Opinion ID: 620898
Heading Depth: 1
Heading Rank: 1

Heading: The Merger and the FTC Proceedings

Text: On January 1, 2000, defendant Northshore, then doing business as Evanston Northwestern Healthcare Corporation, merged with Highland Park Hospital, located in Highland Park, Illinois. Prior to the merger, Northshore owned Evanston Hospital in Evanston, Illinois, as well as Glenbrook Hospital in nearby Glenview, Illinois. In February 2004, the Federal Trade Commission filed an administrative complaint against Northshore alleging that the merger violated section 7 of the Clayton Act, 15 U.S.C. § 18, by substantially lessening competition for general acute care inpatient hospital services in the “area directly proximate to the three [Northshore] hospitals and contiguous geographic areas in northeast Cook County and southeast Lake County, Illinois.” In re Evanston Northwestern Healthcare Corp., 2007 WL 2286195, at  (F.T.C. Aug. 6, 2007). Following an eight-week trial, an administrative law judge concluded that the merger No. 10-2514 5 violated the Clayton Act. The judge ordered Northshore to divest Highland Park Hospital. Id. at . On appeal in 2007, the Federal Trade Commission agreed with the ALJ that the merger enabled Northshore to exercise increased market power and that it used that power to increase its prices by a substantial amount. The FTC pointed out that Northshore’s own economic expert found a price increase of nine to ten percent. Id. at . The FTC concluded that the evidence as a whole demonstrated that Northshore’s “substantially higherthan-predicted merger-coincident price increases were due to market power, rather than competitively- benign factors.” Id. None of Northshore’s alternative explanations for those price increases, the FTC concluded, were supported by the record. Id. The FTC rejected Northshore’s arguments that the merger made Highland Park a meaningful competitor in the market, that the merger’s anticompetitive effects were outweighed by quality improvements at Highland Park resulting from the merger, and that Northshore’s not-for-profit status reduced the potential for anticompetitive harm. Id. at - . The FTC affirmed the ALJ’s ruling that the merger violated section 7 of the Clayton Act. Id. at . When it came to the question of remedy, however, the FTC concluded that divestiture of Highland Park was not required. The FTC instead required Northshore to use “separate and independent” teams — one for Evanston and Glenbrook, and another for Highland Park — to negotiate contracts going forward. Id. at -. This remedy, the Commission concluded, would provide 6 No. 10-2514 for effective competition between the hospitals and avoid the “complex, lengthy, and expensive process” of divestiture. Id. at .