Introduction
Over the past few years, firms within the health care industry in the US have experienced an increment in their profitability. One of the factors that contributed to the profitability relates to the high rate at which firms’ in the industry are incorporating the concept of mergers and joint ventures. The changes in the market have culminated into an increment in the intensity of competition amongst firms in the industry.
In an effort to attain an optimal market position, most health care organizations are increasingly considering the best competitive strategy to adopt. As one of the firms operating within the industry, our organization is considering entering into a joint venture with potential health care firms operating within the society.
However, the firm expects to experience a challenge arising from the recent policies that have been implemented by the presidential administration. The White House has implemented policies to increase regulations with regard to mergers and joint ventures. As a result, mergers and joint ventures will experience a high level of scrutiny.
One of the reasons that explain the increase in the intensity of regulation arises from the fact that the US administration intends to minimize the number of options available to consumers.
Due to these changes, organizations will be required to be more vigilant in the process of undertaking mergers, forming partnerships and joint ventures. This paper is aimed at evaluating the diverse laws and regulations that will guide joint ventures and competition. Understanding these laws will be a great source of insight for the firm in understanding the challenges that it might experience as a result of increased government intervention.
Laws that govern joint ventures and competition
Antitrust laws
The US government has incorporated a number of antitrust laws which are aimed at controlling business operations. Antitrust laws are aimed at preventing businesses from engaging in unfair business practices for example unfair competition or formation of unjust monopolies (Federal Trade Commission, 2009, p. 293).
Antitrust laws prohibit businesses from entering into unlawful associations or horizontal arrangements with their competitors. Under antitrust laws, such arrangements are considered unlawful if their core objective is to develop monopoly power in the market.
Antitrust laws also restrict certain relationships with competitors such as an arrangement aimed at establishing a collective refusal to deal with a certain business enterprise (establishing group boycotts). Such a relationship is considered to be unlawful under antitrust laws.
This arises from the fact that the relationship may reduce freedom of trade. Even if the objective of the relationship is not to restrain competition, antitrust laws consider it to be unlawful (Bloch & Falk, 1994, p.210).
As one of the business structures, joint ventures are lawful. However, there are instances when joint ventures can be considered to be unlawful if they violate antitrust laws. This may occur if the joint venture is established amongst a number of competitors and excludes others (Federal Trade Commission, 2004, p. 28).
If a joint venture takes into consideration a large number of firms compared to those which are excluded, the joint venture may be regarded to have violated antitrust laws.
For example, if all the firms in the health care industry in Houston form a joint venture but exclude a certain category of health care firms for instance non-physicians for anti-competitive objective, the joint venture may be regarded to have engaged in unlawful business action.
Antitrust laws also prevent competitors from engaging in horizontal price fixing. This entails colluding with competitors to set the price of products within a particular range. According to antitrust laws, it is illegal for competitors to involve themselves in market division which entails entering into an agreement to divide the market amongst them (Murray, 2002, p.3).
One of the ways through which organizations may involve themselves in market division entails dividing the market on geographic basis. For example, the health care organization may be restricted from venturing into a region that is assigned to its competitor. The objective of market division is to limit the intensity of competition that a firm experiences. However, such an arrangement is against antitrust laws.
Conclusion
The recent reforms within the health care industry will result into an increment in the intensity of competition within the industry. In an effort to position themselves in the market, most health care organizations will form affiliations such as joint ventures with other providers as a competitive strategy. The reforms were aimed at driving down the cost of offering health care to customers.
In order for health care organizations to successfully form joint ventures, they will be required to adhere with the various antitrust laws which regulate competition and joint ventures. One of the issues that the organization should take into consideration when forming partnerships or joint ventures in an effort to attain a competitive advantage relates to adhering to antitrust laws.
For example, the organization should desist from forming horizontal arrangements aimed at developing a market monopoly and establishing group boycotts. Additionally, the firm should not exclude other firms in the process of establishing the joint venture.
Antitrust laws also prohibit competitors from involving in price fixing. In an effort to ensure that the organization attains an optimal market position, the Board of Directors should be independent in setting the price of its health care services. The organization should also not engage in market division with its competitors.
Reference List
Bloch, R. & Falk, D. (1994). Antitrust, competition and health care reform. Bethesda: HOPE.
Federal Trade Commission. (2009). Inverness medical innovations, incorporation: agreement containing consent order to aid public comment. Federal Register. Vol. 74, issue no. 2, pp. 291-293. Retrieved from https://www.ftc.gov/sites/default/files/documents/federal_register_notices/independent-practice-associates-medical-group-inc-analysis-agreement-containing-consent-order-aid/090105independentpractice.pdf
Federal Trade Commission. (2004). Improving health care: a dose of competition. Health care and competition law and policy. Retrieved from https://www.ftc.gov/sites/default/files/documents/reports/improving-health-care-dose-competition-report-federal-trade-commission-and-department-justice/040723healthcarerpt.pdf
Murray, A. (2002). FTC cracks down on antitrust issue in health-care area. New York: Wall-Street.