United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 24, 2017 Decided April 28, 2017

No. 17-5024

UNITED STATES OF AMERICA, ET AL.,

APPELLEES

v.

ANTHEM, INC.,

APPELLANT

CIGNA CORPORATION,

APPELLANT

Consolidated with 17-5028

Appeals from the United States District Court

for the District of Columbia

(No. 1:16-cv-01493)

Christopher M. Curran argued the cause for appellant

Anthem, Inc. With him on the briefs was J. Mark Gidley. Noah

A. Brumfield, Matthew S. Leddicotte, and George L. Paul

entered appearances.

Charles F. Rule was on the brief for appellant Cigna

Corporation. Craig A. Benson entered an appearance. 
2

Paul T. Denis and Steven G. Bradbury were on the brief for

amici curiae Antitrust Economists and Business Professors in

support of appellant.

Scott A. Westrich, Attorney, U.S. Department of Justice,

argued the cause for appellees. With him on the brief were

Kristen C. Limarzi, James J. Fredricks, Mary Helen Wimberly,

and Daniel E. Haar, Attorneys, Rachel O. Davis, Assistant

Attorney General, Office of the Attorney General for the State

of Connecticut, and Paula Lauren Gibson, Deputy Attorney

General, Office of the Attorney General for the State of

California. Loren L. AliKhan, Deputy Solicitor General, Office

of the Attorney General for the District of Columbia, Sarah O.

Allen and Tyler T. Henry, Assistant Attorneys General, Office

of the Attorney General for the Commonwealth of Virginia,

Ellen S. Cooper, Assistant Attorney General, Office of the

AttorneyGeneral for the State of Maryland, Victor J. Domen Jr.,

Senior Counsel, Cynthia E. Kinser, Deputy Attorney General,

and Erin Merrick, Assistant Attorney General, Office of the

Attorney General for the State of Tennessee, Jennifer L. Foley,

Assistant Attorney General, Office of the Attorney General for

the State of New Hampshire, Devin Laiho, Senior Assistant

Attorney General, Office of the Attorney General for the State

of Colorado, Layne M. Lindebak, Assistant Attorney General,

Office of the Attorney General for the State of Iowa, Christina

M. Moylan, Assistant Attorney General, Office of the Attorney

General for the State of Maine, Irina C. Rodriguez, Assistant

Attorney General, Office of the Attorney General for the State

of New York, and Daniel S. Walsh, Assistant Attorney General,

Office of the Attorney General for the State of Georgia, entered

appearances.

David A. Balto was on the brief for amici curiae American

Antitrust Institute, et al. in support of plaintiffs-appellees.
3

Edith M. Kallas, Joe R. Whatley, Jr., and Henry C. Quillen

were on the brief for amici curiae The American Medical

Association and The Medical Society of the District of

Columbia in support of appellees. 

Douglas C. Ross, David A. Maas, and Melinda Reid Hatton

were on the brief for amicus curiae American Hospital

Association in support of appellees.

Richard P. Rouco was on the brief for amici curiae

Professors in support of appellees. 

Before: ROGERS, KAVANAUGH and MILLETT, Circuit

Judges.

Opinion for the Court filed by Circuit Judge ROGERS.

Concurring opinion filed by Circuit Judge MILLETT.

Dissenting opinion filed by Circuit Judge KAVANAUGH.

ROGERS, Circuit Judge: This expedited appeal arises from

the government’s successful challenge to “the largest proposed

merger in the history of the health insurance industry, between

two of the four national carriers,” Anthem, Inc. and Cigna

Corporation. Appellees Br. 1. In July 2015, Anthem, which is

licensed to operate under the Blue Cross Blue Shield brand in

fourteen states, reached an agreement to merge with Cigna, with

which Anthem competes largely in those fourteen states. The

U.S. Department of Justice, along with eleven States and the

District of Columbia (together, the “government”), filed suit to

permanently enjoin the merger on the ground it was likely to

substantially lessen competition in at least two markets in

violation of Section 7 of the Clayton Act. Following a bench

trial, the district court enjoined the merger, rejecting the factual
4

basis of the centerpiece of Anthem’s defense, and focus of its

current appeal, that the merger’s anticompetitive effects would

be outweighed by its efficiencies because the merger would

yield a superior Cigna product at Anthem’s lower rates. The

district court found that Anthem had failed to demonstrate that

its plan is achievable and that the merger will benefit consumers

as claimed in the market for the sale of medical health insurance

to national accounts in the fourteen Anthem states, as well as to

large group employers in Richmond, Virginia. 

Anthem and Cigna (hereinafter, Anthem) challenge the

district court’s decision and order permanently enjoining the

merger on the principal ground that the court improperly

declined to consider the claimed billions of dollars in medical

savings. See Appellant Br. 10. Specifically, Anthem maintains 1

the district court improperly rejected a consumer welfare

standard — what it calls “the benchmark of modern antitrust

law,” id. — and generally abdicated its responsibility to balance

likely benefits against any potential harm. According to

Anthem, the merger’s efficiencies would benefit customers

directly by reducing the costs of customer medical claims

through lower provider rates, without harm to the providers. 

The government has not challenged Anthem’s reliance on an

Cigna has become a reluctant supporter of the merger,

1

stating in its appellate brief that “[i]n accordance with the merger

agreement, Cigna has appealed and defers to Anthem.” Cigna Br. 3. 

Indeed, the district court noted the “elephant in the courtroom,” for at

trial Cigna executives dismissed various of Anthem’s claims of

savings, cross-examined the merging parties’ expert witness, and

refused to sign Anthem’s proposed findings of fact and conclusions of

law. United States v. Anthem, Inc., No. CV 16-1493 (ABJ), 2017 WL

685563, at *4 (D.D.C. Feb. 21, 2017). Anthem suggested this is a

“‘side issue,’ a mere ‘rift between CEOs.’” Id. That their relationship

may have deteriorated has little to do with the anticompetitive effects

of the proposed merger.
5

efficiencies defense per se. Rather, it points out that Anthem

neither disputes that the merger would be anticompetitive but for

the claimed medical cost savings, nor challenges the district

court’s findings on the relevant market definition, ease of entry,

the effect of sophisticated buyers, or innovation. Instead,

Anthem’s appeal focuses principally on factual disputes

concerning the claimed medical cost savings, which the

government maintains were not verified, not specific to the

merger, and not even real efficiencies. 

For the following reasons, we hold that the district court did

not abuse its discretion in enjoining the merger based on

Anthem’s failure to show the kind of extraordinary efficiencies

necessary to offset the conceded anticompetitive effect of the

merger in the fourteen Anthem states: the loss of Cigna, an

innovative competitor in a highly concentrated market. 

Additionally, we hold that the district court did not abuse its

discretion in enjoining the merger based on its separate and

independent determination that the merger would have a

substantial anticompetitive effect in the Richmond, Virginia

large group employer market. Accordingly, we affirm the

issuance of the permanent injunction on alternative and

independent grounds.

I.

Under Section 7 of the Clayton Act, a merger between two

companies may not proceed if “in any line of commerce or in

any activity affecting commerce in any section of the country,

the effect of such [merger] may be substantially to lessen

competition.” 15 U.S.C. § 18. 

A burden-shifting analysis applies to consider the merger’s

effect on competition. United States v. Baker Hughes Inc., 908

F.2d 981, 982 (D.C. Cir. 1990). First, the plaintiff must
6

establish a presumption of anticompetitive effect by showing

that the “transaction will lead to undue concentration in the

market for a particular product in a particular geographic area.” 

Id. The most common way to make this showing is through a

formula called the Herfindahl-Hirschman Index (“HHI”), which

compares a market’s concentration before and after the proposed

merger. See id. at 983 n.3. By squaring the market share

percentage of each market participant and adding them together,

a market’s HHI can range from >0 to 10,000 (i.e., a pure

monopoly, or 1002). Dept. of Justice & Fed. Trade Comm’n,

Horizontal Merger Guidelines § 5.3 & n.9 (Aug. 19, 2010) (the

“Guidelines”). Under the Guidelines, a market will be

considered highly concentrated if it has an HHI above 2500, and

if the merger increases HHI by more than 200 points and results

in a highly concentrated market, it “will be presumed to be

likely to enhance market power.” Id. § 5.3. Although, as the

Justice Department acknowledges, the court is not bound by,

and owes no particular deference to, the Guidelines, this court

considers them a helpful tool, in view of the many years of

thoughtful analysis they represent, for analyzing proposed

mergers. See Baker Hughes, 908 F.2d at 985–86. 

The burden shifts, once the prima facie case is made, to the

defendant to rebut the presumption. Id. at 982. To do so, it

must provide sufficient evidence that the prima facie case

“inaccurately predicts the relevant transaction’s probable effect

on future competition,” or it must sufficiently discredit the

evidence underlying the initial presumption. Id. at 991. “The

more compelling the prima facie case, the more evidence the

defendant must present to rebut it successfully,” but because the

burden of persuasion ultimately lies with the plaintiff, the

burden to rebut must not be “unduly onerous.” Id. 

Upon rebuttal by the defendant, “the burden of producing

additional evidence of anticompetitive effect shifts to the
7

[plaintiff], and merges with the ultimate burden of persuasion,

which remains with the [plaintiff] at all times.” Id. at 983.

II.

Anthem is the second-largest seller of medical health

insurance to large companies in the United States, and it serves

approximately 38.6 million medical members. It is a member of

the Blue Cross Blue Shield Association, a group of thirty-six

health insurance companies licensed to do business under the

Blue Cross and/or Blue Shield brands. Anthem holds an

exclusive license to the Blue brands in all or part of fourteen

states (the “Anthem states”), and it may also compete for

business outside those states if it receives permission from the

Blue licensee in the relevant area. Anthem also owns non-Blue

subsidiaries through which it may operate both in and outside of

the Anthem states, subject to Anthem’s “Best Efforts”

obligations in its licensing agreement with the Blue Cross

Association. Under these “Best Efforts” provisions, at least

80% of Anthem’s revenue within the Anthem states must come

from Blue-branded products, as must at least 66.67% of its

revenue nationwide. Failure to comply could result in

termination of Anthem’s license, which would trigger a $2.9

billion fee to the Association. 

Cigna, the third-largest seller of health insurance to large

companies in the United States, serves approximately 13 million

medical members nationwide and in more than 30 countries, in

addition to offering other specialty products such as dental and

vision insurance. Unlike Anthem, which has historically been

able to leverage its size to negotiate steep discounts from

providers, Cigna’s provider discounts have generally not been

as good, so Cigna has developed a different and innovative

value proposition in order to compete for customers. Under its

more collaborative arrangementswith providers, and through the
8

integrated, customized wellness programs it offers its

customers’ employees, Cigna’s focus is on reducing employees’

utilization of expensive medical procedures and promoting

wellness through behavioral supports and lifestyle changes. 

This offers customers a different means of lowering health care

costs than the traditional model relying heavily on provider

discounts.

On July 23, 2015, Anthem reached an agreement to merge

with Cigna. The merger would leave Anthem as the surviving

company, with a controlling share of the merged company’s

stock and a majority of seats on the merged company’s board of

directors. Within the Anthem states, Cigna customers would be

permitted to remain with Cigna, at least for the time being, but

Anthem and Cigna would otherwise no longer compete with one

another in those states. Outside the Anthem states, Cigna’s

existing business would allow Anthem a bigger foothold to

compete, subject to Anthem’s “Best Efforts” obligations. The

merger agreement extends until April 30, 2017. 

On July 21, 2016, the United States, along with California,

Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New

Hampshire, New York, Tennessee, Virginia, and the District of

Columbia, sued to enjoin the merger. Relying on Section 7 of

the Clayton Act, 15 U.S.C. § 18, plaintiffs alleged that the

merger would substantially lessen competition in the market for

the sale of health insurance to national accounts in both the

Anthem states and the United States as a whole, as well as in the

market for the sale of health insurance to large group employers

in 35 local markets. Plaintiffs also alleged that the merger

would substantially lessen competition for the purchase of

services from healthcare providers in the 35 local markets by

giving the combined company anticompetitive buying power.
9

Following a six-week bench trial, the district court

permanently enjoined the merger on the basis of its likely

substantial anticompetitive effect in the market for the sale of

health insurance to national accounts in the Anthem states, as

well as in the market for the sale of health insurance to large

group employers in Richmond, Virginia. United States v.

Anthem, Inc., No. CV 16-1493 (ABJ), 2017 WL 685563, at *68

(D.D.C. Feb. 21, 2017). It first defined the relevant national

accounts market, accepting the government’s proposed

definition of “national account” as an employer purchasing

health insurance for more than 5,000 employees across more

than one state. It also found that the market properly included

both fully insured and “administrative services only” (“ASO”)

plans. Under a fully-insured plan, the employer pays for claims

adjudication, access to the insurer’s provider network (including

whatever discounted rates the insurer has negotiated), and

coverage of the employees’ medical costs. Under an ASO plan,

the employer pays for claims adjudication and network access,

but the employer self-insures and thus takes on the risk of its

employees’ medical costs. Finally, the district court found that

the relevant geographic market for national accounts was the

fourteen Anthem states, because that is where Anthem and

Cigna currently compete most prominently, given the

geographical restrictions imposed on Anthem under its Blue

Cross license. 

With the national accounts market so defined, the district

court then found a presumption of anticompetitive effect based

on the combined company’s market share. It determined that

the merger would increase HHI by 537 to 3000, while the

Guidelines threshold is an increase of 200 to 2500, resulting in

a highly concentrated market. Guidelines § 10. It also noted

that under any variation performed by plaintiffs’ expert the

resulting numbers were still well over the presumptive

Guidelines limits: considering only national accounts where 5%
10

of employees reside in anotherstate, HHI would increase 641 to

3124; considering only ASO customers with 5% out-of-state

employees, HHIwould increase 880 to 3675; and considering all

ASO national accounts, HHI would increase 771 to 3663. 

