 United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued March 24, 2017                  Decided April 28, 2017

                        No. 17-5024

            UNITED STATES OF AMERICA, ET AL.,
                      APPELLEES

                             v.

                       ANTHEM, INC.,
                        APPELLANT

                   CIGNA CORPORATION,
                       APPELLANT


                 Consolidated with 17-5028


        Appeals from the United States District Court
                for the District of Columbia
                    (No. 1:16-cv-01493)


    Christopher M. Curran argued the cause for appellant
Anthem, Inc. With him on the briefs was J. Mark Gidley. Noah
A. Brumfield, Matthew S. Leddicotte, and George L. Paul
entered appearances.

     Charles F. Rule was on the brief for appellant Cigna
Corporation. Craig A. Benson entered an appearance.
                               2

    Paul T. Denis and Steven G. Bradbury were on the brief for
amici curiae Antitrust Economists and Business Professors in
support of appellant.

     Scott A. Westrich, Attorney, U.S. Department of Justice,
argued the cause for appellees. With him on the brief were
Kristen C. Limarzi, James J. Fredricks, Mary Helen Wimberly,
and Daniel E. Haar, Attorneys, Rachel O. Davis, Assistant
Attorney General, Office of the Attorney General for the State
of Connecticut, and Paula Lauren Gibson, Deputy Attorney
General, Office of the Attorney General for the State of
California. Loren L. AliKhan, Deputy Solicitor General, Office
of the Attorney General for the District of Columbia, Sarah O.
Allen and Tyler T. Henry, Assistant Attorneys General, Office
of the Attorney General for the Commonwealth of Virginia,
Ellen S. Cooper, Assistant Attorney General, Office of the
Attorney General for the State of Maryland, Victor J. Domen Jr.,
Senior Counsel, Cynthia E. Kinser, Deputy Attorney General,
and Erin Merrick, Assistant Attorney General, Office of the
Attorney General for the State of Tennessee, Jennifer L. Foley,
Assistant Attorney General, Office of the Attorney General for
the State of New Hampshire, Devin Laiho, Senior Assistant
Attorney General, Office of the Attorney General for the State
of Colorado, Layne M. Lindebak, Assistant Attorney General,
Office of the Attorney General for the State of Iowa, Christina
M. Moylan, Assistant Attorney General, Office of the Attorney
General for the State of Maine, Irina C. Rodriguez, Assistant
Attorney General, Office of the Attorney General for the State
of New York, and Daniel S. Walsh, Assistant Attorney General,
Office of the Attorney General for the State of Georgia, entered
appearances.

    David A. Balto was on the brief for amici curiae American
Antitrust Institute, et al. in support of plaintiffs-appellees.
                                 3

    Edith M. Kallas, Joe R. Whatley, Jr., and Henry C. Quillen
were on the brief for amici curiae The American Medical
Association and The Medical Society of the District of
Columbia in support of appellees.

    Douglas C. Ross, David A. Maas, and Melinda Reid Hatton
were on the brief for amicus curiae American Hospital
Association in support of appellees.

    Richard P. Rouco was on the brief for amici curiae
Professors in support of appellees.

    Before: ROGERS, KAVANAUGH and MILLETT, Circuit
Judges.

    Opinion for the Court filed by Circuit Judge ROGERS.

    Concurring opinion filed by Circuit Judge MILLETT.

    Dissenting opinion filed by Circuit Judge KAVANAUGH.

      ROGERS, Circuit Judge: This expedited appeal arises from
the government’s successful challenge to “the largest proposed
merger in the history of the health insurance industry, between
two of the four national carriers,” Anthem, Inc. and Cigna
Corporation. Appellees Br. 1. In July 2015, Anthem, which is
licensed to operate under the Blue Cross Blue Shield brand in
fourteen states, reached an agreement to merge with Cigna, with
which Anthem competes largely in those fourteen states. The
U.S. Department of Justice, along with eleven States and the
District of Columbia (together, the “government”), filed suit to
permanently enjoin the merger on the ground it was likely to
substantially lessen competition in at least two markets in
violation of Section 7 of the Clayton Act. Following a bench
trial, the district court enjoined the merger, rejecting the factual
                                   4

basis of the centerpiece of Anthem’s defense, and focus of its
current appeal, that the merger’s anticompetitive effects would
be outweighed by its efficiencies because the merger would
yield a superior Cigna product at Anthem’s lower rates. The
district court found that Anthem had failed to demonstrate that
its plan is achievable and that the merger will benefit consumers
as claimed in the market for the sale of medical health insurance
to national accounts in the fourteen Anthem states, as well as to
large group employers in Richmond, Virginia.

     Anthem and Cigna (hereinafter, Anthem) challenge the
district court’s decision and order permanently enjoining the
merger on the principal ground that the court improperly
declined to consider the claimed billions of dollars in medical
savings. See Appellant Br. 10.1 Specifically, Anthem maintains
the district court improperly rejected a consumer welfare
standard — what it calls “the benchmark of modern antitrust
law,” id. — and generally abdicated its responsibility to balance
likely benefits against any potential harm. According to
Anthem, the merger’s efficiencies would benefit customers
directly by reducing the costs of customer medical claims
through lower provider rates, without harm to the providers.
The government has not challenged Anthem’s reliance on an

        1
            Cigna has become a reluctant supporter of the merger,
stating in its appellate brief that “[i]n accordance with the merger
agreement, Cigna has appealed and defers to Anthem.” Cigna Br. 3.
Indeed, the district court noted the “elephant in the courtroom,” for at
trial Cigna executives dismissed various of Anthem’s claims of
savings, cross-examined the merging parties’ expert witness, and
refused to sign Anthem’s proposed findings of fact and conclusions of
law. United States v. Anthem, Inc., No. CV 16-1493 (ABJ), 2017 WL
685563, at *4 (D.D.C. Feb. 21, 2017). Anthem suggested this is a
“‘side issue,’ a mere ‘rift between CEOs.’” Id. That their relationship
may have deteriorated has little to do with the anticompetitive effects
of the proposed merger.
                                5

efficiencies defense per se. Rather, it points out that Anthem
neither disputes that the merger would be anticompetitive but for
the claimed medical cost savings, nor challenges the district
court’s findings on the relevant market definition, ease of entry,
the effect of sophisticated buyers, or innovation. Instead,
Anthem’s appeal focuses principally on factual disputes
concerning the claimed medical cost savings, which the
government maintains were not verified, not specific to the
merger, and not even real efficiencies.

     For the following reasons, we hold that the district court did
not abuse its discretion in enjoining the merger based on
Anthem’s failure to show the kind of extraordinary efficiencies
necessary to offset the conceded anticompetitive effect of the
merger in the fourteen Anthem states: the loss of Cigna, an
innovative competitor in a highly concentrated market.
Additionally, we hold that the district court did not abuse its
discretion in enjoining the merger based on its separate and
independent determination that the merger would have a
substantial anticompetitive effect in the Richmond, Virginia
large group employer market. Accordingly, we affirm the
issuance of the permanent injunction on alternative and
independent grounds.

                                I.

    Under Section 7 of the Clayton Act, a merger between two
companies may not proceed if “in any line of commerce or in
any activity affecting commerce in any section of the country,
the effect of such [merger] may be substantially to lessen
competition.” 15 U.S.C. § 18.

     A burden-shifting analysis applies to consider the merger’s
effect on competition. United States v. Baker Hughes Inc., 908
F.2d 981, 982 (D.C. Cir. 1990). First, the plaintiff must
                               6

establish a presumption of anticompetitive effect by showing
that the “transaction will lead to undue concentration in the
market for a particular product in a particular geographic area.”
Id. The most common way to make this showing is through a
formula called the Herfindahl-Hirschman Index (“HHI”), which
compares a market’s concentration before and after the proposed
merger. See id. at 983 n.3. By squaring the market share
percentage of each market participant and adding them together,
a market’s HHI can range from >0 to 10,000 (i.e., a pure
monopoly, or 100²). Dept. of Justice & Fed. Trade Comm’n,
Horizontal Merger Guidelines § 5.3 & n.9 (Aug. 19, 2010) (the
“Guidelines”). Under the Guidelines, a market will be
considered highly concentrated if it has an HHI above 2500, and
if the merger increases HHI by more than 200 points and results
in a highly concentrated market, it “will be presumed to be
likely to enhance market power.” Id. § 5.3. Although, as the
Justice Department acknowledges, the court is not bound by,
and owes no particular deference to, the Guidelines, this court
considers them a helpful tool, in view of the many years of
thoughtful analysis they represent, for analyzing proposed
mergers. See Baker Hughes, 908 F.2d at 985–86.

    The burden shifts, once the prima facie case is made, to the
defendant to rebut the presumption. Id. at 982. To do so, it
must provide sufficient evidence that the prima facie case
“inaccurately predicts the relevant transaction’s probable effect
on future competition,” or it must sufficiently discredit the
evidence underlying the initial presumption. Id. at 991. “The
more compelling the prima facie case, the more evidence the
defendant must present to rebut it successfully,” but because the
burden of persuasion ultimately lies with the plaintiff, the
burden to rebut must not be “unduly onerous.” Id.

    Upon rebuttal by the defendant, “the burden of producing
additional evidence of anticompetitive effect shifts to the
                               7

[plaintiff], and merges with the ultimate burden of persuasion,
which remains with the [plaintiff] at all times.” Id. at 983.

                               II.

     Anthem is the second-largest seller of medical health
insurance to large companies in the United States, and it serves
approximately 38.6 million medical members. It is a member of
the Blue Cross Blue Shield Association, a group of thirty-six
health insurance companies licensed to do business under the
Blue Cross and/or Blue Shield brands. Anthem holds an
exclusive license to the Blue brands in all or part of fourteen
states (the “Anthem states”), and it may also compete for
business outside those states if it receives permission from the
Blue licensee in the relevant area. Anthem also owns non-Blue
subsidiaries through which it may operate both in and outside of
the Anthem states, subject to Anthem’s “Best Efforts”
obligations in its licensing agreement with the Blue Cross
Association. Under these “Best Efforts” provisions, at least
80% of Anthem’s revenue within the Anthem states must come
from Blue-branded products, as must at least 66.67% of its
revenue nationwide. Failure to comply could result in
termination of Anthem’s license, which would trigger a $2.9
billion fee to the Association.

     Cigna, the third-largest seller of health insurance to large
companies in the United States, serves approximately 13 million
medical members nationwide and in more than 30 countries, in
addition to offering other specialty products such as dental and
vision insurance. Unlike Anthem, which has historically been
able to leverage its size to negotiate steep discounts from
providers, Cigna’s provider discounts have generally not been
as good, so Cigna has developed a different and innovative
value proposition in order to compete for customers. Under its
more collaborative arrangements with providers, and through the
                               8

integrated, customized wellness programs it offers its
customers’ employees, Cigna’s focus is on reducing employees’
utilization of expensive medical procedures and promoting
wellness through behavioral supports and lifestyle changes.
This offers customers a different means of lowering health care
costs than the traditional model relying heavily on provider
discounts.

     On July 23, 2015, Anthem reached an agreement to merge
with Cigna. The merger would leave Anthem as the surviving
company, with a controlling share of the merged company’s
stock and a majority of seats on the merged company’s board of
directors. Within the Anthem states, Cigna customers would be
permitted to remain with Cigna, at least for the time being, but
Anthem and Cigna would otherwise no longer compete with one
another in those states. Outside the Anthem states, Cigna’s
existing business would allow Anthem a bigger foothold to
compete, subject to Anthem’s “Best Efforts” obligations. The
merger agreement extends until April 30, 2017.

     On July 21, 2016, the United States, along with California,
Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New
Hampshire, New York, Tennessee, Virginia, and the District of
Columbia, sued to enjoin the merger. Relying on Section 7 of
the Clayton Act, 15 U.S.C. § 18, plaintiffs alleged that the
merger would substantially lessen competition in the market for
the sale of health insurance to national accounts in both the
Anthem states and the United States as a whole, as well as in the
market for the sale of health insurance to large group employers
in 35 local markets. Plaintiffs also alleged that the merger
would substantially lessen competition for the purchase of
services from healthcare providers in the 35 local markets by
giving the combined company anticompetitive buying power.
                               9

     Following a six-week bench trial, the district court
permanently enjoined the merger on the basis of its likely
substantial anticompetitive effect in the market for the sale of
health insurance to national accounts in the Anthem states, as
well as in the market for the sale of health insurance to large
group employers in Richmond, Virginia. United States v.
Anthem, Inc., No. CV 16-1493 (ABJ), 2017 WL 685563, at *68
(D.D.C. Feb. 21, 2017). It first defined the relevant national
accounts market, accepting the government’s proposed
definition of “national account” as an employer purchasing
health insurance for more than 5,000 employees across more
than one state. It also found that the market properly included
both fully insured and “administrative services only” (“ASO”)
plans. Under a fully-insured plan, the employer pays for claims
adjudication, access to the insurer’s provider network (including
whatever discounted rates the insurer has negotiated), and
coverage of the employees’ medical costs. Under an ASO plan,
the employer pays for claims adjudication and network access,
but the employer self-insures and thus takes on the risk of its
employees’ medical costs. Finally, the district court found that
the relevant geographic market for national accounts was the
fourteen Anthem states, because that is where Anthem and
Cigna currently compete most prominently, given the
geographical restrictions imposed on Anthem under its Blue
Cross license.

