Competition in Health Care Markets - March 4 & 6 Flashcards
What does section 1 of the federal Sherman Act focus on? (Q)
Section 1 of the federal Sherman Act focuses on agreements to unreasonably restrain trade.
What does Section 1 of the federal Sherman Act prohibit? (Q)
Section 1 of the federal Sherman Act prohibits agreements among two or more legally separate actors that unreasonably restrain trade, which generally means they decrease competition.
What does it mean when an agreement type is per se illegal? (Q)
Some agreement types are so likely to be unreasonable that they are per se, or automatic, violations of § 1.
What is an example of a per se illegal agreement? (Q)
For example, most price-fixing agreements are per se illegal. An agreement among multiple independent chiropractors in an area to charge a minimum amount for manual adjustments would be a per se violation of § 1.
What is a rule-of-reason analysis? (Q)
A rule-of-reason analysis weighs the agreement’s anticompetitive effects against its procompetitive effects.
Ex: Suppose a chiropractor sold her practice. As part of the sale, the selling chiropractor agreed not to compete in that area for three years. That agreement wasn’t per se illegal, but it could unreasonably restrain trade by preventing competition. Thus, the agreement would be evaluated under a rule-of-reason analysis to see whether it mostly harmed or helped competition.
What is the analysis if an agreement isn’t per se illegal? (Q)
If an agreement isn’t per se illegal, a rule-of-reason analysis is used to determine whether the agreement unreasonably restrains trade.
What does section 2 of the Sherman Act prohibit? (Q)
Section 2 of the Sherman Act prohibits monopolies and attempts to monopolize.
How many requirements does a section 2 violation of the Sherman Act have? (Q)
A § 2 violation has two requirements.
What is the first requirement for a section 2 violation of the Sherman Act? (Q)
First, an entity must have or be attempting to get monopoly power.
What is monopoly power? (Q)
Monopoly power is sufficient power in a specific market to control prices and exclude competitors for an extended period of time.
How is an entity legally allowed to obtain monopoly power? (Q)
An entity is legally allowed to obtain monopoly power through procompetitive conduct, such as by having the best product.
What is the second requirement for a section 2 violation of the Sherman Act? (Q)
The second requirement for a § 2 violation is that the entity willfully attempts to gain or maintain monopoly power through anticompetitive conduct, such as exclusionary actions.
What does the Clayton Act focus on? (Q)
Passed after the Sherman Act, the Clayton Act expanded federal antitrust law. Among other things, the Clayton Act prohibits mergers, acquisitions, and joint ventures that tend to create a monopoly or substantially lessen competition.
What does antitrust analysis of a merger depend on? (Q)
Antitrust analysis of a merger varies depending on whether the merger is horizontal or vertical.
How are horizontal mergers analyzed? (Q)
A horizontal merger combines actual or potential competitors into a single unit.
Ex: Assume two physician practice groups were in the same area and competed by offering similar services. If these groups merged together, that would be a horizontal merger.
How may a horizontal merger substantially lessen competition? (Q)
Horizontal mergers may substantially lessen competition through unilateral effects, coordinated effects, or both.
What is a harmful unilateral effect of a merger? (Q)
The hypothetical practice-group merger would have a harmful unilateral effect if, by itself, the merged group could then successfully raise prices even if the other practice groups in the area didn’t also raise prices.
What is a harmful coordinated effect of a merger? (Q)
The practice-group merger would cause a harmful coordinated effect if it increased the likelihood that other local practice groups would coordinate with each other to raise prices.
This coordination could happen explicitly, like if the new group used its power to talk other area groups into raising prices. Or the coordination could happen implicitly, like if the merged group started raising prices and other area groups accommodated that behavior by following with similar price hikes instead of competing with lower prices.
How are vertical mergers viewed? (Q)
A vertical merger combines two parts of a supply chain, such as a supplier and a distributor, into a single unit.
Ex: If a hospital combined with a physician practice group, that would be a vertical merger.
