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Aetna-Humana and Algorithmic Market Definition in the Guidelines

Kostis Hatzitaskos et al., The Antitrust Source, October 2017

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The Department of Justice and Federal Trade Commission Horizontal Merger Guidelines outline the Agencies’ enforcement policy on horizontal mergers. The Guidelines play an important role during all phases of the merger review process, including litigation. Because merger review is fact specific and because facts vary greatly across mergers, the Guidelines must be general enough to accommodate the nuances of a wide range of potential scenarios. This need to preserve generality can lead to ambiguities that can complicate counseling, merger review, and litigation. We discuss here one such ambiguity in the Guidelines, concerning whether market definition must be strictly algorithmic or may instead be a more holistic process informed by both qualitative and quantitative evidence. The recent Aetna-Humana health insurance merger trial was the first since the 2010 revisions of the Guidelines to focus squarely on this ambiguity. A number of products were at issue in the trial, but the key question was whether the merger would reduce competition in the sale of Medicare Advantage plans to seniors eligible for Medicare. In what follows, we explore the market definition questions raised at trial and their implications for practitioners.

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