Anthem objected that these calculations overstated Anthem’s

market share by including all Blue customers even if they were

not Anthem’s, but the district court found that this was

appropriate. Anthem’s own internal calculations include these

customers, and a key part of Anthem’s value proposition to

customers is that they can access all non-Anthem Blue networks

nationwide. 

Next, the district court found that Anthem had provided

sufficient evidence to rebut the government’s prima facie case. 

It relied on evidence that Anthem’s primary competitor for

national accounts is United Healthcare, not Cigna; that national

accounts tend to be sophisticated, well-informed customers and

thus better able to thwart an attempted price increase; that new

entrants to the market will constrain pricing; and that the

combined company would have incentives to innovate in its

collaborative care arrangements with healthcare providers.

Finally, the district court found that the merger’s overall

effect in the Anthem states would be anticompetitive by

reducing the number of national health insurance carriers from

four to three. It rejected Anthem’s efficiencies defense, which

posited the combined company would realize $2.4 billion in

medical cost savings through its ability to (1) “rebrand” Cigna

customers as Anthem in order for them to access Anthem’s

existing lower rates; (2) exercise an affiliate clause in some of

its provider agreements to allow Cigna customers access to

Anthem rates; and (3) renegotiate lower rates with providers. 

First, it found that the claimed savings were not merger-specific

because they were based on the application of rates that either

company was already able to attain, and thus presumably each
11

company could attain the other’s superior rates on its own. It

also found that for Cigna customers that would be rebranded to

Anthem, any related savings would not be merger-specific

because Cigna customers could simply purchase the Anthem

product today. It rejected the notion that the merger was

necessary to allow Anthem customers access to Cigna’s popular

product offerings because Anthem had failed to show that it

could not develop and offer these products on its own. Second,

the district court found that the claimed savings also failed

because they were not sufficiently verifiable. It found that

Anthem’s plan to exercise the affiliate clause in its provider

contracts was unlikely to work as Anthem suggested. That is,

exercise of the affiliate clause would likely give rise to provider

resistance because the providers were unlikely to accept lower

rates and provide more services without getting anything in

return. The district court also found, as a matter of fact, that

attempts to achieve the claimed savings through renegotiation of

provider contracts would run into similar problems. It found

that any savings would take time to be realized, and that

Anthem’s expert failed to account for utilization, i.e., the

amount of medical services that would be consumed by a given

customer. In sum, it found the claimed savings were

aspirational inasmuch as every proffered strategy either

floundered in the face of business reality or was achievable

without the merger, or both. The district court also expressed

doubt as to whether the type of efficiencies claimed by Anthem,

which merely redistribute wealth from providers to Anthem and

its customers rather than creating new value, are even

cognizable under Section 7. 

Additionally, with regard to the Richmond market for large

group employers, the district court found a presumption of

anticompetitive effect based on the fact that Anthem and Cigna

were the city’s first- and second-largest competitors, with a

combined market share of between 64% and 78%. It found that
12

Anthem rebutted the presumption by challenging the

government’s calculations, pointing to additional competitors

outside the Richmond area and claiming that Anthem customers

in the Federal Employee Program skewed its Richmond market

share. Overall, however, the district court credited the testimony

of the government’s expert that even accepting all of Anthem’s

claimed efficiencies, the merger would still have a net

anticompetitive effect. Because Anthem had not shown that the

remaining competition (or potential market entrants) could

likely constrain a price increase by the combined company, it

found that the merger should be enjoined on that additional basis

as well. 

III.

Our review of the district court’s decision whether to issue

a permanent injunction under the Clayton Act is limited to

determining whether there was an abuse of discretion. United

States v. Borden Co., 347 U.S. 514, 518 (1954); see FTC v. H.J.

Heinz Co., 246 F.3d 708, 713 (D.C. Cir. 2001) (“Heinz”). The

district court’s conclusions of law are reviewed de novo, and its

findings of fact must be affirmed unless clearly erroneous. 

Heinz, 246 F.3d at 713. If a finding of fact rests on an erroneous

legal premise, then the court “must examine the decision in light

of the legal principles [it] believe[s] proper and sound.” Id.

(quoting Ambach v. Bell, 686 F.2d 974, 979 (D.C. Cir. 1982)).

A.

It is undisputed that the government met its burden to

demonstrate a highly concentrated post-merger market, which

would be reduced from four to just three competing companies. 

Anthem also does not dispute the definition of the national

accounts market, nor that such a market will be even more

highly concentrated post-merger. Anthem’s appeal instead

hinges on the district court’s treatment of its efficiencies
13

defense. The premise of its defense was explained by its expert,

Mark Israel, Ph.D. According to Anthem, Dr. Israel quantified

the medical cost savings that the combined company could

achieve post-merger using a “best of best” methodology, based

on the economic theory that the combined company, with its

greater volume, would be able to obtain discount rates that are

no worse than either of the companies could achieve separately. 

Using claims data from Anthem and Cigna, he calculated that

the merger would generate $2.4 billion in medical cost savings

through improved discount rates, 98% of which he predicted

would be passed through to customers, the large national

employers with which Anthem and Cigna contract. Of the $2.4

billion in claimed savings, Dr. Israel projected that $1.517

billion would result from Cigna customers accessing Anthem’s

lower rates, while $874.6 million would result from Anthem

customers accessing Cigna’s lower rates; when viewed in terms

of self-insured versus fully-insured customers, the former would

purportedly see $1.772 billion of the claimed $2.4 billion, while

the latter would see $619.8 million. Using merger simulation

models, he balanced these projected savings against potential

anticompetitive effects from the loss of the rivalry between the

two companies and found the savings easily outweighed any

potential harm. See Appellant Br. 5–6. But, as Anthem tends to

ignore, the government offered its own evidence and experts to

challenge these conclusions, as we discuss below.

Despite, however, widespread acceptance of the potential

benefit of efficiencies as an economic matter, see, e.g.,

Guidelines § 10, it is not at all clear that they offer a viable legal

defense to illegality under Section 7. In FTC v. Procter &

Gamble Co., 386 U.S. 568 (1967), the Supreme Court enjoined

a merger without any consideration of evidence that the

combined company could purchase advertising at a lower rate. 

It held that “[p]ossible economies cannot be used as a defense to

illegality. Congress was aware that some mergers which lessen
14

competition may also result in economies but it struck the

balance in favor of protecting competition.” Id. at 580. In his

concurrence, Justice Harlan criticized this attempt to “brush the

question aside,” and he “accept[ed] the idea that economies

could be used to defend a merger.” Id. at 597, 603 (Harlan, J.,

concurring). No matter that Justice Harlan’s view may be the

more accepted today, the Supreme Court held otherwise, id. at

580, and no party points to any subsequent step back by the

Court. 

Nor does our dissenting colleague, despite his wishful

assertion that Procter & Gamble can be disregarded by this

court because it preceded the “modern approach” adopted in

cases like United States v. General Dynamics Corp., 415 U.S.

486 (1974), and Continental T. V., Inc. v. GTE Sylvania Inc.,

433 U.S. 36 (1977). See Dis. Op. 9–11, 14–15. The Supreme

Court made no mention of Procter & Gamble in General

Dynamics, 415 U.S. 486, and it cannot be read to have implicitly

overruled the earlier decision because it did not involve

efficiencies. See id. at 494–504; see also 4APHILLIPE.AREEDA

& HERBERT HOVENKAMP, ANTITRUST LAW ¶ 976c2, at 115

(2016) (“AREEDA& HOVENKAMP”) (distinguishing between an

efficiencies defense and General Dynamics’ “competitive

significance” defense). And whatever significance Continental

T. V. may have in the area of vertical restraints on trade, 433

U.S. at 54–59, it did not do the yeoman’s work that the dissent

apparently ascribes to it here, for it did not involve efficiencies,

mergers, or Section 7 of the Clayton Act. Even stranger is the

dissent’s suggestion that our decision in Baker Hughes, 908 F.2d

at 986, blessed an efficiencies defense, see Dis. Op. 10–11,

because Baker Hughes did not concern efficiencies and, like

Heinz, 246 F.3d at 720, it could not overrule Supreme Court

precedent. Nor has this court even hinted, as the dissent

proclaims, that General Dynamics overruled Procter &

Gamble’s efficiencies holding. See Baker Hughes, 908 F.2d at
15

988 (citing Procter & Gamble favorably); Heinz, 246 F.3d at

720 & n.18 (interpreting Procter & Gamble’s efficiencies

holding). Put differently, our dissenting colleague applies the

law as he wishes it were, not as it currently is. Even if “the

Supreme Court has not decided a case assessing the lawfulness

of a horizontal merger under Section 7 of the Clayton Act” since

1975, Dis. Op. 10, it still is not a lower court’s role to ignore onpoint precedent so as to adhere to what might someday become

Supreme Court precedent.

Despite the clear holding of Procter & Gamble, 386 U.S. at

580, two circuit courts, and our own, have subsequently

recognized the use of efficiencies evidence in rebutting a prima

facie case. Heinz, 246 F.3d at 720 (citing, inter alia, FTC v.

Tenet Health Care Corp., 186 F.3d 1045 (8th Cir. 1999); FTC

v. Univ. Health, Inc., 938 F.2d 1206 (11th Cir. 1991)); see also

ProMedica Health Sys., Inc. v. FTC, 749 F.3d 559, 571 (6th Cir.

2014). The Eighth Circuit, in holding that the government had

produced insufficient evidence of a well-defined market,

acknowledged that the district court may have properly rejected

the efficiencies defense, while observing evidence of enhanced

efficiencies should be considered in the context of the

competitive effects of the merger. Tenet Health Care Corp.,

186 F.3d at 1053–55. The Eleventh Circuit similarly concluded

that whether an acquisition would yield significant efficiencies

in the relevant market is “an important consideration in

predicting whether the acquisition would substantially lessen

competition,” University Health, Inc., 938 F.2d at 1222, while

noting both that “[i]t is unnecessary . . . to define the parameters

of this defense now,” and that “it may further the goals of

antitrust law to limit the availability of an efficiency defense,”

id. at 1222 n.30. Other circuits have remained skeptical and

simply assumed efficiencies can rebut a prima facie case, before

finding that the merging parties had not clearly shown the

merger would enhance rather than hinder competition. See, e.g.,
16

FTC v. Penn State Hershey Med. Ctr., 838 F.3d 327, 348 (3d

Cir. 2016); Saint Alphonsus Med. Ctr.–Nampa, Inc. v. St. Luke’s

Health Sys., Ltd., 778 F.3d 775, 790 (9th Cir. 2015). These very

recent decisions put to rest the dissent’s notion that “no modern

court” recognizes the continued viability of Procter & Gamble,

see Penn State Hershey Med. Ctr., 838 F.3d at 348; Saint

Alphonsus Med. Ctr., 778 F.3d at 789, while even a cursory

reading of the court’s opinion today puts to rest any suggestion

that it “espouses the old . . . position that efficiencies might be

reason to condemn a merger.” Dis. Op. 15 (emphasis added)

(quoting ERNEST GELLHORN ET AL., ANTITRUST LAW AND

ECONOMICS IN A NUTSHELL 463 (5th ed. 2004)).

“Of course, once it is determinated that a merger would

substantially lessen competition, expected economies, however

great, will not insulate the merger from a [S]ection 7 challenge.” 

Univ. Health, 938 F.2d at 1222 n.29. Notably, Professors

Areeda and Hovenkamp have observed that “Congress may not

have wanted anything to do with an efficiencies defense asserted

by a firm that was already large or low cost within the market

and to whom the efficiencies would give an even greater

advantage over rivals.” AREEDA&HOVENKAMP,supra, ¶ 950f,

at 42; id. ¶ 970c, at 31. As our subsequent analysis shows, this

court, like our sister circuits, can simply assume the availability

of an efficiencies defense to Section 7 illegality because Anthem

fails to show that the district court clearly erred in rejecting

Anthem’s efficiencies defense. 

This court was satisfied in Heinz, in view of the trend

among lower courts and secondary authority, that the Supreme

Court can be understood only to have rejected “possible”

efficiencies, while efficiencies that are verifiable can be

credited. 246 F.3d at 720 & n.18 (discussing 4 PHILLIPAREEDA

& DONALD TURNER, ANTITRUST LAW ¶ 941b, at 154 (1980)). 

The issue in Heinz was whether under Section 13(b) of the
17

Federal Trade Commission Act, 15 U.S.C. § 53(b), preliminary

injunctive relief would be in the public interest. 246 F.3d at

727. The court held that the district court “failed to make the

kind of factual findings required to render that defense

sufficiently concrete to rebut the government’s prima facie

showing,” id. at 725, and, upon weighing the equities, remanded

for entry of a preliminary injunction. Id. at 726–27. The court

expressly stated however: “It is important to emphasize the

posture of this case. We do not decide whether . . . the

defendants’ claimed efficiencies will carry the day.” Id. at 727. 

These are not the issues in Anthem’s appeal from the grant of a

permanent injunction. See LaShawn A. v. Barry, 87 F.3d 1389,

1393 (D.C. Cir. 1996) (en banc). 

