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FTC v. Penn State Hershey Med. Ctr.

United States Court of Appeals for the Third Circuit

July 26, 2016, Argued; September 27, 2016, Filed

No. 16-2365

Opinion

 [*333]  FISHER, Circuit Judge.

At issue in this case is the proposed merger of the two largest hospitals in the Harrisburg, Pennsylvania area: Penn State Hershey Medical Center and PinnacleHealth System. The Federal Trade Commission ("FTC") opposes their merger and filed an administrative complaint alleging that it violates Section 7 of the Clayton Act because it is likely to substantially lessen competition. In order to maintain the status quo and prevent the parties from merging before the administrative adjudication could occur, the FTC, joined by the Commonwealth of Pennsylvania, filed suit in the Middle District of Pennsylvania under Section 13(b) of the Federal Trade Commission Act ("FTC Act") and Section 16 of the Clayton Act, which authorize the FTC and the Commonwealth, respectively, to seek a preliminary injunction pending the outcome of the FTC's adjudication on the merits. The District Court denied the FTC and the Commonwealth's motion for  [*334]  a preliminary injunction, holding that they did not properly define the relevant geographic market—a necessary prerequisite to determining whether a proposed combination [**4]  is sufficiently likely to be anticompetitive as to warrant injunctive relief. For the reasons that follow, we will reverse. We will also remand the case and direct the District Court to enter the preliminary injunction requested by the FTC and the Commonwealth.

I. Background

A. Factual Background

Penn State Hershey Medical Center ("Hershey") is a leading academic medical center and the primary teaching hospital of the Penn State College of Medicine. It is located in Hershey, and it offers 551 beds and employs more than 800 physicians, many of whom are highly specialized. Hershey offers all levels of care, but it specializes in more complex, specialized services that are unavailable at most other hospitals. Because of its advanced services, Hershey draws patients from a broad area both inside and outside Dauphin County.

PinnacleHealth System ("Pinnacle") is a health system with three hospital campuses—two located in Harrisburg in Dauphin County, and the third located in Mechanicsburg in Cumberland County. It focuses on cost-effective primary and secondary services and offers only a limited range of more complex services. It employs fewer than 300 physicians and provides 646 beds.

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838 F.3d 327 *; 2016 U.S. App. LEXIS 17525 **; 2016-2 Trade Cas. (CCH) P79,767

FEDERAL TRADE COMMISSION; COMMONWEALTH OF PENNSYLVANIA, Appellants v. PENN STATE HERSHEY MEDICAL CENTER; PINNACLE HEALTH SYSTEM

Prior History:  [**1] On Appeal from the United States District Court for the Middle District of Pennsylvania. (M.D. Pa. No. 1-15-cv-02362). District Judge: Honorable John E. Jones, III.

FTC v. Penn State Hershey Med. Ctr., 185 F. Supp. 3d 552, 2016 U.S. Dist. LEXIS 60814 (M.D. Pa., May 9, 2016)

CORE TERMS

merger, district court, patients, geographic, anticompetitive, payors, hypothetical, preliminary injunction, monopolist, insurers, effects, prima facie case, relevant market, healthcare, network, prices, increased price, contracting, injunction, savings, merging, weigh, post-merger, parties, proposed merger, public interest, cognizable, consumers, risk-based, benefits

Civil Procedure, Remedies, Injunctions, Preliminary & Temporary Injunctions, Appeals, Standards of Review, Antitrust & Trade Law, Market Definition, Relevant Market, Geographic Market Definition, Standards of Review, Clearly Erroneous Review, Questions of Fact & Law, US Federal Trade Commission Actions, Remedial Powers, Federal Trade Commission Act, Mergers & Acquisitions Law, Antitrust, Antitrust Statutes, Clayton Act, Clayton Act, Claims, Evidence, Burdens of Proof, Burden Shifting, Regulated Practices, Relevant Market, Market Definition, Horizontal Mergers, Healthcare Law, Healthcare Litigation, Antitrust Actions, Facilities, Remedies