# Unite d States Court of Appe als

F O R T H E D I S T R

I C T O F C O L U M B I A

C I R C U I T

Arg ued Mar ch 24, 2017 Dec ided April 28, 2017

No. 17-5024

U N I TE D S TA TE S O F A M E R I C A , E T A L ., A P P E L L E E S

v.

A N TH E M , I

N C ., A P P E L L A N T

C I G N A C O R P O R A TI O N , A P P E L L A N T

Consolidated with 17-5028

Appea ls from the United States District Court for the D istrict of Columbia (No. 1:16-c v-01493)

C h r istopher M. Curran arg ued the cause for appellant Anthem, I nc. Wit h him on the briefs was J. Mark Gidley

. Noah A. B r umfield

, Matthew S. Leddicotte

, and George L. Paul
enter ed appe ara

nces.

Charles F. Rule was on the brief for ap p el l ant Cigna Corporation. Craig A. Benson enter ed an a ppear ance

.2

Paul T. Denis and Steve n G. Bradbury wer e on the brief for amici curiae Antitrust Econom i s t s and Business Professors in support of appe llant.

S co t t A. W estrich

, Attorney
, U.S. Depa rtment of J ustice,
arg u ed t he cause for appellee s. Wit h him on the brief wer e Krist en C. Limarzi
, Jame s J. Fredrick

s , Mary Helen W

imberly

, and Da niel E. Haar
, Attorney s, Rache l O. Davis
, Assistant Attorney Gene ral, Offic e of the Attorney Gene ral for the State of Connecticut, and Paula Lauren Gibson

, Deputy Attorney Gene ral, Offic e of t h e At t orney Gene ral for the State of California. Loren L. AliKhan

, Deputy Solicitor Gene ral, Offic e of t he Attorne y Gene ral for the Dis trict of C olumbia, Sarah O. Allen and Tyler T. He nry , Assistant Attorney s Gene ral, Offic e of the Atto rn ey General for the Commonwealth of Virg inia, Ellen S. Cooper
, Assistant Attorney Gene ral, Office of the Attorney Gene ral for the State of Mary land, Victor J. Domen Jr.
, Senior Counsel, Cynthia E. K i n s er , Deputy Attorney Gene ral, and Erin Merrick

, Assist ant Attorney Gene ral, Offic e of the Attorney Gene ral for

the State of Tenne ssee, Jennifer L. Foley

, Assistant Attorney Gene ral, Office of t he Attorney Gene ral for the State of New Ha m p s h i re, Dev in Laiho

, Senior Assistant Attorney Gene ral, Offic e of the Attorney Gene ral for the State of Colorad o , Layne M. Lindebak

, Assistant Attorney Gene ral, Offic e of the Att orney Gene ral for the S tate of I owa, Christ ina M. Moy lan , Assistant Attorney Gene ral, Of

fice of the Attorne y Gene ral for the State of Maine, Irina C. Rodriguez

, Assistant Attorney Gene ral, Offic e of the Attorney Gene ral for the State of New York, and Daniel S. W alsh

, Assistant Attorney Gene ral, Offic e of the Attorney Gene ral for the State of Geor g ia, enter ed
appea ranc es.

David A. Balto was on the brief for amici curiae Americ an Antitrust I nstitut e, et a l. in support of plaintiffs-appe llees.3

Edith M. Kallas

, Joe R. W hatley

, Jr
., and Henry C. Quillen

wer e on the brief for amici curiae The Ameri ca n Medica l Association and The Medica l Society of the Dist ri ct of Columbi a in support of a

ppellees.

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

wer e on the brief for amicus cur i a e Am eric an Hospital Association in support of appe llees.

Richard P. Rouco wa s on the brief for amici curiae Professors in support of a ppellees.

Be fore : R O G E R S , K A V A N A U G H and M I L L E TT , Circuit Judges

. Opinion for the Court filed by Circuit Judge R O G E R S

. Concurring opinion filed by Circuit Judge M I L L E TT

. Dissenting opinion filed by Circuit Judge K A V A N A U G H

.

R O G E R S , Circuit Judge : This expedited appea l arises from the g overnme nt’s succe ssful challeng e to “the larg est proposed
merg er in the hi story o f t h e health insurance industry

, betwee n two of the four national car riers,” Anthem

, I nc. and Cigna Corporation. Appe llees B r. 1. I n J uly 2015, Anthem, which is licensed to opera te under the Blue Cross Blue Shie l d b rand in fourtee n states, rea ched an ag ree ment to merg e with Cigna

, with which Anthem co m p et es larg ely in those fourtee n states. The U.S. Depa rt m en t of J ustice, along with eleve n States and the District of Columbi a (tog ether , the “g overnme nt”), filed suit to
perma nently enjoin the merg er on the g round it was likely to substantially lessen competition in at lea s t t wo marke ts in

v i o l at i o n of Section 7 of the Clay ton Act. Following a bench trial, the district court enjoined the merg er, reje cting the fac tual4

basis o f t he cente rpiec e of Anthem’s defe nse, and focus of its

curr ent appeal, t hat the mer g er’ s anticompetitive eff ects would be ou t weig hed by its eff iciencie s beca

use the merg er would
y ield a superior C i gn a product at Anthem’s lower rate s. The district court found that Anthem had failed t o demonstrate that its plan is achie vable and that the merg er will benef it consumers

as claimed in the marke t for the sale of medical health insurance
to national acc ounts in the fourtee n Anthem states, as well as to larg e g roup employ ers in Richmond, Virg inia.

Anthem and Cigna (her einaf ter, Anth em) challeng e the district court’s decision and orde r p erma nently enjoining the
merg er on the principal ground that the court improperly declined t o consider the claimed billions of dollars in medical saving s. See Appellant Br

. 10. Specifica lly

, Anthem maintains 1 the district co urt improperly reje cted a consumer welfa re standard — what it calls “the b en ch mark of modern antitrust law,” id. — and g ener ally abdica ted its responsibility to balanc e likely benef

its ag ainst any potential harm. Acc ording to Anthem, the merge r’s eff iciencie s would benef

it customers direc tly by reduci n g the costs of customer medical claims throug h lower provider rate s, without harm to th e providers. The g overnme nt has n ot challeng ed Anthem’s relianc e on an

Cig na has bec om e a re luct ant suppor te r of th e merg er , 1
st at ing in it s appel la te brie f that “[i] n ac co rda n ce w it h the m er ge r ag re em ent, Cigna has appea le d and def er s to Anthem .” Cign a B r. 3

. I ndeed, the dist

ri ct co urt not ed the “ele phant in the co urtr oo m ,” fo r at tria l Cig na exe cuti ve s dism is se d va ri ous of Anthem ’s cl ai ms of

sa vi ngs , cr os s- exa

m ined the m er gi ng p ar

ti es ’ exper

t w it nes s, and

re fuse d to si gn Anthem ’s pro pos ed fi ndings of fa ct and co nclus io ns of la w

. Unite d State

s v. Anthem, Inc

. , No. CV 16- 1493 (ABJ), 2017 WL 6 8 5 5 6 3
, at * 4 (D.D.C. Feb. 21, 2017 ). Anthem sug ge st ed this is a

“‘ si de is sue ,’ a m er e ‘rif

t betw ee n CEOs.’” Id. That thei r re la ti ons hip

m ay hav e de te ri or at ed h as lit

tl e t o do w it

h the a ntic om peti ti ve ef

fe ct s of the pro pos ed m er ge r.5

eff iciencie s defe nse per se

. Rather, it points out that Anthem neither disputes that the merg er would be anticompetitive but for the claimed medical cost saving s, n o r challeng es the district court’s finding s on the rele vant marke t definition, ease of entry , the eff ect of s o phisticated buy ers, or innovation. I nstead, Anthem’s appea l focuse s principally on fac tual disputes

conce rning the claimed m ed ical cost saving s, which the
go v ernme nt maintains wer e not verifie d, not specific to t h e merg er, a nd not even r eal e fficie ncies.

For the following rea sons, we hold that the district court did
not abuse its discretion in enjoining the merg er based on Anthem’s failure to show the kind of extraordinary eff iciencie s

nece ssary to o ffset the conce ded anticompetitive eff ect of the
merg er in the fourtee n Anthem states: t h e loss of Cigna

, an innovative competitor in a highly conce ntrated marke t. Additionally

, we hold that the distri ct court did not abuse its discretio n in enjoining the merg er based on its separ ate and independe nt deter

mination that the merg er would have a substantial anticompetitive eff ect in the Richmond, Virg inia larg e g roup employ er marke t. Acc ording ly

, we affi rm the issuance of the perma

nent injunct i o n on alterna tive and independe nt gr ounds.

I.

Under Section 7 of the Clay ton Act, a merg er betwee n two

co m panies may not proce ed if “in any line of commerc e or i n

an y ac t ivity aff

ecting commerc e in any section of the country , the eff ect of such [m erg er] may be s u b s t an tially to lessen competition.” 15 U.S.C. § 18.

A burden- shifting analy sis applies to consider the merg er’ s eff ect on competition. United States v. Bake r Hughes Inc.
, 908 F.2d 981, 982 (D.C. Cir. 1990). First, the plaintiff must6

establish a presumption of anticom p etitive eff ect by showing that the “tra

nsaction will lead to undue co n ce n t ration in the marke t for a particula

r product in a particula

r g eog raphic are a.” Id. T he most common way to make this showing is throug h a formula called the Her findahl-Hir schman I ndex (“H HI ”), which
compar es a marke t’s conce ntration befor e and afte r the proposed

m er ger

. See id. at 983 n.3. By squaring the marke t share
perc entag e of eac h marke t participa nt and adding them toge ther,

a marke t’s HHI can rang e from >0 to 10,000 ( i.e.
, a pure monopoly

, or 1002). Dept. of J ustice & Fe d. Trade Comm’n, Horizontal Me rg er Guidelines § 5.3 & n.9 (Aug

. 19, 2010) (the “Guidelines”). Under the Guidelines, a marke t will be considere d highly conce ntrated if it has an HHI above 2500, and if the merg er incre ases HHI by more than 200 points and results in a highly conce ntrated marke t, it “w ill be presumed to be l i k ely to enhanc e marke t power .” Id. § 5.3. Although, as t h e J ustice Depa

rtment acknow ledg es, the court is not bound by

, and owes no particula

r defe re n ce to, the Guidelines, this court considers them a helpful t o o l

, in view of the many y ear s of thoughtf ul analy sis they repr esent, for analy z i n g proposed
merg ers. See B aker H

ughes , 908 F.2d a t 985–86.

The burden shifts, once the prima fac ie case is made, to the defe ndant to rebut the presumption. Id. at 98 2

. T o do so, it
must provide sufficie nt evidenc e that the prima fac ie case “inac cura tely predic ts the rele vant transac tion’s probable eff ect

on future competition,” or it must sufficie ntly di s credit the evidenc e underly ing the initial presumption. Id. at 991. “The

more compelling the prima fac ie case , the more evidence the defe ndant must prese nt to rebut it succe ssfully ,” but beca use the burd en of persua sion ultimately lies with the plaintiff, the burden to re but must not be “unduly onerous.” Id.

Upon rebuttal by the defe ndant, “the burden of producing additional evidenc e of anticompetitive eff ect shifts to the7

[pl aintiff], and merg es wi t h the ultimate burden of persua sion, which re mains with the [pl aintiff] at all times.” Id. at 983.

II.

