## Facts

- The Federal Trade Commission (FTC) sued to preliminarily enjoin two proposed horizontal mergers among nationwide prescription-drug wholesalers: Cardinal Health, Inc.’s acquisition of Bergen Brunswig Corp., and McKesson Corp.’s acquisition of AmeriSource Health Corp.
- The FTC sought relief under § 13(b) of the Federal Trade Commission Act to preserve the status quo pending administrative proceedings alleging violations of Clayton Act §§ 7 and 11 and FTC Act § 5.
- The defendants were the largest wholesalers in the United States and, together, constituted the four firms with national reach as full-line distributors of prescription drugs.
- Wholesale distribution accounted for a majority of prescription-drug distribution, but customers also used other channels (e.g., direct purchases from manufacturers, mail-order pharmacies, and self-warehousing).
- The proposed transactions would reduce national full-line wholesalers from four to two, creating two merged firms with nationwide scale.
- The FTC contended the relevant product market was wholesale distribution of prescription drugs to retail pharmacies and hospitals, with a national geographic scope.
- Defendants argued for a broader market including all drug-distribution channels and asserted merger efficiencies such as cost savings and improved service.
- After an extensive evidentiary hearing, the district court ruled on the FTC’s request for preliminary injunctive relief.

## Issues

1. Whether the relevant product market for Clayton Act § 7 analysis was limited to wholesale distribution of prescription drugs to pharmacies and hospitals or included all distribution channels.
2. Whether the proposed mergers were likely to substantially lessen competition or tend to create a monopoly in the relevant market.
3. Whether the FTC satisfied the requirements for a preliminary injunction under FTC Act § 13(b), including likelihood of ultimate success and equities/public interest favoring relief.

## Decision

- The court granted the FTC’s motions for preliminary injunction and enjoined both proposed mergers pending completion of the FTC’s administrative proceedings.
- The court found the FTC showed a likelihood of success on the merits that the mergers would violate Clayton Act § 7.
- The court accepted a wholesale-only relevant product market and treated the geographic market as national.
- The court found the transactions would sharply increase concentration and convert a four-firm national market into a two-firm structure, supporting a strong inference of likely competitive harm.
- The court concluded defendants’ broader-market and efficiencies arguments did not outweigh the structural and evidentiary showing of likely anticompetitive effects.
- The balance of equities and the public interest favored preserving pre-merger conditions because post-closing relief would be difficult to implement.

## Legal Principles

- Under FTC Act § 13(b), the FTC must show a likelihood of ultimate success in its administrative case and that equitable factors, viewed through the public interest, favor preliminary relief to preserve the status quo.
- For Clayton Act § 7, a horizontal merger that significantly increases concentration in a properly defined market may warrant a presumption of likely anticompetitive effect, especially where it would create a duopoly.
- Relevant product markets turn on practical substitutability; distribution channels are not combined when customers cannot realistically switch in response to a small but significant nontransitory price increase.
- Entry and efficiency evidence offered to rebut a strong structural showing must be concrete and persuasive; speculative or weakly supported efficiencies generally do not defeat preliminary relief where competitive risk is substantial.
- In merger cases, courts may treat the difficulty of unwinding a consummated transaction as a major public-interest factor supporting an injunction.

## Conclusion

The court preliminarily blocked two major prescription-drug wholesaler mergers after finding the FTC was likely to prove that, in a national market for full-line wholesale distribution, the transactions would transform a concentrated four-firm market into a duopoly with a substantial risk of higher prices or reduced service, and that the public interest favored maintaining the pre-merger competitive structure pending administrative review.


Fed. Trade Comm'n v. Cardinal Health, Inc., 12 F. Supp. 2d 34 (D.D.C. 1998)