North Carolina Chiropractic Association

Bureau 00 Competition
FEDERAL TRADE GOMMISSlON
WASHlNGT(1W. 0.C.
February 	2 9 r 	1984
Collin M, 	Baynie, D , C I
Chair~an
Ethics Cornittee
North Carolina Chiropractic Association
S%QB Michaux 	Road
Greensboro, 	Nonih Carolina 	24410
Bear D r , 	Haynie:
A r t h u r 	L e r n e r 	h a s 	asked me 	t o 	respond 	ko your 	January 	2 9 ,
8 1984, 	letter 	r e q u e s t i n g 	approval sf 	a 	code of 	ethics 	recently
adapted 	by 	t h e Nsmth 	C a r o l i n a 	Chiropractic Associatian. 	Attached
to your 	fetter 	was 	a 	docment 	w i t h 	provisisns 	numbered 	e i g h t e e n
- 	t5rauqtz 	tmn.tv--five, 	The 	heading 	a n 	t h e 	docment 	i n d i c a t e s 	t h a t
these 	pravisions 	ate 	t o 	supplement 	an 	existing 	code of 	e t h i c s
p r e v i o u s l y 	adopted 	by 	your 	assseiatisn,
Z 	da n o t 	have 	enough 	information 	t o 	g i v e 	you 	a 	definitive
opinion sn the leqaPity 	of 	t h e 	e t h i c a l 	rules you 	submitted, 	For
axample, 	there 	is no 	indieation o f 	whethen: 	and 	how 	the code of
ethics 	is to be 	enforced, 	f 	can, 	however, provide 	same informal
guidance on 	the 	antitrust 	issues raised 	by 	these 	rules, 	You
s h o u l d 	u n d e r s t a n d 	t h a t 	t h i s 	advice 	does 	n o t 	bind 	t h e CornrnissionD
The 	laws enforced 	by 	t h e 	Comission 	do n o t 	prohibit 	prsfes-
sional 	associations 	Ersm adopting 	reasonable 	ethical 	codes
d e s i g n e d 	to pratect 	t h e 	public, 	Such 	self-regulatory 	activity
sesves 	legitimate 	purposes, and 	i n 	most 	cases can 	be 	expected 	to
benefit, 	r a t h e r 	t h a n 	to 	i n j u r e , 	competition 	and 	consumer 	web-
f a r e , 	Xn 	some 	instances, 	hswevee, 	ethicaL rules can 	u n r e a s o n a b l y
restrict 	competition 	and 	thereby 	v i o l a t e 	the 	antitrust 	L a w s , 	'F
.
T h e 	l e g a l i t y of 	t h e 	Association% 	s e l f 	r e g u l a t s h y 	progrm
depends o n 	an 	assessment 	of 	its p u r p s e s 	and 	competition
a f f e c t s . u 	In 	assessing 	whether 	a 	p r o f e s s i o n a l 	association's
- 	See United 	States 	v. 	National 	Soc'y 	of 	Professional 	Eng'rs,
4 3 5 	UoS. 6 7 9 	(1978).

Collin M a Haynie,
Page 	2
D , C ,
rules and 	procedures 	i n j u r e 	competition, it 	i s smetimes 	necessary
ts know 	to what 	extent membership 	in 	the association Is necessary
i n 	order 	to empete effectively, 	The 	greater 	the 	imwrtanee 	of
membership as a 	competitive 	factor, the greater 	is the i m p r t a n c e
sf ensuring t h a t 	restrictions imposed 	by 	ethical 	rules are objee-
tive, reasonable, 	n o t 	overly broad, 	and 	applied i n 	a 	Eair 	and non-
discriminatory manner, 	I n 	the absence of an 	actual investigation,
sf course, Z 	c o u l d make 	no j u d p e n t 	as to the empetitlve 	i m ~ r -
tance of membership 	in the Association,
08 	course, some t m e s 	of 	e t h i c a l 	rules m o u n t i n g 	to agree-
ments 	smong 	competing members may 	i n j u r e 	competition unreasonably
t o t a l l y 	aside 	frm 	the competitive 	significance of membership 	in
the organization, 	POP exmplep restraints an 	t r u t h f u l 	advertising
or on price 	competition are 	Likely to be unlawfulby antieompeti-
tive, regardless of 	t h e 	importance o f 	gaining or r e t a i n i n g member-
ship in the organization,
8 .
The Assaeiation8s p r s p s e d 	ethical 	rules 	include several
pravisisns on advertising, 	I n 	regulating 	advertising by 	its
members, 	the Association-runs simffieant anti-trust risk when 	it
adopts 	broad 	restraints on truthful 	advertising 	i n order 	to pre-
vent 	munprofessionalis~m(Rule 18) or: advertising 	"unbeeoaing a
professional peksonm (Rule f9)* 	As 	the Csmission's 	decision 	in
its 	case against 	the merican Medical 	Association makes 	clear,
professional-assaeiationscan 	legitimately 	prohibit 	false sr
deceptive 	advertising, 	but 	broad 	restraints on t r u t h f u l 	adver-
tising violate 	the FT@ Act,2/ 	Thus, 	R u l e 	18, which 	addresses
advertising 	sf 	free x-rays, 	and 	R u l e 	19, which 	concerns 	' c o u p n
advertisingPA raise serious antitrust 	questions,
- -
Rule 20 declares it 	unethical 	g o 	advertise 	that 	insurance
deductible3 	sr 	c o p a p e n t s will 	be 	waived, 	on 	the grounds 	that such
advertising 	"may 	be 	used 	to mislead 	or misrepresent 	a material
f a c t 	to an 	insurance company,' 	The 	Comission 	has 	not 	eonsidered
the legality of 	such a 	restriction, 	I am 	aware of 	two state
attorneys 	general who 	have 	held 	t h a t 	advertising by 	dentists 	t h a t
t h e y 	would 	waive 	a 	patient's 	e o p a p e n t 	did 	not 	cpnstitute 	false sr
misleading 	advertising, nor 	did 	it 	m o u n t 	to f r a u d 	or misrepre-
sentation against 	I n s u r e r s , g 	T h e Association 	may wish 	to
* .	=
See merican 	Medical Association. 	94 P.T.C. 	701 	( 1 9 7 9 ) .
d 	443 	(2d Gir, 	19801,
4 5 2 	U e S e 	960 	(1902).
I/ 	-	See 64 Cal. 	Op. 	A t t g y Gen. 	782 	(1981); La. 	Op. 	Att'y 	Gen.
No. 	82-345 	(19821,
8