Consequently, the circuit precedent that binds us allowed

that evidence of efficiencies could rebut a prima facie showing,

Heinz, 246 F.3d at 720–22, which is not invariably the same as

an ultimate defense to Section 7 illegality. Cf. generally Saint

Alphonsus Med. Ctr., 778 F.3d at 789–90 (and authorities cited

therein). In this expedited appeal, prudence counsels that the

court should leave for another day whether efficiencies can be 

an ultimate defense to Section 7 illegality. We will proceed on

the assumption that efficiencies as presented by Anthem could

be such a defense under a totality of the circumstances approach,

see Baker Hughes, 908 F.2d at 984–85 (citing General

Dynamics, 415 U.S. at 498), because Anthem has failed to show

the district court clearly erred in rejecting Anthem’s purported

medical cost savings as an offsetting efficiency. Guidelines

§ 10; cf. Heinz, 246 F.3d at 720–22. Additionally, because the

district court could permissibly conclude that the efficiencies

defense failed, because the amount of cost saving that is both

merger-specific and verifiable would be insufficient to offset the

likely harm to competition, this court has no occasion to decide

whether the type of redistributional savings claimed here are

cognizable at all under Section 7. It bears noting, though, that
18

all of those other issues pose potentially substantial additional

obstacles to this merger. 

One further preliminary analytical point. Amici supporting

Anthem invite the court to disregard the merger-specificity and

verifiability requirements on the ground they place an

asymmetric burden on merging parties that could doom

beneficial mergers. See Br. for Antitrust Economists and

Business Professors as Amicus Curiae in Support of Appellant

and Reversal (“Amici Economists”) at 5–7. Anthem itself has

not adopted this argument. See Burwell v. Hobby Lobby Stores,

Inc., 134 S. Ct. 2751, 2776 (2014); Eldred v. Reno, 239 F.3d

372, 378 (D.C. Cir. 2001). We note, however, that Amici

Economists misapprehend the nature of Anthem’s claimed

efficiencies as “direct price reductions,” id. at 6–7, rather than

as potential price reductions subject to a number of

uncertainties. For customers to realize any price reduction,

Anthem would first have to succeed in reducing providers’rates,

and to that extent the purported reductions would not be a direct

effect of the merger. By contrast, the merger would

immediately give rise to upward pricing pressure by eliminating

a competitor, see, e.g., Tr. 960:12–18, and Anthem could

unilaterally raise its prices in response. Further, Amici

Economists ignore that fully-insured customers, and potentially

self-insured customers depending on the terms of their contracts

with Anthem, will not see any savings until Anthem takes a

second action, renegotiating the customers’ contracts to pass

through the savings. This illustrates the reason for the

verifiability requirement: Perhaps Anthem is certain to take

those actions, and there will be no impediments to the savings’

realization, but that showing is still necessary for a court to

conclude that the merger’s direct effect (upward pricing

pressure) is likely to be offset by an indirect effect (potential

downward pricing pressure). See Guidelines § 10. As for

merger-specificity, Amici Economists point to no logical flaw
19

in the policy that consumers should not bear the loss of a

competitor if the offsetting benefit could be achieved without a

merger. See Heinz, 246 F.3d at 722. 

B.

Any claimed efficiency must be shown to be mergerspecific, meaning that it “cannot be achieved by either company

alone because, if [it] can, the merger’s asserted benefits can be

achieved without the concomitant loss of a competitor.” Heinz,

246 F.3d at 722. The Guidelines frame the issue slightly

differently: an efficiency is said to be merger-specific if it is

“likely to be accomplished with the proposed merger and

unlikely to be accomplished in the absence of either the

proposed merger or another means having comparable

anticompetitive effects.” Guidelines § 10. Anthem faults the

district court for considering whetherthe efficiencies “could” be

achieved absent the merger, without regard to likelihood,

Appellant Br. 24, even though in Heinz, 246 F.3d at 722, this

court spoke repeatedly in terms of possibility (“can” or “could”).

Heinz, 246 F.3d at 721–22, cited the Guidelines with

approval in describing the standard for merger-specificity. Both

the current and then-current Guidelines refer to “practical”

alternatives to achieving the efficiency short of merger,

alternatives that are more than “merely theoretical.” Guidelines

§ 10 (2010); Guidelines § 4 (1997). Similarly, in Heinz, 246

F.3d at 722, the court considered whether it was practical for the

company to obtain better baby food recipes by investing more

money in product development, or whetherthat would cost more

money than the merger itself. The real question is whether the

alternatives to merger are practical and more than merely

theoretical, see id.; Guidelines § 10. Even assuming there is any

difference between the two standards, it would not affect the

outcome here on this factual record. Viewed under either

articulation, certain of Anthem’s claimed efficiencies fall away. 
20

The crux of Anthem’s argument regarding mergerspecificity is the theory that the combined company will allow

Anthem to create a “new product” that is “unavailable on the

market today”: a product that features both “Cigna’s customerfacing programs” and Anthem’s “generally lower . . . rates.” 

Appellant Br. 26. One way Anthem maintains the merger will

result in this new product is through rebranding. According to

Anthem, “rebranding means [the combined company] retain[s]

the Cigna product but brand[s] it under the Anthem name with

Anthem’s negotiated provider rates.” Appellant Br. 34. The

record, however, refutes rather than substantiates Anthem’s

proposed rebranding approach. In fact, the record evidence

Anthem cites for its rebranding plan is the testimony of Anthem

Senior Vice President Dennis Matheis. But in that testimony,

Matheis confirmed that, at least “[i]n the short term,” rebranding

would simply involve Anthem “offer[ing] Cigna customers

Anthem products,” in a manner that is “no different” than

Anthem “selling new business in the market.” Tr. 1599:20–25. 

In other words, when a Cigna customer rebrands, the immediate

effect is that the customer gives up a Cigna contract and Cigna

product in favor of an Anthem contract and Anthem product. 

Indeed, it is only “[o]ver the long haul,” Matheis testified, that

Anthem could actualize its “vision . . . [to] combine Cigna

features . . . with Anthem features,” Tr. 1606:17–21, and then

rebranding might result in a former Cigna customer obtaining

some semblance of the formerCigna product at the new Anthem

rate. But rebranding in the immediate aftermath of the merger

would involve a Cigna customer switching to the extant Anthem

product, and that is not a merger-specific outcome; that is just

more successful marketing of the existing Anthem product. And

Anthem expressly “does not contend that . . . a customer simply

switching from a Cigna product to an existing Anthem product[]

results in merger-specific efficiencies.” Appellant ReplyBr. 21.
21

Instead, Anthem claims only that rebranding over the long

haul, once it has successfully rolled out an improved, Cigna-like

product, will result in a merger-specific benefit, and maintains

that the district court clearly erred in finding Anthem could

simply develop and offer an improved product on its own. Just

as in Heinz, 246 F.3d at 722, the evidence offered by Anthem is

woefully insufficient to show that it cannot develop better

customer-facing programs. Anthem points to testimony from

two witnesses that Anthem has failed to replicate Cigna’s

products, for reasons unknown. In particular, Anthem’s

President of SpecialtyBusiness Pam Kehaly testified that Cigna

offers a “packaged integrated wellness approach where [Anthem

offers] disparate pieces that employers kind of have to piece

together on their own.” Kehaly Depo. Tr. 87:12–15 (Apr. 28,

2016). According to Kehaly, Anthem has been trying to solve

the problem for “probably a decade” but for whatever reason it

just has “not been able to crack this nut.” Id. at 88:3–13. She

did not indicate how intensive the effort has been, how many

hours were devoted to it, or how much money Anthem has

allocated toward it. Anthem’s Regional Vice President of Sales

Brian Fetherston also testified that Cigna has “done a really

good job of building wellness programs” and that Anthem has

tried but failed to catch up. Fetherston Depo. Tr. 170:14–19

(May 6, 2016). The district court could properly find that failure

likely results more from Anthem’s own no-frills culture or

flawed marketing strategies than from any inherent difficulties

in pulling together an integrated wellness program. For

instance, Fetherston testified that Cigna is “significantly better

at marketing” its wellness program, while by contrast Anthem

“just [was not] activelypromoting” its own, and indeed, Anthem

recently decided to “dial back some of [its] disease management

programs,” which Fetherston believed was a mistake. Id.

169:1–170:6, 323:1–23. To the extent Anthem has failed to

devote the resources needed to improve its product, it is in no

position to claim that consumers will benefit from it swallowing
22

up Cigna’s superior product. 

Put differently, rebranding does not create a merger-specific

benefit in either the short- or long-term. Perhaps Anthem could

create some brief, interim benefit in the mid-term by integrating

Cigna’s product faster than it could develop a comparable

product of its own. Guidelines § 10 n.13 (“If a merger affects

not whether but only when an efficiency would be achieved,

only the timing advantage is a merger-specific efficiency.”). 

But Anthem made no sufficient factual showing in the district

court on this point. It has offered no evidence to show how long

it would take, once the necessary resources were allocated, to

develop an improved product. Nor has it shown how long it

would take to roll out a hybrid Anthem-Cigna product. At oral

argument, Anthem claimed that it could do so in six months, but

at trial, Anthem’s Senior Vice President Matheis allowed that it

might not be able to do so within two-and-a-half years.

To the extent Anthem also maintains that none of Dr.

Israel’s claimed savings are dependent on rebranding, it ignores

the reality of his economic model. Without one of its

mechanisms to get current Cigna customers access to Anthem

rates, none of the $1.517 billion in claimed Cigna savings could

be realized. Although Dr. Israel may have been agnostic as to

which mechanism is used to achieve those savings, he

acknowledged that rebranding would achieve a portion of them:

“If there was rebranding as a way to get the discounts . . . that

would just be another way to get them faster.” Tr. 2108:9–11. 

Given that rebranding is the linchpin of Anthem’s post-merger

strategy, because it is the only option that helps Anthem comply

with its “Best Efforts” obligations, the inability to credit

rebranding savings seriously undermines Anthem’s efficiencies

defense.
23

The district court further found that none of the medical

cost savings are merger-specific because they are based on an

application of rates that each of the companies has already

achieved on its own. Anthem, quite reasonably, challenges this

finding with regard to Cigna’s rates on the ground that “there is

no dispute that [Cigna] has generally secured less favorable

provider rates than Anthem for years and has been unable to

close that gap despite its best efforts.” Appellant Br. 27. The

record shows that, by its own account, Cigna has been unable to

match Anthem’s volume-based discounts and instead has had to

compete on quality and innovation. Even the government’s

expert, Dr. David Dranove, agreed that a true Cigna product at

Anthem rates would not be achievable absent the merger. That

the district court clearly erred in finding that the application of

Anthem rates to customers that choose to remain with Cigna is

not merger-specific, however, is immaterial to the district

court’s ultimate conclusion that the merger would be unlawful

because these claimed efficiencies are not sufficientlyverifiable. 

C.

Under the Guidelines, projected efficiencies will not be

credited “if they are vague, speculative, or otherwise cannot be

verified by reasonable means.” Guidelines § 10. Anthem

maintains that the district court clearly erred because the $2.4

billion in projected post-merger savings was verified by two

independent sources (Dr. Israel and an integration planning team

from McKinsey & Company, which had access to each

company’s internal files). In Anthem’s view, the district court

also erred as a matter of law by imposing a “virtually

insurmountable burden” of persuasion, Appellant Br. 38, when

all that is required is to show “probabilities, not certainties,”

Baker Hughes, 908 F.2d at 984. 

As discussed, Anthem plans to achieve the claimed savings

through a combination of three mechanisms: rebranding,
24

renegotiating provider contracts, and exercising Anthem’s

affiliate clause. The district court found that practical business

realities would undermine the execution of that plan, making

achievement of the savings speculative, and therefore

unverifiable. With regard to the affiliate clause, the district

court focused on evidence of the potential for provider

discontent if the lower Anthem rates are forced on providers that

must expend extra effort and resources to deliver the Cigna

product, without any corresponding increase in value for

providers. This evidence included testimony by both Anthem

and Cigna witnesses as well as documents from Anthem and

Cigna that acknowledged the likely “abrasi[on].” E.g., Pls.’ Ex.

89. The record indicates that physician contracts can be

terminated by either party with only 90 days’ notice, so the

affiliate clause would accomplish little if the contract is

terminated or renegotiated soon after the clause is exercised. 

Hospital contracts tend to involve three-year commitments, so

the affiliate clause may bind them to offer lower rates for a

longer period. Still, when those hospital contracts expire, large

delivery systems with greater leverage “could push back hard”

in renegotiation. Pls.’ Ex. 717. In either event, it is probable, as

Cigna CEO David Cordani testified, that some providers will

eventually “react [by] renegotiating . . . and putting upward

pressure on rates, which has been a market force to date.” Tr.

443:17–23. That “very few” Anthem providers have

preemptively sought to renegotiate proves little, see Tr.

1686:15–25, because the feared abrasion would not occur until

Anthem invokes the affiliate clause, assuming it ever does so. 

This raises another practical difficulty with the affiliate

clause: although it is theoretically useful to Anthem, in reality

it is unlikely to be widely exercised because it works counter to

Anthem’s contractual obligations. Under the “Best Efforts”

clause in Anthem’s licensing agreement with the Blue Cross

Blue Shield Association, 80% of Anthem’s revenue within the
25

Anthem states must be Blue-branded, as must 66.67% of its

revenue nationwide. The merger would immediately throw

Anthem out of compliance and so Anthem intends to rebrand a

“lion’s share” of current Cigna customers in order to count that

revenue as Blue-branded. Tr. 1600:17–21 (Anthem Sr. VP

Matheis). By contrast, widespread exercise of the affiliate

clause would remove any incentive for Cigna customers to

convert to Anthem because those customers would then be

receiving the Cigna product at Anthem prices, Dr. Israel’s

much-touted “best of both worlds” scenario. Anthem fails to

address this reality when it maintains that 80% of the savings to

Cigna customers could be achieved rapidly using the affiliate

clause. See Appellant Br. 40. Because doing so would work

contrary to Anthem’s own contractual obligations, its witnesses

conceded that it will instead rely heavily on rebranding, which,

as discussed, gives rise to no merger-specific benefits. 

