Legal Document

73 United States Supreme Court Reports Lawyer’s Edition 2d Series KF101.8 U54 48 102 Reporter 2466 457 U.S. 332 ARIZONA, Petitionerv.MARICOPA COUNTY MEDICAL SOCIETY et al. Number 80-419. Argued Nov. 4, 1981. Decided June 18, 1982. Syllabus Respondent foundations for medical care were organized by respondent Maricopa County Medical Society and another society to promote fee-for-service medicine provide the community with a competitive alternative existing health insurance plans. The foundations, agreement of their member doctors, established maximum fees doctors may claim in full payment services provided policyholders specified Petitioner State Arizona filed complaint against respondents Federal District Court, alleging that they engaged an illegal price-fixing conspiracy violation § 1 Sherman Act. denied State's motion partial summary judgment, but certified interlocutory appeal question whether maximum-fee agreements per se under Appeals affirmed denial judgment held could not be answered without evaluating purpose effect at trial. Held: agreements, as are unlawful Pp. 342-357. (a) do escape condemnation rule because horizontal fix prices. Horizontal prices on same legal—even if economic—footing minimum or uniform Kiefer-Stewart company versus Joseph E. Seagram & Sons, Inc., 340 211, 71 259, 95 L.Ed. 219; Albrecht Herald Co., 390 145, 88 869, 19 998. is violated here price restraint tends economic rewards all practitioners regardless skill, experience, training, willingness employ innovative difficult procedures individual cases. Such also discourage entry into market deter experimentation new developments entrepreneurs. Pacific KF135 P2 348. (b) Nor does fact rather than nonprofessionals parties preclude application rule. Respondents quality professional members enhanced restraint, Goldfarb Virginia Bar, 421 773, 2004, 44 572, National Professional Engineers States, 435 679, 98 1355, 55 637, distinguished, will make it easier customers pay distinguish profession from any other provider goods services. 348-349. (c) That judiciary has had little antitrust experience industry insufficient reason applying here. "[T]he Act, so far concerned, establishes one applicable industries alike." Socony-Vacuum Oil 310 150, 222, 60 811, 843, 84 1129. 349-351. (d) rendered inapplicable this case alleged issue have procompetitive justification. anticompetitive potential justifies facial invalidation even justifications offered some. Even when given every benefit doubt, record inconsistent presumption respondents' significantly enhance competition. most can said having able more efficiently insurers, there no believe savings might accrue arrangement would sufficiently great affect competitiveness these kinds 351-354. (e) Respondents' schedules involve only literal sense. Broadcast Music, Incorporated Columbia Broadcasting System, 441 1, 99 1551, distinguished. As among independent competing entrepreneurs, fit squarely mold. 355-357 9th Cir., 643 Reporter, 2nd 553, reversed. Kenneth R. Reed, Phoenix, Ariz., petitioner. Stephen M. Shapiro, Washington, D. C., amicus curiae, special leave Court. Philip Berelson, respondents. [Amicus Curiae Information pages 334-336 intentionally omitted] Justice STEVENS delivered opinion presented 26 Statutes-at-Large 209, amended, 15 Code KF62 been physicians setting, majority vote, Ninth Circuit actual 553 (1980). Because undisputed facts disclose statute, we granted certiorari, 450 979, 101 1512, 67 813 (1981), now reverse. 2 * In October 1978 civil two county societies "foundations care" organized. defendants conspiracies.1 After answers, was dismissed consent, conducted limited amount pretrial discovery, moved liability. motion,2 entered order pursuant 28 1292(b), certifying "whether FMC membership which contain promise abide fee schedules, section Act."3 3 Appeals, divided Court's refusing enter each three judges panel different view case. Judge Sneed persuaded "the challenged practice violation." F.2d, 560.4 Kennedy, although concurring, cautioned he found "these reimbursement proper, [or] examination practices trial reveal proscribed adverse competition, court foreclosed some later date, evidence, concluding such constitute violations." Ibid.5 Larson dissented, expressing should apply and, alternatively, rule-of-reason analysis condemn approach warranted. Id., 563-569.6 4 ultimate certiorari petition must assume version disputed correct. We therefore first review relevant then identify factual basis contention unlawful. II 5 Foundation Care nonprofit corporation composed licensed medicine, osteopathy, podiatry private practice. Approximately 1,750 representing about 70% County, members. 