## Facts

- Rockford, Illinois had three general acute-care hospitals; two (Rockford Memorial and SwedishAmerican) were substantially larger than the third (St. Anthony).
- Rockford Memorial Corporation and SwedishAmerican Corporation, both nonprofit hospital operators, agreed to merge.
- The United States sued to enjoin the merger, alleging it would substantially lessen competition under § 7 of the Clayton Act and also violate § 1 of the Sherman Act.
- After a bench trial, the district court defined the relevant product market as general acute-care inpatient hospital services and the geographic market as the Rockford area.
- The district court found the merged hospitals would control roughly 64% to 72% of the relevant market and permanently enjoined the merger under § 7 without reaching the Sherman Act claim.
- The hospitals appealed, arguing § 7 does not apply to nonprofits, the market definition was too narrow, and nonprofit status reduces the likelihood of anticompetitive effects.

## Issues

1. Whether § 7 of the Clayton Act applies to mergers between nonprofit corporations, including nonprofit hospitals.
2. Whether the relevant product and geographic markets were properly defined as general acute-care services in the Rockford area.
3. Whether the merger’s high post-merger concentration and market share established a probability of substantially lessening competition, and whether asserted efficiencies or nonprofit status rebutted that showing.

## Decision

- The Seventh Circuit affirmed the permanent injunction blocking the merger.
- The court held § 7 applies to nonprofit hospital mergers and rejected a nonprofit exemption based on lack of stock and asserted limits on FTC jurisdiction.
- The court upheld the district court’s product and geographic market definitions centered on general acute-care hospital services in Rockford and its immediate environs.
- The court concluded the merger’s roughly two-thirds market share in a three-hospital market created a strong structural presumption of anticompetitive effect that defendants did not rebut with credible, merger-specific efficiencies.
- Because § 7 independently supported relief, the court did not decide the Sherman Act § 1 claim.

## Legal Principles

- Clayton Act § 7 reaches acquisitions and consolidations that may substantially lessen competition, and it applies to nonprofit corporations as well as for-profit firms.
- Nonprofit status does not negate the ability or incentive to exercise market power; managers and institutional constituencies may benefit from reduced competition through higher prices, reduced quality pressure, or expanded spending.
- Relevant geographic markets turn on demand substitution—whether customers would switch to alternative providers in response to a small but significant price increase—so patient flow and physician admitting patterns can support a localized hospital market.
- High post-merger concentration and large market shares in a properly defined market create a presumption that a merger may substantially lessen competition; defendants bear the burden of rebutting with concrete evidence (e.g., merger-specific efficiencies or other competitive constraints).
- Section 7 is prophylactic; the government need not prove anticompetitive effects are certain, only that they are reasonably probable given the structural change.

## Conclusion

The Seventh Circuit held that nonprofit hospitals are fully subject to Clayton Act § 7 merger control and affirmed an injunction where a merger between the two largest hospitals in a localized market would create a highly concentrated structure and a probability of reduced competition that was not overcome by claimed efficiencies or nonprofit status.


United States v. Rockford Mem'l Corp., 898 F.2d 1278 (7th Cir. 1990)