As for renegotiation, the short answer is that if Anthem

cannot persuade providers to extend lower rates to Cigna under

its affiliate clauses — where it has apparent contractual recourse

to do so — then it is speculative that Anthem could get them to

agree to do the same thing through negotiations absent

compulsion. Anthem assumes, as did Dr. Israel’s model, that in

all instances renegotiation would result in providers accepting

the lower Anthem rates. That assumption appears questionable

in the case of a provider that has just terminated a contract

because Anthem mandated, through an affiliate clause, the

acceptance of those very rates. Instead, Cigna’s CEO Cordani

predicted such renegotiation would put upward pressure on the

Anthem rate, and to the extent Anthem were to adopt a take-itor-leave-it approach, the provider could simply choose to walk

away. See Br. for Amici Am. Med. Ass’n. & Med. Soc’y of 

D.C. (“AMA Br.”) 11–12. This is especially true for large

hospital networks with significant bargaining power. 
26

To the extent that some medical savings would be achieved

for Cigna customers at the bargaining table due to the combined

company’s volume, the district court expressed concern over

how long such savings would take to be realized. Anthem’s

CEO Swedish testified that capturing medical savings requires

a “long gestation period,” in part because existing hospital

contracts span three to five years and would not be subject to

renegotiation “for a considerable period of time.” Tr.

337:21–338:16. He also rejected the idea that Anthem would

simply “drop[] the hammer” on providers by insisting on

maximum discounts across-the-board because Anthem instead

relies upon “customized relationship-driven contract[s]” that

seek to optimize performance on a case-by-case basis, rather

than focusing solely on discounts. Tr. 294:20–295:11. 

Anthem’s expert agreed that renegotiations in the ordinary

course of business will take place over time. The longer it takes

for an efficiency to materialize, the more speculative it can be,

see Guidelines § 10 & n.15, so the district court was on solid

ground to give less weight to the claimed renegotiation savings. 

In sum, although renegotiation will lead to a decrease in

Cigna’s rates, the assumption that it will in every instance lead

to the Anthem rate is farfetched. See Tenet Health Care Corp.,

186 F.3d at 1054. Indeed, as the district court observed, “the

Department of Justice is not the only party raising questions

about Anthem’s characterization of the outcome of the merger”

because Cigna itself had “provided compelling testimony

undermining the projections of future savings.” Anthem, Inc.,

2017 WL 685563, at *4; see also Pls.’ Ex. 722.

Whatever mechanism is employed to achieve the savings,

the district court had “reason to question . . . whether the quality

of the Cigna offering will in fact degrade” as a result of the

merger, Anthem, 2017 WL 685563, at *61, which further

undermines the purported efficiency claims. Guidelines § 10. 
27

For those that choose to stay with Cigna post-merger — and

thus would access lower rates through renegotiation or exercise

of the affiliate clause — the abrasion problem arises because

providers would be asked to continue offering the high-touch,

collaborative Cigna service, with its added behavioral, wellness,

and lifestyle programs, for less money. See AMA Br. 10–11. 

It was perfectly reasonable for the district court to find that some

providers, even if they are willing to accept less money, will

simply respond by offering customers less in the way of Cigna

high-touch service. Furthermore, according to Cigna’s CEO

Cordani, the value of the Cigna offering will be diminished

because Anthem’s rebranding strategy will siphon business

away from Cigna, leaving behind an atrophied Cigna customer

base that is less attractive to providers. This will in turn

diminish Cigna’s capacity for further innovation with its

collaborative model. And for Cigna customers that agree to

migrate to Anthem (or are pushed into doing so because the

company refuses to extend their expiring Cigna contracts),

provider abrasion again rears its head, this time with providers

being asked to offer Anthem customers better, and more

resource-intensive, collaborative service for the same rates they

have historically received. Anthem does not respond

meaningfully to these concerns, simply labeling them

“speculation.” Appellant ReplyBr. 10. In light of the numerous

Anthem witnesses who acknowledged the abrasion problem, the

district court did not err in finding it “dubious” that Anthem

would be able to offer a true Cigna-like product, or that legacy

Cigna would be able to maintain the quality of its own product. 

Anthem, 2017 WL 685563, at *59, *61. 

The fact is, it is widely accepted that customers value the

existing Cigna product, and that Cigna is a leading innovator in

collaborative patient care. That threat to innovation is

anticompetitive in its own right. Cf. United States v. Cont’l Can

Co., 378 U.S. 441, 465 (1964). And the problem is neither
28

answered by Anthem’s evidence nor offset by its purported

efficiency of offering a degraded Cigna product at a lower rate.

In addition to claimed savings to current Cigna customers, 

Dr. Israel also projected that $874.6 million in savings would be

realized if Anthem’s customers were able to access superior

rates that Cigna has already negotiated. In focusing almost

entirely on the other side of the ledger, Anthem offers little

reason to think that the district court clearly erred in rejecting

the claimed savings to existing Anthem customers. See

Appellant Br. 41–42. To the extent Anthem argues on appeal

that Anthem customers could access Cigna’s superior rates

through rebranding or exercise of an affiliate clause, the only

witness it cites was actually discussing the affiliate clause in

Anthem’s contracts that would apply to Cigna’s customers. And

even assuming that Cigna’s contracts contain an affiliate clause,

Blue Cross Association rules would prohibit Anthem from

exercising it. Further, rebranding Anthem customers to Cigna

would only exacerbate Anthem’s “Best Efforts” problem, which

indicates why Anthem Senior VP Matheis testified that Anthem

would rebrand a lion’s share of Cigna customers to Anthem, not

the other way around. Renegotiation would be the only viable

option for realizing the projected savings to Anthem customers.

Moreover, Anthem has not explained why these projected

savings would even exist. The record is clear that Anthem,

unlike Cigna, has already achieved whatever economies of scale

are available. According to Anthem’s expert Dr. Robert Willig,

in the 35 local markets identified in the government’s complaint,

the data did not show that Anthem’s size correlated with its

provider discounts. To the contrary, Dr. Willig testified that

Anthem is “already past the threshold of having enough size to

do what it needs to do in terms of offering volume to providers.”

Tr. 2231:9–12. Similarly, Anthem’s CEO Joseph Swedish

denied that Anthem would seek to negotiate even greater
29

volume-based discounts after the merger because post-merger

Anthem would “certainly not [pay] less than what [it is] now

paying as Anthem.” Tr. 294:10–19. The evidence indicates

that where Cigna has better discounts than Anthem, that is a

result of factors other than volume, and the district court

reasonably questioned whether those atypical discounts would

remain available post-merger. In the absence of an additional

volume-based discount, then, Anthem makes no effort to show

how its current customers would see lower prices as a result of

the merger, and certainly not to the tune of $874.6 million. 

Consequently, the district court did not clearly err in rejecting

these alleged medical cost savings as unverifiable.

Next, the claimed medical cost savings only improve

consumer welfare to the extent that they are actually passed

through to consumers, rather than simply bolstering Anthem’s

profit margin. See Univ. Health, Inc., 938 F.2d at 1223. After

all, the merger potentially harms consumers by creating upward

pricing pressure due to the loss of a competitor, and so only

efficiencies that create an equivalent downward pricing pressure

can be viewed as “sufficient to reverse the merger’s potential to

harm consumers . . . , e.g., by preventing price increases.”

Guidelines § 10; see also AREEDA & HOVENKAMP, supra,

¶ 971a, at 48 (“[A] sufficient amount of any efficiencies [must]

be passed on that the post-merger price is no higher than the premerger price.”). Dr. Israel testified that absent monopsony (i.e.,

the exercise of market power to gain subcompetitive prices from

providers), any cost savings will create downward pricing

pressure, and while this is unobjectionable, the amount passed

through to consumers indicates the strength of that pressure. See

Br. of Professors as Amici Curiae in Support of Appellee and for

Affirmance 7–8 (“Amici Professors”). The district court rightly

cast doubt on Dr. Israel’s estimated pass-through rate of 98%,

which was unsupported by the evidence and treated self-insured

and fully-insured customers identically. 
30

BecauseASO customers paytheir employees’medical costs

directly, any reduction in medical rates would result in savings

that automatically pass through to the customer, absent some

corresponding ASO price increase by Anthem. This would

improve the quality of one aspect of the ASO product (i.e.,

access to more deeply discounted network rates), and it could

thus be procompetitive even if it did not immediately result in

an ASO price decrease. See Guidelines § 10. Dr. Israel’s

analysis rested on the assumption that rather than raising ASO

prices to capture the medical cost savings, Anthem would

attempt to increase its market share by providing a much

superior product at only a slightly higher price, thereby

maximizing its profits through increased sales. The district

court highlighted internal Anthem documents that discussed

ways to keep those savings for itself, in particular where

Anthem listed seven alternatives with 100% pass-through to

ASO customers considered last. Contrary to Dr. Israel’s

assumption, then, Anthem apparently concluded that total passthrough was not the profit-maximizing, “optimal solution to

capture the most value from [the] deal,” and that it could

actually lose business if customers initially saw savings that

were not sustained over the long term. Pls.’ Ex. 727. Amici

Professors offer another reason why Anthem might have come

to this conclusion: in highly concentrated markets, already-large

insurers are less constrained by competition and thus tend to find

it more profitable to capture medical savings and increase

premiums. Amici Professors Br. 6–9; see also AREEDA &

HOVENKAMP, supra, ¶ 971f, at 56 (in highly concentrated

markets “there is less competition present to ensure that the

benefit of efficiencies will flow to consumers”). That

corroborates rather than remediates anticompetitive concerns.
31

As for fully insured customers, which comprise $619.8

million of the projected savings, the estimated pass-through is

even less likely given that the savings would automatically inure

to Anthem’s benefit absent some corresponding price decrease

to its customers. Dr. Israel recognized this dynamic at trial, and

yet his model takes no account of it, applying a pass-through

rate of 98% to both ASO and fully insured accounts. The record

indicates that ASO customers, which pay medical costs directly

to providers, are keenly attuned to fee transparency, but it is

unclear fully-insured customers are afforded the same

transparency. That is, if Anthem negotiates provider rates and

pays providers directly, how would a customer be aware that

Anthem had achieved medical savings, in order to be able to

seek a pass-through in the form of a lower negotiated price?

Further, when would fully-insured customers realize that

renegotiated price, given that their existing contracts would not

pass though any savings? See Tr. 2107:17–21 (Dr. Israel:

ordinary-course renegotiation of employers’ contracts “will take

place over time”). Neither Anthem nor Dr. Israel answers (or

addresses) these problems. 

Finally, the district court did not clearly err when it

criticized Anthem’s failure to account in its projected savings

for utilization, which is a signature aspect of the Cigna product. 

Dr. Israel’s model was based on discounts that either company

was able to achieve on its own multiplied by the total claims

value, but as Anthem’s CEO Swedish testified, “We don’t live

in a discount world any longer.” Tr. 295:11. Cigna’s CEO

Cordani agreed: “If you’re looking [only at] a discount

calculation, if [Anthem] has a 2 percent lower discount for the

emergency room service, you would assume that that’s a

savings,” unless Cigna’s wellness program helps the patient

avoid that emergency room visit altogether. Tr. 443:10–16. 

Anthem maintains that Dr. Israel and the McKinsey & Co. team

did account for utilization, because Dr. Israel testified that lower
32

utilization would result in a lower total claims value, a value that

factored into both his and the McKinsey& Co. models. But this

ignores that on cross-examination, Dr. Israel conceded that he

did not control for the different risks and features of each

company’s population at a particular provider, which would be

necessary to compare utilization, and so his model did not

account for whether one company’s utilization was better than

the other’s. And although Anthem nevertheless maintains that

no evidence shows accounting for utilization would materially

reduce the claimed savings, Dr. Dranove testified that any error

or incorrect assumption would have a significant effect on the

overall projected savings. See Tr. 2327:15–2329:11. Thus, the

problem is less that the failure to account for utilization would

necessarily reduce the projected savings, and more that it

undermined the district court’s confidence in the reliability and

factual credibility of those savings calculations. 

Both sets of projections suffered from additional, basic

analytic flaws. For instance, Dr. Israel did not agree with the

district court’s national accounts market definition (employers

with 5,000+ employees), so his savings projection was based on

the broader market definition that he believed appropriate (largegroup employers with either 50+ or 100+ employees). In other

words, Dr. Israel’s claimed $2.4 billion in savings is unmoored

from the actual market at issue, and there is no indication of

what portion is properly derived from the national accounts

market. Similarly, the McKinsey & Co. analysts based some of

their savings on a comparison of Cigna and Anthem rates where

only one of the companies had negotiated a discount with that

particular provider. This apples-to-oranges comparison of innetwork versus out-of-network rates overstated the true disparity

between the companies’ existing discounts and thus necessarily

inflated McKinsey & Co.’s projected savings. Even Dr. Israel

acknowledged as much: his model only compared in-network

rates because he concluded that “that’s what the economics tells
33

you you need to do to get the answer right.” Tr. 1855:2–22. 

This could help to explain why Dr. Israel’s otherwise similar

methodology resulted in a projection that was almost a billion

dollars less than McKinsey & Co.’s. 

The savings projected by McKinsey& Co. and Dr. Israel —

uncritically relied on by the dissent, e.g., Dis. Op. 4–8, 18 —

were without a doubt enormous. The problem is, those

projections fall to pieces in a stiff breeze. If merging companies

could defeat a Clayton Act challenge merely by offering expert

testimony of fantastical cost savings, Section 7 would be dead

letter. 