6 1969 promoting plans.7 foundation performs primary activities. It schedule participating agree accept performed patients insured plans approved foundation. reviews necessity appropriateness treatment its persons. authorized draw checks accounts covered patients. performing functions, considered "insurance administrator" Director Department Insurance. Its however, financial interest operation 7 Pima Care, includes 400 doctors,8 similar functions. For purposes litigation, seem regard activities essentially same. No challenge made peer administration allege necessary them engage establishing schedules. 8 At time lawsuit filed,9 use "relative values" "conversion factors" compiling schedule. conversion factor dollar used determine particular specialty. Thus, example, factors "medicine" "laboratory" $8 $5.50, respectively, 1972, $10 $6.50 1974. relative value provides numerical weight service—thus, office consultation lesser home visit. multiplied fee. revised periodically. board trustees solicit advice various need change either values respective specialties. formulate submit vote entire membership.10 9 limit recover foundations. To obtain approval insurers—including self-insured employers well companies11—agree doctors' charges up scheduled amounts, exchange those amounts free charge higher uninsured patients, patient less maxima. A who foundation-endorsed plan guaranteed complete coverage his bills treated member. He go nonmember physician still exceed schedule, excess charge. 10 impact premiums matter dispute. contends periodic upward revisions stabilizing enhancing level physicians, increasing turn increases premiums. hand, argue impose meaningful physicians' charges, advance maxima enables carriers calculate risks underwrite serves effective cost-containment mechanism saved insurers millions dollars. Although Attorneys General 40 Solicitor certain organizations consumers services, curiae briefs supporting Arizona's position merits, genuine issues 11 This assumption presents, answer, Act prohibits adopting, revising, agreeing implementation III 12 recognize our decisions establish face. But govern prices, profession, justifications. Before examine arguments, pause consider history meaning agreements. Atlantic 13 Section 1890 literally "in trade."12 Joint Traffic Assn., 171 505, 25, 43 259 (1898), recognized Congress intended interpretation word "every"; since Standard New Jersey 221 31 502, 619 (1911), analyzed restraints so-called "rule reason." name suggests, requires factfinder decide circumstances restrictive imposes unreasonable competition.13 14 elaborate inquiry reasonableness business entails significant costs. Litigation often extensive complex. Northern 356 5, 78 514, 518, 545 (1958). Judges lack expert understanding industrial structures behavior confidence practice's Topco Associates, 405 596, 609-610, 92 1126, 1134, 515 (1972). And result process certainty guidance legality context. 609, n. 10, S.Ct., n.10; supra, U.S., 518. costs judging reason, reduced recognition rules.14 Once kind predict it, applied conclusive unreasonable.15 general application, match between presumed imperfect. sake litigation efficiency, tolerated fullblown proved reasonable.16 16 Thus ended once proved, "a brought [such agreements] within statute." 65, 517. By 1927, state "it . decided always assumed controlling substantial manner trade interstate commerce prohibited Law." Trenton Potteries 273 392, 398, 47 377, 379, 700. 17 "The aim agreement, effective, elimination form power reasonably exercised not, involves control arbitrary reasonable fixed today through changes become tomorrow. established, maintained unchanged absence competition secured fixed. Agreements create themselves restraints, minute placing government enforcing Law burden ascertaining day mere variation conditions." 397-398, 379. 18 Thirteen years later, report "for over forty consistently deviation adhered principle showing abuses evils designed eliminate alleviate interposed defense." 