FTC Will Move to Block Merger of Hospital Equipment Rental Firms

The Federal Trade Commission today voted to ask a federal district court to block a merger that would join the nation's two largest firms that rent movable medical equipment -- such as respiratory, infusion, and monitoring devices -- to hospitals. The FTC will argue that the $100 million acquisition of Universal Hospital Services, Inc. by MEDIQ Incorporated would give MEDIQ a monopoly in the market for national customers and a dominant share of the rental markets in many major metropolitan areas. The result will be higher rental prices because hospitals and hospital chains will not switch from renting to buying expensive equipment that may sit idle for long periods, even in the face of a significant rental price increase, the FTC will argue.

The product market at issue is durable, movable medical equipment that can be delivered to hospitals in a matter of hours during periods of peak need. It is prohibitively expensive for hospitals to buy this equipment for peak need periods. Hospitals generally enter into long-term contracts with rental firms for the various products of this type they may require, and in return for relatively low prices and attractive terms, they agree to use the supplier with which they contract for a large percentage of their rental needs, the FTC staff said.

MEDIQ, the largest rental firm of this type in the country, is based in Pennsauken, New Jersey. It has 85 rental facilities throughout the country and a rental inventory of more than 130,000 pieces of equipment from more than 150 different manufacturers. Universal Hospital Services (UHS), based in Bloomington, Minnesota, has 46 rental facilities and more than 40,000 pieces of equipment from numerous manufacturers.

Other firms that rent durable, movable hospital equipment are generally local or regional, the FTC staff said. Those firms are much smaller or only rent a limited line of equipment, and none has geographic coverage and inventory anywhere close to that of MEDIQ and UHS, the FTC staff said. Moreover, the FTC will argue, it would take a new entrant too long to establish a nationwide network with sufficient inventory and delivery and service capabilities to compete effectively with the merged firm. Declarations from large hospitals, hospital chains, and group purchasing organizations will support the FTC's contention that these two companies are the only viable suppliers for renting durable, movable medical equipment, the staff said. Therefore, the FTC will argue to the court that, if the merger is allowed to go through, MEDIQ will be able to raise and maintain prices above a competitive level.

The FTC will file its complaint shortly seeking a temporary restraining order to block the transaction in an appropriate federal district court. Thereafter, the Commission will seek to extend the temporary restraining order into a preliminary injunction, which would ensure that the two firms remain separate as they are now, pending the outcome of an administrative trial on the merits of the case. If the court grants the FTC's initial motion for a temporary restraining order, the Commission will have 20 days in which to issue an administrative complaint that would list the alleged antitrust law violations in more detail and start the administrative trial process.

The Commission vote to file the complaint was 5-0.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the complaint will be available upon filing in court on the FTC's web site at http://www.ftc.gov and also from its Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Bonnie Jansen

Office of Public Affairs

202-326-2161 or 202-326-2180

William J. Baer or Ann Malester

Bureau of Competition

202-326-2932 or 202-326-2682

(FTC File No. 971 0066)