St. Alphonsus Med. Ctr. v. St. Luke’s Health Sys.

An efficiencies defense, that clearly demonstrates that the proposed merger enhances competition because of the increased efficiencies, can successfully rebut a prima facie case for a Clayton Act § 7 violation.

The health care market in Nampa, Idaho, was primarily dominated by Saltzer Medical Group, P.A. (“Saltzer”) and St. Luke’s Health Systems, Ltd. (“St. Luke’s”). Saltzer, “the largest independent multi-specialty physician group in Idaho,” was also the largest adult primary care physician provider in Nampa. St. Luke’s was the second largest adult primary care physician (“PCP”) provider in Nampa, and also “operated an emergency clinic in the city.” In 2012, Saltzer and St. Luke’s entered into a merger agreement. Two private hospitals filed suit, claiming a violation of § 7 of the Clayton Act. The private hospitals sought to enjoin the merger, but the district court denied the preliminary injunction. The Federal Trade Commission (“FTC”) and the State of Idaho filed a complaint as well, however, that complaint “alleged anticompetitive effects only to the adult PCP market.” The district court consolidated the complaints, and ultimately determined that the merger “‘create[d] a substantial risk of anticompetitive price increases’ in the Nampa adult PCP market,” and therefore violated § 7. The district court ordered divestiture, and Saltzer and St. Luke’s appealed. The Ninth Circuit reviewed the § 7 prima facie case for clear error “under a ‘burden-shifting framework.’” The panel determined that “a prima facie case that [the] merger is anticompetitive” was established through evidence, particularly of the high market share of the "post-merger entity." The panel then reviewed whether Saltzer and St. Luke’s could establish an efficiencies defense to rebut the prima facie case. An efficiencies defense must “‘clearly demonstrate’ that ‘the proposed merger enhances rather than hinders competition because of increased efficiencies.’” The panel determined that the efficiencies defense raised by Saltzer and St. Luke’s was insufficient because it failed to “show that the prediction of anticompetitive effects from the prima facie case is inaccurate.” The panel therefore affirmed the district court’s judgment and divestiture order. AFFIRMED.