Legal Document

476 U.S. 447 106 S.Ct. 2009 90 L.Ed.2d 445 FEDERAL TRADE COMMISSION, Petitionerv.INDIANA FEDERATION OF DENTISTS. No. 84-1809. Argued March 25, 1986. Decided June 2, Syllabus Respondent organization of dentists in Indiana promulgated a policy requiring its members to withhold x rays from dental insurers connection with evaluating patients' claims for benefits. The Federal Trade Commission (FTC) issued cease-and-desist order, ruling that the constituted an unfair method competition violation § 5 Act, since it amounted conspiratorial restraint trade 1 Sherman Act. Court Appeals vacated FTC's order on ground was not supported by substantial evidence, holding findings respondent's x-ray anticompetitive were erroneous; inadequate because failure define market which respondent allegedly restrained and establish had power restrain market; FTC erred determining whether alleged among actually resulted higher costs patients insurers. Held: 1. factual regarding are evidence. There is no dispute conspired themselves rays, finding respect cooperation insurers' requests diminished where held sway also finds adequate support record. Pp. 455-457. 2. Evaluated under Rule Reason, sufficient as matter law i.e., unreasonable trade, hence Respondent's takes form horizontal agreement their customers particular service they desire. Absent some countervailing procompetitive virtue, such cannot be sustained Reason. This conclusion precluded absence specific or find more costly services than would have chosen if able evaluate conjunction claim forms. Nor do noncompetitive "quality care" considerations justify policy. And consistent Indiana's supposed against submission insurers, immunized antitrust scrutiny. Anticompetitive collusion private actors, even when state policy, acquires immunity only supervised State, there suggestion supervision here. 457-465. 745 F.2d 1124 (CA7 1984), reversed. WHITE, J., delivered opinion unanimous Court. Marcy J.K. Tiffany, petitioner. Bruce W. Graham, Lafayette, Ind., respondents. Justice WHITE case concerns commercial relations certain dentists, patients, health care question presented correctly concluded conspiracy refuse submit use benefits determinations "unfair competition" 38 Stat. 719, amended, 15 U.S.C. 45 (1982 ed. Supp. II). 2 * Since 1970's, responding demands policyholders, attempted contain cost treatment by, other devices, limiting payment "least expensive yet treatment" suitable needs individual patients. Implementation cost-containment measures, known "alternative benefits" plans, requires evaluation insurer diagnosis recommendation treating dentist, either advance following provision care. In carry out evaluation, frequently request submit, along insurance forms requesting benefits, any been used dentist examining patient well information concerning diagnoses recommendations. Typically, accompanying reviewed lay examiners, who approve or, materials submitted raise recommended course fact necessary, refer consultants, licensed further review. On basis available, supplemented appropriate diagnostic aids, consultant may recommend claim, deny it, pay less treatment. 3 Such review decisions has viewed threat professional independence economic well-being. early Dental Association, comprising 85% practicing State Indiana, initiated aggressive effort hinder efforts implement alternative plans enlisting member pledge forms.1 Association's met considerable success: large numbers signed pledge, operating found difficult obtain compliance accordingly choose employ means making (for example, visiting office conducting independent oral examination) abandon altogether. 4 By mid-1970's, fears possible liability dampened enthusiasm opposing 1979, Association number constituent societies consented them cease desist prevent submitting rays. re Assn., 93 F.T.C. 392. Not all content leave dentist. 1976, group formed Federation Dentists, this case, continue pursue resisting Federation, styled itself "union" belief label stave off liability,2 immediately "work rule" forbidding Although Federation's membership small, numbering 100, highly concentrated around three communities: Anderson, Fort Wayne. succeeded nearly 100% specialists Anderson area, approximately 67% Lafayette. areas strength, successful continuing enforce prior refusal 1978, complaint alleging substance complying Following lengthy proceedings including full evidentiary hearing before Administrative Law Judge, ruled organize 101 57 (1983). based unlawful standards judging restraints developed Court's precedents interpreting E.g., Chicago Board v. United States, 246 231, 242, 62 L.Ed. 683 (1918); National Society Professional Engineers 435 679, 98 1355, 55 637 (1978). both own rays; absent restraint, tended lead compete policies dealing insurers; those strong, actual effect eliminating preventing obtaining access desired manner. These effect, concluded, proof occurred provided. Further, rejected argument withholding reasonable might make inaccurate proper level thus injure insured patients: evidence companies result Finally, contention actions exempt scrutiny benefit determination companies. existed, event existence justified dentists' unsupervised trade. 