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September 1, 2003

Bar Advocate Footnotes

Filed under: — David Giacalone @ 7:20 pm


[*]  As is stated in the recently-released Department of Justice “Antitrust Primer for Federal Law Enforcement Personnel” (August 2003) concerning antitrust liability:

“The victims . . . can be private parties or government entities, whether federal, state, or local.”


“The agreement must be between two or more independent business entities or individuals. No overt acts need be proved, nor is an express agreement necessary. The offense can be established either by direct evidence from a participant or by circumstantial evidence.”


“Price fixing is an agreement among competitors at any level of the economy (manufacturers, distributors, or retailers) to raise, fix, or otherwise maintain the price at which their products or services are sold.   Price fixing can take many forms . . .  Price fixing is any agreement among competitors which affects the ultimate price or terms of sale for a product or service.  (emphasis added) 

“Because of their pernicious effect on competition and lack of any redeeming economic value, per se agreements, like price fixing, bid rigging, and market allocation, are conclusively presumed to be unreasonable and therefore illegal, without elaborate inquiry as to the precise harm they have caused or the business excuse for their use. If a per se violation is shown, defendants cannot offer any evidence to demonstrate the reasonableness or the alleged necessity of the challenged conduct.”

[**]   Like all other states, Masschusetts can offer whatever price it wants when purchasing services.  That is true, even if it has monopsony power (which is most unlikely in the legal services market).   As the Supreme Court noted in FTC v. SCTLA, if the price offered for assigned counsel fees is too low, the government takes the risk that not enough lawyers will accept the price.   Moreover, even if it is violating its own legislative or consitutional obligations, it does not lose antitrust protection against concerted refusals to deal by the sellers of the desired service.    For example, in FTC v. Indiana Federation of Dentists (“IFD”), 476 U.S. 447, 465 (1986), the dentists tried to justify their refusal to submit x-rays to insurance companies by saying that it was unlawful for non-dentists to review dental x-rays.  The Supreme Court clearly rejected the argument:

“That a particular practice may be unlawful is not, in itself, a sufficient justification for collusion among competitors to prevent it. See Fashion Originators’ Guild of America, Inc. v. FTC, 312 U.S. 457, 468 (1941).  Anticompetitive collusion among private actors, even when its goal is consistent with state policy, acquires antitrust immunity only when it is actively supervised by the State.  See Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 57 (1985). There is no suggestion of any such active supervision here; accordingly, whether or not the policy the Federation has taken upon itself to advance is consistent with the policy of the State of Indiana, the Federation’s activities are subject to Sherman Act condemnation.”

In addition, in its 1999 decision in California Dental Association v. FTC  (1999, No. 97-1625, 526 U.S. 756), the U.S. Supreme Court described the unlawful conduct in IFD as “a horizontal agreement among the participating dentists to withhold from their customers a particular service that they desire.”   The Court placed IFD in a string of cases where “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets,” and could be condemned after only a “quick look.”    Even though the Court is often reluctant to use the per se rule in the context of professional services, a concerted refusal to deal by Massachusetts bar advocates, to increase their fees or seek other better terms, would surely receive even quicker condemnation by the Court than did the IFD conspiracy.

        3] A recent Advisory Opinion (Feb. 6, 2003) from the Staff of the FTC’s Bureau of Competition to a group of Dayton, Ohio, physicians analyzes many of the issues that are raised when a group of professionals that are in competition in the provision of services get together to educate and lobby for increased compensation.  Their situation has many similarities to the efforts of the Massachusetts assigned counsel:

[PriMed] intends to create with other Dayton-area physicians an advocacy group to undertake “a campaign to inform and educate the general public” about, in the physicians’ opinion, the “ill effects and other consequences of the policies and procedures, including depressed reimbursement, by third party payers in Dayton.” The organization will be open to all Dayton physicians and thus may contain a majority of the area’s practicing physicians.

You informed us that two health plans in Dayton – each having at least 250,000 enrollees – cover a majority of the city’s insured population. Some Dayton physicians believe that these health plans have market power in Dayton that enables them to under-compensate Dayton physicians relative to physicians in comparable cities where the plans also do business. You assert that this alleged discrepancy in payments for services rendered to insureds, as well as other health plan policies and practices, disadvantages Dayton physicians and their patients. Among other things, you contend that health plan payments in Dayton are such that recruitment and retention of physicians is particularly difficult.

The FTC Staff Advisory Opinion goes on to give a very useful analysis.  Three excerpts are worth emphasizing here:

“Injury to competition and consumers would result if the proposed exchange of information facilitated an agreement among Dayton area physicians on prices to demand of health plans or an agreement to refuse to deal with health plans except on agreed terms.”

“The advocacy group intends to apply certain rules to prevent the development of anticompetitive physician conduct. It will not negotiate with health plans on behalf of member physicians. It also will not publish or share information that would be “conclusory or suggestive as to how an individual physician or physician group should deal with a third party issue or suggest how any physician will deal with any individual issues,” and will prohibit members from sharing among themselves information about their negotiations with any health plan. The occurrence of any of these activities, of course, would present very serious antitrust concern.”

CONCLUSION: “If the advocacy group undertakes the proposed activities in the manner you have described and consistent with the antitrust principles discussed above, then its operation does not appear likely to have anticompetitive effects and to violate the antitrust laws. Indeed, if the venture helps inform patients, employers, and payers, as well as physicians, about the operation of the Dayton health care market, while avoiding anticompetitive conduct, then its effect may be procompetitive. Accordingly, the Commission staff has no present intention to recommend enforcement action. If the physicians use the organization or its activities as a vehicle for collective action that unreasonably limits physician competition, however, then both the group and its members may be subject to such action.”

Because the Massachusetts lawyers have only recently engaged in a joint boycott and some have threatened future joint action, they need to be particularly squeaky clean when jointly addressing compensation issues.  [update Aug. 11, 2004: See Assigned Counsel Don’t’s & Do’s, based on the FTC’s Clark County (WA) Decision and Order]

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