Antitrust and Unfair Competition Law

Competition: Spring 2015, Vol. 24, No. 1



By Ari Y. Basser1


On January 24, 2014, following a bench trial in October 2013, Chief Judge B. Lynn Winmill of the United States District Court for the District of Idaho found that St. Luke’s Health System, Ltd.’s ("St. Luke’s") acquisition of the Saltzer Medical Group, P.A. ("Saltzer")2 violated Section 7 of the Clayton Act,3 and the Idaho Competition Act,4 because "the effect of such acquisition may be substantially to lessen competition."5 Upon such finding, the court entered a permanent injunction and ordered St. Luke’s to fully divest itself of Saltzer’s physicians and assets, and unwind the acquisition of Saltzer, which had been consummated at the end of 2012.

The court rejected the defendants’ request for a so-called "conduct-based remedy." The court instead elected, in its discretion and after a thorough review of the evidence presented at trial, the remedy of "divestiture" to restore the market to its pre-acquisition structure, despite having previously denied Saint Alphonsus Health System, Inc.’s ("St. Alphonsus") and Treasure Valley Hospital’s ("TVH") request for a preliminary injunction. The defendants subsequently appealed the decision and judgment to the Ninth Circuit Court of Appeals,6 where it was affirmed in favor of the Federal Trade Commission ("FTC"), the State of Idaho, St. Alphonsus, and TVH.7

Effective December 31, 2012, Boise, Idaho-based St. Luke’s acquired the tangible assets of physicians’ practice group Saltzer of Nampa, Idaho for $16,000,000 (hereinafter referred to as the "Acquisition"). Included in the deal was a five-year professional services agreement ("PSA"), which obligated Saltzer’s physicians’ services exclusively to St. Luke’s and guaranteed that Saltzer’s physicians receive annual compensation at no less than a base

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amount for two years after the agreement. St. Luke’s also received Saltzer’s intangible assets, personal property, and equipment.8

St. Alphonsus and TVH (collectively, "Plaintiffs"), two competing health care entities in Nampa, instituted a lawsuit in federal court in Idaho on November 12, 2012, asserting that St. Luke’s acquisition of Saltzer violated Section 7 of the Clayton Act. Both the FTC and the Idaho Attorney General were investigating the proposed acquisition. The Idaho Attorney General asked St. Luke’s to delay closing the deal to allow its office time to complete its investigation, and the FTC accelerated its investigation in an effort to complete it before the closing of the Acquisition. Meanwhile, St. Luke’s proceeded to close the Acquisition before the end of 2012. The FTC filed a lawsuit against St. Luke’s and Saltzer on March 12, 2013.


Section 7 of the Clayton Act states: "No person . . . shall acquire, directly or indirectly, the whole or any part of the stock or other share capital . . . of another person . . . where . . . the effect of such acquisition may be substantially to lessen competition . . . ."9 The Clayton Act was designed to prevent harm to consumers.10 An acquisition is illegal under Section 7 of the Clayton Act if "the effect of such acquisition may be substantially to lessen competition."11 Congress used the words "may be" "to indicate that its concern was with

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probabilities, not certainties."12 Section 7 of the Clayton Act is prophylactic in nature; its fundamental purpose is "to arrest the trend toward concentration, the tendency to monopoly, before the consumer’s alternatives disappear[] through merger."13 Importantly, Section 7 necessarily "requires a prediction" of a transaction’s likely competitive effect, and "doubts are to be resolved against the transaction."14

Plaintiffs in any case asserting a violation of Section 7 must show that the acquisition in question would produce "a firm controlling an undue percentage share of the relevant market, and [would] result[] in a significant increase in the concentration of firms in that market."15 "Such a showing establishes a ‘presumption’ that the merger will substantially lessen competition."16

A. Plaintiffs May Seek a Preliminary Injunction to Prevent Irreparable Injury

Section 16 of the Clayton Act empowers any person threatened with injury by a violation of the Sherman or Clayton Acts to seek injunctive relief in the federal courts.17 Such actions are expressly subject to the "same conditions and principles" applied to injunctions "by courts of equity," thus triggering traditional equitable prerequisites for injunctive relief.18

Equity treats the preliminary injunction as an "extraordinary remedy."19 A person seeking such relief must show that "irreparable injury is likely in the absence of an injunction."20 An injury is not irreparable if it can be remedied by money damages or some form of relief other than an injunction.21 The irreparable harm must occur "before a decision on the merits can be rendered."22

In an effort to block the consummation of the merger before any ruling on the merits as to whether or not it violated Section 7 of the Clayton Act, Plaintiffs moved for

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preliminary injunctive relief. By Order dated December 20, 2012,23 the court denied Plaintiffs’ motion for preliminary injunction finding that "irreparable harm" was not likely following the merger and prior to any decision on the merits—which, at that time, was anticipated to issue in the summer of 2013.

