In a March 31, 2015 blog post, Federal Trade Commission (FTC) Director of the Bureau of Competition Deborah Feinstein and Assistant Director of the Bureau of Competition Alexis Gilman discussed how the FTC analyzes the failing and flailing firm defense, focusing on how the defense is assessed in hospital mergers. When offering a failing firm defense, the merging parties assert that the target firm is in such a poor financial position that it would imminently exit the market but for the acquisition. In a flailing firm defense, the parties assert that due to financial weakness, a firm's future competitive significance is less than its market shares otherwise suggest. The Bureau of Competition noted that a failing firm defense is only appropriate under the Merger Guidelines if the target:

The Bureau of Competition focused on the third requirement and emphasized that a target must conduct due diligence to find an alternate buyer before it can successfully assert the failing or flailing firm defense. The Bureau of Competition explained that even if a hospital merger is not subject to Hart-Scott-Rodino (HSR) reporting requirements, the FTC often learns of problematic transactions from the press or state attorneys general and will not hesitate to inquire about the target's search for a less problematic buyer. In its inquiry, the FTC will:

The Bureau of Competition also noted that though a bankruptcy court may approve a buyer, the FTC may still challenge the buyer on antitrust grounds.

The Bureau of Competition explained that if the FTC doubts that the parties conducted a satisfactory search for a buyer, it may require an appropriate search before closing an investigation. For example, in 2009 the FTC closed its investigation into a merger between Scott & White Healthcare and King's Daughters Hospital based on the failing firm defense. During its investigation, the FTC learned that an alternate buyer had been interested but had not been given proper time to consider the transaction. The FTC required Scott & White to offer to sell the target to the alternate buyer, but the buyer was not interested in a merger and the FTC closed the investigation.

The Bureau of Competition did not set out explicit guidelines for how to conduct an adequate search, but noted that a search should:

For more information on the failing firm defense, see Practice Note, The Failing Firm Defense.