Despite its origins in the early days of the Industrial Revolution, antitrust law remains an important consideration for today’s healthcare industry.
Although the principles of antitrust law can be stated very broadly, the legal outcome in a particular situation involves complex analysis of facts and the interpretation of 125 years of case law. The advice of experienced antitrust counsel is essential.
Having said that, it may be helpful to remember certain basic principles.
Major Antitrust Statutes
There are three main federal antitrust statutes:
- The Sherman Antitrust Act (1890) establishes the federal government’s power to regulate commerce and promote competition. Section 1 prohibits “contracts, combinations, and conspiracies” in restraint of trade, and section 2 prohibits monopolies and attempts to monopolize.
- The Clayton Act (1914) addresses a wide range of anti-competitive issues, such as price discrimination, agreements between competitors with respect to prices (“price fixing”), tying arrangements, and overlapping directorships.
- The Federal Trade Commission Act (1914) bans “unfair methods of competition” and “unfair or deceptive acts or practices” by for-profit corporations.
Federal law provides for civil and/or criminal penalties and possible injunctive relieve for antitrust violations. Depending on the situation, the statutes may be enforced by the Department of Justice or the Federal Trade Commission. And note: there may be state antitrust statutes to consider as well.
Rule of Reason Analysis
Most cases are determined by a “rule of reason” analysis to determine whether a particular restraint of trade is unreasonable. As Justice Louis Brandeis explained nearly 100 years ago:
To determine that question [of legality] the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint and its effect, actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts.
Per Se Violations
The complicated analysis Brandeis described is applied in most cases, but some behavior is so clearly anticompetitive that such a detailed review is considered unnecessary. Therefore, over time the courts have developed the per se standard, which holds that price fixing, division of markets, group boycotts, and tying arrangements are automatic violations. Of these four categories, only the first three are often seen in the healthcare arena.
Application to Health Care
As health reform generates mergers, acquisitions, new provider networks, and other realignment of the marketplace, questions about restraint of trade and per se violations must be considered. Experienced antitrust counsel must be consulted when one engages in talks with competitors or contemplates new endeavors that might affect competition.
J. Stuart Showalter, JD, MFS, is a contributing editor to HFMA’s Legal & Regulatory Forum.
Forum members: What do you think? Please share your thoughts in the comments section below.
- If you could ask a lawyer any question about per se violations or other antitrust principles, what would you ask?