The DC District Court cited damaging market ownership and considerably large anti-competitive implications as basis for the Cigna-Anthem merger block.
The full opinion of United States District Court for the District of Columbia blocking Anthem’s acquisition of Cigna became publicly available earlier this week and provides details into the court’s decision.
In the memorandum opinion, Judge Amy Berman Jackson based the bulk of her decision on the effects of the Anthem-Cigna merger on market competition. In particular, the judge keyed in on the example of the insurance market in Richmond, VA, in which the merged entity would control 77 percent of the sector (with similar negative effects to occur in 35 other markets).
The plaintiffs in the case — the Department of Justice and 11 states — found that even without a merger, Anthem controlled 61 percent of the health insurance without a merger. Disregarding Blue Cross Blue Shield entities, Anthem by itself owned 48 percent of the healthcare market. After calculating the potential market shares within in various regions as well as a framework of antitrust violations, the court ruled in favor of blocking the merger.
The court analyzed major legal arguments highlighting the anticompetitive nature of the merger including a reduction in competitors, customer inability to negotiate, smaller opportunities for new competition to join the market, reduced market innovation, and significant harm to large employer group within major geographic healthcare markets.
“In light of this evidence, the Court holds that plaintiffs have met their burden to prove by a preponderance of the evidence that the merger will have anticompetitive effects on the Richmond, Virginia market for the sale of large group health insurance.”
“A merger between two competing sellers prevents buyers from playing those sellers off against each other in negotiations,” the court said. “This alone can significantly enhance the ability and incentive of the merged entity to obtain a result more favorable to it, and less favorable to the buyer, than the merging firms would have offered separately absent the merger.”