218, 841, 1129 (1940). glut spot gasoline prompted major oil refiners concerted effort purchase store surplus maintain stable Absent companies argued, cutthroat self-defeating. argument did carry day: "Any combination tampers activity. though group market, extent raised, lowered, stabilized directly interfering play forces. places schemes beyond pale protects vital part economy degree interference. left us determination wise unwise, healthy destructive. permitted age-old cry ruinous defense conspiracies. allowed fancied legal justification good intentions combination. If shift made, done Congress. Certainly choice. created creation exception favor industry. Whatever peculiar problems characteristics, 221-222, 843. 20 maximum-price-fixing 219 (1951), followed ineluctably Socony-Vacuum: 21 "For cripple freedom traders thereby restrain ability sell accordance own judgment. reaffirm what 223 [60 844, 1129]: 'Under formed raising, depressing, fixing, pegging, commodity foreign se.' " 213, 839. 22 Over objection "economic equivalent" minimum-price-fixing agreements,17 reaffirmed 998 (1968): 23 "Maximum fixing consequences many situations. substituting perhaps erroneous seller forces severely intrude upon buyers compete survive market. Competition, single product, cast Maximum too low dealer furnish essential consumer conveniences desire willing pay. channel distribution few large specifically advantaged dealers otherwise subject nonprice Moreover, charged scheme nearly price, increasingly likely approaches cost dealer, acquire attributes prices." 152-153, 872-873 (footnote omitted). 24 wavered enforcement fixing. Indeed, recent summarily reversed decision competitors credit terms necessarily contravene laws. Catalano, Target Sales, 446 643, 100 1925, 64 580 B 25 Our foreclose place prices.18 "is grounded faith force [and not] policy selling eliminating competition." Rahl, Price Competition Fixing Rule—Preface Perspective, 57 Nw. U.L.Rev. 137, 142 (1962). masquerade future take character. doctors—rather support position. 788, 17, 2013, n.17, 572 (1975), stated "public service aspect, features professions, require practice, properly viewed context, differently." See 696, 1367, 637 (1978). case, premised public ethical norms. argue, Engineers, restraint. relief simply insureds facilitates successful marketing attractive plan. 27 equally unpersuaded industry.19 quite obviously withSocony-Vacuum. unequivocal terms, that, "[w]hatever "[t]he [in industry] justification" id., 220, yet refused removed model.20 Consistent prediction Socony-Vacuum, 221, reasoning adoption standard based prices,21 condemned.22 Finally, rejustified ignores rationale rules, avoid incredibly complicated prolonged investigation involved, related industries, unreasonable—an wholly fruitless undertaken." principal indicates misunderstanding concept. inherent some.23 Those claims unlikely prove adhere law justified application. 29 contend possible uniquely desirable exist. stress choice coverage, lower hardly unique Since foundation, guarantee applies chooses 70%. elects nonfoundation doctor, required portion doctor's fair presume, least markets "usual, customary, reasonable" typical reimburse full.24 Counties parts country, asks doctor complete, presumably cases say "Yes" 30% "No." 30 true binding assurance coverage—as premiums25—can obtained insurer service. desirable, fixing.26 Comprehensive Medical/Dental Program Foster Children administered contract prescribed agency doctors.27 program Blue Shield Group Life Health Insurance Royal Drug 440 205, 1067, 59 261 (1979), indicate capable reimbursable obtaining providers guaranteeing provider's light examples, surprising nothing arguably supports conclusion type function set way. insurers. validity obvious,28 event entirely dictate offset theoretical efficiencies ultimately rests.29 Contract 32 adherence prediction, judicial convenience, certainty, roles Judiciary regulating economy. 611-612, 1135. Given generality, much substantive content. articulating rules clarity adhering legislative prerogative amend law. arguments better directed Legislature. read statute.30 IV 33 Having declined invitation cut back argument, rely (1979). 34 Music confronted right copyrighted compositions derived American Composers, Authors Publishers (ASCAP). "blanket license" product composer himself.31 composers separate compositions, blanket-license copyright owner separately buyer price.32 "necessary consequence" blanket license established. 