California Dental Ass'n v. Federal Trade Commission

FEDERAL ASSOCIATION DENTAL CALIFORNIA COMMISSION TRADE 24, 1999 May 13, 1999 Decided January Argued 97-1625. No. respect with Court a unanimous for opinion the J., delivered Souter, III, in Part respect with Court the of opinion II, and I and Parts JJ., joined. Thomas, Scalia, and O’Connor, J., and C. Rehnquist, which in part, dissenting and part concurring in opinion an J., filed Breyer, p. post, joined, JJ., Ginsburg, Kennedy, and Stevens, which himWith petitioner. for cause argued M. Peter Sfikas Dyhrkopp, and F. Mendel, Erik M. Scott were briefs on Graham. M. Edward Solicitor Deputy General Solicitor were brief him With

respondent. Q.R. Paul Klein, Attorney General Assistant Waxman, Le L. Daly, Joanne Valentine, John A. Debra Wolfson, Hilder.* R. Elizabeth vine, American for filed were reversal urging curiae amid of *Briefs Guarino, Wil- Toni by Elizabeth Medicine Advancement for College Associa- Dental American Skitol; for A. Robert MacLeod, and C. liam American Seitz; for A. Virginia Bierig and R. Jack by al. et tion Smith, and M. Jacobs, Paul A. Jerry by Executives of Association Soeiety Roy Association Athletic Collegiate National for Miller; and Nory Shapiro, M. Curtner, Stephen L. Gregory Falk, M. Jr., Donald Englert, T. Cole. Kircher Elsa Odorizzi, and L. McConnell, Michele W. Michael of State curiae amici of brief A R. Illinois, Don Attorney General Ryan, E. by James al. et Arizona Attorney Montgomery, Betty D. General, Attorney Assistant Sampen, General, Attorney Assistant Lindgren, G. Thomas Ohio, and General follows: jurisdictions respective then- General Attorneys by the Lungren E. Daniel Arkansas, Bryant Arizona, Winston Woods Grant Justice Souter delivered the opinion Court. There are two issues in jurisdiction this case: whether of the Federal Trade Commission extends to the California (CDA), Dental nonprofit Association professional associa- tion, “quick and whether a look” justify sufficed finding advertising that certain adopted by restrictions the CDA vi- olated the antitrust laws. We hold that the Commission’s jurisdiction (FTC under the Federal Trade Commission Act Act) extends to an provides that, association like the CDA, substantial economic for-profit its benefit to members, but any anticompetitive where, as given here, effects re- intuitively straints are far from obvious, the rule of reason thorough enquiry demands a more consequences into the those than Appeals restraints performed. Court of

HH voluntary nonprofit CDA ais association of local den- tal societies which belong, 19,000 some including dentists three-quarters about practicing of those in the State. In re (1996). Dental Assn., 121 P. T. C. 190, 196-197 California exempt The CDA is from federal income tax under 26 § “[bjusiness 501(c)(6), U. covering S. C. leagues, chambers California, of Rickard Blumenthal of Connecticut, M. Brady Jane of Dela- ware, Robert A Butterworth of Florida, Alan G. Lance of Idaho, Thomas J. Miller of Iowa, Curran, Jr., J. Joseph Maryland, of Kelley Frank J. of Michigan, H. Humphrey HubeH III of Minnesota, Mike Moore of Missis- sippi, Frankie Del Papa Sue Nevada, of Philip T. McLaughlin of New Hampshire, Easley Michael F. Carolina, of North W. Drew A. Edmondson Oklahoma, Hardy Myers Oregon, of D. Michael Fisher of Pennsylvania, of José A Fuentes-Agostini Rico, of Puerto Jeffrey B. Pine of Rhode Island, John Walkup Knox Tennessee, of Jan Graham of Utah, William H. Sor- rell of Vermont, Christine Gregoire O. McGraiv, Washington, of Darrell V. Jr., of Virginia, West Doyle James E. and of Wisconsin. James S. Turner Betsy E. and filed a brief for the Consumer Lehrfeld Project Dental Choice of the National Science, Institute for Law and Policy, Public Inc., as amicus curiae. al- trade,” of [and] boards boards, real-estate commerce, of give its members that for-profit subsidiaries though it has including insurance, sorts advantageous to various access estate, real financing for their coverage, liability and and lobbies CDA The bills. patients’ and cars, equipment, marketing conducts and interests, members’ litigates in its 3d 128 F. benefit. their campaigns public relations and 1997). (CA9 720, associ- through these belong CDA who The dentists (Code) including Ethics a Code agree abide

ations § following 10: shall dentist advertise, no may any “Although dentist communi- any form patients or solicit advertise any misleading in or false manner ain cation public, serve properly order to respect. In material a manner themselves represent should dentists should Dentists public. to the esteem contributes any competence in training and misrepresent their any material misleading in or false way would App. 33. respect.” inter- advisory opinions a number has issued

The CDA advertising separate through section,1 preting this the Califor parts of substantially mirror which advisory opinions, §§ Ann. Code Prof. & Code, Bus. see Cal. Professions nia Business following propositions: (West 1999), include respect material any misleading in is false or claim statement “A it: when fact; misrepresentation “a. contains only it makes in context because or deceive mislead likely to “b. facts; relevant disclosure partial expectations unjustified or false likely create isor is intended “e. costs; and/or results favorable spe- fully and without of services types specific fees for relates "d. factors; relevant other variables disclosing all cifically

guidelines intended to help members comply with the Code and with state law the CDA has advised its dentists of dis- closures they must make under state law when engaging discount advertising.2

Responsibility for enforcing the Code rests in the first in- stance with the local dental societies, to which applicants for CDA membership must submit copies of their own advertise- ments and those of their employers or referral services to assure compliance with the Code. The local societies also actively seek information about potential Code violations by applicants or CDA members. Applicants who refuse to withdraw or revise objectionable advertisements bemay de- nied membership; and members who, after a hearing, remain “e. contains other representations or implications that in reasonable probability will cause an ordinarily prudent person to misunderstand or be deceived.

“Any communication or advertisement which refers to the cost of dental services shall be exact, without omissions, and shall make each service clearly identifiable, without the use of such phrases as ‘as as,’ low ‘and up,’ ‘lowest prices,’ or words phrases or of similar import. which refers to the cost of dental services and uses words of comparison or relativity example, ‘low —for fees’ —must be based on verifiable data substantiating the comparison or statement of relativity. The burden shall be on the dentist who advertises in such terms to estab- lish the accuracy of the comparison or statement of relativity.” as to the quality of services are not susceptible to measurement or verification; accordingly, such claims are likely to be false or misleading in any material respect.” 128 F. 3d 720,723-724 (CA9 1997) (some internal quotation marks

