Preliminary Injunction – Clayton Act

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7^th Circuit Court of Appeals

Case Name: Federal Trade Commission et al v. Advocate Health Care Network, et al

Case No.: 16-2492

Officials: WOOD, Chief Judge, and BAUER and HAMILTON, Circuit Judges.

Focus: Preliminary Injunction – Clayton Act

Court erred in denying preliminary injunction preventing merger by failing to properly analyze the relevant geographic market.

“The hospitals correctly point out that, strictly speaking, that reasoning is not the same as the silent majority fallacy. The silent majority fallacy treats present travel as a proxy for post-merger travel, while diversion ratios predict likely postmerger travel more directly. But the district court’s reasoning and the silent majority fallacy share a critical flaw: they focus on the patients who leave a proposed market instead of on hospitals’ market power over the patients who remain, which means that the hospitals have market power over the insurers who need them to offer commercially viable products to customers who are reluctant to travel farther for general acute hospital care. That flaw runs through the district court’s decision. The court focused on identifying hospitals that compete with those in the Commission’s proposed market. But the relevant geographic market does not include every competitor. It is the “area of effective competition,” E. I. du Pont, 353 U.S. at 593 (emphasis added) (citation omitted), the place where the “effect of the merger on competition will be direct and immediate,” Philadelphia National Bank, 374 U.S. at 357. It includes the competitors that discipline the merging hospitals’ prices. AD/SAT, 181 F.3d at 228; Rebel Oil, 51 F.3d at 1434. The geographic market question asks in essence, how many hospitals can insurers convince most customers to drive past to save a few percent on their health insurance premiums? We should not be surprised if that number is very small. Plaintiffs have made a strong case that it is. “

Reversed and Remanded

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.