St. Vincent’s Hospital in Manhattan may have survived its recent brush with possible monopolization, but its financial health leaves it susceptible to relapse.  That’s the diagnosis of some antitrust practitioners, who are bracing for another outbreak.

The weak financial health of St. Vincent’s Hospital has been in the news lately.  News reports indicate that St. Vincent’s, located on Manhattan’s West 12th Street, is again having difficultly meeting its financial obligations.  (St. Vincent’s is no stranger to the bankruptcy process, having gone through a Chapter 11 proceeding in 2005.)

One proposal would have shored up St. Vincent’s financial position by reducing health services and competition.  Continuum Health Care Partners – a health care consortium that operates three Manhattan hospitals, including Roosevelt Hospital (at W. 55th Street), St. Luke’s Hospital (at W. 114th Street) and Beth Israel Medical Center (at E. 16th Street) – proposed acquiring St. Vincent’s and turning it into a strictly outpatient facility.  In other words, Continuum stated that it would shut down St. Vincent’s inpatient, emergency services facility if it were to operate St. Vincent’s. click here for more »

The U.S. Department of Justice is weighing whether to pursue an investigation into the legality of the National Collegiate Athletic Association (“NCAA”) Bowl Championship Series (“BCS”), which critics contend unfairly excludes smaller universities from the national football title.

Senator Orrin Hatch raised the issue in a letter to the Justice Department in October 2009 in which he complained that the BCS system is an artificial market barrier against smaller schools. Assistant Attorney General Ronald Weich has now responded to Senator Hatch in a letter that the DOJ is considering such a probe into “the current lack of a college football national championship playoff” because it “raises important questions affecting millions of fans, colleges and universities, players and other interested parties.”

Microsoft is battling its latest antitrust challenger – Datel – by taking a page out of the antitrust playbook of its archrival, Apple.

Microsoft is being sued by Datel, a manufacturer of “video game enhancement products,” for allegedly monopolizing an aftermarket for accessories to Microsoft’s popular Xbox 360 video game system in Datel Holdings Ltd. et al. v. Microsoft Corp., Case No. CV 09-5535 EDL.  The case was filed in the Northern District of California on November 20, 2009. 

Datel manufactures the “MAX Memory” card which, at two gigabytes, allegedly has quadruple the memory of Microsoft’s largest memory card.  Datel claims it is the only source of memory cards for the Xbox 360 other than Microsoft.  

Datel alleges that Microsoft requires Xbox 360 users to download its “dashboard” software update in order to access online gaming, and that the update is “intended to, and does in fact, disable Datel’s memory cards.”  Datel claims that the dashboard update therefore enables Microsoft to monopolize an aftermarket for “Xbox 360 Accessories and Add-ons” in violation of the antitrust laws. click here for more »

Federal antitrust enforcers are signaling that they don’t want merger enforcement to be the butt of the classic joke about the shipwrecked economist who solves the problem of how to open a can of soup by assuming a can opener.  Merger justifications that assume hypothetical competitors would block anticompetitive effects may not pass the laugh test under new Merger Guidelines.

Antitrust enforcers are likely to give greater weight to real-world competitive harm than to theoretical assumptions, according to Christine Varney, Assistant Attorney General for Antitrust, who made concluding remarks last week on the completion of two months of workshops on revising the Department of Justice and Federal Trade Commission’s Horizontal Merger Guidelines.

It is likely that this effort will lead to a significant revision of the Merger Guidelines. Due to the Guidelines’ persuasive influence on jurists, the courts’ approach to mergers is also likely to change.

AAG Varney cited the following “gaps” between the Guidelines and actual agency practice:

• “[D]efining markets and measuring market shares may not always be the most effective starting point for many types of merger reviews. . . . When it is clear, for instance, that either certain vulnerable customers are likely to be harmed by a merger . . . the need to define a market to assess likely competitive effects is diminished.”

• “[T]he Guidelines overstate the importance of HHIs in merger analysis . . . Revising the HHI thresholds to express accurately how the Agencies use HHIs seems not just appropriate but also necessary to correct what has become an affirmative misstatement at this point.”

• The Guidelines do not explain fully the agencies’ tools of economic analysis, such as sales diversion ratios, price-cost margins, customer win-loss reports, and the views of competitors, customers, and other industry observers.

AAG Varney’s comments echoed lessons learned from the financial markets’ collapse in 2008.  She noted that:  “Theoretical assumptions that market forces naturally and inevitably correct for market failures clearly need to be reconsidered.  In the context of the Horizontal Merger Guidelines, the most relevant aspect of this reassessment involves explicit or implicit assumptions that entry will erode market power otherwise enhanced by a merger.”

The prospects for repeal of the McCarren-Ferguson Act’s antitrust exemption for health insurers may have gotten a bit dicier with the Supreme Court’s landmark decision giving the green light to corporate spending in political elections. 

The Court in Citizens United v. Federal Election Commission held that the government may not ban “independent expenditures” for “political speech” by corporations in elections.  The essence of the 5-4 opinion is that the government can no longer suppress political speech on the basis of the speaker’s corporate identity.

Prior to the opinion, corporations were banned from taking money out of their general funds to pay for the broadcast of commercials advocating the election or defeat of a political candidate shortly before a federal election.  The opinion overruled the two precedents – Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990), and McConnell v. Federal Election Commission, 540 U.S. 93 (2003), which upheld restrictions on corporate political spending. 

The decision could have a significant impact on the current healthcare reform movement.  The repeal of the McCarran-Ferguson Act, which exempts health and medical malpractice insurers from the federal antitrust laws, as reported in earlier posts, could be in jeopardy.  Health insurance companies are no longer restricted from paying for political advertisements which could persuade voters to elect candidates who are unlikely to support the repeal.

President Obama criticized the decision calling it “a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans.”