FTC To Appeal District Court Decision in Butterworth/Blodgett Hospital Merger Case

Says Actions Will Help Keep Hospital Prices Competitive In Grand Rapids Area

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The Federal Trade Commission today announced that it will continue to challenge the proposed merger of the Butterworth and Blodgett hospitals in Grand Rapids, Michigan by appealing a federal district court decision and pursuing administrative litigation. The administrative challenge will offer the hospitals the FTC's newly adopted "Fast Track" procedure. The Commission continues to believe that the merger warrants challenge under the antitrust laws.

In August 1995, Butterworth and Blodgett, the two premier hospitals in Grand Rapids, Michigan, proposed to merge. In January 1996, the Commission voted to seek a preliminary injunction in federal district court to prevent consummation of the proposed merger. At that time, the Commission said that the merger would substantially reduce competition for acute-care inpatient hospital services in the Grand Rapids area, and that health care purchasers would not be able to turn to other hospitals in the area if the merged firm raised prices. Thus, the merger would allow the combined firm to price its services anticompetitively, the FTC said.

On January 23, the Commission filed for the preliminary injunction in district court in the Western District of Michigan. Prior to the commencement of the action, Butterworth and Blodgett agreed not to consummate the transaction until after the district court had rendered its decision or, should an appeal be undertaken, after a decision by the Sixth Circuit on an expedited appeal. On September 26, the district court issued its opinion, finding "no question but that the FTC has demonstrated that the merged entity would have substantial market power in two relevant markets," and that "the FTC has established its prima facie case that the proposed merger would violate Section 7 of the Clayton Act," but concluding that the FTC had not established that the merged entity was likely to exercise its market power to the detriment of all consumers. The court, as a condition of denying the Commission's request for a preliminary injunction, ruled that the hospitals must sign a proposed consent decree containing certain terms. On October 28, 1996, the court entered the consent decree as an order of the court.

The FTC's decision to appeal the district court's decision and to issue an administrative complaint is based on the concerns expressed by the Commission when it determined to seek a preliminary injunction in January. If the hospitals elect the Fast Track, an initial decision by an administrative law judge would be due in six and one-half months, and a Commission opinion in 13 months.

The Commission vote to appeal the district court decision and to issue the complaint was 3-0 with Chairman Robert Pitofsky recused and Commissioner Mary L. Azcuenaga not participating. An administrative hearing will be scheduled shortly.

NOTE: The Commission issues a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of a complaint is not a finding or ruling that a respondent has violated the law. The complaint marks the beginning of a proceeding in which the allegations will be ruled upon after a formal hearing.

Copies of the complaint will be available shortly on the Internet at the FTC's World Wide Web site at http://www.ftc.gov (no period). The complaint is also available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Victoria Streitfeld

Office of Public Affairs
202-326-2718

Office of the General Counsel
Steve Calkins, 202-326-2481
Mel Orlans, 202-326-2475

 

(FTC File Number 951-0126)

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