21, 1563. delegation ASCAP species categorically forbidden disclosed "literal sense." 8, 1556. 35 fundamentally different. Each Neither nor insurance, derive profits sale policies. Their permit product.33 merely prevailing care. 36 analogous partnerships joint arrangements persons pool capital share loss opportunities profit. ventures, partnership regarded firm sellers attack hundreds concerning offer number consumers. surgeons, anesthesiologists, psychiatrists, package clinic flat fee, cooperating perfectly proper. They 37 38 ordered. 39 BLACKMUN O'CONNOR took consideration POWELL, whom THE CHIEF JUSTICE REHNQUIST join, dissenting. 41 condemned comparatively method providing predetermined coercion. companies, alike participate choose. On face, seems interest. 42 theory. motion, and—because novelty issue—certified liability appeal. inferences therefrom favorable Nevertheless, identifying clearly principles remanding completed record, makes invalidity. "consumers" benefited substantially short shrift. concedes [only] discovery," ante, 336, leaving undeveloped critical informed N Dec. Immigration Nationality Decisions think today's incomplete consistent proper resolution complexity, novelty, importance public. dissent. Foundations associations counties.1 available prepaid plan, aspects target litigation. Under insure themselves. Rather, key secure maximum-price specific agreed following balloting, invite offering policies schedule.2 bills—so long An foundation-sponsored physician. performed.3 chosen bill exceeds liable excess. billing member, disallows executed joining foundation.4 offers expenses permits choose 45 comes plaintiff's after discovery. Therefore, noted above, drawn Diebold, 369 654, 655, 82 993, 994, 176 requires, acknowledges, "impose[s] charges," "enables underwrite," "therefore dollars." Ante, 342. forthwith 46 Several significance stressed First, forecloses Unlike classic cartel instruct competitors: "Deal others." both associate level, high low—and serve patients—at low. Similarly, remain liberty outside physician—foundation not—at level. locked year's membership. supra. compete, withdraw, preserved. cites remotely comparable basis. Second, find represent interests. Normally search insured5—i.e., plan—he largely indifferent full, insurer, indifferent. keep profitable, including contracts foundations—step consumer's shoes incentive costs, difficulty comparing 49 before us, evidence opposition companies—or, matter, Rather seven willingly out task developing schedules.6 Again, infer plan—open public—has "enabl[ing] underwrite." conclusively draws contrary 50 settled labeled "price fixing" se. characterization talisman Many lawful contracts, mergers, discerning approach. "determining 'fixed' 'price.' [Rather], characterize conduct falling category label 'per fixing.' often, always, simple matter." 9, 1557, 51 characterizing meriting condemnation, 'naked restrain[t] except stifling competition.' 608, 1133, (1972), quoting White Motor 372 253, 263, 83 702, 738 (1963). Continental T.V., GTE Sylvania 433 36, 49-50, 97 2549, 2557, 53 568 (1977). "departure demonstrable formalistic line drawing." 58-59, 2561-2562. inquiry, economies purportedly realizable agreement. 52 (1978), engineering association's canon ethics bidding "compiled voluminous discovery record," 685, 1362, carefully considered—rather rejected hand—the engineers' "affirmative defense" agreement: tempt engineers inferior work threaten safety. 693, 1366. merits "confirm[ed] refut[ed] [the] agreement." Ibid. incident efficiencies. 646, 649-650, 1928-1929, (1980) (challenged lacked "no apparent potentially redeeming value"). nevertheless agreed, unanimously,7 clearinghouses sold performance rights libraries warrant Individual licensing owners. reasoned yielded realized. 20-21, 1562-1563. itself "to extent, product." 22, 1563.8 54 sum, setting ceiling itself, justify condemning illegal. Only clear "so plainly study [its effects] needed [its] illegality" 692, 1365. And, demonstrate, assigned considering benefits especially novel, 9-10, 1556-1557; 607-608, 1133 ("It considerable relationships courts classify violations"). acknowledges ban invoked 355-357. One expected acknowledge inappropriate achieves attainable. this. neither criteria determined. content brand describe Music—which involved prices—as "fundamentally different." 