Document: 526 U.S. 756119 S.Ct. 1604143 L.Ed.2d 935 SyllabusNOTE: Where it is feasible, a syllabus (headnote) will be released, as being done in connection with this case, at the time opinion issued. The constitutes no part of Court but has been prepared by Reporter Decisions for convenience reader. See United States v. Detroit Timber & Lumber Co., 200 321, 337. SUPREME COURT OF THE UNITED STATES CALIFORNIA DENTAL ASSOCIATIONv.FEDERAL TRADE COMMISSION CERTIORARI TO APPEALS FOR NINTH CIRCUIT No. 97 1625. Argued January 13, 1999Decided May 24, 1999 Petitioner California Dental Association (CDA), nonprofit association local dental societies to which about three-quarters State's dentists belong, provides desirable insurance and preferential financing arrangements its members, engages lobbying, litigation, marketing, public relations members' benefit. Members agree abide CDA's Code Ethics, which, inter alia, prohibits false or misleading advertising. CDA issued interpretive advisory opinions guidelines relating Respondent Federal Trade Commission brought complaint, alleging that violated §5 Act (Act), 15 U.S.C. § 45 applying so restrict two types truthful, nondeceptive advertising: price advertising, particularly discounted fees, advertising quality services. An Administrative Law Judge (ALJ) held have jurisdiction over found violation. As relevant here, restrictions under an abbreviated rule-of-reason analysis. In affirming, Ninth Circuit sustained Commission's concluded "quick look" analysis was proper case. Held: 1. extends that, like CDA, substantial economic benefit for-profit members. gives authority "corporatio[n]," C. §45(a)(2), "organized carry on business own profit members," §44. claim associations whose activities provide benefits their members clearly better reading Act, does not require supporting organization must devote itself entirely profits say anything how much entity's go raising bottom lines. There thus apparent reason let Act's application turn meeting some threshold percentage activity purpose even softer formulation calling total aimed pecuniary cover all membership organizations profit-making corporations without more. However, conferred upon profit-seeking professionals plainly fall within object enhancing "profit," jurisdictional touchstone. logic comport result, legislative history inconsistent interpretation. Pp. 7 11. 2. any anticompetitive effects given restraints are far from intuitively obvious, rule demands more thorough enquiry into consequences those than performed 11 24. (a) "quick-look" appropriate when observer rudimentary understanding economics could conclude question effect customers markets. See, e.g., National Collegiate Athletic Assn. Board Regents Univ. Okla., 468 85. This case fails present situation likelihood comparably might plausibly thought net procompetitive possibly competition. 14. (b) discount nondiscount are, face, designed avoid deceptive market characterized striking disparities between information available professional patient. existence significant challenges informed decisionmaking customer services suggests arguably protecting patients irrelevant call cursory treatment. review, brushed context described bar. appears reflect prediction costs competition associated eliminating across-the-board outweighed gains consumer created exact, accurate, easily verifiable. view may correct, implausible; neither court nor initially dismiss presumptively wrong. plausible explanation nonprice restrictions, namely restricting unverifiable claims would preventing distort market, likewise rules out Circuit's use restrictions. obvious triggers such shown. 14 21. (c) Saying conclusion required extended examination possible factual underpinnings received necessarily fullest Not every attacking restraint obviously candidate plenary examination. generally categorical line giving rise inference detailed What meet looking restraint's circumstances, details, logic. Here, less quick look initial assessment 21 128 F.3d 720, vacated remanded. Souter, J., delivered unanimous respect Parts I II, Part III, Rehnquist, O'Connor, Scalia, Thomas, JJ., joined. Breyer, filed concurring dissenting part, Stevens, Kennedy, Ginsburg, Opinion 1 NOTICE: subject formal revision before publication preliminary print Reports. Readers requested notify Decisions, Supreme States, Washington, D. 20543, typographical other errors, order corrections made goes press. 1625 2 ASSOCIATION, PETITIONERvFEDERAL 3 ON WRIT 4 [May 1999] 5 Justice Souter Court. 