In opposing both Plaintiffs’ motion for a preliminary injunction and their argument that irreparable injury would occur because the combined entity would have increased leverage with health insurers—thereby resulting in higher premiums for customers—St. Luke’s responded that it had already entered into a memorandum of understanding with Idaho’s largest insurer, Blue Cross of Idaho, setting forth an agreement to enter into a contract on January 1, 2013 for a term of two years. The court determined that even assuming the Acquisition would give St. Luke’s leverage at some point, it would come too late to be exercised with regard to Idaho’s largest insurer before the case could be resolved on the merits.24

The court noted that since one of St. Alphonsus’s main hospitals providing a full range of imaging procedures is located in Nampa, Idaho, doctors would likely opt to send their patients—particularly those in Nampa—to St. Alphonsus’s hospital for imaging procedures as opposed to St. Luke’s hospitals, should St. Luke’s raise prices for comparable services.25 In response to Plaintiffs’ contention that they would be forced to lay off 150 employees triggered by an immediate loss of referrals as a consequence of the merger—as allegedly happened in past instances where St. Luke’s had taken over physician practices—the court observed that, under the terms of the merger agreement, Saltzer’s physicians retained the right to make referral decisions based on the best interests of the patient. The court also concluded that St. Luke’s would not prompt Saltzer’s physicians to steer patients to St. Luke’s. Therefore, it found that any prediction of an immediate drop in referrals would not likely occur before trial, and any layoffs by the Plaintiffs would not likely be caused by St. Luke’s "steering" the patients away from them.26

The court based its decision on several critical assumptions.27 First, the case was going to proceed on a fast track to trial, which would be held by July 29, 2013. Second, prior to trial, no measureable reduction in referrals to St. Alphonsus or TVH from Saltzer’s physicians would occur. Third, given the agreement between the merging entities, the integration of St. Luke’s and Saltzer would "take place gradually over time." There were no plans to close Saltzer’s clinics or facilities, dispose or discontinue use of any major equipment, or alter Saltzer’s service offerings. Saltzer’s chief organizational structure would remain unchanged for at least one year. Converting Saltzer’s phone, email coding, billing, accounts receivables, and medical records systems would also not occur for over a year.

Last, and foreshadowing the ultimate remedy that was imposed, the Acquisition could be unwound and divestiture ordered in the event Plaintiffs prevailed on their antitrust

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claims. The agreement reached between the merging parties gave Saltzer the right to repurchase its tangible assets from St. Luke’s and ensured Saltzer access to the personnel, facilities, medical records, and resources it required to provide uninterrupted care to its patients. Also, according to the PSA, if the transaction were ever unwound, Saltzer would be allowed to return to operating as an independent physicians’ group. The court further made clear that if its assumptions proved unfounded at any time prior to a trial on the merits, Plaintiffs were at liberty to renew their efforts to secure a preliminary injunction to freeze or even unwind the integration process.28

B. Anti-Competitive Effects in the Relevant Market Must Be Likely to Occur

Courts may only proscribe merger activity that is likely to have anti-competitive effects in the relevant product and geographic market. In the January 24, 2014 opinion, the Idaho District Court found that the merger’s relevant product market was adult primary care services sold to commercially-insured patients and the relevant geographic market was Nampa, Idaho, where a significant majority of the city’s residents (68%) received their primary care services.29

Upon examining the issue of market share and whether the merger would likely have anti-competitive effects, the court observed that St. Luke’s became the largest provider of adult primary care services in Nampa due to the Acquisition. Citing the Merger Guidelines,30 the court noted that "market concentration is ‘often one usual indicator of the likely competitive effects of a merger.’"31 In evaluating that market concentration, the court noted that the FTC looks at both the pre- and post-merger market concentrations.

The court relied heavily on the Herfindahl-Hirschman Index ("HHI"), a metric which is customarily considered to be the preeminent measure of market concentration. The HHI is calculated by squaring the market share of each firm competing in a market and then summing the resulting numbers. The FTC uses HHI numbers to determine thresholds for evaluating "when an industry is considered highly concentrated or when potential mergers require investigation."32 The court observed that a particular HHI will range anywhere from 0 to 10,000 points and that an HHI above 2,500 signals a highly concentrated market. Citing the Merger Guidelines § 5.3, the court further observed that a merger that increases the HHI by more than 200 points will be presumed to be likely to enhance market power. The court found that, as a result of the merger between St. Luke’s and Saltzer, the HHI of the Nampa market would rise by 1,607 points to a post-merger HHI of 6,219, both values that are "well above the thresholds for a presumptively anticompetitive merger (more than

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double and seven times their respective thresholds, respectively)."33 It was determined that St. Luke’s and Saltzer, as a combined entity, comprised 80% of the adult primary care physicians in Nampa, constituted the dominant provider in Nampa for primary care, and enjoyed significant bargaining leverage over health insurance plans.

Based on the HHI score and the finding that, when combined, St. Luke’s and Saltzer accounted for nearly 80% of the primary care physicians in Nampa, the court concluded that the Acquisition was "presumptively" anti-competitive under Section 7 of the Clayton Act.34 Indeed, the court found that St. Luke’s and Saltzer were each other’s closest substitutes, thus effectively eliminating the ability of health plans to pit one against the other in negotiating pricing after the merger. Based on its view of the evidence, the court determined that it was likely that the combination would also create anti-competitive effects because of the merged entities’ ability to negotiate higher reimbursement rates from payors that would be passed on to patients, higher prices for ancillary services in the form of hospital outpatient provider-based rates for those services, and a reduction in referrals to third-party providers.