     With the national accounts market so defined, the district
court then found a presumption of anticompetitive effect based
on the combined company’s market share. It determined that
the merger would increase HHI by 537 to 3000, while the
Guidelines threshold is an increase of 200 to 2500, resulting in
a highly concentrated market. Guidelines § 10. It also noted
that under any variation performed by plaintiffs’ expert the
resulting numbers were still well over the presumptive
Guidelines limits: considering only national accounts where 5%
                               10

of employees reside in another state, HHI would increase 641 to
3124; considering only ASO customers with 5% out-of-state
employees, HHI would increase 880 to 3675; and considering all
ASO national accounts, HHI would increase 771 to 3663.
Anthem objected that these calculations overstated Anthem’s
market share by including all Blue customers even if they were
not Anthem’s, but the district court found that this was
appropriate. Anthem’s own internal calculations include these
customers, and a key part of Anthem’s value proposition to
customers is that they can access all non-Anthem Blue networks
nationwide.

     Next, the district court found that Anthem had provided
sufficient evidence to rebut the government’s prima facie case.
It relied on evidence that Anthem’s primary competitor for
national accounts is United Healthcare, not Cigna; that national
accounts tend to be sophisticated, well-informed customers and
thus better able to thwart an attempted price increase; that new
entrants to the market will constrain pricing; and that the
combined company would have incentives to innovate in its
collaborative care arrangements with healthcare providers.

     Finally, the district court found that the merger’s overall
effect in the Anthem states would be anticompetitive by
reducing the number of national health insurance carriers from
four to three. It rejected Anthem’s efficiencies defense, which
posited the combined company would realize $2.4 billion in
medical cost savings through its ability to (1) “rebrand” Cigna
customers as Anthem in order for them to access Anthem’s
existing lower rates; (2) exercise an affiliate clause in some of
its provider agreements to allow Cigna customers access to
Anthem rates; and (3) renegotiate lower rates with providers.
First, it found that the claimed savings were not merger-specific
because they were based on the application of rates that either
company was already able to attain, and thus presumably each
                                11

company could attain the other’s superior rates on its own. It
also found that for Cigna customers that would be rebranded to
Anthem, any related savings would not be merger-specific
because Cigna customers could simply purchase the Anthem
product today. It rejected the notion that the merger was
necessary to allow Anthem customers access to Cigna’s popular
product offerings because Anthem had failed to show that it
could not develop and offer these products on its own. Second,
the district court found that the claimed savings also failed
because they were not sufficiently verifiable. It found that
Anthem’s plan to exercise the affiliate clause in its provider
contracts was unlikely to work as Anthem suggested. That is,
exercise of the affiliate clause would likely give rise to provider
resistance because the providers were unlikely to accept lower
rates and provide more services without getting anything in
return. The district court also found, as a matter of fact, that
attempts to achieve the claimed savings through renegotiation of
provider contracts would run into similar problems. It found
that any savings would take time to be realized, and that
Anthem’s expert failed to account for utilization, i.e., the
amount of medical services that would be consumed by a given
customer. In sum, it found the claimed savings were
aspirational inasmuch as every proffered strategy either
floundered in the face of business reality or was achievable
without the merger, or both. The district court also expressed
doubt as to whether the type of efficiencies claimed by Anthem,
which merely redistribute wealth from providers to Anthem and
its customers rather than creating new value, are even
cognizable under Section 7.

     Additionally, with regard to the Richmond market for large
group employers, the district court found a presumption of
anticompetitive effect based on the fact that Anthem and Cigna
were the city’s first- and second-largest competitors, with a
combined market share of between 64% and 78%. It found that
                               12

Anthem rebutted the presumption by challenging the
government’s calculations, pointing to additional competitors
outside the Richmond area and claiming that Anthem customers
in the Federal Employee Program skewed its Richmond market
share. Overall, however, the district court credited the testimony
of the government’s expert that even accepting all of Anthem’s
claimed efficiencies, the merger would still have a net
anticompetitive effect. Because Anthem had not shown that the
remaining competition (or potential market entrants) could
likely constrain a price increase by the combined company, it
found that the merger should be enjoined on that additional basis
as well.

                               III.

     Our review of the district court’s decision whether to issue
a permanent injunction under the Clayton Act is limited to
determining whether there was an abuse of discretion. United
States v. Borden Co., 347 U.S. 514, 518 (1954); see FTC v. H.J.
Heinz Co., 246 F.3d 708, 713 (D.C. Cir. 2001) (“Heinz”). The
district court’s conclusions of law are reviewed de novo, and its
findings of fact must be affirmed unless clearly erroneous.
Heinz, 246 F.3d at 713. If a finding of fact rests on an erroneous
legal premise, then the court “must examine the decision in light
of the legal principles [it] believe[s] proper and sound.” Id.
(quoting Ambach v. Bell, 686 F.2d 974, 979 (D.C. Cir. 1982)).

                             A.
    It is undisputed that the government met its burden to
demonstrate a highly concentrated post-merger market, which
would be reduced from four to just three competing companies.
Anthem also does not dispute the definition of the national
accounts market, nor that such a market will be even more
highly concentrated post-merger. Anthem’s appeal instead
hinges on the district court’s treatment of its efficiencies
                                 13

defense. The premise of its defense was explained by its expert,
Mark Israel, Ph.D. According to Anthem, Dr. Israel quantified
the medical cost savings that the combined company could
achieve post-merger using a “best of best” methodology, based
on the economic theory that the combined company, with its
greater volume, would be able to obtain discount rates that are
no worse than either of the companies could achieve separately.
Using claims data from Anthem and Cigna, he calculated that
the merger would generate $2.4 billion in medical cost savings
through improved discount rates, 98% of which he predicted
would be passed through to customers, the large national
employers with which Anthem and Cigna contract. Of the $2.4
billion in claimed savings, Dr. Israel projected that $1.517
billion would result from Cigna customers accessing Anthem’s
lower rates, while $874.6 million would result from Anthem
customers accessing Cigna’s lower rates; when viewed in terms
of self-insured versus fully-insured customers, the former would
purportedly see $1.772 billion of the claimed $2.4 billion, while
the latter would see $619.8 million. Using merger simulation
models, he balanced these projected savings against potential
anticompetitive effects from the loss of the rivalry between the
two companies and found the savings easily outweighed any
potential harm. See Appellant Br. 5–6. But, as Anthem tends to
ignore, the government offered its own evidence and experts to
challenge these conclusions, as we discuss below.

     Despite, however, widespread acceptance of the potential
benefit of efficiencies as an economic matter, see, e.g.,
Guidelines § 10, it is not at all clear that they offer a viable legal
defense to illegality under Section 7. In FTC v. Procter &
Gamble Co., 386 U.S. 568 (1967), the Supreme Court enjoined
a merger without any consideration of evidence that the
combined company could purchase advertising at a lower rate.
It held that “[p]ossible economies cannot be used as a defense to
illegality. Congress was aware that some mergers which lessen
                                14

competition may also result in economies but it struck the
balance in favor of protecting competition.” Id. at 580. In his
concurrence, Justice Harlan criticized this attempt to “brush the
question aside,” and he “accept[ed] the idea that economies
could be used to defend a merger.” Id. at 597, 603 (Harlan, J.,
concurring). No matter that Justice Harlan’s view may be the
more accepted today, the Supreme Court held otherwise, id. at
580, and no party points to any subsequent step back by the
Court.

     Nor does our dissenting colleague, despite his wishful
assertion that Procter & Gamble can be disregarded by this
court because it preceded the “modern approach” adopted in
cases like United States v. General Dynamics Corp., 415 U.S.
486 (1974), and Continental T. V., Inc. v. GTE Sylvania Inc.,
433 U.S. 36 (1977). See Dis. Op. 9–11, 14–15. The Supreme
Court made no mention of Procter & Gamble in General
Dynamics, 415 U.S. 486, and it cannot be read to have implicitly
overruled the earlier decision because it did not involve
efficiencies. See id. at 494–504; see also 4A PHILLIP E. AREEDA
& HERBERT HOVENKAMP, ANTITRUST LAW ¶ 976c2, at 115
(2016) (“AREEDA & HOVENKAMP”) (distinguishing between an
efficiencies defense and General Dynamics’ “competitive
significance” defense). And whatever significance Continental
T. V. may have in the area of vertical restraints on trade, 433
U.S. at 54–59, it did not do the yeoman’s work that the dissent
apparently ascribes to it here, for it did not involve efficiencies,
mergers, or Section 7 of the Clayton Act. Even stranger is the
dissent’s suggestion that our decision in Baker Hughes, 908 F.2d
at 986, blessed an efficiencies defense, see Dis. Op. 10–11,
because Baker Hughes did not concern efficiencies and, like
Heinz, 246 F.3d at 720, it could not overrule Supreme Court
precedent. Nor has this court even hinted, as the dissent
proclaims, that General Dynamics overruled Procter &
Gamble’s efficiencies holding. See Baker Hughes, 908 F.2d at
                                 15

988 (citing Procter & Gamble favorably); Heinz, 246 F.3d at
720 & n.18 (interpreting Procter & Gamble’s efficiencies
holding). Put differently, our dissenting colleague applies the
law as he wishes it were, not as it currently is. Even if “the
Supreme Court has not decided a case assessing the lawfulness
of a horizontal merger under Section 7 of the Clayton Act” since
1975, Dis. Op. 10, it still is not a lower court’s role to ignore on-
point precedent so as to adhere to what might someday become
Supreme Court precedent.

     Despite the clear holding of Procter & Gamble, 386 U.S. at
580, two circuit courts, and our own, have subsequently
recognized the use of efficiencies evidence in rebutting a prima
facie case. Heinz, 246 F.3d at 720 (citing, inter alia, FTC v.
Tenet Health Care Corp., 186 F.3d 1045 (8th Cir. 1999); FTC
v. Univ. Health, Inc., 938 F.2d 1206 (11th Cir. 1991)); see also
ProMedica Health Sys., Inc. v. FTC, 749 F.3d 559, 571 (6th Cir.
2014). The Eighth Circuit, in holding that the government had
produced insufficient evidence of a well-defined market,
acknowledged that the district court may have properly rejected
the efficiencies defense, while observing evidence of enhanced
efficiencies should be considered in the context of the
competitive effects of the merger. Tenet Health Care Corp.,
186 F.3d at 1053–55. The Eleventh Circuit similarly concluded
that whether an acquisition would yield significant efficiencies
in the relevant market is “an important consideration in
predicting whether the acquisition would substantially lessen
competition,” University Health, Inc., 938 F.2d at 1222, while
noting both that “[i]t is unnecessary . . . to define the parameters
of this defense now,” and that “it may further the goals of
antitrust law to limit the availability of an efficiency defense,”
id. at 1222 n.30. Other circuits have remained skeptical and
simply assumed efficiencies can rebut a prima facie case, before
finding that the merging parties had not clearly shown the
merger would enhance rather than hinder competition. See, e.g.,
                                16

FTC v. Penn State Hershey Med. Ctr., 838 F.3d 327, 348 (3d
Cir. 2016); Saint Alphonsus Med. Ctr.–Nampa, Inc. v. St. Luke’s
Health Sys., Ltd., 778 F.3d 775, 790 (9th Cir. 2015). These very
recent decisions put to rest the dissent’s notion that “no modern
court” recognizes the continued viability of Procter & Gamble,
see Penn State Hershey Med. Ctr., 838 F.3d at 348; Saint
Alphonsus Med. Ctr., 778 F.3d at 789, while even a cursory
reading of the court’s opinion today puts to rest any suggestion
that it “espouses the old . . . position that efficiencies might be
reason to condemn a merger.” Dis. Op. 15 (emphasis added)
(quoting ERNEST GELLHORN ET AL., ANTITRUST LAW AND
ECONOMICS IN A NUTSHELL 463 (5th ed. 2004)).

     “Of course, once it is determinated that a merger would
substantially lessen competition, expected economies, however
great, will not insulate the merger from a [S]ection 7 challenge.”
Univ. Health, 938 F.2d at 1222 n.29. Notably, Professors
Areeda and Hovenkamp have observed that “Congress may not
have wanted anything to do with an efficiencies defense asserted
by a firm that was already large or low cost within the market
and to whom the efficiencies would give an even greater
advantage over rivals.” AREEDA & HOVENKAMP, supra, ¶ 950f,
at 42; id. ¶ 970c, at 31. As our subsequent analysis shows, this
court, like our sister circuits, can simply assume the availability
of an efficiencies defense to Section 7 illegality because Anthem
fails to show that the district court clearly erred in rejecting
Anthem’s efficiencies defense.

     This court was satisfied in Heinz, in view of the trend
among lower courts and secondary authority, that the Supreme
Court can be understood only to have rejected “possible”
efficiencies, while efficiencies that are verifiable can be
credited. 246 F.3d at 720 & n.18 (discussing 4 PHILLIP AREEDA
& DONALD TURNER, ANTITRUST LAW ¶ 941b, at 154 (1980)).
The issue in Heinz was whether under Section 13(b) of the
                               17

Federal Trade Commission Act, 15 U.S.C. § 53(b), preliminary
injunctive relief would be in the public interest. 246 F.3d at
727. The court held that the district court “failed to make the
kind of factual findings required to render that defense
sufficiently concrete to rebut the government’s prima facie
showing,” id. at 725, and, upon weighing the equities, remanded
for entry of a preliminary injunction. Id. at 726–27. The court
expressly stated however: “It is important to emphasize the
posture of this case. We do not decide whether . . . the
defendants’ claimed efficiencies will carry the day.” Id. at 727.
These are not the issues in Anthem’s appeal from the grant of a
permanent injunction. See LaShawn A. v. Barry, 87 F.3d 1389,
1393 (D.C. Cir. 1996) (en banc).

