DOJ vs. Michigan Blue Cross

Diane Bartz of Reuters writes,

The U.S. Justice Department filed a lawsuit against Blue Cross Blue Shield of Michigan on Monday, accusing it of violating antitrust law by negotiating contracts with hospitals that bar the hospitals from giving Blue Cross’ rivals a better deal. […]

Michigan’s attorney general’s office took issue with the idea that the company’s goal was to save consumers money.

“On the contrary, the investigation showed that Blue Cross increased its payouts to many hospitals to guarantee they would in turn charge all other insurers up to 40 percent more, pricing them out of the market and raising prices on all Michigan consumers,” said John Sellek, a spokesman for the office.

This is a real life example of something I’ve discussed. Raising rivals’ costs is one way to maintain or increase market share. As I wrote,

There are a variety of ways to raise rivals’ costs, including engaging in exclusive contracts with the lowest cost (or only) suppliers, supporting regulatory standards with which the predatory firm is already efficient, engaging in an ad or R&D war (if the predatory firm can do so at lower costs than its rivals due, say, to economies of scale), among others.

More here and here.

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