Med South: FTC 2002 Advisory Opinion

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 wasnt
  
• a straight per se analysis applied?
• What is efficiency-enhancing integration? What
  were the primary
  
• efficiency factors here?

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?

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 GMs idle plant in
Fremont, CA. What was GMs and Toyotas market
shares? What was business justification for joi
nt venture from GM and Toyota perspective?
What restrictions did FTC impose in its decree?
What were three pro-competitive benefits per Cha
irman Miller? Did the JV circumvent import rest
rictions? Was the dissent correct is claiming t
hat any automobile JV would be permitted
under new antitrust standard set by FTC?
4
SCFC ILC, Inc. v. VISA USA, Inc. (10th Cir. 1994)
Basic Facts Sears, through acquisition of SL,
sought to offer VISA card (Premier Option) in a
ddition to its Discover card. VISA refused,
under its rule 2.06 that prohibited any competing
credit card issuer. Sears sued, alleging Sherma
n 1 violation for its exclusion from market.
Dist. Ct. held there was Sherman 1 violation.
What was relevant market per District Court? Pe
r 10th Cir? What were the parties market shares
? What was VISAs justification for its rule
of exclusion?
5
SCFC ILC, Inc. v. VISA USA, Inc. (10th Cir. 1994)
Holding VISAs exclusion of Sears not Sherman
1 violation. - Relevant market is at issuer
level, where market remarkably unconcentrated.
- Dist. Ct finding of market power insufficie
nt 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 fro
m developing new card.
6
SCFC ILC, Inc. v. VISA USA, Inc. (10th Cir. 1994)
Holding VISAs exclusion of Sears not Sherman
1 violation. - No evidence exclusion hurts c
onsumers. - Sears already competes vigorousl
y. - No reason to allow Sears to free ride o
n VISA technology. - To force VISA to admit
intersystem competitors would suck court into
economic riptide of contrived market
forces.
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 iss
ue re SRI? How did District Ct. handle?
What was Plaintiffs theory of liability? I
ssue for summary judgment? How did Dist. Ct
. decide per se price fixing issue on summary
judgment? Was rule of reason even an issu
e? Why Not?
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.