Antitrust Compliance: The Do's and Don'ts You Need to Know

Originally published in the May 2018 issue of the WSDA News. 

Editor’s note: Because antitrust law can be complex, the WSDA will soon be publishing an antitrust compliance guide for members. In the meantime, we’ve excerpted some of the most important parts of the guide for you here. 

Introduction

As the voice of dentistry in Washington, the Washington State Dental Association (WSDA) provides value and useful tools to participants in the industry. Like all trade associations, WSDA activity will be closely scrutinized for antitrust violations. Since WSDA by nature is a combination of competitors, the Association and its members must ensure that their activities do not constitute an illegal restraint of trade, or even create the appearance of anticompetitive conduct.

All WSDA members must be very aware of the threat of antitrust liability – at formal and informal meetings of association members; at cocktail parties, dinners, and social events; and in telephone and on-line correspondence and conversations. This is because an association is inevitably the first place government enforcers look to in investigating potential anticompetitive conduct in an industry. WSDA is a firm believer that competitive markets are the key for continuing success of its members in the industry. Federal and state antitrust provisions promote competition and prohibit certain behavior therefore WSDA expects all members to comply with applicable federal and state antitrust laws.

Antitrust Basics

Most of the antitrust violations are brought under Section 1 of the Sherman Act which prohibits any agreement, combination or conspiracy in restraint of trade. By definition, any anticompetitive agreement, express or implied, that you reach with a competitor meets the threshold test of Section 1. For example, an association would directly violate the Sherman Act if negotiating prices on behalf of members. A member of the association may also violate antitrust laws if there are not appropriate safeguards in place.

There should not be personal liability for those who exercise reasonable care in the performance of their duties, showing honesty and good faith. There may be personal liability for those who participate in or knowingly approve of an antitrust violation.

Antitrust issues can arise for associations and association 
members in a variety of instances, including:

• Price fixing through statistical reporting by the association
• Price fixing through inappropriate communications between members 
• Group boycotts, when competitors get together and agree not to deal with a third party payor, other competitor, or vendor
• Group boycotts through:
  • Self-regulation and codes of ethics
  • Standard-setting and certification
  • Membership requirements and access to association services and activities

General Antitrust Do’s and Don’ts

The following is provided as a general overview of topics you may feel comfortable discussing, and topics you should refrain from discussing, when meeting with competitors at trade association meetings.

What you can do

• Discuss better ways to educate and provide meaningful information to the public about the dental care industry, e.g., publishing a consumer guide.
• Discuss economic trends, business forecasts and materials availability generally, emphasizing that each member is free to use the information as needed in making its independent business decisions.
• Discuss federal and state legislation and regulations, government payor policies, and develop and coordinate lobbying efforts and publicity campaigns.
• Discuss common industry problems generally.
• Discuss approaches the association might take to help solve industry problems.
• Discuss ways in which to improve the public image of the dental care industry generally or a specific segment of the industry.
• Discuss new insurance plans or products generally, for example Medicaid products, but not if, or on what terms, members should contract with such plans or products.
• Discuss technological advances and ways members can better utilize them in their operations.
• Discuss quality standards and outcome measures; develop best practices policies.
• Discuss strengths and weaknesses of suppliers and service vendors; develop a group purchasing cooperative.

What you cannot/should not do

Unlawful “Agreement”:

• The antitrust laws prohibit agreements that unreasonably restrain trade. To be unlawful, an agreement need not be formal or binding, but may involve as little as a “knowing wink.”
• The government and private plaintiffs need only show that two or more parties “knowingly participated” in a common scheme or plan. It is enough to show that concerted action was contemplated and the parties’ conduct conformed to the arrangement. “Agreement” has been inferred from mere attendance at meetings with competitors followed by parallel conduct inconsistent with economic self-interest.
• Criminal intent can be proven by showing either: (a) that the “challenged conduct had an anticompetitive effect and was undertaken with knowledge of its probable consequences,” or (b) that “the conduct was undertaken with the purpose of producing anticompetitive effects (whether or not such effects resulted).”
• Avoid creating an inference that an unlawful agreement has either been made or attempted. For example, avoid discussing proprietary business issues during breaks or at dinner.

Agreements Affecting Price:

• Do not discuss a company’s current or future pricing strategies, or ways in which competitors might level the playing field, avoid unnecessary competition, or sanction a member that is perceived as overly competitive.
• Do not share price or cost information, except in the context of a confidential survey conducted by the association or an independent third party from which only aggregated data are reported.

Refusal to Deal and Group Boycotts:

• Do not discuss whether to deal or not to deal with any specific patient group (e.g., indigents or self-pay patients), specific payor (e.g., Delta Dental) or payor type (e.g., Exchange Products) or employer groups. 
• Do not discuss whether to deal or not to deal with specific suppliers or service vendors, unless limited to the operations of a group purchasing initiative.

Other Antitrust Issues for Trade Associations

Lobbying: Under the Noerr-Pennington doctrine of antitrust immunity, joint action by trade associations or groups of competitors such as the WSDA to influence government policy generally does not violate the antitrust laws. This includes legislative activity, litigation in the courts, and matters before administrative bodies. “Sham” lobbying, or petitioning the government for actions to exclude competitors, is NOT permitted. 

Examples of antitrust in action

Below are several examples of situations that a WSDA member may encounter as well as a brief explanation of probable antitrust consequences. However, analysis for these situation is highly fact-intensive and small changes in facts can lead to different results. These examples provide just a general illustration of how antitrust laws may apply to particular situations. 

• Twenty WSDA members agree to increase the price of an office visit by 20 percent
  • This is a naked price fixing agreement that is per se illegal. It does not matter that it was only twenty dentists and WSDA has over 4,000 members since this would still be considered concerted action.
• The same ten WSDA members agree to form a professional dental corporation, fully integrate their offices, and practice together for all purpose. They then agree to charge $100 for an office visit
  • Assuming this group does not include all or most of the dentists or members of WSDA of a particular specialty or type of practice in the area, this arrangement raises no antitrust concerns. However, the dentists must be careful not to include too large a percentage of dentists in that area within this practice or it could generate antitrust concerns.
• Members of WSDA agree that they will not participate in an insurance plan unless the plan increases reimbursement rates by 20 percent
  • This is a group boycott to enforce a price fixing agreement and it is per se illegal.
• After reviewing an insurer’s proposal, members of WSDA object to it because insurer’s claim process would be burdensome to complete and there would be too much “red tape.” Unless these problems are solved, WSDA members do not want to participate. 
  • Communicating these concerns to the insurer on behalf of the members is completely legitimate activity. However, threatening a group boycott by the members as a means of changing the insurer’s proposal, however, would pose substantial antitrust risk. The dentists’ concerns probably could be addressed in a way that would present little antitrust risk by explaining the problem to the insurance company, perhaps even focusing on any negative impact the program might have on patient care. Regardless, legal advice should be sought.

Conclusion

The reader may be asking if there is any real benefit to be obtained from trade association meetings in light of the long list of items that should not be discussed. All meetings with competitors are subject to questionable conduct, but a healthy respect for the antitrust laws and the guidelines provided will minimize any antitrust risk associated with your company’s active participation in trade association activities.