Rockford Returns — Part II: Court Grants FTC's Preliminary Injunction Against Hospital Merger To Preserve Status Quo For Preliminary Hearing

In 1989, the Antitrust Division of the United States Department of Justice (DOJ) successfully challenged a proposed merger between Rockford Health System (Rockford) and SwedishAmerican Health System (SwedishAmerican), two of the three major general acute-care hospital systems in the Rockford, Illinois region. United States v. Rockford Mem'l, 717 F.Supp. 1251, aff'd, 898 F.2d 1278 (7th Cir. 1990).

On April 5, 2012, the United States District Court for the Northern District of Illinois granted the Federal Trade Commission's (FTC) motion seeking relief under Section 13(b) of the FTC Act enjoining Rockford from being acquired by the area's third hospital system, OSF Healthcare Systems (OSF)1 FTC v. OSF Healthcare System, No. 11-cv-50344 (N.D. Ill. filed Apr. 5, 2012) (pending an administrative trial at the FTC on the merger). The trial is scheduled to begin before an FTC Administrative Law Judge on April 27, 2012. While similar to seeking preliminary injunctive relief in federal court, the FTC has argued successfully in this and other recent cases that its burden under Section 13(b) is lighter than the normal showing required for a preliminary injunction.

The FTC's complaint alleged that the merged hospital system would control 64% of the general acute care (GAC) inpatient services market and would result in a significant market concentration increase. The Court found that the FTC had, with its market share and market concentration evidence, established a prima facie case, and that the defendants had to overcome the presumption of illegality. Because an action for preliminary relief is narrow and not a call for the court to resolve the merits of the case, "all that is necessary is that the merger create an appreciable danger of [anticompetitive] consequences in the future. A predictive judgment, necessarily probabilistic and judgmental rather than demonstrable is called for." Id. at 20 (citations omitted).

The FTC argued that the acquisition threatened substantial competitive harm in the market for GAC inpatient services sold to commercial health plans, the cluster product market usually at issue in these cases. Notably, the FTC also alleged a separate product market for primary care physician (PCP) services. The District Court decided it did not need to make findings regarding the allegations concerning the PCP market to resolve the question of injunctive relief. The Court did observe that the FTC's PCP market claim was less likely to succeed...