Regarding patient referrals, the court determined that while Saltzer’s physicians retained the ability to refer their patients to any practitioner or facility regardless of its affiliation with St. Luke’s, in accordance with the PSA, it was likely such physicians would nonetheless make increasing referrals to St. Luke’s as a consequence of the transaction. The court noted that St. Luke’s did not own a hospital in Nampa, whereas the Plaintiffs owned and operated the only health care facilities in Nampa. This likely shift in referrals further supported the court’s decision that the transaction would result in anti-competitive effects.

C. Pro-Competitive Intentions Are Insufficient to Redress Anti-Competitive Effects

To St. Luke’s credit, the court acknowledged that the Acquisition was motivated by pro-competitive intentions. The court was persuaded that the intent of the transaction was to improve the delivery of health care in the Nampa area rather than to degrade it.35 In addition, the court determined that the merging parties intended the transaction to work to the benefit of patient outcomes and did not find any reason to believe that the transaction would have anything but that result.

Notwithstanding the parties’ intent, the court concluded that they could achieve the same goals through alternative arrangements that could avoid the potential to raise prices—a

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conclusion St. Luke’s attempted to dispute by proffering testimony that the parties had, unsuccessfully, attempted other forms of affiliation. The court did not find persuasive other arguments advanced by St. Luke’s and Saltzer with respect to their position that the transaction actually increased efficiencies36 and, in particular, rejected Saltzer’s argument that it did not have the financial reserves to transition to value-based compensation on its own. Although the Ninth Circuit recognized St. Luke’s intent to provide better service to patients after the merger, it found that St. Luke’s did not prove that efficiencies resulting from the merger would have a positive effect on competition.37

D. Ease of Entry May Mitigate the Anti-Competitive Effects of a Merger

St. Luke’s contended that other providers would enter the relevant market and compete, thereby mitigating any anti-competitive effects of the Acquisition—the "ease of entry" defense. To establish this defense, it was necessary for St. Luke’s to show that entry by competitors would be "timely, likely, and sufficient in its magnitude, character, and scope to deter or counteract the competitive effects" of a proposed transaction.38 The higher the barriers to entry, the less likely it is that the "timely, likely and sufficient" test can be met.39

In analyzing whether evidence is sufficient to support an "ease of entry" defense, the "history of entry into the relevant market is a central factor in assessing the likelihood of entry in the future."40 The court found that St. Luke’s failed to carry its burden of proving that entry by competitors was likely and would be timely. The court felt that entry was unlikely to mitigate the transaction’s anti-competitive effects, noting that private physicians’ groups would be unable to recruit family practitioners to Nampa—as previously demonstrated in 2013—and that they had been unsuccessful in recruiting pediatricians or general internists to Nampa in the two years prior to trial.

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E. Newly-Created Efficiencies of a Merger May Mitigate Its Anticompetitive Effects

St. Luke’s also argued, among other things, that the merger would create efficiencies that far outweigh any anti-competitive effects—commonly referred to as the "efficiencies defense." The efficiencies defense requires convincing proof of significant and merger-specific efficiencies arising as a result of the merger.41 Although the United States Supreme Court has not sanctioned the use of the efficiencies defense in a Section 7 case,42 the trend among lower courts is to recognize the defense.43 When high market concentrations will result from the merger, the defense requires "proof of extraordinary efficiencies."44

Courts undertake a rigorous analysis of the kinds of efficiencies that are "urged by the parties in order to ensure that those ‘efficiencies’ represent more than just mere speculation and promises about post-merger behavior."45 The efficiencies must be merger-specific—that is, they must be "efficiencies that cannot be achieved by either company alone because, if they can, the merger’s asserted benefits can be achieved without the concomitant loss of a competitor."46 The Merger Guidelines only credit those efficiencies likely to be accomplished with the proposed merger and unlikely to be accomplished in the absence of either the proposed merger or another means having comparable anti-competitive effects.47 The court found that St. Luke’s did not carry its burden of showing convincing proof of significant and merger-specific efficiencies arising as a result of the Acquisition.

On January 24, 2014, after completing an evidentiary bench trial of the consolidated actions in October 2013, and reviewing further submissions by the parties in November 2013, the Idaho District Court ruled that the Acquisition violated Section 7 of the Clayton Act. The court ordered the divestiture of the affiliation between St. Luke’s and Saltzer.


The form and structure of mergers are numerous. Horizontal mergers, vertical mergers, and mergers with a mix of both horizontal and vertical dimensions typically present different competitive issues and challenges that require different remedial measures. Consequently, there can be wide variance with regard to selecting an appropriate merger remedy that effectively preserves competition in the relevant market.48 The purpose of

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relief in a Section 7 case is to restore competition lost through the unlawful acquisition.49 The restoration of competition is the "key to the whole question of an antitrust remedy."50 "Fashioning appropriate equitable antitrust relief requires that courts balance the benefit to competition against the hardship or competitive disadvantage the remedy may cause."51

As the United States Supreme Court has articulated, "[t]he relief in an antitrust case must be ‘effective to redress the violations’ and ‘to restore competition'[;] . . . divestiture is particularly appropriate where asset or stock acquisitions violate the antitrust laws," adding, "[t]he District Court is clothed with ‘large discretion’ to fit the decree to the special needs of the individual case."52 A remedy that is carefully tailored to address the competitive harm that has been created by the proposed or consummated merger is the best way to ensure that relief will be effective.53

A. Merger Remedies May Be Conduct or Structural in Nature

Effective merger remedies typically include "conduct" or "structural" provisions, either, or both of which, can be used to preserve competition where appropriate. Conduct remedies, which the United States Department of Justice, Antitrust Division, views as valuable tools, ordinarily involve provisions that prescribe certain aspects of the firms’ post-consummation business conduct. Conduct provisions may preserve a merger’s potential efficiencies, while, at the same time, intending to remedy the competitive harm resulting from the merger.54 Effective conduct remedies are tailored as precisely as possible to the competitive harms associated with the merger.

