Question: In July 1977 anesthesiologist Edwin G Hyde applied for admission
In July 1977, anesthesiologist Edwin G. Hyde applied for admission to the medical staff of East Jefferson Hospital in New Orleans. The credentials committee and the medical staff executive committee recommended approval, but the hospital board denied the application because the hospital was a party to a contract providing that all anesthesiological services required by the hospital's patients would be performed by Roux & Associates, a professional medical corporation. Hyde filed suit against the board, arguing that the contract violated § 1 of the Sherman Act. The district court ruled in favor of the board, finding that the anticompetitive effects of the contract were minimal and outweighed by the benefits of improved patient care. It noted that there were at least 20 hospitals in the New Orleans metropolitan area and that roughly 70 percent of the patients residing in Jefferson Parish went to hospitals other than East Jefferson. It therefore concluded that East Jefferson lacked any significant market power and could not use the contract for anticompetitive ends. The Fifth Circuit Court of Appeals reversed, holding that the relevant market was the East Bank Jefferson Parish rather than the New Orleans metropolitan area. The court therefore concluded that because 30 percent of the parish residents used East Jefferson and "patients tend to choose hospitals by location rather than price or quality," East Jefferson possessed sufficient market power to make the contract a per se illegal tying contract. Was the Fifth Circuit correct?
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