The Inefficient Efficiency Defense: St. Luke's and the Efficiency Analysis

Abstract

Today, efficiencies are considered to play a critical role during the Clayton Act Section 7 analysis. However, despite the 1997 revision of the Merger Guidelines, no prima facie case has yet been rebutted with an efficiency claim. This paper looks at the importance of an efficiency story, specifically in the healthcare industry, through the lens of the recent St. Luke’s case. In St. Luke’s, the Court found that absent a decrease in price efficiencies, quality efficiencies would not offset any anticompetitiveness of the transaction. This paper examines the importance of quality efficiencies in the healthcare industry and how these efficiencies could potentially benefit consumers even more than price decreases. Additionally, this paper looks at the importance of having a sound burden-shifting framework for a Section 7 analysis. Specifically, I argue that in St. Luke’s the district court seemed to treat market shares as more than just a “convenient starting point,” ultimately causing insurmountable hurdles in presenting an efficiency defense during litigation. Finally, this paper discusses why an efficiency defense should not involve having to disprove all the potential negatives on competition.