Indiana Federation of Dentists

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IN THE MATTER OF INDIANA FEDERATION OF DENTISTS FINAL ORDER, OPINION, ETC. , IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 9118. Complaint, Oct. 1978-Final Order, Feb. , 1983 This Final Order, among other things, prohibits an Anderson, Ind. dental association IFD") from engaging in any action or course of conduct having the effect of requiring or organizing dentists to refuse to submit radiographs or other materials requested by third-party payers for use in benefit determinations or to deal with a third-party payer in a certain way. The order also forbids IFD from engaging in any action that compels a third-party payer to deal with or to operate in a certain way in connection with dental health care benefits programs; or whose purpose is to influence a consumer s choice of dentists based on the degree of non -cooperation between such dentists and a third-party payer. Additionally, the association is required to timely mail to each of its members a copy of the Commission order together with a letter advising that IFD has abandoned all policies and guidelines that fail to conform to the provisions of the order, and that members are free to deal with dental health care programs and payers as they see fit. Appearances For the Commission: L. Barry Costilo, M Elizabeth Gee, James McCarty and Laurel Brandt.

For the respondent: Ronald K. Fowler Anderson, Ind. add Bruce W. Graham West Lafayette, Ind., intervenor for State ofIndiana. COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act as amended (15 V. C. 41 et seq. and by virtue ofthe authority vested in it by said Act, the Federal Trade Commission, having reason to believe that the respondent named in the caption hereof has violated the provisions of Section 5 of the Federal Trade Commission Act and that a proceeding by it in respect thereof would be in the public interest, hereby issues this complaint, stating its charges as follows: PARAGRAPH 1. The following definition shall apply in this Complaint. Third-party payer or payer means any entity that provides a program of reimbursement for dental health care services to employees or members of any business organization, and any person such as an independent claims adjuster who provides evaluative services in connection with any such reimbursement program. Complaint 101 F.T.C. PAR. 2. Respondent IDdiana Federation of Dentists ("IFD") is an unincorporated association with its principal place of business at 2403 Raible Ave., Anderson, Indiana. The IFD is composed of dentists licensed to practice dentistry in the State ofIndiana and has approximately 250 members.

PAR. 3. The Indiana Dental Association ("IDA"), is an Indiana corporation with approximately 2000 members, all of whom are licensed to practice dentistry in Indiana. IDA charters, and is divided into geographic component societies. Membership in a component society is a condition of membership in IDA.

PAR. 4. Members of respondent and of IDA are engaged in the business of providing dental health care services to patients for a fee add are paid for such services from the patients' personal funds and/ or from funds provided under dental health care benefits programs. Except to the extent that competition has been restrained as herein alleged, members of respondent have been and are now in competition among themselves and with other dentists. (2) PAR. 5. Among respondent's objectives is representation of dentists in socio-economic matters, as a result of which respondent is a corporation organized to carry OD business for the profit of its members within the meaning of Section 4 ofthe Federal Trade Commission Act as amended, 15 U. C. 44.

PAR. 6. In 1976, total expenditures for dental health care services in the United States were approximately $8.6 bilion. The annual rate of expenditure in Indiana is at least $150 milion. PAR. 7. In the course and conduct of their businesses, members of respondent, among other things (A) Receive substantial revenue from private third-party payers and from the Federal Government in payment for rendering dental health care services, which money flows across state lines; (B) Provide dental health care services to patients who receive reimbursements from private third-party payers and from the Federal Government for payments made for such services, which reimbursements flow across state lines;

(C) Receive and treat patients from states other than Indiana; and (D) Utilize and prescribe drugs, medicines, and other products which are shipped in interstate commerce;

as a result of which the acts and practices herein below alleged are in or affect commerce within the meaning of the Federal Trade Commission Act, and respondent is subject to the jurisdiction of the Federal Trade Commission.

