By Diane Bartz
WASHINGTON (Reuters) - An appeals court sided on Monday with U.S. antitrust enforcers trying to stop a merger of two Chicago hospital systems, handing the government a victory in its effort to block deals that it believes will lead to higher prices.
The U.S. Federal Trade Commission had filed a lawsuit in December 2015 to stop the proposed merger of Advocate Health Care and NorthShore University HealthSystem. But a district court in Chicago disagreed with the FTC's analysis that the deal could lead to higher prices and said it could go forward.
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The FTC appealed, and the U.S. Court of Appeals for the Seventh Circuit said that the lower court's findings regarding the market was "clearly erroneous."
Essentially, the FTC and the companies proposing to merge had disagreed on how far consumers would drive to be treated at a hospital under ordinary circumstances and the appeals court sided with the FTC.
"The FTC is pleased that the Seventh Circuit rejected the district court’s geographic market findings, and we are looking forward to proving our case," said Debbie Feinstein, director of the FTC’s Bureau of Competition, in a statement.
Advocate Health Care and NorthShore said in a statement that they were disappointed. "While our legal teams review the decision, we remain confident our merger would lower costs and improve outcomes for consumers," the companies said in a statement.
Advocate and NorthShore announced plans to merge in September 2014. Advocate is in Downers Grove, a suburb west of Chicago while NorthShore is in Evanston, a northern suburb.
Advocate says on its website that it is the largest health system in Illinois with 12 hospitals among its 250 facilities. NorthShore has four hospitals, according to its website.
The FTC had said the merged hospital system would control 55 percent of the area's general acute care inpatient services. The hospitals argued that the federal agency's analysis had improperly failed to include competitors such as Northwestern Memorial Hospital.
Financial terms of the deal have not been disclosed.
The FTC was seeking a preliminary injunction aimed at stopping the deal while its internal judge hears the case. A preliminary injunction generally scuppers proposed mergers as few companies can keep a deal together during the extended internal FTC review.
The FTC, which works with the U.S. Department of Justice to administer antitrust law, has struggled lately to enforce its decisions.
But the agency won high-profile fights to stop Sysco Foods from merging with rival US Foods last year and this year blocked Staples from merging with Office Depot.
(Reporting by Diane Bartz; Editing by Bill Rigby)