## Facts

- Blue Cross & Blue Shield United of Wisconsin (Blue Cross) sold health-insurance products and paid for medical services provided to its subscribers; its subsidiary, Compcare, operated as a health maintenance organization (HMO).
- Marshfield Clinic (Marshfield) was a large physician-owned clinic employing hundreds of physicians and was a leading provider of medical services in north-central Wisconsin.
- Marshfield’s subsidiary, Security Health Plan of Wisconsin (Security), offered HMO coverage in the same general region where Compcare sought to compete.
- Compcare alleged that Security and Marshfield’s contracting practices resulted in Security having access to so many regional physicians that Compcare could not recruit an adequate physician network to sell competitively priced HMO coverage, amounting to unlawful monopolization.
- Blue Cross separately alleged that Marshfield used market power (and, in part, arrangements with other providers) to obtain supracompetitive reimbursement rates for physician services paid by Blue Cross.
- The case went to a jury trial in the district court. The jury returned a verdict for the plaintiffs, which (after remittitur, trebling, and fees) produced a judgment just under $20 million, and the district court entered a sweeping injunction against Marshfield and Security.
- Marshfield and Security appealed, challenging both liability under Sherman Act §§ 1 and 2 and the breadth of the injunction (which had been stayed pending appeal).

## Issues

1. Whether plaintiffs proved a properly defined relevant market (product and geography) and monopoly power sufficient to support Sherman Act § 2 claims involving HMO competition and/or physician services.
2. Whether the record supported a finding that Marshfield or Security engaged in exclusionary conduct that harmed competition (as opposed to only harming a competitor) in violation of Sherman Act § 2.
3. Whether the evidence supported Sherman Act § 1 liability based on alleged agreements with other providers (including claims framed as price fixing or division of markets).
4. What role “most-favored-nation” (MFN) provisions and common contracting practices played in evaluating market power and competitive effects.
5. Whether the damages award and broad injunctive relief could stand given the proof at trial.

## Decision

- The Seventh Circuit reversed the principal bases for the plaintiffs’ antitrust victory, concluding that the proof at trial did not justify the jury’s broad findings of liability.
- The court rejected the effort to treat “HMO services” as a stand-alone relevant product market on the record presented, and it found the market-power showing inadequate for the § 2 monopolization theories.
- The court emphasized that a market share around 50% is generally below accepted levels for inferring monopoly power from share alone, and it faulted the evidentiary record and market definitions offered to establish durable power to control price or exclude competition.
- The court found the proof insufficient to sustain the claimed § 1 unlawful agreement theories as submitted, where the evidence did not adequately establish a prohibited agreement and resulting harm to competition.
- The court vacated the damages and set aside the sweeping injunction, remanding for proceedings consistent with the appellate opinion.

## Legal Principles

- A relevant product market turns on reasonable interchangeability and cross-elasticity of demand; a financing or delivery label (such as “HMO”) does not by itself define an antitrust market.
- Monopoly power under Sherman Act § 2 requires more than proof of a large firm or a high share in a loosely defined area; shares near 50% are ordinarily insufficient, without more, to infer monopoly power.
- Section 2 targets conduct that harms the competitive process; proof that a rival had difficulty entering or operating does not alone establish unlawful exclusion.
- MFN clauses are not automatically unlawful; they require a fact-based assessment of how they operate in the market and whether they actually restrain competition.
- Section 1 liability requires evidence of an agreement that restrains trade; parallel conduct or ordinary contracting relationships do not substitute for proof of concerted action.
- Antitrust injunctions must be tied to proven violations and tailored to the misconduct found; broad remedial orders cannot rest on rejected or unproven theories.

## Conclusion

The Seventh Circuit overturned the district court’s broad antitrust judgment against Marshfield Clinic and its HMO subsidiary, holding that the plaintiffs failed to establish the necessary market definitions and monopoly power for § 2 claims and did not prove the required unlawful agreement for § 1 theories, and it therefore vacated the large damages award and the sweeping injunction and remanded for further proceedings consistent with those holdings.


Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic, 65 F.3d 1406 (7th Cir. 1995)