6 sought judicial Commission's States Seventh Circuit, (1984). Accepting characterization rule merely ethical moral designed enhance welfare majority erroneous. According majority, did offering nor, accepting finding, prevented competition. court offer precise definition market. faulted third panel concurred judgment solely insufficient element tend compete. 7 We granted certiorari, 474 900, 225, 88 224 (1985), consider vacating misconstrued applicable principles " 'misapprehended grossly misapplied' test," American Textile Manufacturers Institute, Inc. Donovan, 452 490, 523, 2478, 69 185 (1981) (citation omitted). now reverse. II 8 issue competition," involves legal determinations. As former, our governed 45(c), provides "[t]he facts, shall conclusive." statute forbids "make appraisal testimony, picking choosing uncertain conflicting inferences." Algoma Lumber Co., 291 67, 73, 54 315, 318, 78 655 (1934). Rather, essentially identical "substantial evidence" standard agency factfinding, must accept "such relevant mind conclusion." Universal Camera Corp. NLRB, 340 474, 477, 71 456, 459, 95 456 (1951); see Beneficial FTC, 542 611, 616 (CA3 1976), cert. denied, 430 983, 97 1679, 52 377 (1977). 9 issues presented—that is, identification governing application facts are, contrast, courts resolve, although considering give deference informed practice condemned "unfair." See Sperry & Hutchinson 405 233, 92 898, 31 170 (1972); Atlantic Refining Co. 381 357, 367-368, 85 1498, 1505, 14 443 (1965); Cement 333 683, 720, 68 793, 812, 1010 (1948). "unfairness" Act necessity, elusive one, encompassing practices violate laws, supra, at 689-695, S.Ct., 797-800, but determines public reasons, Hutchinson, U.S., 244, 905. Once rationale unfair, however, familiar administrative dictate decision stand fall basis, reviewing reasons why deemed unfair. id., 245-250, 906-08; cf. SEC Chenery Corp., 318 80, 63 454, 87 626 (1943). us, sole collective 26 209, Accordingly, us findings, III 10 requested suppressing first these can serious dispute: abundant record reveals one primary reasons—if reason promulgation enforcement so-called 11 second crucial finding—that suppressed—the Circuit unsupported two theories. First, stated aspect would, Second, assuming otherwise cooperating companies, impair competition, continued allow benefits: specifically, "the IFD allowed visit examine patient's clinical aids formulating treatment." F.2d, 1143. 12 Neither criticisms founded. "[i]n . concerted behavior, subject forces creating incentives comply third-party insurers," F.T.C., 173, common sense theory, upon reasonably rely, documents, newsletters circulated revealing perceived unrestrained colleagues App. Pet. Cert. 289a, 306a-308a. Moreover, outside collectively refused little difficulty requests. 172. A "reasonable mind" could conclude obvious seeking will cooperate (and elsewhere) 13 most significant (that vicinity Lafayette) unable forced resort other, costly, purpose determination. nor brief identifies suggesting impact ability incorrect. lower court's discounted allowing costly—indeed, prohibitively costly—methods unpersuasive. remains insurers) service: pretreatment through forwarding activities denial between acquiring manner forgoing To extent, least, restrained. IV legally Act—that constitutes "unreasonable" Under precedents, adjudged fits within class "per se unreasonable, violates what come "Rule Reason," "test legality imposed regulates perhaps thereby promotes suppress destroy competition." 238, 385 244. members' dealings resembles labeled "group boycotts": deal terms covered insurance. Cf. St. Paul Fire Marine Insurance Barry, 438 531, 2923, 932 (1978); Paramount Famous Lasky 282 30, 51 42, 75 145 (1930). past boycotts per se, General Motors 384 127, 86 1321, 16 415 (1966); Klor's, Broadway-Hale Stores, 359 207, 79 705, 741 (1959), we decline resolve forcing into "boycott" pigeonhole invoking rule. observed last Term Northwest Wholesale Stationers, Pacific Stationery Printing 472 284, 105 2613, 202 category classed expanded indiscriminately, approach generally limited cases firms boycott suppliers discourage doing business competitor—a situation obviously present slow condemn rules adopted associations (1978), and, general, extend analysis context relationships obvious, Broadcast Music, Columbia Broadcasting System, Inc., 441 1, 99 1551, 60 (1979). Thus, Reason rather illegality. Application great difficulty. participating desire—the "While price fixing such, elaborate industry required demonstrate character agreement." Engineers, 692, 1365. package offered customers, term agreement, impairs social ensuring goods consumers approximating marginal providing them. virtue—such as, creation efficiencies operation services, supra; Trade, Collegiate Athletic Assn. Regents Univ. Okla., 468 85, 104 2948, 82 70 (1984)—such consumer choice impeding "ordinary take place," 1365, No credible advanced proposition needed effect. 