2 Thedisclosures include: “1. The dollar amount of the nondiseounted fee for the service!.] amount of the discount fee or the percentage of the discount for specific service!.] length of time that ' the discount will be offered!.] “4. Verifiable fees!.] discount any other terms and conditions or restrictions for qualifying for the discount.” Id., at 724. 762 or suspension, censure, subject to are

similarly recalcitrant 724. 3d, at F. 128 CDA. the from expulsion brought a Commission The truthful, restrict toas so guidelines its applied it that leging Act, FTC § the 5 of violated advertising, so and nondeceptive alleged that complaint § The 45.3 S. C. U. 15 Stat. 38 types of advertis two unreasonably restricted had CDA the ad and fees, discounted particularly advertising, price ing: Com services. dental of the relating to vertising (ALJ) the held Judge Law Administrative An ¶ 7. plaint the which, CDA, the over jurisdiction Commission programs itsof a selection “stated itself had noted, ALJ between of members value potential services and that, found He 207. atC., T.F. 121 $65,127,” and $22,739 although exerted CDA the proof no been had there an establish required was proof such power, market Registration Bd. re Mass. In under violation antitrust had CDA (1988), since 549 C.T.F. 110 Optometry, members potential and members unreasonably prevented det advertising, all nondeceptive truthful, using from services. dental consumers and dentists both riment 121 Act. FTC § of the 5of violation accordingly found He 272-273. C., at T.F. Commission The power, market lacked CDA conclusion his

except for Commission The disagreed. Commission which with il- advertising discount restrictions CDA’s treated Com- alternative, In 3d, F. 128 per se. legal nonprice) (as as well advertising price held mission Acts FTC Sherman of the violations restrictions acts deceptive competition 3 unfair prohibition Act’s FTC Sherman §1 scope overlaps 45(a)(1), §C. U. S. practices, Indiana trade, FTC restraint prohibiting 1,§ aimed S. C. U. Act, 15 Commission (1986), and 447, 454-455 S.U. Dentists, Federation of re ease, In California adjudicating law Act Sherman upon relied (1996). n. 5 190, 292, T. C. Assn., Dental under an abbreviated analysis. rule-of-reason One Commis- sioner concurred separately, arguing that the Commission should have applied the Mass. i3d. standard, per se analysis, to the limitations on price advertising. Another Commissioner dissented, finding the evidence insufficient to show either that the restrictions had an anticompetitive ef- fect under the rule of reason, or that the CDA had market power. 128 F. 3d, at 725.

Court of Appeals for the Ninth Circuit affirmed, sus- taining the Commission’s jurisdiction assertion of over the CDA and its ultimate conclusion on the merits. Id., at 730. The court thought it error for the Commission to ap- plied per se analysis to price advertising restrictions, finding analysis under the rule of required reason for all the restrictions. But the Court of Appeals went on explain that the Commission had properly “applied an 'quick abbreviated, or look,’ rule of reason

analysis designed for restraints that are not per se un- lawffil but are sufficiently anticompetitive on their face that they do require not [National a full-blown rule of reason inquiry. See Collegiate Athletic Assn. v. Board Regents Univ. Okla., 468 U. S. 85, 109- 110, and (1984)] ('The n. 39 point essential is that the rule of reason can sometimes applied in the twinkling eye.’ an [Ibid, (citing P. Areeda, The “Rule of Rea- son” in Antitrust Analysis: General (Fed- Issues 37-38 eral Judicial 1981) Center, June (parenthetical omit- ted)).] It allows the condemnation of a 'naked restraint’ price or output without an 'elaborate industry analy- sis.’ Id., at 109.” Id., at The Court of Appeals thought truncated rule-of-reason analysis to be in order for several reasons. As for the re- strictions on discount advertising, they “amounted prac- tice to a fairly 'naked’ restraint on price competition itself,” ibid. The CDA’s procompetitive justification, that the re- and false prevented and disclosure encouraged strictions “it weight because little advertising, carried misleading re- information of the all to disclose infeasible simply evidence provides record “the id., quired,” trans- disclosure increased led fact the rule advertising nonpriee toAs pricing,” ibid. dental parency said court restrictions, the output limita- forma in effect are “[t]hese restrictions about information supply they restrict tion, Hoven- & Areeda See services. dentists’

individual 1997).... (Supp. 693-94 ¶ Law kamp, Antitrust directly, as more output may affect also restrictions The cus- some may induce advertising comfort and might they care when nonemergeney obtain tomers circumstances, these Under . . . so. do otherwise not re- sufficiently naked is a restriction think we analysis.” Ibid. look quick justify output on straint Commis- hold toon Appeals went Court in- and agreement CDA’s respect to the findings with sion’s restric- effect on aswell as trade, restrain tent supported all were power, market existence and tions Judge dissent, In 728-730. Id., at evidence. by substantial did jurisdiction Commission’s position took Real association professional nonprofit a the CDA cover not But Id., operations. no commercial engaging rule-of- full-bore argued, he jurisdiction, assuming even require- disclosure since for, called analysis was reason prices nor fixed neither and restraints naked were ments 730-731. Id., advertising. nondeceptive banned among conflicts to resolve certiorari granted We nonprofit over jurisdiction Commission’s on Circuits for abbreviated occasions association4 professional aff’d, 701, 983-984, Assn., 4 T. C. 94 Medical American Compare In re 676 U. Court, S. 455 divided equally by an (CA2 1980), aff'd 2dF. Nutrition, Egg Comm’n National curiam), FTC (1982) (per rule-of-reason analysis.5 524 (1998). U. S. 980 We now va- cate judgment of the Court of Appeals and remand.

W The FTC gives Act the Commission authority “per- over sons, partnerships, or corporations,” § 15 U. S. C. 45(a)(2), and defines “corporation” to include “any company ... or association, incorporated or unincorporated, without shares capital capital stock or certificates of interest, except partnerships, which organized carry on business for its profit own or that of its §44. members,” Although the Cir- cuits agreed have not precise on the extent of this definition, see n. 4, supra, the Commission long held that some cir- give cumstances jurisdiction it over an entity that seeks no profit for itself. While the Commission has claimed to have jurisdiction over a nonprofit entity if a part substantial of its total provides activities pecuniary benefits to its members, see In re American Medical Assn., 94 F. T. C. 701, 983-984 (1980), respondent now advances the slightly different for- mulation that the jurisdiction Commission has “over anti- competitive practices by nonprofit associations whose activi- provid[e] ties substantial economic benefits to for-profit their members’ businesses.” Brief for Respondent