Anthem is the second- l ar gest seller of medical health insurance to la

rg e companies in the United States, and it se rves approximately 38.6 milli on medical members. I t is a member of
t he Blue Cross Blue Shield Association, a g roup of thi rt y -s i x health insurance companies licensed to do busine s s u n der the Blue Cross and/or Blue Shield brands. Anthem hol ds an exclusive license to the Blue b ra nds in all or part of fourtee n states (t h e “A n them states”)

, and it may also compete for busi n es s outside those states if it rec eives permission from the Blue licensee in the rele vant are a. Anthem also owns non-B lue subsidiaries throug h which it may opera te both in and outside of the Anthem stat es, subject to Anthem’s “B est Effor ts” obliga tions in its licensing ag ree ment with the Blue Cross Association. Under these “B est Effor ts” provi s i o n s, at least 80% of Anthem’s reve nue within the Anthem states must come from Blue -bra

nded products, as must at least 6 6

. 6 7 % of its

reve nue nationwide. Fa ilure to comply could result in termination o f Anthem’s license, which would trig g er a $2.9 billion fee to the Associa tion.

Cigna

, the third-larg est sel l er o f health insurance to larg e companies in the United States, serve s approximately 13 milli on medical members nationwide and in mor e than 30 countries, in addition to offer ing othe r specialty products such a s dental and vision insurance

. Unlike Ant hem, which has historically been able to lever ag e its siz e to neg otiate steep di s co u n t s from providers, Cigna ’s p rovider discounts have g ener ally not been

as g ood, so Cigna has develope d a differ ent and innovative value proposition in order to c ompete for customers. Under its

more collabora tive arr ang eme n ts w it h p r o v id e rs, and throug h the8

integ rate d, customiz ed wellness p ro grams it offe rs its customers’ employ ees, Cigna ’s focus is on reduc ing employ ees’

u t i l ization of expensive medical proce dures and promotin g wellness t h ro ug h behavior al supports and lifesty le chang es. This offe rs customers a differ ent means of lowering health car e costs th an the traditional model rely ing heavily on provider discounts.

On J uly 23, 2015, Anthem re ache d an ag ree ment to merg e with Cigna

. The merg er would leave Anthem as the s u rv i v i ng company , with a controlling share of the merg ed company ’s stock and a majority of seats on the merg ed company ’s board of direc tors. Wit hin the Anthem states, Cigna customers would be permitted t o rema in with Cigna

, at l east for the t ime being

, but Anthem and Cigna would otherwise no longe r compete with one another in those s tates. Outside the Anthem states, Cigna ’s exis ting business would allow Anthem a bigg er foothold to compete, subject to Anthem’s “B est Effor ts” obliga tions. The
merg er a g ree ment extends unti l April 30, 2017.

On J uly 21, 2016, the United States, along with California, Colorado, C onnecticut, Georg ia, I owa, Maine, Mary land, New Hampshire, New York, Tenne ssee, Virg inia, and the District of Columbi a, s u ed to enjoin the merg er. Rely ing on Section 7 of the Clay ton Act, 15 U.S.C. § 18, p l ai n t i ffs alleg ed that the
merg er would substantially lessen competition in the marke t for the sale of health insurance to national acc ounts i n b oth the Anthem states and the United States as a whole, as well as in the marke t for the sale of health insurance to larg e g roup employ ers in 35 local marke ts. Plainti ff s al so alleg ed that the merg er would substantially lessen competit ion for the purcha se of service s from h ea lthcare providers in the 35 local marke ts by
g iving the c ombined company anticompetitive buy

ing pow er.9

Following a six -we ek bench tr ial, the district court perma n en t l y enjoi ned the merg er on the basis of its likely substantial anticompetitive eff ect in the marke t for the sale of health insurance to national acc ounts in the Anthem states, as well as in the marke t for the sale of health insurance to larg e g roup em p loy ers in Richmond, Virg inia. United States v. Anthem, Inc.
, No. CV 16-1493 (AB J ), 2017 WL 685563, at *68 (D.D.C. Feb

. 2 1
, 2017). I t first define d the rele vant national

acc ounts marke t, acc epting the g overnme nt’s proposed d ef i nition of “national acc ount” as an employ er purcha si n g h ea lth insurance for more than 5,000 employ ees acr oss m o re than one state. I t also found t h at the marke t proper ly included both fully insured and “administrative service s only ” (“A SO”) plans. Under a fully -insured plan, the employ er pay s for claims adjudication, acc ess to the insurer’ s provider network (including whateve r discounted rate s the insurer has neg otiat ed), and

cover ag e of the employ ees’ medical costs. Under an ASO plan, the employ er pay s for claims adjudication and network acc ess, but the employ er s el f-insure s and thus takes on the risk of its employ ees’ medical costs. Finally

, the district c ourt found that the rele vant g eog raphic marke t for national acc ounts wa s the fo urtee n Anthem states, beca use that is wher e Anthem an d Cigna curren t ly compete most prominently

, g iven the
g eog raphic al restric tions imposed on Anthem under its Blue Cross license.

Wit h the national acc ounts marke t so def i n ed, the district
court then found a

presumption of anticompetitive eff ect based

o n the combined company ’s marke t share

. I t deter mine d t h at the merg er would incre ase HHI by 537 to 3000, while the Guidelines threshold is an incre ase of 200 to 2500, resulting in

a highly conce ntrated marke t. Guidel i n es § 1 0. I t also noted that under any varia

tion perf ormed by plaintiffs’ exp er t the resulting numbers wer e still well over the presum ptive Guidelines limit s: considering only national acc ounts wher e 5%10

of employ ees reside in another state, HHI would incre ase 641 to 3 1 2 4; considering only ASO customers with 5% out-of-stat e employ ees, HHI would incre ase 880 to 3675; and considering all ASO national acc ounts, HHI would incre ase 771 to 3663. Anthem o bjected that these calc ulations overstate d Anthem’s marke t sha

re by including all Blue customers e ven if they wer e not Ant h em ’s, but the district court found that this was appropr iate. Anthem’s own internal calculations i nclude these

cu s t o m ers, and a key part of Anthem’s value proposition t o customers is that they can acc ess all non-Anthem Blue networks nationwide.

Next, the district court found that Anthem h ad provided sufficie nt evidence to rebut t he gover nment’s prima fa cie c ase. I t relied on evidenc e that Anthem’s primary competit or for national acc ounts is United Hea lthcare

, not Cigna ; that national

acc ounts tend to be sophisticated, well-infor med customers and thus better able t o thwart an attempted price incre ase; that new entra nts to the marke t wi l l co n strain pricing ; and that the combined company would have incentives to innovate in its collabora tive car e ar

rang ements with hea lthcare providers.

Finally

, the d istrict court found that the merg er’ s overa ll eff ect in the Anthem states would be anticom p etitive by reduc ing the number of national healt h insurance car riers from four to three

. I t reje cted Anthem’s effi ci en cies defense

, which posited the combined company would rea l i z e $2.4 billion in medical cost saving s throug h its ability t o (1 ) “re brand” Cigna
customers as Anth em i n o rder for them to acc ess Anthem’s exis ting lower rate s; (2) exercise an aff iliate clause in some of its provider ag ree ments to allow Ci gn a customers acc ess to Anthem rate s; and (3) rene g otiate lower rate s with providers. First, it found that the claimed saving s wer e not merg er- specific beca use they wer e based on the application of rate s that either
company was alre ady able to attain, and thu s presumably eac h11

company could attain the o t h er’s superior rate s on its own. I t also found that for Cigna customers that would be rebr anded to Anthem, any rela ted saving s would not be merg er- spec i fi c beca use Cigna customers could simply purcha se the Anth em prod u ct t o d ay

. I t reje cted the notion that the merg er was

nece ssary to allow Anthem customers acc ess to Cigna ’s popular
p ro d u ct offe ring s beca

use Anthem had failed to show that it could not develop and offe r these products on its own. Second,
t he district court found that the claimed saving s also fa i l ed beca use they wer e not sufficie ntly verifia ble. I t found that Anthem’s plan to exercise the aff iliate clause in its provider
contra cts was unlikely to work as An t h em sug g ested. That is, exercise of the aff

iliate clause would likely g ive rise to provider resistanc e beca

use the providers wer e unlikely to acc ept lower
rate s and provide more service s with o u t g etting any thing in
return. The district court also found, as a matter of fac t, that attempts to achie ve the claimed saving s throug h rene g otiation of provider contra cts would run into simil ar problems. I t fo und that any savings wo u l d take time to be rea liz ed, and that Anthem’s expert failed to acc ount for utiliz ation, i.e.
, the
amount of medical service s that would be consumed by a g iven

cu s tomer. I n sum, it found the claimed saving s wer e

as p i rational inasmuch as ever y proff ere d strateg y either floundere d in the fac e of business real i t y or was achie vable without the m er ger, or both. The district court also expressed doubt as to whether the ty pe of eff iciencie s claimed by Anthem, which mere ly redistribute wea lth from providers to Anthem and its customers rathe r than cre ating new value, are even cog nizable under Sec tion 7.

Additionally

, with reg ard to the Richmond marke t for larg e g roup employ ers, the district court fo und a presumption of anticompetitive eff

ect based on the fac t that Anthem and Cigna

we re t he city ’s first- and second- larg est competitors, with a combined marke t share of betwee n 64% and 78%. I t found that12

Anthem rebutted the presumption b y challeng ing the
g overnme nt’s calc ulations, pointing to additional competitors outside the Richmond are a and claiming that Anthem customers in the Fe dera l Employ ee Prog ram skewe d its Richmond marke t share

. Over all, howeve r, the district court cre dited the testimony of the g overnme nt’s expert that even acc epting all of Anthem’s claimed eff

ici en ci es, the merg er would still have a net anticompetitive eff

ect. Be cause Anthem had not shown that the

rema ining competition (or potential marke t entra nts) could likely constrain a price incre ase by the combin ed company , it found that the merg er should be enjoined on that additional basis

as we ll.

III.

Our revie w of the district court’s decision whether to issue

a perma nent injunction under the Clay ton Act is l i m i t ed to deter mining whether there was an abuse of discretion. United States v. Borden Co.
, 347 U.S. 514, 518 (1954); see FTC v. H.J. Heinz C o. , 246 F.3d 708, 713 ( D.C. Cir. 2001) (“ Heinz ”). The district court’s conclusions of law are revie wed de novo , and its finding s of fact m u st be aff irmed unless clea

rly err oneous. Heinz
, 246 F.3d at 713. I f a finding of fac t rests on an err oneous leg al premise, then the court “must examine the decision in light of the leg al p ri n cipl es [i t] believe[s] proper and sound.” Id. (quoting Ambach v . Bell , 686 F.2d 974, 979 ( D.C. Cir. 1982)).

A. I t is undispu ted that the g overnme nt met its burden to demonstrate a highly conce ntrated post-merg er marke t, which would be reduc ed from four to just three competing companies. Anthem also does not dispute the definition of the national

acc ounts marke t, nor that such a m arket will be even more highly conce ntrated post-merg er

. Anthem’s appea l instead hinge s on the district court’s trea tment of its eff iciencie s13

defe nse. The premise of its defe nse was explained by its expert, Mark I srae l, Ph.D. Ac cording to A nthem, Dr. I srae l quantified
t h e medical cost saving s that the combined company co u l d achie ve post-merg er using a “be st of best” methodology

, based

on t h e economic theory that the combined company , with its
g rea ter volume, would be able to obtain discount rate s that are

no worse than either of the companies could achie ve separ ately

. Using claims data from Anthem and Cigna

, he calc ulated th at the m erg er w ould ge nera te $2.4 billion in m edica l cost saving s throug h improved discount rate s, 98% of which he predic ted would be passed thr o u gh to customers, the larg e national employ ers with which Anthem and Cigna contra ct. Of the $2.4 billion in claimed saving s, Dr. I s ra el projec ted that $1.517 billion would result from Cigna customers acc essing Anthem’s lower rate s, while $874.6 milli on would result from An t hem
customers acc essing Cigna ’s lower rate s; when viewed in terms of self-insure d 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 milli on. Using m erge r simulation models, he balanc ed these projec ted savi ng s ag ainst potential anticompetitive ef

fec ts from the loss of the rivalry betwee n the
two companies and found the saving s easily outweig hed any potential harm. See Appellant Br

. 5–6. But, as Anthem tends to ignor e, the g overnme nt of fer ed its own evidenc e and experts to challeng e these conclusions, as we discuss below.

