The U.S. Court of Appeals for the Third Circuit affirmed dismissal of a Sherman Act Section 1 antitrust claim brought by New Jersey Hospital Deborah Heart and Lung Center (“Deborah Heart”) against competitor health system Virtua Health, Inc. (“Virtua”) and The Cardiology Group P.A. (CGPA). The court held that Deborah Heart failed to introduce sufficient evidence of harm to competition in the designated relevant market as a whole.
Deborah Heart alleged that CPGA and Virtua engaged in an illegal exclusive dealing arrangement with Penn Presbyterian Hospital of Philadelphia that harmed competition by forcing some consumers to obtain certain cardiology procedures at Penn Presbyterian when, in a competitive market, they would have chosen Deborah Heart. In order to proceed to trial Deborah Heart was required to provide sufficient evidence of anticompetitive effects in the “relevant market.” The court further explained that, for Section 1 claims, anticompetitive effects could be demonstrated either by showing “actual anticompetitive effects” or by showing the defendant has “[m]arket power—the ability to raise prices above those that would prevail in a competitive market.”
Deborah Heart defined the product markets at issue in the dispute as emergency and non-emergency advanced cardiac interventional (ACI) procedures. The parties agreed that the relevant geographic market for emergency ACI procedures consisted of a three-county area in New Jersey, and that the relevant geographic market for non-emergency ACI procedures consisted of a five-county area in New Jersey plus portions of Philadelphia. Because CGPA and Virtua did not have sufficient market power (e.g., CGPA’s physicians represented less than eight percent of the cardiologists practicing in the relevant market for emergency ACI procedures), Deborah Heart attempted to show actual anticompetitive effects.
Despite using relevant market definitions that included multiple hospitals and hundreds of cardiologists, Deborah Heart’s arguments to show actual anticompetitive effects pertained only to CGPA and Virtua patients. After pointing out this inconsistency, the court went on to explain that such a narrow definition would be improper even if it matched with Deborah Heart’s expert’s relevant market definition, noting that . . . courts have routinely concluded that “absent an allegation that the hospital is the only one serving a particular area or offers a unique set of services . . . the relevant geographic market” may not be limited “to a single hospital.” No evidence was introduced indicating that CGPA or Virtua were sufficiently unique to call for reducing the size of the geographic market only to those entities. Thus, the court concluded that even if Deborah Heart had been able to provide sufficient evidence that CGPA’s and Virtua’s agreement caused some anti-competitive effects to the patients of those entities, such a showing would be insufficient to demonstrate the type of anticompetitive effects on the overall market necessary to prove a Section 1 claim.
The court concluded that a plaintiff who asserts actual anticompetitive effects to prove a Section 1 violation must, absent evidence of market power possessed by the defendants, show anticompetitive effects on the market as a whole. Where, as here, a plaintiff shows effects only on a small subset of that market while making no attempt to show broader effects, the plaintiff cannot meet the requirements of the antitrust inquiry. The court noted that resolution of this appeal was relatively simple but that it wrote to clarify the burden on an antitrust plaintiff alleging a Section 1 claim in which the plaintiff does not assert that the defendants possessed market power.