PAR. 8. A substantial portion ofthe population ofIndiana is covered by dental health care benefis programs administered by third-party INDIANA FEDERATION OF DENTISTS D:1 Complaint payers. Many of such programs include provisions for determination of benefits in advance of treatment ("predetermination ) and limitation of coverage to the least expensive adequate course of treatment with a requirement that radiographs ("X-rays ) be submitted to aid in benefit determination. The purpose of such provisions is to contain the cost of dental care. Their effcient utilzation requires cooperation from treating dentists.

PAR. 9. Since at least 1961, IDA, its component societies, and their members have engaged in acts, practices, and methods of competition to eliminate, prevent, or hinder competition among dentists with respect to cooperation by dentists with dental health care benefits programs containing predetermination and least expensive adequate itscourse of treatment (3) provisions. In the course thereof, IDA, component societies, and their members in concert and agreement among themselves, and with IFD and its members, as hereinbelow alleged inter alia:

A. Promulgated and distributed to their members guidelines and principles for dealing with third-party payers, along with forms and information to facilitate adherence to such guidelines and principles; B. Encouraged and induced their members to discontinue servng and/ or to refuse to serve as dental consultants for third-party payers and to refuse to provide payers with other professional services such as, but not limited to, taking X-rays for use in benefits determination; C. Conducted meetings, workshops, and pledge campaigns among their members to gain the agreement of individual members not to compete with other dentists in dealing with third-party payers; D. Urged dental organizations in other states to pursue courses of conduct similar to that hereinabove described; and E. Urged payers, purchasers, and beneficiaries of dental health care benefits plans to eliminate provisions of such plans that they find unacceptable.

PAR. 10. In or about September 1976, respondent was organized and founded by dentists, at least some of whom were or had been members or offcers ofIDA. In or about September 1976, respondent announced its intention to adopt and pursue the purposes of the agreement and concert of action alleged in Paragraph Nine. PAR. 11. Since September 1976, respondent and its members, in concert and agreement among themselves, have acted in furtherance of the agreement and concert of action alleged in Paragaph Nine and have otherwise engaged in acts, practices, and methods of competition to eliminate, prevent, or hinder competition among dentists with respect to cooperation with dental health care benefits programs Initial Decision IQj F. containing predetermination and least expensive course oftreatmeDt provisions by, inter alia:

A. Promulgating, adopting, publishing, add distributing to its members a purported "work rule" that details certain uniform courses of conduct for dentists in their dealings with third-party payers; and (4) B. Urging payers, purchasers and beneficiaries of dental health care benefits plans to eliminate provisions of such plans that respondent finds unacceptable.

PAR. 12. The acts, practices add methods of competition alleged Paragraphs Nine through Eleven have had, or have the tendency or capacity to have, among others, the following effects: A. Competition among dentists in Indiana has been hindered, restrained, foreclosed, add frustrated;

B. The cost of dental health care services in Indiana has been or may be stabilized, fixed, or otherwise tampered with; C. Consumers have been or may be deprived of the benefits of third-party payers' cost- containing measures, including lower or potentially lower costs for dental health care services and dental health care benefits insurance;

D. Consumers have been or may be denied the benefits of a second dentist' s opinion as to the adequacy of proposed dental treatment; and E. Consumers have been limited in their opportunity to select dentists who cooperate with dental health care benefits programs. PAR. 13. The aforesaid acts add practices of respondent constitute unfair methods of competition and unfair acts or practices in violation of Section 5 ofthe Federal Trade Commission Act, and are within the scope of Section 5(m)(1)(B) of said Act.

INITIAL DECISION BY PAUL R. TEETOR, ADMINISTRATIVE LAW JUDGE MARCH 24, 1980 1. SUMMARY OF PROCEEDINGS On 10/18/78 the Commission issued its complaint against the Indiana Federation of Dentists (IFD), a small unincorporated association organized in 1976. The complaint was served on Indiana Federation of Dentists at its offce at 2403 Raible Ave. in Anderson Indiana on 11/13/78. The complaint charged the Federation and its members, in substance, with adopting and pursuing a conspiracy started some years earlier by the much larger Indiana Dental Associa- INDIANA FEDERATION OF DENTISTS Initial Decision tion (IDA), which was named here as a co-conspirator but not as a Respondent. The conspiracy charged centers about an organized effort to keep Indiana dentists from turning over patients' dental radiographs (commonly called X-rays) to group dental health care insurers. The principal terms of the alleged conspiracy are described in Paragraph 9 as follows:

