## Facts

- Advocate Health Care Network and NorthShore University HealthSystem operated multiple general acute-care hospitals in Chicago’s northern suburbs and proposed a horizontal merger.
- The Federal Trade Commission (FTC) and the State of Illinois challenged the merger under § 7 of the Clayton Act, alleging it would substantially lessen competition for general acute-care inpatient hospital services sold to commercial health insurers.
- Hospital prices were set through negotiations between hospitals and insurers, with bargaining leverage shaped by the hospitals an insurer must include to sell attractive plans to employers.
- Insurers testified that a commercially viable network in the northern Chicago suburbs needed either Advocate or NorthShore, and that including both materially strengthened an insurer’s offering and negotiating position.
- The government’s expert applied the hypothetical monopolist test (HMT) and defined a proposed geographic market consisting of an eleven-hospital region; he concluded a hypothetical monopolist controlling that region could profitably impose a small but significant nontransitory increase in price (SSNIP).
- The expert distinguished “local” hospitals (chosen largely based on proximity) from “destination” hospitals (drawing patients from a wider area for specialized care) and excluded destination hospitals from the proposed market.

## Issues

1. Whether the plaintiffs presented sufficient evidence of a relevant geographic market under the hypothetical monopolist test to show a likelihood of success on their § 7 Clayton Act claim.
2. Whether the district court erred in denying a preliminary injunction under § 13(b) of the FTC Act and § 16 of the Clayton Act based on its market-definition and merits findings.

## Decision

- The Seventh Circuit reversed the denial of a preliminary injunction and remanded with instructions to enter an injunction blocking the merger pending completion of the FTC’s administrative proceedings.
- The court held the district court’s geographic market finding was clearly erroneous.
- The court held the plaintiffs established a likelihood of success on the merits by presenting substantial evidence supporting the proposed geographic market and likely competitive harm.

## Legal Principles

- A preliminary injunction against a merger pending agency proceedings requires showing a likelihood of success on the merits of a § 7 Clayton Act claim.
- Geographic market definition may be established using the hypothetical monopolist test, which iteratively tests whether a hypothetical monopolist in a proposed region could profitably impose a SSNIP.
- In hospital merger cases involving insurer negotiations, market definition must account for insurer network requirements and bargaining dynamics, not solely historical patient-origin patterns.
- Insurer testimony about which hospitals must be included in commercially viable networks can be strong evidence of substitutability and geographic market boundaries.
- Distinguishing local hospitals from destination/specialty hospitals may be warranted where insurer and patient behavior shows destination hospitals do not sufficiently constrain prices for local inpatient services.

## Conclusion

The Seventh Circuit required entry of a preliminary injunction because the government’s HMT-based geographic market proof and insurer evidence supported a coherent northern-suburbs hospital market in which the merger would likely increase bargaining leverage and prices, and the district court’s contrary market-definition analysis was clearly erroneous.


Fed. Trade Comm'n v. Advocate Health Care Network, 841 F.3d 460 (7th Cir. 2016)