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Med South: FTC 2002 Advisory Opinion

Med South: FTC 2002 Advisory Opinion. Basic Facts: Med South is for-profit entity formed by a large group of primary-care and specialty physicians in Denver area to negotiate fee arrangements with insurance carriers. What had been the prior experience with HMOs in the market?

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Med South: FTC 2002 Advisory Opinion

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  1. Med South: FTC 2002 Advisory Opinion • Basic Facts: Med South is for-profit entity formed by a large group of • primary-care and specialty physicians in Denver area to negotiate fee • arrangements with insurance carriers. • What had been the prior experience with HMOs in the market? • What were the alleged benefits of this venture? • Was this venture open to all physicians? • Would a member physician be free to practice and charge outside • the business scope of the venture? • Was there any question this was horizontal price fixing? Why wasn’t • a straight per se analysis applied? • What is efficiency-enhancing integration? What were the primary • efficiency factors here? Law 552 - Antitrust - Instructor: Dwight Drake

  2. Med South: FTC 2002 Advisory Opinion • How significant was the common computer system? What were its • benefits? Does this confirm that technology advances may justify • more formal, collaborative arrangements between competitors? • What were the primary anticompetitive and pro-competitive effects? • Did Med South have market power? • What should Med Soft watch out for in moving forward? • Would a court have come to a different conclusion that the FTC? • Does the FTC have more discretion? • Compare Med South FTC ruling with Supreme Court decision in • Arizona v. Maricopa County Medical Society (pg. 105). Are there • any key differences? Law 552 - Antitrust - Instructor: Dwight Drake

  3. General Motors / Toyota Consent Decree Basic Facts: GM and Toyota formed joint venture to make a small Car (Nova), which would be sold to GM. Plan to produce 200k cars per year. Cars would be produced in GM’s idle plant in Fremont, CA. What was GM’s and Toyota’s market shares? What was business justification for joint venture from GM and Toyota perspective? What restrictions did FTC impose in its decree? What were three pro-competitive benefits per Chairman Miller? Did the JV circumvent import restrictions? Was the dissent correct is claiming that any automobile JV would be permitted under new antitrust standard set by FTC? Law 552 - Antitrust - Instructor: Dwight Drake

  4. SCFC ILC, Inc. v. VISA USA, Inc. (10th Cir. 1994) Basic Facts: Sears, through acquisition of S&L, sought to offer VISA card (“Premier Option”) in addition to its Discover card. VISA refused, under its rule 2.06 that prohibited any competing credit card issuer. Sears sued, alleging Sherman 1 violation for its exclusion from market. Dist. Ct. held there was Sherman 1 violation. What was relevant market per District Court? Per 10th Cir? What were the parties market shares? What was VISA’s justification for its rule of exclusion? Law 552 - Antitrust - Instructor: Dwight Drake

  5. SCFC ILC, Inc. v. VISA USA, Inc. (10th Cir. 1994) Holding: VISA’s exclusion of Sears not Sherman 1 violation. - Relevant market is at issuer level, where market “remarkably unconcentrated”. - Dist. Ct finding of market power insufficient as matter of law. - Dist. Ct on uncharted journey of speculation, conjecture and theoretical harm. - Very existence of JV is premised on pooling of resources to effect competition. Issue is impact of rules of JV, not existence of rules. - VISA rule not impact general credit card market or pattern of distribution. - Sears not barred from market. - Exclusion of Sears not prevent Sears from developing new card. Law 552 - Antitrust - Instructor: Dwight Drake

  6. SCFC ILC, Inc. v. VISA USA, Inc. (10th Cir. 1994) Holding: VISA’s exclusion of Sears not Sherman 1 violation. - No evidence exclusion hurts consumers. - Sears already competes vigorously. - No reason to allow Sears to free ride on VISA technology. - To force VISA to admit intersystem competitors would “suck” court into “economic riptide of contrived market forces.” Law 552 - Antitrust - Instructor: Dwight Drake

  7. DAGHER v. SAUDI REFINING INC. (“SRI”) (9TH Cir. 2004) Basic Facts: Texaco and Shell formed national alliance of two joint ventures - Equilon in west; Motiva in east. SRI was part of Motiva. Ventures owned all down market refining and market activities, including refineries, research labs, thousands of stations, and all pipeline. Goal was to promote efficiencies by savings costs and consolidating operations. Single person had job of setting prices, which were same for both Shell and Texaco brands in both markets. West coast station owners (23k) sued under Sherman 1. What was standing issue re: SRI? How did District Ct. handle? What was Plaintiff’s theory of liability? Issue for summary judgment? How did Dist. Ct. decide per se price fixing issue on summary judgment? Was “rule of reason” even an issue? Why Not? Law 552 - Antitrust - Instructor: Dwight Drake

  8. DAGHER v. SAUDI REFINING INC. (“SRI”) (9TH Cir. 2004) • Ninth Circuit: • - Plaintiffs have no standing against SRI, who has no west coast involvement. • No evidence SRI part of nationwide price fixing alliance – SRI not give a • hoot what happens in west. Dist. Ct. summary judgment affirmed. • Dist. Ct. summary judgment for Defendants on per se pricing claim reversed. • Unified pricing per se illegal. Presence of joint venture not relevant if pricing • not necessary for efficiencies of JV. Here, no justification for naked price • unification. Robinson Patman defense bogus – pricing not based on identify • of customers. • Different result if merged into “one collective brand”, if each set its own prices • at same level after independent analysis, or if evidence that unified price • was important to legitimate aims of JV. • - Dissent: JV is the business. It can set its prices free of Sherman 1. Law 552 - Antitrust - Instructor: Dwight Drake

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