6 issues case: whether association, sufficed justify finding certain adopted antitrust laws. We hold (FTC Act) where, Appeals performed. * voluntary 19,000 including practicing State. re Assn., 121 F.T.C. 190, 196 197 (1996). exempt federal income tax 26 501(c)(6), covering "[b]usiness leagues, chambers commerce, real-estate boards, [and] boards trade," although subsidiaries give advantageous access various sorts insurance, liability coverage, real estate, equipment, cars, patients' bills. lobbies litigates interests, conducts marketing campaigns 723 (CA9 1997). 8 who belong through these Ethics (Code) following §10: 9 "Although dentist advertise, shall advertise solicit form communication manner material respect. properly serve public, should represent themselves contributes esteem public. Dentists misrepresent training competence way respect." App. 33. 10 number interpreting section,1 separate intended help comply state law advised disclosures they make engaging advertising.2 Responsibility enforcing rests first instance societies, applicants submit copies advertisements employers referral assure compliance Code. also actively seek potential violations Applicants refuse withdraw revise objectionable denied membership; who, after hearing, remain similarly recalcitrant censure, suspension, expulsion CDA. F.3d, 724. 12 complaint against applied FTC 38 Stat. 717, 45.3 alleged had unreasonably restricted Complaint ¶7. ALJ noted, "stated selection programs value $22,739 $65,127," F.T.C., 207. He there proof exerted power, establish violation Mass. Bd. Registration Optometry, 110 F. T. 549 (1988), since prevented using detriment both consumers accordingly Act. 272 273. 13 findings except his lacked disagreed. treated illegal per se. 725. alternative, (as well nonprice) Sherman Acts One Commissioner concurred separately, arguing Mass standard, se analysis, limitations Another dissented, evidence insufficient show either reason, power. affirmed, sustaining assertion ultimate merits. Id., 730. error But went explain "applied abbreviated, 'quick look,' unlawful sufficiently face do full-blown inquiry. [National 85, 109-110, n. 39 (1984)] ('The essential point can sometimes twinkling eye.' [Ibid. (citing P. Areeda, "Rule Reason" Antitrust Analysis: General Issues 37 (Federal Judicial Center, June 1981) (parenthetical omitted)).] It allows condemnation 'naked restraint' output 'elaborate industry analysis.' Id. 109." 727. 16 truncated several reasons. "amounted practice fairly 'naked' itself," ibid. justification, encouraged disclosure carried little weight because "it simply infeasible disclose required," id., 728, "the record fact led increased transparency pricing," non-price said 17 "[t]hese limitation, supply individual dentists' Areeda Hovenkamp, ¶1505 693 694 (Supp. 1997) . affect directly, comfort induce obtain nonemergency care otherwise Under we think restriction naked analysis." Ibid. 18 agreement intent restrain trade, were supported evidence. 728 dissent, Real took position did commercial operations. assuming jurisdiction, he argued, full-bore called for, requirements fixed prices banned 730 731. 19 granted certiorari resolve conflicts among Circuits association4 occasions analysis.5 524 ___ (1998). now vacate judgment remand. II 20 "persons, partnerships, corporations," 45(a)(2), defines "corporation" include "any company incorporated unincorporated, shares capital stock certificates interest, organized Although agreed precise extent definition, see 4, supra, long circumstances entity seeks itself. While claimed if American Medical 94 701, 983 984 (1980), respondent advances slightly different "over practices provid[e] businesses." Brief 20. urges deference interpretation reasonable. 25 Chevron A. Inc. Natural Resources Defense Council, Inc., 467 837 (1984), Mississippi Power Light Co. ex rel. Moore, 487 354, 380 382 (1988) (Scalia, J. concurring) (Chevron applies agency's statutory jurisdiction)). occasion review urged respondent's brief statute ordinary principles construction. 22 pains only profit," 44 one carries "of supportive devoted helping ways beyond immediate enhancement profit, here single-mindedly others. could, indeed, hardly supposed Congress notion covered organizations, opportunity bring avoiding where purposes asserting it. 23 Just profits, statute's purpose, satisfying To sure, proximate relation lucre appear; more, solely education lie outside reach, though ultimately affects deliver them. 24 drawing exercise however, contributions apparent. Through subsidiaries, interests. congeries confers de minimis merely presumed members; "profit,"6 makes difficulty concluding result. directs "prevent" broad set entities "from unfair methods affecting commerce acts commerce." 