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FTC v. Advocate Health Care Network

United States Court of Appeals for the Seventh Circuit

August 19, 2016, Argued; October 31, 2016, Decided

No. 16-2492


 [*464]  Hamilton, Circuit Judge. This horizontal merger case under the Clayton Act depends on proper definition of geographic markets for hospitals. Defendants Advocate Health Care Network and NorthShore University HealthSystem both operate hospital networks in Chicago's northern suburbs. They propose to merge. Section 7 of 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 of Illinois sued in district court to enjoin the proposed Advocate-NorthShore merger while the Commission considers the issue through its ordinary but slower administrative process. See 15 U.S.C. § 53(b); 15 U.S.C. § 26; Hawaii v. Standard Oil Co. of California, 405 U.S. 251, 260-61, 92 S. Ct. 885, 31 L. Ed. 2d 184 (1972).

To obtain an injunction, plaintiffs had to demonstrate a likelihood of success on the merits. 15 U.S.C. § 53(b); 15 U.S.C. § 26; West Allis Memorial Hospital, Inc. v. Bowen, 852 F.2d 251, 253 (7th Cir. 1988). To show that the merger may lessen competition, the Commission and Illinois had to identify a relevant geographic market where anticompetitive effects of the merger would be felt. See United States v. Philadelphia National Bank, 374 U.S. 321, 357, 83 S. Ct. 1715, 10 L. Ed. 2d 915 (1963); Brown Shoe Co. v. United States, 370 U.S. 294, 323, 82 S. Ct. 1502, 8 L. Ed. 2d 510 (1962). Plaintiffs relied on a method called the hypothetical [**2]  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. In re Southeastern Milk Antitrust Litig., 739 F.3d 262, 277-78 (6th Cir. 2014). The Commission's expert economist, Dr. Steven Tenn, chose an eleven-hospital candidate region and determined that it passed the hypothetical monopolist test.

The district court denied the motion for preliminary injunction. Federal Trade Comm'n v. Advocate Health Care, No. 15 C 11473, 2016 U.S. Dist. LEXIS 79645, 2016 WL 3387163 (N.D. Ill. June 20, 2016). It found that the plaintiffs had not demonstrated a likelihood of success because they had not shown a relevant geographic market. 2016 U.S. Dist. LEXIS 79645, [WL] at *5. The plaintiffs appealed, and the district court stayed the merger pending appeal. That stay remains in place.

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841 F.3d 460 *; 2016 U.S. App. LEXIS 19535 **; 2016-2 Trade Cas. (CCH) P79,806

FEDERAL TRADE COMMISSION and STATE OF ILLINOIS, Plaintiffs-Appellants, v. ADVOCATE HEALTH CARE NETWORK, et al., Defendants-Appellees.

Subsequent History: Injunction granted at, On reconsideration by FTC v. Advocate Health Care, 2017 U.S. Dist. LEXIS 37707 (N.D. Ill., Mar. 16, 2017)

Prior History:  [**1] Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 15 C 11473 — Jorge L. Alonso, Judge.

FTC v. Advocate Health Care, 2016 U.S. Dist. LEXIS 79645 (N.D. Ill., June 20, 2016)


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Antitrust & Trade Law, Clayton Act, Scope, Mergers & Acquisitions Law, Antitrust, Antitrust Statutes, Clayton Act, Market Definition, Relevant Market, Geographic Market Definition, Market Definition, Regulated Practices, Regulated Industries, Claims, Civil Procedure, Appeals, Standards of Review, Abuse of Discretion, Clearly Erroneous Review, De Novo Review, Questions of Fact & Law