the U.S. Court of Appeals for the 9th Circuit, the Federal Trade Commission today withdrew its appeal challenging Laboratory Corp. of America's $57.5 million acquisition of Westcliff Medical Laboratories Inc.
In December, the FTC voted 4 to 1 to block the deal, which had been consummated six months earlier, alleging that the transaction would lead to higher prices and lower quality in the Southern California market for the sale of clinical laboratory testing services to physician groups.
Commissioner J. Thomas Rosch dissented, arguing that the FTC’s market definition must also include lab services provided under fee-for-service contracts. “Although I think that there is reason to believe that this transaction will have anticompetitive effects, I cannot support a complaint that alleges an erroneous definition of the relevant product market,” he wrote.
In February, Central District of California Judge Andrew Guilford agreed and refused to issue a preliminary injunction forcing Lab Corp. to hold Westcliff’s assets separate while the FTC pursued an administrative complaint against the merger.
“Otherwise identical products are not in separate markets simply because consumers pay for those products in different ways,” he wrote, echoing Rosch.
Hogan Lovells represented Lab Corp., with a team led by former FTC Chief Trial Counsel Robby Robertson and partner Corey Roush.
The FTC appealed to the 9th Circuit for an emergency injunction pending appeal, which the court granted on March 4. But 10 days later, the court after further review lifted the injunction, leaving Lab Corp. free to move forward with integrating the companies.
“Accordingly, the Commission moves to dismiss its appeal from the district court’s denial of a preliminary injunction,” wrote FTC counsel David Sieradzki.
The Lab Corp. loss comes on the heels of the FTC’s defeat last fall in a case against Lundbeck Inc. involving medicine for premature babies with heart defects. That case also turned on market definition issues.