A. Promulgated and distributed to their members guidelines and principles for dealing with third-party payers, along with forms and information to facilitate adherence to such guidelines and principles;

B. Encouraged and induced their members to discontinue servng and/or to refuse to serve as dental consultants for third-party payers and to refuse to provide payers with other professional services such as, but not limited to, taking X-rays for use in benefits determination;

C. Conducted meetings, workshops, and pledge campaigns among their members to gain the agreement of individual members not to compete with other dentists in dealing with third-party payers;

D. Urged dental organizations in other states to pursue courses of conduct similar to that hereinabove described; and (2) E. Urged payers, purchasers, and beneficiaries of dental health care benefits plans to eliminate provisions of such plans that they find unacceptable. Paragraph 11 of the Complaint added the following: Since September 1976, respondent and its members, in concert and agreement among themselves, have acted in furtherance of the agreement and concert of action alleged in Paragraph Nine, and have otherwise engaged in acts, practices, and methods of competition to eliminate, prevent, or hinder competjtion among dentists with respect to cooperation with dental health care benefits programs containing predetermination and least expensive course of treatment provisions by, inter alia: A. Promulgating, adopting, publishing, and distributing to its members a purported work rule" that details certain uniform Courses of conduct for dentists in their dealings with third-party payers; and B. Urging payers, purchasers and beneficiaries of dental health care benefits plans to eliminate provisions of such plans that respondent finds unacceptable. (The complaint regularly refers to "third-party payers" rather than insurers" but we use the term "insurer" as following popular usage more closely.)2 The conspiracy is said to have adversely affected competition among Indiana dentists; tended to fix or tamper with the price of dental health care in Indiana; deprived CODsumers of the benefit of insurers' cost-containment efforts; deprived them, too, of the benefit of a second dentist' s opinion on the adequacy of proposed dental treat- I At the same time that the Commission issued this complaint it accepted a consent order from IDA in Docket No. G-2957. See Fcdcral Register Vol 43, No. 22 Frjday, :\ovember 7, 1978 (93 F. C. 392J. 2 Techncally a cost-plus group insurer is probably not an "insurer" because the Supreme Court views the spreading and underwriting of risk as the "primary elements" of insurance.See Group Life Health Ins. Co. Royal Drug Co. 440 U.S. 205, 211 (1979) Initial Decision 101 F. ment; and limited their opportunity to select dentists who cooperate with (3) dental health care benefit plans. The relevant text (Par. 12) reads:

The acts, practices and methods of competition alleged in Paragraphs Nine through Eleven have had, or have the tendency or capacity to have, among others, the following effects:

A. Competition among dentists in Indiana has been hindered, restrained, foreclosed and frustrated;

B. The cost of dental health care services in Indiana has been or may be stabilized, fixed, or otherwise tampered with;

C. Consumers have been or may be deprived of the benefit of third-party payers cost-containing measures, including lower or potentially lower costs for dental health care services and dental health care benefits insurance; D. Consumers have been or may be denied the benefits of a second dentist's opinion as to the adequacy of proposed dental treatment; and E. Consumers have been limited in their opportunity to select dentists who cooperate with dental health care benefits programs.

The acts and practices described in the complaint are said to constitute both unfair methods of competition and unfair acts and practices and for both reasons to violate Section 5 ofthe Federal Trade Commission Act. The contemplated relief is an order for Respondent to cease and desist from the following:

1. to cease and desist from engaging in any activity that has the purpose or effect of causing or inducing dentists not to cooperate with any third-party payer; 2. to cease and desist from engaging in any activity which has the purpose or effect of causing or inducing consumers to (4) choose dentists who do not cooperate with third-party payers;