Despite, ho we v er, widespre ad acc eptanc e of the potential benef it of eff iciencie s as an economic matter, see, e.g. , Guidelines § 10, it is not at all clea r that they offe r a viable leg al defe nse to illega lity under Section 7. I n FTC v. P r o ct er & Gamble Co.
, 386 U.S. 568 (1967), the Supreme Court enjoined

a merg er without any consideration of evidenc e that the combined company could purchase advertising at a lower ra t e. I t held that “[p] ossible economies cannot be used as a defe nse to illega lity

. Congr ess was awa re that some merg ers which lessen14

competition may also result in economies but it struck the balanc e in favor of protec ting competition.” Id. at 5 8 0

. I n his

concur renc e, J ustice Har lan criticized this attempt to “brush the question as i d e,” and he “ac cept[ed] the idea that economies could be used t o defe nd a merg er.” Id. at 597, 603 (Ha rl an , J
., concur ring ). No m at ter that J ustice Har lan’s view may be the

more acce pted today

, the Supreme Court held otherwise, id. at 5 8 0, and no party points to any subsequent step back by t h e Court.

Nor does our dissenting colleag ue, despite his wi s h ful

asser tion that Procter & Gamble can be disreg arde d by this
court beca

use it prec eded the “moder n approa ch” adopte d in

case s like United States v. Ge n er al Dynamics Corp.
, 415 U.S. 486 (1974), an d C o ntinental T. V., Inc. v. GTE Sylvania Inc.
, 433 U.S. 36 (1977). See Dis. Op. 9

– 1 1
, 14–15. The Supreme Court made no mention of Procter & Gamble in Gener a l Dynamic s , 415 U.S. 486, and it cannot be rea d to have implicitl y

overr uled the ea rlier decision beca use it did not involve eff iciencie s. See id. at 494–504; see also 4A P H I L L I P E. A R E E D A & H E R B E R T H O V E N K A M P , A N TI TR U S T L A W ¶ 976c2, at 115 (2016) (“A R

E E D A & H O V E

N K A M P ”) (distinguishing betwee n an eff iciencie s defe nse and Gene ral Dynamics ’ “compe titive signific ance ” defe nse). And whateve r signific ance Continental T. V. may have in the are a of vertica l restra ints on trade

, 433 U.S. at 54–59, it did not do the y eoman’ s work that the di ssent appar ently ascr ibes to it here

, for it did not involve eff iciencie s, merg ers, or Section 7 of the Clay ton Act. E v en strang er is the dissent’s sug g estion that our decision in Bake r Hughes

, 908 F.2d
at 986, b l essed an eff

iciencie s defe nse, see Dis. Op. 10–11, beca use Bake r Hughes did not conce rn eff iciencie s and, like Heinz
, 246 F.3d at 720, it could not overr ul e Supreme Court
prec edent. Nor has this court eve n hinted, as the dissent procla ims, that Gene ral Dynam ics overr uled Procter & Gamble ’s eff

iciencie s holding . See B aker H ughes , 908 F.2d a

t15

988 (citing Procter & Ga mble favor ably ); Heinz
, 246 F.3d at 720 & n.18 (interpr eting Procter & Gamble ’s eff i ci encies holding)

. Put diffe re ntly

, our dissenting colleag ue applies the law as he wishes it wer e, not as it curr ently is. Even if “the Supreme Court ha s not decided a case assessing the lawfulne ss of a horizontal merg er under Section 7 of the Clay ton Act” since 1975, Dis. Op. 10, it still is not a lower court’s role to ignor e onpoint prec edent so as to a dhere to w hat might someday become Supreme Court pre cede nt.

Despite the clea

r holding of Procter & Gamble

, 386 U.S. at 580, two circ uit courts, and our own, h av e subsequently

rec og nized the use of eff

iciencie s evidenc e in rebutting a prima fac ie ca s e. Heinz
, 246 F.3d at 720 (citing

, inter alia

, FTC v. Tenet Health Care Corp.
, 186 F.3d 10 4 5 (8 t h Cir. 1999); FTC

v. Univ. Health, Inc
., 938 F.2d 1206 (11th Cir. 1991) ); see also ProMedic a Health Sys., Inc. v. FTC
, 749 F.3d 559, 571 (6th Cir. 2014). The E ighth Circuit, in holding tha t the g overnme nt had produce d insufficient evidenc e of a well-defi n ed marke t, acknow ledg ed that the district court may have proper ly reje cted the eff iciencie s defe nse, while observing evidenc e of enhanc ed eff iciencie s should be considere d i n the context of the competitive eff

ects of the merg er. Tenet He a l th Care Corp.
, 186 F.3d at 1053–55. The Eleventh Circuit simil arly conclude d that whether

an ac quisiti on would y ield signific ant ef ficienc ies in the re l evant marke t is “an important consideration in predic ting whether the acquisition would substanti al ly lessen competitio n , ” Uni versity Health, Inc.
, 938 F.2d at 1222, while noting both that “[i] t is unnece ssary

. . . to define the para meters of this defe nse now,” and that “it may further the g oals of antitrust law to limit the availability of an eff iciency defe nse,” id

. at 1222 n.3 0

. Other circ uits have rema ined skeptical and simply assumed eff

iciencie s can rebut a prima fac ie case , befor e finding that the merg ing parties h ad not clea rly shown the
merg er would enhanc e rathe r than hinder competition. See, e.g. ,16

FTC v. P enn State Hershey Med. Ctr.
, 838 F.3d 327, 348 (3d Cir. 2016); Saint Alphonsus Med. Ctr.–N ampa, Inc. v. St. Luke’s Health Sys., Ltd.

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

rec ent decisions put to rest the dissent’s notion that “no modern court” rec og nizes the continued viability of Procter & Gamble

, see P enn State Hershey Med. Ctr.
, 838 F.3d at 348; Saint A l p h o n s u s Med. Ctr.
, 778 F.3d at 789, while even a cursor y

rea ding of

the cour t’s opinion today

puts to re st a

ny sug g estion that it “espouse s the old . . . positi on that eff iciencie s might be

re as o n to condem n a merg er.” Dis. Op. 15 (empha sis added ) (quoting E R

N E S T G E L L H O R

N E T A L ., A N TI TR

U S T L A W A N D E C O N O M I C S I

N A N U TS H E L L 463 (5th ed. 2004))

.

“Of course , once it is deter minated that a merg er would substantially lessen competition, expected economies, howeve r g rea t, will not insulate the merg er from a [S ]ection 7 challeng e.” Univ. Health

, 9 3 8 F.2d at 1222 n.29. Notably

, Professors Are eda and Hovenka

mp have observe d that “Cong ress may not have wanted any

thing to do with an eff

iciencie s defe nse asser

ted by a firm that was al re ady larg e or low cost within the marke t and to whom the eff

iciencie s would g ive an even g rea ter advanta g e over rivals.” A R E E D A & H O V E

N K A M P , supra , ¶ 950f,
at 42; id

. ¶ 970c, at 31. As our subseque nt a naly sis shows, this court, like our sister circ uits, can simply assume the availability of an eff iciencie s defe nse to Section 7 illega lity beca use Anthem fails to show that the district court cle ar ly err ed in reje cting Anthem’s ef

ficienc ies defe nse.

This court was s at i s fi ed in Heinz
, in view of the trend
among lo we r courts and secondary authority

, that the S upreme Court can be understood only to have reje cted “possible” eff iciencie s, while eff

iciencie s that are ver i fiable can be

cre dited. 246 F.3d at 720 & n.18 (discussing 4 P H I L L I P A R E E D A & D O N A L D T U R

N E R , A N TI TR U S T L A W ¶ 941b, at 154 (1980))

. The issue in Heinz was whether u n d er S ection 13(b) of the17

Fe dera l Trade Commi ssion Act, 15 U.S.C. § 53(b), preliminary injunctive rel i ef wo u ld be in the public interest. 246 F.3d at 727. The court held t h at t h e district court “fa iled to make the k ind of fac tual finding s require d to rende r that defe n s e sufficie n t ly concr ete to rebut the g overnme nt’s prima fac ie showing ,” id. at 725, and, upon weig hing the equities, rema nded for e ntry of a preliminary injunction. Id. at 726–27. The c ourt

ex pressly stated howeve r: “I t is important to emphasize t h e posture of th i s ca s e. We do not decide whether

. . . the defe ndants’ claimed eff

iciencie s will car

ry the day .” Id. at 727. These are not the issues in A nthem’s appea l from the g rant of a perma nent injunction. See LaShawn A. v. Barry
, 87 F.3d 1389, 1393 (D.C. Cir. 1996) (e n banc)

. Consequentl y , the circ uit prec edent that binds us allowed that evidenc e of eff

iciencie s could rebut a prima fac ie showing

, Heinz , 246 F.3d a t 720–22, which is not inva riably the same a s

an ultim at e defe nse to Section 7 illega lity

. Cf. generally Saint Alphonsus Med. Ctr.
, 778 F.3d at 789–90 (and authorities cited there i n ). I n this expedited appea l, prudenc e counsels that the
court shoul d l ea ve for another day whether eff iciencie s can be

an ultimate de fense to Sec tion 7 illega lity

. We will procee d on the assumpt ion th at ef

fi cienc ies as presented by Anthem could be such a defe nse under a totality of the circ umstances approa ch,

see Bake r Hughes

, 908 F.2d at 984

– 8 5 (citing Gene ral Dynamic s , 415 U.S. at 498), beca use Anthem has failed to show the district court clea

rly er re d in reje cting Anthem’s purported medical cost saving s as an offse tting eff iciency

. Guidelines § 10; cf. Heinz

, 246 F.3d at 720–22. Additionally , beca use the district court could p ermissibly conclude that the eff iciencie s defe nse failed, beca

use the amount of cost sav i n g that is both
merg er- specific and verifia ble would be insufficient to offse t the likely harm to competition, this court has no occa sion to decide wh et h er the ty

pe of redistributional saving s claimed here are cog nizable at al l under Section 7. I t bear s noting, though, that18

all of those other issues pose potentially substantial additional obstacles to this merg er.

One further preliminary analy tical point. Amici supporting Anthem invite the court to disre g ard the merg er- specific ity and verifia bility requirements on the g round they place an asy mmetric burden on merg ing parties that co uld doom beneficial merg ers. See Br

. for Antitrust Economists and Business Professors as Amicus Curiae in Support of Appellant and R ever sal (“A mici Economists”) at 5–7. Anthem i t s el f has
not adopted this arg ument. See Burwell v. Hobby Lobby Stores, Inc.
, 134 S. Ct. 2751, 2776 (2014); El d r ed v. Reno
, 239 F.3d 372, 378 (D.C. Cir. 2001). W e note, howeve r, that Amici Economists misap p re h end the nature of Anthem’s claimed eff iciencie s as “dire ct price reduc tions,” id. at 6–7
, ra ther than

as potential price reduc tions subject t o a number of

uncer tainties. For customers to rea liz e any price reduc tion, Anthem would first have to succe ed in reduc ing providers’ rate s, and to that extent the purported reduc tions would not be a direc t eff ect of the merg er. By contr as t , the merg er would immediately g ive rise to upwar d pricing pressure by eliminating

a competitor, see, e.g. , Tr. 960:12–18, and Anthem could unilatera lly raise its price s in response

. Further, Amici Economists ignor e that fully -insured customers, and potentially self-insure d customers depending on the terms of their contra cts with Anthem, will not see any saving s un t i l An them takes a second action, rene g otiating the customers’ contracts to pass throug h the saving s. Th i s i l l ustrates the rea son for the verifia bility require ment: Perhaps An t h em is cer tain to take those ac tions, and there w ill be no impediments to the saving s’

rea liz ation, but that showing is still nece ssary for a court to conclude that the merg er’ s direc t eff ect (upwa

rd pricing
pressure ) is likely to be offse t by an indi re ct effect (potential downwar d pricing pressure ). S ee Guidelines § 10. As for
merg er- specific ity

, Amici Economists point to no logic al fl aw19

in the p o l i cy that consumers should not bear the loss of a competitor if the offse tting benef it could be achie ved without a
merg er. See H

einz , 246 F.3d a t 722.

