Judge John Bates ruled Monday that the proposed merger between Aetna and Humana was likely to substantially lessen competition in the Medicare Advantage market in all 364 complaint counties as well as the public exchange in three counties in Florida. After the decision came down blocking the merger, Aetna released a statement saying it was seriously considering an appeal. While this may leave consumers wary of too much celebration over today’s victory, consider the following reasons why a successful appeal is unlikely.
1. Judge Bates wins often. Bates is a Republican appointee with a stellar record of ruling the right way the first time. Like Tom Brady, he loses but not often. He is only reversed a very small portion of the time.
2. DC Circuit recognized the importance of Medicare Advance and the public exchanges. The DC Circuit Court, which is dominated by democratic appointees, has already recognized the importance of Medicare Advantage and the public exchanges when it rejected an attack to Obamacare. The court documented in detail that Aetna withdrew from the 17 exchanges at issue in the case not as a business decision but to punish the DOJ for having the temerity to seek to protect consumers. This is reflected in the introductory portion of the decision: “In the public exchanges, the Court finds that Aetna withdrew from competing in the 17 complaint counties for 2017 specifically to evade judicial scrutiny of the merger.”
3. The DC Circuit tends to be pro-government in merger cases. In the government’s cases against Whole Foods-Wild Oats and Heinz-Beech Nut (baby food) mergers, the DC Circuit strongly supported the government challenges and created strong case law that ultimately supported DOJ’s case in Aetna.
4. The key issue is the definition of the relevant market, a tremendously factual determination. Appellate courts are very deferential to district courts in the definition of the relevant market because the district court is much closer to the evidence. When reviewing discretionary decisions, the courts of appeals give great deference to the result reached by the trial judge because the appellate judges were not present at trial and are not in as good a position as the trial judge to evaluate the relevant factors.
5. Skepticism of efficiency claims. The DC Circuit has always been skeptical of any efficiency claims from mergers (see Heinz-Beech Nut – which questions whether such a defense exists). In this case, the claims are thin at best -- even their expert admitted less than 50% of any savings would be passed on to consumers.
6. Judge Bates was Aetna's best shot at obtaining a favorable ruling. In the controversial Arch Coal decision, Judge Bates was highly sympathetic to the defendants' arguments and willing to reject the government's case. Here, Judge Bates authored a sweeping 156-page decision that carefully considers and rejects each of the defendants' arguments. Aetna was unlikely to receive this degree of consideration from any other judge, and when Aetna faces the less sympathetic judges of the D.C. Circuit they will be doing so with a carefully authored opinion that will serve as a road map to reject any arguments they may make.