17 advances principal arguments that, notwithstanding lack competitive should Appeals, suggests market, unreasonably erroneous law, regardless challenged impermissibly engaged persons together possessed specifically defined contention, runs counter "[a]s does naked restriction output," "requires justification detailed analysis." Id., 109-110, 2965. sufficiently "naked" call principle play, engage fatal localities (the Lafayette areas), heavy majorities were, over period years, inquiries determine arrangement potential genuine adverse effects "proof detrimental effects, reduction obviate need inquiry power, "surrogate effects." P. Areeda, Antitrust ¶ 1511, p. 429 (1986). actual, predominated, light reality markets relatively localized, analysis.3 18 again argues argument, too, true goal minimize least treatment, showing achieved essential step establishing attempt thwart achievement refusing supply effective (or costly) purchase likely enough disrupt functioning price-setting mechanism prices here, priced occur absence. completely useless treatment—or, put another way, far greater savings resulting use—the still deciding behalf information: presumably, discipline soon abandoning entitled pre-empt working demand. 19 Third, complains failing consider, analysis, justifications prohibition reflects Appeals' repeated "legal, moral, quality care, 1144. gist standing alone, bases problems formulation acceptable permitted opposed examination available danger erroneously interest patient, deprived fully 20 flawed factually. premise having too impact: selection Precisely illegitimate case. essence, given believe choices unwise dangerous choices. amounts "nothing frontal assault basic Act." 695, 1367. harmful markets. Insurers recipients clear minimization costs. They patronage patients—or, cases, unions businesses contract coverage—and satisfy provide coverage cost, meet customers' needs. expect sacrifice return in, say, engineering services. quality-of-service inadmissible latter credit 21 event, not, suggests, quality-of-care failed introduce justification: "IFD pointed evidence—or argued—that harmed determinations, medically erroneous." 177. Judge appears consisted entirely expert experts arguing diagnosis, testifying useful assessing variety complaints. 128-132, 1322-23. amply concluding concern circumstances serve sort careful destructive care.4 22 addition renew pressed virtue employees Brief 25-26, n. 10. Allegedly, companies—even denied without ray dentist—would constitute unauthorized dentistry company employees. authoritative source 181-183, identified rejecting conclusion. Even incorrect reading fail. That itself, competitors it. Fashion Originators' Guild America, 312 457, 468, 61 703, 708, 949 (1941). actively State. Southern Motor Carriers Rate Conference, 471 48, 57, 1721, 1727, 36 (1985). active here; accordingly, taken condemnation. V 23 hence, entered remedy improper distinct claimed impropriety violation, sustained. 24 Reversed. presentation made 1974 Dr. David McClure, official later founders motives underlying resistance determinations: "The associated party programs many, I 'Indiana Plan' [i.e., rays] sound work together, win battle. fighting war very survival profession stake. "How long leaders states so complacent willing trap being set us. If time, whence arrows heading direction. Delta Plans bedded down setting up greatest controls ever free society. name game money. government labor determined reduce dollar expense way rendered cheaper share dollar. "Already locked fee freeze control left enough." Complaint Counsel's Trial Exhibit CX 372A, F, 104. longer makes pretense immune organization. Because address continuation formerly throughout Indiana. It undisputed examiners employed authority rather, initial screening serves identifying merit serving consultants Any pursued him—x forms, whatever he chooses consult—are indicate dentist's necessary patient. divergence exists, assumed represents best interests

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