## Facts

- Poplar Bluff, Missouri (population about 17,000), had two private general acute-care hospitals: Lucy Lee Hospital and Doctors’ Regional Medical Center.
- Lucy Lee (owned by Tenet Health Care Corporation) provided primary and secondary inpatient acute-care services and operated multiple outpatient clinics; Doctors’ Regional (owned by a physician group) provided similar services and operated rural clinics.
- Both hospitals were described as underutilized and faced difficulty attracting specialists.
- Tenet agreed to buy Doctors’ Regional for more than $40 million, planning to consolidate inpatient acute-care services at Lucy Lee and convert Doctors’ Regional to long-term care.
- The Federal Trade Commission and the State of Missouri sued under § 7 of the Clayton Act, alleging the acquisition would substantially lessen competition for primary and secondary inpatient acute-care hospital services in a Poplar Bluff-centered geographic market.
- The district court, after an evidentiary hearing, granted a preliminary injunction blocking the merger; Tenet and Doctors’ Regional appealed.

## Issues

1. Whether the government established a well-defined relevant geographic market for primary and secondary inpatient acute-care hospital services.
2. Whether, given the proper geographic market, the government showed a substantial likelihood that the merger would substantially lessen competition under Clayton Act § 7, warranting a preliminary injunction.

## Decision

- The Eighth Circuit reversed the grant of the preliminary injunction.
- The court held the government did not establish a well-defined relevant geographic market, a threshold requirement for showing likely market power and anticompetitive effects.
- The court found the government relied too heavily on the hospitals’ service areas and did not sufficiently account for competitive constraints from hospitals outside the proposed market.
- Evidence that patients and payors could use hospitals in nearby communities and larger regional centers undermined the government’s narrow market definition.
- The court noted the district court should have examined potential efficiencies more carefully in assessing competitive effects.

## Legal Principles

- A Clayton Act § 7 merger challenge requires proof of a relevant market, including both a product market and a geographic market, and a showing that the merged firm is likely to obtain market power in that market.
- A hospital’s service area is not, by itself, proof of the relevant geographic market; the geographic market must reflect where patients and payors can practicably turn for alternative services.
- Market definition in hospital cases must consider whether customers would switch to out-of-area providers in response to a price increase, such that out-of-area hospitals would constrain pricing.
- In seeking a preliminary injunction, the government must make a prima facie showing of likely success on the merits; failure to prove a coherent geographic market defeats that showing.

## Conclusion

The Eighth Circuit vacated the preliminary injunction because the government did not carry its burden to define a defensible relevant geographic market, and without that threshold showing it could not establish likely market power or a substantial likelihood of anticompetitive effects under Clayton Act § 7.


Fed. Trade Comm'n v. Tenet Health Care Corp., 186 F.3d 1045 (8th Cir. 1999)