     Consequently, the circuit precedent that binds us allowed
that evidence of efficiencies could rebut a prima facie showing,
Heinz, 246 F.3d at 720–22, which is not invariably the same as
an ultimate defense to Section 7 illegality. Cf. generally Saint
Alphonsus Med. Ctr., 778 F.3d at 789–90 (and authorities cited
therein). In this expedited appeal, prudence counsels that the
court should leave for another day whether efficiencies can be
an ultimate defense to Section 7 illegality. We will proceed on
the assumption that efficiencies as presented by Anthem could
be such a defense under a totality of the circumstances approach,
see Baker Hughes, 908 F.2d at 984–85 (citing General
Dynamics, 415 U.S. at 498), because Anthem has failed to show
the district court clearly erred in rejecting Anthem’s purported
medical cost savings as an offsetting efficiency. Guidelines
§ 10; cf. Heinz, 246 F.3d at 720–22. Additionally, because the
district court could permissibly conclude that the efficiencies
defense failed, because the amount of cost saving that is both
merger-specific and verifiable would be insufficient to offset the
likely harm to competition, this court has no occasion to decide
whether the type of redistributional savings claimed here are
cognizable at all under Section 7. It bears noting, though, that
                               18

all of those other issues pose potentially substantial additional
obstacles to this merger.

     One further preliminary analytical point. Amici supporting
Anthem invite the court to disregard the merger-specificity and
verifiability requirements on the ground they place an
asymmetric burden on merging parties that could doom
beneficial mergers. See Br. for Antitrust Economists and
Business Professors as Amicus Curiae in Support of Appellant
and Reversal (“Amici Economists”) at 5–7. Anthem itself has
not adopted this argument. See Burwell v. Hobby Lobby Stores,
Inc., 134 S. Ct. 2751, 2776 (2014); Eldred v. Reno, 239 F.3d
372, 378 (D.C. Cir. 2001). We note, however, that Amici
Economists misapprehend the nature of Anthem’s claimed
efficiencies as “direct price reductions,” id. at 6–7, rather than
as potential price reductions subject to a number of
uncertainties. For customers to realize any price reduction,
Anthem would first have to succeed in reducing providers’ rates,
and to that extent the purported reductions would not be a direct
effect of the merger. By contrast, the merger would
immediately give rise to upward pricing pressure by eliminating
a competitor, see, e.g., Tr. 960:12–18, and Anthem could
unilaterally raise its prices in response. Further, Amici
Economists ignore that fully-insured customers, and potentially
self-insured customers depending on the terms of their contracts
with Anthem, will not see any savings until Anthem takes a
second action, renegotiating the customers’ contracts to pass
through the savings. This illustrates the reason for the
verifiability requirement: Perhaps Anthem is certain to take
those actions, and there will be no impediments to the savings’
realization, but that showing is still necessary for a court to
conclude that the merger’s direct effect (upward pricing
pressure) is likely to be offset by an indirect effect (potential
downward pricing pressure). See Guidelines § 10. As for
merger-specificity, Amici Economists point to no logical flaw
                               19

in the policy that consumers should not bear the loss of a
competitor if the offsetting benefit could be achieved without a
merger. See Heinz, 246 F.3d at 722.

                                B.
     Any claimed efficiency must be shown to be merger-
specific, meaning that it “cannot be achieved by either company
alone because, if [it] can, the merger’s asserted benefits can be
achieved without the concomitant loss of a competitor.” Heinz,
246 F.3d at 722. The Guidelines frame the issue slightly
differently: an efficiency is said to be merger-specific if it is
“likely to be accomplished with the proposed merger and
unlikely to be accomplished in the absence of either the
proposed merger or another means having comparable
anticompetitive effects.” Guidelines § 10. Anthem faults the
district court for considering whether the efficiencies “could” be
achieved absent the merger, without regard to likelihood,
Appellant Br. 24, even though in Heinz, 246 F.3d at 722, this
court spoke repeatedly in terms of possibility (“can” or “could”).

     Heinz, 246 F.3d at 721–22, cited the Guidelines with
approval in describing the standard for merger-specificity. Both
the current and then-current Guidelines refer to “practical”
alternatives to achieving the efficiency short of merger,
alternatives that are more than “merely theoretical.” Guidelines
§ 10 (2010); Guidelines § 4 (1997). Similarly, in Heinz, 246
F.3d at 722, the court considered whether it was practical for the
company to obtain better baby food recipes by investing more
money in product development, or whether that would cost more
money than the merger itself. The real question is whether the
alternatives to merger are practical and more than merely
theoretical, see id.; Guidelines § 10. Even assuming there is any
difference between the two standards, it would not affect the
outcome here on this factual record. Viewed under either
articulation, certain of Anthem’s claimed efficiencies fall away.
                               20


     The crux of Anthem’s argument regarding merger-
specificity is the theory that the combined company will allow
Anthem to create a “new product” that is “unavailable on the
market today”: a product that features both “Cigna’s customer-
facing programs” and Anthem’s “generally lower . . . rates.”
Appellant Br. 26. One way Anthem maintains the merger will
result in this new product is through rebranding. According to
Anthem, “rebranding means [the combined company] retain[s]
the Cigna product but brand[s] it under the Anthem name with
Anthem’s negotiated provider rates.” Appellant Br. 34. The
record, however, refutes rather than substantiates Anthem’s
proposed rebranding approach. In fact, the record evidence
Anthem cites for its rebranding plan is the testimony of Anthem
Senior Vice President Dennis Matheis. But in that testimony,
Matheis confirmed that, at least “[i]n the short term,” rebranding
would simply involve Anthem “offer[ing] Cigna customers
Anthem products,” in a manner that is “no different” than
Anthem “selling new business in the market.” Tr. 1599:20–25.
In other words, when a Cigna customer rebrands, the immediate
effect is that the customer gives up a Cigna contract and Cigna
product in favor of an Anthem contract and Anthem product.
Indeed, it is only “[o]ver the long haul,” Matheis testified, that
Anthem could actualize its “vision . . . [to] combine Cigna
features . . . with Anthem features,” Tr. 1606:17–21, and then
rebranding might result in a former Cigna customer obtaining
some semblance of the former Cigna product at the new Anthem
rate. But rebranding in the immediate aftermath of the merger
would involve a Cigna customer switching to the extant Anthem
product, and that is not a merger-specific outcome; that is just
more successful marketing of the existing Anthem product. And
Anthem expressly “does not contend that . . . a customer simply
switching from a Cigna product to an existing Anthem product[]
results in merger-specific efficiencies.” Appellant Reply Br. 21.
                               21

     Instead, Anthem claims only that rebranding over the long
haul, once it has successfully rolled out an improved, Cigna-like
product, will result in a merger-specific benefit, and maintains
that the district court clearly erred in finding Anthem could
simply develop and offer an improved product on its own. Just
as in Heinz, 246 F.3d at 722, the evidence offered by Anthem is
woefully insufficient to show that it cannot develop better
customer-facing programs. Anthem points to testimony from
two witnesses that Anthem has failed to replicate Cigna’s
products, for reasons unknown. In particular, Anthem’s
President of Specialty Business Pam Kehaly testified that Cigna
offers a “packaged integrated wellness approach where [Anthem
offers] disparate pieces that employers kind of have to piece
together on their own.” Kehaly Depo. Tr. 87:12–15 (Apr. 28,
2016). According to Kehaly, Anthem has been trying to solve
the problem for “probably a decade” but for whatever reason it
just has “not been able to crack this nut.” Id. at 88:3–13. She
did not indicate how intensive the effort has been, how many
hours were devoted to it, or how much money Anthem has
allocated toward it. Anthem’s Regional Vice President of Sales
Brian Fetherston also testified that Cigna has “done a really
good job of building wellness programs” and that Anthem has
tried but failed to catch up. Fetherston Depo. Tr. 170:14–19
(May 6, 2016). The district court could properly find that failure
likely results more from Anthem’s own no-frills culture or
flawed marketing strategies than from any inherent difficulties
in pulling together an integrated wellness program. For
instance, Fetherston testified that Cigna is “significantly better
at marketing” its wellness program, while by contrast Anthem
“just [was not] actively promoting” its own, and indeed, Anthem
recently decided to “dial back some of [its] disease management
programs,” which Fetherston believed was a mistake. Id.
169:1–170:6, 323:1–23. To the extent Anthem has failed to
devote the resources needed to improve its product, it is in no
position to claim that consumers will benefit from it swallowing
                                22

up Cigna’s superior product.

      Put differently, rebranding does not create a merger-specific
benefit in either the short- or long-term. Perhaps Anthem could
create some brief, interim benefit in the mid-term by integrating
Cigna’s product faster than it could develop a comparable
product of its own. Guidelines § 10 n.13 (“If a merger affects
not whether but only when an efficiency would be achieved,
only the timing advantage is a merger-specific efficiency.”).
But Anthem made no sufficient factual showing in the district
court on this point. It has offered no evidence to show how long
it would take, once the necessary resources were allocated, to
develop an improved product. Nor has it shown how long it
would take to roll out a hybrid Anthem-Cigna product. At oral
argument, Anthem claimed that it could do so in six months, but
at trial, Anthem’s Senior Vice President Matheis allowed that it
might not be able to do so within two-and-a-half years.

     To the extent Anthem also maintains that none of Dr.
Israel’s claimed savings are dependent on rebranding, it ignores
the reality of his economic model. Without one of its
mechanisms to get current Cigna customers access to Anthem
rates, none of the $1.517 billion in claimed Cigna savings could
be realized. Although Dr. Israel may have been agnostic as to
which mechanism is used to achieve those savings, he
acknowledged that rebranding would achieve a portion of them:
“If there was rebranding as a way to get the discounts . . . that
would just be another way to get them faster.” Tr. 2108:9–11.
Given that rebranding is the linchpin of Anthem’s post-merger
strategy, because it is the only option that helps Anthem comply
with its “Best Efforts” obligations, the inability to credit
rebranding savings seriously undermines Anthem’s efficiencies
defense.
                                23

     The district court further found that none of the medical
cost savings are merger-specific because they are based on an
application of rates that each of the companies has already
achieved on its own. Anthem, quite reasonably, challenges this
finding with regard to Cigna’s rates on the ground that “there is
no dispute that [Cigna] has generally secured less favorable
provider rates than Anthem for years and has been unable to
close that gap despite its best efforts.” Appellant Br. 27. The
record shows that, by its own account, Cigna has been unable to
match Anthem’s volume-based discounts and instead has had to
compete on quality and innovation. Even the government’s
expert, Dr. David Dranove, agreed that a true Cigna product at
Anthem rates would not be achievable absent the merger. That
the district court clearly erred in finding that the application of
Anthem rates to customers that choose to remain with Cigna is
not merger-specific, however, is immaterial to the district
court’s ultimate conclusion that the merger would be unlawful
because these claimed efficiencies are not sufficiently verifiable.

                               C.
     Under the Guidelines, projected efficiencies will not be
credited “if they are vague, speculative, or otherwise cannot be
verified by reasonable means.” Guidelines § 10. Anthem
maintains that the district court clearly erred because the $2.4
billion in projected post-merger savings was verified by two
independent sources (Dr. Israel and an integration planning team
from McKinsey & Company, which had access to each
company’s internal files). In Anthem’s view, the district court
also erred as a matter of law by imposing a “virtually
insurmountable burden” of persuasion, Appellant Br. 38, when
all that is required is to show “probabilities, not certainties,”
Baker Hughes, 908 F.2d at 984.

    As discussed, Anthem plans to achieve the claimed savings
through a combination of three mechanisms: rebranding,
                                24

renegotiating provider contracts, and exercising Anthem’s
affiliate clause. The district court found that practical business
realities would undermine the execution of that plan, making
achievement of the savings speculative, and therefore
unverifiable. With regard to the affiliate clause, the district
court focused on evidence of the potential for provider
discontent if the lower Anthem rates are forced on providers that
must expend extra effort and resources to deliver the Cigna
product, without any corresponding increase in value for
providers. This evidence included testimony by both Anthem
and Cigna witnesses as well as documents from Anthem and
Cigna that acknowledged the likely “abrasi[on].” E.g., Pls.’ Ex.
89. The record indicates that physician contracts can be
terminated by either party with only 90 days’ notice, so the
affiliate clause would accomplish little if the contract is
terminated or renegotiated soon after the clause is exercised.
Hospital contracts tend to involve three-year commitments, so
the affiliate clause may bind them to offer lower rates for a
longer period. Still, when those hospital contracts expire, large
delivery systems with greater leverage “could push back hard”
in renegotiation. Pls.’ Ex. 717. In either event, it is probable, as
Cigna CEO David Cordani testified, that some providers will
eventually “react [by] renegotiating . . . and putting upward
pressure on rates, which has been a market force to date.” Tr.
443:17–23.       That “very few” Anthem providers have
preemptively sought to renegotiate proves little, see Tr.
1686:15–25, because the feared abrasion would not occur until
Anthem invokes the affiliate clause, assuming it ever does so.