B. Divestiture of an Existing Business Is a Preferred Structural Remedy

The Antitrust Division has recognized that "in structural remedies, the general preference is for the divestiture of an existing business."55 The FTC explained that, "'[d]ivestiture is desirable because, in general, a remedy is more likely to restore competition if the firms that engage in pre-merger competition are not under common ownership,’ and there are ‘usually greater long-term costs associated with monitoring the efficacy of a conduct remedy than with imposing a structural solution.’"56 Certain structural remedies, including those involving the sale of physical assets by the merging firms or requiring that the merged firms create new competitors through the sale or licensing of intellectual

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property rights,57 have been referred to as simple, relatively easy to administer, and "sure" to preserve competition.58

The structural remedy of divestiture must enable firms to compete effectively in the relevant market. To achieve the goal of ensuring that the efficient current and future reduction and distribution of the relevant product will be achieved by divestiture, thereby effectively preserving the competition that would have been lost through the merger, the Antitrust Division often insists on the divestiture of an existing business entity that has already demonstrated the ability to compete in the relevant market.59 A 1999 FTC study determined that the divestiture of on-going businesses succeeded at a higher rate than the divestiture of invested assets.60

Both the Department of Justice and the FTC (collectively, "the agencies") are no doubt mindful of the considerable challenges that can be presented when deploying the remedy of divestiture in order to restore competition. The agencies recognize what they term "th[e] inherent need for prediction," and have established guidelines that "reflect the congressional intent that merger enforcement should interdict competitive problems in their incipiency and that certainty about anticompetitive effect is seldom possible and not required for a merger to be illegal."61

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C. Divestiture Should Be Ordered Discriminately and When It Will Inure to the Public Interest

Understandably, courts have been inclined to order divestiture to remedy the likely anti-competitive effects of a transaction, particularly where divestiture is "the remedy best suited to redress the ills of an anticompetitive merger."62 Divestiture "should always be in the forefront of a court’s mind when a violation of § 7 has been found."63

However, divestiture should not be prescribed haphazardly as it has been referenced as the "least accessible end of a spectrum of injunctive relief that should not be entered into "without substantial evidence that the benefit outweighs the harm."64 Divestiture has been characterized as a "drastic and rarely awarded remedy" that should not be awarded where it would "disserve the public interest."65 Courts are further mindful that "[s]ince divestiture is a remedy to restore competition and not to punish those who restrain trade, it is not to be used indiscriminately, without regard to the type of violation or whether other effective methods, less harsh, are available."66 Where the divested entity would be unable to compete effectively, divestiture may be an inappropriate remedy.67

A divestiture may be disfavored when the transaction has already been completed and unwinding it would harm the community.68 Because the Clayton Act was not designed to be punitive, an order of divestiture may not be appropriate when such relief would "inure to no one’s benefit."69

In considering whether divestiture was an appropriate remedy in the instant case, the Idaho District Court was mindful of the court’s admission in Garabet that "the costs and complexities of unwinding a merger may be considered in evaluating prejudice to the

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affected parties."70 However, St. Luke’s had previously represented to the court during the preliminary injunction proceedings that it would "not oppose divestiture on grounds that divestiture cannot be accomplished."71 Thus, the court determined that the cost and complexity of unwinding the transaction was not a defense to divestiture.72

St. Luke’s also argued that an unwound acquisition entity (Saltzer) would be significantly and negatively affected due to the departure of seven surgeons from Saltzer to St. Alphonsus. The court noted that, while that loss was a financial hardship, the seven surgeons who left Saltzer did so "in large part because of the acquisition."73 Courts do not consider "self-inflicted wounds" in fashioning the appropriate remedy.74 Hence, having determined that Saltzer’s weakness—the loss of seven surgeons—was caused by the Acquisition, the court ruled that this could not be a reason to hold together the Acquisition. It further noted that any financial hardship was mitigated by St. Luke’s payment of nine million dollars for goodwill and intangibles as part of the Acquisition, a payment it had previously agreed Saltzer did not have to be pay back in the event the Acquisition was ever undone.75

St. Luke’s also proposed that divestiture be disregarded as a remedy and supported ordering itself and Saltzer to negotiate separately with health plans. St. Alphonsus argued that this proposed alternative of separate "negotiating teams" would be completely

