Nature of the Case
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Facts
Anthem (D) is the second-largest seller of medical health insurance to large companies and serves approximately 38.6 million medical members. Anthem (D) holds an exclusive license to Blue Cross Blue Shield brands in all or part of fourteen states. Cigna (D), the third-largest seller of health insurance to large companies in the United States. It serves approximately 13 million medical members nationwide and in more than 30 countries, in addition to offering other specialty products such as dental and vision insurance. Cigna's (D) provider discounts have generally not been as good, so Cigna (D) has developed a different and innovative value proposition in order to compete for customers. Under its more collaborative arrangements with providers, and through the integrated, customized wellness programs it offers its customers' employees, Cigna's (D) focus is on reducing employees' utilization of expensive medical procedures and promoting wellness through behavioral supports and lifestyle changes. Ds reached an agreement to merge leaving Anthem (D) as the surviving company, with a controlling share of the merged company's stock and a majority of seats on the merged company's board of directors. Within the Anthem (D) states, Cigna (D) customers would be permitted to remain with Cigna, (D) at least for the time being, but Ds would otherwise no longer compete with one another in those states. Outside the Anthem (D) states, Cigna's (D) existing business would allow Anthem (D) a bigger foothold to compete, subject to Anthem's (D) 'Best Efforts' obligations. The U.S. Department of Justice, along with eleven States and the District of Columbia (P), filed suit to permanently enjoin the merger on the ground it was likely to substantially lessen competition in at least two markets in violation of Section 7 of the Clayton Act. The district court defined the relevant national accounts market, accepting P’s proposed definition of 'national account' as an employer purchasing health insurance for more than 5,000 employees across more than one state. It also found that the market properly included both fully insured and 'administrative services only' (ASO) plans. It found that the relevant geographic market for national accounts was the fourteen Anthem states because that is where Ds currently compete most prominently, given the geographical restrictions imposed on Anthem (D) under its Blue Cross license. The court found a presumption of anticompetitive effect based on the combined company's market share. The merger would increase HHI by 537 to 3000, while the Guidelines threshold is an increase of 200 to 2500, resulting in a highly concentrated market. Anthem (D) objected that these calculations overstated Anthem's (D) market share by including all Blue customers even if they were not Anthem's (D). Anthem's (D) own internal calculations include these customers, and a key part of Anthem's (D) value proposition to customers is that they can access all non-Anthem Blue networks nationwide. The court found that Anthem (D) had provided sufficient evidence to rebut P's prima facie case. The court accepted that United Healthcare was Anthem's (D) main competitor and that national accounts tend to be sophisticated, well-informed customers and thus better able to thwart an attempted price increase. In Anthem (D) states it found that the merger would be anticompetitive by reducing the number of national health insurance carriers from four to three. It rejected Anthem's efficiencies defense and $2.4 billion in medical cost savings by allowing current Cigna (D) customers to take advantage of Anthem's lower rates and by renegotiating lower rates with providers. The court found none of the alleged benefits to be merger-specific as all could be done without any merger. It found the claimed savings were aspirational inasmuch as every proffered strategy either floundered in the face of business reality or was achievable without the merger, or both. The court ruled for Ps and Ds appealed.
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