U.S. Court of Appeals Affirms FTC Decision That Texas Doctors Group Engaged in Illegal, Anticompetitive Price-Fixing

In a unanimous opinion issued on May 14, the U.S. Court of Appeals for the Fifth Circuit affirmed a 2005 Federal Trade Commission decision that found certain activities of North Texas Specialty Physicians (NTSP) violated Section 5 of the FTC Act. In particular, NTSP, a group of independent competing physicians based in Forth Worth, was found to have participated in horizontal price-fixing that was not related to any procompetitive efficiencies. The appellate court’s decision fully endorsed the analytical framework applied by the Commission in its decision, which found NTSP’s conduct to be “inherently suspect,” with no procompetitive justification.

In the appellate opinion, which can be found on the FTC’s Web site as a link to this press release, the Court concluded that the Commission properly condemned certain NTSP practices, as the anticompetitive effects of those practices were obvious, and stated that NTSP’s justifications for its conduct did not bear up under scrutiny. The Court concluded that, based on the case record, the Commission properly condemned the conduct without the need for a “fullblown market analysis.” The Court did, however, find the FTC’s remedial order overly broad in one narrow respect and remanded it to the Commission for modification regarding that one provision.

Case History

In September 2003, the FTC issued an administrative complaint charging NTSP with unlawfully restraining competition, resulting in increased health care costs for consumers in the Fort Worth area. The Commission charge the group with violating federal law by negotiating agreements among its participating physicians on price and other terms, refusing to deal with payors except on collectively agreed-upon terms, and refusing to submit payor offers to participating doctors unless the offers’ terms complied with NTSP’s minimum-fee standards. The Commission also charged NTSP with illegally polling its participating physicians to determine the minimum fee they would accept for medical services provided under a group payor agreement, reducing competition among participating doctors. Finally, the Commission charged the group with discouraging payors and participating physicians from negotiating directly with one another and that the arrangements resulted in no increase in clinical integration.

In an initial decision filed on November 8, 2004, Administrative Law Judge (ALJ) D. Michael Chappell upheld the Commission’s complaint, finding that NTSP restrained trade by conspiring to fix prices in certain contracts its doctors entered into to provide medical services to health plan patients in Fort Worth. Chappell wrote in the decision that, “The government has proved its case . . .,” and that, “the appropriate remedy [is] an order to cease and desist.” NTSP subsequently appealed the decision to the full Commission, which issued its decision and order in December 2005.

The Commission’s decision, issued in favor of complaint counsel, was authored by Commissioner Thomas B. Leary and announced on December 1, 2005. In it, the FTC confirmed the ALJ’s initial decision that NTSP had illegally fixed prices in its negotiations with payors, including insurance companies and health plans. “This is not really a close case,” the Commission wrote in its opinion. “NTSP’s conduct is similar to conduct that has been found per se unlawful and summarily condemned in other contexts...” In issuing its accompanying order, the FTC required NTSP to cease and desist from engaging in the anticompetitive price-fixing conduct alleged in the complaint. The defendants appealed the Commission’s decision to the Fifth Circuit, leading to the decision and order announced today.

The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No.: 021-0075; Docket No. 9312)
(NTSP Appeal.final.wpd)