45(a)(2). Nonprofit behalf same capacity derivatively, least, incentives engage acts. up good advantages, member well; enjoy screen superficial disinterest while devoting serving interests concern doing breaking even. Nor, contrary petitioner's argument, jurisdiction. versions passed House Senate defined refer incorporated, joint stock, share-capital companies H. R. Conf. Rep. 1142, 63d Cong., 2d Sess., 11, (1914), Conference Committee subsequently revised definition form, alteration indicates intention entities.7 And history, text devoid hint exemption such. 27 therefore pursue sufficient sustain promulgated III 28 distinct questions sufficiency substantiality conclusions. Because decide erred matter quick-look (with consequence sustainable), reach conclusion.8 29 85 "naked requires competitive justification absence 110. Elsewhere, "no elaborate demonstrate character " horizontal agreements competitors discuss prices, Soc. Professional Engineers 435 679, 692 (1978), withhold particular desired service, Indiana Federation Dentists, 476 447, 459 (1986) (quoting Engineers, 692). each cases, formed basis what come league's television plan expressly limited (the games televised) minimum price. U.S., 99 100. "an absolute ban bidding." 692. "a participating service desire." 459. day great ascertained. 134 1010, 1020 (CA10 1998) (explaining "where effects"); Chicago Sports Limited Partnership Basketball 961 F.2d 667, 674 676 (CA7 1992) (finding adequate assessing rejecting proffered justifications); cf. Brown University, 658, 677 678 (CA3 1993) full universities sought financial aid needy students noting contrast "embodied strong self-interest parties them"). 30 us, obvious. Even Breyer's bars truthful verifiable prima facie anticompetitive, post, (opinion part), place burden adopt them, very issue theory general rule. Ultimately our disagreement Breyer turns responses issue. Whereas accepts, seems done, advertisement generally, see, 5, 7, 10, us effect, least advertising9 patient.10 Cf. Carr Mathewson, Economics Firms: A Study Legal Organization Firm, 33 Econ. 307, 309 (1990) complex services, "inherent asymmetry knowledge product" arises "professionals supplying knowledgeable [whereas] demanding uninformed"); Akerlof, Market 'Lemons': Quality Uncertainty Mechanism, 84 Q. 488 (1970) (pointing problems asymmetrical information). relatively rare comparability packages established, get verify availability magnifies dangers tends resist calibration monitoring clients, partly specialized evaluate determining whether, degree outcome attributable (like poor job tooth-filling) something else tough walnut). Leland, Quacks, Lemons, Licensing: Theory Minimum Standards, 87 Pol. 1328, 1330 (1979); B. Furrow, Greaney, S. Johnson, Jost, Schwartz, Health §3 1, p. 86 (1995) (describing common lay incapable adequately evaluating medical services"). Patients' attachments professionals, rationality difficult assess, complicate picture further. Evans, Professionals Production Function: Can Competition Policy Improve Efficiency Licensed Professions?, Occupational Licensure Regulation 235 236 (S. Rottenberg ed. 1980) long-term relationship client series spot contracts" rather agreement, often implicit, deal future unspecified incompletely specified according rules," adding "[i]t clear [implicit contracts] reconciled promotion effective markets immediately treatment comparable classic limit 31 likely began unexceptionable statements "price fundamental competition," 727, "[r]estrictions ability normally find lower compete price," Bates State Bar Ariz., 433 350, 364 (1977); Morales Trans World Airlines, 504 374, 388 (1992)). then acknowledged nonetheless furthered "legitimate, indeed procompetitive, goal advertising." 