356. 56 fact, important respects. resulted cooperative pricing.9 consumers.10 apparently reaping unattainable efficiencies.11 thus unconvincing.12 defending holding, suggests "respondents' Legislature." 354-355. curious advice. mention rules. enactment 1890, duty interpret mandate—and 58 plaintiff discharged proving efficiency my view, correctly grant judgment.13 remains unresolved. Fed.Rule Civ.Proc. 56(c). V action loses sight basic noted, laws "consumer welfare prescription." Reiter Sonotone Corp., 442 330, 343, 2326, 2333, 931 rush novel knows very little, end achieved invalidating harm. show means injures them. complex economy, commonplace. unwise one, final where mandatory fact. statute. statute interpreted conformity federal 554, (CA9 1980). prayed injunction ask damages. reasons decision. citing (1977), trend appears emerging Rule Reason preferred determining law." App. Pet. Certiorari 43. price-fixing, [Kiefer-Stewart (1968) ], rule." 44. Third, here." 45. approach, "because [purpose allegedly defendants.]" 47. defendants' dismiss ground McCarran-Ferguson 1011 seq. 39-41. order. 559, 7. quoted language Appeals' phrasing question. 554. 1979, providing, part: file additional appropriate." 48. August further providing: Order 1979 amended addition following: analyzing instant occurred difference immediate denying materially foregoing 1292(b)." 50-51. explained reluctance follows: assumptions carried recently professions. already obstacles pure compare prevail ideal conditions. Furthermore, Keifer-Stewart (1968), prices; underlying sound. Kennedy's concurring concluded "There appear definitive caused scrutiny are, essentials, condemned." 560. stated, "Defendants formulated dispersed guides lists together upper received third-party payors. constituted competitors. Disregarding 'special industry' facts, Precedent alone mandate standard. "I nature exemption price-fixing." 563-564 (citations Most type. agrees charges. bears risk treatment. illustrated maintenance Maintenance Organization 1973, 300e pays functionally integrated group's subscriber need. borne doctors. contains divergent figures percentage belong 1975 publication reported 80%; affidavit executive director 30%. 1980, discontinued formulating year bylaws adopted described text, mooted changes. W. T. Grant 345 629, 894, 1303 (1953). disagree cause rate markets. There 85-95% above levels Foundation. Seven Foundation, data relies 1974 indicating endorsed 63% contest accuracy analysis. "Every contract, trust otherwise, conspiracy, several nations, declared ." 1. Brandeis statement Chicago Bd. Trade 246 231, 238, 242, 62 683 (1918): test imposed regulates promotes suppress destroy ordinarily applied; condition imposed; effect, probable. evil believed exist, adopting remedy, sought attained, facts. intention save objectionable regulation reverse; knowledge intent help consequences." thoughtful brief discussion see KF105 F3 Scherer, Industrial Market Structure Economic Performance 438-443 (1970). Professor Scherer's "opinion, shared economists concerned policy, present framework implementing prohibiting unreasonable." 440. "Among heretofore deemed division markets, boycotts, tying arrangements." 518 Steel 334 495, 522-523, 68 1107, 1121-1122, 1533 (1948). invalidate "[w]hether way irrelevant us." 1134. point 50, 16, 16: "Per broad generalizations social utility commercial practices. probability severity balanced consequences. Cases generalization arise, reflects common expense them." 156, 875 (Harlan, J., dissenting). Keifer-Stewart, Albrecht, vertical resale event, generally defensible restraints. (1977); Easterbrook, Fixing, U.Chi.L.Rev. 886, 890, (1981). confused until obtains challenged. unwillingness reexamination industry, moreover, presents particularly area. step access consuming expensive applicant generally, numerous subventions demand supply artificially high. functions approximate exist purely accurate description moreover available. baselines measured distance 556. "Perforce exists, absent feature, baseline measuring impact. becomes paid system payable Put differently, widely deviant model, agriculture, enhances simplified attainment monopolist's goal, viz., matching marginal revenue, obstructs end." arising pass sufficiency plea rates actually beneficial Assuming plea, Trans-Missouri Freight 166 290, 540, 1007 (1897). 