On March 30, United States District Court Judge Denise Page Hood
(E.D. Mich.) handed Blue Cross Blue Shield of Michigan a victory,
dismissing an antitrust action filed against it by the City of
Pontiac in which the City alleged that Blue Cross's use of
"most favored nation" clauses in its provider contracts
violated the antitrust laws. (City of Pontiac v. Blue Cross
Blue Shield of Michigan, Case No. 11-10276, Eastern District
The action, which was filed by the City in January of 2011
against Blue Cross and twenty-two Michigan hospitals, alleged that
the defendants' inclusion of "most favored nation"
clauses in their provider contracts, requiring the hospitals to
charge other insurers more than they charged to Blue Cross for
provider services, constituted a per se violation of the
Ruling on Blue Cross's motion to dismiss the Complaint,
Judge Hood held that the City's antitrust allegations did not
state a claim. Specifically, Judge Hood noted that the City had
pled a per se violation, and that while some
horizontal agreements are subject to per se
condemnation, "all vertical price restraints are
judged under the rule of reason." Because "Blue Cross and
the hospital defendants are at different levels of the
market," with Blue Cross acting as a purchaser of hospital
services from the hospital defendants, "the relationship
between Blue Cross and the hospital defendants is vertical."
Accordingly, the Court held that "in light of the City of
Pontiac's reliance on a per se violation analysis,
which this Court rejects . . . the Court finds that the City of
Pontiac fails to state a plausible claim under the Sherman Act and
the Michigan antitrust laws."
After finding that the City of Pontiac had also failed to allege
a claim of unjust enrichment, the Court dismissed the City's
complaint, bringing this portion of the closely watched MFN actions
to a close. (Notably, litigation between Blue Cross of Michigan and
the DOJ over the use of most favored nation clauses, which is the
subject of a separate action, continues at this time, as do other
related civil actions. In the DOJ case the government contends that
Blue Cross's contracts constitute a "rule of reason"
antitrust violation which, unlike a per se violation, will
require that the DOJ also prove that Blue Cross's alleged
conduct has had anticompetitive effects in the market, a more
difficult task for an antitrust plaintiff ).
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An interesting and growing debate in the antitrust arena is whether most favored nation ("MFN") pricing provisions are pro-competitive or anticompetitive. For many years, MFN provisions have been considered a fairly noncontroversial contract term included by purchasers in an attempt to assure that other buyers do not receive a more favorable price.
A well-attended program on antitrust treatment of "bundled pricing" and "loyalty discounts" at the American Bar Association Antitrust Section Spring Meeting highlighted the confusion generated by the antitrust law implications.
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