3. to cease and desist from engaging in any activity that compels or coerces any third-party payer to incorporate, delete, or modify any provision in any existing or proposed dental health care benefits program; 4. to cease and desist from all activities that have the purpose or effect ofinfluencing the selection of dental consultants or the opinions rendered by such consultants; and 5. to notify their members and local chapters of the substantive relief provided by the order, including affrmative statements advising members that they are free to make their own decisions concerning cooperation with third-party payers. On 10/20/78 the matter was assigned for trial to Paul R. Teetor Administrative Law Judge, and he has since presided over all proceedings. A motion by Respondent for a more definite statement ofthe charges ofthe complaint was denied but Respondent's time to answer was extended to 12/22/78. In its Answer, Respondent admitted a few preliminary allegations of the complaint but denied all important substantive allegations and raised a number of affrmative defenses including failure to state a claim, state action defense, no effect on INDIANA FEDERATION OF DENTISTS Initial Decision interstate commerce, non-profit association, commercial free speech business of insurance, and complaint contrary to the public interest. On 12/29/78 the State of Indiana moved to intervene in this proceeding to see that the so-called "state action" defense would be presented adequately. On 1/5/79, however, the Administrative Law Judge, while wiling to grant amicus curiae status, denied the motion to intervene on the ground that the diffculties of trial would be increased without offsetting value, absent any showing that Respondent would not be able to present the "state action" defense properly. On 1/9/79 a major prehearing conference was held in Washington at which both sides made opening statements of position, followed by arguments as to important legal questions involved. A substantial part of the conference was devoted to planDing discovery, including Complaint Counsel's need for certain subpoenas and Respondent's demand for inspection and copying of Commission fies and its applications for interrogatories to Complaint Counsel and (5) for thirdparty subpoenas. Complaint Counsel were ordered to turn all their evidence over to Respondent by 5/20/79 add Respondent to turn its evidence over to Complaint Counsel by 6/20/79. Trial was anticipated for the coming summer. Thereafter both sides worked actively and productively on discovery problems through the Spring of 1979. At the prehearing conference of 1/9/79 Complaint Counsel's objection to searching Commission fies as far back as 1961 had been overruled because the Complaint's allegations go that far back. On 211/79, however, Complaint Counsel gave notice oftheir wilingness to limit their case to activities from 1970 on and Respondent accordingly agreed on 2/6/79 that the Government' s fie search might omit documents prepared, sent or received by the Commission prior to 1/1/70. This stipulation was approved by the Administrative Law Judge on 2/8/79.

On 2/5/79 the Commission denied a request for an appeal by the State ofIndiana from the Administrative Law Judge s refusal to permit intervention as a party but confirmed that the State might have amicus curiae status. Unsatisfied, the State of Indiana on 5/23/79 fied a complaint (Civ. IP 79-453-C) in the U.S. District Court for Southern Indiana (Indianapolis Division) seeking an injunction against further prosecution of this matter unless and until the State ofIndiana be permitted to intervene as a party or, alternatively, an injunction against further prosecution of this matter under any circumstances (because, the complaint averred, the "state action " doctrine is applicable here and operates to deprive this Commission of jurisdiction).

On 6/15/79 another prehearing conference was held in Washington, primarily to discuss the practical problems that were arising Initial Decision IOI F. because of a substitution of counsel for Respondent. A request by Respondent for an additional 90 days to prepare for trial was denied as unnecessary because Respondent's new counsel was its regular lawyer and quite familiar with the facts of the case. Respondent' scheduled turnover of its evidence on 7/20/79 was confirmed and trial was set for 8/6/79. By 7/17/79, however, counsel on both sides felt need for more time and trial was postponed until 9/17/79. Meanwhile, on 7/19/79 the U.S. District Court for Southern Indiana, Holder, J., conducted a brief trial on affdavits in the State of Indiana s suit against the Commission and on 8/17/79 handed down a decision by mistake granting the State both of the alternative judgments it sought. The mistake was corrected almost immediately by the Court by leaving only the judgment of intervention standing but the supporting findings were never altered. (6) In conformance with Judge Holder s intervention order3 and in view of the need of the IDdiana Attorney General's offce for some time to prepare for participation in the trial, the holding of evidentiary hearings in this matter was again postponed. On 8/17/79 the Intervenor was given unti 9/24/79 to turn its proposed evidence over to the other parties and trial was finally set to begin on 10/2/79 in the Federal Courthouse in Indianapolis, Indiana. Early in the hearings (10/5/79) Complaint Counsel moved, on instructions from the Administrative Law Judge, to amend the complaint to conform to their proposed proof by including certain theories of interstate commerce not specifically referred to in the complaint although literally covered by the words "among other things" in Paragraph 7 ofthe complaint. It appearing that Respondent and Intervenor had been on notice for several weeks before trial that Complaint Counsel proposed to add the evidence iD question to their proof of interstate commerce, the Judge, while doubting need for the amendment, proceeded to grant it purely as a precautionary matter in open court on 10/9/79.