 

D.

Having considered the totality of circumstances, see Baker

Hughes, 908 F.2d at 984, we hold that the district court

reasonably determined Anthem failed to show the kind of

“extraordinary efficiencies” that would be needed to constrain

likely price increases in this highly concentrated market, and to

mitigate the threatened loss of innovation. Cf. Heinz, 246 F.3d

at 720. Given the record evidence, Anthem’s objection that the

district court “abdicated its responsibility” to balance the

merger’s likely benefits against its potential harm, Appellant Br.

46, rings hollow. Anthem seems to insist upon a dollar-fordollar comparison after discounting whatever claimed

efficiencies were properly rejected, in responding that “so long

as at least one-third of the $2.4 billion of savings are likely to be

achieved, the merger is procompetitive.” Appellant Reply Br.

10. This would apparently require the court to calculate, for

instance, a more realistic pass-through rate than the rejected

98% figure, or to estimate what percentage of the claimed $2.4

billion was attributable to customers with fewer than 5,000

employees and thus outside of the relevant market. Anthem has

pointed to no relevant expert economic evidence on which to

base such an imprecise calculation, and Anthem, not the district
34

court, has the burden of showing what portion of the claimed

efficiencies will result from the merger itself. Even assuming it

were possible on this record, see University Health, 938 F.2d at

1223, “[e]conomies cannot be premised solely on dollar figures,

lest accounting controversies dominate § 7 proceedings,”

Procter & Gamble, 386 U.S. at 604 (Harlan, J., concurring). 

Because “the state of the science does not permit such refined

showings,” commentators have recommended simply giving the

government the benefit of the doubt in a close case. See

AREEDA&HOVENKAMP, supra, ¶ 971f, at 56. In any event, this

is not a close case. 

The dissent’s critique of the court’s opinion is not well

founded. Its fundamental flaw is the failure to engage with the

facts shown in the record as they pertain to merger-specificity

and verifiability. Repeated references to unspecified evidence, 

see, e.g., Dis. Op. 3, 12, 14, 17, on which the dissent bases

sweeping conclusions, speak volumes. Rather than engage with

the record, much less adhere to our standard for reviewing

findings of fact by the district court, the dissent offers a series of

bald conclusions and mischaracterizes the court’s opinion. For

instance, the dissent repeatedly claims that the court “does not

fully accept the fact . . . that providers rates would actually be

lower,” Dis. Op. 17; id. at 15, when in fact the court accepts that

rates would be lower for some existing Cigna (but not Anthem)

customers post-merger. Those who rebrand with Anthem,

however, will see no merger-specific savings, Op. 20–21, and

the few that Anthem fails to rebrand will see far fewer savings

than Anthem claims, due in large part to provider abrasion and

big hospital systems that will stand their ground in renegotiation,

Op. 24–27. The dissent baldly asserts that the efficiencies “are

merger-specific bydefinition,” Dis. Op. 6–7, without addressing

the paucity of evidence that Anthem would be unable to develop

a Cigna-like product without merging. So too, it baldly asserts

that the savings were “sufficiently verified,” while admitting
35

that it is not clear “just how much the employers would benefit

from this merger.” Id. at 7 (emphasis omitted). In other words,

Anthem estimated an astronomical amount of savings, so even

if that amount were wildly overstated, the dissent expects the

court to trust that, as an unknown fraction of a large number, the

result “would be large.” Id. 

To the extent the dissent notes any of the major factual

problems with Anthem’s depiction of the merger, it brushes

them aside. It dismisses as “highly speculative” the provider

abrasion problem that was conceded by both Anthem and Cigna

witnesses, Dis. Op. 17, a problem that undermines Anthem’s

plans for realizing the savings through the affiliate clause and

renegotiation. It characterizes record evidence that squarely

contradicts Anthem’s pass-through estimates — Anthem’s own

internal PowerPoint presentation — as “secret Anthem plans to

dramatically raise [its] fees,” id., which is precisely what the

evidence reflects. It attacks straw men like supposed reliance on

“friction between the Anthem and Cigna CEOs,” id., when the

court does not so rely, noting indeed the limited probative value

of that evidence. Op. 4 n.1. It fails entirely to address Anthem’s

“Best Efforts” obligations, which make it likely that Anthem

will rely predominantly on rebranding, a strategy that gives rise

to no merger-specific benefit. Op. 24–25. The “Best Efforts”

clause also creates a verifiability problem with regard to

Anthem’s other savings strategies, for instance undercutting

Anthem’s assertion that 80% of the savings to Cigna customers

“could be achieved simply [and rapidly] by invoking the affiliate

clause.” Appellant Br. 40. Again, pulling at any one loose

thread quickly unravels Anthem’s narrative, but the dissent is

simply unwilling to do so. 

Ultimately, the dissent concludes that “[o]n this record,

there is little basis to doubt that the cost savings for employers

as a result of the merger would be large,” without evincing any
36

real awareness of the record beyond the testimony of Anthem’s

expert and consultants. See Dis. Op. 7. To wit, the dissent

suggests that Anthem’s savings estimates went unrebutted at

trial, Dis. Op. 6, when the record shows Dr. Dranove not only

offered his own estimate of $100 million to $500 million but

explained why those savings were unlikely to be realized,

essentially for the reasons discussed in this opinion. See, e.g.,

Tr. 3802:25–3803:11. Similarly, it recognizes no distinction

between savings to existing Cigna customers (some of which the

government concedes will materialize) and savings to existing

Anthem customers (the existence of which even Anthem cannot

explain in light of the testimony of both its CEO and expert, see

supra Part III.C). Likewise, in concluding that the quality of

the Cigna product (its wellness programs and the high-touch

service that providers offer in support of the programs) will not

degrade post-merger, the dissent does not go so far as to say

there is no evidence to support the district court’s contrary

finding, Anthem, 2017 WL 685563, at *59, *61; rather, it asserts

it does not consider this evidence “persuasive” or “convincing.”

Dis. Op. 18. Such de novo analysis throughout the dissent

betrays no meaningful effort to engage with the district court’s

factual findings, which are subject only to review for clear error. 

Furthermore, the dissent’s assumption that the prices paid

by consumers (regardless of the quality of the resulting product)

are the sole focus of antitrust law is flawed. “The principal

objective of antitrust policy is to maximize consumer welfare by

encouraging firms to behave competitively.” Kirtsaeng v. John

Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2013) (emphasis

added) (quoting 1 P. AREEDA & H. HOVENKAMP, ANTITRUST

LAW ¶ 100, at 4 (2006)). This single-minded focus on price

ignores that in highly concentrated markets like this one, lower

prices, if they occur at all, may be transitory. Owing to the

lower level of competition in highly concentrated markets, when

presented with lower supply input prices, companies have a
37

greater ability to retain for themselves the input savings rather

than pass them on to consumers. The Clayton Act, as the

Supreme Court “ha[s] observed many times, [is] a prophylactic

measure, intended primarilyto arrest apprehended consequences

of intercorporate relationships before those relationships could

work their evil.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,

429 U.S. 477, 485 (1977) (internal quotation marks and citation

omitted). The ability of a firm to obtain lower prices for inputs

for its product (here, provider services) should, especially in

light of the prophylactic nature of the Clayton Act, be viewed

skeptically when high market concentrations may have the

future effect of permitting capture of those savings. The dissent

uncritically accepts Dr. Israel’s rosy testimony to the effect that

ASO savings “will be passed through to employers,” Dis. Op.

15, but fails to address contrary Anthem documents and the

historical tendencies of large companies in highly concentrated

markets to capture savings. E.g., AREEDA & HOVENKAMP,

supra, ¶ 971f, at 56. The dissent also ignores the district court’s

numerous and not clearly erroneous findings, as previously

discussed, that total or nearly total pass-through is unlikely. See,

e.g., Anthem, 2017 WL 685563, at *4, *62. Even if ASO

savings would pass through in the short term, that does not

“practically guarantee[]” that Anthem would not then raise its

prices correspondingly. But see Dis. Op. 16. 

Additionally, the dissent fails to recognize that lower prices

may arise due to, or ultimately lead to, a decrease in product

quality. Everyone would agree that rock-bottom provider rates

seem beneficial to consumers, but when those rock-bottom

prices lead to inferior medical services, any benefit to the

consumers’ wallets is diminished by the harm to their health. As

the Guidelines state, if merging firms “would withdraw a

product that a significant number of customers strongly prefer

to those products that would remain available, this can constitute

a harm to customers over and above any effects on the price or
38

quality of any given product.” Guidelines § 6.4; see also id.

§ 10 (“[P]urported efficiency claims based on lower prices can

be undermined if they rest on reductions in product quality or

variety that customers value.”). And a decrease in product

quality is not merely speculative here — every dollar of medical

cost savings realized by consumers will come at the expense of

providers. It thus is quite plausible that paid less, the medical

providers will provide less. These inconvenient facts do not jibe

with the dissent’s superficial, thirty-thousand-foot view of this

case, and it is thus unsurprising that they are addressed in

passing, if at all. 

IV.

Anthem fares no better in its challenge to the district court’s

independent and alternative determination that the merger

should be enjoined on the basis of its anticompetitive effect in

the Richmond, Virginia market for the sale of health insurance

to “large group” employers with more than fifty employees. 

There, the government’s prima facie case was even stronger than

in the market for national accounts in the fourteen Anthem

states. Depending on how market share was calculated (i.e.,

including all Blue customers as Anthem or not, including fully

insured customers or just ASO), the companies’ combined

market share ranged from 64% to 78%. Even under the

calculation most favorable to Anthem (ASO-only, disregarding

non-Anthem Blue customers), the merger would raise an

overwhelming presumption of anticompetitive effect: HHI

would rise 1511 to a post-merger total of 4350, where the

Guidelines presumption threshold is an increase of 200 to a postmerger total of 2500. As the President of Anthem Virginia

acknowledged, Anthem has the biggest share of the large group

employer market across all of Virginia, and in Richmond, Cigna

is its strongest competitor. 
39

Anthem principally challenges the district court’s reliance

on a chart prepared by Dr. Dranove, the government’s expert

witness, showing the merger would have an anticompetitive

effect in Richmond even crediting all of Dr. Israel’s claimed

efficiencies. The chart included an asterisk next to the

Richmond entry signifying that “no amount of cost savings

could offset employer harm due to decreased competition.” 

Pls.’ Ex. 760. On cross examination, Dr. Dranove was asked

whether that meant even a savings of $10 billion or $20 billion

would not offset the merger’s harm, and he acknowledged that

he could not recall the foundation for his statement. Given this

inabilityto address that extreme hypothetical, Anthem maintains

that the district court should not have relied on the statement or

even on the chart as a whole. 

The record shows that the district court did not rely on the

“asterisk” statement and explained at trial that it would not do so

because it was unnecessary to finding a substantial

anticompetitive effect. As to the broader question whether Dr.

Dranove’s inability to explain the asterisk meant that the district

court should have disregarded his chart (and related testimony)

altogether, the district court did not abuse its discretion. See

Heller v. District of Columbia, 801 F.3d 264, 272 (D.C. Cir.

2015). Leaving the asterisk statement aside, Anthem raises no

real objection to the substance of the chart, only urging that Dr.

Dranove’s inability to explain the asterisk was so damaging that

it called into doubt the reliability of his overall analysis. The

district court, which heard extensive testimony from Dr.

Dranove about the anticompetitive effects revealed by his

economic models and relied on it heavily throughout its opinion,

clearly concluded otherwise. The district court had

“considerable leeway” to do so in determining that all other

aspects of the chart and his testimonywere reliable. Kumho Tire

Co. v. Carmichael, 526 U.S. 137, 152 (1999); cf. Snyder v.

Louisiana, 552 U.S. 472, 477 (2008).
40

Anthem’s remaining challenges amount to an ineffectual

attack on the district court’s weighing of rebuttal evidence. It

incorrectly states that the district court relied solely on Dr.

Dranove’s chart to find anticompetitive harm while ignoring

evidence of “enormous” medical savings, Appellant Br. 53,

when in fact Dr. Dranove testified that his chart credited 100%

of Anthem’s claimed savings and still found a net

anticompetitive effect. Anthem posits that there would still be

five or more competitive insurers in Richmond post-merger, but

even assuming that is true (one of the two witnesses it cites

identified only four, including the combined company), the mere

existence of competitors may not be sufficient to constrain a

larger Anthem that would control 64% to 78% of the market. 

See Guidelines § 5. Indeed, one of those competitors, Optima,

was said to have struggled in the Richmond market, and Anthem

shows no clear error in the district court’s finding that Optima

“does not appear able to compete on the same field as the

merged company.” Anthem, 2017 WL 685563, at *68. Nor

does Anthem show clear error in the finding that other

companies do not appear interested in entering the Richmond

market, or that even if they did, their entry would be insufficient

to constrain the combined company. The evidence cited by

Anthem shows only that other companies may intend to enter

Richmond (Innovation), or may have the ability to enter

Richmond (Piedmont, VCU), or may have a marginal or

embryonic presence in Richmond (Kaiser, Bon Secours), not

that entry by these companies would offset the merger’s

anticompetitive potential.

Tellingly, our dissenting colleague offers a single mention

of the district court’s Richmond holding (in a parenthetical, no

less), which itself is a sufficient basis for enjoining the merger.

Any suggestion that the claimed savings would make the merger

procompetitive in Richmond ignores the record evidence,
41

namely that even crediting all of the claimed savings, the merger

of Richmond’s two biggest large-group insurers would give the

combined company such a vast market share that the overall

effect of the merger would still be anticompetitive. As Dr.