689, 1364, referred Taft's "classic rejection lawfully agreed-upon reasonable." Addyston Pipe 85 271 (CA6 1898), aff'd, 175 96, 136 (1899). latest reiterated point: "It excuse 647, "Whatever thought have, reasonableness. banned threat central nervous economy." 226, 59, According figures, well-founded. Brief 42, 120. perceive rest premise reduce accordingly premiums, restate long-rejected yield. arguable, existence easier—and expensive—for arrive appropriate claims. Commission staff report: "Until mid-1960's, determined how prepared reflecting determinations. Fee approximately percent contracts." Bureau Commission, Participation Control Certain Other Open-Panel Prepayment Plans 128 suggest controlled discusses length, belief rise Kass Pautler, Economics, Staff Report Physician may, bilateral reached 210, 1072, 5. brief, expressed unless plaintiffs work. Amicus Curiae, O.T.1978, 77-952, Pages 10-11. administrative paying someone canvass enough attract sufficient numbers sign competitive. canvassing foundation; deals insurer. bypass dealing itself. look (and, continue revoke membership). similar, protracted, occur doctor. insurance. greater bargaining monopoly "[Congress] can, course, cases, ramble wilds theory flexible approach." 610, 10. exempted reach See, e.g., §§ 291, 292 (Capper-Volstead agricultural cooperatives); 1011-1013 (McCarran-Ferguson insurance); 5b (Reed-Bulwinkle rail motor carrier rate-fixing bureaus); 1801 (newspaper operating agreements). "Thus, really sales sellers, license, raw material." 1563 "Here, owners, license. cannot equated anything issue. authors individually mask markets." 23-24, 1564 becoming practitioner advantage unilaterally obtain. people But, indicated, price. open area Arizona. renewable 5-year term. voluntary resignation provision earlier exit January announcement resign. admits society. 1-year term Initial annual termination date maintained. practicing county. Society, consent decree. Three Foundation-sponsored plans: Cross-Blue Shield, Mutual Connecticut latter five companies. Apparently employers, Motorola, act foundation-approved respect employees' companies' agents administer propriety entered. years, 4% insurers' bound [f]oundation [foundation physician] 31-32. "understand shall computation billed me patient." 2, stage vigorously successfully. "consumer"—commonly literature—is herein mean introduced effectively perform themselves, participation. clear, services—unlike products—are compare. Cf. Bates Bar Arizona, 350, 391-395, 2691, 2712-2715, 810 (1977) (opinion J.). Presumably wish utilize foundations' 1565 (Stevens, dissenting part) ("The holds ASCAP's holding"). 54, 2559, (identifying achievement "redeeming virtue" sustaining challenge); L. Sullivan, Antitrust 74, Page 200 (per scale improves performance); 66, 180 (higher placed efficiencies). owners aggregated copyrights package, distributed proceeds according formula. Publishers, 562 130, 135-136 (CA2 1977). attempt rectify inflationary consequence patients' indifference size commitment whatever submit. defect inhered "those music profit widespread, performances fleeting, practical impossible negotiate users detect unauthorized uses." 4-5, 1554. insurers—those best situated motivated inspire judgment—believe efficient scheduling clearinghouse "reduce[d] absolutely states "there compositions." 355. irrational distinction. existed, 6, 1555; 134-135, 138, persists sensible while similarly completely distinction "any "different product" precisely Music's clearinghouses. holders sellers—the compositions. efficiently, eliminated owner. 21-22, manner, deliver service—insured wide range one's choice—in economical manner. replace weak containment incentives stronger mechanism: absolute charged. presently exists administering therefore, delivery service—"to differ patient-by-patient basis, rarely compared recipient. person requiring ready "shopping" Primarily foundations—operating issue—perform prospective individually. collective—and average—basis, express render identifiable fees, conventional "perfect market" give uniqueness certainly useful Affirmance holding immunized eventual remand invalid. petitioner failed remained comports reason. Gypsum 438 422, 441, 2864, 2875, 854

Classification Label: 7