      This raises another practical difficulty with the affiliate
clause: although it is theoretically useful to Anthem, in reality
it is unlikely to be widely exercised because it works counter to
Anthem’s contractual obligations. Under the “Best Efforts”
clause in Anthem’s licensing agreement with the Blue Cross
Blue Shield Association, 80% of Anthem’s revenue within the
                               25

Anthem states must be Blue-branded, as must 66.67% of its
revenue nationwide. The merger would immediately throw
Anthem out of compliance and so Anthem intends to rebrand a
“lion’s share” of current Cigna customers in order to count that
revenue as Blue-branded. Tr. 1600:17–21 (Anthem Sr. VP
Matheis). By contrast, widespread exercise of the affiliate
clause would remove any incentive for Cigna customers to
convert to Anthem because those customers would then be
receiving the Cigna product at Anthem prices, Dr. Israel’s
much-touted “best of both worlds” scenario. Anthem fails to
address this reality when it maintains that 80% of the savings to
Cigna customers could be achieved rapidly using the affiliate
clause. See Appellant Br. 40. Because doing so would work
contrary to Anthem’s own contractual obligations, its witnesses
conceded that it will instead rely heavily on rebranding, which,
as discussed, gives rise to no merger-specific benefits.

      As for renegotiation, the short answer is that if Anthem
cannot persuade providers to extend lower rates to Cigna under
its affiliate clauses — where it has apparent contractual recourse
to do so — then it is speculative that Anthem could get them to
agree to do the same thing through negotiations absent
compulsion. Anthem assumes, as did Dr. Israel’s model, that in
all instances renegotiation would result in providers accepting
the lower Anthem rates. That assumption appears questionable
in the case of a provider that has just terminated a contract
because Anthem mandated, through an affiliate clause, the
acceptance of those very rates. Instead, Cigna’s CEO Cordani
predicted such renegotiation would put upward pressure on the
Anthem rate, and to the extent Anthem were to adopt a take-it-
or-leave-it approach, the provider could simply choose to walk
away. See Br. for Amici Am. Med. Ass’n. & Med. Soc’y of
D.C. (“AMA Br.”) 11–12. This is especially true for large
hospital networks with significant bargaining power.
                                26

     To the extent that some medical savings would be achieved
for Cigna customers at the bargaining table due to the combined
company’s volume, the district court expressed concern over
how long such savings would take to be realized. Anthem’s
CEO Swedish testified that capturing medical savings requires
a “long gestation period,” in part because existing hospital
contracts span three to five years and would not be subject to
renegotiation “for a considerable period of time.” Tr.
337:21–338:16. He also rejected the idea that Anthem would
simply “drop[] the hammer” on providers by insisting on
maximum discounts across-the-board because Anthem instead
relies upon “customized relationship-driven contract[s]” that
seek to optimize performance on a case-by-case basis, rather
than focusing solely on discounts. Tr. 294:20–295:11.
Anthem’s expert agreed that renegotiations in the ordinary
course of business will take place over time. The longer it takes
for an efficiency to materialize, the more speculative it can be,
see Guidelines § 10 & n.15, so the district court was on solid
ground to give less weight to the claimed renegotiation savings.

      In sum, although renegotiation will lead to a decrease in
Cigna’s rates, the assumption that it will in every instance lead
to the Anthem rate is farfetched. See Tenet Health Care Corp.,
186 F.3d at 1054. Indeed, as the district court observed, “the
Department of Justice is not the only party raising questions
about Anthem’s characterization of the outcome of the merger”
because Cigna itself had “provided compelling testimony
undermining the projections of future savings.” Anthem, Inc.,
2017 WL 685563, at *4; see also Pls.’ Ex. 722.

     Whatever mechanism is employed to achieve the savings,
the district court had “reason to question . . . whether the quality
of the Cigna offering will in fact degrade” as a result of the
merger, Anthem, 2017 WL 685563, at *61, which further
undermines the purported efficiency claims. Guidelines § 10.
                                27

For those that choose to stay with Cigna post-merger — and
thus would access lower rates through renegotiation or exercise
of the affiliate clause — the abrasion problem arises because
providers would be asked to continue offering the high-touch,
collaborative Cigna service, with its added behavioral, wellness,
and lifestyle programs, for less money. See AMA Br. 10–11.
It was perfectly reasonable for the district court to find that some
providers, even if they are willing to accept less money, will
simply respond by offering customers less in the way of Cigna
high-touch service. Furthermore, according to Cigna’s CEO
Cordani, the value of the Cigna offering will be diminished
because Anthem’s rebranding strategy will siphon business
away from Cigna, leaving behind an atrophied Cigna customer
base that is less attractive to providers. This will in turn
diminish Cigna’s capacity for further innovation with its
collaborative model. And for Cigna customers that agree to
migrate to Anthem (or are pushed into doing so because the
company refuses to extend their expiring Cigna contracts),
provider abrasion again rears its head, this time with providers
being asked to offer Anthem customers better, and more
resource-intensive, collaborative service for the same rates they
have historically received.        Anthem does not respond
meaningfully to these concerns, simply labeling them
“speculation.” Appellant Reply Br. 10. In light of the numerous
Anthem witnesses who acknowledged the abrasion problem, the
district court did not err in finding it “dubious” that Anthem
would be able to offer a true Cigna-like product, or that legacy
Cigna would be able to maintain the quality of its own product.
Anthem, 2017 WL 685563, at *59, *61.

     The fact is, it is widely accepted that customers value the
existing Cigna product, and that Cigna is a leading innovator in
collaborative patient care. That threat to innovation is
anticompetitive in its own right. Cf. United States v. Cont’l Can
Co., 378 U.S. 441, 465 (1964). And the problem is neither
                               28

answered by Anthem’s evidence nor offset by its purported
efficiency of offering a degraded Cigna product at a lower rate.

     In addition to claimed savings to current Cigna customers,
Dr. Israel also projected that $874.6 million in savings would be
realized if Anthem’s customers were able to access superior
rates that Cigna has already negotiated. In focusing almost
entirely on the other side of the ledger, Anthem offers little
reason to think that the district court clearly erred in rejecting
the claimed savings to existing Anthem customers. See
Appellant Br. 41–42. To the extent Anthem argues on appeal
that Anthem customers could access Cigna’s superior rates
through rebranding or exercise of an affiliate clause, the only
witness it cites was actually discussing the affiliate clause in
Anthem’s contracts that would apply to Cigna’s customers. And
even assuming that Cigna’s contracts contain an affiliate clause,
Blue Cross Association rules would prohibit Anthem from
exercising it. Further, rebranding Anthem customers to Cigna
would only exacerbate Anthem’s “Best Efforts” problem, which
indicates why Anthem Senior VP Matheis testified that Anthem
would rebrand a lion’s share of Cigna customers to Anthem, not
the other way around. Renegotiation would be the only viable
option for realizing the projected savings to Anthem customers.

     Moreover, Anthem has not explained why these projected
savings would even exist. The record is clear that Anthem,
unlike Cigna, has already achieved whatever economies of scale
are available. According to Anthem’s expert Dr. Robert Willig,
in the 35 local markets identified in the government’s complaint,
the data did not show that Anthem’s size correlated with its
provider discounts. To the contrary, Dr. Willig testified that
Anthem is “already past the threshold of having enough size to
do what it needs to do in terms of offering volume to providers.”
Tr. 2231:9–12. Similarly, Anthem’s CEO Joseph Swedish
denied that Anthem would seek to negotiate even greater
                               29

volume-based discounts after the merger because post-merger
Anthem would “certainly not [pay] less than what [it is] now
paying as Anthem.” Tr. 294:10–19. The evidence indicates
that where Cigna has better discounts than Anthem, that is a
result of factors other than volume, and the district court
reasonably questioned whether those atypical discounts would
remain available post-merger. In the absence of an additional
volume-based discount, then, Anthem makes no effort to show
how its current customers would see lower prices as a result of
the merger, and certainly not to the tune of $874.6 million.
Consequently, the district court did not clearly err in rejecting
these alleged medical cost savings as unverifiable.

      Next, the claimed medical cost savings only improve
consumer welfare to the extent that they are actually passed
through to consumers, rather than simply bolstering Anthem’s
profit margin. See Univ. Health, Inc., 938 F.2d at 1223. After
all, the merger potentially harms consumers by creating upward
pricing pressure due to the loss of a competitor, and so only
efficiencies that create an equivalent downward pricing pressure
can be viewed as “sufficient to reverse the merger’s potential to
harm consumers . . . , e.g., by preventing price increases.”
Guidelines § 10; see also AREEDA & HOVENKAMP, supra,
¶ 971a, at 48 (“[A] sufficient amount of any efficiencies [must]
be passed on that the post-merger price is no higher than the pre-
merger price.”). Dr. Israel testified that absent monopsony (i.e.,
the exercise of market power to gain subcompetitive prices from
providers), any cost savings will create downward pricing
pressure, and while this is unobjectionable, the amount passed
through to consumers indicates the strength of that pressure. See
Br. of Professors as Amici Curiae in Support of Appellee and for
Affirmance 7–8 (“Amici Professors”). The district court rightly
cast doubt on Dr. Israel’s estimated pass-through rate of 98%,
which was unsupported by the evidence and treated self-insured
and fully-insured customers identically.
                               30

     Because ASO customers pay their employees’ medical costs
directly, any reduction in medical rates would result in savings
that automatically pass through to the customer, absent some
corresponding ASO price increase by Anthem. This would
improve the quality of one aspect of the ASO product (i.e.,
access to more deeply discounted network rates), and it could
thus be procompetitive even if it did not immediately result in
an ASO price decrease. See Guidelines § 10. Dr. Israel’s
analysis rested on the assumption that rather than raising ASO
prices to capture the medical cost savings, Anthem would
attempt to increase its market share by providing a much
superior product at only a slightly higher price, thereby
maximizing its profits through increased sales. The district
court highlighted internal Anthem documents that discussed
ways to keep those savings for itself, in particular where
Anthem listed seven alternatives with 100% pass-through to
ASO customers considered last. Contrary to Dr. Israel’s
assumption, then, Anthem apparently concluded that total pass-
through was not the profit-maximizing, “optimal solution to
capture the most value from [the] deal,” and that it could
actually lose business if customers initially saw savings that
were not sustained over the long term. Pls.’ Ex. 727. Amici
Professors offer another reason why Anthem might have come
to this conclusion: in highly concentrated markets, already-large
insurers are less constrained by competition and thus tend to find
it more profitable to capture medical savings and increase
premiums. Amici Professors Br. 6–9; see also AREEDA &
HOVENKAMP, supra, ¶ 971f, at 56 (in highly concentrated
markets “there is less competition present to ensure that the
benefit of efficiencies will flow to consumers”). That
corroborates rather than remediates anticompetitive concerns.
                                31

      As for fully insured customers, which comprise $619.8
million of the projected savings, the estimated pass-through is
even less likely given that the savings would automatically inure
to Anthem’s benefit absent some corresponding price decrease
to its customers. Dr. Israel recognized this dynamic at trial, and
yet his model takes no account of it, applying a pass-through
rate of 98% to both ASO and fully insured accounts. The record
indicates that ASO customers, which pay medical costs directly
to providers, are keenly attuned to fee transparency, but it is
unclear fully-insured customers are afforded the same
transparency. That is, if Anthem negotiates provider rates and
pays providers directly, how would a customer be aware that
Anthem had achieved medical savings, in order to be able to
seek a pass-through in the form of a lower negotiated price?
Further, when would fully-insured customers realize that
renegotiated price, given that their existing contracts would not
pass though any savings? See Tr. 2107:17–21 (Dr. Israel:
ordinary-course renegotiation of employers’ contracts “will take
place over time”). Neither Anthem nor Dr. Israel answers (or
addresses) these problems.

     Finally, the district court did not clearly err when it
criticized Anthem’s failure to account in its projected savings
for utilization, which is a signature aspect of the Cigna product.
Dr. Israel’s model was based on discounts that either company
was able to achieve on its own multiplied by the total claims
value, but as Anthem’s CEO Swedish testified, “We don’t live
in a discount world any longer.” Tr. 295:11. Cigna’s CEO
Cordani agreed: “If you’re looking [only at] a discount
calculation, if [Anthem] has a 2 percent lower discount for the
emergency room service, you would assume that that’s a
savings,” unless Cigna’s wellness program helps the patient
avoid that emergency room visit altogether. Tr. 443:10–16.
Anthem maintains that Dr. Israel and the McKinsey & Co. team
did account for utilization, because Dr. Israel testified that lower
                                32

utilization would result in a lower total claims value, a value that
factored into both his and the McKinsey & Co. models. But this
ignores that on cross-examination, Dr. Israel conceded that he
did not control for the different risks and features of each
company’s population at a particular provider, which would be
necessary to compare utilization, and so his model did not
account for whether one company’s utilization was better than
the other’s. And although Anthem nevertheless maintains that
no evidence shows accounting for utilization would materially
reduce the claimed savings, Dr. Dranove testified that any error
or incorrect assumption would have a significant effect on the
overall projected savings. See Tr. 2327:15–2329:11. Thus, the
problem is less that the failure to account for utilization would
necessarily reduce the projected savings, and more that it
undermined the district court’s confidence in the reliability and
factual credibility of those savings calculations.

     Both sets of projections suffered from additional, basic
analytic flaws. For instance, Dr. Israel did not agree with the
district court’s national accounts market definition (employers
with 5,000+ employees), so his savings projection was based on
the broader market definition that he believed appropriate (large-
group employers with either 50+ or 100+ employees). In other
words, Dr. Israel’s claimed $2.4 billion in savings is unmoored
from the actual market at issue, and there is no indication of
what portion is properly derived from the national accounts
market. Similarly, the McKinsey & Co. analysts based some of
their savings on a comparison of Cigna and Anthem rates where
only one of the companies had negotiated a discount with that
particular provider. This apples-to-oranges comparison of in-
network versus out-of-network rates overstated the true disparity
between the companies’ existing discounts and thus necessarily
inflated McKinsey & Co.’s projected savings. Even Dr. Israel
acknowledged as much: his model only compared in-network
rates because he concluded that “that’s what the economics tells
                                 33

you you need to do to get the answer right.” Tr. 1855:2–22.
This could help to explain why Dr. Israel’s otherwise similar
methodology resulted in a projection that was almost a billion
dollars less than McKinsey & Co.’s.

