Merger Remedies: Lessons from the Evanston Northwestern Healthcare Decision

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Toby Singer, May 27, 2008

On August 6, 2007, the Federal Trade Commission issued an order in the Evanston Northwestern Healthcare hospital merger case, creating a unique remedy for a consummated hospital merger that the Commission had concluded in an adjudicative proceeding had violated the Clayton Act. Finding that the traditional remedy in a merger case divestiture would do more harm than good in this case, the FTC decided to permit the merged hospitals (Highland Park Hospital and Evanston Northwestern Healthcare’s two hospitals) to continue to operate as a single entity, but to require them to conduct managed care negotiations separately at the option of managed care payers. The Commission’s theory was that the competitive harm from the transaction was the added leverage over these customers from the merger and that the leverage could be eliminated through this remedy. The Commission warned, however, that this was a highly unusual case, and that divestiture is the preferred remedy for unlawful mergers. Even in the case of consummated mergers, “where it is relatively clear that the unwinding of a hospital merger would be unlikely to involve substantial costs, all else being equal, the Commission likely would select divestiture as the remedy.” Subscribers can download the entire article available in the column on the left.

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