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Sorry Doc
Before agreeing to cooperate in business ventures, Americans are well advised to ask permission from their overseers in Washington. Last year, when Staples and Office Depot thought of merging, the Federal Trade Commission said no, using the novel theory that firms which constitute 6 percent of the market could wield monopoly power. (See "No Deal," October 1997.)
But office superstores aren't the only businesses under the scrutiny of antitrust busybodies. Last July the Department of Justice informed a group of gastroenterologists in eastern Pennsylvania who wanted to merge their practices that it would view their efforts to combine forces as anticompetitive and therefore couldn't promise "that it would not take enforcement action against the merger."
In asking permission to start a new business, the 12 docs pointed out that there were 21 other gastroenterologists in the Greater Lehigh Valley. But citing the Lehigh River as an insurmountable "psychological barrier," Joel Klein, then acting assistant attorney general of the Antitrust Division, redefined the market these doctors operated in to include only Allentown, thus boosting their market share to 92 percent.
As Klein's letter to the 12 physicians makes clear, however, the real issue is that managed care companies in the Lehigh Valley didn't want to have to negotiate with the new firm. Thanks to the Department of Justice, they won't have to.
More Articles by Michael W. Lynch
- The Experimental Economist, Nick Gillespie & Michael W. Lynch, October 1, 2002
- Making a Killing in Business, Michael W. Lynch, October 1, 2002
- Road Show, Michael W. Lynch, August 1, 2002
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