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Federal Trade Commission v. Indiana Federation of Dentists | 476 U.S. 447 (1986)
Generally, in antitrust law, horizontal restraints, which are agreements between competitors at the same level of distribution or market structure, are illegal per se. However, some types of horizontal restraints aren’t illegal per se and are instead judged under the rule of reason analysis, where a court weighs a restraint’s procompetitive and anticompetitive effects. In Federal Trade Commission versus Indiana Federation of Dentists, the United States Supreme Court considered whether an agreement across a professional association was an unreasonable restraint on trade.
The Indiana Dental Association, which we’ll call the association, is a professional organization of practicing dentists in Indiana.
In the 1970s, dental health insurers attempted to regulate the cost of dental treatment for patients by limiting benefit payments to the least expensive yet adequate treatment suitable. Such cost-saving measures, also referred to as alternative benefits plans, required the insurer to evaluate a dentist’s diagnosis and recommendations for a patient. In making such an evaluation, insurers often requested dentists to submit a patient’s dental X-rays for review.
In response, the association sought to prohibit alternative benefits plans by asking its members to agree not to submit X-rays to insurers. But by the mid ninety seventies, out of fears of possible antitrust liability, the association stopped asking its members not to submit such X-rays.
In nineteen seventy-six, a group of dentists who viewed the practice as dangerous to their profession formed the Indiana Federation of Dentists, which we’ll call the federation. The federation agreed to continue to oppose the submission of X-rays to insurers. And although the federation was small in terms of size, it was highly concentrated in three Indiana counties.
Two years later, the Federal Trade Commission, or F T C, brought a complaint against the federation, alleging that the practice of withholding X-rays was an unfair method of competition in violation of the Federal Trade Commission Act. Specifically, it claimed that the practice eliminated competition among dentists regarding policies for dealing with insurers.
Following a hearing before an administrative law judge, the F T C held that the federation’s policy was an unreasonable restraint of trade in violation of the Sherman Act. Consequently, the F T C issued an order requiring the federation to cease and desist from its efforts. The federation sought judicial review of the order in the Seventh Circuit, which vacated the order on the ground that it wasn’t supported by substantial evidence. The United States Supreme Court granted cert.
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