     The savings projected by McKinsey & Co. and Dr. Israel —
uncritically relied on by the dissent, e.g., Dis. Op. 4–8, 18 —
were without a doubt enormous. The problem is, those
projections fall to pieces in a stiff breeze. If merging companies
could defeat a Clayton Act challenge merely by offering expert
testimony of fantastical cost savings, Section 7 would be dead
letter.

                                 D.
     Having considered the totality of circumstances, see Baker
Hughes, 908 F.2d at 984, we hold that the district court
reasonably determined Anthem failed to show the kind of
“extraordinary efficiencies” that would be needed to constrain
likely price increases in this highly concentrated market, and to
mitigate the threatened loss of innovation. Cf. Heinz, 246 F.3d
at 720. Given the record evidence, Anthem’s objection that the
district court “abdicated its responsibility” to balance the
merger’s likely benefits against its potential harm, Appellant Br.
46, rings hollow. Anthem seems to insist upon a dollar-for-
dollar comparison after discounting whatever claimed
efficiencies were properly rejected, in responding that “so long
as at least one-third of the $2.4 billion of savings are likely to be
achieved, the merger is procompetitive.” Appellant Reply Br.
10. This would apparently require the court to calculate, for
instance, a more realistic pass-through rate than the rejected
98% figure, or to estimate what percentage of the claimed $2.4
billion was attributable to customers with fewer than 5,000
employees and thus outside of the relevant market. Anthem has
pointed to no relevant expert economic evidence on which to
base such an imprecise calculation, and Anthem, not the district
                                 34

court, has the burden of showing what portion of the claimed
efficiencies will result from the merger itself. Even assuming it
were possible on this record, see University Health, 938 F.2d at
1223, “[e]conomies cannot be premised solely on dollar figures,
lest accounting controversies dominate § 7 proceedings,”
Procter & Gamble, 386 U.S. at 604 (Harlan, J., concurring).
Because “the state of the science does not permit such refined
showings,” commentators have recommended simply giving the
government the benefit of the doubt in a close case. See
AREEDA & HOVENKAMP, supra, ¶ 971f, at 56. In any event, this
is not a close case.

     The dissent’s critique of the court’s opinion is not well
founded. Its fundamental flaw is the failure to engage with the
facts shown in the record as they pertain to merger-specificity
and verifiability. Repeated references to unspecified evidence,
see, e.g., Dis. Op. 3, 12, 14, 17, on which the dissent bases
sweeping conclusions, speak volumes. Rather than engage with
the record, much less adhere to our standard for reviewing
findings of fact by the district court, the dissent offers a series of
bald conclusions and mischaracterizes the court’s opinion. For
instance, the dissent repeatedly claims that the court “does not
fully accept the fact . . . that providers rates would actually be
lower,” Dis. Op. 17; id. at 15, when in fact the court accepts that
rates would be lower for some existing Cigna (but not Anthem)
customers post-merger. Those who rebrand with Anthem,
however, will see no merger-specific savings, Op. 20–21, and
the few that Anthem fails to rebrand will see far fewer savings
than Anthem claims, due in large part to provider abrasion and
big hospital systems that will stand their ground in renegotiation,
Op. 24–27. The dissent baldly asserts that the efficiencies “are
merger-specific by definition,” Dis. Op. 6–7, without addressing
the paucity of evidence that Anthem would be unable to develop
a Cigna-like product without merging. So too, it baldly asserts
that the savings were “sufficiently verified,” while admitting
                               35

that it is not clear “just how much the employers would benefit
from this merger.” Id. at 7 (emphasis omitted). In other words,
Anthem estimated an astronomical amount of savings, so even
if that amount were wildly overstated, the dissent expects the
court to trust that, as an unknown fraction of a large number, the
result “would be large.” Id.

     To the extent the dissent notes any of the major factual
problems with Anthem’s depiction of the merger, it brushes
them aside. It dismisses as “highly speculative” the provider
abrasion problem that was conceded by both Anthem and Cigna
witnesses, Dis. Op. 17, a problem that undermines Anthem’s
plans for realizing the savings through the affiliate clause and
renegotiation. It characterizes record evidence that squarely
contradicts Anthem’s pass-through estimates — Anthem’s own
internal PowerPoint presentation — as “secret Anthem plans to
dramatically raise [its] fees,” id., which is precisely what the
evidence reflects. It attacks straw men like supposed reliance on
“friction between the Anthem and Cigna CEOs,” id., when the
court does not so rely, noting indeed the limited probative value
of that evidence. Op. 4 n.1. It fails entirely to address Anthem’s
“Best Efforts” obligations, which make it likely that Anthem
will rely predominantly on rebranding, a strategy that gives rise
to no merger-specific benefit. Op. 24–25. The “Best Efforts”
clause also creates a verifiability problem with regard to
Anthem’s other savings strategies, for instance undercutting
Anthem’s assertion that 80% of the savings to Cigna customers
“could be achieved simply [and rapidly] by invoking the affiliate
clause.” Appellant Br. 40. Again, pulling at any one loose
thread quickly unravels Anthem’s narrative, but the dissent is
simply unwilling to do so.

     Ultimately, the dissent concludes that “[o]n this record,
there is little basis to doubt that the cost savings for employers
as a result of the merger would be large,” without evincing any
                                36

real awareness of the record beyond the testimony of Anthem’s
expert and consultants. See Dis. Op. 7. To wit, the dissent
suggests that Anthem’s savings estimates went unrebutted at
trial, Dis. Op. 6, when the record shows Dr. Dranove not only
offered his own estimate of $100 million to $500 million but
explained why those savings were unlikely to be realized,
essentially for the reasons discussed in this opinion. See, e.g.,
Tr. 3802:25–3803:11. Similarly, it recognizes no distinction
between savings to existing Cigna customers (some of which the
government concedes will materialize) and savings to existing
Anthem customers (the existence of which even Anthem cannot
explain in light of the testimony of both its CEO and expert, see
supra Part III.C). Likewise, in concluding that the quality of
the Cigna product (its wellness programs and the high-touch
service that providers offer in support of the programs) will not
degrade post-merger, the dissent does not go so far as to say
there is no evidence to support the district court’s contrary
finding, Anthem, 2017 WL 685563, at *59, *61; rather, it asserts
it does not consider this evidence “persuasive” or “convincing.”
Dis. Op. 18. Such de novo analysis throughout the dissent
betrays no meaningful effort to engage with the district court’s
factual findings, which are subject only to review for clear error.

     Furthermore, the dissent’s assumption that the prices paid
by consumers (regardless of the quality of the resulting product)
are the sole focus of antitrust law is flawed. “The principal
objective of antitrust policy is to maximize consumer welfare by
encouraging firms to behave competitively.” Kirtsaeng v. John
Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2013) (emphasis
added) (quoting 1 P. AREEDA & H. HOVENKAMP, ANTITRUST
LAW ¶ 100, at 4 (2006)). This single-minded focus on price
ignores that in highly concentrated markets like this one, lower
prices, if they occur at all, may be transitory. Owing to the
lower level of competition in highly concentrated markets, when
presented with lower supply input prices, companies have a
                                37

greater ability to retain for themselves the input savings rather
than pass them on to consumers. The Clayton Act, as the
Supreme Court “ha[s] observed many times, [is] a prophylactic
measure, intended primarily to arrest apprehended consequences
of intercorporate relationships before those relationships could
work their evil.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,
429 U.S. 477, 485 (1977) (internal quotation marks and citation
omitted). The ability of a firm to obtain lower prices for inputs
for its product (here, provider services) should, especially in
light of the prophylactic nature of the Clayton Act, be viewed
skeptically when high market concentrations may have the
future effect of permitting capture of those savings. The dissent
uncritically accepts Dr. Israel’s rosy testimony to the effect that
ASO savings “will be passed through to employers,” Dis. Op.
15, but fails to address contrary Anthem documents and the
historical tendencies of large companies in highly concentrated
markets to capture savings. E.g., AREEDA & HOVENKAMP,
supra, ¶ 971f, at 56. The dissent also ignores the district court’s
numerous and not clearly erroneous findings, as previously
discussed, that total or nearly total pass-through is unlikely. See,
e.g., Anthem, 2017 WL 685563, at *4, *62. Even if ASO
savings would pass through in the short term, that does not
“practically guarantee[]” that Anthem would not then raise its
prices correspondingly. But see Dis. Op. 16.

     Additionally, the dissent fails to recognize that lower prices
may arise due to, or ultimately lead to, a decrease in product
quality. Everyone would agree that rock-bottom provider rates
seem beneficial to consumers, but when those rock-bottom
prices lead to inferior medical services, any benefit to the
consumers’ wallets is diminished by the harm to their health. As
the Guidelines state, if merging firms “would withdraw a
product that a significant number of customers strongly prefer
to those products that would remain available, this can constitute
a harm to customers over and above any effects on the price or
                                 38

quality of any given product.” Guidelines § 6.4; see also id.
§ 10 (“[P]urported efficiency claims based on lower prices can
be undermined if they rest on reductions in product quality or
variety that customers value.”). And a decrease in product
quality is not merely speculative here — every dollar of medical
cost savings realized by consumers will come at the expense of
providers. It thus is quite plausible that paid less, the medical
providers will provide less. These inconvenient facts do not jibe
with the dissent’s superficial, thirty-thousand-foot view of this
case, and it is thus unsurprising that they are addressed in
passing, if at all.

                                IV.

      Anthem fares no better in its challenge to the district court’s
independent and alternative determination that the merger
should be enjoined on the basis of its anticompetitive effect in
the Richmond, Virginia market for the sale of health insurance
to “large group” employers with more than fifty employees.
There, the government’s prima facie case was even stronger than
in the market for national accounts in the fourteen Anthem
states. Depending on how market share was calculated (i.e.,
including all Blue customers as Anthem or not, including fully
insured customers or just ASO), the companies’ combined
market share ranged from 64% to 78%. Even under the
calculation most favorable to Anthem (ASO-only, disregarding
non-Anthem Blue customers), the merger would raise an
overwhelming presumption of anticompetitive effect: HHI
would rise 1511 to a post-merger total of 4350, where the
Guidelines presumption threshold is an increase of 200 to a post-
merger total of 2500. As the President of Anthem Virginia
acknowledged, Anthem has the biggest share of the large group
employer market across all of Virginia, and in Richmond, Cigna
is its strongest competitor.
                                39

     Anthem principally challenges the district court’s reliance
on a chart prepared by Dr. Dranove, the government’s expert
witness, showing the merger would have an anticompetitive
effect in Richmond even crediting all of Dr. Israel’s claimed
efficiencies. The chart included an asterisk next to the
Richmond entry signifying that “no amount of cost savings
could offset employer harm due to decreased competition.”
Pls.’ Ex. 760. On cross examination, Dr. Dranove was asked
whether that meant even a savings of $10 billion or $20 billion
would not offset the merger’s harm, and he acknowledged that
he could not recall the foundation for his statement. Given this
inability to address that extreme hypothetical, Anthem maintains
that the district court should not have relied on the statement or
even on the chart as a whole.

     The record shows that the district court did not rely on the
“asterisk” statement and explained at trial that it would not do so
because it was unnecessary to finding a substantial
anticompetitive effect. As to the broader question whether Dr.
Dranove’s inability to explain the asterisk meant that the district
court should have disregarded his chart (and related testimony)
altogether, the district court did not abuse its discretion. See
Heller v. District of Columbia, 801 F.3d 264, 272 (D.C. Cir.
2015). Leaving the asterisk statement aside, Anthem raises no
real objection to the substance of the chart, only urging that Dr.
Dranove’s inability to explain the asterisk was so damaging that
it called into doubt the reliability of his overall analysis. The
district court, which heard extensive testimony from Dr.
Dranove about the anticompetitive effects revealed by his
economic models and relied on it heavily throughout its opinion,
clearly concluded otherwise.           The district court had
“considerable leeway” to do so in determining that all other
aspects of the chart and his testimony were reliable. Kumho Tire
Co. v. Carmichael, 526 U.S. 137, 152 (1999); cf. Snyder v.
Louisiana, 552 U.S. 472, 477 (2008).
                                40


     Anthem’s remaining challenges amount to an ineffectual
attack on the district court’s weighing of rebuttal evidence. It
incorrectly states that the district court relied solely on Dr.
Dranove’s chart to find anticompetitive harm while ignoring
evidence of “enormous” medical savings, Appellant Br. 53,
when in fact Dr. Dranove testified that his chart credited 100%
of Anthem’s claimed savings and still found a net
anticompetitive effect. Anthem posits that there would still be
five or more competitive insurers in Richmond post-merger, but
even assuming that is true (one of the two witnesses it cites
identified only four, including the combined company), the mere
existence of competitors may not be sufficient to constrain a
larger Anthem that would control 64% to 78% of the market.
See Guidelines § 5. Indeed, one of those competitors, Optima,
was said to have struggled in the Richmond market, and Anthem
shows no clear error in the district court’s finding that Optima
“does not appear able to compete on the same field as the
merged company.” Anthem, 2017 WL 685563, at *68. Nor
does Anthem show clear error in the finding that other
companies do not appear interested in entering the Richmond
market, or that even if they did, their entry would be insufficient
to constrain the combined company. The evidence cited by
Anthem shows only that other companies may intend to enter
Richmond (Innovation), or may have the ability to enter
Richmond (Piedmont, VCU), or may have a marginal or
embryonic presence in Richmond (Kaiser, Bon Secours), not
that entry by these companies would offset the merger’s
anticompetitive potential.

