Note: The following is the FTC's answer to the Center's comment letter on Obstetrics and Gynecology Medical Corporation of Napa Valley.

To read the Center's response to the FTC, click here

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580

Office of the Secretary

May 30, 2002

Mr. S.M. Oliva
Center for the Advancement of Capitalism
PO Box 16325
Alexandria, VA 22302-8325, USA

Re: Obstetrics and Gynecology Medical Corporation of Napa Valley, et al. FTC File No.011 0153, Docket No. C-4048

Dear Mr. Oliva:

This responds to your electronically transmitted letter providing comments of the Center for the Advancement of Capitalism (CAC) regarding the consent agreement and accompanying complaint that the Federal Trade Commission accepted for public comment in the above-captioned matter. The complaint in this matter alleges, inter alia, that the Obstetrics and Gynecology Medical Corporation of Napa Valley (OGMC) and the physician respondents have "acted to restrain competition by, among other things, facilitating, entering into, and implementing agreements . . . to fix price and other competitively significant terms of dealing" with Napa Valley Physicians and/or health plans, and refusing "to deal with Napa Valley Physicians and/or health plans except on collectively agreed-upon terms."[1] As the Commission indicated in its analysis of the terms of the complaint and the proposed consent order, the order "is designed to prevent recurrence of the illegal concerted actions alleged in the complaint, while allowing the OB/GYNs to engage in legitimate joint conduct."[2]

CAC's comment has been placed on the public record pursuant to Rule 4.9(b)(6)(ii) of the Commission's Rules of Practice, 16 C.F.R. § 4.9(b)(6)(ii) (2002), and has been given serious consideration by the Commission. The comment begins by noting that CAC "has consistently opposed the application of federal antitrust laws through litigation and administrative action on the grounds that these laws are unconstitutional." The Commission of course disagrees with this position; indeed, Congress has expressly directed the Commission to prevent "unfair methods of competition" —pursuant to Section 5 of the Federal Trade Commission Act[3]  — and to prevent mergers, acquisitions, price discrimination, and certain other practices that may "substantially lessen competition" or "tend to create a monopoly," in violation of the Clayton Act.[4] The Supreme Court has on numerous occasions confirmed the constitutionality of the FTC Act by sustaining Commission orders prohibiting unfair methods of competition.[5]

CAC's comment also expresses the view that the respondents in this matter did not act coercively; that their actions did not "legally injure" the rights of consumers or any individuals;[6] that the respondents therefore did not violate Section 5 of the Federal Trade Commission Act; and that the consent agreement consequently violates the Privileges and Immunities Clause of, and the Fourteenth Amendment to, the United States Constitution. The comment also expresses the view that even if there is a legal basis for the consent agreement, its terms will "undermine the ability of physicians to compete within the marketplace," and thereby undermine "the free exchange of medical services in Napa County, California." The comment concludes by urging the Commission "to reject the proposed Consent Agreement, and dismiss the case against OGMC and all physician respondents."

After reviewing CAC's comment and other relevant materials, the Commission has determined that the public interest would best be served by making final the complaint and the consent order in this matter. The analysis that the Commission issued when it accepted the consent agreement for public comment provides a detailed basis for this determination, through its extensive discussion of both the complaint and the consent order.[7] Moreover, with respect to CAC's concerns about the complaint allegations, it is important to note that the consent order is the product of a negotiated settlement between the Commission and the respondents. Indeed, although the evidence adduced in this case certainly gave the Commission reason to believe that the respondents had violated the law, the Commission has expressly noted that the consent order "has been entered into for settlement purposes only and does not constitute an admission by the proposed respondents that they violated the law or that the facts alleged in the complaint (other than jurisdictional facts) are true."[8] Thus, the respondents have voluntarily agreed to comply with the terms of the consent order in the future without a fact-finding proceeding to determine whether they violated the antitrust laws in the past.

Thank you again for your comment.

By direction of the Commission.

/S/ 

Benjamin I. Berman
Acting Secretary 

[1] Complaint at ¶ ¶ 15, 16.
[2] Analysis of Agreement Containing Consent Order to Aid Public Comment, 67 Fed. Reg. 18010, 18011 (April 12, 2002).
[3] 15 U.S.C. § 45. In addition, although the Commission does not enforce the Sherman Act directly, a violation of the Sherman Act also constitutes an unfair method of competition that in turn violates Section 5 of the FTC Act. See, e.g., FTC v. Cement Institute, 333 U.S. 683, 690 (1948).
[4] 15 U.S.C. §§ 12 et seq.
[5] See, e.g., FTC v. Ticor Title Ins. Co., 504 U.S. 621(1992); FTC v. Superior Court Trial Lawyers Association, 493 U.S. 411 (1990); FTC v. Indiana Federation of Dentists, 476 U.S. 447 (1986); Atlantic Refining Co. v. FTC, 381 U.S. 357 (1965).
[6] In particular, the comment states that "[u]nless the members of OGMC have violated a voluntary contractual agreement with [Napa Valley Physicians] —and the Complaint makes no such allegation —there is no legal injury upon which to sustain a Section 5 allegation against OGMC and the physician respondents."
[7] Analysis of Agreement Containing Consent Order to Aid Public Comment, 67 Fed. Reg. at 18011.
[8] Id..

Sign up for CAC's Newsletter
Keep up with the latest news—type in your e-mail address and click Go!

» Philosophy
Learn more about our organization and the ideas behind capitalism

» Advocacy
Learn about the Center's projects.

» Capitalist Book Club
Purchase the essential texts on capitalism.

» Media Center
News mentions, press releases and speakers.

» Feedback
Send us a comment or ask a question—we want to hear from you!

» Contribute
The Center's advocacy programs are not free—we depend on you to support our efforts.