urges deference to this interpretation of the jurisdiction Commission’s as (cit- reasonable. Id., at 25-26 ing Chevron U.S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. (1984), S. 837 Mississippi Power & Light Co.v. Mississippi ex rel. Moore, 487 U. S. 354, 380-382 485, 487-488 F. 2d (CA7 1975), with Community Blood FTC, Bank 405 1011, 1017 F. 2d (CA8 1969). Bogan 5Cf. v. Hodgkins, 166 509, F. 514, 3d (CA2 and n. 6 1999); United States v. Brown University, 5 658, (CA3 F. 3d 669 1993); Chicago Profes sional Sports Limited Partnership v. National Basketball Assn., 667,674-676 2d (CA7 1992); Law v. National Collegiate Assn., Athletic 134 F. 3d 1010, (CA10 1998); U S. Healthcare, Inc. v. Healthsource, Inc., 986 F. 2d (CA1 594-595 1993). applies to (Chevron deference concurring) (1988) J., (Scalia, statutory jurisdiction)). own its interpretation agency's deference for call review to occasion no we But being brief respondent’s urged interpretation here, the ordinary prin- under statute reading of clearly better construction. ciples of an to pains isAct FTC S.U. C. profit,” own its for carry business on to ganized “of profit for business on carries one that also but §44, organization supportive a such While members,” ibid. its im- beyond ways members helping its to devoted may be claimed here one no profit, enhancement mediate to the single-mindedly itself entity devote must an such supposed hardly be indeed, could, It of others. profit sup- covered notion restricted such intended Congress bring would this opportunity with organizations, porting of the purposes where jurisdiction avoiding for itwith asserting it. obviously for call would Act FTC require does Act FTC Just members' entirely its itself devote must organization much how about anything say Act does the neither profits, bot- raising members’ go to must entity’s activities of the let reason apparent accordingly There lines. tom per- threshold meeting some turn application the statute’s satisfying a even purpose, activity for centage of non- of the part calling a substantial formulation softer members’ its aimed entity’s activities total profit lucre relation proximate sure, beTo benefit. pecuniary membership all not cover does Act the FTC appear; must more, without corporations profit-making organizations education professional solely devoted organization an even reach, jurisdictional Act’s FTC outside may lie ultimately affects services professional though the them. deliver who those profits of however, case, drawing exercise line is no There individual itsof profits contributions CDA’s where members are proximate and apparent. Through for-profit subsidiaries, the CDA provides advantageous insurance and preferential financing arrangements for its members, and it engages in lobbying, litigation, marketing, public rela- tions for the benefit of its members’ interests. This conge- ries of activities confers far more than de minimis or merely presumed economic benefits on CDA members; the economic benefits conferred upon the CDA’s profit-seeking profession- als plainly fall within the object of its enhancing members’ “profit,”6 which the FTC Act makes the jurisdictional toueh- 6This conclusion is consistent with holdings aby number of Courts of Appeals. In FTC v. National Comm’n on Egg Nutrition, the Court of Appeals held that a nonprofit association "organized for the profit of the egg industry,” 517 2d, F. 488, at fell within the Commission’sjurisdiction. In American Medical Assn. v. FTC, (CA2 638 F. 2d 443 1980),the Court of Appeals held that the “business aspects,” id., 448, of the AJVLA’sactiv ities brought it within the Commission’sreach. These cases are consist ent with our conclusionthat an entity organized to carry on activities that will confer greater than de minimis or presumed economic benefits on profit-seeking members certainly falls within the Commission’sjurisdic tion. In Community Blood FTC, Bank v. the Court of Appeals addressed the question whether the Commissionhad jurisdiction over a blood bank and an association of hospitals. It held that “the question jurisdic tion over the corporations or other associations involved should be deter mined on an ad hoc basis,” 405 2d, and that the Commission’s jurisdiction extended to “any legal entity without shares of capital which engages in business for profit within the traditional meaning of that lan ibid, guage,” (emphasis deleted). The Court of Appeals also said that “Recording to a generally accepted definition ‘profit’ gain means from business or investment over and above expenditures, or gain made on business or investment where both receipts or payments are taken into account,” id., at 1017,although in the same breath it noted that the term’s “meaning must be derived from the context in which used,” it is id., at 1016. Our decision here is fully consistent with Community Blood Bank, because the CDA contributes to the profits of at least some of its members, even on a restrictive definition of profit as gain above expenditures. (It should go without saying that the FTC Act does not require for Commis .sion jurisdiction that members of an entity turn a profit on their member ship, but only that the entity be organized to carry on business for mem bers’ profit.) Nonetheless, we not, do and indeed, on the facts here, could Commis- the concluding that difficulty in nois There stone. the CDA. over jurisdiction sion purpose logic and The “prevent” to Commission the directs Act FTC

result. using “from jurisdiction its under entities of set broad and commerce affecting or in competition of methods unfair affecting com- or in practices or acts deceptive or unfair organized entities Nonprofit 45(a)(2). §C.S.U. merce.” and capacity same have members for-profit of behalf on organi- for-profit as incentives the same derivatively, least, unfair or competition of methods in unfair engage to zations nonprofit a that possible may even It acts. deceptive and only advantages, not certain would good entity up to membership for-profit a over but member for-profit over superficial screen enjoy the would itwell; organization interests serving the to devoting itself while disinterest breaking than doing more for concern without members its even. argument, contrary petitioner’s to Nor, Commis- interpretation with history inconsistent Act FTC versions Although the jurisdiction. sion’s “corpora- defined the Senate by House passed first share- stock, joint incorporated, only refer tion” profit, carry on business organized companies capital 11, Sess., 2d Cong., 63d Rep. No. Conf. H. R. see revised subsequently Committee (1914), Conference an indicates alteration an form, present its definition nonprofit over has jurisdiction Commission today whether not, decide do, for but members for-profit profit confer not do organizations commerce, significant engage surpluses, income annual show example, do We therefore players. for-profit with markets relevant compete fall might profit paradigms various possibility foreclose purpose whether decide do we Nor Act. FTC ambit within profes- enhancing sense, as a presumed only in profit contributing jurisdiction. Commission's implicate efforts, would educational sional intention to include nonprofit entities.7 And the legislative like history, the text of the FTC Act, is devoid of any hint at an exemption for professional associations as such. Commission had jurisdic- tion to pursue the claim here, and turn to the question whether the Court of Appeals devoted sufficient analysis to sustain the claim that the advertising restrictions promul- gated by the CDA violated the FTC Act.

The Court of Appeals treated as distinct questions the suf- ficiency of the of analysis anticompetitive effects and the substantiality of the evidence supporting the Commission’s conclusions. Because we decide that the Court of Appeals erred when it held as a matter of law that quick-look analysis was (with appropriate the consequence that the Commis- sion’s abbreviated analysis and conclusion were sustainable), we do not reach the question of the substantiality of the evi- dence supporting Commission’s conclusion.8 In National Collegiate Athletic Assn. v. Board Regents of Univ. Okla., 468 U. S. 85 (1984), we held that a “naked restraint on price and output requires some competitive jus-

7A letter from Bureau of Corporations Commissioner Joseph E. Davies to Senator Francis G. Newlands, the bill’s sponsor and a member of the Conference Committee, written August 8, 1914, before the Conference Committee revisions, included a memorandum dated August 7,1914, that expressed concern that the versions of the bill passed by the House and the Senate would not jurisdiction extend to purportedly nonprofit organi zations, which might “furnish convenient vehicles for common understand ings looking to the limitation of output and the fixing of prices contrary to law." Trade Commission Bill: Letter from the Commissioner of Corpo rations to the Chairman Comm, of the Senate on Interstate Commerce, Transmitting Certain Suggestions Relative to (H. the Bill 15613) R. Create a Federal Trade Commission, 63d Cong., 2d Sess., (1914). 3 8 onremand it can effectively assess the Commission’s decision for substantial evidence on the record, or whether it must remand to the Commission for a more extensive rule-of-reason analysis on the basis an enhanced record. analysis.” market detailed aof absence even tifieation industry “no elaborate held we Elsewhere, Id., char anticompetitive demonstrate required analysis refuse competitors among agreements horizontal of” acter Engineers Soc. Professional National prices, discuss to withhold (1978), or 679, S.U. States, 435 United Federation of v. Indiana service, FTC desired particular Soc. National (1986)(quoting U. S. Dentists, these 692). each In supra, Engineers, Professional come what basis formed eases, which rule under analysis “quick-look” abbreviated called rudimentary understand even with observer reason, an in arrangements that conclude could economics ing of customers on effect anticompetitive an would question Assn., the Athletic Collegiate National In markets. and (the number output limited expressly plan television league's price. minimum televised) a fixed and could that games Engi Soc. Professional National In 99-100. S., at U. 468 bid competitive ban absolute “an was restraint neers, Den Federation of Indiana In 692. atS.,U. ding.” 435 among the agreement “a horizontal was restraint tists, a customers their from to withhold dentists participating As S., U. 476 they desire.” service particular day when analysis carries quick-look cases, such in easily as be Assn., can effects anticompetitive likelihood great Collegiate Athletic National v. Law See certained. quick-look 1998) (explaining (CA10 1010, 1020 3d anticompeti- obvious practice “where applies analysis Partner Sports Limited Chicago effects”); Professional tive 674-676 667, 2dF. Assn., Basketball National ship v. as after adequate analysis quick-look 1992) (finding (CA7 justi procompetitive proffered logic rejecting sessing and 3d University, F. Brown States fications); United cf. re analysis rule-of-reason 1993) (finding full (CA3 677-678 aid financial provide sought universities quired where agree- contrast way of noting needy students merits in National Soc. Engineers of Professional and Indi- ana Federation Dentists “embodied a strong economic self-interest of parties them”). case us, however, present fails to a situation in

