Group purchasing organizations (GPOs), also known as buying groups, provide smaller enterprises with an opportunity to increase their buying power by pooling their resources with those of other entities. Buying groups can often negotiate better purchasing terms with suppliers, incur lower human resources and payroll costs, and save on wholesale supplies.
However, because of this very power, market regulators keep a close watch on buying groups. The ability to influence product pricing and availability raises anti-trust concerns, especially in the healthcare industry.
Regulators worry about price manipulation
One of the biggest concerns buying groups present for the Federal Trade Commission is the risk of a group acquiring monopsony or oligopsony power. Buying agreements among competitors can sometimes slip into price fixing, a major concern for the FTC.
If a group has too much sway over suppliers, they may be able to force prices down. In some cases, the concern comes from other businesses – such the recent push from a leading retail group for the FTC to look closer at Amazon and Google’s power over price and product information.
Another practice that can put a group purchasing organization under the microscope of regulators is requiring members to buy from one vendor exclusively. This type of agreement can close off a substantial share of the market and hinder competition.
Buying groups have plenty of options to craft agreements in a way that avoids anti-trust issues. By applying a deep knowledge of federal and state competition law, an attorney experienced in counseling buying groups can help lay the groundwork.