Ftc v. Indiana Fed’n of Dentists, 476 U.S. 447 (1986)

Federal Trade Commission v. Indiana Federation of Dentists

No. 84-1809

Argued March 25, 1986
Decided June 2, 1986
476 U.S. 447

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE SEVENTH CIRCUIT

Syllabus

Respondent organization of dentists in Indiana promulgated a policy requiring its members to withhold x-rays from dental insurers in connection with evaluating patients’ claims for benefits. The Federal Trade Commission (FTC) issued a cease-and-desist order, ruling that the policy constituted an unfair method of competition in violation of § 5 of the Federal Trade Commission Act, since it amounted to a conspiratorial restraint of trade in violation of § 1 of the Sherman Act. The Court of Appeals vacated the FTC’s order on the ground that it was not supported by substantial evidence, holding that the FTC’s findings that respondent’s x-ray policy was anticompetitive were erroneous; that the findings were inadequate because of the FTC’s failure to define the market in which respondent allegedly restrained competition and to establish that respondent had the power to restrain competition in that market; and that the FTC erred in not determining whether the alleged restraint on competition among dentists had actually resulted in higher dental costs to patients and insurers.

Held:

1. The FTC’s factual findings regarding respondent’s x-ray policy are supported by substantial evidence. There is no dispute that respondent’s members conspired among themselves to withhold x-rays, and the FTC’s finding that competition among dentists with respect to cooperation with insurers’ requests for x-rays was diminished where respondent held sway also finds adequate support in the record. Pp. 455-457.

2. Evaluated under the Rule of Reason, the FTC’s factual findings are sufficient as a matter of law to establish a violation of § 1 of the Sherman Act, i.e., an unreasonable restraint of trade, and hence a violation of § 5 of the FTC Act. Respondent’s x-ray policy takes the form of a horizontal agreement among its members to withhold from their customers a particular service that they desire. Absent some countervailing procompetitive virtue, such an agreement cannot be sustained under the Rule of Reason. This conclusion is not precluded by the absence of specific findings as to the market in which respondent allegedly restrained competition or as to the power of respondent’s members in that market, or by the FTC’s failure to find that respondent’s x-ray policy resulted in more costly dental services than the patients and insurers would have chosen if they were able to evaluate x-rays in conjunction with claim forms. Nor do alleged noncompetitive "quality of care" considerations justify respondent’s x-ray policy. And whether or not respondent’s policy is consistent with Indiana’s supposed policy against submission of x-rays to insurers, it is not immunized from antitrust scrutiny. Anticompetitive collusion among private actors, even when consistent with state policy, acquires antitrust immunity only when it is actually supervised by the State, and there is no suggestion of such supervision here. Pp. 457-466.

745 F.2d 1124, reversed.

WHITE, J., delivered the opinion for a unanimous Court.