B. Any claim ed eff

iciency must be shown to be merg erspecific

, meaning that it “ca nnot be achie ved by either company alone because

, if [i t] can, the merg er’ s asser ted benefits can be achie ved without the concomitant loss of a competitor.” Heinz
, 246 F.3 d at 722. The Guidelines fra me the issue slightly differ ently : an eff

iciency is said to be merg er-s p ec ific if it is “likely to be acc omplished with the pro p osed merg er and unlikely to be acc omplish ed in the absenc e of either the proposed merg er or another m eans having compar able anti co m p et itive eff

ects.” Guidelines § 10. Anthem faults the district court for considering whether the eff iciencie s “could” be achie ved absen t the merg er, without reg ard to likelihood, Appellant Br

. 24, even though in Heinz
, 246 F.3d at 722, this
court spoke repe atedly in terms of possibili ty (“c an” or “could” ).

Heinz
, 246 F.3d at 721–22, cited the Guidelines with
approva l in descr ibing the standard for merg er- specific ity

. Both the curr ent and then-c urre nt Guidelines refer to “pra ctical” alterna tives to achieving the eff iciency short of merg er, alterna tives that are more than “mer ely theore tical.” Guidelines § 1 0 (2010); Guidelines § 4 (1997). Simi larly

, in Heinz
, 2 4 6 F.3d at 722, the court considere d whether it was prac tical for the
company to obtain b et t er baby food rec ipes by investing more money in product development, or whether that would cost more money than t he merg er itself. The real question is whether the alterna tives to merg er are p ra ct ical and more than mere ly theore tical, see id. ; Guidelines § 10. Even assuming there is any differ enc e betwee n the two standards, it would not aff ect the
outcome here on this fac tual re cord. Viewe d under either articula tion, cer

tain of Anthem’s claimed eff iciencie s fall awa

y

.20

The crux of Anthem’s arg ument rega rding merg erspecific ity is the theory that the combined compan y will allow Anthem to cre ate a “n ew product” that is “unava ilable on the marke t toda

y ”: a product that fea tures both “Cig na’s c ustomerfac ing p ro gra m s ” and Anthem’s “g ener ally lower

. . . rate s.” Ap p el l ant Br. 26. One way Anthem m aintains the m erg er will result i n this new product is throug h rebr anding

. Acc ording to Anthem, “r ebra

nding me ans [the combined company ] retain[s] the C igna product but brand[s] it under the Anthem name with Anthem’s neg otiated provider rate s.” Appellant Br

. 34. The

rec ord, howeve r, ref

utes rathe r than substant i at es Anthem’s proposed rebr anding approa ch. I n fac t, the rec ord evidenc e Anthem cites for its rebr anding plan is the testimony of Anthem Senior Vice P re s i d ent Dennis Matheis. But in that testimony

, Matheis confirme d that, at least “[i] n the short term,” rebr anding would si m p ly involve Anthem “off er[ing] Cigna customers Anthem products,” in a manner that is “no differ ent” than Anthem “selling new business in the marke t.” Tr. 1599:20–25. I n other words, when a Cigna customer rebr ands, the immediate eff ect is t hat the customer

g ives up a C igna contra ct and Cigna product in favor of an Anthem contra ct and An them product. I ndeed, it is only “[o] ver the long haul,” Mathei s t es t i fied, that Anthem cou ld actua liz e its “vision

. . . [t o] combine Cigna fea tures

. . . with Anthem fea tures,” T r. 1606:17–21, and then rebr anding might result in a former Cigna customer obtaining

some semblance of the former Cigna product at the new Anthem
rate

. But re b ra n d ing in the i mmediate aftermath of the m erg er would involve a Cigna customer switching to the extant Anthem product, and that is not a merg er- specific outcome; t h at i s just

more succe ssful marke ting of the exis ting Anthem product. And Anthem expressly “does not contend that

. . . a customer simply switching from a Cigna product to an exis ting Anthem product[] results in merg er- specific eff iciencie s.” Appellant Reply Br

. 21.21

I nstead, Anthe m claims only that rebr anding over the long haul, once it has succe ssfully rolled out an improved, Cigna -like product, will result in a merg er- specific benef it, and maintains that the district court clearl y err ed in finding Anthem could simply develop and offe r an improved product on its own. J ust

as in Heinz
, 246 F.3d at 722, the evidenc e offe red by Anthem is

wo ef u lly insufficient to show that it cannot develop better

cu s t omer-f

acing prog rams. Anthem points to testimony from
two wi t n esses that Anthem has failed to replica te Cigna ’s products, for rea sons unknown

. I n particula r, Anthem’s President of Specialty Business Pam Keha ly testified that Cigna offe rs a “pac kag ed integ rate d wellness approa ch wher e [Anthem offe rs] disparate piece s that employ ers kind of have to piece toge ther on their own.” Keha l y De po. Tr. 87:12–15 (Apr. 28, 2016). Acc ording to Keh al y , Anthem has been try ing to solve the problem for

“proba bly a dec ade” but for whatever rea son it just has “not been able t o cr ack this nut.” Id. at 88:3–13. She did not i n dicate how intensive the eff ort has been, how many h o u rs wer e devoted to it, or how much money Anthem h as allocate d toward it. Anthem’s Reg ional Vice President of Sales Br ian Fe therston also testified t h at Cigna has “done a rea lly
g ood job of building wellness prog rams” and that Anthem has tried but failed t o ca t ch up. Fe therston Depo. Tr. 170:14–19 (May 6, 2016). The district court could proper ly find that failure likely results more from Anthem’s own no-f ri l l s culture or fl awe d marke ting strateg ies than from any inhere nt difficulties in pulling t o gether an integ rate d wellness prog ram. For instance, Fe therston testified that Cigna is “sig nificantly better
at marke ting” i t s wellness prog ram, while by contra st Anthem “just [was not] actively promoting” its own, and indeed, Anthem

rec ently decide d to “dial back some of [i ts] disease manag ement prog rams,” which Fe therston believed was a mistake. Id. 169:1–170:6, 323:1–23. To the ex t ent Anthem has failed to devote the resour ces neede d to improve i t s p roduct, it is in no position to claim that consumers will benef it from it swallowing22

up Cigna ’s superior

product.

Put differ ently

, rebr anding does no t cre ate a merg er- specific benef it in either the short- or long- term. Perhaps Anthem could

cre ate some brief, interim benef it in the mid-term by integ rating Ci gn a’ s product faster than it could develop a compar able product of its own. Gu idelines § 10 n.13 (“I f a merg er aff ects

n o t whether but only when an eff iciency would be achie ved, only the timing advanta g e is a merg er- specific eff icien cy .”). But Anthem made no sufficie nt fac tual showing i n the district
court on this point. I t has offe red no evidenc e to show how long it would take, once the nece ss ar y resources wer e allocate d, to develop an improved product. Nor has it shown how lo ng it would take to roll out a hy brid Anthem-Cig na product. At oral
arg ument, 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 a

ble to do so within two-and-a -half y ear s.

To the extent Anthem al s o maintains that none of Dr. I srae l’s claimed saving s are depende nt on rebr anding

, it ignor es the rea lity of his economic model. Wit hout one of its mecha nisms to g et curr ent Cigna customers acce s s to Anthem
rate s, none of the $1.517 billion in claimed Cigna saving s could be rea liz ed. Although Dr. I srae l may have been ag nostic as to which mecha

nism is used to achie v e t hose saving s, he acknow ledg ed that rebr anding would achie ve a portion of them: “I f t h er e was rebr anding as a way to g et the discounts

. . . that would just b e an o t h er way to g et t hem faster.” Tr. 2108:9–11. Given that rebr anding is the l inchpin of Anthem’s post-merg er strateg y , beca

use it is the only option that helps Anthem comply wit h its “B est Effor

ts” obliga tions, the inability to cre dit rebr anding saving s seriously undermines Anthem’s eff iciencie s defe nse.23

T h e district court further found that none of the medi ca l
cost saving s are merg er- specific beca use t h ey ar e based on an application o f rate s that eac h of the companies has alre ady achie ved on its own. Anthem, quite rea sonably

, challeng es this finding with reg ard to Cigna ’s rate s on the g round that “ther e is

no dispu t e t hat [C igna ] has g ener ally secur ed less favor able
p ro v i d er rate s than Anthem for y ear s and has been unable to close that g ap despite its b es t ef forts.” Appellant Br

. 27. The

rec ord shows that, by its own acc ount, Cigna has been unable to match Anthem’s volume-base d discounts and instead has had to compete o n quality and innovation. Even the g overnme nt’s expert, Dr. David Dra

nove, agree d that a true Cigna product at Anthem rate s would not be achie vable absent the merg er. That the di s t ri ct court clearly err ed in finding that the application of Anthem ra tes to customers that choose to remain with Cigna is
not merg er- specific

, howeve r, is immaterial to the district court’s ultimate conclusion that the merg er would be unlawfu l beca use these claimed eff

iciencie s are not sufficie ntly verifia ble.

C. Under the Guidelines, projec ted eff iciencie s will n o t be

cre dited “if they

are vag ue, spec ulative, or other wise ca nnot be

v er i fi ed by rea sonable means.” Guidelines § 10. Anthem mai ntains that the district court clea rly err ed beca

use the $2.4 billion in projec ted post-merg er saving s was verifie d by two independe nt source s (Dr. I srae l and an integ ration planning team from McKinsey & Company
, which had acc es s t o eac h
company ’s i nter n al files). I n Anthem’s view, the di strict court also err ed as a matter of law by imposing a “virtually insurmountable burden” of per suasion, Appellant B r. 38, when all that is require d is to show “ probabilit ies
, not cer

tainties,” Bake r Hughes , 908 F.2d a t 984.

As discussed, Anthem plans to achie ve the claimed saving s t h ro ug h a combination of three mecha nisms: rebr anding

,24

rene g otiating provider contra cts, and exercising Anthem ’s aff iliate clause . The district c ourt found that prac tical business

rea lities would undermin e the execution of that plan, making achievement of the saving s specula tive, and there fore unverifia ble. Wit h reg ard to the aff iliate clause

, the d i s trict
court foc used on evidenc e of the potential for provider discontent if the lower Anthem rate s are forc ed on providers that

m u s t ex pend extra eff

ort and resour ces to deliver the Cign a product, with o u t any corr esponding incre ase in value for providers. This evidenc e included testimony by bot h Anthem and Cigna witnesses as well as documents from Anthem and Cigna that acknow ledg ed the likely “abr asi[on] .” E.g.
, Pls.’ Ex

. 89. The record indicates that phy sician contra cts can be terminated by either party wi t h o n l y 90 day s’ notice, so the aff iliate clause would acc omplish li ttle if the contra ct is
t erminate d or rene g otiated soon afte r the clause is exer ci s ed

. Ho spital contra cts tend to involve three -y ear commitments, s o the aff iliate clause may bind them to offe r lower rat es for a longe r period. Stil l, when those hospital contra cts expire, larg e delivery sy stems with g rea ter lever ag e “could push back hard” in rene g otiation. Pls.’ Ex

. 717. I n either event, it is probable

, as Cigna CEO David C o rd ani testified, that some providers will
eventua lly “re act [ b y ] rene g otiating

. . . and putting upwar d
pressure on rate s, which h as been a marke t forc e to date.” Tr. 443:17–23. That “ver y few ” Anthem providers have
pree mptively soug ht to rene g otiate proves littl e, see Tr. 1686:15–25, beca

use the fea

red a brasion would not occ ur until Anthem invokes the a ffiliate c lause, a ssuming it ever does so.