which the likelihood of anticompetitive effects is comparably obvious. Even on Breyer’s Justice view that bars on truthful and price verifiable and quality advertising are prima anticompetitive, facie post, see at 784-785 (opinion concurring part and dissenting part), place burden of procompetitive justification on those agree who adopt them, very issue at the threshold of this case is professional whether price and quality advertising is suffi- ciently verifiable in theory and in fact to fall within such general rule. Ultimately our disagreement with Justice Breyer turns on our responses different to this issue. Whereas he accepts, as the Ninth Circuit seems to have done, that the restrictions here were like restrictions on ad- price vertisement of and quality generally, see, g., post, e. 785, 787, 790, it seems to us that the CDA’sadvertising re- might strictions plausibly be thought to have a procom- net petitive effect, or possibly no effect at all on competition. The restrictions on both discount and nondiscount advertis- ing are, at least on their designed face, to avoid false or de- ceptive advertising9 in a market by characterized striking disparities between the information available to profes- the sional and patient.10 the Cf. Carr & Mathewson, The Eco- 9That false or misleading advertising has an anticompetitive effect, as that term is customarily used, has been long established. Cf. FTC v. Al goma Lumber Co., 291 U. 67, 79-80 S. (1934) (finding a false advertisement to be unfair competition). 10«The fact that a restraint operates upon a profession as distinguished from a is, business of course, relevant in determining whether that particu- lar restraint violates the Sherman Act. It would be unrealistic to view practice the of professions as interchangeable with other business activi- ties, and automatically to apply to professions the antitrust concepts which originated in other areas. The public service aspect, and other features of the professions, may require that a particular practice, which could of Organization Legal the in Study A Firms: Lawof nomics in (1990) (explaining 307,309 Econ. &Law 33 J. Firm, the asym- “inherent services, professional complex for market a “pro- because arises product” the about knowledge of metry [whereas] knowledgeable are good the supplying fessionals Akerlof, uninformed”); are good the demanding consumers Mar- the and Uncertainty Quality “Lemons”: for Market quality out (pointing (1970) Econ. J.Q. Mechanism, ket infor- asymmetrical characterized market in problems ad- in which services, professional for market mation). In service of comparability the and rare relatively is vertising customers difficulty established, the easily packages about information verify and to get competitors or potential to dangers the magnifies of services availability and price What advertising. misleading with associated competition resist tends services of professional quality more, is cli- or patients individual monitoring by calibration either required knowledge the specialized of because ents, partly in difficulty because partly and services, evaluate outcome which, an degree and whether, determining job (like poor services quality attributable is walnut). tough very (like a else something toor filling) tooth Theory A Licensing: and Lemons, Leland, Quacks, See (1979); 1328,1330 Econ. Pol. 87 J. Standards, Quality Minimum Schwartz, & R. Jost, T. Johnson, S. Greaney, T. Furrow, B.1 view common (describing (1995) §3-1, p. Law Health evaluating adequately incapable lay public “the to par- attachments services”). Patients’ medical difficult which rationality professionals, ticular Pro- Evans, Cf. further. even picture complicate assess, Competition Can Function: Production fessionals Professions?, Licensed Efficiency Improve Policy (S. Rotten- 235-236 Regulation Licensure Occupational context, another inAct Sherman a violation viewed be properly 773, Bar, S. U. State Virginia, differently.” Goldfarb treated (1975). 788-789, n. berg 1980) ed. (describing long-term relationship between professional and client not as “a series of spot contracts” but rather as “a long-term agreement, often implicit, to deal with each other in a set of future unspecified or incompletely spec- ified circumstances according to certain rules,” and adding "CQt is not clear how or if these [implicit contracts] can be reconciled with promotion price effective competi- tion in individual spot markets particular for services”). The existence of such significant challenges to informed deci- sionmaking by the customer professional services imme- diately suggests that advertising restrictions arguably pro- tecting patients from misleading or irrelevant advertising call for more than cursory treatment as obviously compara- ble to classic horizontal agreements to limit output price competition.

The explanation proffered by the Court of Appeals for the likely anticompetitive effect of the CDAs restrictions on discount advertising began with the unexceptionable state ments “price advertising is fundamental price compe tition,” 128 F. 3d, at 727, and “[r]estrictions on the abil ity to advertise prices normally make it more difficult for consumers to find a price lower and for dentists to compete on the basis ibid, price,” (citing Bates v. State Bar Ariz., 433 U. S. 350, 364 (1977); Morales v. Trans World Airlines, Inc., 504 U.S. (1992)). The court then acknowl edged that, according to the CDA, the restrictions nonethe less furthered the “legitimate, indeed proeompetitive, goal of preventing false and misleading price advertising.” 128 F. 3d, at 728. The Court of Appeals might, juncture, have recognized that the restrictions at issue here are very far from a total ban price on or discount advertising, might have considered the possibility that particular re strictions professional advertising could have different ef fects from those “normally5’found in the commercial world, even to point of promoting competition by reducing the occurrence of unverifiable and misleading across-the-board con- Appeals of Court the Instead, advertising.11 discount disclosure “CDA’s the that assertion brief the to itself fined discounts aeross-the-board prohibit to appear requirements informa- the of all disclose to infeasible simply isit because that observation the by followed ibid., required,” is that tion led fact in rule the that evidence no provides record “the pricing,” dental of transparency and disclosure increased to ibid. these But that Assuming effects. anticompetitive describe and

text dis- CDA the that conclusion supports fact in record across-the- of advertisement essentially bar rules closure bana such that obviously follow not does it discounts, board ad- Whether here. effect anticompetitive net a would say, first-time for, discounts announced that vertisements information conveying effective less be customers, would dis- and original they listed if competition relevant they than fillings, and X-rays, checkups, for prices counted discount percentage specified simply they if would em- susceptible question aus seems board, across world, suspicious aIn analysis. priori anot but pirical necessary condi- abe may well example specific of discipline practi- all for that claims professional plausibility tion possible also It shopping. comparison defy purposes cal advertise- discount aeross-the-board if even that, principle in short drawing customers effective more were ments acci- intentional measure some recurrence run, might claims their breadth due misstatement dental consider did Appeals Court “the Breyek claims Justice noth says cites he language But Post, at differences.” relevant “some here inappropriate analysis se per than more ing false restrict purported restrictions where appropriate was caution” appropriate, course ofwas Caution 726-727. 3d, at see advertising, consider constitute does Appeals Court statement advertising but other these between differences possible ation restrictions. leak out over time to potential make patients skeptical of

any such across-the-board advertising, so undercutting the method’s effectiveness. Cf. Akerlof, 84 J. Q. Eeon., at (explaining that “dishonest dealings tend to drive honest dealings market”). out of the might It be, too, that across- the-board discount advertisements would continue to attract business indefinitely, might but work precisely they because were misleading customers, and just thus because their ef- fect would be anticompetitive, not procompetitive. Put an- way, other the CDA’s appears rule to reflect prediction the any costs competition to associated with the elimination of across-the-board advertising will be outweighed by gains to (and consumer information hence competition) by created discount advertising that is exact, accurate, and easily more (at verifiable by regulators). least As a matter of economics this may view may not be correct, but it is not implausible, and neither a court nor the may Commission initially dismiss it as presumptively wrong.12 In theory, it is true, the Court Appeals neither ruled out the plausibility of some procompetitive support for the CDA’srequirements nor foreclosed utility of an eviden- tiary discussion on point. The court indirectly acknowl- edged the plausibility of procompetitive justifications for the Breyer Justice suggests that our analysis is "of limited relevance,” post, at because “[t]he basic question is whether this ... theoretically redeeming virtue in fact offsets the restrictions’ anticompetitive effects in case,” this ibid. He thinks that the Commission and the Court of Appeals “adequately answered that question,” ibid., but the absence of any empiri cal evidence on this point indicates that the question was not answered, merely avoided implicit burden shifting of the kind accepted by Jus Breyer. tice point is that before a theoretical claim of anticompeti- tive effects can justify shifting to a defendant the burden to show empiri cal evidence of procompetitive effects, as quick-look analysis in effect requires, there must be some indication that the court making the decision has properly identified the theoretical basis for the anticompetitive effects and considered whether the effects actually are anticompetitive. Where, as here, the circumstances of the restriction are somewhat complex, as sumption alone will not do. provides record “the stated it when position