     Tellingly, our dissenting colleague offers a single mention
of the district court’s Richmond holding (in a parenthetical, no
less), which itself is a sufficient basis for enjoining the merger.
Any suggestion that the claimed savings would make the merger
procompetitive in Richmond ignores the record evidence,
                               41

namely that even crediting all of the claimed savings, the merger
of Richmond’s two biggest large-group insurers would give the
combined company such a vast market share that the overall
effect of the merger would still be anticompetitive. As Dr.
Dranove testified at trial, his analysis “still predicts a price
increase” in the Richmond market “even [after] crediting every
penny of th[e] efficiencies” estimated by Dr. Israel. That is,
even ignoring Anthem’s failure to show that the savings were
merger-specific and sufficiently verifiable, see supra Part
III.B–C, the proposed merger would cause an already highly
concentrated market to become overwhelmingly so, with
Anthem controlling as much as 78% of the market and two or
three other companies fighting to maintain relevance. Although
the dissent recognizes this appeal raises “fact-intensive
question[s],” Dis. Op. 13, it has persistently failed to engage
with the facts.

     In conclusion, the district court did not clearly err in its
factual findings that the merger would have anticompetitive
effects in the Richmond market, and importantly, Anthem does
not allege any error of law with respect to that determination.
Thus, the district court did not abuse its discretion in enjoining
the merger on the basis of the merger’s anticompetitive effects
in the Richmond market. And, as previously noted, this holding
provides an independent basis for the injunction, even absent a
finding of anticompetitive harm in the fourteen-state national
accounts market.

    Accordingly, we affirm the issuance of the permanent
injunction on alternative and independent grounds.
     MILLETT, Circuit Judge, concurring: I join the opinion of
the court in full, including its two separate and independent
holdings that the proposed merger would substantially reduce
competition in (i) the national-accounts market and (ii) the
large-group-employer market in Richmond. Indeed, as to the
latter holding, all of Anthem’s and the dissenting opinion’s
Sturm und Drang over efficiencies is beside the point because
the district court held that, even accepting all of Anthem’s
claimed cost savings, the merger would still have substantial
anticompetitive effects. United States v. Anthem, Civil Action
No. 16–1493 (ABJ), 2017 WL 685563, at *68 (D.D.C. Feb. 21,
2017).

     With respect to the holding regarding the national-
accounts market, I write separately only to underscore the
foundational problems that pervade Anthem’s and the
dissenting opinion’s insistence that any reduction in provider
rates, standing alone, excuses an anticompetitive merger.

     First, there is no dispute that, to have any legal relevance,
a proffered efficiency cannot arise from anticompetitive
effects. Dissenting Op. 13 (“Cognizable efficiencies * * * do
not arise from anticompetitive reductions in output or
service.”) (quoting DEPARTMENT OF JUSTICE & FEDERAL
TRADE COMM’N, HORIZONTAL MERGER GUIDELINES § 10,
at 30 (Aug. 19, 2010)). Rather, the proffered efficiencies, even
if verifiable, must at least neutralize if not outweigh the harm
caused by the loss of competition and innovation.
HORIZONTAL MERGER GUIDELINES § 10, at 30 (“cognizable
efficiencies” must “reverse the merger’s potential to harm
customers in the relevant market”); see also 4A PHILLIP E.
AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 270e,
at 36–40 (4th ed. 2016).

     That means that once a court has found a Section 7
violation, a generic statement that prices will go down proves
nothing by itself. Yet the dissenting opinion repeatedly hangs
                               2
its hat on the government’s statement that the proposed merger
will “lower” provider rates. See Dissenting Op. 4, 7, 15, 18–
19. The government, however, never agreed with Anthem or
the dissenting opinion’s assigned dollar amounts. Nor did it
ever concede that (i) the reduction would be sufficiently large
to offset the merger’s anticompetitive effects, (ii) the savings
were obtainable only through merger, or (iii) the savings were
verifiable.

    In fact, all that the government stated was that any
decrease in provider rates would come about through an
exercise of unlawful market power. See J.A. 545. That would
be an antitrust violation, not an efficiency. And that statement
by the government hardly seems to merit “[l]inger[ing]” over,
Dissenting Op. 4.

     Second, what the dissenting opinion (at 15) labels as an
“undeniable” predicate assumption—that any cost savings will
necessarily be passed through to customers—not only is very
much denied, Appellees’ Br. 58, but actually flies in the face of
the factual record. As the district court found, a number of
damaging internal Anthem documents detailed the company’s
efforts and specific business options for actively preventing
those savings from being passed through to customers and
instead capturing the money for itself. Compare Dissenting
Op. 5–6, 12, 15–16, with, e.g., Anthem, 2017 WL 685563, at
*62 (“Anthem’s internal documents reflect that the company
has been actively considering multiple scenarios for capturing
any medical cost savings for itself[.]”); J.A. 2159 (Anthem
presentation, entitled “Overview of potential ASO value
capture models,” states that “[p]ass[ing] all savings through to
customers” is “not * * * optimal” because it fails to “capture
most value from [the] deal”); Suppl. App’x 1863–1865, 1858,
                                  3
1419, 463, 472 (sealed materials). It is right there in black and
white.1

     So the reason the opinion of the court does not “fully
accept[]” the dissenting opinion’s “key fact[],” Dissenting Op.
15, is because the district court found it to be untrue. And given
the content of the internal Anthem documents, that factual
determination was not clearly erroneous.2

     Third, context matters. Lower rates cannot be trumpeted
without first asking what those lower rates will buy. The
second half of the government’s statements about decreased
provider rates was that they would lead to an inferior health
care product, including reduced access to medical care and
fewer doctors. Compl. ¶ 72; see also J.A. 545. The district
court found as a matter of fact, and the opinion of the court
rightly affirms, that customers would be paying less because
they would be getting less in the form of a degraded Cigna
product. Op. 27–28; Anthem, 2017 WL 685563, at *59
(crediting testimony that “imposing lower fee structures would
unravel [Cigna’s] collaborative relationships with providers”);
id. at *61; id. at *63 (“[T]here is ample evidence in the record
that the merger would harm consumers by reducing or
weakening the Cigna value based offerings which aim to
reduce medical costs by reducing utilization and by engaging
with, rather than simply reducing the fees paid to, providers.”).


     1
       In addition, the dissenting opinion’s rosy forecast (at 8) that
Anthem’s employer-customers would then automatically use those
(unproven) savings to raise their employees’ pay is cut out of whole
cloth. Not even Anthem offered up that Panglossian prediction.
     2
         Curiously, none of the large employers who, according to
Anthem, stand to gain billions of dollars in savings have filed any
brief in support of this merger.
                                  4
     Paying less to get less is not an efficiency; it is evidence of
the anticompetitive consequences of reducing competition and
eliminating an innovative competitor in a highly concentrated
market.

     Fourth, while the dissenting opinion repeatedly declares
the record evidence “overwhelming[]” that the post-merger
firm will deliver health care for less, e.g., Dissenting Op. 8, it
bears emphasizing that one half of this merger disagrees. “In
this case, the Department of Justice is not the only party raising
questions about Anthem’s characterization of the outcome of
the merger: one of the two merging parties”—Cigna—“is also
actively warning against it.” Anthem, 2017 WL 685563, at *4.
Importantly, “Cigna officials provided compelling testimony
undermining the projections of future savings” that Anthem
proffered and the dissenting opinion embraces. Id. (emphasis
added).

     Finally, the assumption that the prices paid by Anthem’s
customers—whatever the quality of the resulting product—are
the sole focus of antitrust law sits at the center of Anthem’s and
the dissenting opinion’s contentions. But antitrust law is not
so monocular. Rather, product variety, quality, innovation, and
efficient    market      allocation—all       increased    through
competition—are equally protected forms of consumer
welfare. See HORIZONTAL MERGER GUIDELINES § 6.4, at 24.3
Indeed, “withdraw[al of] a product that a significant number of
customers strongly prefer to those products that would remain

     3
       See also Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421,
1433 (9th Cir. 1995) (“Consumer welfare is maximized when
economic resources are allocated to their best use, and when
consumers are assured competitive price and quality.”) (citing, inter
alia, National Gerimedical Hosp. & Gerontology Ctr. v. Blue Cross
of Kansas City, 452 U.S. 378, 387–388 & n.13 (1981)).
                                  5
available * * * can constitute a harm to customers over and
above any effects on the price or quality of any given product.”
Id. That is why, under antitrust law, anticompetitive conduct
that lowers prices can be illegal. See United States v. Socony-
Vacuum Oil Co., 310 U.S. 150, 223 (1940) (“Under the
Sherman Act a combination formed for the purpose and with
the effect of raising, depressing, fixing, pegging, or stabilizing
the price of a commodity in interstate or foreign commerce is
illegal per se.”) (emphasis added).4

     The dissenting opinion also founders on the mistaken
belief that any exercise of increased bargaining power short of
monopsony is procompetitive. But securing a product at a
lower cost due to increased bargaining power is not a
procompetitive efficiency when doing so “simply transfers
income from supplier to purchaser without any resource
savings.” AREEDA & HOVENKAMP, supra, ¶ 975i, at 106. Plus,
as Professors Areeda and Hovenkamp explain in language that
speaks directly to Anthem’s proposed merger: “Congress may
not have wanted anything to do with an efficiencies defense
asserted by a firm that was already large or low cost within the
market and to whom the efficiencies would give an even
greater advantage over rivals.” Id. ¶ 970c, at 31.

     Ultimately, the judicial task here is not to favor cost
redistribution or any other economic agenda for its own sake.
Congress      has     decided    that    any    merger   that
“substantially * * * lessen[s] competition” is forbidden. 15

     4
        See also Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d
979, 988 (9th Cir. 2000) (“[T]he central purpose of the antitrust laws,
state and federal, is to preserve competition. It is competition—not
the collusive fixing of prices at levels either low or high—that these
statutes recognize as vital to the public interest.”).
                                 6
U.S.C. § 18. Our task is to enforce that legislative judgment.
To allow a merger that has already been proven to
“substantially * * * lessen competition,” id., to proceed
anyhow because of some unverifiable and non-merger-specific
amount of price decreases accruing to one segment of the
health care market would rewrite rather than enforce the
Clayton Act.5




    5
        Thus far the courts of appeals—including United States v.
Baker Hughes, 908 F.2d 981 (D.C. Cir. 1990), and all of the cases on
which the dissenting opinion relies—have only held that efficiencies
may be used as part of an evidentiary burden-shifting scheme to
rebut the government’s prima facie showing of an anticompetitive
merger. No court of appeals has gone as far as Anthem and held that
a reduction in costs standing alone greenlights a substantially
anticompetitive merger that would otherwise be barred by the
Clayton Act. See Federal Trade Comm’n v. University Health, Inc.,
938 F.2d 1206, 1222 n.29 (11th Cir. 1991) (“Of course, once it is
determined that a merger would substantially lessen competition,
expected economies, however great, will not insulate the merger
from a section 7 challenge.”); AREEDA & HOVENKAMP, supra,
¶ 970f, at 42.
     KAVANAUGH, Circuit Judge, dissenting: This important
antitrust case involves a multi-billion dollar merger between
two health insurers, Anthem and Cigna. As relevant to this
case, those two insurers sell insurance services to large national
businesses. There are four national insurers in that market:
Anthem, Cigna, United, and Aetna. Anthem and United are the
two major insurers in this market, whereas Cigna is a fairly
small player. In the 14 States where Anthem and Cigna sell
insurance services to large national businesses, Anthem has a
41% share of the market, and Cigna has a 6% share.

     The U.S. Government sued under Section 7 of the Clayton
Act to block the Anthem-Cigna merger. See 15 U.S.C. §§ 18,
25. The Government alleged that the merger would unlawfully
lessen competition in the market for insurance services sold to
large national businesses. The District Court agreed with the
Government and enjoined the merger. The majority opinion
affirms. I respectfully dissent.

      At the outset, it is important to stress that this is an unusual
horizontal merger case because of the nature of this particular
slice of the insurance industry. To properly analyze this case,
it is essential to understand precisely how these markets work.

      There are three main players: (i) large employers,
(ii) insurers, and (iii) healthcare providers, namely hospitals
and doctors. Under the standard contracts that apply in this
particular segment of the insurance industry, the employers do
not pay premiums to the insurers. And the insurers do not pay
the hospitals and doctors for healthcare services provided to the
employers’ employees. Instead, the employers pay insurers a
fee for obtaining access to the insurers’ provider network.
Insurers in turn contract with healthcare providers – hospitals
and doctors – to develop that provider network. In that
upstream market, the insurers negotiate rates in advance with
the hospitals and doctors.
                                2
     As a result, when the employers’ employees need health
care, the employers pay those negotiated rates to the healthcare
providers. Importantly, therefore, employers in this market are
self-insured. They pay the insurers a fee simply to obtain
access to the provider networks arranged by the insurers, as
well as for certain administrative services performed by the
insurers.

    To summarize in simple terms: The employers pay the
insurers a fee, and the insurers then act as the employers’
purchasing agents for healthcare services. In that upstream
market, the insurers negotiate in advance with hospitals and
doctors over the rates that will be charged to employers for their
employees’ health care. When insurers negotiate lower
provider rates, employers save money on health care.