Complaint Counsel's case- in-chief was presented by 17 witnesses largely insurance company dentists and administrators, between 10/ 2/79 and 10/17/79. Respondent's defense was presented by 4 witnesses, largely Respondent' s organizers and offcials, on 10/30/79. Intervenor s case was presented by four witnesses, including two academic experts in dentistry, on 10/29/79 and 11/1/79. Complaint Counsel's sole rebuttal witness, an offcial ofthe Indiana Department ofInsurance, was heard on 11/1/79. It was understood by all parties that iffor any reason the State s status as an Intervenor were eventually disapproved, nonetheless the testimony adduced by it would re- J The Commssion s formal reversa of its2/5179 order did Dot occur until 10/16179. 'Tr 1058 INDIANA FEDERATION OF DENTISTS Initial Decision main in the record and would be treated as if adduced by Respondent. A List of Witnesses follows. (7) 1648 References 1976-1991 1930-1949 387-:26 '60 2762-2784 250-9 1212-1394(8) 1757-1806 2525-2554 Page 979 979 1 1979 1979 1 1979 '979 1979 1979 1979 16, 16, 3- 12, 10, 15, 30, Datesfestimony October October October October November October2 October October October Counsel Counsel Counsel Counsel Counsel Counsel Counsel Counsel Sponsor Complaint Complaint Complaint Complaint Complaint Complaint Complaint Complaint RespondentWitnesses of List Drive Cal. 07006 Insurance Street Conn. Indiana Michigan Wood N. RoadConn. Ohio State, 147FlushingSt. Avenues.J. Kenosha Stoneyhil1 MissionFrancisco, Park, North Ridge Department Address Park 28Cadwell 25-11 Flushing, 14Enfield, 1984Hudson, Indiana 1235San Newington, 21760Oak 716Anderson, DOS A. II G. Steven L., , V. David F Carlton Richard Ernest William Jacob Robert Gene Witness Anderson. Arvanitis, Chichester, Christianson, Clegg, Dixie, Downes, Hurwitz, Janzarik, Roberts, Pierce, Oliver, Notting, Nelsen Mishler, Miele, MacKilop, Kos,John Kasle, Witness Fred James Richard Robert Ernest Frank, MyronJ. Charles Dr. Donald G. T. K.

2910 West Indiana 271 933 51.16High 63 the The East Dental School Address Den of Briar Charles,Wilmington,Bodine Anderson, Lafayette Fox Indiana Greenwood, UnitedAssurance Gate Glastonbury, State Equitable Bury III. Lafayette, Patch Road Hil University Ufe Indiana Ind. ExaminersBoard Indianalane Court Conn. StatesSociety Dentistry Rd. ofDelawareDrive of List of Witnesses Sponsor Complaint Respondent Respondent Intervenor Compa;nt Complaint Complaint Complaint Intervenor Intervenor Counsel Counsel Counsel Counsel Counsel October October October October October October October October November 5, 11 , 15, 29, October31, 29 16, 4-, 31, , t 1979 1 1979 1979 1979 979 1979 1979 1979 Datesfrestimony 1979 1979 t Page 629-10 2563-2619 2631-2656 2197-2338 908-54 1414-1536 1835-1858 2338-2375 2712-2742 950-1975(9) References ,, References J 2381-2524 96&-1171 2681-2708 1826-1835(10) 811-907 1656-1682 1536-1804(11 Page 1979 1979 , 1979 1979 1979 1979 1 1979 , 30, 5 12, 11 DateslTestimony October October9, November October15, October October October Counsel Counsel Counsel Counsel Counsel Sponsor Respondent Complaint Intervenor Complaint Complaint Complaint ComplaintWitnesses of List Road East Drive Drive Ind. Va. Indiana Hil1Conn. Dentistry Way of City University Terrace Georgia York Angie Cardinal Chippewa Goodale Park Address School Alexandria, 887Glastonbury, Indiana 67New 4457Lilburn, 4321Indianapolis, 109Alexandria, Jr.