CDA’s disclosure increased led to fact rule evidence But 3d, pricing,” dental transparency in- incentive had would alone petitioner because though sounds statement evidence, such troduce without justified was it thought may have Appeals cf Court hard adduce CDA burden shift analysis further policy; its nature proeompetitive evidence moment evidence empirical adversión court’s its leniency of shifting underscores burden implicit anticompetitive restrictions’ evidence into enquiry effects. comparably was Appeals of Court The analysis as rule-of-reason sufficiency abbreviated ing the began court The advertising restrictions. nonpriee to effect are restrictions “[t]hese argument with infor- supply they restrict as limitation, output form Ibid, P. (citing services.” dentists’ individual about mation 693-694 pp. 1505, ¶Law Hovenkamp, Antitrust H.& Areeda appear indeed does sentence Although this (1997 Supp.)). output relevant given puzzling, is it cited, as ad- information not presumably is here purposes antitrust question The themselves. services dental vertising, but advertisements possible universe whether limitation has), whether but assuredly (as it limited been delivery total limit obviously tends advertisements on addressing closest came court services. dental limiting assert to on went it when question latter den- “prevents safety quality regarding advertisements they services package describing the fully from tists may restrictions “[t]he adding that 728, 3d, at 128 F. offer,” ad- comfort quality directly, output more affect also nonemer- obtain customers some may induce vertising ibid. so,” do otherwise might not they when care gency ad- quality If puzzling. also output about suggestion This care more obtain patients some actually induces vertising they

than would in its absence, then restricting such adver- tising would reduce the demand for dental services, not the supply; and it is of course producers’ supply good of a relation to demand that is normally relevant in determining whether a producer-imposed output limitation has the anti- competitive effect of artificially raising prices,13see General Leaseways, Inc. v. National Truck Leasing Assn., 744 P. 2d (CA7 1984) 594-595 (“An agreement output also equates to a price-fixing agreement. If firms price, raise market’s demand for product their will fall, so the amount supplied will fall too—in other output words, will be re- stricted. If instead the firms output restrict directly, price will as mentioned rise in order to limit demand to the re- duced supply. Thus, with exceptions not relevant here, rais- ing price, reducing output, and dividing markets have the same anticompetitive effects”). Appeals acknowledged the CDA’s

view that “claims about quality are inherently unverifiable and therefore misleading,” 128 F. 3d, at responded 728, it that this concern “does not justify banning all claims regard without they whether are, in fact, false or mislead- ing,” ibid. As a result, the court said, “the restriction is a sufficiently naked restraint output on justify to quick look analysis.” Ibid. The court assumed, in these words, that some dental quality may claims escape justifiable censure, they because are both verifiable and true. But implicit its Breyer Justice wonders if we “mea[n] this statement as an argu ment against the anticompetitive tendencies that flow from an agreement not to advertise service quality.” Post, at 791. But as the preceding sen tence shows, we intend simply to question the logic of the Court of Ap peals’s suggestion that the restrictions are anticompetitive because they somehow “affect output,” 3d, 128 at 728, presumably with the intent to raise prices by limiting supply while demand remains constant. We do not mean to deny that an agreement not to advertise service quality might have anticompetitive effects. We merely mean that, absent further analy sis of Breyer the kind Justice undertakes, it is not possible to con clude that the net effect of this particular restriction is anticompetitive. the weight no gave why it explain fails assumption that suggestion plausible, equally least countervailing, at and patient or quality about difficult-to-verify claims restricting preventing effect procompetitive a have would comfort in- is, It market. the distort that claims misleading false or restrictions CDA’s the understand possible entirely deed, nothing advertising as comfort quality unverifiable on Bates, ef. puffery, on ban procompetitive than more legal services quality the relating to (claims atS.,U. or measurement precise susceptible not are “probably might well circumstances, some under and, verification id., false”); even or public, misleading to or deceptive serv- quality toas claims (“[Advertising 383-384 at verifica- of measurement susceptible not are ... ices mislead- likely to be may sobe claims accordingly, such tion; notwithstanding restriction”), Justice warrant ing as never that discussion (to Commission citation Breyer’s quality professional unverifiability of issue faces 785.14 Bates), post, raised claims, point The pos- isitA;CD by the claimed effect procompetitive all effect no might have claims banning that sible very made many dentists example, if, competitiveness possi- course is also it And claims. sort same much anti- analysis be final might in restrictions ble plausibility rather, point, The competitive. adver- professional of the effects about claims competing abbreviated indulgently out rules tising restrictions treated. was order Commission’s which review abbreviated triggers effect anticompetitive obvious shown. been analysis one deceives puffing’ ““mere only said 14The Commission question C., T. 121 F. regulation.” subject been never governmental subject may puffery whether course, not here, of it. may ban organization professional whether but regulation, light In of our focus on the adequacy of the Court Ap-

peals’s analysis, Breyer’s Justice thorough-going, de novo antitrust analysis contains much to impress on its own merits but little to demonstrate the sufficiency of the Court Ap- peals’s review. The obligation give a more deliberate look than quick one does not arise at the door of this Court and should not be satisfied here in the first instance. Had the Court of Appeals engaged in a painstaking discussion in a league with Breyer’s (compare his Justice pages with the Ninth 8), Circuit’s and had it confronted the comparabil- ity of these restrictions to bars on clearly verifiable advertis- ing, its reasoning might have sufficedto justify its conclusion. Certainly Breyer’s Justice treatment of the antitrust is- sues here is “quick look,” Lingering is more like it, and indeed Justice surprisingly, stops short of en- Breyer, dorsing the Court of Appeals’s discussion as adequate to the task at hand.

