Federal Court Decision in Unitedhealth/change Highlights Challenges to Antitrust Agencies' Aggressive Enforcement Agenda: a Win for Merger Remedies and Private Equity Divestiture Buyers

• Jurisdiction: United States,Federal
• Citation: Vol. 1 No. 1
• Publication year: 2023

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Bernard A. Nigro Jr., Nathaniel L. Asker, Aleksandr B. Livshits, and Renee E. Turner ^*

In this article, the authors analyze the federal court decision rejecting the Justice Department's attempt to block UnitedHealth Group's proposed acquisition of Change Healthcare.

In a recent decision, the U.S. District Court for the District of Columbia rejected the request from the U.S. Department of Justice ("DOJ") to block UnitedHealth Group's proposed acquisition of Change Healthcare. ¹

The loss is significant, as it is DOJ's first antitrust challenge to a merger to reach a decision in litigation during the Biden administration, and follows two recent losses by the Federal Trade Commission in the agency's internal adjudicative process. ² Although Assistant Attorney General Jonathan Kanter has stated that the Antitrust Division is "reviewing the opinion closely" to evaluate whether to appeal, ³ in an aggressive enforcement environment this ruling highlights the value of being ready and willing to defend a transaction through litigation.

Opinion Highlights

In seeking to block UnitedHealth's proposed $13 billion acquisition of Change, the DOJ offered three theories of competitive harm resulting from the proposed transaction, one of which related to horizontal competition between the parties, and the other two from

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a vertical relationship between the companies. The court rejected all three.

First, the DOJ argued, and UnitedHealth/Change did not dispute, that UnitedHealth and Change together would account for over 90 percent of the market for the sale of first-pass claims-editing solutions in the United States. ⁴ However, the court found that in assessing the likely competitive effects of the transaction, it must account for UnitedHealth's proposed sale of Change's claims-editing business to a private equity buyer through a divestiture agreement signed after the DOJ filed its complaint.

In ruling that the divestiture of Change's claims-editing business was sufficient to maintain competition in the claims-editing market, the court specifically rejected the DOJ's position that the divestiture buyer's lack of experience in claims editing and status as a private equity investor "doom" the effectiveness of the divestiture. Rather, the court found that the evidence established that the new owner's incentives "are geared toward preserving, and even improving, [the business'] competitive edge." ⁵ The court also stated that the new owner will maintain...