FTC Wins Preliminary Injunction, Stopping Second Hospital Merger in a Week

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In a second hospital merger victory in a week for the Bureau of Competition at the Federal Trade Commission (FTC), Federal District Court Judge Kapala in the Northern District of Illinois granted the FTC’s motion for a preliminary injunction (PI) last week, stopping a merger between two hospital systems in Rockford, Illinois. The decision kept the parties’ assets separate pending an administrative litigation before an FTC administrative judge, which was to begin on April 17, 2012. The hospitals withdrew their merger filing on April 12, ending that case.

The case illustrates the continuing value of a strong structural case for enforcement agencies in federal court; in this instance, the merger reduced the number of competitors from three to two. It also demonstrates the limitations of efficiency arguments at the PI stage, especially when the deal is not motivated by the efficiencies. An unusual aspect of the case is that the administrative litigation proceeded along with the PI litigation in federal court. As a result, the administrative hearing was scheduled to occur less than three weeks after the decision to grant the preliminary injunction. The district court judge seemed cognizant of the impending administrative case, noting repeatedly that the FTC, and not the court, is authorized to determine whether the transaction violates antitrust laws.

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