Dranove testified at trial, his analysis “still predicts a price

increase” in the Richmond market “even [after] crediting every

penny of th[e] efficiencies” estimated by Dr. Israel. That is,

even ignoring Anthem’s failure to show that the savings were

merger-specific and sufficiently verifiable, see supra Part

III.B–C, the proposed merger would cause an already highly

concentrated market to become overwhelmingly so, with

Anthem controlling as much as 78% of the market and two or

three other companies fighting to maintain relevance. Although

the dissent recognizes this appeal raises “fact-intensive

question[s],” Dis. Op. 13, it has persistently failed to engage

with the facts. 

In conclusion, the district court did not clearly err in its

factual findings that the merger would have anticompetitive

effects in the Richmond market, and importantly, Anthem does

not allege any error of law with respect to that determination.

Thus, the district court did not abuse its discretion in enjoining

the merger on the basis of the merger’s anticompetitive effects

in the Richmond market. And, as previously noted, this holding

provides an independent basis for the injunction, even absent a

finding of anticompetitive harm in the fourteen-state national

accounts market. 

Accordingly, we affirm the issuance of the permanent

injunction on alternative and independent grounds. 
MILLETT, Circuit Judge, concurring: I join the opinion of 

the court in full, including its two separate and independent 

holdings that the proposed merger would substantially reduce 

competition in (i) the national-accounts market and (ii) the 

large-group-employer market in Richmond. Indeed, as to the 

latter holding, all of Anthem’s and the dissenting opinion’s 

Sturm und Drang over efficiencies is beside the point because 

the district court held that, even accepting all of Anthem’s 

claimed cost savings, the merger would still have substantial 

anticompetitive effects. United States v. Anthem, Civil Action 

No. 16–1493 (ABJ), 2017 WL 685563, at *68 (D.D.C. Feb. 21, 

2017). 

With respect to the holding regarding the nationalaccounts market, I write separately only to underscore the 

foundational problems that pervade Anthem’s and the 

dissenting opinion’s insistence that any reduction in provider 

rates, standing alone, excuses an anticompetitive merger. 

First, there is no dispute that, to have any legal relevance, 

a proffered efficiency cannot arise from anticompetitive 

effects. Dissenting Op. 13 (“Cognizable efficiencies * * * do 

not arise from anticompetitive reductions in output or 

service.”) (quoting DEPARTMENT OF JUSTICE & FEDERAL 

TRADE COMM’N, HORIZONTAL MERGER GUIDELINES § 10, 

at 30 (Aug. 19, 2010)). Rather, the proffered efficiencies, even 

if verifiable, must at least neutralize if not outweigh the harm 

caused by the loss of competition and innovation. 

HORIZONTAL MERGER GUIDELINES § 10, at 30 (“cognizable 

efficiencies” must “reverse the merger’s potential to harm 

customers in the relevant market”); see also 4A PHILLIP E.

AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 270e, 

at 36–40 (4th ed. 2016). 

 That means that once a court has found a Section 7 

violation, a generic statement that prices will go down proves 

nothing by itself. Yet the dissenting opinion repeatedly hangs
2 

its hat on the government’s statement that the proposed merger 

will “lower” provider rates. See Dissenting Op. 4, 7, 15, 18–

19. The government, however, never agreed with Anthem or 

the dissenting opinion’s assigned dollar amounts. Nor did it 

ever concede that (i) the reduction would be sufficiently large

to offset the merger’s anticompetitive effects, (ii) the savings 

were obtainable only through merger, or (iii) the savings were 

verifiable. 

In fact, all that the government stated was that any 

decrease in provider rates would come about through an 

exercise of unlawful market power. See J.A. 545. That would 

be an antitrust violation, not an efficiency. And that statement 

by the government hardly seems to merit “[l]inger[ing]” over, 

Dissenting Op. 4. 

Second, what the dissenting opinion (at 15) labels as an 

“undeniable” predicate assumption—that any cost savings will 

necessarily be passed through to customers—not only is very 

much denied, Appellees’ Br. 58, but actually flies in the face of 

the factual record. As the district court found, a number of 

damaging internal Anthem documents detailed the company’s 

efforts and specific business options for actively preventing

those savings from being passed through to customers and 

instead capturing the money for itself. Compare Dissenting 

Op. 5–6, 12, 15–16, with, e.g., Anthem, 2017 WL 685563, at 

*62 (“Anthem’s internal documents reflect that the company 

has been actively considering multiple scenarios for capturing 

any medical cost savings for itself[.]”); J.A. 2159 (Anthem 

presentation, entitled “Overview of potential ASO value 

capture models,” states that “[p]ass[ing] all savings through to 

customers” is “not * * * optimal” because it fails to “capture 

most value from [the] deal”); Suppl. App’x 1863–1865, 1858, 
3 

1419, 463, 472 (sealed materials). It is right there in black and 

white.1 

So the reason the opinion of the court does not “fully 

accept[]” the dissenting opinion’s “key fact[],” Dissenting Op.

15, is because the district court found it to be untrue. And given 

the content of the internal Anthem documents, that factual 

determination was not clearly erroneous.2 

Third, context matters. Lower rates cannot be trumpeted 

without first asking what those lower rates will buy. The 

second half of the government’s statements about decreased 

provider rates was that they would lead to an inferior health 

care product, including reduced access to medical care and 

fewer doctors. Compl. ¶ 72; see also J.A. 545. The district 

court found as a matter of fact, and the opinion of the court 

rightly affirms, that customers would be paying less because 

they would be getting less in the form of a degraded Cigna 

product. Op. 27–28; Anthem, 2017 WL 685563, at *59 

(crediting testimony that “imposing lower fee structures would 

unravel [Cigna’s] collaborative relationships with providers”);

id. at *61; id. at *63 (“[T]here is ample evidence in the record 

that the merger would harm consumers by reducing or 

weakening the Cigna value based offerings which aim to 

reduce medical costs by reducing utilization and by engaging 

with, rather than simply reducing the fees paid to, providers.”). 

 1

 In addition, the dissenting opinion’s rosy forecast (at 8) that 

Anthem’s employer-customers would then automatically use those 

(unproven) savings to raise their employees’ pay is cut out of whole 

cloth. Not even Anthem offered up that Panglossian prediction.

2

 Curiously, none of the large employers who, according to 

Anthem, stand to gain billions of dollars in savings have filed any 

brief in support of this merger. 
4 

Paying less to get less is not an efficiency; it is evidence of

the anticompetitive consequences of reducing competition and 

eliminating an innovative competitor in a highly concentrated 

market. 

Fourth, while the dissenting opinion repeatedly declares 

the record evidence “overwhelming[]” that the post-merger 

firm will deliver health care for less, e.g., Dissenting Op. 8, it 

bears emphasizing that one half of this merger disagrees. “In 

this case, the Department of Justice is not the only party raising 

questions about Anthem’s characterization of the outcome of 

the merger: one of the two merging parties”—Cigna—“is also 

actively warning against it.” Anthem, 2017 WL 685563, at *4. 

Importantly, “Cigna officials provided compelling testimony 

undermining the projections of future savings” that Anthem 

proffered and the dissenting opinion embraces. Id. (emphasis 

added). 

Finally, the assumption that the prices paid by Anthem’s 

customers—whatever the quality of the resulting product—are 

the sole focus of antitrust law sits at the center of Anthem’s and 

the dissenting opinion’s contentions. But antitrust law is not

so monocular. Rather, product variety, quality, innovation, and 

efficient market allocation—all increased through 

competition—are equally protected forms of consumer 

welfare. See HORIZONTAL MERGER GUIDELINES § 6.4, at 24.3

 

Indeed, “withdraw[al of] a product that a significant number of

customers strongly prefer to those products that would remain 

 3

 See also Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 

1433 (9th Cir. 1995) (“Consumer welfare is maximized when 

economic resources are allocated to their best use, and when 

consumers are assured competitive price and quality.”) (citing, inter 

alia, National Gerimedical Hosp. & Gerontology Ctr. v. Blue Cross 

of Kansas City, 452 U.S. 378, 387–388 & n.13 (1981)). 
5 

available * * * can constitute a harm to customers over and 

above any effects on the price or quality of any given product.” 

Id. That is why, under antitrust law, anticompetitive conduct 

that lowers prices can be illegal. See United States v. SoconyVacuum Oil Co., 310 U.S. 150, 223 (1940) (“Under the 

Sherman Act a combination formed for the purpose and with 

the effect of raising, depressing, fixing, pegging, or stabilizing 

the price of a commodity in interstate or foreign commerce is 

illegal per se.”) (emphasis added).4

The dissenting opinion also founders on the mistaken 

belief that any exercise of increased bargaining power short of

monopsony is procompetitive. But securing a product at a 

lower cost due to increased bargaining power is not a 

procompetitive efficiency when doing so “simply transfers 

income from supplier to purchaser without any resource 

savings.” AREEDA & HOVENKAMP, supra, ¶ 975i, at 106. Plus, 

as Professors Areeda and Hovenkamp explain in language that 

speaks directly to Anthem’s proposed merger: “Congress may 

not have wanted anything to do with an efficiencies defense 

asserted by a firm that was already large or low cost within the 

market and to whom the efficiencies would give an even 

greater advantage over rivals.” Id. ¶ 970c, at 31. 

Ultimately, the judicial task here is not to favor cost 

redistribution or any other economic agenda for its own sake. 

Congress has decided that any merger that 

“substantially * * * lessen[s] competition” is forbidden. 15 

 4

 See also Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 

979, 988 (9th Cir. 2000) (“[T]he central purpose of the antitrust laws, 

state and federal, is to preserve competition. It is competition—not 

the collusive fixing of prices at levels either low or high—that these 

statutes recognize as vital to the public interest.”). 
6 

U.S.C. § 18. Our task is to enforce that legislative judgment. 

To allow a merger that has already been proven to 

“substantially * * * lessen competition,” id., to proceed 

anyhow because of some unverifiable and non-merger-specific 

amount of price decreases accruing to one segment of the 

health care market would rewrite rather than enforce the 

Clayton Act.5

 5

 Thus far the courts of appeals—including United States v. 

Baker Hughes, 908 F.2d 981 (D.C. Cir. 1990), and all of the cases on 

which the dissenting opinion relies—have only held that efficiencies 

may be used as part of an evidentiary burden-shifting scheme to 

rebut the government’s prima facie showing of an anticompetitive 

merger. No court of appeals has gone as far as Anthem and held that 

a reduction in costs standing alone greenlights a substantially 

anticompetitive merger that would otherwise be barred by the 

Clayton Act. See Federal Trade Comm’n v. University Health, Inc., 

938 F.2d 1206, 1222 n.29 (11th Cir. 1991) (“Of course, once it is 

determined that a merger would substantially lessen competition, 

expected economies, however great, will not insulate the merger

from a section 7 challenge.”); AREEDA & HOVENKAMP, supra, 

¶ 970f, at 42. 
KAVANAUGH, Circuit Judge, dissenting: This important 

antitrust case involves a multi-billion dollar merger between 

two health insurers, Anthem and Cigna. As relevant to this 

case, those two insurers sell insurance services to large national 

businesses. There are four national insurers in that market: 

Anthem, Cigna, United, and Aetna. Anthem and United are the 

two major insurers in this market, whereas Cigna is a fairly 

small player. In the 14 States where Anthem and Cigna sell 

insurance services to large national businesses, Anthem has a 

41% share of the market, and Cigna has a 6% share.

The U.S. Government sued under Section 7 of the Clayton 

Act to block the Anthem-Cigna merger. See 15 U.S.C. §§ 18, 

25. The Government alleged that the merger would unlawfully 

lessen competition in the market for insurance services sold to 

large national businesses. The District Court agreed with the 

Government and enjoined the merger. The majority opinion 

affirms. I respectfully dissent. 

At the outset, it is important to stress that this is an unusual 

horizontal merger case because of the nature of this particular 

slice of the insurance industry. To properly analyze this case, 

it is essential to understand precisely how these markets work. 

There are three main players: (i) large employers, 

(ii) insurers, and (iii) healthcare providers, namely hospitals 

and doctors. Under the standard contracts that apply in this 

particular segment of the insurance industry, the employers do 

not pay premiums to the insurers. And the insurers do not pay 

the hospitals and doctors for healthcare services provided to the 

employers’ employees. Instead, the employers pay insurers a 

fee for obtaining access to the insurers’ provider network.

Insurers in turn contract with healthcare providers – hospitals 

and doctors – to develop that provider network. In that

upstream market, the insurers negotiate rates in advance with 

the hospitals and doctors. 
2

As a result, when the employers’ employees need health

care, the employers pay those negotiated rates to the healthcare 

providers. Importantly, therefore, employers in this market are

self-insured. They pay the insurers a fee simply to obtain 

access to the provider networks arranged by the insurers, as 

well as for certain administrative services performed by the 

insurers. 

To summarize in simple terms: The employers pay the 

insurers a fee, and the insurers then act as the employers’ 

purchasing agents for healthcare services. In that upstream 

market, the insurers negotiate in advance with hospitals and 

doctors over the rates that will be charged to employers for their 

employees’ health care. When insurers negotiate lower 

provider rates, employers save money on health care.

Here, two insurers (Anthem and Cigna) want to merge. 

The majority opinion sees this as a classic horizontal merger 

case where the high concentration of this market and the 

merged insurer’s high market share would mean increased 

prices for the employer-customers. But that understanding

misses what I believe is the critical feature of this case. Here, 

these insurance companies act as purchasing agents on behalf 

of their employer-customers in the upstream market where the 

insurers negotiate provider rates for the employer-customers. 