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inadequate, citing ProMedica Health System v. FTC.76 To that end, relying on Copperweld Corp. v. Independence Tube Corp.,77 St. Alphonsus argued that even if there was a separate Saltzer negotiating team, as St. Luke’s suggested, as long as Saltzer was ultimately part of St. Luke’s, it could be expected to act in St. Luke’s interest. St. Alphonsus further argued that if St. Luke’s bottom line was benefitted, whether negotiating team "Saltzer" or negotiating team "St. Luke’s" succeed in getting more business, there would be "no incentive for a separate Saltzer negotiating team to vigorously compete."78 The Idaho District Court found ProMedica persuasive and rejected the far more limited separate negotiating teams remedy propounded by St. Luke’s.79


In light of the final decision entered by the Ninth Circuit, which affirmed the lower court’s decision and the important issues presented during trial and appeal, St. Alphonsus is, and shall continue to be, significantly instructive for hospitals and health systems’ accountable care strategies. Hospitals have been acquiring and aligning with physicians’ groups to create an integrated care continuum for patients, and moving toward value-based reimbursement. Clearly, the FTC has been scrutinizing such transactions in light of their potential anti-competitive effects, particularly with respect to any potential resulting leverage obtained by health insurers.

Importantly, St. Alphonsus demonstrates the reality that the salutary goals of Congress, in enacting antitrust laws to preserve competitive markets, are paramount to any salutary goals of the parties to the particular transaction. Here, as the Idaho District Court found, the Acquisition "was intended by St. Luke’s and Saltzer primarily to improve patient outcomes" and "would have that effect if left intact."80 The court applauded St. Luke’s for

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its efforts to improve the delivery of health care in the geographic market the Acquisition affected. The court even complimented St. Luke’s on its foresight and vision.81

But, after a thorough assessment, the Idaho District Court nonetheless concluded that the Acquisition was illegal under Section 7 of the Clayton Act because the effects of the merger "may be substantially to lessen competition," noting that "the particular structure of the Acquisition — creating a huge market share for the combined entity — creates a substantial risk of anticompetitive price increases."82 The court cautioned that "the Clayton Act is in full force and effect, and it must be enforced," adding, "[t]he Act does not give the Court discretion to set it aside to conduct a health care experiment."83

This case is an example of the FTC’s vigorous challenge through trial and appeal to what it perceives to be an anti-competitive physicians’ practice group acquisition. It also stands as an important demonstration of the FTC’s commitment to combat what it deems anti-competitive transactions by aggressively implementing divestiture remedies—not merely conduct-based remedies—in the health care industry context even after an acquisition has been consummated.

St. Alphonsus reveals the vitality of the divestiture remedy and illustrates the critical burden merging parties bear to proffer evidence of the pro-competitive effects of the challenged transaction without exploiting so-called "self-inflicted wounds." Merging parties are well-advised not to presume or take for granted that a court will order that a consummated transaction be unwound upon a finding that it has or would have an anti-competitive effect. Finally, and, importantly, even if acquisition agreements include language that may tend to negate or thwart a showing of irreparable harm—as the court confronted here—securing a consequent denial of a request for preliminary injunctive relief based on such language may prove to be a two-edged sword that ultimately cuts in support of granting divestiture upon a finding that the transaction violates Section 7 of the Clayton Act.

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1. Principal and Managing Attorney at Basser Law. The views and opinions expressed in this article are those of the individual author and do not necessarily reflect the views or opinions of the firm.

2. Saltzer is Nampa, Idaho region’s largest independent physician association.

3. 15 U.S.C. § 18.

4. Idaho Code § 48-106.

5. Findings of Fact & Conclusions of Law, Saint Alphonsus Med. Ctr.-Nampa, Inc. v. St. Luke’s Health Sys. Ltd., No. 1:12-cv-00560-BLW (D. Idaho Jan. 24, 2014).

6. St. Alphonsus Med. Ctr. – Nampa, Inc. v. St. Luke’s Health Sys., No. 14-35173 (9th Cir. June 16, 2014).

7. St. Alphonsus Med. Ctr. – Nampa, Inc. v. St. Luke’s Health Sys., No. 14-35173, 2015 U.S. App. LEXIS 2098 (9th Cir. Feb. 10, 2015).

8. Plaintiff St. Alphonsus operates hospitals, out-patient clinics, and other health care facilities in the Treasure Valley of Idaho and Eastern Oregon. In Idaho, it owns and operates hospitals in Boise and Nampa. It is the only hospital in the City of Nampa. St. Alphonsus employs over 200 physicians who practice in what it calls the St. Alphonsus Medical Group ("SAMG"). Over sixty of the SAMG physicians provide primary care services. St. Alphonsus is owned by Michigan-based Trinity Health, which operates approximately fifty hospitals across the country. Plaintiff Treasure Valley Hospital is a nine-bed, physician-owned, for-profit hospital in Boise, largely used for outpatient surgeries. In the fall of 2012, St. Alphonsus and TVH jointly opened a new out-patient surgery center in Nampa.

St. Luke’s operates seven hospitals in Idaho—none of which are in Nampa—and operates an emergency clinic with out-patient services in Nampa. St. Luke’s employs or has entered into PSAs with each of its 500 physicians who have numerous medical specialties and are geographically distributed across Southern Idaho and Eastern Oregon. Prior to the fall of 2011, St. Luke’s did not employ any primary care physicians in Nampa. In the fall of 2011, seven physicians affiliated with the Mercy Physicians Group, and employed by St. Alphonsus in Nampa, decided to leave St. Alphonsus and join St. Luke’s.