This raises another prac tical difficulty with the aff iliate clause : al though it is theore tically useful to Anthem, in rea lity it is unlikely to be widely exercised beca use it works counter to Anthem’s contra ctual obliga tions. Under t he “B est Effor ts” clause in Anthem’s licensing ag reement with the Blue Cross Blue Shield Association, 80% of Ant h em ’s reve nue withi n the25

Anthem states must be Blue -bra nded, as must 66.67% of i ts

reve nue nationwide. The merg er would immediately throw Anthem out of compliance and so Anthem intends to rebra nd a “lion’s share ” of curr ent Cigna customers in or der to count that

reve n u e as Blue -bra

nded. Tr. 1600:17–21 (Anthem Sr. VP Matheis). By contra st, widespre ad exercise of the aff iliate clause wo u l d remove any incentive for Cigna customers to

conver t to Anthem b eca

use those customers would then be

re ceiving the Cigna product at Anthem price s, Dr. I srae l’ s much-touted “best of both worlds” scena rio. Ant h em fails to addre ss this rea lity when it maintains that 80% of the saving s to Cigna customers could be achie ved rapidly using the aff iliate clause

. See Appellant Br

. 40. Be cause do i n g s o wo uld work
contra ry to Anthem’s own contra ctual obliga tions, its witnesses

conce ded that it will i nstead rely heavily on rebr anding

, which, as discussed, g ives rise to no merg er- specific benef its.

As for rene g otiation, the short answe r is that if Anthem
cannot persua de providers to extend lowe r rate s to Cigna under its aff iliate clause s — wher e it has appar ent contra ctual rec ourse to do so — then it is specula tive that Anthem could g et them to ag ree to do the sam e thing throug h neg otiations absent compulsion. Anthem assumes, as did Dr. I srae l’s model, that in all instances rene g otia t i o n would result in providers acc epting the lower Anthem rate s. That assumption appea rs questionable in the case of a provider that has just terminated a contract beca use Anthem mandated, t h roug h an aff iliate clause

, the

acc eptanc e of those very rates

. I nstead, C i gn a’s CEO Cordani predic ted such rene g otiation would put upwa rd pre ssure on the Anthem ra te, and to the e x tent Anthem were to adopt a take- itor-lea ve-it appr oach, the provider c ould simpl y choose to walk

awa y

. See Br

. for Amici Am

. Med. Ass’n. & Med. Soc’y of D.C. (“A MA Br .”) 11–12. This is es pecia lly true for larg e hospital networks with signif icant bar g aining power

.26

To the extent that some medical saving s would be achie ved for Cigna customers at the barg aining table due to the combined
company ’s vol u m e, the district court expressed conce rn over how l o n g such saving s would take to be rea liz ed. Anthem’s CEO Swedish testified t hat capturing medical savings requires

a “long g estation period,” in part beca use exis ting hospital
contra cts span t h re e to five y ear s and would not be subject to

rene g otiation “for a considera ble period of time.” Tr. 337:21–338:16. He also reje cted the idea that Anthem wo u l d simply “drop[] the hammer” o n p rovi ders by insisti ng on maxi mum d i scounts acr oss-the-boa rd beca use Anthem instead relies upon “customized rela tionship-driven contra ct[s] ” that seek to optimiz e perf

ormanc e on a ca s e-by -ca se basis, rathe r than focusing solely on discounts. Tr. 294:20–295:11. Anthem’s expert ag ree d that rene g otiations in the ordinary

course of business will take place over time. The longe r it takes for an eff iciency to mat er i al ize, the m ore speculative it can be,

see Guidelines § 10 & n.15, so the dis t ri ct court was on solid
g round to g ive less weig ht to the claimed rene g otiation saving s.

I n sum, althoug h rene g otiation will lead to a d ec rea se in Cigna ’s rates, the assumpt ion that it will in ever y instance lead
to the Anthem rate is far fetc hed. See Tenet Health Care Corp.
, 186 F.3d at 1054. I ndee d

, as the district court observe d, “the Depa rt m ent of J ustice is not the only party raising questions about Anthem’s char acte rization of the outcome of the merg er” becau s e Cigna itself had “provide d compelling testimony underminin g t he projec tions of future saving s.” Anthem, Inc.
, 2017 WL 685563, at *4; see also Pls.’ Ex . 722.

Whatever mecha

nism is emplo y ed to achie ve the saving s, the district court had “re ason to question

. . . whether the quality of the Cigna offe ring will i n fa ct deg rade ” as a result of the
merg er, A n t h em , 2017 WL 685563, at *61, which further undermines the purported eff iciency claims. Guidelines § 10.27

For tho s e t hat choose to stay with Cigna post-merg er — and thus would acc ess lower rate s throug h rene g otiation or exercise of the aff iliate clause — the abra s i o n problem arises beca use providers would be asked to co n t i n ue offe ring the high- touch, collabora tive Cigna service

, with its added behavior al, wellness, and l i festy le prog rams, for less money

. See AMA Br

. 10–11. I t was perf

ectly rea sonable for the district court to find that some provi ders, even if they are willing to acc ept less money , will simply respond by offe ring customers less in the way o f C i gna high- touch service

. Fur

thermore

, acc ording to Cigna ’s CEO Cordani, the value of the Cigna offe ring will be d i m inished beca use Anthem’s rebr anding strateg y will siphon business

awa y from C igna

, leaving behind an a trophied Cigna customer base that is less att rac tive to providers. This will in turn diminis h Ci gn a’s capa city for further innovation with its collabora tive model. And for Cign a cu stomers that ag ree to migr ate to Anthem (or are pushed into doing so bec au s e the
company ref

uses to extend their expiring Cigna co n trac ts),
prov i d er abrasion ag ain rears it s head, this time with providers being as ked to offe r Anthem customers better, and more

resour ce- intensive, collabora tive service for the same rate s they h ave historically rec eived. Anthem does not respond meaning full y t o these conce rns, simply labeling them “spec ulation.” Appellant Reply Br

. 10. I n light of the numerous Anthem witnesses who acknow ledg ed the abra sion problem, the district court did not err in finding it “dubious” that Anthem would be able to offe r a tr u e C igna -like product, or t hat l eg acy Cigna would be able to maintain the quality of its own product. Anthem , 2017 WL 685563, at *59, *61.

The fac t is, it is widely acc epted that customer s v al u e the exis ting Cigna product, and that Cigna is a leading innovator in collabora tive patient car e. T h at threa t to innovation is anticompetitive in its own rig ht. Cf. United States v. Cont’l Can Co.
, 378 U.S. 441, 465 (1964). An d t h e problem is neither28

answe red by Anthem’s evidenc e nor offse t by its purport ed eff iciency of offe ring a deg rade d Cigna product a t a lower rate

.

I n addition to claimed saving s to c urre nt Cig na customer s, Dr. I srae l also projec ted that $874.6 milli on in saving s would be

rea l i zed if Anthem’s customers wer e able to acc ess superior
rate s that Cigna has alre ady neg otiated. I n focusing almost enti rely on the other side of the ledg er, Anthem offe rs littl e

rea son to think that th e district court clea rly err ed in reje cting the claimed saving s to exis ting Anthem cust o m er s. See Appellant Br

. 41–42. To the extent Anthem arg ues o n appea l that Ant hem customers could acc ess Cigna ’s superior rate s throug h rebr anding or exercise of an aff iliate clause

, the only witn ess it cites was actua lly discussing the aff iliate clause in Anthem’s contra cts that would apply to Cigna’s customers. And

even assuming that Cigna ’s contra cts contain an aff iliate clause

, Blue Cross Association rules would prohibit Anthem from exercising it. Fur

ther, rebr anding Anthem customers to Cigna would only exacer

bate Anthem’s “B est Effor ts” problem, which indicates why Anthem Senior VP Matheis testified that Anthem would rebr and a lion’s share of Cigna customers to Anthem, not the other way around. R eneg otiation would be the only viable option for rea liz ing the projec ted saving s to Anthem customers.

Moreove r, Anthem has not explained why t h ese projec ted saving s would even exis t. The rec ord is clea r that Anthem, unlike Cigna

, has alre ady achie ved whateve r economies of scale

are available

. Acc ording to Anthem’ s expert Dr. Robert Wil lig, in the 35 local marke ts identified in the g overnme nt’s complaint, the data did not show that Anthem’s siz e corr elated with its provider d i s co u nts. To the contra ry , Dr. Wil lig testified that Anthem is “alre ady

past the threshold of ha

ving enoug h siz e to do what it needs to do in terms of offe ring volume to providers.” Tr. 2231:9–12. Simi larly

, Anthem’s CEO J oseph S we d i s h denied that Anthem would seek to neg otiate ev en g rea ter29

volume-base d discou n t s afte r the merg er beca use post-merg er Anthem would “ce rtainly not [pay ] less than what [i t is] now pay ing as Anthem.” Tr. 294:10–19. The evidenc e indicates that wher e Cigna h as b et t er discounts than Anthem, that is a result o f fac tors other than volume, and the district court

rea sonabl y q uestioned whether those aty pical discounts would

rema in available post-merg er. I n the absenc e of an additional volume-base d discount, then, Anthem make s no eff ort to show how i ts curr ent custom ers would see lowe r price s as a r esult of the merg er, and cer

tainly not to the tune of $8 7 4

. 6 m i l l ion. Consequently

, the district court did not clea rly err in reje cting these a lleg ed medica l cost saving s as unver ifiable.

