Important information for all dentists
Antitrust laws cannot be ignored by dentists on the basis that they are not fair, are too complicated or make no sense. The U.S. Justice Department and the Federal Trade Commission are particularly interested in prosecuting physicians and dentists for antitrust violations. Since dental organizations like the Wisconsin Dental Association are composed
of independent practitioners, the activities of organized dentistry fall under federal scrutiny.
A basic understanding of the antitrust laws is therefore essential for all WDA members. Here’s what you need to know, it is perilous indeed to ignore the laws.
Requirements for violation
Section one of the Sherman Antitrust Act declares contracts, combinations or conspiracies in restraint of trade to be unlawful. For a violation of this act to
occur, two things must happen:
Joint action – The law does not apply to actions taken individually by a dentist.
There must be an agreement or understanding, and it takes more than one person or entity to have an agreement. Such joint action does not exist in a completely integrated dental group practice.
In such a group practice, the separate practices of individual dentists are “merged” or “integrated” into the group. The dentists share profits and losses, and do not have independent competing practices. Because there is only one practice, the joint action element required for a violation is absent.
Any agreement by two or more independently practicing dentists, or group practices, which restrains competition, may constitute “joint action”.
An example of such joint action would be two or more independent dentists who together decide not to sign a managed care participating contract or who decide to terminate such a contract.
Another example would be two or more dentists with independent practices who agree on minimum or maximum fees or capitation amounts. Business managers of two independent dental practices who agree that the practices will not compete against each other in a certain geographic area would be another example.
The “agreement” need not be formal or written to be illegal. A tacit understanding is enough.
Dentists do not need to know the agreement is illegal in order to violate the law. The key is to avoid even the appearance of an illegal agreement. For example, informal conversations
with other dentists at a dental society meeting about problems incurred with a managed care plan, which result in some dentists terminating their contracts with the plan, may be construed as an illegal agreement.
A letter to another dentist that merely discusses fees may evidence an agreement to fix prices.
Restraint on competition In order for joint, action or an agreement to constitute an antitrust violation, it must unreasonably restrain trade. This occurs when the effect or purpose of the agreement is to decrease competition. To determine whether the agreement is unreasonable, the courts use two different standards, depending on the type
Illegal per se – If the agreement involves price-fixing, group boycotts or the allocation of practice territories or patients, the courts apply the per se rule. Under the per se rule, the court presumes that an unreasonable restraint of trade occurred.
The plaintiff only has to prove the existence of the agreement, not that the agreement decreased competition. Under the per se analysis, it does not matter that the dentists did not intend to violate the antitrust laws, or that the agreement operates to lower consumer
Rule of reason – If the per se rule does not apply, a court applies the rule of reason. Under this analysis, the court balances the pro-competitive purposes and effects of the agreement against the anti-competitive purposes and effects, If, on balance, the agreement is considered to be anti-competitive, then the agreement is illegal.
Illegal per se joint action
Price-fixing and group boycotts constitute the greatest risks of joint activities conducted by dentists that may lead to antitrust violations.
Price-fixing – An agreement or understanding among competitors to fix, stabilize, raise or lower prices (or any element of price) and is per se illegal.
The following types of activity generally constitute price-fixing, if conducted by independent dentists:
Group boycotts – An agreement by two or more dentists not to deal with a third party may constitute an illegal group boycott.
The following types of activity may be considered group boycotts if conducted by independent dentists:
Federal antitrust laws are enforced by the Justice Department, the Federal Trade Commission, and suits brought by private parties.
The Justice Department may bring either criminal or civil action against dentists who are in violation of the antitrust laws. Criminal actions are felonies punishable by imprisonment and fines.
Private parties can sue dentists for antitrust violations and, if successful, recover treble damages.
Reprinted with permission from the Michigan Dental Association.