Saying here that the Court of Appeals’s conclusion at least required a more extended examination possible of the factual underpinnings than it received is not, of course, necessarily to call for the fullest market analysis. Although we have said that a challenge to a “naked restraint price and out- put” need not be supported by “a detailed market analysis” in order to “requirfe] some competitive justification,” Na- tional Collegiate Athletic Assn., 468 U. S., at 110, it does not follow that every ease attacking a less obviously anticompeti- (like tive restraint one) is a candidate for plenary market examination. The truth is that our categories of analysis of anticompetitive effect are less fixed than terms “per like se,” “quick look,” and “rule of reason” tend to make them appear. We have recognized, for example, that “there is often no bright line separating per se from Rule of Reason analysis,” since “considerable inquiry into market conditions” may be required before the application any “per so-called se” con- demnation justified. Id., at “[Wjhether 104, n. 26. ultimate finding is product of a presumption or actual same— the remains inquiry essential the analysis, market competi- enhances restraint challenged the not whether anti- enriched who scholar the Indeed, 104. Id., at tion.” for eye” anof twinkling “the of metaphor the with law trust cautioned himself analysis rule-of-reason condensed most the aof “spec- in speaking even misleading of risk the against upon passing for analysis reasonableness adequate of trum” sliding aof something always “There claims: antitrust for- scale sliding the reasonableness, but appraising in scale can we than precision greater suggests deceptively mula required of proof Nevertheless, the ... for. hope Antitrust Areeda, P. circumstances.” with vary should Professor time, same theAt (1986).15 1507, p. Law f great necessity, particularly emphasized also Areeda explain courts antitrust, of realm law quasi-common reasoning, their exposing “By conclusions. their of logic which analyses, critical others’ to subjected are ... judges future.” for understanding better to lead can turn demonstrate, here circumstances theAs Id., ¶ at between drawn be to line categorical no is generally there See, e.g., Ko- views. similar expressed have commentators Other Approach “Stepwise” Justice’s Department The Counterpoint: lasky, Anti Agreements, Horizontal to Parties Burden Heavy a Too Imposes courts, as reason, the rule (“[I]n 1998) applying 41,43 (spring trust proof much how determine scale sliding test, a use balancing any with Stand NewA Reason: Rule Making Sense Piraino, require”); (1994) 1753, 1771 Rev. L. Vand. Act, 47 Sherman 1 of Section for ard depending inquiry degrees varying undertake will (“[C]ourts will restraints certain legality issue. of restraint type upon obvious. are effects competitive their because determine easy com their because analysis detailed more a require will restrictions Other Ap “Stepwise” Klein, A see But ambiguous”). more impact petitive Needed Much a Provide Will Agreements Horizontal Analyzing for proach (examina 1990) (spring 41, 42 Review, Antitrust Antitrust Structure scrutiny of full means “is justifications of procompetitive tion justifica look hard rather, is, It efficiency justification. proffered forward coming burden defendant’s meets it if determine tion justification”). efficiency valid establishing with —but —a restraints give rise to an intuitively obvious inference of anticompetitive effect and those that call for more detailed treatment. What is required, rather, is an enquiry meet for the case, looking to the circumstances, logic details, and of a restraint. object The is to see whether experience the market has been so clear, or necessarily will be, that a confident conclusion about the principal tendency of a re- striction will (or follow quick from a at quicker) least look, in place of a more sedulous one. And of course what we see may vary over time, if rule-of-reason analyses in case after ease reach identical conclusions. Por now, at least, a less quick look required was for the initial assessment of the tendency of professional these advertising restrictions. Be- cause the Court Appeals did not scrutinize assumption of relative anticompetitive tendencies, we vacate judg- ment and remand the case for a fuller consideration of the issue.

It is so ordered. Justice Breyer, with whom Justice Stevens, Justice Kennedy, Ginsburg and Justice join, concurring part dissenting part. agree I with the Court that the Federal Trade Commission (FTC Commission) jurisdiction over petitioner, and join I I Parts and II opinion. of its I agree also that in a “rule of reason” antitrust case “the quality proof re- quired vary should with the circumstances,” “[w]hat is required ... is an enquiry meet for the case,” and that object is a “confident conclusion about the principal tendency of a restriction.” Ante, at (internal 780 page quota- tion omitted). marks But I do not agree that the Court has properly applied unobjectionable those principles here. In my view, a application traditional of the rule of reason to the facts as found requires Commission affirming the just as the Court Commission— of Appeals did below.

I find- “factual its if lawful conclusion Commission’s evi- by “substantial supported they are insofar ings,” §1.” FTC Act Sherman violation out “make dence,” 454-455 U. S. Dentists, Federation Indiana simply would Iso, whether (1986). determine To over- anticompetitive are issue restraints whether ask (and Commis- Appeals Court like Rather, all. classical, four into down question break sion), I would re- specific (1) isWhat questions: subsidiary antitrust ef- anticompetitive likely its (2) are What issue? straint justifica- proeompetitive offsetting (3) there Are fects? power market sufficient parties (4) theDo tions? difference? amake

A are What first: question important most Collegiate g., National e. See, issue? restraints specific 468 Okla., Univ. Regents of v. Board of Assn. Athletic Inc. Music, (NCAA); Broadcast (1984) 98-100 S.U. 1, 21-23 S.U. Inc., System, Broadcasting Columbia agree- merely the include do not restraints (1979). Those (Dental Association’s Dental California which ment refers, literally Association) rule ethical or Association “ ‘false advertising that from refrain promise namely, ” (quot- Ante, at respect.’ any material misleading in 33). (1993), App. §10 Ethics Code Dental California ing arising restraints set found Commission Instead, the implemented Association Dental way the out advi- through practice, rule innocent-sounding ethical review and policies, enforcement guidelines, sory opinions, Assn., Dental re In applications. California membership rule ethical implemented, (1996). As 190C.T.F. and truthful prevent target, nominal beyond its reached Commission particular, advertising. In nondeceptive practice: rule, determined (1) “precluded advertising that characterized a dentist’s fees being as low, reasonable, or affordable,” id., at 301; (2) “precluded advertising ... of across the board dis- counts,” ibid.; and

(3) “prohibited] all claims,” id., at 308. Whether the Dental Association’s basic rule imple- actually mented restrained the truthful nondeceptive ad- vertising prices, of low across-the-board qual- discounts, and ity questions service are of fact. The Administrative Law (AU) Judge and the may Commission have found those questions difficult ones. But both the AU and the Com- mission ultimately against found the Dental Association in respect to these facts. question And the for us—whether agency those findings supported are by substantial evidence, see Indiana supra, Federation, at 454-455—is not difficult. Appeals referred explicitly to some of the evidence that it found adequate support the Commission’s pointed conclusions. It out, for example, that the Dental Association’s “advisory opinions guidelines indicate that... descriptions prices as 'reasonable’ or ‘low5do not comply” with the Association’s rule; that in “numerous cases” the Association “advised objections members of special to offers, senior citizen discounts, patient and new discounts, apparently regard without to their truth”; and that one advi sory opinion “expressly states that claims as to the of services inherently are likely to be false or misleading,” all any particular “without consideration of whether” such statements were “true or (CA9 false.” 128 F. 3d 720, 1997). The Commission itself had before it far more evidence. It referred to instances in which the Association, without re- gard for the truthfulness of the statements at issue, recom- mended denial of membership to wishing dentists to adver- tise, example, for “reasonable quoted fees in advance,” “major savings,” “making or teeth cleaning... inexpensive.” “across- testimony that to referred It 301. atC.,T.P. with compliance advertising literal in discount the-board tele- in pages two take probably ‘would requirements in that really advertise to going ‘[njobodyis book' phone many ” instances to pointed itAnd Id., at fashion.’ advertising such suppressed Association Dental which “latest year,” 1for work dental all guarantee “we claims earing envi- dentistry ain “gentle dentistry,” and in cosmetic 308-310. Id., ronment.” review not need I courts for matter ais evidence” “substantial that said ought only in what intervene “will it that appeals, been have appears standard when instance rare Camera Universal misapplied.” grossly or misapprehended (1951). said have I 490-491 S.U. NLRB, Corp. warranting our case a is not that clear enough to make only basic decide must we Consequently, intervention. above described restraints three whether legal question competition.