When the insurers negotiate lower provider rates, those savings 

go directly to the employer-customers. The merged AnthemCigna would be a more powerful purchasing agent than 

Anthem and Cigna operating independently. The merged 

Anthem-Cigna would therefore be able to negotiate lower

provider rates on behalf of its employer-customers. Those 

lower provider rates would mean cost savings that would be 

passed through directly to the employer-customers. To be sure, 

the merged company may charge its employer-customers an 

increased fee for obtaining those savings. But the record 
3

overwhelmingly demonstrates that the cost savings to 

employers would far exceed any increased fees paid by 

employers. 

In short, the record decisively demonstrates that this 

merger would be beneficial to the employer-customers who 

obtain insurance services from Anthem and Cigna. That is the 

core of my respectful disagreement with the majority opinion. 

(As I will explain in Part I-C below, if there is a problem with 

this merger, the problem lies in the merger’s effects on 

hospitals and doctors in the upstream market, not in the 

merger’s effects on employers in the downstream market.) 

In Part I of this dissent, I will outline my approach to this 

case. In Part II, I will briefly summarize some of my concerns 

about the majority opinion and the concurrence. 

I

A

The Government contends that this merger between 

Anthem and Cigna would cause undue market concentration in 

the market for the sale of insurance services to large employers, 

and would increase the merged company’s market share to an 

anti-competitive level. The Government argues that, as a 

result, the merged Anthem-Cigna would be able to use its 

market power to raise the fees it charges to large employers for

those insurance services. How much? The evidence in the 

record suggests that large employers would pay Anthem-Cigna

increased fees of about $48 million annually by one estimate, 

up to $220 million annually by another estimate, and up to $930 

million annually by yet another estimate. 
4

But that is not the end of the antitrust analysis under the 

law governing horizontal mergers. The case law of the 

Supreme Court and this Court, as well as the Government’s 

own Merger Guidelines, establish that we must consider the 

efficiencies and consumer benefits of a merger together with 

its anti-competitive effects. See United States v. General 

Dynamics Corp., 415 U.S. 486, 498-500 (1974); FTC v. H.J. 

Heinz Co., 246 F.3d 708, 720 (D.C. Cir. 2001); United States 

v. Baker Hughes Inc., 908 F.2d 981, 990-91 (D.C. Cir. 1990);

U.S. Department of Justice & Federal Trade Commission, 

Horizontal Merger Guidelines § 10, at 29-31 (2010). 

Here, as I will explain, the analysis of the overall effects 

of this merger shows that the merger would not substantially 

lessen competition in the market for the sale of insurance 

services to large employers. The record demonstrates that 

those large employers would save an amount ranging from $1.7

to $3.3 billion annually due to reduced rates charged by 

healthcare providers. For large employers, therefore, the 

savings from the merger would far exceed the increased fees 

they would pay to Anthem-Cigna as a result of the merger. 

To begin with, the record evidence overwhelmingly 

demonstrates that the merged Anthem-Cigna, with its 

additional market strength and negotiating power in the 

upstream market, would be able to negotiate lower provider 

rates from hospitals and doctors for healthcare services. 

Indeed, the Government itself agrees that this merger would

allow Anthem-Cigna to obtain lower provider rates. Linger on 

that point for a moment: The Government concedes that 

Anthem-Cigna would be able to negotiate lower provider rates 

that employers would pay for their employees’ health care. On 

top of that, in light of the “affiliate clause” in many of 

Anthem’s existing contracts, the merger would allow at least 

some of the businesses that currently purchase insurance 
5

services from Cigna to obtain lower rates that Anthem has 

previously negotiated with providers. 

How much would provider rates be reduced? AnthemCigna’s integration planning team, working in consultation 

with McKinsey, an independent consulting firm, calculated 

$2.6 to $3.3 billion in projected annual savings for AnthemCigna’s employer-customers as a result of the merger. 

Anthem-Cigna’s expert, Dr. Israel, worked independently of 

the integration team, but he came to a similar conclusion. He 

determined that the merger would yield $2.4 billion in annual 

medical cost savings. 

The record evidence also overwhelmingly demonstrates 

that the medical cost savings from the lower provider rates 

negotiated by Anthem-Cigna would be largely if not entirely 

passed through to the large employers that contract with 

Anthem-Cigna. The savings are passed through to employers 

because, under the contractual arrangements that apply in that 

market, the employers pay healthcare providers for the 

healthcare services provided to employees. So if the price of 

healthcare services is lower, the employers would directly 

benefit because the employers would then pay those lower

prices. 

The Government critiques those estimates in part by 

noting that the estimates include cost savings that will accrue 

to the fully insured employers. It is true that a slice of this large 

employer market is fully insured, not self-insured. For those 

large employers, there would not necessarily be automatic 

pass-through. Even taking the fully insured employers out of 

the equation, however, the annual savings to self-insured 

employers would still be at least $1.7 billion annually.
6

By contrast, the Government’s expert, Dr. Dranove, never 

did a merger simulation that calculated the amount of the 

savings that would result from the lower provider rates and be 

passed through to employers. Even though the Government 

admitted that the merger would lead to a reduction in provider 

reimbursement rates, Dr. Dranove built an assumption into all 

of his models that there would be zero medical cost savings. 

See Trial Tr. 1159, 1867. So we are left with Anthem-Cigna’s 

evidence showing $1.7 to $3.3 billion annually in passedthrough savings for employers.1

 

Under the law, those efficiencies and consumer benefits 

identified by Anthem-Cigna must be both merger-specific and 

verified. See U.S. Department of Justice & Federal Trade 

Commission, Horizontal Merger Guidelines § 10, at 30. Both 

requirements are satisfied here. 

The efficiencies and consumer benefits in this case are 

merger-specific by definition. As even the Government 

 1 To be sure, if a price decrease were accompanied by a 

substantial reduction in quality, that fact would raise a separate 

concern about this merger. But here, the record does not contain 

sufficient evidence, beyond some speculation and guesswork by the 

Government, that the merger would cause an actual decrease in the 

quality of medical service provided to employers by hospitals and 

doctors, or in the quality of customer service provided to employers 

by insurers.

Relatedly, the Government suggests that the current Cigna 

employer-customers, once switched over to Anthem after the merger, 

would utilize healthcare services more often. The Government 

argues that the higher utilization would cancel out some of the cost 

savings that the employer-customers would otherwise achieve. That 

suggestion is likewise highly speculative and does not square with 

the record, which shows that current Anthem employer-customers 

have lower utilization rates than the current Cigna employercustomers. See J.A. 480.
7

admits, Anthem-Cigna’s enhanced bargaining power would 

come from the merger. And that enhanced bargaining power 

is a large part of what would enable Anthem-Cigna to negotiate 

the lower provider rates that in turn would lead to cost savings 

for employers. So, too, Anthem’s ability to rely on its existing 

contracts to offer lower rates to Cigna customers is a direct 

result of the merger. There is little if any evidence to support 

the made-up notion that Anthem and Cigna could obtain lower 

provider rates even absent the merger. The claimed savings are 

merger-specific. 

Moreover, the efficiencies and benefits were sufficiently 

verified (i) by Anthem-Cigna’s expert witness Dr. Israel, 

(ii) by the merger integration planning team, working with 

McKinsey, the independent consulting firm, and (iii) by 

various healthcare providers who testified at trial. To be 

verified, the efficiencies and consumer benefits must be “more 

than mere speculation and promises about post-merger 

behavior.” Heinz, 246 F.3d at 721. But they need not be 

certain. They merely must be probable. See Baker Hughes, 

908 F.2d at 984 (“Section 7 involves probabilities, not 

certainties or possibilities.”). Here, that bar is cleared because 

there is no doubt that the merger would reduce provider rates 

(as the Government concedes) and no doubt that the savings 

from those lower provider rates would be largely passed 

through to employers (as the contracts and basic structure of 

this self-insured market require). To be sure, one can debate 

just how much the employers would benefit from this merger. 

But Anthem-Cigna’s expert and integration planning team 

calculated savings of $1.7 to $3.3 billion annually. On this 

record, there is little basis to doubt that the cost savings for 

employers as a result of the merger would be large – and far 

larger than the increased fees charged by insurers to employers 

as a result of the merger. 
8

In short, the record overwhelmingly establishes that the 

merger would generate significant medical cost savings for 

employers in all of the geographic markets at issue here –

overall, approximately $1.7 to $3.3 billion annually – and 

employers would therefore spend significantly less on 

healthcare costs. (As noted, the increased fees for employers, 

on the other hand, would amount to $48 to $930 million.) And 

because the employers would spend less on health care for 

employees, they would have more to spend on employees’ 

salaries, thereby benefitting their employees. Some of the 

ultimate beneficiaries of this merger would be the rank-and-file 

workers who are employed by the businesses that obtain 

insurance services from Anthem and Cigna.

I of course recognize that the District Court’s factual 

findings are reviewed only for clear error. But we are not a 

rubber stamp. And here, the record convincingly demonstrates 

that this merger would significantly reduce healthcare costs for 

the large employers that purchase insurance services from 

Anthem and Cigna. That is true across the 14 states in which 

Anthem and Cigna both operate, including Virginia (and the 

Richmond market). The District Court clearly erred, therefore, 

in concluding that the merger would substantially lessen 

competition in the market in which insurance services are sold 

to large employers. 

B

In a separate discussion, however, the District Court also 

relied on 1960s Supreme Court cases and suggested that 

antitrust law may not allow consideration of the efficiencies 

and consumer benefits in the first place. If that were true, this 

would be an easy case for the Government given the 
9

concentration of the market and the market share of the merged 

company. But that description of the law is not correct. 

In landmark decisions in the 1970s – including United 

States v. General Dynamics Corp., 415 U.S. 486 (1974), and 

Continental T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977)

– the Supreme Court indicated that modern antitrust analysis

focuses on the effects on the consumers of the product or 

service, not the effects on competitors. In the horizontal 

merger context, the Supreme Court in the 1970s therefore

shifted away from the strict anti-merger approach that the 

Court had employed in the 1960s in cases such as Brown Shoe 

Co. v. United States, 370 U.S. 294 (1962), and United States v. 

Philadelphia National Bank, 374 U.S. 321 (1963). 

As this Court has previously noted, in “the mid-1960s, the 

Supreme Court construed section 7 to prohibit virtually any 

horizontal merger or acquisition,” but the Supreme Court 

subsequently “cut” those precedents “back sharply,” beginning 

with its 1974 decision in General Dynamics. Baker Hughes, 

908 F.2d at 989-90. In General Dynamics, the Supreme Court 

made clear that the merger analysis must take account not just 

of market concentration and market shares, but also of the 

“structure, history and probable future” of the market. 415 U.S. 

at 498 (quoting Brown Shoe, 370 U.S. at 322 n.38); see also E.

THOMAS SULLIVAN & JEFFREY L. HARRISON, UNDERSTANDING 

ANTITRUST AND ITS ECONOMIC IMPLICATIONS 369 (6th ed. 

2014) (“General Dynamics signaled a major shift in § 7 

interpretation.”); Note, Horizontal Mergers After United States 

v. General Dynamics Corp., 92 HARV. L. REV. 491, 499, 502

(1978) (The General Dynamics case “signaled a new judicial 

approach to section 7 cases. . . . By endorsing an inquiry into 

such factors – the structure, history and probable future of the 

relevant market – General Dynamics brought antitrust analysis 

back into line with current economic thought.”) (internal 
10

quotation marks omitted); cf. ROBERT H. BORK, THE 

ANTITRUST PARADOX 210 (1978) (“It would be overhasty to 

say that the Brown Shoe opinion is the worst antitrust essay 

ever written. . . . Still, all things considered, Brown Shoe has 

considerable claim to the title.”). 

Applying that broader analysis, the General Dynamics

Court rejected the Government’s assertion in that case that a 

proposed merger between two leading coal producers would 

violate Section 7 of the Clayton Act. In subsequent cases, the 

Supreme Court has adhered to General Dynamics. See, e.g., 

United States v. Marine Bancorporation, Inc., 418 U.S. 602, 

631 (1974); United States v. Citizens & Southern National

Bank, 422 U.S. 86, 120 (1975). Notably, since 1975, the 

Supreme Court has not decided a case assessing the lawfulness 

of a horizontal merger under Section 7 of the Clayton Act. So 

General Dynamics remains the last relevant word from the 

Supreme Court. 

This Court has already concluded that we are bound by 

General Dynamics, not by the earlier 1960s Supreme Court 

cases. In Baker Hughes, we explained that “General Dynamics

began a line of decisions differing markedly in emphasis from 

the Court’s antitrust cases of the 1960s. Instead of accepting a 

firm’s market share as virtually conclusive proof of its market 

power, the Court carefully analyzed defendants’ rebuttal 

evidence.” Baker Hughes, 908 F.2d at 990.2

 In Baker Hughes, 

we thus cited General Dynamics for the proposition that the 

Section 7 analysis is “comprehensive” and focuses on a 

“variety of factors,” including “efficiencies.” Id. at 984, 986. 

As Baker Hughes recognized, and as this Court reaffirmed in 

its later decision in Heinz, modern merger analysis must 

 2 Baker Hughes was authored by Judge Clarence Thomas and 

joined by Judge Ruth Bader Ginsburg and Judge David Sentelle. 
11

consider the efficiencies and consumer benefits of the merger. 

See Baker Hughes, 908 F.2d at 984-86; Heinz, 246 F.3d at 720 

(“[E]fficiencies can enhance the merged firm’s ability and 

incentive to compete, which may result in lower prices, 

improved quality, or new products.”) (internal quotation marks 

omitted). Importantly, even the Government’s own Merger 

Guidelines now recognize that the merger analysis must 

consider the efficiencies and consumer benefits of the merger. 

