Avoiding Illegal Restraints of Trade

Two sets of laws, the Sherman Anti-Trust Act, the Clayton Act, and the Robinson-Patman Act (Federal laws), and the Cartwright Act (State law), are the principle provisions that make conduct that is deemed harmful to competition illegal. We generally refer to these as "anti-trust violations" or illegal "restraints of trade." In particular, so-called "price fixing" and group boycotts are considered per se illegal restraints of trade. Because they are per se illegal, these two types of activities are not subject to the "rule of reason" defense (see below) normally available to anti-trust claims.

Imporantly, as will be seen in the brief summary below, a defendant that acts independently, and does not "conspire with" or have an agreement with another party, generally cannot be found to have violated these laws. A corporation cannot "conspire" with itself (that is, it is not a conspiracy for a corporate Board to agree for the corporation take some action). Thus, the establishment of a truly independent entity, one that does not act at the bequest or under the direction of others, such as voting members, is the first and most important step in being able to communicate with third party payers the issues that affect optometry while limiting anti-trust exposure. Just as a single doctor does not violate anti-trust law and is not treatening a "boycott" by going to a third party payer and saying, "if you don't agree to pay me more I'm going to quit taking your plan," a single independent entity can also ask a third party payer to re-evaluate its policies and communicate the results of those discussions (it cannot, however, advocate a boycott; the decision on what to do with the information communicated by the entity is then up to each individual doctor).

With that in mind, here is a very brief summary of some relevant anti-trust law. This is a complex area of law and this is far from complete, but it provides some of the foundation for how and why the AADO can act in ways others cannot, without violating state or Federal law.

Rule of Reason

The Rule of Reason prohibits only those actions that cause an "unreasonable" restraint of trade. In other words, except for the per se restraints (price fixing and group boycotts), other restraints of trade that are considered "reasonsable" are not illegal. Acts with little redeeming virtue are considered illegal without much inquiry. But restraints that are more regulatory in nature and actually have the effect of promoting competition, as opposed to destroying it, are not.

Price Fixing

Price fixing is per se illegal. The elements of a claim of "price fixing" are that the defendant and another party agreed to fix, raise, lower, maintain, or stablize prices or other terms of trade for a product or service, the plaintiff was harmed, and the defendant's conduct was a substantial factor in causing the harm. If the conduct interfers with the plaintiff's independent ability to set prices in the context of market demands the conduct is deemed to be price fixing. Price fixing requires proof of a conspiracy by and between two or more defendants.

Group Boycotts

Group boycotts are also per se illegal. The elements of a claim of group boycott are that the defendant and another party agreed to refuse to deal with the plaintiff, the plaintiff was harmed, and the defendant's conduct was a substantial factor in causing the harm.

Noerr-Pennington Doctrine

The efforts of a lobbying group or association to influence the marketplace may be immune to anti-trust liability under the so-called Noerr-Pennington Doctrine, even if the underlying motive is anti-competitive. This is limited to lobbying of governmental and administrative bodies.