FTC v. Advocate Health Care Network, No. 16-2492 (7th Cir. 2016)Annotate this Case
Advocate Health Care and NorthShore University HealthSystem operate hospital networks in Chicago’s northern suburbs. They propose to merge. The Clayton Act forbids asset acquisitions that may lessen competition in any “section of the country,” 15 U.S.C. 18. The Federal Trade Commission and the state sought an injunction, pending the Commission’s consideration of the issue. To identify a relevant geographic market where anticompetitive effects of the merger would be felt, plaintiffs relied on the “hypothetical monopolist test,” which 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. The Commission’s expert economist chose an 11-hospital candidate region and determined that it passed the hypothetical monopolist test. The district court denied a preliminary injunction, finding that the plaintiffs had not demonstrated a likelihood of success on the merits, but stayed the merger pending appeal. The Seventh Circuit reversed; the geographic market finding was clearly erroneous. The evidence was not equivocal: most patients prefer to receive hospital care close to home and insurers cannot market healthcare plans to employers with employees in Chicago’s northern suburbs without including some of the merging hospitals in their networks. The district court rejected that evidence because of some patients’ willingness to travel for care; its analysis erred by overlooking the market power created by the remaining patients’ preferences (the “silent majority” fallacy).