     Here, two insurers (Anthem and Cigna) want to merge.
The majority opinion sees this as a classic horizontal merger
case where the high concentration of this market and the
merged insurer’s high market share would mean increased
prices for the employer-customers. But that understanding
misses what I believe is the critical feature of this case. Here,
these insurance companies act as purchasing agents on behalf
of their employer-customers in the upstream market where the
insurers negotiate provider rates for the employer-customers.
When the insurers negotiate lower provider rates, those savings
go directly to the employer-customers. The merged Anthem-
Cigna would be a more powerful purchasing agent than
Anthem and Cigna operating independently. The merged
Anthem-Cigna would therefore be able to negotiate lower
provider rates on behalf of its employer-customers. Those
lower provider rates would mean cost savings that would be
passed through directly to the employer-customers. To be sure,
the merged company may charge its employer-customers an
increased fee for obtaining those savings. But the record
                               3
overwhelmingly demonstrates that the cost savings to
employers would far exceed any increased fees paid by
employers.

     In short, the record decisively demonstrates that this
merger would be beneficial to the employer-customers who
obtain insurance services from Anthem and Cigna. That is the
core of my respectful disagreement with the majority opinion.
(As I will explain in Part I-C below, if there is a problem with
this merger, the problem lies in the merger’s effects on
hospitals and doctors in the upstream market, not in the
merger’s effects on employers in the downstream market.)

    In Part I of this dissent, I will outline my approach to this
case. In Part II, I will briefly summarize some of my concerns
about the majority opinion and the concurrence.

                                I

                               A

     The Government contends that this merger between
Anthem and Cigna would cause undue market concentration in
the market for the sale of insurance services to large employers,
and would increase the merged company’s market share to an
anti-competitive level. The Government argues that, as a
result, the merged Anthem-Cigna would be able to use its
market power to raise the fees it charges to large employers for
those insurance services. How much? The evidence in the
record suggests that large employers would pay Anthem-Cigna
increased fees of about $48 million annually by one estimate,
up to $220 million annually by another estimate, and up to $930
million annually by yet another estimate.
                               4
     But that is not the end of the antitrust analysis under the
law governing horizontal mergers. The case law of the
Supreme Court and this Court, as well as the Government’s
own Merger Guidelines, establish that we must consider the
efficiencies and consumer benefits of a merger together with
its anti-competitive effects. See United States v. General
Dynamics Corp., 415 U.S. 486, 498-500 (1974); FTC v. H.J.
Heinz Co., 246 F.3d 708, 720 (D.C. Cir. 2001); United States
v. Baker Hughes Inc., 908 F.2d 981, 990-91 (D.C. Cir. 1990);
U.S. Department of Justice & Federal Trade Commission,
Horizontal Merger Guidelines § 10, at 29-31 (2010).

     Here, as I will explain, the analysis of the overall effects
of this merger shows that the merger would not substantially
lessen competition in the market for the sale of insurance
services to large employers. The record demonstrates that
those large employers would save an amount ranging from $1.7
to $3.3 billion annually due to reduced rates charged by
healthcare providers. For large employers, therefore, the
savings from the merger would far exceed the increased fees
they would pay to Anthem-Cigna as a result of the merger.

     To begin with, the record evidence overwhelmingly
demonstrates that the merged Anthem-Cigna, with its
additional market strength and negotiating power in the
upstream market, would be able to negotiate lower provider
rates from hospitals and doctors for healthcare services.
Indeed, the Government itself agrees that this merger would
allow Anthem-Cigna to obtain lower provider rates. Linger on
that point for a moment: The Government concedes that
Anthem-Cigna would be able to negotiate lower provider rates
that employers would pay for their employees’ health care. On
top of that, in light of the “affiliate clause” in many of
Anthem’s existing contracts, the merger would allow at least
some of the businesses that currently purchase insurance
                                 5
services from Cigna to obtain lower rates that Anthem has
previously negotiated with providers.

     How much would provider rates be reduced? Anthem-
Cigna’s integration planning team, working in consultation
with McKinsey, an independent consulting firm, calculated
$2.6 to $3.3 billion in projected annual savings for Anthem-
Cigna’s employer-customers as a result of the merger.
Anthem-Cigna’s expert, Dr. Israel, worked independently of
the integration team, but he came to a similar conclusion. He
determined that the merger would yield $2.4 billion in annual
medical cost savings.

     The record evidence also overwhelmingly demonstrates
that the medical cost savings from the lower provider rates
negotiated by Anthem-Cigna would be largely if not entirely
passed through to the large employers that contract with
Anthem-Cigna. The savings are passed through to employers
because, under the contractual arrangements that apply in that
market, the employers pay healthcare providers for the
healthcare services provided to employees. So if the price of
healthcare services is lower, the employers would directly
benefit because the employers would then pay those lower
prices.

     The Government critiques those estimates in part by
noting that the estimates include cost savings that will accrue
to the fully insured employers. It is true that a slice of this large
employer market is fully insured, not self-insured. For those
large employers, there would not necessarily be automatic
pass-through. Even taking the fully insured employers out of
the equation, however, the annual savings to self-insured
employers would still be at least $1.7 billion annually.
                                 6
    By contrast, the Government’s expert, Dr. Dranove, never
did a merger simulation that calculated the amount of the
savings that would result from the lower provider rates and be
passed through to employers. Even though the Government
admitted that the merger would lead to a reduction in provider
reimbursement rates, Dr. Dranove built an assumption into all
of his models that there would be zero medical cost savings.
See Trial Tr. 1159, 1867. So we are left with Anthem-Cigna’s
evidence showing $1.7 to $3.3 billion annually in passed-
through savings for employers. 1

     Under the law, those efficiencies and consumer benefits
identified by Anthem-Cigna must be both merger-specific and
verified. See U.S. Department of Justice & Federal Trade
Commission, Horizontal Merger Guidelines § 10, at 30. Both
requirements are satisfied here.

    The efficiencies and consumer benefits in this case are
merger-specific by definition. As even the Government
    1
        To be sure, if a price decrease were accompanied by a
substantial reduction in quality, that fact would raise a separate
concern about this merger. But here, the record does not contain
sufficient evidence, beyond some speculation and guesswork by the
Government, that the merger would cause an actual decrease in the
quality of medical service provided to employers by hospitals and
doctors, or in the quality of customer service provided to employers
by insurers.
     Relatedly, the Government suggests that the current Cigna
employer-customers, once switched over to Anthem after the merger,
would utilize healthcare services more often. The Government
argues that the higher utilization would cancel out some of the cost
savings that the employer-customers would otherwise achieve. That
suggestion is likewise highly speculative and does not square with
the record, which shows that current Anthem employer-customers
have lower utilization rates than the current Cigna employer-
customers. See J.A. 480.
                                7
admits, Anthem-Cigna’s enhanced bargaining power would
come from the merger. And that enhanced bargaining power
is a large part of what would enable Anthem-Cigna to negotiate
the lower provider rates that in turn would lead to cost savings
for employers. So, too, Anthem’s ability to rely on its existing
contracts to offer lower rates to Cigna customers is a direct
result of the merger. There is little if any evidence to support
the made-up notion that Anthem and Cigna could obtain lower
provider rates even absent the merger. The claimed savings are
merger-specific.

      Moreover, the efficiencies and benefits were sufficiently
verified (i) by Anthem-Cigna’s expert witness Dr. Israel,
(ii) by the merger integration planning team, working with
McKinsey, the independent consulting firm, and (iii) by
various healthcare providers who testified at trial. To be
verified, the efficiencies and consumer benefits must be “more
than mere speculation and promises about post-merger
behavior.” Heinz, 246 F.3d at 721. But they need not be
certain. They merely must be probable. See Baker Hughes,
908 F.2d at 984 (“Section 7 involves probabilities, not
certainties or possibilities.”). Here, that bar is cleared because
there is no doubt that the merger would reduce provider rates
(as the Government concedes) and no doubt that the savings
from those lower provider rates would be largely passed
through to employers (as the contracts and basic structure of
this self-insured market require). To be sure, one can debate
just how much the employers would benefit from this merger.
But Anthem-Cigna’s expert and integration planning team
calculated savings of $1.7 to $3.3 billion annually. On this
record, there is little basis to doubt that the cost savings for
employers as a result of the merger would be large – and far
larger than the increased fees charged by insurers to employers
as a result of the merger.
                               8
     In short, the record overwhelmingly establishes that the
merger would generate significant medical cost savings for
employers in all of the geographic markets at issue here –
overall, approximately $1.7 to $3.3 billion annually – and
employers would therefore spend significantly less on
healthcare costs. (As noted, the increased fees for employers,
on the other hand, would amount to $48 to $930 million.) And
because the employers would spend less on health care for
employees, they would have more to spend on employees’
salaries, thereby benefitting their employees. Some of the
ultimate beneficiaries of this merger would be the rank-and-file
workers who are employed by the businesses that obtain
insurance services from Anthem and Cigna.

     I of course recognize that the District Court’s factual
findings are reviewed only for clear error. But we are not a
rubber stamp. And here, the record convincingly demonstrates
that this merger would significantly reduce healthcare costs for
the large employers that purchase insurance services from
Anthem and Cigna. That is true across the 14 states in which
Anthem and Cigna both operate, including Virginia (and the
Richmond market). The District Court clearly erred, therefore,
in concluding that the merger would substantially lessen
competition in the market in which insurance services are sold
to large employers.

                               B

     In a separate discussion, however, the District Court also
relied on 1960s Supreme Court cases and suggested that
antitrust law may not allow consideration of the efficiencies
and consumer benefits in the first place. If that were true, this
would be an easy case for the Government given the
                               9
concentration of the market and the market share of the merged
company. But that description of the law is not correct.

     In landmark decisions in the 1970s – including United
States v. General Dynamics Corp., 415 U.S. 486 (1974), and
Continental T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977)
– the Supreme Court indicated that modern antitrust analysis
focuses on the effects on the consumers of the product or
service, not the effects on competitors. In the horizontal
merger context, the Supreme Court in the 1970s therefore
shifted away from the strict anti-merger approach that the
Court had employed in the 1960s in cases such as Brown Shoe
Co. v. United States, 370 U.S. 294 (1962), and United States v.
Philadelphia National Bank, 374 U.S. 321 (1963).

     As this Court has previously noted, in “the mid-1960s, the
Supreme Court construed section 7 to prohibit virtually any
horizontal merger or acquisition,” but the Supreme Court
subsequently “cut” those precedents “back sharply,” beginning
with its 1974 decision in General Dynamics. Baker Hughes,
908 F.2d at 989-90. In General Dynamics, the Supreme Court
made clear that the merger analysis must take account not just
of market concentration and market shares, but also of the
“structure, history and probable future” of the market. 415 U.S.
at 498 (quoting Brown Shoe, 370 U.S. at 322 n.38); see also E.
THOMAS SULLIVAN & JEFFREY L. HARRISON, UNDERSTANDING
ANTITRUST AND ITS ECONOMIC IMPLICATIONS 369 (6th ed.
2014) (“General Dynamics signaled a major shift in § 7
interpretation.”); Note, Horizontal Mergers After United States
v. General Dynamics Corp., 92 HARV. L. REV. 491, 499, 502
(1978) (The General Dynamics case “signaled a new judicial
approach to section 7 cases. . . . By endorsing an inquiry into
such factors – the structure, history and probable future of the
relevant market – General Dynamics brought antitrust analysis
back into line with current economic thought.”) (internal
                              10
quotation marks omitted); cf. ROBERT H. BORK, THE
ANTITRUST PARADOX 210 (1978) (“It would be overhasty to
say that the Brown Shoe opinion is the worst antitrust essay
ever written. . . . Still, all things considered, Brown Shoe has
considerable claim to the title.”).

     Applying that broader analysis, the General Dynamics
Court rejected the Government’s assertion in that case that a
proposed merger between two leading coal producers would
violate Section 7 of the Clayton Act. In subsequent cases, the
Supreme Court has adhered to General Dynamics. See, e.g.,
United States v. Marine Bancorporation, Inc., 418 U.S. 602,
631 (1974); United States v. Citizens & Southern National
Bank, 422 U.S. 86, 120 (1975). Notably, since 1975, the
Supreme Court has not decided a case assessing the lawfulness
of a horizontal merger under Section 7 of the Clayton Act. So
General Dynamics remains the last relevant word from the
Supreme Court.

     This Court has already concluded that we are bound by
General Dynamics, not by the earlier 1960s Supreme Court
cases. In Baker Hughes, we explained that “General Dynamics
began a line of decisions differing markedly in emphasis from
the Court’s antitrust cases of the 1960s. Instead of accepting a
firm’s market share as virtually conclusive proof of its market
power, the Court carefully analyzed defendants’ rebuttal
evidence.” Baker Hughes, 908 F.2d at 990. 2 In Baker Hughes,
we thus cited General Dynamics for the proposition that the
Section 7 analysis is “comprehensive” and focuses on a
“variety of factors,” including “efficiencies.” Id. at 984, 986.
As Baker Hughes recognized, and as this Court reaffirmed in
its later decision in Heinz, modern merger analysis must

    2
      Baker Hughes was authored by Judge Clarence Thomas and
joined by Judge Ruth Bader Ginsburg and Judge David Sentelle.
                              11
consider the efficiencies and consumer benefits of the merger.
See Baker Hughes, 908 F.2d at 984-86; Heinz, 246 F.3d at 720
(“[E]fficiencies can enhance the merged firm’s ability and
incentive to compete, which may result in lower prices,
improved quality, or new products.”) (internal quotation marks
omitted). Importantly, even the Government’s own Merger
Guidelines now recognize that the merger analysis must
consider the efficiencies and consumer benefits of the merger.
See U.S. Department of Justice & Federal Trade Commission,
Horizontal Merger Guidelines § 10, at 29-31; see also Baker
Hughes, 908 F.2d at 985-86 (“It is not surprising” that “the
Department of Justice’s own Merger Guidelines contain a
detailed discussion of non-entry factors that can overcome a
presumption of illegality established by market share
statistics.” Those “factors include . . . efficiencies.”).

