Federal Trade Commission; State of North Dakota, Plaintiffs - Appellees,
Sanford Health; Sanford Bismarck; Mid Dakota Clinic, P.C., Defendants - Appellants. State of Minnesota; State of Alaska; State of California; State of Delaware; State of Hawaii; State of Idaho; State of Iowa; State of Mississippi; State of Massachusetts; State of Pennsylvania; Puerto Rico; State of Wyoming, Amici on Behalf of Appellee(s).
Submitted: November 13, 2018
from United States District Court for the District of North
Dakota - Bismarck
COLLOTON, SHEPHERD, and STRAS, Circuit Judges.
Colloton, Circuit Judge.
an antitrust case arising under § 7 of the Clayton Act,
15 U.S.C. § 18. The Federal Trade Commission and the
State of North Dakota moved to enjoin Sanford Bismarck's
acquisition of Mid Dakota Clinic, P.C., alleging that the
merger would violate the Act. The district
court granted a preliminary injunction after
determining that the plaintiffs were likely to succeed in
proving that the acquisition would substantially lessen
competition in four types of physician services in the
Bismarck-Mandan area. The companies appeal, and we affirm.
is an integrated healthcare system operating in North Dakota
and several other States. In the Bismarck-Mandan region,
Sanford operates an acute care hospital and multiple clinics.
The company employs approximately thirty-seven adult primary
care physicians, five pediatricians, eight OB/GYN physicians,
and four general surgeons.
two main competitors in the Bismarck-Mandan region are Mid
Dakota and Catholic Health Initiatives St. Alexius Health.
Mid Dakota is a multi-speciality physician group that
includes approximately twenty-three adult primary care
physicians, six pediatricians, eight OB/GYN physicians, and
five general surgeons. Catholic Health employs eighty-eight
physicians, the majority of whom are hospitalists; five are
adult primary care physicians.
North Dakota, there are three leading commercial insurers:
Blue Cross Blue Shield North Dakota, Medica, and Sanford
Health Plan. Blue Cross is the largest, accounting for 61% of
the North Dakota health insurance market in 2016. Blue Cross
has a participation agreement with every general acute care
hospital in the State and with approximately 99% of
practicing physicians. Sanford and Medica accounted for 31%
and 8% of the 2016 market, respectively.
2015, Mid Dakota offered itself for sale, and both Catholic
Health and Sanford submitted purchase proposals. Mid Dakota
initially executed a letter of intent with Catholic Health,
but after Catholic Health terminated the deal, Mid Dakota
began negotiations with Sanford. The two entities executed a
term sheet in August 2016 providing that Sanford would
acquire the assets of Mid Dakota. Ten months later, they
signed a stock purchase agreement in which Sanford agreed to
purchase the outstanding capital stock of Mid Dakota. If the
companies merge, then Sanford will have the following market
shares in the Bismarck-Mandan region: 99.8% of general
surgeon services, 98.6% of pediatric services, 85.7% of adult
primary care physician services, and 84.6% of OB/GYN
Federal Trade Commission and North Dakota Attorney General
brought an action seeking to enjoin the merger. Section 7 of
the Clayton Act provides that no person engaged in commerce
and subject to the jurisdiction of the FTC shall acquire the
stock or assets of another person if "the effect of such
acquisition may be substantially to lessen competition."
15 U.S.C. § 18. The FTC alleged that Sanford's
acquisition of Mid Dakota would contravene this proscription
and sought an injunction under 15 U.S.C. §§ 26 and
53(b). The complaint asserted that Sanford's plan
"to purchase [Mid Dakota's] assets through two
separate transactions" would "violate Section 7 of
the Clayton Act by substantially lessening competition."
After a four-day evidentiary hearing, the district court
found that the plaintiffs were likely to succeed on the
merits of their claim. The court therefore issued a
review the district court's grant of a preliminary
injunction for abuse of discretion. Lankford v.
Sherman, 451 F.3d 496, 503 (8th Cir. 2006). "An
abuse of discretion occurs where the district court rests its
conclusion on clearly erroneous factual findings or erroneous
legal conclusions." Id. at 503-04. A district
court may enjoin a proposed merger if the FTC shows that
"weighing the equities and considering the
Commission's likelihood of ultimate success, such action
would be in the public interest." FTC v. Tenet
Health Care Corp., 186 F.3d 1045, 1051 (8th Cir. 1999)
(quoting 15 U.S.C. § 53(b)).
evaluate the FTC's likelihood of success on the merits,
the district court employed a burden-shifting method endorsed
by the D.C. Circuit in United States v. Baker Hughes
Inc., 908 F.2d 981, 982-83 (D.C. Cir. 1990). Under this
approach, the plaintiffs must first present a prima
facie case that the merger will result in an undue
market concentration for a particular product or service in a
particular geographic area. That showing creates a
presumption that the merger will substantially lessen
competition. The burden of production then shifts to the
defendant to rebut the presumption, and, on a sufficient
showing, back to the plaintiffs to present additional
evidence of anticompetitive effects. The ultimate burden of
persuasion remains at all times with the plaintiffs.
companies argue that the district court improperly shifted
the ultimate burden of persuasion to the defendants when it
required them to produce rebuttal evidence that "clearly
shows" that no anticompetitive effects were likely. The
district court cited United States v. Philadelphia
National Bank, 374 U.S. 321 (1963), where the Court said
that "a merger which produces a firm controlling an
undue percentage share of the relevant market, and results in
a significant increase in the concentration of firms in that
market, is so inherently likely to lessen competition
substantially that it must be enjoined in the absence of
evidence clearly showing that the merger is not
likely to have such anticompetitive effects."
Id. at 363 (emphasis added). The D.C. Circuit in
Baker Hughes reviewed later decisions that used the
term "show" instead of "clearly show,"
and concluded that the Supreme Court, without overruling
Philadelphia National Bank, "has at the very
least lightened the evidentiary burden on a section 7
defendant." 908 F.2d at 990-91.
conclude that there was no legal error by the district court
here. The court followed the analytical framework of
Baker Hughes, and specified that "[t]he FTC has
the burden of persuasion at all times." While Baker
Hughes adverted to the Supreme Court's shift in
terminology since the 1960s, the D.C. Circuit also recognized
that "[t]he more compelling the prima facie case, the
more evidence the defendant must present to rebut it
successfully." Id. at 991. In the context of
this case, where the plaintiffs presented strong evidence of
monopolization or near-monopolization in each service line,
it was necessary for the defendants to make a strong
presentation in rebuttal. We are not convinced that the
quotation from Philadelphia National Bank, read in
the context of the district court's order as a whole,
shifted the burden of persuasion to the defendants or