California Dental Association v. Federal Trade Commission

526 U.S. 756 (1999)

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Nature of the Case

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Facts

D is a voluntary nonprofit association of local dental societies to which some 19,000 dentists belong, including about three-quarters of those practicing in California. D provides discounts and favorable deals on business insurance, and financing as well as lobbying, litigation, marketing and public relations to its members. D’s programs and services have a potential value to members of between $22,739 and $65,127 per year. The dentists agree to abide by a Code of Ethics (Code) including false or misleading advertising in any material respect. The CDA has issued a number of advisory opinions interpreting this section, and through separate advertising guidelines intended to help members comply with the Code and with state law the CDA has advised its dentists of disclosures they must make under state law when engaging in discount advertising. Applicants for CDA membership must submit copies of their own advertisements and those of their employers or referral services to assure compliance with the Code. Applicants who refuse to withdraw or revise objectionable advertisements may be denied membership; and members who, after a hearing, remain similarly recalcitrant are subject to censure, suspension, or expulsion from the CDA. P brought a complaint against the CDA, alleging that it applied its guidelines so as to restrict truthful, nondeceptive advertising, and so violated § 5 of the FTC Act. P alleged that D had unreasonably restricted price advertising, particularly discounted fees, and advertising relating to the quality of dental services. An Administrative Law Judge held that P had jurisdiction over D. The judge found that D had unreasonably prevented members and potential members from using truthful, nondeceptive advertising, all to the detriment of both dentists and consumers of dental services. A violation of § 5 of the FTC Act was found. The Court of Appeals affirmed assertion of jurisdiction but found it error for P to have applied per se analysis to the price advertising restrictions, finding analysis under the rule of reason required for all the restrictions. The Court of Appeals explained that an 'applied an abbreviated, or 'quick look,' rule of reason analysis designed for restraints that are not per se unlawful but are sufficiently anticompetitive on their face do not require a full-blown rule of reason inquiry. Judge Real in dissent argued, full-bore rule-of-reason analysis was called for since the disclosure requirements were not naked restraints and neither fixed prices nor banned nondeceptive advertising. The Supreme Court granted certiorari to resolve conflicts among the Circuits on the Commission's jurisdiction over a nonprofit professional association and the occasions for abbreviated rule-of-reason analysis.