unreasonably restrict

B po- “the have mentioned restrictions the three each Do Indi- competition”? effects adverse genuine for tential Law Antitrust Areeda, 7 P. 460; S., at U. Federation, 476 ana Areeda). should I (hereinafter (1986) pp. 372-377 ¶ 1503a, three tendencies anticompetitive thought that advertise not agreement An obvious. were restrictions that inexpensive, service that reasonable, a fee difficult more it makes discount a receive will customer a price. lower a charges he customers inform dentist will he price, lower about know does customer If fact, That price service. buy lower difficult more it find more obtain will a dentist likely that less it makes turn, likelihood And prices. offering lower customers lower offer likely to less prove will dentists means To obvious? spell out to I have why should But prices. restrain truthful advertising about prices lower likely competition restrict respect in price central ner- —“the system vous of the economy.” United States v. Socony- Vacuum Oil Co., 310 U.S. 150, 226, n. (1940); e.g., cf., Bates v. State Bar Ariz., 433 (1977) U. S. 350, (price advertising plays an “indispensable role in the allocation of resources in a free enterprise system”); Virginia Bd. of Pharmacy Virginia Citizens Consumer Council, Inc., 425 (1976). U. S. 748,765 The Commission thought this fact suf- (in ficient to hold alternative) price that the advertising restrictions were per unlawful se. See 121 F. T. C., at 307; cf. Socony-Vacuum, supra, at 222-228 (finding agreement among competitors buy “spot-market oil” per unlawful se because of its tendency to price restrict competition). For present purposes, I need not decide whether the Commission right was applying per se rule. I need only assume a rule of applies, reason and note the serious anticompetitive price tendencies of the advertising restraints. The restrictions on the advertising of quality service also have serious anticompetitive tendencies. This is anot case puffing,” “mere as the recognized. FTC See 121 F. T. C., at 317-318;cf. ante, at 778. days my youth, when the

billboards near Emeryville, California, home of AAA base- ball’s Oakland Oaks, displayed the name of “Painless” Parker, long Dentist, are gone along with the Oakland Oaks. — But parents some may still want to know particular that a dentist point makes “gentle care.” may Others want to know 1-year about guarantees. dental work To restrict that kind quality service advertisement is to competition restrict over of service itself, for, unless consumers know, they may purchase, not may dentists compete sup- ply that which will make little difference to the demand for their services. any That, at rate, is the theory of the Sher- man Act. And it is rather late in day anyone deny significant anticompetitive tendencies agreement of an competition restricts any legitimate respect, g., see, e. S. 282 U. States, Corp. United v. Lasky Famous Paramount Inc., 282 Pictures, Nat. First (1930); States United 30, 43 customers inhibits that (1930), one alone let 44, 54-55 S.U. service. a dentist’s quality of the learning about from solely on rely the Commission did Nor ad- to ability of dentists the on a restriction that proposition compete to incentive their likely to limit quality on vertise record to pointed Commission the Rather, qusility. on com- quality-based establishing that affirmatively evidence California. consumers dental to important petition consumers these Unsurprisingly, 309-311. atC., T. part “information on at least based services dental choose Simi- 249. Id., at service.” quality of type and about testimony credited ALJ noted, Commission larly, will services “advertising comfort that effect re- conversely, that and, patients,” bring in more ‘absolutely’ de- would on based ability to advertise straining the attract. could dentist that patients number crease testimony looked Finally, Commission at 310. Id., effects adverse suffered had themselves who dentists ad- discontinue by petitioner forced when business their 310-311. id., at See quality of care. vertising price FTC found The competi- price attempt eliminate “naked ato amounted quality adver- service found It 300. Id., at tion.” they information consumers “deprive tising restrictions Id., patronage.” their competition healthy value these “anticompetitive nature added It Appeals Court Ibid. “plain.” was restrictions” anticompeti- deny possible it believe I do agreed. mentioned. I have tendencies tive

C anticompetitive despite their whether, ask also must We pro- by other justified might be restrictions these tendencies, Areeda, 7See redeeming virtues. tendencies competitive ¶ 1504,at 377-383. question This is a closer least in the- —at ory. The Dental argues Association that the three relevant restrictions are inextricably legitimate tied to a Association effort to restrict false misleading or advertising. The Asso- argument ciation, the goes, prevent had to dentists from en- gaging in the kind of nondeeeptive truthful, advertising that it banned in order effectively stop dentists making from unverifiable claims price about or quality, service which claims would mislead the consumer. problem The with any this or argument similar is an em- pirical one. Notwithstanding its theoretical plausibility, the record does not bear out such a claim. The Commission, expert which is in the area of false and misleading advertis- ing, was uncertain petitioner whether had even made the claim. It petitioner’s characterized argument efficiencies rooted (unproved) factual assertion that its ethical rule “challenges only advertising that is false misleading.” 121F. added). C.,T. (emphasis at 316 Regardless, the Court Appeals respect wrote, in price to the restrictions, that “the provides record no evidence that the rule has in fact led to increased disclosure and transparency of dental pricing.” 128 3d, F. at 728. respect With quality advertising, Commission stressed that the Association no “offered con- vincing argument, let alone evidence, that consumers of den- tal services have been, or likely are to be, harmed categories broad of advertising it restricts.” 121F. T. C., at 319. Nor did the Appeals Court of think that the Associa- tion’s unsubstantiated contention that “claims about quality inherently are unverifiable and therefore misleading” could “justify banning quality all claims regard without to whether they are, in fact, false or misleading.” 128 F. 3d, at 728.

With one exception, my own review of the record reveals significant evidentiary support for the proposition that the Association’s agree members must to ban price truthful advertising in order stop untruthful claims. exception one is the obvious fact that one can stop un- 788 But advertising. all prohibits one advertising if

truthful false sift virtually no effort made Association since does fact 316-317, that atC.,T. 121 see true, from S., 468 U. NCAA, See defense. antitrust valid aout make 383-384. ¶ at 1505, Areeda, 7 119; § case, 1Act Sherman usual In See justification. proeompetitive establishing a burden States, United v. Engineers Soc. National Professional 11 H. 397; ¶ 1507b, Areeda, (1978); 7 695 679, U.S. 435 (1998);see 313-315 pp. 1914c, ¶ Law Hovenkamp, Antitrust 3dF. Assn., Athletic Collegiate v. National Law also (1998); United U. S. denied, (CA10),cert. 1010, 1019 1993);Capital (CA3 3dF.5 Univ., Brown States Associates, Valley Medical v. Mohawk Imaging Associates 947 S.U. 510 denied, (CA2), cert. 537, 543 2dF. Inc., 996 Periodontology, Academy American of (1993); Kreuzer 1984). Court And (CADC 1479, 1492-1495 2dF. 735 justifi such that concluded it when correct was Appeals here. established had been cation

D addi- one prove must the Commission assume I shall restraints Association’s namely, that circumstance, tional marketplace. difference real a made likely have would dis- Commission, 376-377. ¶1503, Areeda, See found single point, on ALJ with agreeing to make power enough market possess did Association mid- California, region one least In at difference. 90% than more for accounted members its peninsula, See 75%. they accounted average marketplace; into by new-dentists entry addition, In at 314. C., T. ex- is education Dental fairly difficult. marketplace $50,000- with school dental graduates (leaving pensive (which dentistry office newa debt), opening as is $100,000 Asso- Dental And 315-316. Id., at $75,000~$100,000). costs Association membership in believe members ciation important and valuable recognized by as such public. Id., at 312-313, 315-316. These facts, in the Court Appeals’ view, were sufficient to show “enough power market to harm competition through [the Association’s] setting standard in the area of advertis ing.” 128 F. 3d, at 730. And that conclusion is correct. Restrictions on advertising price discounts in Palo may Alto make a difference potential because patients may not re spond readily to discount advertising by (10%) the handful of dentists who are not members of the Association. And that fact, in turn, means that the remaining 90% prove will less likely engage price competition. Facts such as these previously led this Court to find power— market unless the defendant has overcome the showing with strong contrary evidence. g., See, e. Indiana Federation, 476 U. S., at 456-457; cf. United States v. Loew’s Inc., 371 U. S. 38, (1962); Brown Shoe Co. v. United States, 370 U. S. 294, (1962); 341-344 accord, United States v. Aluminum Co. of America, 148F. 2d (CA21945). 416, 424 I can find no reason for departing from precedent here. In the Court’s view, legal analysis conducted Court Appeals was insufficient, and the Court remands the case for a more thorough application of the rule of reason. But in what way did the Court of Appeals fail? I find the Court’s answers to question unsatisfactory one —when divides the overall Sherman question Act into its traditional component parts and adheres to judicial traditional practice for allocating the persuasion burdens of in an antitrust case. Did the Court of Appeals misconceive the anticompetitive tendencies of the restrictions? After object all, the of the rule of reason is to separate those restraints “may that sup- press or destroy even competition” from those that “merely regulat[e] and perhaps thereby promot[e] competition.” Board Trade Chicago v. United States, 246 U. S. 231, “adver- Association’s says that majority (1918). The a net thought to have plausibly might tising restrictions competi- on all at effect possibly or effect, procompetitive that adds It Ante, at 771. tion.” patients protecting arguably