Saltzer Medical Group consisted of forty-one physicians, nearly three quarters of whom provided adult or pediatric primary care services. Thirty-four of the Saltzer physicians, including sixteen of the adult primary care physicians and eight of the pediatricians, practice in Nampa. Saltzer is a very prestigious group with a long history, and is regarded as a "reputable and long-standing significant player" in the Treasure Valley health care community.

In December 2008, Saltzer and St. Luke’s executed a memorandum of understanding establishing an informal partnership alignment. In 2009, Saltzer initiated discussions with St. Luke’s regarding a closer affiliation. Negotiations progressed over approximately three years and "evolved significantly." See Findings of Fact & Conclusions of Law, supra note 5, at 4-7, ¶¶ 1-21.

9. 15 U.S.C. § 18.

10. See Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1446 (9th Cir. 1995) ("[T]he original Clayton Act’s primary aim was to prevent harm to consumers.").

11. 15 U.S.C. § 18.

12. Brown Shoe Co. v. United States, 370 U.S. 294, 323 (1962).

13. United States v. Philadelphia Nat’l Bank, 374 U.S. 321, 367 (1963).

14. FTC v. Elders Grain, Inc., 868 F.2d 901, 906 (7th Cir. 1989) (citations omitted).

15. Philadelphia Nat’l Bank, 374 U.S. at 363.

16. FTC v. H.J. Heinz Co., 246 F.3d 708, 715 (D.C. Cir. 2001) (citation omitted). To rebut this presumption, the defendants must produce evidence which clearly shows that the market’s concentration inaccurately predicts the likely competitive effects of the transaction. United States v. Marine Bancorporation, Inc., 418 U.S. 602, 631 (1974). Rebuttal evidence can take the form of a showing that "the anticompetitive effects of the merger will be offset by efficiencies resulting from the union of the two companies." Heinz, 246 F.3d at 720. Other forms of rebuttal evidence may include a showing of "ease of entry into the market, the trend of the market either toward or away from concentration, and the continuation of active price competition." Heinz, 246 F.3d at 715 n.7 (citation omitted) (internal quotation marks omitted).

17. See 15 U.S.C. § 26.

18. Id.

19. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008).

20. Id. at 22.

21. See Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2948.1 (2d ed. 1995).

22. See id.

23. St. Alphonsus Med. Ctr. – Nampa, Inc. v. St. Luke’s Health Sys., No. 1-12-cv-00560-BLW, 2012 U.S. Dist. LEXIS 181363 (D. Idaho Dec. 20, 2012).

24. Id. at *7.

25. Id. at *7-8.

26. Id. at *9.

27. Id. at *11.

28. Id.

29. Interestingly, Nampa and Boise are only about twenty miles apart, but nevertheless are considered distinct relevant markets. Approximately 68% of Nampa residents receive primary care from physicians located in Nampa, and only about 15% of Nampa residents obtain their primary care in Boise. Findings of Fact & Conclusions of Law, supra note 5, at 15.

30. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines (rev. ed. 2010), available at [hereinafter Merger Guidelines].

31. Findings of Fact & Conclusions of Law, supra note 5, at 16 (citing Merger Guidelines, supra note 30, § 5.3).

32. Findings of Fact & Conclusions of Law, supra note 5, at 16-17 (citation omitted).

33. Findings of Fact & Conclusions of Law, supra note 5, at 17, [ [ 78-81 (citation omitted).

34. Findings of Fact & Conclusions of Law, supra note 5, at 17, [ 82.

35. The court noted: "[E]xperts . . . advocate moving away from our present fee-for-service health insurance reimbursement system that rewards providers, not for keeping their patients healthy, but for billing high volumes of expensive medical procedures. A far better system would focus on maintaining a patient’s health and quality of life, rewarding successful patient outcomes and innovation, and encouraging less expensive means of providing critical medical care. . . . [T]here is a broad if slow movement to such a system . . . away from our fragmented delivery system and toward a more integrated system where primary care physicians supervise the work of a team of specialists, all committed to a common goal of improving a patient’s health. . . . The Acquisition was intended by St. Luke’s and Saltzer primarily to improve patient outcomes." Findings of Fact & Conclusions of Law, supra note 5, at 2-3.

36. On appeal, the Ninth Circuit emphasized its reluctance to accept an efficiencies defense; however, it noted that "a successful efficiencies defense requires proof that a merger is not, despite the existence of a prima facie case, anticompetitive." St. Alphonsus Med. Ctr. — Nampa, Inc. v. St. Luke’s Health Sys., No. 14-35173, 2015 U.S. App. LEXIS 2098, at *31 (9th Cir. Feb. 10, 2015). "[A] Clayton Act defendant must ‘clearly demonstrate’ that ‘the proposed merger enhances rather than hinders competition because of the increased efficiencies.’" Id. (citing United States v. Long Island Jewish Med. Ctr., 983 F. Supp. 121, 137 (E.D.N.Y. 1997)).