     We are bound by the modern approach taken by the
Supreme Court and by this Court. See generally BRYAN A.
GARNER ET AL., THE LAW OF JUDICIAL PRECEDENT 31 (2016)
(“[W]hen the Supreme Court overturns the standard that it had
previously used to resolve a particular class of cases,” federal
courts “must apply the new standard and reach the result
dictated under that new standard.” The “results reached under
the old standard” are no longer “binding precedent.”). Under
the modern approach reflected in cases such as General
Dynamics, Baker Hughes, and Heinz, the fact that a merger
such as this one would produce heightened market
concentration and increased market shares (and thereby
potentially harm other insurers that are competitors of Anthem
and Cigna) is not the end of the legal analysis. Under current
antitrust law, we must take account of the efficiencies and
consumer benefits that would result from this merger. Any
suggestion to the contrary is not the law.
                               12
                               C

      That said, on my view of the case, the Government could
still ultimately block this merger based on the merger’s effects
on hospitals and doctors in the upstream provider market. At
trial, the Government asserted an alternative ground for
blocking the merger: The Government claimed that the merger
between Anthem and Cigna would give Anthem-Cigna
monopsony power in the upstream market where Anthem-
Cigna negotiates provider rates with hospitals and doctors. The
District Court did not decide that separate claim. I would
remand for the District Court to decide it in the first instance.

     Monopsony power describes a scenario in which Anthem-
Cigna would be able to wield its enhanced negotiating power
to unlawfully push healthcare providers to accept rates that are
below competitive levels. That may be an antitrust problem in
and of itself. Moreover, the exercise of monopsony power to
temporarily reduce consumer prices does not qualify as an
efficiency that can justify an otherwise anti-competitive
merger.       The consumer welfare implications (and
consequently, the antitrust law implications) of monopsony
power and ordinary bargaining power are very different.
Although both monopsony and bargaining power result in
lower input prices, ordinary bargaining power usually results
in lower prices for consumers, whereas monopsony power
usually does not, at least over the long term. See 4A PHILLIP
E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 980,
at 108 (3d ed. 2009); HERBERT HOVENKAMP, FEDERAL
ANTITRUST POLICY § 1.2b, at 15 (4th ed. 2011). Therefore, the
exercise of bargaining power by Anthem-Cigna is pro-
competitive because it usually results in lower prices for
Anthem-Cigna’s employer-customers.           By contrast, the
exercise of monopsony power by Anthem-Cigna may be anti-
competitive because it may result in higher prices for Anthem-
                              13
Cigna’s employer-customers. Cf. U.S. Department of Justice
& Federal Trade Commission, Horizontal Merger Guidelines
§ 10, at 30 (“Cognizable efficiencies . . . do not arise from
anticompetitive reductions in output or service.”).

     Notably, even Anthem-Cigna concedes that the merger
would be unlawful if the merger would give Anthem-Cigna
monopsony power in the upstream market. See Tr. of Oral Arg.
at 85 (Defense Counsel: “If it was an exercise of market power
on the buy-side, monopsony, we are not claiming that it’s a
cognizable efficiency. We’re accepting the rule in the merger
guidelines that if it really is the exercise of market power,
which means a constraint in output, bringing the price away
from the competitive level, yes, we’re not claiming that that’s
a cognizable efficiency.”).

     To be clear, if Anthem-Cigna would obtain lower provider
rates merely because of its enhanced ability to negotiate lower
prices with providers, that alone would not necessarily be an
antitrust problem. But if Anthem-Cigna would obtain provider
rates that are below competitive levels because of its exercise
of unlawful monopsony power against providers, that could be
a problem, and perhaps a fatal one for this merger. In other
words, if the lower provider rates from this merger turn out to
be the fruit of a poisonous tree – namely, the fruit of Anthem-
Cigna’s exercise of unlawful monopsony power against
hospitals and doctors in the upstream market – then the merger
may be unlawful. See U.S. Department of Justice & Federal
Trade Commission, Horizontal Merger Guidelines § 10, at 30.

     As a result, the legality of the merger should turn on the
answer to the following fact-intensive question: Would
Anthem-Cigna obtain lower provider rates from hospitals and
doctors because of its exercise of unlawful monopsony power
in the upstream market where it negotiates rates with healthcare
                                14
providers? Given the way it resolved the case, the District
Court never reached that critical question. Therefore, I would
remand for the District Court to expeditiously decide that
question in the first instance.

                                 II

     The majority opinion portrays this as an easy case for
blocking the merger. If the law and the facts were as described
by the majority opinion, I would agree with it. But in my view,
the law and the facts are not as described by the majority
opinion. Indeed, the majority opinion outflanks even the
Government’s position on the law and the facts.

     First, the Government accepts as a given that a defendant
in a Section 7 case may rely on a merger’s efficiencies to show
that a merger would not be anti-competitive despite the
increased market concentration and market shares that would
result from the merger. But the majority opinion – echoing the
District Court – does not accept that legal principle as a given.
On the contrary, the majority opinion casts doubt on this
Court’s opinions in Baker Hughes and Heinz, and on whether
Section 7 analysis allows a court to take account of a merger’s
efficiencies as a defense in a merger case. The majority
opinion says that the Supreme Court’s 1967 decision in FTC v.
Procter & Gamble Co., 386 U.S. 568 (1967), is the essential
precedent on this question. For the majority opinion, we are
apparently stuck in 1967. The antitrust clock has stopped. No
General Dynamics. No Continental T. V. v. GTE Sylvania. No
Baker Hughes. No Heinz. No updated Merger Guidelines. 3
To reiterate, not even the Government makes that far-reaching
argument. For good reason. As one hornbook aptly puts it, the

    3
     The concurrence goes so far as to say that even if “prices will
go down,” that “proves nothing by itself.” Concurring Op. at 1.
                                15
“truly important point is that no modern observer, and no
modern court, espouses the old FTC v. Procter & Gamble Co.
(1967) position that efficiencies might be reason to condemn a
merger.” ERNEST GELLHORN, WILLIAM E. KOVACIC &
STEPHEN CALKINS, ANTITRUST LAW AND ECONOMICS IN A
NUTSHELL 463 (5th ed. 2004); see also Baker Hughes, 908 F.2d
at 985 (“Indeed, that a variety of factors other than ease of entry
can rebut a prima facie case has become hornbook law. . . .
[O]ther factors include industry structure, weakness of data
underlying prima facie case, elasticity of industry demand,
inter-industry cross-elasticities of demand and supply, product
differentiation, and efficiency.”) (emphasis added).

     Fortunately, the majority opinion in the end does not
actually hold that there is no efficiencies defense available in
Section 7 cases. The majority opinion merely suggests as much
in dicta – perhaps portending a return to 1960s antitrust law in
some future merger case. For purposes of this case, however,
the majority opinion simply says that even assuming such a
defense exists under the law, the defense would not be satisfied
here. The majority opinion’s lack of a square holding on the
role of efficiencies in merger cases is some measure of good
news because it means that future district courts and future
panels of this Court still must follow General Dynamics, Baker
Hughes, and Heinz, not the ahistorical drive-by dicta in today’s
majority opinion.

     Second, on the facts, the majority opinion never fully
accepts the two key facts in this case: First, provider rates will
be lower; and second, the savings from those lower rates will
be passed through to employers. The first fact is conceded by
the Government, and the second fact is undeniable given the
nature of this market and the contractual relationships between
employers and insurers.
                               16
     As mentioned above, the key difference between this
horizontal merger and some horizontal mergers is that the
increased savings obtained by the merged company in the
upstream supply market in this case would be passed through
directly to consumers. That one fact makes this merger
unusual. In the ordinary case of a merger where the merged
firm would have market power, it can be difficult for the
merged firm to demonstrate that a substantial portion of the
efficiencies resulting from the merger would actually be passed
through to consumers instead of being retained by the merging
companies. See, e.g., FTC v. Staples, Inc., 970 F. Supp. 1066,
1090 (D.D.C. 1997) (“Staples and Office Depot have a proven
track record of achieving cost savings through efficiencies, and
then passing those savings to customers in the form of lower
prices. However, in this case the defendants have projected a
pass through rate of two-thirds of the savings while the
evidence shows that, historically, Staples has passed through
only 15-17%.”); see also U.S. Department of Justice & Federal
Trade Commission, Horizontal Merger Guidelines § 10, at 31
(“The greater the potential adverse competitive effect of a
merger, the greater must be the cognizable efficiencies, and the
more they must be passed through to customers.”). However,
in this case, a high pass-through rate is practically guaranteed
because, under the contractual arrangements that apply in the
relevant market, the employers pay healthcare providers for the
healthcare services provided to employees. So if the price of
healthcare services is lower, the employers directly benefit
because Anthem-Cigna’s employer-customers pay those lower
prices.

     The only real factual question concerning the effects of the
merger on large employers should be whether the savings to
employers from lower provider rates would exceed the
increased fees employers would pay to Anthem-Cigna for the
insurance services. As I have explained, the record evidence
                                17
overwhelmingly indicates that the savings to employers from
lower provider rates would greatly exceed the increased fees
they would pay to Anthem-Cigna for the insurance services.

     But the majority opinion does not conduct that key inquiry.
That is because the majority opinion does not fully accept the
fact, undisputed by the parties, that provider rates would
actually be lower as a result of this merger. And the majority
opinion likewise does not accept that any possible cost savings
would actually be passed through. So for the majority opinion,
there are no cognizable efficiencies to consider in the first place
and no need to assess whether the cost savings for employers
are greater than the increased fees paid by employers.

     The majority opinion offers up a smorgasbord of reasons
to think that provider rates would not be lower or would not
really be passed through, ranging from provider “abrasion,” to
secret Anthem plans to dramatically raise the fees it charges
employers, to Anthem’s supposed inability to force or
negotiate with providers to obtain Anthem rates for Cigna
customers, to friction between the Anthem and Cigna CEOs.
All of that seems at best highly speculative. The plural of
anecdote is not data. Of course, lots of bad things could happen
after the merger. But the courts have to assess what is likely.
See Baker Hughes, 908 F.2d at 984 (“Section 7 involves
probabilities, not certainties or possibilities.”). The majority
opinion seems to be accepting the worst-case possibility rather
than determining what is likely. And the overwhelming
evidence of what is likely is that provider rates would go down,
that the savings would be passed through to employers, and that
the savings to employers would greatly exceed any increase in
fees paid by employers.

    To the extent the majority opinion acknowledges even
obliquely that prices possibly could go down after the merger,
                               18
the majority opinion retorts that quality will also go down after
the merger. But quality of what? As noted earlier, there is no
persuasive evidence that the quality of medical care provided
by hospitals and doctors would decrease. Nor is there any
convincing evidence that the quality of services provided to
employers by insurers would meaningfully decrease. Not to
mention, does any supposed decrease in quality really rise to
the level of $1.7 to $3.3 billion annually? The record discloses
no meaningful effort to quantify or calculate the supposed
decrease in quality.

      The majority opinion also says that Cigna provides
programs that help reduce utilization and that those could be
jettisoned after the merger. But there is no good reason to think
that those programs would be jettisoned rather than adopted by
the merged company. Moreover, this speculation does not
account for the fact that Anthem already has lower utilization
rates than Cigna. So is it not likely that Cigna customers would
utilize health care more after the merger than they do now.


                             ***

     The analysis of a merger’s effects necessarily entails a
predictive judgment. Courts are often ill-equipped to render
those predictive judgments in cases of this sort. But here, we
have a far clearer picture of what will unfold than we often do.
We know that Anthem-Cigna would be able to negotiate lower
provider rates; indeed, even the Government admits as much.
And we know that those savings will be largely passed through
to employers because that is the way the market and contracts
are structured. After all, the whole point of the provider rates
negotiated by insurers is to establish the prices that the
employers will pay. If the prices are lower, the employers will
pay less. And we know, furthermore, that any cost savings to
                                19
employers likely would greatly exceed any increase in fees
paid by employers.

     On this record, this horizontal merger therefore would not
substantially lessen competition in the market for the sale of
insurance services to large employers. The District Court
clearly erred in concluding otherwise, and I disagree with the
majority opinion’s affirmance of the District Court’s judgment.

     The problem for this merger, if there is one, is in its effects
in the upstream market – namely, in its effects on hospitals and
doctors as a result of Anthem-Cigna’s enhanced negotiating
power. Therefore, my approach to this case would require
District Court resolution of one remaining question: Would
Anthem-Cigna obtain lower provider rates from hospitals and
doctors because of its exercise of unlawful monopsony power
in the upstream market where it negotiates rates with
providers? If yes, then Anthem-Cigna concedes that the
merger is unlawful and should be enjoined. If no, then the
merger is lawful and should be able to go forward. I would
vacate the District Court’s judgment and remand for the
District Court to expeditiously resolve that fact-intensive
question in the first instance.

    I respectfully dissent.