Do vertical mergers receive a lot of antitrust scrutiny? (Q)
No. Although vertical mergers can create market power that allows the new entity to raise prices, they can also result in financial efficiencies that reduce prices. Generally, vertical mergers are viewed as less likely to threaten competition and may receive less antitrust scrutiny.
What does section 5 of the Federal Trade Commission Act (FTCA) generally prohibit? (Q)
Section 5 of the Federal Trade Commission Act generally prohibits unfair competition and unfair trade practices.
How does section 5 of the FTCA increase the reach of federal antitrust laws? (Q)
Section 5 increases the reach of federal antitrust laws by:
(1) providing an alternative means for addressing anticompetitive actions that violate the Sherman and Clayton Acts;
(2) providing a way to address other anticompetitive actions, such as deceptive marketing; and
(3) allowing scrutiny of some anticompetitive actions by nonprofit entities.
What is the most common defense against a claim of anticompetitive behavior? (Q)
The most common defense against a claim of anticompetitive behavior is that the challenged conduct actually helps competition. However, only benefits to competition are relevant. Other benefits are irrelevant. For instance, the fact that a merger increases the quality of care in an area isn’t a defense to an antitrust claim.
What is the primary shield for the federal government against mergers and acquisitions that create antitrust issues? (Q)
For the federal government, the Clayton Act is the primary shield against mergers and acquisitions that create antitrust issues.
What does the Clayton Act prohibit? (Q)
The Clayton Act prohibits mergers, acquisitions, and joint ventures that tend to either create a monopoly or substantially lessen competition.
Can a merger be prohibited even if it doesn’t cause immediate harm? (Q)
Yes. Even if a merger doesn’t cause immediate harm, the merger is still prohibited if it likely will harm the market.
What is the two-part market analysis to determine whether a merger created an antitrust threat and was prohibited by the Clayton Act? (Q)
First, the government needed to define the relevant market. Second, the government needed to determine whether the merger was likely to harm that relevant market.
In antitrust cases, what are the two parts of the relevant market? (Q)
In antitrust cases, the relevant market has two parts, the geographic market and the product market.
In antitrust cases, what analysis is done on the relevant markers? (Q)
In general, the overlap between these markets is the relevant market to analyze for harm.
In antitrust cases, what is the geographic market? (Q)
The geographic market is the physical area where the merger will have a direct and immediate impact on competition.
Typically, the geographic market for healthcare services, such as hospital care, is limited. However, the geographic market for healthcare products that are easily distributed, such as prescription drugs, may be larger.
In antirust cases, what is the product market? (Q)
The relevant product market is defined by which products are reasonably interchangeable.
Ex: Because the services offered by one obstetrician are reasonably interchangeable with the services offered by another obstetrician, obstetrician services can be a single-product market.
What is a cluster marker? (Q)
Cluster market are where the product is the cluster of services offered by that kind of hospital.
What do cross-market theories focus on? (Q)
Cross-market theories focus on a healthcare merger’s ripple effects across separate markets and are growing in popularity.
What is the hypothetical-monopolist test? (Q)
The test starts with a narrow market definition and asks whether a hypothetical monopolist can raise prices in that market by a small-but-significant amount for a meaningful period of time. If not, then the market definition is expanded a little, and the test is run again until the hypothetical monopolist can harm the market. The market definition being used at that point becomes the relevant market for analyzing whether real actors might cause competitive harm.
What is market concentration? (Q)
Market concentration is one way to measure the likelihood of market harm. Essentially, if too much market power gets concentrated among too few competitors, then market harm is likely.
What is the Herfindahl-Hirschman Index (HHI) index? (Q)
An entity’s HHI is the square of that entity’s market share.
How may entities still merge if the government shows that a merger is likely to harm competition? (Q)
If the government shows that a merger is likely to harm competition, the entities may not merge unless they show that the feared harm won’t actually happen.
What is a consent decree? (Q)
In a consent decree, the merged entity agrees to various conditions designed to protect competition, such as limiting price increases or offering access to indigent patients.
What are Certificate of Public Advantage (COPA) laws? (Q)
Under COPA laws, the state may agree to oversee a merged entity to ensure it’s not harming competition. In exchange, the merger is immunized from federal antitrust laws.