Next, the claimed medical cost saving s only im prove

consumer welfa

re to the ex t en t that they are actua lly passed throug h to consumer s , rathe r than simply bolstering Anthem’s profit m arg in. See Univ. Health, Inc.
, 938 F.2d at 1223. After all, the merg er potentially harms consumers by cre ating upwar d pricing pressure due to the loss of a competit o r, and so only eff iciencie s that cre ate an equivalent downwar d pricing pressure

can be viewed as “suff

icient to reve rse the merg er’ s potential to harm consumers

. . . , e.g ., by preve nting price incre ases.” Guidelines § 10; see also A R E E D A & H O V E

N K A M P , supra , ¶ 971a, at 48 (“[A] sufficie nt a mount of any eff

iciencie s [m ust] be passed on that the post-merg er price is no highe r than the premerg er price .”). Dr. I srae l testified that absent monopsony ( i.e.
, the exercise of marke t power to g ain subcompetitive price s from providers)

, any cost savi ng s will cre ate downwar d pricing
p re s s u re, and while this is unobjectionable, the amount passed throug h to consumers indicates the streng th of that pressure

. See Br

. of Professors as Amici Curiae in Support of Appellee and for Affir mance 7–8 (“A mici Professors” ). The district court rig htly
cast doubt on Dr. I srae l’s es t i mated pass-throug h rate of 98%, which was unsupported by the evidenc e and trea ted self-insure d and fully -insured c ustomers identically

.30

Be cause ASO customers pay their employ ees’ me d ic a l c o s ts direc tly

, any

reduc tion in medical rates would result i n saving s that automatically pass t h ro ug h to the customer, absent some

co rresponding ASO price incre ase by Anthem. This woul d improve the quality of one aspec t of the ASO product ( i.e.
, acc ess to more deeply discounted network rate s), and it could thus be procompe titiv e even if it did not immediately result in

an AS O price decr ease

. See Guidelines § 10. Dr. I srae l’s analy sis rested on the assumption that rathe r than raising AS O price s to capture t he medical cost saving s, Anthem would attempt to incre ase i ts marke t share by providing a much superior product at only a slightly highe r price

, there by maxi miz ing its profits thr o u gh i ncre ased sales. The district
court highlig hted internal Anthem documents that dis cu s sed
way s to keep those saving s for itself, in particula r wher e Anthem listed seven alterna tives with 100% pass-thr o u gh to ASO customers considere d last. Contrary to Dr. I srae l’s assumption, then, Anthem appar ently conclude d that total passthroug h was not the profi t -maxim izi ng , “optimal solution to captur e the most value from [t he] deal,” and t hat it could
actua lly lo s e business if customers initially saw saving s that

wer e not sustained over t h e long term. Pls.’ Ex

. 727. Amici Professors offer another rea son why Anthem m i ght have come
to this conclusion: in highly conce ntrated marke ts, alre ady -larg e insurers are less constraine d by competition and thus tend to find it more profitable to captur e medical sav i ng s and incre ase p re m iums. Amici Professors Br

. 6–9; see also A R E E D A & H O V E N K A M P , s u p ra , ¶ 971f, at 56 (in highly conce ntrated marke ts “ther e is less competition p re s ent to ensure that the benef it of eff iciencie s will flow to consumers” ). That

corr oborate s rather

than re mediates a

nticompetitive conce rns.31

As for fully insured customers, wh ich comprise $619.8 milli on of th e p ro

j ecte d saving s, the estimated pass-throug h is

even less likely g iven that the saving s would automatically inure
to Anthem’s benefit absent some corr esponding price decr ease to its customers. Dr. I srae l rec og nized this dy namic at trial, and
y et his model t ak es n o acc ount of it, apply ing a pass-throug h
rate of 98% to both ASO and fully insured acc ounts. The rec ord indicates that ASO customers, which pay medical costs direc tly
t o p ro v i ders, are keenly attuned to fee transpar ency , but it i s unclea r fully -insured customers are aff orded the same transpar ency

. That is, if Anthem neg oti ates provider rate s and
pay s providers direc tly

, how would a customer b e awa re that Anthem had achie ved medical saving s, in ord er to be able to seek a pass-throug h in the fo rm of a lower neg otiated price ? Fur ther, when would fully -insured customers rea liz e that

rene g otiated price

, g iven that their exis ting contra cts would not pass though an y s aving s? See Tr. 2107:17–21 (Dr. I srae l: ordinary -cour se rene g otiation of employ ers’ contra cts “will take place over time”). Neither Anthem nor Dr. I s rae l answe rs (or addre sses) these problems.

Finally

, the district court did n o t cl ea rly err when it criticized Anthem’s failure to accou nt in its projec ted saving s for utiliz ation, which is a signa ture aspec t of the Cigna product. Dr. I srae l’s model was based on discounts that either company

was able to achie ve on its own multipl ied by the total cla i m s value, but as Anthem’s CEO Swedish testified, “We don’t live in a discount world any longe r.” Tr. 295:11. Cigna ’s CEO Cordani ag reed : “If y ou’re looking [onl y at] a discount calc ulation, if [Anthem] has a 2 perc ent lower discount for the

emer g ency room service

, y ou would assume that that’s a saving s,” unless Cigna ’s wellness prog ram helps the patient avoid that emer g ency room visit altog ether

. Tr. 443:10–16. Anthem maintains that Dr. I srae l and the McKinsey & Co. team did acc ount for utiliz ation, beca use Dr. I srae l testified that lower32

utiliz ation would result in a lower total claims value, a value that fac tored into both his and the McKinsey & Co. models. But this ignor es that on cross-e x amination, Dr. I srae l conc ed ed that he did not control for t h e differ ent risks and fea tures of eac h
company ’s population at a particula r provider , which would be
necessary to compar e utiliz ation, and so his model did not

acc ount fo r whether one company ’s utiliz ation was better than the ot her’ s. And although Anthem never theless m aintains that

no evidenc e shows acc ounting for utiliz ation would mat er ially reduc e the claimed saving s, Dr. Dra nove testified that any err or

or incorre ct assumption would have a si gn ificant eff ect on the

overa ll projec ted saving s. See Tr. 2327:15–2329:11. Thus, the problem i s less th at t he failure to acc ount for util ization would

n ece ssarily reduc e the projec ted saving s, and more t h at i t undermined the district court’s confide nce in the reliability and fac tual cre dibilit y

of those saving s calc ulations.

Both sets of projec tions suffe red from ad d i t i onal, basic anal y t ic flaws. For instance, Dr. I srae l did not ag ree with the dist ri ct court’s national acc ounts marke t definition (employ ers with 5,000+ employ ees)

, so his saving s projec tion was based on th e broade r marke t definition that he believed appropr iate (larg eg roup employ ers with either 50+ or 100+ employ ees) . I n other words, Dr. I srae l’s claimed $2.4 billion in saving s is unmoore d from the actua l marke t at issue, and t here is no indication of what portion is proper ly derive d from the national acc ounts marke t. Simi larly

, the McKinsey & Co. analy sts based some of their saving s on a compar ison of Cigna and Anthem rate s wher e only one of the companies had neg oti at ed a discount with that particula r provider. This apples-to- orang es compar ison of innetwork v e r s u s out-of-ne twork rate s overstate d the true disparity betwee n the companies’ exis ting discounts and thus nece ssarily inflated M cK i n sey & Co.’s projec ted saving s. Even Dr. I srae l acknow ledg ed as much: his model o n ly compar ed in-network
rate s beca use he conclude d that “that’s what the economics tells33

y ou y ou need to do to g et the answ er ri ght.” Tr. 1855:2–22. This could help to explain why Dr. I srae l’ s otherwise simil ar methodology resulted in a projec tion that was alm o s t a billion dollars less than McKinsey & Co.’s.

The saving s projec ted by McKinsey & Co. and Dr. I srae l

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

—
wer e without a doubt enormous. The probl em is, those projec tions fall to piece s in a stiff bree ze. I f merg ing companies could defe at a Clay

ton Act cha lleng e mere ly by offe ring expert testimony of fanta stical cost saving s, S ec tion 7 would be dead letter.

D. Having considere d the totality of circ umstances, see Bake r Hughes

, 908 F.2d at 984, we hold t h at the district court

rea sonabl y deter

mined Anthem failed to show the kind of “extraordinar

y eff iciencie s” that woul d be neede d to constrain likely price incre ases in this highly conce ntrated marke t, and to mitigate the threa tened loss of innovation. Cf. He inz
, 246 F.3d
at 720. Given the rec ord evidenc e, Anthem’s objection that the district court “abdic ated its responsibility ” to balanc e the
merg er’ s likely benef

its ag ainst its potential harm, Appellant Br

. 46, ring s hollow. Anthem seems to ins i s t u pon a dollar-fordollar compar ison afte r discounting whateve r claimed eff iciencie s were proper ly

reje cted, in re sponding tha t “so long

as at least one-third of the $2.4 billion of saving s are likely to be achie ved, the merg er is procompe titive.” Ap p el l ant Reply Br

. 1 0

. This would appar ently require the court to calc ulate, for instance, a more rea listi c pass-throug h rate than the re j ec ted 98% fig ure, or to estimate what pe rce ntag e of the claimed $2.4 billion was attributable to customers with few er than 5,000 employ ees and thus outside of the rele vant marke t. Anthem has pointed to no rele vant expert economic ev i d ence on which to base such an imprecise calc ulation, and Anthem, not the district34

court, has the burden of showing what portion of the claimed eff iciencie s will result from the merg er itself. Even assuming it

wer e possible on this rec ord, see University Health

, 938 F.2d at 1223, “[e]conomies cannot be premised solely on dollar fig ures, lest acc ounting controve rsies dominate § 7 proce eding s,” Proct er & Gamble

, 386 U.S. at 604 (Ha rlan, J
., concur

ring ). Be cause “the s t ate of the scienc e does not permit such ref ined showing s,” commentators have rec ommended simply g iving the
g overnme nt the benef

it of the doubt in a close case

. See A R E E D A & H O V E

N K A M P , supra , ¶ 971f, at 56. I n any event, this is not a close ca se.

The disse n t ’s critique of the court’s opinion is not well founded. I ts fundamental f law is the fa ilure to eng ag e with the fac ts shown in the rec ord as they perta in to merg er- specificity and ver ifiability . Repea

ted re fer ence s to unspe cified e vidence

, s ee , e. g

. , Dis. Op. 3, 12, 14, 17, on which the dissent base s

swee ping conclusions, speak volumes. Rather than eng ag e with the rec ord, much less adher e to our standard for revie wing finding s of fac t by the district court, the dissent offe rs a series of bald conclusions and mischara cter izes the court’s opinion. For instance, the dissent repe ate d l y cl aims that the court “does not fully acc ept the fac t

. . . that providers rate s woul d actua lly be lower,” Dis. Op. 17; id. at 15, when in fac t the court acc epts that
rate s would be lower for some exis ting Cigna (but not Anthem)
customers post-merg er. Those who rebr and with Anthem, howeve r, will see no mer ger- specific saving s, Op. 20–21, and the few that Anthem fails to rebr and will s ee fa r fewer saving s than Anthem cla ims, due in larg e part to provider a brasion and big hospital sy stems that will stand their g round in rene g otiation, Op. 24–27. The dissent ba ldly asser ts tha t the eff iciencie s “ar e merg er- specific by definition,” Dis. Op. 6–7, without addre ssing the paucity of evidenc e that Anthem would be unable to develop a Cig na-like pr oduct without merg ing. So too, it ba ldly asser ts that the s av i ng s wer e “suff iciently verifie d,” while admitting35

that it is not clea

r “just how much the employ ers would benef it from this merg er.” Id. at 7 (empha sis omitted). I n other words, Anthem esti mat ed an astronomical amount of savings, so even if that amount wer e wildly overstate d, t h e d i ssent expects the
court to trust that, as an unknown fra ction of a larg e number, the result “would be larg e.” Id

.

To the ext en t t h e dissent notes any of the major fac tual problems with Anthem’s depiction of the merg er, it brushes them aside. I t dismiss es as “hig hly specula tive ” t h e provider abra sion problem that was conce ded by both Anthem and Cigna witnesses
, Dis. Op. 17, a problem that undermines Anth em’s plans for rea liz i n g t h e saving s throug h the aff iliate clause and

rene g otiatio n

. I t char acte rizes rec ord evidenc e that square ly
contra dicts Anthem’s pass-throug h estimates — Anthem’s own internal PowerPoint prese ntation — as “sec ret Anthem plans to drama tically raise [i ts] fee s , ” i d.

, which is prec isely what the evidenc e ref

lects. I t attacks straw men like supposed relianc e on “fr iction betwee n the An t h em and C igna CEOs,” id.

, when the
court does not so rely

, noting indeed the limit ed probative value of that evidenc e. Op. 4 n.1. I t fails entirely to addre ss Anthem’s “B est Effor

ts” obliga tions, which make it likely t h at Anthem will rely predominantly on rebr anding

, a strateg y that g ives rise
to no merg er- specific benef it. Op. 24–25. Th e “B est Effor ts” clause also cre ates a verifia bility probl em with reg ard to Anthem’s other saving s strate gi es, for instance underc utting Anthem’s asser

tion that 80% of the saving s to Cigna customers “could be achie ved simply [and rapidly ] by invoking the aff iliate clause .” Appe l l an t Br

. 40. Ag ain, pulling at any one loose threa d quickly unrave ls Anthem’s narr ative, but the dissent is simply unwilling to do so.

