Opinion ID: 747684
Heading Depth: 3
Heading Rank: 1

Heading: Price Advertising

Text: 34 The Commission concluded that the CDA's restrictions on price advertising--namely, the effective ban on volume discounts and statements describing prices as low or reasonable--were per se violations of Section 1 of the Sherman Act and Section 5 of the FTC Act. We disagree with its use of per se analysis but sustain its alternative conclusion that an abbreviated rule of reason analysis applies. 35 There is some support among older cases for the FTC's use of per se scrutiny. See United States v. Gasoline Retailers Ass'n, 285 F.2d 688, 691 (7th Cir.1961) (finding ban on price signs to be part of conspiracy to stabilize prices). In recent cases, however, per se analysis has only applied to price fixing, output limitations, horizontal market divisions, tying, and group boycotts. See American Ad Management, Inc. v. GTE Corp., 92 F.3d 781, 784 (9th Cir.1996). The Supreme Court, and this court, have been unwilling to expand the categories of conduct subject to the per se prohibitions. See NCAA v. Bd. of Regents of Univ. of Oklahoma, 468 U.S. 85, 100, 104 S.Ct. 2948, 2959-60, 82 L.Ed.2d 70 (1984); American Ad Management, 92 F.3d at 784-85. This is especially true where the economic impact of the restraint is not immediately obvious, see Indiana Federation of Dentists, 476 U.S. at 458-59, 106 S.Ct. at 2017-18, and where the restraint is a rule adopted by a professional organization. See National Soc'y of Professional Engineers v. United States, 435 U.S. 679, 692-96, 98 S.Ct. 1355, 1365-68, 55 L.Ed.2d 637 (1978). 36 We do not doubt that the FTC has gained considerable experience with advertising restrictions since AMA. See Mass. Board, 110 F.T.C. at 549. It may be correct that some types of price advertising restrictions amount to bans on price competition that warrant per se condemnation. See Arizona v. Maricopa County Medical Soc'y, 457 U.S. 332, 344, 102 S.Ct. 2466, 2473, 73 L.Ed.2d 48 (1982) (Once experience with a particular kind of restraint enables the court to predict with confidence that the rule of reason will condemn it, it has applied a conclusive presumption that the restraint is unreasonable.). But we cannot endorse the use of per se analysis in this case, which concerns a set of ethical guidelines promulgated by a professional organization for the apparent purpose of preventing false and misleading advertising. Unlike the situation in AMA and Mass. Board, the CDA's policies do not, on their face, ban truthful, nondeceptive ads. The allegation instead is that the rules have been enforced in a way that restricts truthful advertising. The value of restricting false advertising (which may itself violate the FTC Act) counsels some caution in attacking rules that purport to do so but merely sweep too broadly. As a result, we do not believe that this type of restriction warrants per se condemnation without further inquiry into its effects on competition. 37 We therefore analyze the restraints under the rule of reason, which requires balancing the anticompetitive effects and possible efficiency gains or business justifications of the challenged practice. See Professional Engineers, 435 U.S. at 691, 98 S.Ct. at 1365. In this case, the FTC applied an abbreviated, or quick look, rule of reason analysis designed for restraints that are not per se unlawful but are sufficiently anticompetitive on their face that they do not require a full-blown rule of reason inquiry. See NCAA, 468 U.S. at 109-10 & n. 39, 104 S.Ct. at 2964-65 & n. 39 (The essential point is that the rule of reason can sometimes be applied in the twinkling of an eye. (internal quotations omitted)). It allows the condemnation of a naked restraint on price or output without an elaborate industry analysis. Id. at 109, 104 S.Ct. at 2964. Although we have held that the quick look analysis should be the exception, rather than the rule, see American Ad Management, 92 F.3d at 789, we conclude that the FTC properly applied it here. 38 The restrictions CDA placed on price advertising amounted in practice to a fairly naked restraint on price competition itself. As the Commission and courts have found, price advertising is fundamental to price competition--one of the principal concerns of the antitrust laws. It plays an indispensable role in the allocation of resources in a free enterprise system. Bates v. State Bar of Arizona, 433 U.S. 350, 364, 97 S.Ct. 2691, 2699, 53 L.Ed.2d 810 (1977). Restrictions on the ability to advertise prices normally make it more difficult for consumers to find a lower price and for dentists to compete on the basis of price. See id.; Morales v. Trans World Airlines, 504 U.S. 374, 388, 112 S.Ct. 2031, 2039, 119 L.Ed.2d 157 (1992). This is particularly true of a restriction on advertising price discounts, a significant basis of price competition. See Mass. Board, 110 F.T.C. at 605. 39 The complexity in this case is that CDA asserts as justification for its restrictions the legitimate, indeed procompetitive, goal of preventing false and misleading price advertising. In particular, it claims, the rules simply require more disclosure, which enhances rather than limits price competition. We agree that as a general matter disclosure can augment competition and increase market efficiency by providing consumers more information. The problem is with the nature and amount of disclosure required. As the Supreme Court has recognized in other contexts, disclosure requirements can become so onerous that they actually stifle the information that consumers receive. Morales, 504 U.S. at 389-90, 112 S.Ct. at 2039-40. In practice, CDA's disclosure requirements appear to prohibit across-the-board discounts because it is simply infeasible to disclose all of the information that is required. Indeed, the record provides no evidence that the rule has in fact led to increased disclosure and transparency of dental pricing. Consequently, we do not think this possible justification, on these facts, requires more than a quick look under the rule of reason.