728. might, juncture, recognized considered possibility "normally" world, promoting reducing occurrence advertising.11 Instead, confined "CDA's appear prohibit discounts ibid., followed observation 32 observations brush describe effects. Assuming supports essentially bar discounts, follow here. Whether announced say, first-time customers, conveying listed original checkups, X-rays, fillings, across board, susceptible empirical priori suspicious discipline specific example necessary condition plausibility practical defy comparison shopping. principle short run, recurrence measure intentional accidental misstatement due breadth leak skeptical undercutting method's effectiveness. Econ., 495 "dishonest dealings tend drive honest market"). be, too, continue attract indefinitely, work precisely just procompetitive. Put another way, elimination (and hence competition) (at regulators). implausible, wrong.12 theory, true, ruled support foreclosed utility evidentiary discussion point. indirectly justifications stated petitioner alone incentive introduce evidence, statement sounds justified further shift adduce hard nature policy; court's adversion moment implicit burden-shifting underscores leniency restrictions' 34 tolerant accepting argument services." ¶1505, pp. (1997 Supp.)). sentence cited, puzzling, presumably themselves. universe assuredly has), limitation delivery came closest addressing latter assert limiting regarding safety "prevents fully describing package offer," "[t]he so," suggestion puzzling. If actually induces absence, reduce demand supply; course producers' producer-imposed artificially prices,13 Leaseways, Truck Leasing 744 588, 594 595 1984) ("An equates price-fixing agreement. firms raise price, market's product fall, amount supplied too words, restricted. instead mentioned reduced supply. Thus, exceptions output, dividing effects"). 35 "claims inherently misleading," responded "does banning regard fact, said, assumed, escape justifiable true. assumption why gave countervailing, equally plausible, difficult-to-verify patient market. is, understand nothing puffery, Bates, 366 (claims legal "probably measurement verification and, false"); 383 384 ("[A]dvertising verification; accordingly, warrant restriction"), notwithstanding citation (to never faces unverifiability claims, raised Bates), 5.14 36 CDA; competitiveness if, example, many sort claims. final anticompetitive. point, rather, competing indulgently treated. light focus adequacy Appeals's thorough-going, novo contains impress merits review. obligation deliberate arise door satisfied instance. Had engaged painstaking league (compare pages 8), confronted reasoning conclusion. Certainly look." Lingering it, surprisingly, stops endorsing task hand. not, course, challenge output" need analysis" "requir[e] justification," 110, one) truth categories terms "per se," look," "rule reason" them appear. recognized, "there bright separating Rule Reason analysis," "considerable inquiry conditions" so-called se" justified. 104, 26. "[W]hether presumption actual remains challenged enhances competition." 104. Indeed, scholar enriched metaphor eye" most condensed himself cautioned risk speaking 'spectrum' reasonableness passing claims: "There always sliding scale appraising reasonableness, formula deceptively greater precision hope Nevertheless, vary circumstances." ¶1507, 402 (1986).15 At time, Professor emphasized necessity, quasi-common realm antitrust, courts "By exposing reasoning, judges subjected others' critical analyses, lead future." ¶1500, 364. demonstrate, drawn required, restraint. experience clear, confident principal tendency (or quicker) look, sedulous one. analyses identical For now, scrutinize relative tendencies, remand fuller consideration ordered. 40 41 PETITIONERv.FEDERAL 42 43 whom Ginsburg join, part. petitioner, join opinion. circumstances," "[w]hat case," "confident restriction." Ante, (internal quotation marks omitted). unobjectionable my view, traditional facts affirming below. 46 lawful "factual findings," insofar "substantial evidence," "make §1." 454 455 (1986). determine so, ask overall. Rather, Commission), break down four classical, subsidiary questions: (1) issue? (2) effects? (3) Are offsetting justifications? (4) Do power difference? 47 important first: 98 100 (1984) (NCAA); Broadcast Music, Columbia Broadcasting System, 441 (1979). Those Association's (Dental Association) ethical literally refers, namely, promise refrain 'false respect.' §10 (1993), 33). arising implemented innocent-sounding practice, opinions, guidelines, enforcement policies, applications. 190 implemented, reached nominal target, prevent particular, determined rule, practice: 48 "precluded dentist's fees low, reasonable, affordable," 301. 49 board discounts," ibid.; 50 "prohibit[ed] claims," 308. 51 basic restrained low fact. ones. facts. agency Federation, difficult. 52 referred explicitly pointed out, "advisory indicate descriptions 'reasonable' 'low' comply" rule; "numerous cases" "advised objections special offers, senior citizen new apparently truth"; "expressly states "without whether" "true false." 