What constitutes precedent and when can it be overruled were at issue in the D.C. Circuit's decision to block the Anthem-Cigna merger.  Judge Kavanaugh dissented from the majority's opinion in that case, and was criticized for not properly respecting Supreme Court precedent.

The Obama Department of Justice and multiple states sued to stop the merger of Anthem and Cigna, two of the nation's larges health insurance providers.  The government argued that the merger would substantially lessen competition in the market for employers purchasing insurance.  After a six-week trial, the D.C. District Court enjoined the merger, finding that it would lessen competition under Section 7 of the Clayton Act.

There were two main issues on appeal: (1) whether courts can consider efficiencies as a defense to illegality under Section 7; and (2) whether the District Court erred in holding that Anthem's purported efficiencies were sufficient to overcome the anticompetitive effects of the merger.  Anthem argued that the court had overlooked the cost savings that could be generated from the combined entity negotiating more favorable rates with healthcare providers.

In a 2-1 decision, the D.C. Circuit affirmed the lower court's ruling.  The majority expressed some skepticism about whether efficiencies could be an ultimate defense to Section 7 illegality because of the Supreme Court's 1967 decision in FTC v. Procter & Gamble, 386 U.S. 568 (1967) that "possible economies cannot be used as a defense to illegality."  The majority noted that, despite the "clear holding of Procter & Gamble," which has not been explicitly overruled, some courts of appeals had recognized the use of efficiencies evidence in rebutting a prima facie case.  In this case, however, the D.C. Circuit sidestepped the issue by assuming that, even if efficiencies could be a defense, the district court did not clearly err in rejecting Anthem's efficiencies defense.  The majority was skeptical that here were any such efficiencies or that they would be passed along to the employers.

Judge Kavanaugh wrote a dissenting opinion in which he determined the district court erred by not considering that the combined Anthem-Cigna would have been able to negotiate lower provider rates, which he believed would be passed through to employers.

In reaching his dissenting opinion, Kavanaugh first argued that, despite the language from Procter & Gamble, efficiencies could be considered in a Section 7 case under a "modern" antitrust analysis.  Describing the history of merger enforcement under antitrust law, Kavanaugh explained that in the 1960s the Supreme Court construed Section 7 to prohibit virtually any horizontal mergers, but subsequently cut those precedents back beginning with its 1974 decision in United States v. General Dynamics Corp., 415 U.S. 486 (1974).  Thus, Kavanaugh argues that the D.C. Circuit is bound by this "modern approach taken by the Supreme Court" rather than the outdated decision in Procter & Gamble.

The majority criticized Kavanaugh's "wishful assertion" that the older Procter & Gamble precedent could be "disregarded ... because it preceded the 'modern approach'" that Kavanaugh preferred. "Put differently, our dissenting colleague applies the law as he wishes it were, not as it currently is." Id. at 354.  Even if the Supreme Court has not recently opinion on the issue, explained Judge Rogers for the majority,"it still is not a lower court's role to ignore on-point precedent so as to adhere to what might someday become Supreme Court precedent."

This critique of Kavanaugh's respect for precedent may foreshadow some of the questions he will be asked during his confirmation hearings, especially with respect to Roe v. Wade.  Of course, if confirmed as a Supreme Court Justice, Kavanaugh would not be in the position of a lower court constrained by binding precedent.  Instead, he would be in a position to decide "what might someday become Supreme Court precedent."

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