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Taking the Offensive Against the FTC
[May 03, 2003]

By S. M. Oliva

One year ago, CAC filed its first public comment letter in a federal administrative proceeding. The case at issue was a Federal Trade Commission settlement with a group of six gynecologists practicing in Napa, California. The FTC claimed the doctors violated the FTC Act—which vaguely bans “unfair methods of competition”—by forming a group to collectively negotiate contracts with local health plans and HMOs. In the government’s eyes, this action constituted price fixing by the doctors, a practice traditionally considered per se illegal under the antitrust laws.

CAC filed comments strongly opposing the settlement. We argued, first and foremost, that physicians possessed an absolute right to voluntarily associate with others to act in their mutual self-interest. As producers, the doctors owned the use of their skills, and they had the right to contract with others to use said skills professionally. This did not strike us as a controversial proposition, especially in America. After all, this is a nation which supports unions, even those unions which occasionally do employ unjust coercion (such as teacher unions) to maintain their economic power. Generally, however, it is well accepted that voluntary collective bargaining is a basic liberty protected by the Constitution. The FTC, however, argues that physicians enjoy a unique exemption from that liberty, for reasons known only to the Commission and its staff.

The most consistent argument advanced by the FTC is that physicians actually enjoy no rights at all, but rather consumers enjoy an unlimited right to obtain whatever services they want at whatever price they want. If a producer doesn’t want to sell, then he must be engaged in some antitrust violation or other illegal activity. The FTC’s reasoning, you see, stems from two basic axioms: First, “competition” is the basic governing principle of society; and second, “consumers” are free to demand whatever they want without regard to the interests of others.

CAC, in contrast, subscribes to a radically different philosophy. We believe that individual rights, not “competition,” is the society’s basic organizing principle. Furthermore, we believe that individual rights require the government to protect the right of producers to use and dispose of their property on terms they agree to. Consumers, in our view, have a right to be free of fraud and coercion in their dealings with producers, but this freedom does not extend to the ability to compel producers to sell. The very concept of private property rights forbid such actions. Yet in their pursuit of perfect “competition,” the FTC has decided to dispose of property rights, and even the right to life itself, in order to bring physicians under the thumbs of consumers.

It’s worth noting that in this context, “consumers” do not mean the individuals who actually seek health care services. Rather, consumers are the insurance companies, largely HMOs, who collectively bargain on consumers’ behalf with physicians. In other words, the consumers may join together to obtain lower prices from doctors, but doctors are forbidden from doing the same to try and obtain higher prices. The FTC views any action to raise consumer prices a violation of their “competition” philosophy.

Despite our thorough analysis of the Napa case last May, the FTC chose not to address our concerns. In fact, they blatantly ignored our arguments and simply ratified the Napa settlement without comment. As we soon learned, this was part of a pattern. Since last year, the FTC has approved four more settlements with physician groups, and several more are expected later this year. Every case follows the same pattern: doctors assert their rights, then the FTC moves in to violate them. And again and again, our efforts to hold the FTC accountable for their actions are met with silence. Even after I presented the FTC with a series of questions asking them to clarify their anti-physician policies, the Commission refused to answer. This is clearly an agency that views itself as above public scrutiny or accountability.

For the most part, Congress has stayed silent as well, permitting the FTC to run amok. Every so often, a proposal will be floated around Capitol Hill to give physicians some relief from antitrust prosecution. Usually this takes the form of a bill to lower the legal standard applicable in physician cases. Currently, the FTC employs a per se rule, which means the Commission is allowed to simply presume illegal conduct without having to prove anyone was actually harmed. Past congressional proposals would hold the FTC to a “rule of reason” standard, which means the physicians would be presumed guilty, but could absolve themselves if they show their acts tended to benefit consumers. Simply asserting one’s own rights is not sufficient, however.

While the “rule of reason” compromise sounds like a step forward, it would actually be a disastrous surrender. The FTC staff may not be brilliant, but they’re smart enough to manipulate the “rule of reason” standard to still get what they want. Indeed, it’s unlikely any physician group that has already been victimized would have been spared the FTC’s wrath under the supposedly looser standard. The FTC has succeeded in stigmatizing physicians as habitual antitrust violators, and a simple tweaking of the law won’t overcome years of bureaucratic inertia.

But there is now another alternative. Rep. Ron Paul, Texas Republican, has introduced legislation that would put an end to the FTC’s war on physicians by exempting doctors from the antitrust laws when they bargain with health plans. It’s an idea that’s so simple and principled, it will face massive resistance from the FTC and the antitrust community. Heck, the last time the “rule of reason” compromise was proposed, FTC officials screamed bloody murder. The Commission will accept no efforts to reduce their power over doctors, which currently is near-absolute. That’s why the power can’t just be modified, but must be destroyed outright.

 

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