Rudolph, E. Danie! Roy John Gerhard, Henry Sam Ralph Wilham Witness Rohn, Schade, Shafer, Siegel, Speziale Trego, Winkworth, INDIANA FEDERATION OF DENTISTS Initial Deision The demeanor and apparent credibility of all witnesses for both sides was generally quite impressive, with the sole exception of one of Respondent's witnesses, Dr. James Pierce, an organizer of Respondent, who consistently professed inabilty to remember important facts he might be expected to recall. It might further be noted that, surprisingly, Respondent's first President, Dr. David McClure, who has shared with Dr. Daniel Rohn the top leadership of virtually every Indiana effort to keep X-rays out of insurers' hands during the past decide, was never called to testify.

Approximately 440 exhibits were offered (90% by Complaint Counsel) and very generally received in evidence. This being in the nature of a conspiracy case, many of Complaint Counsel's exhibits were offered in evidence as acts and/or declarations of Respondent's co-conspirators but were challenged by Respondent and/or Intervenor as hearsay evidence and urged to be inadmissible unless and until a prima facie case of conspiracy be established. Such exhibits were typically admitted by the Judge only for non-hearsay use (i. to prove the fact that a statement was made and any reasonable implication therefrom) but not for hearsay use (i. to prove the truth of the statement) unless and unti Complaint Counsel should establish a prima facie case of conspiracy which would make Respondent responsible for declarations by other members of the conspiracy made during and in furtherance of it.

In accordance with the usual practice in conspiracy cases, the Administrative Law Judge did not attempt to decide at the time of each evidentiary ruling whether or not a prima facie case of conspiracy had yet been made out but postponed that determination until after trial. When closing the record on 11/16/79 the Judge directed Complaint Counsel to "set out clearly in a special section oftheir proposed findings and conclusions the chief evidence on which they rely to establish the existence ofthe conspiracy alleged in the complaint. Complaint Counsel's Brief Supporting Conclusions Of Law " contains a section entitled "Bases For Admission Of Third Party Dental Society Documents Against Respondent." (pp. 28-1 incl.)5 Complaint Counsel rely principally on three kinds of evidence to make their prima facie case: (12) (1) The testimony of Connecticut General's National Accounts Director Chichester" and former Indianapolis Regional Manager Robert to their personal experiences in dealing with IDA and its leaders when trying to set up and administer the General Motors/ UA W dental health plan and likewise the testimony of Aetna s Group o The problem arose mostly, although Dot e:tirely, with reference to docments of IDA, which was Darned as a co-mnspirator but Dot a Respondent.

