FTC v. Advocate Health Care Network

841 F.3d 460 (7th Cir. 2016)

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Nature of the Case

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Facts

In September 2014, Advocate and NorthShore (Ps) announced that they intended to merge. Ps sought a preliminary injunction against the merger. To obtain an injunction, plaintiffs had to demonstrate a likelihood of success on the merits. To show that the merger may lessen competition, Ps had to identify a relevant geographic market where anticompetitive effects of the merger would be felt. Ps presented their evidence and relied on a method called the hypothetical monopolist test. That test asks what would happen if a single firm became the sole seller in a proposed region. If such a firm could profitably raise prices above competitive levels, that region is a relevant geographic market. Ps’ expert Dr. Steven Tenn, chose an eleven-hospital candidate region and determined that it passed the hypothetical monopolist test. Executives from major insurers also testified unequivocally that it would be difficult or impossible to market a network to employers in metropolitan Chicago that excludes Ps. Evidence was shown that no health insurance product has been successfully marketed to employers in Chicago without offering access to either NorthShore hospitals or Advocate hospitals. Ds expert, Dr. Thomas McCarthy, criticized the criteria Dr. Tenn used to select his candidate market. Dr. McCarthy argued that academic medical centers are substitutes for local hospitals because patients seek the same treatments at both hospital types. He also contended that the candidate market should include competitors to either Ps, not just competitors to both. A competitor to either system, he reasoned, would also compete with and constrain the merged system. The court denied the motion for a preliminary injunction. It found that Ps had not shown a relevant geographic market. Ps appealed.