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FTC v. Ind. Fed'n of Dentists - 476 U.S. 447, 106 S. Ct. 2009 (1986)

Rule:

Under U.S. Supreme Court precedents, a restraint may be adjudged unreasonable either because it fits within a class of restraints that has been held to be "per se" unreasonable, or because it violates what has come to be known as the "Rule of Reason," under which the test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. 

Facts:

Respondent Indiana Federation of Dentists 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 the Federation'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 the Federation 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.

Issue:

Did the practice constitute an unfair method of competition because it had the effect of suppressing competition among dentists, with respect to cooperation with the requests of insurance companies?

Answer:

Yes

Conclusion:

The U.S. Supreme Court reversed a judgment that held that a conspiracy among dentists to refuse to submit x-rays to dental insurers for use in benefits determinations did not constitute an unfair method of competition in violation of § 5 of the Federal Trade Commission Act, 15 U.S.C.S. § 45. First, the Court held that the proper standard of review was to determine if the findings were supported by such relevant evidence that a reasonable mind might accept it as adequate to support the conclusion. Applying this standard, the Court held that the evidence supported a finding that the respondents' practice of refusing to submit dental x-rays to the insurance companies had the effect of suppressing competition among dentists, with respect to cooperation with the requests of insurance companies. The Court rejected respondents' arguments that the conclusions were erroneous as a matter of law, due to a lack of specific findings concerning the market definition, or lack of a finding that the policy resulted in a rise in costs to patients. The Court also rejected respondents' argument that the practice was not anti-competitive because it was motivated by a quality of care justification.

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