California Dental Association v Federal Trade Commission: the Revenge of Footnote 17

Abstract

In 1975, in Goldfarb v. Virginia State Bar, the Court ruled that professionals were not exempt from the antitrust laws, although in footnote 17 it stated that antitrust might apply differently to the professions. Footnote 17 notwithstanding, the Court aggressively applied antitrust to restraints among professions without special consideration. In cases concerning restraints on professional advertising decided under the First Amendment, however, the Court has prominently considered the allegedly special nature of professional markets. In California Dental Advertising v. FTC, the Court's first antitrust case to consider restraints on professional advertising, a narrow majority emphasized that professional restraints required a more searching analysis than the Court of Appeals gave them. Although the Court explicitly recognized for the first time the appropriateness of applying truncated Rule of Reason analysis to certain restraints among competitors without examining the effect of the restraint or of competitors' market power, the Court remanded for an examination of the plausible efficiency justifications the dentists had raised. This article shows that a large empirical literature already provides the evidence that the Court sought that restraining professional advertising raises prices without improving quality.