6 See transcript references cited in CPF 112-13, 115.16, 120-22, 175 1 See tranript references cited in CPF 87, 112-13, 115- , 121, 125-27. Initial Decision 101 F. and Claims Program Director Schade9 toClaims Director Downes8 their personal experiences in dealing with IDA and its leaders when trying to set up and administer the International Harvester/VA W dental health plan. Their stories establish clearly the IDA-organized concert of action with regard to submission of X-rays to insurers and the important roles therein played by the future leaders ofIFD. (2) Detail about the IFD phase of the conspiracy, such as pressure put on insurers not to request X-rays and to abide by "gentlemen ageements" developed during the IDA phase of the conspiracy, is found in the testimony of Connecticut General's former Indianapolis Regional Manager Speziale,lO who also told of his dealings in regard to submission of X-rays with such continuing IDA/IFD leaders as Drs. McClure and Rohn.ll Evidence that IFD was dedicated to fighting submission of dental X-rays to insurers is found in the testimony of Brockaway Glass' Personnel Manager Christianson!2 and ITT-Hoffman s Personnel Manager Trego.13 (3) Hearsay found in Respondent' s own minutes or other declarations (whose admissibilty thus does not depend on prior establishment of a prima facie case of conspiracy) can be used to prove IDA' prior conduct opposing X-ray (13) submission;14 the founding of IFD as a purported "union" to evade the antitrust laws against boycotts; the deferral ofIDA action against submission of X-rays to give newlyfounded IFD a chance to work out an arrangement with insurers; exchanges of reports on IFD and IDA actions regarding the X-ray question;!7 IFD members' conduct conforming to its "Work Rule" and refusal to submit X-rays;!8 and statements in newsletters of IFD' position on the "Work Rule" and the submission ofX-rays.1 We agree with Complaint Counsel that the evidence cited makes out a rich prima facie case of conspiracy. Accordingly, we now rule that all hearsay evidence received conditionally (i. dependent on proof of a prima facie case of conspiracy) is hereby relieved of such condition and is now received in evidence unconditionally. Many times during the trial of this matter Respondent and Intervenor objected to "double" or "multiple" hearsay, usually in documentary evidence. Rule 805 ofthe Federal Rules of Evidence provides: See transcript references citein CPF 94- 99, 105, 108-110. See transcript references cited in CPF 107 1l0. 10 See transcript references cited in CPF 180-2. 11 See trall3cipt references cited in CPr' 134--5. 12 See transcript references cite in CPl" 151, 176-179. )3 See transcript references cited in CPF 151. 183- 187 14 ex 505A; ex 575A-C; ex 584A- 15 See transcript references cited in CPF 140, 193 16 See transcript references cited in CPF 145, 157; see also ex 194K and ex 492A. 11 See transcript references cited in CPF 145. 18 &dranscript references cited in CPF 147 164. 19 See transcript references cited in CPF 150, 153, 162. _...___ . .

dU- Initial Decision Hearsay within hearsay. Hearsay included within hearsay is not excluded under the hearsay rule ifeach part ofthe combined statements conforms with an exception to the hearsay rule provided in these rules.

In each case when a multiple hearsay objection was raised the Administrative Law Judge assured counsel that he did not propose to rule on the admissibility of each of the many instances of multiple hearsay often found in lengthy proposed exhibits but that even if the overall document was admitted, no weight would be attached to any part violative of Rule 805. We now make it clear that we have not intentionally relied on any multiple hearsay in any exhibit, if such part violates Rule 805. Any finding based (14) in part on multiple hearsay implies that the Judge thought that particular multiple hearsay fell within an exception to the hearsay rule as contemplated by Rule 805.

It proved necessary to admit certain exhibits after the last hearing day (11/1/79) but before the closing of the record. For the record these exhibits are as follows.

IX 500-00e: a statement of one major insurer s policy regarding Review of X-rays, offered by Intervenor and received in camera written order on 11/2/79.

ex 852, ex 853, ex 854: certified copies of certain papers fied by the Federal Trade Commission in the suit against it by the State of Indiana in the U.S. District Court for the Southern District ofIndiana (Civ. No. IP 79-462-C), offered by Complaint Counsel to supplement other papers from the same fie offered by Intervenor and received on 11/1/79 as IX 1000-1000 GGG. The supplementary papers were received by written order dated 11/14/79.