Ultimately

, the dissent conclu d es that “[o] n this rec ord, there is littl e basis to doubt that the cost saving s for emp l o y ers

as a re sult of the merg er w ould be larg e,” w ithout evinc ing any36

rea l awa rene ss of the rec ord bey ond the testimony of Anthem’s expert and consultants. See Dis. Op. 7. T o wi t , the dissent
sug g ests that An them’s saving s estimates went unrebutted at trial, Dis. Op. 6, when the re co rd s h ows Dr. Dra nove not only offe red his own estimate of $100 milli on to $500 milli on but

ex plained why those saving s wer e unlikely to be rea liz ed, essentially for the rea sons discussed in this opinion. S ee , e.g. , T r. 3 802:25–3803:11. Simi larly

, it rec og nizes no distinction betwee n saving s to exis ting Cigna customers (some of which the
g overnme nt conce des will materia liz e) and saving s to exis ting Anthem customers (the exis tence of which even Anthem cannot explain in light of the testimony of both its CEO and expert, see supra Part I I I .C)

. L ikewise, in concluding that the quality of the Cigna product (its wellness prog rams and the high- touch service that providers offe r in support of the prog rams) will not deg rad e post-merg er, the dissent does not g o so far as to say t h er e is no evidenc e to support the district court’s contrary finding

, Anthem

, 2017 WL 685563, at *59, *61; rathe r, it asser ts it does not consider this evidenc e “per suasive” or “convinc ing.” Dis. Op. 18. Such de novo analy sis throug hout t h e d issent betra y s no meaning ful eff

ort to eng ag e wi th the di strict court’s fac tual finding s, which are subject only to revie w for clea r err or.

Fur thermore

, the dissent’s assumption that t h e price s paid by consumers (re g ardle ss of the quality of the resulting product)

are the sole focus of antitr u s t l aw is flawe d. “The principal objective of antitrust policy is to maxi miz e consumer welfa re by encouraging firms to behave compe titively .” Kirts aeng v. John W iley & Sons, Inc.
, 133 S. Ct. 1351, 1363 (2013) (empha sis added) (quoting 1 P. A R E E D A & H. H O V E

N K A M P , A N TI TR U S T L A W ¶ 100, at 4 (2006))

. This single -minded foc u s o n price ignor es that in hig hly

conce ntrated ma

rkets like this one

, lower price s, if they occur at all

, may be transitory

. Owing to the lower level of competition in highly conce ntrated marke ts, when
prese nted with lower supply inp ut price s, companies have a37

g rea t er ability to reta in for themselves the input saving s rathe r than pass them on to consumers. The Clay ton Act, as t he Supreme Court “ha[s] observe d many times, [i s] a prophy lactic

measure , intended primarily to arr est ap p r e h e n d ed conseque nces of i nterc orpora

te relationships befor e thos e relationship s could work their evil.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.
, 429 U.S. 477, 485 (1977) (interna l quotation marks and citation omitted). The ability of a firm to obta in lowe r price s for inputs for its product (her e, provider service s) should, espec ially i n light of the prophy lactic nature of the Clay ton Ac t , be viewed skeptically when hi gh marke t conce ntrations may have the future eff ect of permitting captur e of those saving s. The dissent uncritica lly acc epts Dr. I srae l’s rosy testimony to the eff ect that ASO saving s “will be passed throug h to em p l o y ers,” Dis. Op. 15, but fails to addre ss contra ry Anthem documents an d the historical tendenc ies of larg e companies in hig hly conce ntrated marke ts to captur e saving s. E.g.
, A R EE D A & H O V E

N K A M P , supra , ¶ 971f, at 56. The dissent also ignor es the district court’s

numerous and not clea

rly err oneous finding s, as p re viously discussed, that total or near ly total pass-throug h is unlikely

. See,
e.g. , Anthem

, 2 0 1 7 WL 685563, at *4, *62. Even if ASO saving s would p as s t h rough in the short term, that does not “pra ctically g uara

ntee[]” that Anthem would not then rai s e its price s corr esponding ly

. But see Dis. Op. 16.

Additionally

, the dissent fails to rec og nize that lower price s may arise due to, o r u l t imately lead to, a decr ease in product quality

. Every

one would ag ree that rock- bottom provide r rate s

seem benef

icial t o consumers, but when those rock- bottom price s l ea d t o inferior medical service s, any benef it to the consumers’ wallets is diminis hed by the harm to their health. As the Guidelines state, if m er g ing firms “would withdraw a product that a signific ant n umber of customers strong ly pref er to those products that would rema in available

, this can constitute a harm to customers over and above any eff

ects on the price or38

quali t y o f any g iven product.” Guidelines § 6.4; see also id. § 10 (“[P] urported e fficie ncy claims based on lower prices can be undermined if they rest on reduc tions in produc t q u ality or varie ty th at cu s t omers value.” ). And a decr ease in product quality is not mere ly specula tive here — ever y dollar of medical
cost saving s rea liz ed by consumers will c ome at the expense of providers. I t thus is quite plausible that paid less, th e m ed i ca l providers will provide less. These inconvenient fac ts do not jibe with the di ss en t ’s superf

icial, t hirty -thousand-f

oot view of this

case , and it is thus unsurprising that they are ad d re s s ed in passing , if at all.

IV.

Anthem far es no better in its challeng e to the district court’s independe nt an d alterna tive deter mination that the merg er should be enjoined on the basi s o f its anticompetitive eff ect in the R ichmond, Virg inia marke t for the sale of health i nsuranc e to “lar g e g roup” employ ers with more than fifty em p l oy ees. There

, the g overnme nt’s prima fac ie case was even strong er than in the marke t for national acc ounts in the fou rt een Anthem
states. Depe nding on how marke t share was calc u l ated ( i.e.
, including all Blue customers as Anthem or not, including fully insured customers or just ASO), the companie s ’ combined marke t share rang ed from 64% to 7 8 %. Even under the calc ulation most favor able to Anthem (ASO-only

, disreg arding

n o n -Anthem Blue customers), the merg er would raise an

overw helm i ng presumption of anticompetitive eff ect: HHI would rise 1511 to a post-merg er total of 4350, wher e the Guidelines presumption threshold is an incre ase of 200 to a postmerg er total of 2500. As the Presi d en t o f Anthem Virg inia acknow ledg ed, Anthem has the bigg est share of the larg e g roup employ er marke t acr oss all of Virg inia, and in Richmond, Cigna is its s trong est competitor.39

Anthem principally challenge s the district court’s relianc e

on a char t prepare d by Dr. Dra

nove, the g overnme nt’s expert witness, showing the merg er would have an anticompetitiv e eff ect in Richmond even cre d iting all of Dr. I srae l’s claimed ef fi ciencies. The char

t included an asterisk next to the Ri ch m o n d entry signify

ing that “no amount of cost saving s coul d offse t employ er harm due to decr ease d competition.” P ls.’ Ex

. 760. On cross examination, Dr. Dra nove was aske d whether that meant even a saving s of $10 billion or $20 bill ion would not offse t the m erg er’ s harm, and he acknowledge d that he could not rec all the foundation for his state ment. Given this inability to addre ss that extre me hy pothetical, Anthem maintains that the district court should not have relied on the statement or even on the char

t as a whole

.

The re cord shows that the di strict court did not rely on the “aste risk” statement and explained at trial that it would not do so beca use it was unnece ssary to finding a substan t ial anticompetitive effec t. As to the broade r question whether Dr. Dra nove’s inability to explain the asterisk meant that the district
court should ha

ve disreg arde d his c hart (a nd rela ted testimony ) altog ether

, t h e d istrict court did not abuse its discretion. See Heller v. District of Columbia

, 801 F.3d 264, 272 (D.C. Cir. 2015). L eaving the asterisk statement aside, An them raises no

rea l obje ction to the substance of the char t, only urg ing that Dr. Dra nove’s inability to explain the asterisk was so damag ing that it called into doubt the reliability of his over al l analy sis. The district court, which hear d extensive testimony from Dr. Dra nove about the anticomp et i tive eff ects reve aled by his economic models and relied on it heavily throug hout its opinion, clea rly conclude d otherwise. The district court h ad “c onsiderable leewa

y ” to do so in deter

mining that all oth er aspec ts of the char

t and his testimony wer e reliable

. Kumho Tire Co. v. Carmichael

, 526 U.S. 137, 152 (1999); cf. Snyder v. Louisi ana , 552 U.S. 472, 477 (2008).40

Anthem’s rema ining challeng es amount to an ineffe ctual attack on the district court’s weig hin g o f rebuttal evidenc e. I t incorre ctly states that the district court relied sole l y on Dr. Dra nove’ s char

t to find anticompetitive harm while ignor ing evi d en ce of “enor

mous” medical saving s, Appellant Br

. 53, when in fa ct Dr. D ranove testified that his char t cre dited 100% of Anthem’s claimed saving s and still found a net anticompetit ive effec t. Anthem pos its that there would still be five or more competitive insurers in Richmond post-merg er, but

even assuming that is true (one of the t wo wi t n es ses it cites identified only four, including the combined company ), the mere exis tence of competitors m ay not be sufficie nt to constrain a larg er Anthem that would control 64% to 78% of the m arke t. See Guidelines § 5. I ndeed, one of those competitors, Opti ma,

was said to have strug g led in the Richmond marke t, and Anthem shows no clea

r err or in the d i s t ri ct court’s finding that Optima “does not appear ab l e to compete on the same field as the

m er ged company .” Anthem

, 2017 WL 685563, at *68. No r does An t hem show clea r err or in the finding that other companies do not appear interested in enter ing the Richmond marke t, or that even if they did, their entry would be insufficient
to constrain the combined company

. The evidenc e cited by Anthem shows only that other companies may i n tend to enter Richmond (I nnovation), or may have the ability t o en ter R ichmond (Piedmont, VCU), or may have a marg inal o r embry onic prese nce in R i chmond (Ka iser, Bon Secours)

, not that entr y by these companies would offse t the merg er’ s anticompetitive potential.

Telling ly , our di ssenting colleag ue offers a single mention of t he dis trict court’s Richmond holding (in a parenthetica l, no less), which itself is a sufficie nt basis for enjoining the merg er. Any sug g estion that the claimed saving s would make the merg er procompe titive in Richmond ignor es the rec ord evidenc e,41

namely that even cre diting all of the claimed saving s, the merg er of Richmond’s two bigg est larg e-g roup insurers would g ive the combi n ed company such a vast marke t share that the overa ll eff ect of the merger would still be anticompetitive. As Dr. Dranove testified at trial, his analy sis “still predic ts a p ri ce incre ase” in the Richmond marke t “eve n [after] c rediting ever y penny of th[ e] eff

ici encies” estimated by Dr. I srae l. That is,

ev en ignor ing Anthem’s failure to show that the saving s wer e merg er- specific and sufficie ntly verifia ble, see supra P ar t I I I .B–C, the proposed merg er would cause an alre ady highl y

conce ntrated m arke t to become overw helmingly so, with Anthem controlli ng as m uch as 78% of t he mar k et and two or three other companies fig hting to maintain rele vance

. Although the dissen t rec og nizes this appea l raises “fa ct-intensive question[s ],” Dis. Op. 13, it has persistently failed to engag e with the fac ts.

I n conclu s i o n , the district court did not clea rly err in its fac tual finding s that th e merg er would have anticompetitive eff ects in the Richmond ma

rket, and importantly

, Anthem does
not alleg e any err or of law with respe ct to that deter mi n at ion. Thus, the district court did not abuse its di scre tion in enjoining the m erg er on the basis of t he mer ger ’s anticompetiti ve effec ts in the Richmond marke t. And, as previously noted, this holding provides an inde pendent basis for the injunction, even a bsent a finding of anticompetitive h arm in the fourtee n-state national

acc ounts market.