Callin M, Haynie, D,C,
Page 	3
consider a mote n a ~ r o w l ytailsred rule, t h a t 	p r o h i b i t s 	misrepre-
sentations of material 	facts 	to insurance 	eampanies,
R u l e 	21, 	which 	provides 	that 	it is 	" h i g h l y 	undthieal" to
charge i n s u r e d 	patients 	a h i g h e r 	fee 	t h a n 	uninsured 	p a t i e n t s ,
appears to be overbroad, 	Here again, 	t h e Association can properly
prohibit 	f a l s e or 	misleading 	representations $0 insurers, 	Rule
2 X 8 	hawever, appears to prohibit 	d e n t i s t s 	from granting 	various
discounts, such as 	discounts t o 	those who pay 	cash 	at t h e 	time
service 	i s 	rendered, 	Agreements not to g r a n t 	discounts can in
some circmstanees 	constitute illegal price-fixing,
Rule 22 appears to be 	a 	restatement of 	a 	r u l i n g 	by 	t h e 	North
Carolina Chiropractic Board 	s f 	E x m i n e r s , 	T h e r e 	appears 	to be 	a
mrd 	or 	wards miss.ing, 	so i t s meaning 	is n o t 	clear* 	An 	ethical
ban on 	averprescribing would 	probably 	not 	r a i s e 	any 	antitrust
problems 	as 	long as it was 	applied fairly and 	in a 	nondiscri-
minatory 	manner,
Rule 	23 	appears 	ts be 	atmed 	at preventing 	certain 	deceptive
ptactiee 	regardfnp e-11~	srnhitted 	t r s 	third-parw- p a y e n , 	and 	on
its 	face 	presents 	no 	apparent 	problem,
R u l e 	24 	also recites a 	requirement of 	t h e 	North 	Carolina
Baard 	sf Chiropractic 	E x m i n e r s , 	i n 	this case a 	requirement f o r
prior 	approval by 	t h e 	Board 	of a n y 	advertising, 	If the Baasd 	h a s
such 	a provision, 	it 	is 	i n 	all, 	likebikosd a 	violation s f 	t h e 	F i r s t
U e n d m e n t 	as 	a n 	illegal p r i o r 	r e s t r a i n t , 	5: 	am not 	aware of any
cases 	addressing 	t h e 	question o f 	a private 	associatian, such 	as .
y o u r s , 	imposing 	such 	a 	prior 	approval requirement, 	I n my 	opinion,
s u c h 	a 	r u l e 	would 	raise significant 	a n t i t r u s t 	questions,
Rule 	2 5 	is an 	admonition 	ts exercise 	"considerably moee
restraintm i n 	a d v e r t i s i n g 	t h a n 	t h a t 	e x h i b i t e d 	by 	csmercial
enterprises, 	It appears vague and 	overbroad, 	A s 	noted 	above,
e f F a r t s 	t o 	restrict t r u t h f u l 	advertising an t 3 e 	grounds 	t h a t 	i t 	is 	-
deemed overly 	"comercial" would 	pose serious 	antitrust 	risks, w
C 	s -
I 	am 	enclosing 	for 	y o u r 	informatiow 	a 	espy 	sf a 	recent Com-
mission 	advisory 	opinion on a pm~fessisnalsociety's code sf
ethics, 	I encourage 	you 	to g i v e 	serious 	t h o u g h t 	to t h e 	issues 	1
have- 	raised 	above, and, 	in consultation with 	an attorney, to con-	-
8 si?er 	what 	k i n d 	ok 	revisions 	i n 	t h e 	proposed 	addition 	to y o u r
e t h i c a l 	code m i g h t 	be 	necessary 	to a v o i d 	antitrust problems, 	I n

Callin M, Baynie, Dee,
Page 	4
addition, let me 	know as 	soon as p s s i b l e 	what action t h e Associa-
tion 	intends 	to t a k e 	w i t h 	respect 	to t h e 	ethical rules 	that 	you
submitted,
Very 	t r u l y 	y o u r s ,
Elizabeth R, 	Hilder
A t t o r n e y