The Third Circuit sided with the FTC in finding that the proposed merger was likely to have anti-competitive effects in violation of Section 7 of the Clayton Act, 15 U.S.C. Section 18. That section prohibits mergers whose impact “may be substantially to lessen competition, or to tend to create a monopoly.” The court held that, although the district court had correctly identified the “hypothetical monopolist” test, i.e., whether a hypothetical monopolist could impose a small but significant nontransitory increase in price (SSNIP) in the proposed market, as the appropriate means of analyzing the geographic markets proposed by the parties, it had improperly formulated and applied the test.

While Third Circuit precedent suggests that a decision on market definition is often a factual question that is subject to the clearly erroneous standard of review, the Third Circuit determined that the application of the hypothetical monopolist test invokes a legal standard, the application of which is subject to plenary review. Thus, the Third Circuit afforded to the government a favorable standard of review. Moreover, in contrast to the District Court, which approached the case with a somewhat holistic view that considered the merger in light of the realities of the ever-changing health care industry, the Third Circuit took a more formalistic approach focused on traditional antitrust jurisprudence and economics.

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