National Society Of Professional Engineers v. United States

435 U.S. 679 (1978)

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Nature of the Case

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Facts

There are about 325,000 engineers registered as professional engineers. States usually require the applicant to be a graduate engineer with at least four years of practical experience and to pass a written examination. Many of them perform services in connection with the study, design, and construction of all types of improvements to real property -- bridges, office buildings, airports, and factories are examples. Fees, amounting to well over $ 2 billion each year, constitute about 5% of total construction costs. In any given facility, approximately 50% to 80% of the cost of construction is the direct result of work performed by an engineer concerning the systems and equipment to be incorporated in the structure. D was organized in 1935 to deal with the nontechnical aspects of engineering practice, including the promotion of the professional, social, and economic interests of its members. Its present membership of 69,000 resides throughout the United States. Approximately 12,000 members are consulting engineers who offer their services to governmental, industrial, and private clients. This case involves a charge that the members of D have unlawfully agreed to refuse to negotiate or even to discuss the question of fees until after a prospective client has selected the engineer for a particular project. In its code of ethics, D prohibits consulting engineers from sharing price information with potential customers prior to being selected for a specific position. P reasoned that this prevents competitive bidding in the market for engineering services. D claims a bidding process will produce inferior work and public hazards. P believed it restrained trade and indicted D. D averred that the standard set out in the Code of Ethics was reasonable because competition among professional engineers was contrary to the public interest. It was averred that it would be cheaper and easier for an engineer 'to design and specify inefficient and unnecessarily expensive structures and methods of construction.' It reasoned that competitive pressure to offer engineering services at the lowest possible price would adversely affect the quality of engineering. Moreover, the practice of awarding engineering contracts to the lowest bidder, regardless of quality, would be dangerous to the public health, safety, and welfare. For these reasons, the Society claimed that its Code of Ethics was not an 'unreasonable restraint of interstate trade or commerce.' The court issues an injunction against D and D appealed. The court of appeals affirmed in that the prohibition was unlawful on its face and D appealed. The Supreme Court granted certiorari. Relying heavily on the major cases applying a Rule of Reason, D argues that its attempt to preserve the profession's traditional method of setting fees for engineering services is a reasonable method of forestalling the public harm which might be produced by unrestrained competitive bidding.