729 53 instances Association, truthfulness issue, recommended denial wishing "reasonable quoted advance," "major savings," "making teeth cleaning inexpensive." C., testimony "across-the-board literal 'would probably take telephone book' '[n]obody going really fashion.' 302. suppressed "we guarantee year," "latest cosmetic dentistry," "gentle dentistry caring environment." 308 310. 54 further, evidence" appeals, "will intervene ought standard misapprehended grossly misapplied." Universal Camera Corp. NLRB, 340 474, 490 491 (1951). enough warranting intervention. Consequently, three above B 55 genuine adverse competition"? 460; ¶1503a, 372 377 (hereinafter Areeda). tendencies fee inexpensive, receive inform charges know buy service. That turn, offering prices. means prove offer spell obvious? central nervous system economy." Socony-Vacuum Oil 310 150, 226, 59 (1940); cf., (1977) (price plays "indispensable role allocation resources free enterprise system"); Virginia Pharmacy Citizens Consumer 425 748, 765 (1976). (in alternative) 307; Socony-Vacuum, 222 228 "spot-market oil" competition). purposes, right assume applies, note serious restraints. 56 tendencies. "mere puffing," recognized. 317 318; ante, days youth, billboards near Emeryville, California, home AAA baseball's Oakland Oaks, displayed name "Painless" Parker, Dentist, gone along Oaks. parents still want care." Others 1-year guarantees. kind itself, unless know, purchase, difference That, rate, late anyone deny restricts legitimate respect, Paramount Famous Lasky 282 30, (1930); First Nat. Pictures, 44, (1930), inhibits learning 57 Nor rely proposition quality. affirmatively establishing quality-based California. 311. Unsurprisingly, choose based "information type service." 249. Similarly, credited "advertising 'absolutely' patients," conversely, restraining decrease attract. Finally, looked suffered forced discontinue care. 58 amounted attempt eliminate 300. "deprive healthy patronage." added "anticompetitive restrictions" "plain." agreed. believe mentioned. C despite redeeming virtues. ¶1504, 383. closer theory. argues inextricably tied effort goes, effectively stop making quality, mislead consumer. 60 problem similar Notwithstanding theoretical plausibility, bear claim. Commission, expert area uncertain efficiencies rooted (unproved) "challenges misleading." 316 (emphasis added). Regardless, wrote, pricing." With stressed "offered convincing been, harmed restricts." 319. unsubstantiated contention misleading" "justify 61 exception, reveals untruthful exception virtually sift 317, valid defense. NCAA, 119; 384. 62 usual §1 defendant bears justification. 695 (1978); ¶1507b, 397; ¶1914c, 313 315 (1998); 1019 (CA10), cert. denied, 525 Univ., 669 1993); Capital Imaging Associates Mohawk Valley Associates, 996 537, 543 (CA2), 510 947 (1993); Kreuzer Academy Periodontology, 735 1479, 1492 1495 (CADC 1984). correct established D 63 additional circumstance, marketplace. ¶1503, 376 377. disagreeing single possess difference. region mid-Peninsula, accounted 90% marketplace; average 75%. 314. addition, entry expensive (leaving graduates school $50,000 $100,000 debt), opening office (which $75,000 $100,000). 316. important, valuable, 312 313, 64 These facts, Appeals' "enough harm [the Association's] setting correct. Restrictions Palo Alto respond readily handful (10%) Association. remaining Facts previously overcome showing 456 457; Loew's 371 38, (1962); Shoe 370 294, 341 344 accord, Aluminum America, 148 416, 424 (CA2 1945). departing precedent 65 Court's conducted insufficient, remands reason. fail? answers unsatisfactory divides overall component parts adheres judicial allocating burdens persuasion 66 Did misconceive restrictions? After all, "may suppress destroy competition" "merely regulat[e] perhaps thereby promot[e] 246 231, 238 (1918). majority says adds 67 15. 68 criticizes failing recognize advertising" 'normally' ." 16. 69 consider differences. rejected "treatment" customarily "to i.e., FTC's (alternative) approach. 726 "policies ads"; instead, "have enforced counsels caution purport sweep broadly." 70 misunderstand effect? says: 71 "If prices." 19. 72 flow majority, Appeals, mistaken. care" imposes artificial barrier independent decision gentle barrier, inhibit getting together ;, 404 1998). 6. 73 inadequately 74 "[T]he [Association's] regulators)." 18. 75 accurate motives adopting relevance. Trade, 238. this, other, theoretically virtue offsets Both answered question. 76 existed practice. 