See U.S. Department of Justice & Federal Trade Commission, 

Horizontal Merger Guidelines § 10, at 29-31; see also Baker 

Hughes, 908 F.2d at 985-86 (“It is not surprising” that “the 

Department of Justice’s own Merger Guidelines contain a 

detailed discussion of non-entry factors that can overcome a 

presumption of illegality established by market share 

statistics.” Those “factors include . . . efficiencies.”).

We are bound by the modern approach taken by the 

Supreme Court and by this Court. See generally BRYAN A.

GARNER ET AL., THE LAW OF JUDICIAL PRECEDENT 31 (2016)

(“[W]hen the Supreme Court overturns the standard that it had 

previously used to resolve a particular class of cases,” federal 

courts “must apply the new standard and reach the result 

dictated under that new standard.” The “results reached under 

the old standard” are no longer “binding precedent.”). Under 

the modern approach reflected in cases such as General 

Dynamics, Baker Hughes, and Heinz, the fact that a merger 

such as this one would produce heightened market 

concentration and increased market shares (and thereby 

potentially harm other insurers that are competitors of Anthem 

and Cigna) is not the end of the legal analysis. Under current 

antitrust law, we must take account of the efficiencies and 

consumer benefits that would result from this merger. Any

suggestion to the contrary is not the law. 
12

C

That said, on my view of the case, the Government could 

still ultimately block this merger based on the merger’s effects 

on hospitals and doctors in the upstream provider market. At 

trial, the Government asserted an alternative ground for 

blocking the merger: The Government claimed that the merger 

between Anthem and Cigna would give Anthem-Cigna 

monopsony power in the upstream market where AnthemCigna negotiates provider rates with hospitals and doctors. The 

District Court did not decide that separate claim. I would 

remand for the District Court to decide it in the first instance. 

Monopsony power describes a scenario in which AnthemCigna would be able to wield its enhanced negotiating power 

to unlawfully push healthcare providers to accept rates that are

below competitive levels. That may be an antitrust problem in 

and of itself. Moreover, the exercise of monopsony power to 

temporarily reduce consumer prices does not qualify as an 

efficiency that can justify an otherwise anti-competitive 

merger. The consumer welfare implications (and 

consequently, the antitrust law implications) of monopsony 

power and ordinary bargaining power are very different. 

Although both monopsony and bargaining power result in 

lower input prices, ordinary bargaining power usually results 

in lower prices for consumers, whereas monopsony power 

usually does not, at least over the long term. See 4A PHILLIP 

E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 980, 

at 108 (3d ed. 2009); HERBERT HOVENKAMP, FEDERAL 

ANTITRUST POLICY § 1.2b, at 15 (4th ed. 2011). Therefore, the 

exercise of bargaining power by Anthem-Cigna is procompetitive because it usually results in lower prices for 

Anthem-Cigna’s employer-customers. By contrast, the 

exercise of monopsony power by Anthem-Cigna may be anticompetitive because it may result in higher prices for Anthem-
13

Cigna’s employer-customers. Cf. U.S. Department of Justice 

& Federal Trade Commission, Horizontal Merger Guidelines

§ 10, at 30 (“Cognizable efficiencies . . . do not arise from 

anticompetitive reductions in output or service.”). 

Notably, even Anthem-Cigna concedes that the merger 

would be unlawful if the merger would give Anthem-Cigna 

monopsony power in the upstream market. See Tr. of Oral Arg. 

at 85 (Defense Counsel: “If it was an exercise of market power 

on the buy-side, monopsony, we are not claiming that it’s a 

cognizable efficiency. We’re accepting the rule in the merger 

guidelines that if it really is the exercise of market power, 

which means a constraint in output, bringing the price away 

from the competitive level, yes, we’re not claiming that that’s 

a cognizable efficiency.”). 

To be clear, if Anthem-Cigna would obtain lower provider 

rates merely because of its enhanced ability to negotiate lower 

prices with providers, that alone would not necessarily be an 

antitrust problem. But if Anthem-Cigna would obtain provider 

rates that are below competitive levels because of its exercise 

of unlawful monopsony power against providers, that could be 

a problem, and perhaps a fatal one for this merger. In other 

words, if the lower provider rates from this merger turn out to 

be the fruit of a poisonous tree – namely, the fruit of AnthemCigna’s exercise of unlawful monopsony power against 

hospitals and doctors in the upstream market – then the merger 

may be unlawful. See U.S. Department of Justice & Federal 

Trade Commission, Horizontal Merger Guidelines § 10, at 30. 

As a result, the legality of the merger should turn on the 

answer to the following fact-intensive question: Would 

Anthem-Cigna obtain lower provider rates from hospitals and 

doctors because of its exercise of unlawful monopsony power 

in the upstream market where it negotiatesrates with healthcare 
14

providers? Given the way it resolved the case, the District 

Court never reached that critical question. Therefore, I would 

remand for the District Court to expeditiously decide that 

question in the first instance.

II

The majority opinion portrays this as an easy case for 

blocking the merger. If the law and the facts were as described 

by the majority opinion, I would agree with it. But in my view,

the law and the facts are not as described by the majority 

opinion. Indeed, the majority opinion outflanks even the 

Government’s position on the law and the facts. 

First, the Government accepts as a given that a defendant 

in a Section 7 case may rely on a merger’s efficiencies to show 

that a merger would not be anti-competitive despite the 

increased market concentration and market shares that would 

result from the merger. But the majority opinion – echoing the 

District Court – does not accept that legal principle as a given. 

On the contrary, the majority opinion casts doubt on this 

Court’s opinions in Baker Hughes and Heinz, and on whether 

Section 7 analysis allows a court to take account of a merger’s 

efficiencies as a defense in a merger case. The majority 

opinion says that the Supreme Court’s 1967 decision in FTC v. 

Procter & Gamble Co., 386 U.S. 568 (1967), is the essential

precedent on this question. For the majority opinion, we are 

apparently stuck in 1967. The antitrust clock has stopped. No 

General Dynamics. No Continental T. V. v. GTE Sylvania. No 

Baker Hughes. No Heinz. No updated Merger Guidelines.3

 

To reiterate, not even the Government makes that far-reaching 

argument. For good reason. As one hornbook aptly puts it, the 

 3 The concurrence goes so far as to say that even if “prices will 

go down,” that “proves nothing by itself.” Concurring Op. at 1. 
15

“truly important point is that no modern observer, and no 

modern court, espouses the old FTC v. Procter & Gamble Co.

(1967) position that efficiencies might be reason to condemn a 

merger.” ERNEST GELLHORN, WILLIAM E. KOVACIC &

STEPHEN CALKINS, ANTITRUST LAW AND ECONOMICS IN A 

NUTSHELL 463 (5th ed. 2004); see also Baker Hughes, 908 F.2d 

at 985 (“Indeed, that a variety of factors other than ease of entry 

can rebut a prima facie case has become hornbook law. . . .

[O]ther factors include industry structure, weakness of data 

underlying prima facie case, elasticity of industry demand, 

inter-industry cross-elasticities of demand and supply, product 

differentiation, and efficiency.”) (emphasis added). 

Fortunately, the majority opinion in the end does not

actually hold that there is no efficiencies defense available in 

Section 7 cases. The majority opinion merely suggests as much

in dicta – perhaps portending a return to 1960s antitrust law in 

some future merger case. For purposes of this case, however, 

the majority opinion simply says that even assuming such a 

defense exists under the law, the defense would not be satisfied 

here. The majority opinion’s lack of a square holding on the 

role of efficiencies in merger cases is some measure of good 

news because it means that future district courts and future 

panels of this Court still must follow General Dynamics, Baker 

Hughes, and Heinz, not the ahistorical drive-by dicta in today’s 

majority opinion. 

Second, on the facts, the majority opinion never fully

accepts the two key facts in this case: First, provider rates will 

be lower; and second, the savings from those lower rates will 

be passed through to employers. The first fact is conceded by 

the Government, and the second fact is undeniable given the 

nature of this market and the contractual relationships between 

employers and insurers.
16

As mentioned above, the key difference between this 

horizontal merger and some horizontal mergers is that the 

increased savings obtained by the merged company in the 

upstream supply market in this case would be passed through 

directly to consumers. That one fact makes this merger 

unusual. In the ordinary case of a merger where the merged 

firm would have market power, it can be difficult for the 

merged firm to demonstrate that a substantial portion of the 

efficiencies resulting from the merger would actually be passed 

through to consumers instead of being retained by the merging 

companies. See, e.g., FTC v. Staples, Inc., 970 F. Supp. 1066, 

1090 (D.D.C. 1997) (“Staples and Office Depot have a proven 

track record of achieving cost savings through efficiencies, and 

then passing those savings to customers in the form of lower 

prices. However, in this case the defendants have projected a 

pass through rate of two-thirds of the savings while the 

evidence shows that, historically, Staples has passed through 

only 15-17%.”); see also U.S. Department of Justice & Federal 

Trade Commission, Horizontal Merger Guidelines § 10, at 31 

(“The greater the potential adverse competitive effect of a 

merger, the greater must be the cognizable efficiencies, and the 

more they must be passed through to customers.”). However, 

in this case, a high pass-through rate is practically guaranteed 

because, under the contractual arrangements that apply in the 

relevant market, the employers pay healthcare providers for the 

healthcare services provided to employees. So if the price of 

healthcare services is lower, the employers directly benefit 

because Anthem-Cigna’s employer-customers pay those lower 

prices. 

The only real factual question concerning the effects of the 

merger on large employers should be whether the savings to 

employers from lower provider rates would exceed the 

increased fees employers would pay to Anthem-Cigna for the 

insurance services. As I have explained, the record evidence 
17

overwhelmingly indicates that the savings to employers from 

lower provider rates would greatly exceed the increased fees 

they would pay to Anthem-Cigna for the insurance services. 

But the majority opinion does not conduct that key inquiry. 

That is because the majority opinion does not fully accept the 

fact, undisputed by the parties, that provider rates would 

actually be lower as a result of this merger. And the majority

opinion likewise does not accept that any possible cost savings 

would actually be passed through. So for the majority opinion, 

there are no cognizable efficiencies to consider in the first place 

and no need to assess whether the cost savings for employers 

are greater than the increased fees paid by employers. 

The majority opinion offers up a smorgasbord of reasons 

to think that provider rates would not be lower or would not

really be passed through, ranging from provider “abrasion,” to 

secret Anthem plans to dramatically raise the fees it charges 

employers, to Anthem’s supposed inability to force or 

negotiate with providers to obtain Anthem rates for Cigna 

customers, to friction between the Anthem and Cigna CEOs. 

All of that seems at best highly speculative. The plural of 

anecdote is not data. Of course, lots of bad things could happen

after the merger. But the courts have to assess what is likely. 

See Baker Hughes, 908 F.2d at 984 (“Section 7 involves 

probabilities, not certainties or possibilities.”). The majority 

opinion seems to be accepting the worst-case possibility rather 

than determining what is likely. And the overwhelming 

evidence of what is likely is that provider rates would go down, 

that the savings would be passed through to employers, and that 

the savings to employers would greatly exceed any increase in 

fees paid by employers. 

To the extent the majority opinion acknowledges even 

obliquely that prices possibly could go down after the merger, 
18

the majority opinion retorts that quality will also go down after 

the merger. But quality of what? As noted earlier, there is no 

persuasive evidence that the quality of medical care provided 

by hospitals and doctors would decrease. Nor is there any 

convincing evidence that the quality of services provided to 

employers by insurers would meaningfully decrease. Not to 

mention, does any supposed decrease in quality really rise to 

the level of $1.7 to $3.3 billion annually? The record discloses 

no meaningful effort to quantify or calculate the supposed 

decrease in quality. 

The majority opinion also says that Cigna provides 

programs that help reduce utilization and that those could be 

jettisoned after the merger. But there is no good reason to think 

that those programs would be jettisoned rather than adopted by 

the merged company. Moreover, this speculation does not 

account for the fact that Anthem already has lower utilization 

rates than Cigna. So is it not likely that Cigna customers would 

utilize health care more after the merger than they do now.

* * *

The analysis of a merger’s effects necessarily entails a 

predictive judgment. Courts are often ill-equipped to render 

those predictive judgments in cases of this sort. But here, we 

have a far clearer picture of what will unfold than we often do. 

We know that Anthem-Cigna would be able to negotiate lower 

provider rates; indeed, even the Government admits as much. 

And we know that those savings will be largely passed through

to employers because that is the way the market and contracts 

are structured. After all, the whole point of the provider rates 

negotiated by insurers is to establish the prices that the

employers will pay. If the prices are lower, the employers will 

pay less. And we know, furthermore, that any cost savings to 
19

employers likely would greatly exceed any increase in fees 

paid by employers. 

On this record, this horizontal merger therefore would not 

substantially lessen competition in the market for the sale of 

insurance services to large employers. The District Court 

clearly erred in concluding otherwise, and I disagree with the 

majority opinion’s affirmance of the District Court’s judgment. 

The problem for this merger, if there is one, is in its effects 

in the upstream market – namely, in its effects on hospitals and 

doctors as a result of Anthem-Cigna’s enhanced negotiating 

power. Therefore, my approach to this case would require

District Court resolution of one remaining question: Would 

Anthem-Cigna obtain lower provider rates from hospitals and 

doctors because of its exercise of unlawful monopsony power 

in the upstream market where it negotiates rates with 

providers? If yes, then Anthem-Cigna concedes that the 

merger is unlawful and should be enjoined. If no, then the 

merger is lawful and should be able to go forward. I would

vacate the District Court’s judgment and remand for the 

District Court to expeditiously resolve that fact-intensive 

question in the first instance. 

I respectfully dissent.