Tuesday, September 25, 2007

The FTC rules

Check out this August 6 Federal Trade Commission ruling in Illinois, where a large hospital system resulting from a merger was ruled to have too much market power vis-a-vis its negotiations with managed care payers -- after the fact, in a retrospective review.


Anonymous said...

Well that's just a WEIRD thing. I'm a real pro-competition anti-oligopoly guy, but I also work in the business world, and it's hard to imagine any practical way to "unscramble the eggs," as the article says.

I can imagine getting a building permit to add a deck to my house, and then, some years later, being told I had to tear it down because they changed their mind. I imagine that has actually happened somewhere, but I'd be irate.

Is there any indication of how the change of opinion happened? It appears that the merger was approved under Clinton and un-approved under Bush -- the opposite of what one might expect, on the surface.

Am I missing something? I might be...

Anonymous said...

Well, on the face of it, this just seems another example of governmental insanity. However, it does raise some legitimate questions. Sometimes, deciding whether a merger will produce an adverse (anti-trust) result is nothing more than a guess prospectively. So there is nothing wrong with reviewing these things retrospectively to gain experience in predicting future cases prospectively. The dilemma lies in the question of whether the FTC should have the power to unravel the studied merger so much later. (BTW, the remedy they picked DOES seem insane)

It also appears that the merged entity did do some weird things post-merger. In a normal business world, increased demand for services or a product would result in DECREASED prices, based on profit due to volume, would it not? So raising prices just because there was increased demand does seem questionable. But I wasn't a business major.

This reminds one somewhat of the Whole Foods/Wild Oats merger. Only retrospective review will reveal whether, in fact, this proves to be another anti-trust situation.

Anonymous said...

Medical Marts, Las Vegas based company opening up retail based clinics staffed by physicians. Chicago Tribune 9/20/07