37. Id. at *34-35.

38. See Merger Guidelines, supra note 30, § 9; FTC v. Procter & Gamble Co., 386 U.S. 568, 579 (1967).

39. United States v. Visa U.S.A., Inc., 163 F. Supp. 2d 322, 342 (S.D.N.Y. 2001), aff’d, 344 F.3d 229, 240 (2d Cir. 2003).

40. FTC v. Cardinal Health, Inc., 12 F. Supp. 2d 34, 56 (D.D.C. 1998); see also Merger Guidelines, supra note 30, § 9 ("Recent examples of entry, whether successful or unsuccessful, generally provide the starting point for identifying the elements of practical entry efforts.").

41. See Phillip E. Areeda et al., Antitrust Law 48, ¶ 971 (1998).

42. See Procter & Gamble Co., 386 U.S. at 580.

43. See, e.g., FTC v. H.J. Heinz Co., 246 F.3d 708, 720 (D.C. Cir. 2001) (citations omitted).

44. Id.

45. Id. at 721.

46. Id. at 722 (citation omitted).

47. See Merger Guidelines, supra note 30, § 10.

48. See U.S. Dep’t of Justice, Antitrust Division, Antitrust Division Policy Guide to Merger Remedies (June 2011), available at [hereinafter Antitrust Policy Guide].

49. See United States v. du Pont, 353 U.S. 586, 607 (1957).

50. United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 326 (1961).

51. Ginsburg v. InBev NV/SA, 623 Fd.3d 1229, 1235 (8th Cir. 2010).

52. Ford Motor Co. v. United States, 405 U.S. 562, 573 (1972).

53. See id. (relief in a Section 7 action "necessarily must ‘fit the exigencies of the particular case’"); see also United States v. Microsoft Corp., 253 F.3d 34, 107 (D.C. Cir. 2001) (relief "should be tailored to fit the wrong creating the occasion for the remedy").

54. Antitrust Policy Guide, supra note 48, at 6.

55. Antitrust Policy Guide, supra note 48, at 9 (emphasis added); see also E.I. du Pont de Nemours, 366 U.S. at 329 (calling divestiture "a natural remedy" when a merger violates the antitrust laws).

56. In re ProMedica Health Systems, Inc., No. 9346, 2012 FTC LEXIS 58, at *162 (F.T.C. Mar. 28, 2012) (alteration in original) (quoting In re Evanston Nw. Healthcare Corp., No. 9315, 2007 FTC LEXIS 210, at *245-46 (F.T.C. Aug. 6, 2007)).

57. See United States v. 3D Sys. Corp., No. 1:01-cv-01237, 2002 U.S. Dist. LEXIS 18377, at *7-9 (D.D.C. 2002).

58. See E. I. du Pont de Nemours & Co., 351 U.S. at 377.

59. See Antitrust Policy Guide, supra note 48, at 8.

60. See Staff of the Bureau of Competition, Fed. Trade Comm’n, A Study of the Commissions Divestiture Process § II.B.3 (1999).

61. See Merger Guidelines, supra note 30, § 1. Prior to the establishment of the "pre-merger notification program" by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")—§ 7A of the Clayton Act, 15 U.S.C. § 18a—the agencies were often unaware of corporate mergers before they occurred and were frequently unable to restore competition following a determination that the mergers were anti-competitive. The Senate Report on the proposed legislation emphasized the need for more effective antitrust remedies in post-acquisition divestitures and merger cases. Quoting Assistant Attorney General Thomas Capler:

[D]ivestiture of stock or assets after an illegal merger is consummated is frequently an inadequate remedy for a variety of reasons . . . moreover, divestiture is normally a painfully slow process, and in some cases might never occur . . . firms under divestiture orders may deliberately delay to reap the benefits of the unlawful merger. During these delays anticompetitive consequences grow.

S. Rep. No. 94-803, at 1284 pt. 1 (1976).

The HSR Act prohibits the acquisition of voting securities and assets without filing notice to and getting approval from the antitrust agencies. The purpose of the HSR Act was to strengthen the agencies’ abilities to enforce antitrust laws by the creation of a premerger notification and waiting period requirement before any consummation of mergers and acquisitions. The Clayton Act and the FTC Act: A Response to Dissatisfaction with a Broad Antitrust Statute, Antitrust Laws & Trade Reg. (MB) § 9.03[4][f][I] (1997). However, the HSR Act only applies to the acquisition of voting securities and assets of a certain value.

62. California v. Am. Stores Co., 495 U.S. 271, 285 (1990).

63. Ash Grove Cement Co. v. FTC, 577 F.2d 1368, 1380 (9th Cir. 1978) (quoting E. I. du Pont de Nemours & Co., 351 U.S. at 328-31) (internal quotation marks omitted).

64. Garabet v. Autonomous Techs. Corp., 116 F. Supp. 2d 1159, 1172 (C.D. Cal. 2000).

65. Taleff v. Sw. Airlines Co., 554 F. App’x 598, 598 (9th Cir. 2014) (citations omitted). See also Kennecott Copper Corp. v. Curtiss-Wright Corp., 449 F. Supp. 951, 968 (S.D.N.Y. 1978) ("Divestiture . . . is a harsh remedy which should not be ordered without an opportunity for the presentation and consideration of less drastic alternative forms of relief appropriate to remedy the antitrust violations.") (citations omitted), aff’d in part & rev’d in part, 584 F.2d 1195 (2d Cir. 1978).

