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Antitrust Enforcement in 2020 Offers Lessons for Associations in 2021

Recent antitrust activity is instructive for associations to identify and limit key areas of antitrust risk. Here are some highlights from 2020:

Certification and Accreditation Programs Are Pro-Competitive Functions of Trade and Professional Associations; Tying Them to the Purchase of Other Services May Be Problematic

“Courts have long recognized that establishing and monitoring product and service standards is a legitimate and beneficial function of trade and professional associations” that presumptively serve competition and the public interest through “the promotion of enhanced education and training requirements.”[1]

This principle was re-affirmed in 2020 by the third court in the last two years to address medical certification boards’ requirements for ongoing recertification.[2] A federal district court in Illinois dismissed a plaintiff’s assertion of a violation of Section 1 of the Sherman Act based upon a certifying medical board’s alleged conspiracy with health insurers and hospitals to require physicians to purchase recertification from the board.[3] To establish a Section 1 violation, a plaintiff must prove an agreement that unreasonably restrains trade. However, Section 1 “does not encompass unilateral conduct, no matter how anticompetitive. [And] Section 1 does not prohibit every restraint on trade, but only those agreements which unreasonably restrain trade.”[4] The Illinois federal court thus dismissed the complaint because it determined there were no plausible factual allegations that the board exerted control or authority over the hospitals, or entered into an arrangement with hospitals and insurers throughout the country, or why it would even make sense for them to do so. Instead, the court reasoned that there is an alternative explanation for hospitals and insurers to require recertification—hospitals and insurers independently decided it is valuable information.

In the two previous cases, groups of physicians contended that recertification requirements violated the Sherman Antitrust Act by tying the recertification requirements to the physicians’ initial certification. Under the Sherman Act, courts will scrutinize arrangements that require the purchase of one product (the “tying” product) on the condition that the buyer also purchase a second product from the seller (the “tied” product). Many tying arrangements are permissible, but an illegal tying arrangement arises when a seller possesses market power over the tying product and exploits that power to force a buyer to purchase a distinct tied product that the buyer would have purchased elsewhere. In other words, the antitrust laws will prohibit the seller of a product with little competition from tying sales of that product to the sales of a competitive second product, reducing competition in that second market.

The courts found that the initial certification was not a distinct product from recertification. That is, board certification was found to be an ongoing, not a distinct product, for which there is independent demand. If recertification is not an independent product, there cannot be tying, nor can the boards have monopoly power in the market for those services since no such separate market exists. The courts recognized that “It would entirely alter the nature of the certification if outside vendors could re-certify internists and potentially disrupt the trust hospitals, patients, and insurance companies place on the [the board’s] certification”[5]

Price-Related Conditions Remain Fraught With Antitrust Risk

There are now at least four nearly identical federal antitrust class actions wending their way through the courts challenging real estate brokers’ alleged agreement to maintain higher commissions. [6] The plaintiffs contend that the National Association of Realtors (NAR) and four of the largest real estate brokerage companies in the United States unreasonably restrained competition through their multiple listing service (MLS) rules, which require a home’s listing broker to make a “blanket offer” to share a portion of their commission with the buyer’s broker when advertising a home through an MLS.[7]

In permitting one of the cases to proceed to discovery last year, an Illinois federal judge concluded that the plaintiffs pleaded sufficient facts to support their theory that this MLS rule prevented effective negotiation of commission rates. While the plaintiffs’ theory seems contrary to the reality of residential real estate financing in the US (e.g., a buyer cannot finance broker commissions) and how broker commissions are routinely negotiated, the court’s decision signaled an important message to trade and professional associations about price-related restrictions: a requirement that does not set price, but that may reduce price negotiations, may be anticompetitive.

Associations Can Remain Relevant to the Virtual Marketplace With Proper Safeguards

As the COVID-19 pandemic continues into 2021 for the foreseeable future, the US Department of Justice offered critical lessons for trade and professional associations as they attempt to navigate the online marketplace.

As previously reported here, the DOJ issued a business review letter on April 16, 2020, highlighting key elements for trade associations to consider as they invest in creating virtual marketplaces for their members in the wake of COVID-19. A trade association, by its nature of operating by and for its members, risks violating the antitrust laws if its online marketplace may facilitate price-fixing. Carefully crafted safeguards can ensure that online platforms are not used by competitors to exchange pricing, cost, sales data, or other competitively sensitive information.

 

[1] Poindexter v. Am. Bd. of Surgery, Inc., 911 F. Supp. 1510, 1520 (N.D. Ga. 1994) (quoting Sherman College of Straight Chiropractic v. American Chiropractic Ass'n, Inc., 654 F.Supp. 716, 722 (N.D.Ga.1986)), aff'd sub nom. Poindexter v. Am. Bd. of Surgery, 56 F.3d 1391 (11th Cir. 1995).

[2] See, e.g., Ass'n of Am. Physicians & Surgeons, Inc. v. Am. Bd. of Med. Specialties, No. 14-CV-02705, 2020 WL 5642941 (N.D. Ill. Sept. 22, 2020), pending appeal Case No. 20-3072 (7th Circuit); Kenney v. Am. Bd. of Internal Med., 412 F. Supp. 3d 530 (E.D. Pa. 2019), pending appeal; Siva v. Am. Bd. of Radiology, 418 F. Supp. 3d 264 (N.D. Ill. 2019).

[3] Ass'n of Am. Physicians & Surgeons, Inc. v. Am. Bd. of Med. Specialties, No. 14-CV-02705, 2020 WL 5642941 (N.D. Ill. Sept. 22, 2020)

[4] Am. Council of Certified Podiatric Physicians and Surgeons v. Am. Bd. of Podiatric Surgery, Inc. [“Certified Podiatric Physicians I”], 185 F.3d 606, 619–24 (6th Cir. 1999)

[5] Kenney v. Am. Bd. of Internal Med., 412 F. Supp. 3d 530, 551 (E.D. Pa. 2019)

[6] 19-CV-01610, 2020 WL 5878016, at *1 (N.D. Ill. Oct. 2, 2020)

[7] See, e.g., Moehrl v. Nat'l Ass'n of Realtors, No. 19-CV-01610, 2020 WL 5878016, at *9 (N.D. Ill. Oct. 2, 2020)

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