New Areas of Antitrust Enforcement

The second macro trend has been enforcement of the Sherman Act in fields where it had been thought to be inapplicable. In the 1970s, antitrust enforcement came to the real estate industry, particularly shopping center development. No discount clauses, veto clauses, radius clauses, and exclusives came under attack by the FTC despite the perception up to that time that real estate development was local and therefore did not implicate the antitrust laws. In the 1980s, health care providers including hospitals , doctor groups and third-party payers came under attack in peer review situations, tie-ins and mergers despite the fact that up until the late 1970s, the perception was that the antitrust laws were not applicable to the professions, i.e. the professions were not involved in trade or commerce as defined by the antitrust laws. In the 1990s, the antitrust laws focused their attention on the securities industry with attacks on various industry practices which were said to amount to price fixing despite the perception up to that time that the securities industry was exempt from antitrust scrutiny principally because of the industrys comprehensive regulation by the SEC.

In the healthcare field, there is a triumvirate, the members of which are generally at odds with one another. There is the institutional provider, the hospital; there is the third-party payer, the HMO or the insurance company; and then there are the doctors and doctor groups, to say nothing of the consumer who gets tossed around in all of this.

What has happened is that economic power has shifted from individual healthcare providers (the doctors) to the third-party payers for a number of reasons including supply/demand shifts, Congressional incentives to reduce hospital stays and because the Supreme Court and other courts have said: The third-party payer is the surrogate for the consumer. As a group buyer, it has the ability to create downward pressure on prices; whereas, doctors, who are independent sellers of services, cannot band together in order to push back against that power unless they are true partners and doctors are famous for not wanting to form big partnerships. They have felt the impact of this downward pressure on prices, along with increased costs, particularly malpractice insurance. This broad, sweeping shift in economic power from sellers of healthcare services to buyers of healthcare services, or, more accurately, their surrogates, the third-party payers is the most significant and dramatic shift in economic power I have ever seen.

There are bills now pending in Congress and in various state legislatures to allow doctors to engage in collective bargaining with third-party payers even though they are separate economic entities, but no significant legislation has passed to date, despite great pressure from the American Medical Association. Of course, competition has also come to the institutional provider the hospitals, as they face competitive challenges. If you doubt it, ask yourself why hospitals are advertising, merging and developing specialized niches .

As noted above, the antitrust laws have also focused on the securities industry, beginning in 1994, when two previously not very well known finance professors wrote an article that asked why quotes on the NASDAQ stocks were always in even eighths, never in odd eighths, meaning the figures were ¼, ½, and ¾, or the whole number, never 3/8, 5/8 or 7/8. As a result, the SEC, the NASD, the Department of Justice, and class action private treble damage suits were brought virtually the next day. That began a whole series of matters wherein plaintiffs lawyers , the DOJ, and the SEC, in addition to the SECs concern about violations of SEC rules, asserted that these activities were coordinated anticompetitive actions among competitors . A number of these cases are still pending. And so today, we have antitrust coverage in all these areas that were not too long ago considered outside the domain of antitrust enforcement.