66. Timken Roller Bearing Co. v. United States, 341 U.S. 593, 602-03 (1951).

67. See United States v. General Dynamics Corp., 415 U.S. 486, 507-08 (1974) (affirming denial of a divestiture where the acquired company "even if it remained in the market, [it] did not have sufficient reserves to compete effectively"); see also Mid-West Paper Prods. Co. v. Cont’l Grp., Inc., 596 F.2d 573, 587 (3d Cir. 1979) (cautioning against "overkill" such that the divestiture remedy’s "punitive impact may unduly cripple a defendant and lead to an overall deleterious effect upon competition"); Nat’l Ass’n of Chain Drug Stores v. Express Scripts, Inc., No. 12-395, 2012 U.S. Dist. LEXIS 57884, at *7-8 (W.D. Pa. Apr. 25, 2012) (declining to order divestiture where the divested entity "would likely be unable to survive on its own, much less compete against" the divesting entity).

68. See United States v. First City Nat’l Bank, 386 U.S. 361, 370-71 (1967); Miller v. Cal. Pac. Med. Ctr., 991 F.2d 536, 545 (9th Cir. 1993).

69. United States v. Rice Growers Ass’n, No. S-84-1066 EJG, 1986 U.S. Dist. LEXIS 30507, at *34 (E.D. Cal. Jan. 31, 1986).

70. Findings of Fact & Conclusions of Law, supra note 5, at 48, ¶ 52 (citing Garabet v. Autonomous Techs. Corp., 116 F. Supp. 2d 1159, 1173 (C.D. Cal. 2000)).

71. Findings of Fact & Conclusions of Law, supra note 5, at 48, ¶ 53.

72. Findings of Fact & Conclusions of Law, supra note 5, at 48, ¶ 54.

73. Findings of Fact & Conclusions of Law, supra note 5, at 48, ¶¶ 56-58.

74. See, e.g., Sierra Club v. U.S. Army Corps of Eng’rs, 645 F.3d 978, 996-97 (8th Cir. 2011); Pappan Enters., Inc. v. Hardee’s Food Sys., Inc., 143 F.3d 800, 806 (3d Cir. 1998). St. Alphonsus maintained that Saltzer management knew—well in advance of the Acquisition—that proceeding with the transaction with St. Luke’s and penalizing the surgeons for working at TVH could cause them to leave, and that this could have a significant financial impact. Evidence was submitted that in 2011, a year before the transaction, Saltzer paid a consultant to analyze the impact on the group if the surgeons left. Nonetheless, Saltzer decided to proceed with the transaction. St. Luke’s also argued that even self-inflicted wounds can affect competition and should be considered. However, St. Alphonsus noted that if St. Luke’s arguments were to be credited, "this would create serious perverse incentives." Answering Brief of Saint Alphonsus Medical Center-Nampa; Saint Alphonsus Health System Inc.; Saint Alphonsus Regional Medical Center, Inc.; and Treasure Valley Hospital Limited Partnership at 59, St. Alphonsus Med. Ctr. — Nampa, Inc. v. St. Luke’s Health Sys., No. 14-35173 (9th Cir. July 16, 2014), ECF No. 60 [hereinafter Answering Brief of St. Alphonsus].

75. Findings of Fact & Conclusions of Law, supra note 5, at 48, ¶¶ 57-58.

76. 749 F.3d 559 (6th Cir. 2014) (finding that the FTC did not abuse its discretion in rejecting "separate negotiating team" remedy). ProMedica involved a joinder of ProMedica Health Systems and St. Luke’s Hospital. In ProMedica, the FTC concluded that the joinder was likely to substantially lessen competition in the market for the sale of general acute-care inpatient hospital services to commercial health plans—and in a separate relevant market consisting of inpatient OB services sold to commercial health plans—therefore, it violated Section 7 of the Clayton Act. The two merging hospitals proposed maintaining two separate negotiating teams that would prevent anticompetitive effects, while addressing the concerns of the financial viability of one of the hospitals. The FTC rejected the argument and cited case law favoring divestiture. Responding to an argument that the separate negotiating teams remedy had been approved in a past case, the FTC noted that the remedy had only been approved because the entities had fully integrated seven years earlier, making divestiture unworkable. The FTC distinguished that past case on the grounds that the parties in the case before it—just like the parties in St. Alphonsus—had not yet fully integrated. To remedy the violations, the FTC required ProMedica, among other things, to divest St. Luke’s to an approved buyer in accordance with established FTC procedures.

77. 467 U.S. 752, 769, 771 (1984) ("The officers of a single firm are not separate economic actors pursuing separate economic interests. . . . [W]ithout a formal ‘agreement,’ the subsidiary acts for the benefit of the parent, its sole shareholder.").

78. Answering Brief of St. Alphonsus, supra note 74, at 51.

79. Findings of Fact & Conclusions of Law, supra note 5, at 49, 60-62.

80. Findings of Fact & Conclusions of Law, supra note 5, at 3.

81. Findings of Fact & Conclusions of Law, supra note 5, at 2-3.

82. Findings of Fact & Conclusions of Law, supra note 5, at 41, 51.

83. Findings of Fact & Conclusions of Law, supra note 5, at 51, ¶ 77.

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