“advertising restrictions more for advertising call misleading irrelevant from clas- to comparable obviously cursory treatment than compe- price output or limit agreements horizontal sic Ante, tition.” recognize failing to for Appeals Court criticizes

itAnd total very from far are here issue restrictions “the that particu “the that advertising” and or discount price on ban differ advertising could professional on restrictions lar commercial in the ‘normally1found those from effects ent . . .” . competition promoting point of world, even Ibid. Court that statements these problem with The rejected It differences. relevant consider did Appeals horizon- classic applied “to customarily legal “treatment” e., competition” price output or limit —i. agreements tal 3d, at See approach. per se (alternative) FTC’s not, do “policies Association’s because so did It 726-727. they instead, ads”; nondeceptive truthful ban face, their adver- truthful way restricts in a enforced been “have restricting “[t]he value added It at 727. id., tising,” attacking rules caution some advertising... counsels false broadly.” Ibid. sweep too merely but so do purport of an nature misunderstand Appeals the Court Did says: Court effect? anticompetitive patients some actually induces advertising

“If then absence, in its they would than care more obtain demand reduce advertising would restricting such produc- ... supply; and services, dental determining normally relevant supply ... ers’ whether a . .. limitation has the anticompetitive effect of artificially raising prices.” Ante, at 776-777. But if the Court means this statement as an argument against the anticompetitive tendencies flow from an agreement not to advertise service I quality, believe it is the majority, and not the Court of Appeals, is mistaken. An agreement not to advertise, say, “gentle care” is anticom- petitive because it imposes an artificial barrier against eaeh dentist’s independent decision to advertise gentle care. That barrier, in turn, tends to inhibit those dentists who want to gentle supply care from getting together with those customers who want to buy gentle care. See P. Areeda & H. Hovenkamp, Antitrust Law ¶ 1505', p. 1998). (Supp. There is adequate reason to believe that tendency present this case. See supra, at 786.

Did the Court of Appeals inadequately consider possible procompetitive justifications? The Court seems to think so, for it says:

“[T]he [Association’s] rule appears to reflect the predic- tion that any costs to competition associated with the elimination of across-the-board will advertising be out- weighed by gains consumer (and information hence competition) created by discount advertising exact, accurate, and more easily (at verifiable least by regulators).” Ante, at 775. That ormay may not be an accurate assessment of the Asso- ciation’s motives in its adopting rule, but it is of limited rele- vance. Cf. Board Trade Chicago, supra, at 238. The basic question is whether this, or some other, theoretically redeeming virtue in fact offsets the restrictions’ anticom- petitive effects in this case. Both court and Commission adequately answered that question. The Commission found that the defendant did not make

the necessary showing that a redeeming virtue existed in practice. See 121 F. T. C., at 319-320. The Court of Ap- “augmented] enforced, as rules, the asking whether peals, the efficiency,” found inerease[d] market and competition evidence. by substantial supported conclusion Commission’s “the that said why court the That 728. at 3d, led fact in rule the that evidence no provides record pricing”— of dental transparency disclosure increased the that evidence no provides record the say that tois which or redeemed nonetheless are anticompetitive, though effects, Ibid. justified. majority The evidence” such introduce incentive the had have

would (Indeed, that is 776. Ante, at justification. procompetitive burden the normally bear defendants reasons the one 788.) supra, See redeeming virtues. about persuasion Court brief petitioner’s incentive, despite this But conclu- Commission’s the counter nothing concrete offers justifi- claim support the not does record that sion itself evidence such produce failure Petitioner’s cation. . .. weight to gave court] why [the lower “explain[s] about difficult-to-verify claims restricting that suggestion ef- procompetitive have would patient comfort or distort that claims misleading false by preventing fect at 778. Ante, market.” respect to With fol- concerns its majority summarizes discounts, board conclu- supports the fact record “Assuming that lows: essentially bar rules disclosure [Association’s] that sion obviously fol- not it does discounts, [such] advertisement effect anticompetitive net would bana such that low assume, than accept, rather I 774. Ante, here.” bar did rules disclosure that found FTC premise: finding that discounts, across-the-board advertisement 783- supra, at See evidence. by substantial supported conclusion literally true accept as IAnd anti- “net namely, that premise, from says follows Court from “obviously” follow do effects” competitive premise. But obviousness is not point. respect With any of the three restraints found the Commission, whether “net anticompetitive effects” follow is a matter of how the Commission, and, here, the Court of Appeals, have answered questions the I laid out at the beginning. See supra, at 782. Has the Commission shown that the restric- tion has anticompetitive tendencies? It has. Has the Asso- ciation nonetheless shown offsetting virtues? It has not. Has the Commission shown market power sufficient for it to believe that the restrictions will likely make a real world difference? It has. upshot,

The in my view, is that the Court of Appeals, applying ordinary antitrust principles, reached an unexcep- tional conclusion. It is the legal same conclusion that this Court itself reached in Indiana Federation —a much closer case than this one. There the Court found agree- that an ment dentists not to submit dental raysX to insurers violated the rule of reason. The anticompetitive tendency agreement of that was to competition reduce among dentists in respect to their willingness to submit raysX to insurers, see 476 U. S., at 456—a matter in respect to which consumers are relatively compared indifferent, as to advertising price discounts and service quality, the matters at issue here. The redeeming virtue in Indiana Federation alleged was the undesirability of having insurers consider a range of matters when deciding whether justified treatment was virtue no —a less plausible, and proved, less than the virtue offered here. See id., at 462-464. “power” The of the dentists enforce agreement their greater was no than that at issue (control here of 75% to 90% of markets). relevant See id., at 460. It is difficult to see how the two cases can reconciled.

not rigid; it admits of some variation according to the circum- I would note that the ^[*] form of ^[*] analysis ^[*] I have followed is stances. important The point, however, is that its allocation evolution gradual a reflects persuasion burdens evolu- That years. many period over courts within proeompeti- carefully to blend effort an represents tion administrative with antitrust law objectives tive from both advance, considerable represents necessity. It refute and/or present had Commission days when theories antitrust from theory, and and fact possible every former analysis. proper prevent toas abbreviated so Bok, conclusion, cf. reaching a ever from cases prevented Law Merging of Clayton Act of7 Section latter (1960), and L. Rev. Harv. Economics, always “Government criticism forth called 270, 301 S.U. Grocery Co.,384 Von’s States United wins,” does ease hope I dissenting). (Stewart, J., (1966) important, basic, an abandonment represent analysis. form I reasons, these

For opinion. Court’s

Case Details

Case Name: California Dental Ass'n v. Federal Trade Commission

Court Name: Supreme Court of the United States

Date Published: May 24, 1999

Citation: 526 U.S. 756

Docket Number: 97-1625

Court Abbreviation: SCOTUS