IN A COURT RULING THAT WENT AGAINST the Federal Trade Commission (FTC) last week, Laboratory Corporation of America may have moved one step closer to completing its acquisition of Westcliff Medical Laboratories, Inc., of Santa Ana, California.
On February 22, 2011, Judge Andrew Guilford of the U.S. District Court for Central California, denied the FTC’s request for a preliminary injunction to prevent LabCorp from consolidating Westcliff’s testing activities into its national testing network. The judge also dissolved the temporary restraining order, thereby allowing LabCorp to proceed to integrate Westcliff’s assets.
The next day, on February 23, the FTC returned to Guilford’s courtroom and filed a motion to appeal the decision and another request to prevent LabCorp and Westcliff from closing the transaction until this appeal is decided. For its part, LabCorp says it “vigorously will defend the merger in the hearing before an FTC administrative law judge, due to begin May 2.”
Acquisition Happened in May
This acquisition deal was inked back in May 2010. That month, Westcliff filed for bankruptcy protection and said in a court filing that it was planning to sell its assets to LabCorp. LabCorp was the highest bidder and it offered to pay $57.5 million for Westcliff. (See TDR, June 1, 2010.)
Shortly after that, in June, LabCorp entered into an agreement with the FTC to hold the Westcliff assets separate until December 3, 2010. The FTC requested additional time to review the acquisition and how it might alter the lab testing marketplace in the nation’s most populous state.
It was November 30, 2010, when the FTC announced its opposition to the acquisition. It stated that the merger of the two companies could harm competition in Southern California’s market for laboratory testing. The FTC went to court seeking an extension of its agreement with LabCorp, pending a ruling in the administrative adjudicative proceeding on antitrust matters scheduled for May 2, 2011.
FTC’s Market Analysis
The FTC has said LabCorp and Westcliff are two of only three vendors of clinical laboratory testing services for most physician groups in Southern California. The third is Quest Diagnostics Incorporated, the FTC said. The acquisition would result in higher prices and inferior service for physician groups, the FTC added. (TDR, Dec. 6, 2010.)
The FTC defined the Southern California market to include all counties south of, and including: San Luis Obispo, Kern, and San Bernardino. The FTC believes the transaction would leave LabCorp and Quest Diagnostics in control of about 89% of this lab test market.