## Facts

- Butterworth Health Corporation and Blodgett Memorial Medical Center were nonprofit hospitals providing general acute-care inpatient services in Grand Rapids, Michigan.
- Grand Rapids had four general acute-care hospitals; Butterworth and Blodgett proposed to merge following local planning recommendations supporting consolidation/coordination.
- The FTC sought to block the merger, alleging it may substantially lessen competition under § 7 of the Clayton Act.
- The hospitals presented evidence that separate modernization plans would require over $260 million in capital spending, while the merger would require just over $161 million, projecting about $99 million in savings.
- The FTC relied primarily on market concentration measures to argue the merger would create a highly concentrated market and likely anticompetitive effects.
- The hospitals contended that nonprofit governance reduced profit-driven incentives to exercise market power and that merger-specific efficiencies would benefit consumers.
- After a five-day evidentiary hearing with extensive exhibits, the district court ruled on the FTC’s request for preliminary injunctive relief under § 13(b) of the FTC Act.

## Issues

1. Whether the FTC demonstrated a likelihood of success on the merits that the proposed merger may substantially lessen competition in violation of § 7 of the Clayton Act.
2. Whether traditional structural presumptions based on concentration should control the analysis for a merger between nonprofit hospitals asserting significant efficiencies.
3. Whether the balance of equities and the public interest favored preliminary injunctive relief under § 13(b) of the FTC Act.

## Decision

- The district court denied the FTC’s motion for a preliminary injunction.
- The court held the FTC did not show a sufficient likelihood of success on the merits under § 7.
- The court found concentration evidence important but not dispositive given market characteristics and the nonprofit setting.
- The court credited the hospitals’ projected, merger-specific efficiencies (including substantial capital savings) as rebutting the prima facie structural case.
- The court concluded the equities and public interest weighed against enjoining the transaction pending administrative proceedings.
- The Sixth Circuit affirmed in an unpublished per curiam decision.

## Legal Principles

- Under § 13(b) of the FTC Act, preliminary injunctive relief requires a showing of likelihood of ultimate success on the merits and that the balance of equities/public interest supports an injunction.
- Under § 7 of the Clayton Act, a merger is unlawful if its effect may be substantially to lessen competition or tend to create a monopoly.
- High market concentration can establish a prima facie case and rebuttable presumption of illegality, but structural evidence is not conclusive where other market characteristics meaningfully affect competitive effects.
- Evidence of substantial, merger-specific efficiencies may rebut a prima facie structural case in assessing likely competitive harm at the preliminary-injunction stage.
- Buyer power and other competitive constraints (including managed-care organizations and alternative providers) may reduce the likelihood that increased concentration will translate into anticompetitive pricing or reduced output.

## Conclusion

The court refused to preliminarily enjoin the merger of two nonprofit hospitals, concluding the FTC failed to show a sufficient likelihood of proving a § 7 violation and that the anticipated, merger-specific efficiencies and asserted competitive constraints made the equities and public interest favor allowing the transaction to proceed.


Fed. Trade Comm'n v. Butterworth Health Corp., 946 F. Supp. 1285 (W.D. Mich. 1996)