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From Antitrust Law Daily, May 4, 2015

High Court will not disturb FTC win in Ohio hospital merger case

By Jeffrey May, J.D.

The U.S. Supreme Court will not be taking up a substantive merger case this term after all. A petition, asking the Court to consider the FTC's successful challenge to Ohio-based hospital operator ProMedica Health System, Inc.’s consummated acquisition of St. Luke's Hospital in Toledo, had been pending on the docket for more than four months. Today, the court denied the petition for certiorari in the action (ProMedica Health System, Inc. v. FTC, Dkt. 14-762).

Left standing is a decision of the U.S. Court of Appeals in Cincinnati, concluding that the company's consummated acquisition of St. Luke's Hospital would adversely affect competition in violation of Section 7 of the Clayton Act. The appellate court upheld an FTC opinion and order requiring ProMedica to unwind the 2010 hospital acquisition.

ProMedica had argued that the Sixth Circuit's decision will have a substantial chilling effect on procompetitive and beneficial mergers, particularly hospital mergers that are necessitated by the Affordable Care Act. According to ProMedica, the FTC improperly analyzed ProMedica's acquisition of St. Luke's, which was “struggling to survive in light of new mandates imposed by the Affordable Care Act and other federal statutes.” The petitioner also had questioned the Sixth Circuit rejection of ProMedica's defense based on the financial weakness of St. Luke's. ProMedica had contended that the case presented a “rare and uniquely apt vehicle for consideration of the issues based on a fully-developed record,” noting that there was a dearth of Clayton Act, Section 7 cases.

In its petition for certiorari, filed on December 22, 2014, ProMedica raised three questions for review:

  1. Whether the FTC, in defining the relevant market for merger analysis, is permitted to ignore group of services that market participants actually negotiate for and purchase as a package, and instead define the product market based on supply-side considerations, thus allowing the FTC to gerrymander the product market to artificially inflate market shares;

  2. Whether a presumption of anticompetitive harm based on market-share statistics should apply where the FTC relies exclusively on a unilateral effects theory in challenging the merger; and

  3. Whether the FTC can rely on market-share statistics to preclude consideration of a merger target's financial weakness to rebut a presumption of harm based in market-share statistics in a unilateral-effects case.

In its opposition brief, the FTC asserted that the Sixth Circuit’s analysis was “correct and [did] not conflict with any decision of this Court or of another court of appeals.” Further, “the court of appeals rejected as factually unsupported petitioner’s argument that St. Luke’s was in such dire financial straits that it was not a meaningful competitive constraint on petitioner,” according to the agency.

Attorneys: Paul D. Clement (Bancroft PLLC) and David Marx, Jr. (McDermott, Will & Emery LLP) for ProMedica Health System, Inc. Donald B. Verrilli Jr., U.S. Solicitor General, for FTC.

Companies: ProMedica Health System, Inc.

MainStory: TopStory AcquisitionsMergers Antitrust FederalTradeCommissionNews

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