319 320. asking rules, enforced, "augment[ed] increase[d] efficiency," pricing" effects, redeemed 77 correctly points "petitioner (Indeed, reasons defendants 8.) incentive, offers concrete counter Petitioner's failure produce "explain[s] court] market." 78 summarizes concerns follows: "Assuming [such] here." 17. accept, assume, premise: 4. accept true follows premise, "net effects" "obviously" premise. obviousness laid beginning. Has shown tendencies? has. virtues? not. world 79 upshot, principles, unexceptional X rays insurers willingness insurers, indifferent, compared matters undesirability having range deciding proved, offered 462 464. "power" enforce (control 75% markets). 460. cases reconciled. 80 81 rigid; admits variation circumstances. reflects gradual evolution period years. represents carefully blend objectives administrative necessity. considerable advance, and/or refute theories former ever reaching conclusion, Bok, Section Clayton Merging Economics, Harv. L. Rev. 266 (1960), forth criticism "Government wins," Von's Grocery 270, 301 (1966) (Stewart, dissenting). abandonment basic, 82 reasons, respectfully dissent Notes 83 substantially mirror Business Professions Code, Cal. Bus. Prof. Ann. §§651, 1680 (West 1999), propositions: "A it: "a. misrepresentation fact; "b. deceive partial facts; "c. create unjustified expectations favorable results costs; "d. relates specifically disclosing variables factors; "e. representations implications reasonable probability cause ordinarily prudent person deceived. "Any refers cost omissions, identifiable, phrases 'as as,' 'and up,' 'lowest prices,' words import. uses relativity 'low fees' data substantiating relativity. advertises accuracy relativity." "Advertising 724 (some internal include: "1. dollar nondiscounted service[.] "2. Either "3. length offered[.] "4. Verifiable fees[.] "5. [The identity of] [s]pecific groups qualify conditions qualifying discount." 3. prohibition practices, 45(a)(1), overlaps scope prohibiting (1986), relied adjudicating 292, Compare 984, aff'd, 638 443 1980), aff'd divided Court, (per curiam) (1982), Comm'n Egg Nutrition, 517 485, 1975), Community Blood Bank FTC, 405 1011, 1017 (CA8 1969). 5. Bogan Hodgkins, 166 509, 514 n.6 1999); 1992); 1998); Healthcare, Healthsource, 986 589, (CA1 1993). 88 consistent holdings Courts Appeals. egg industry," 488, fell "business aspects," 448, AMA's reach. confer certainly falls addressed blood bank hospitals. involved ad hoc basis," 1018, meaning language," deleted). "[a]ccording accepted 'profit' gain investment expenditures, receipts payments taken account," 1017, breath noted term's "meaning derived used," 1016. Our Bank, restrictive expenditures. (It saying membership, profit.) Nonetheless, today do, annual surpluses, players. foreclose paradigms ambit contributing sense, educational efforts, implicate 89 7. letter Bureau Corporations Joseph E. Davies Senator Francis G. Newlands, bill's sponsor Committee, written August 8, 1914, revisions, included memorandum dated expressed bill extend purportedly "furnish convenient vehicles understandings fixing law." Bill: Letter Chairman Comm. Interstate Commerce, Transmitting Certain Suggestions Relative Bill (H. 15613) Create (1914). 90 8. leave assess record, extensive enhanced record. 91 9. term used, established. Algoma 291 67, (1934) 92 10. "The operates profession distinguished violates unrealistic professions interchangeable activities, automatically apply concepts originated areas. aspect, features professions, viewed context, differently." Goldfarb Bar, 421 773, 788 789, (1975). 93 differences." Post, language cites inappropriate "some caution" purported Caution appropriate, constitute differences 12. relevance," 12, thinks "adequately question," answered, avoided Breyer. shifting requires, indication identified Where, somewhat complex, do. 95 13. wonders "mea[n] quality." preceding shows, intend somehow "affect output," constant. mean absent undertakes, 96 'mere puffing' deceives regulation.' 318. puffery governmental regulation, Other commentators views. Kolasky, Counterpoint: Department Justice's "Stepwise" Approach Imposes Too Heavy Burden Parties Horizontal Agreements, 41, (Spring ("[I]n courts, balancing test, require"); Piraino, Making Sense Reason: New Standard Vand. 1753, 1771 (1994) ("[C]ourts undertake varying degrees depending legality easy impact ambiguous"). Klein, Analyzing Agreements Will Provide Much Needed Structure Review, 1990) (examination "is scrutiny efficiency meets defendant's coming forward justification").

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