Acc ording ly

, we aff

irm the issuance of the perma nent injunction on alternative a nd independe nt gr ounds.M ILLETT , Circuit Judge , concurring: I join the opinion of the court in full, including its two separate and independent holdings that the proposed merge r would substantially reduce competition in (i) the national-accounts market and (ii) the large-group-employer market i n 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, e ven 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 separa tely 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 D EPARTMENT OF J USTICE & F EDERAL T RADE C OMM ’ N , H ORIZONTAL M ERGER G UIDELINES § 10, at 30 (Aug. 19, 2010)). Rather, the proffered efficiencies, ev en if verifiable, must at least neutralize if not outweigh the har m caused by the loss of competition and innovation. H ORIZONTAL M ERGER G UIDELINES § 10, at 30 (“cognizable efficiencies” must “reverse the merger’s potential to harm customers in the relevant market”); see also 4A P HILLIP E. A REEDA & H ERBERT H OVENKAMP , A NTITRUST L AW ¶ 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 disse nting opinion repeatedly hangs2
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 reduc tion would be sufficiently large to offset the merger’s anticompetitive effects, (ii) the saving s were obtainable only through merg er, 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 a n efficiency. And that stateme nt by the government hardly seems to merit “[l]inge r[ing]” over, Dissenting Op. 4.

Second, what the dissenting op inion (at 15) labels as an “undeniable” predicate assumpti on—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 di strict 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 t o 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 g iven 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 r elationships 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) th at 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 “overwhelm ing[]” that the post-merger firm will deliver health care for less, e.g. , Dissenting Op. 8, it bears emphasizing that one half o f this merger disagrees. “In this case, the Department of Justice is not the only party rais ing questions about Anthem’s charact erization 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 contenti ons. But antitrust law is not so monocular. Rather, product variety, quality, innovation, an d efficient market allocation—all increased through competition—are equally protected forms of consumer welfare. See H ORIZONTAL M ERGER G UIDELINES § 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. & Ger ontology 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 incr eased bargaining power short of monopsony is procompetitive. But securing a product at a lower cost due to increased b argaining power is not a procompetitive efficiency when doing so “simply transfers income from supplier to purchaser without any resource savings.” A REEDA & H OVENKAMP , supra , ¶ 975i, at 106. Plus, as Professors Areeda and Hove nkamp 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 th e 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 antitru st laws, state and federal, is to preserve competition. It is competiti on—not the collusive fixing of prices at levels either low or high—tha t 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 * * * lesse n competition,” id. , to proceed anyhow because of some unverifiable and non-merger-specific amount of price decreases accr uing 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 efficie ncies 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.”); A REEDA & H OVENKAMP , supra , ¶ 970f, at 42.K AVANAUGH , 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 tha t 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 4 1% 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 ma rket 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 dis sent.

At the outset, it is important to stress that this is an unusu al horizontal merger case because of the nature of this particular slice of the insurance industry

. To properly analyze th is c ase , it is essential to understand precisely how these market s work

. There are three main players: (i) large employers, (ii) insu rers, 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

no t pay premiums to the insurers. A nd the insurers do not pay the hospi tals 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, t he insurers negotiate rates in advance with the hospital s and doctor s

.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 insurer s , as well as for certain administrative services performed by the insurers

.

To summarize in simple terms : T he employers pay the insurers a fee , and t he 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 th at understanding misses what I believe is the critical feature of this case. Here, the se insurance companies act as purchasing agents on behalf of t he ir employer

- c ustomer s in the upstream market where the insurers negotiate provider rates for the e mployer

- custo mers. W hen the insurers negotiat e lower provider rates, those saving s go directly to the employer

- custo mers. T he merged Anthem

Cigna would be a more powerful purchasing agent than Anthem and Cigna o perating independently. The merged Anthem

- Cigna would therefore be able to negotiate low er prov ider rates on behalf of its employer

- custom ers. Those lower provider rates would mean cost savings that would be passed through directly to the employer

- c ustome rs. To be sure, the merged co mpany may charge its employer

- custo mers an increased fee f or obtaining those savings. But the record3
overwhelmingly demonstrates that the cost savings to employers would far exceed any increased fee s paid by employers

.
In short, the record decisively demonstrates that this merger would be beneficial to the employer

- custo mers 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 th e 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

T he Government contends that this merge r 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 co mpany’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 govern ing horizontal mergers. The case law of the Supreme Court and this Court, as well as the Government’s

own Merger G uidelines, establish that we must consider the efficienci es 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, 72 0 (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 § 1 0, 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 th ose 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 t he merger

. To begin with, t he 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 ho spitals and doctors for healthcare services. Indee d, 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 pa y for their employees’ health care. On top of that, in light of the “affiliate c lause” in many of Anthem’ s existing contracts

, the merger would allow at least some of the businesses that currently purchase insurance5
services from Cigna to obtain lower rates that Anthem has previously negotiated with providers.

How much would provider rates be reduced? Anthem

Cigna’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 Anthem

Cigna’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 w ould 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 w ould be largely if not entirely passed through to the la rge employers that contract with Anthem

- Cigna. T he 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 e mployees. 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 critique s th o se estimates in part by noting that the estimates include cost savings that will acc rue 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 o f the equation, however, the annual savings to self

- insured employ ers would still be at least $1.7 billion annually.6

B y contrast, t he Government’s expert , Dr. Dranove, never did a merger simulation that calculated the amount of the savings that would resu lt 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 A nthem

- Cigna’s evidence showing $1.7 to $3.3 billion annually in passed

through savings for employers. 1

Under the law, t h o se e fficiencies 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 § 1 0, at 30

. B oth requirements are satisfied here

.

The efficiencies and consumer benefits in t his 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 Go vernment, 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 ot herwise 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 employer

customers. 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 pr ovider 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 72 1 . 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
t his 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 i s 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, t he record overwhelmingly establishes tha t 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 h and, 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 beneficiar ies 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 wh ich insurance services are sold to large employers.

B

In a separate discussion

, however, t he 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 the9

concentration of the market and the market share of the merged company. But that description of the law is not correct

.

In landmark decision s in the 1970s

– including United States v. General Dynamics Corp. , 415 U.S. 486 (1974), and Co ntinental 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 shift ed away from the strict anti

- merger approach that the Court had employed in the 1960s in cases such as Brown Shoe C o. 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 s ection 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 mus t 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

. T HOMAS S ULLIVAN & J EFFREY L. H ARRISON , U NDER STANDING A NTITRUST AND I TS E CONOMIC I MPLICATIONS 369 (6th ed. 2014) (“ General Dynamics signaled a major shift in § 7 interpretation.”); Note, Horizontal Mergers After United States v. General Dynamics Corp

. , 92 H ARV

. L. R EV

. 491 , 499, 502 (1978) ( The General Dynamics case “signaled a new judicial approach to s ection 7 cases. . . . By endorsing an inquiry into such f actors

– the structure, history and probable future of the relevant market

– General Dynamics brought antitrust analysis back into line wi th current economic thought.”) (internal10
quotation marks omitted) ; cf. R OBERT H. B ORK , T HE A NTITRUST P ARADOX 210 (1978) (“It would be overhasty to say that the Brown Shoe opinion is the worst antitrust essay

eve r written.

. . . Still, all things considere d, 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 Cla yton Act

. In subsequent cases, t he 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 Gene ral Dynamics for the proposition that the Section 7 analysis is “comprehensive” and f ocuses 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

, mod ern merger analysis must

2 Baker Hughes w as 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 98 4

- 8 6; 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

. ”) (inte rnal quotation marks omitted)

. Importantly, even the Government’s own M erger 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

- e ntry 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 B RYAN A. G ARNER ET AL ., T HE L AW OF J UDICIAL P RECEDENT 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 t hat new standard.” The “results reached under the old standard” are no longer “binding precedent.”)

. U nder the modern approach reflected in cases such as General Dynamics

, Baker Hughes

, and Heinz

, t he 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
ant itrust 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. A t trial

, t he Government asserted an alternative ground for blocking the merger: T he Government claimed that the merger between Anthem and Cigna would give Anthem

- Cig na monopsony power in the upstream market where Anthem

Cigna 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.

M onopso ny power describes a scenario in which Anthem

Cigna 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 pr ices does not qualify as an efficiency that can justify an otherwise anti

- competitive merger. T he consumer welfare implications (and consequently, the antitrust law implications) o f 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 no t , at least over the long term

. See 4A P HILLIP E. A REEDA & H ERBERT H OVENKAMP , A NTITRUST L AW ¶ 980, at 108 (3d ed. 2009 ); H ERBERT H OVENKAMP , F EDERAL A NTITRUST P OLICY § 1.2b, at 15 (4th ed. 2011). Therefore, the exercise of bargaining power by Anthem

- Cigna is pro

competitive 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 anti

competitive because it may result in higher prices for Anthem

-13
Cigna’s employer

- c ustomers. C f. U .S. Department of Justice & Federal Trade Commission, Horizontal Merger Guidelines § 1 0, at 30 (“Cognizable efficiencies . . . do not arise from anticompetitive redu ctions 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 th at’s
a cog nizable 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 i f Anthem

- Cigna would o btain provider
rates that are below competitive levels because of its exercise of unlawful monopsony power against providers , that c ould 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 Anthem

Cigna’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 e xercise of unlawfu l monopsony power in the upstream market where it negotiate s rates with healthcare14
providers ? Given the way it resolved the case , th e 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 portray s t his as an easy case for blocking the merger

. I f 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, t he majority opinion casts doubt on this Court’s opinion s 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. Pro cter & Gamble Co. , 386 U.S. 568 (1967)

, is the essential
p recedent 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, t he

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. Proct e r & Gamble Co. (1967) position that efficiencies might be reason to condemn a merger.” E RNEST G ELLHORN , W ILLIAM E. K OVACIC & S TEPHEN C ALKINS , A NTITRUST L AW AND E CONOMICS IN A N UTSHELL 463 ( 5th ed. 2004 ) ; see also Baker Hughes , 908 F.2d at 985 (“Indeed, that a va riety o f 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 de mand 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 a s much in dicta

– perhaps portending a return to 1960s antitrust law in

some future merger case. F or 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 court s and future panels of this Court still must fol low 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 seco nd, 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

A s mentioned above, the key difference between this horizontal merger and some horizontal merger s 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 actua lly 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 efficienc ies, 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.”). How ever, 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.

T he only real factual question concerning the effects of the merger on large emplo yers 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

. A s I have explained, the record evidence17
overwhelmingly indicates that the savings to employers from lower provider rates w ould greatly exceed the increased fees they would pay to Anthem

- Cig na for the insurance services.

But th e majority opinion does not conduct th at key inquiry

. That is because the majority opinion does not fully acce pt 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 f or 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 th at 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 q uality of what? As noted earlier, t here is no persuasive evidence tha t 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 utiliz ation 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 alread y 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

.

* * *

T he analysis of a merger’s effects necessarily entails a predictive judgment. C ourts 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. W e know that Anthem

- Cigna w ould 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 th e market and contracts

are structured. After all, t he whole point of the provider rates negotiated by insurers is to establish the price s that the employers will pay. If the prices are lower , the employers will pay less. And we know

, furthermore

, that any cost savings to19
employers likely would greatly exceed any increase in fees paid by employers

.
On this record, t his 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 Cour t’s judgment.

T he 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 negotiate s rates with providers ? If yes, the n 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 resolv e that fact

- intensive question in the first instance

. I respectfully dissent.