Law Antitrust - Instructor: Dwight Drake FTC v. Indiana Federation of Dentists (1986) Basic Facts: Indiana Dental Assoc., comprised of 85% dentist in Indiana, reused to provide x-rays to insurance carriers for review. Insurers required as cost containment measure. Dentist said it threatened their professional independence and economic well-being. Assoc. agreed to FTC consent decree, and then new, smaller group formed (Indiana Federation of Dentists) concentrated in three communities. FTC ruled policy violated Section 5 of FTC Act as “unfair method of competition.” What did Seventh Circuit hold? What did 7 th cir say was relevant market? Was there evidence restrain resulted in higher patient costs?

Law Antitrust - Instructor: Dwight Drake FTC v. Indiana Federation of Dentists (1986) Supreme Court upheld FTC ruling – violation of Sherman 1. - Absent concerted behavior, individual dentists would have complied with insurers requests to remain competitive. - Although this group boycott, refuse to pigeon hole as per se violation. Will use rule of reason – professional association and impacts of practice not immediately obvious. - Here not price fixing, but horizontal agreement that is anticompetitive. Refusal to compete on package of services impairs market ability to advance social welfare. Absent pro-competitive benefit, agreement to limit consumer choice not sustainable under rule of reason. - FTC failure to define relevant market not make its finding erroneous as matter of law. Sufficient that it found concentrations in a few cities to show actual anticompetitive effects, which is purpose of market inquiry.

Law Antitrust - Instructor: Dwight Drake FTC v. Indiana Federation of Dentists (1986) Supreme Court upheld FTC ruling – violation of Sherman 1. - Failure to find that prices higher with restrain not vital. Concerted action to withhold information as to cost-justifying enough to disrupt functioning of price-setting mechanism without proof of higher prices. - Justification defense of legal, moral, ethical quality of care not valid. Argument is that information will cause patients to make bad decisions is “frontal assault” on antitrust policy. No evidence to show insurers will disregard patient’s well-being as they, too, must compete for business.

Law Antitrust - Instructor: Dwight Drake California Dental Assoc. v. FTC (Sup. Ct. 1999) Base Facts: California Dental Assoc. included 75% of all Cal. Dentists. Rules (1) prohibited across the board discounts, (2) prohibited promotional statements about cheap or reasonable prices, (3) prohibited claims about quality or superior services, (4) discouraged solicitations, and (5) imposed disclosure requirements for advertising discounts. FTC held price constrains illegal per se and non-price constrains illegal after quick look under Sherman 1 because of market power. Ct. of Appeals affirmed after quick look. What is purpose of quick look? What was purpose of restrictions? What effect – anti or pro competitive? Who was hurt by restrains? Are less restrictive restraints possible?

Law Antitrust - Instructor: Dwight Drake California Dental Assoc. v. FTC (1999) Issue: Did FTC error in applying quick long and per se analysis? Decision: Yes -Anticompetitive effects not intuitively obvious. Restrictions may be pro- competitive due to knowledge gap of patients, risks of false advertising. May have no effect on the quantity of dental services. Can’t dismiss pro-competitive effects as presumptively wrong. -Terms “Per Se”, “Rule of Reason” and “Quick Look” not fixed. Flow with facts of each case. Key issue is whether restrain enhances competition. Look to circumstances, details and logic of restrain. If clear, quick look is all that is needed. If not clear, as here, more detailed review warranted. Dissent: (Breyer, Stevens, Kennedy, Ginsburg) – Price, advertising, non-price constrains all hurt competition and consumers. Antitrust injury is “plain”. Can prohibit false advertising without prohibiting all advertising.

Law Antitrust - Instructor: Dwight Drake Rothery Storage & Van Co. v. Atlas Van Lines (D.C. Cir. 1986) Basic Facts: Deregulation of moving industry made it possible for independents to compete with major movers who work with independent agents. Atlas adopted rule that it would terminate agency contract and deny Atlas services to any independent who handled business for own account. Independents alleged Atlas actions were illegal group boycott. Dist. Ct. granted Atlas summary judgment motion. How big of market share did Atlas have? How did Atlas hurt independents? Was price a factor? How?

Law Antitrust - Instructor: Dwight Drake Rothery Storage & Van Co. v. Atlas Van Lines (D.C. Cir. 1986) Appeals Ct. (Bork) affirmed Atlas summary judgment. - At 6% market share, no issue of price or output control of market. Sub-market analysis not proven, nor tight oligopoly claims. Analysis might begin and end with no market power. - Free rider claim is supported. Independents have capacity for free ride on Atlas national rep, facilities, dispatching services, etc. - If free-riding allowed to continue, Atlas might decide to discontinue services which would hurt market. Its subsidy to competing agents may cut marginal revenue so less can be offered. Restrain here counter free-riding. - Restrain here really ancillary to main joint venture between Atlas and its agents. Addyston Pipe.

Law Antitrust - Instructor: Dwight Drake Rothery Storage & Van Co. v. Atlas Van Lines (D.C. Cir. 1986) Concurring: - Reject Majority view that lack of market power requires no balancing of anticompetitive and pro-competitive effects. Majority wrong in suggesting only purpose of antitrust is control of output and prices. - Rule of Reason analysis is not decided solely by looking at market shares and efficiency. Market share important, but not only factor to consider.

Law Antitrust - Instructor: Dwight Drake Broadcast Music Inc. v. Columbia Broadcasting (Sup Ct. 1979) Base Facts: ASCAP and BMI secured nonexclusive licenses from composers and artists and then master licensed to users. CBS claimed master licenses controlled and fixed prices and were per se illegal. Ct of Appeals held per se illegal. What was underlying purpose of master license? What impact on market? Who gets hurt by this restraint? What was issue for court?

Law Antitrust - Instructor: Dwight Drake Broadcast Music Inc. v. Columbia Broadcasting 1979) Issue: Were master licenses per se illegal price fixing under Sherman 1. Decision: No. Remand for rule of reason analysis. - To apply per se, must first inquire whether conduct interferes with free market System. - Blanket licenses not naked restrain, is nonexclusive, not interfere with competition, and is necessary to market the product. - Not illegal where agreement on price necessary to market product.

Law Antitrust - Instructor: Dwight Drake Broadcast Music Inc. v. Columbia Broadcasting 1979) Dissent (Stevens) - No per se violation holding is correct. But no need to remand because record shows blanket license violates Sherman 1 under Rule of Reason. - Market dominated by ASCAP blanket “all-or-nothing” license that is patently discriminatory. Price paid unrelated to quantity or quality used. All buyers must pay for more than they want. - No price competition between separate compositions. Composers disinclined to go direct. - Large buyers (CBS) are also protected by antitrust.