Federal Court Extends Tunney Act Review to Embrace Mini-Trial on DOJ Settlement of CVS-Aetna Merger
In a rather extraordinary move, United States District Court Judge Richard J. Leon has ordered a to determine whether the 聽U.S. Department of Justice (鈥淒OJ鈥�) settlement green-lighting the merger of CVS Health and Aetna is in the public interest.
To date, no federal court has ordered a hearing with testimony from various concerned non-parties.聽 While it remains to be seen whether the Judge Leon鈥檚 hearing in the U.S. District Court for the District of Columbia will derail the proposed settlement of the CVS-Aetna merger, the court鈥檚 active review may pave the way for more aggressive challenges of DOJ settlements.
Background on the Tunney Act
Passed in 1974 and then amended in 2004, the , commonly referred to as the Tunney Act, requires that the United States government file any proposal for a consent judgement of any antitrust matter within 60 days with the district court where the matter is presiding.聽 During that 60-day period, in addition to a public comment period through the Federal Register, a federal court must review and consider if the consent judgement is 鈥渋n the public interest.鈥澛� In making that determination, the court shall review any 鈥渃ompetition consideration bearing upon the adequacy of such judgment,鈥� including 鈥渃ompetitive impact,鈥� 鈥減rovisions of enforcement and modification,鈥� and 鈥渄uration of relief sought.鈥�
Importantly, the Tunney Act provides the court significant discretion on the procedural review.聽 Under the law, a court can:聽 (1) take testimony of Government officials or non-party experts; (2) appoint a special master to review the settlement; (3) authorize participating in proceedings by amici curiae or allow intervention by a party; (4) review all comments and objections that were filed; or (5) 鈥渢ake such other action in the public interest as the court may deem appropriate.鈥�
There has been limited meaningful review under the Tunney Act.聽 Prior to the law being amended, of the D. C. District Court reviewed and analyzed a settlement between DOJ and Microsoft concerning various alleged antitrust violations.聽 In rejecting the settlement, Judge Sporkin noted that DOJ failed to provide 鈥渆ssential information鈥� to assist the court in making 鈥渋ts public interest finding.鈥澛� Ultimately, the United States Court of Appeals for the District of Columbia that decision and remanded the case to a different district court judge.聽 On the other hand, third parties, including the , were able to persuade a Massachusetts state court judge to block a settlement agreement involving the merger of two hospitals in Boston.聽 While the matter did not fall under the Tunney Act, invoked its 鈥減ublic interest鈥� standard to the state court.
CVS and Aetna Settlement
At the end of 2018, DOJ the $69 billion merger of CVS and Aetna鈥攃reating a healthcare entity that combines CVS鈥檚 pharmacies, clinics, and pharmacy benefit manager (鈥淧BM鈥�) with a leading national health insurer.聽 As a condition to its approval, DOJ required that Aetna its Medicare Part D Prescription Drug Plans to a rival, WellCare Health Plans, to ensure continuing competition in the Part D space.
In response to the proposed settlement, numerous groups raised , including the American Medical Association, U.S. Public Interest Research Group, and the AIDS Healthcare Foundation.聽 In particular, the not only alleged harm to competition due to consolidation in the Part D space, but also argues that the merger will further consolidate the PBM services market and could cause vertical harm by increasing barriers to market entry and foreclosing competitors.聽 Judge Leon appears to have been persuaded by the public comments and concerns raised by various parties.聽 When pushed by DOJ to approve the settlement, Judge Leon even indicated that the 鈥�.鈥澛� As a result, Judge Leon has ordered a Tunney Act hearing in mid-May and has permitted various third parties to on the impact of the merger.聽 The DOJ and the merging parties are currently seeking to limit that testimony, but it remains likely that Judge Leon will allow some of the parties鈥� expert witnesses to testify.
Conclusion
Judge Leon鈥檚 embracement of the full power of the Tunney Act鈥檚 review provisions may create a future opening for concerned third-parties to challenge antitrust settlements by the federal government.聽 While impacted parties typically discuss their concerns with the reviewing antitrust enforcer, the Tunney Act provides an additional path for parties to consider when challenging a merger.
Edited by Gary J. Malone
Tagged in: Antitrust Enforcement, Antitrust Litigation,