(It should be noted that the progress of the State s injunction suit after Judge Holder s judgment of intervention on 8/17/79 is dealt with hereafter in connection with the State s contention that certain findings by the District Judge are now binding on the Administrative Law Judge here by operation of collateral estoppel.)20 On 11/16/79 the record of this case was closed, subject to reopening for good cause shown any time before submission of the Initial Decision. On 12/21/79 Complaint Counsel submitted "Proposed Findings And Conclusions Of Counsel Supporting The Complaint" and "Complaint Counsel's Brief Supporting Conclusion Of Law." On the same date Intervenor served "Findings Of Fact And Conclusions Of Law. Some days later, pursuant to agreement of the parties and approval by the Administrative Law Judge, Respondent served "Respondent' 20 See Pars. 187 to 209, below.

Initial Decision IOl F. Submitted Findings Of Fact And Conclusions Of Law." On or about 1/10/80 all parties served responsive papers as follows: (15) Respondent' s Response To Complaint Counsel's Findings Of Fact And Conclusions Of Law.

State ofIndiana s "Response To Complaint Counsel's Proposed Findings Of Fact And Conclusions Of Law.

Complaint Counsel's Reply To Proposed Findings Of Fact And Conclusions Of Law Of Respondent Indiana Federation Of Dentists And Intervenor State Of Indiana.

On 2/8/80 the Administrative Law Judge sought and on 2/14/80 the Commission granted an extension of time until 3/14/80 for the fiing ofthe Initial Decision. A further extension of time to 2/24/80 was sought on 2/13/80 and on 3/18/80 was granted by the Commis- Slon.

II. OVERVIEW This case explores the economic impact of mushrooming dental health care insurance on the practice of dentistry. Traditionally a dentist has been relatively unfettered in his diagnosis of a patient' needs. ! The patient might or might not be able to afford what the dentist recommended but the recommendation itself was hardly ever questioned by anybody. The phenomenal growth of group dental health care insurance in recent years22 has changed all that. Insurers naturally anxious to contain dental health care costs, have not generally been prepared to pay for anything that a dentist recommends. Their covenants to pay dental bils have commonly been limited to payment ofa reasonable charge2' for work reasonably (16) required. That imports an objective standard of necessity. As a result, someone beside the dentist must now be involved in deciding (or at least confirming) a proper treatment plan on which the payment of insurance benefits can fairly be based.

The economic interest of dentists in not being "second-guessed" by their patients' insurers is too plain to need elaboration. The experience of dental health insurers-who, of course, have their own bias- 'ex 139 I.

ex 804Z-18 (group dental expense health insurance benefit payments up from $140 milion iD 1970 to $951 million in 1976); By 1978 some 48 milion Americans were receiving prepaid dental Clife through II contract with their employers or unions (CX 584A) "ITr 394-95 The language commonly used is "usual and customary" charge. (CX 47H). However, the rea8onablene of the fee isnot an iB.uC in this case :! The phrase eommooly used is "ltJast expensive yet adequate treatment" (CX 47K). The implementation oHhis phrase goes to the heart of the case.

_. _. .....

Initial Decision has been that correcting the treatment plans submitted by dentists in Indiana almost always means slimming them down rather than beefing them Up.26 Experience shows that an alternate benefits clause is a significant cost-containing mechanism.

This is not to say that any large number of dentists deliberately set out to defraud whomever is paying the bil. But where a range of opinion is possible it is (17) not surprising for dentists and bil-payers to have honest disagreements of opinion as to how much dental work is really required in a particular instance. That economic conflct constitutes the background of this case.

It is worthwhile noting that this essentially economic struggle has been embittered by something equally deep-seated. The record reveals many comments by dentists reflecting the professional man inevitable indigation at being "second-guessed". Such revealing 29phrases as "degrading abuse, "subjugating his own professional judgment "30 Udictate to the doctor"31 and !!questioned as to my professional integrity"32 give some indication of the strong emotional component involved in the struggle here. When Respondent' s leaders complain about insurers interference with the dentist/patient relationship,"33 they are referring not only to the possibility of losing money but to a loss of personal pride.

The wrath of the dentists of Indiana has most frequently been vented on two practices of insurers which, the dentists assert, justify them in refusing to turn over their patients' radiographs (commonly called "X-rays ) to insurers who want to see what the X-rays show. The first reason usually given for such refusal is that insurers rely too heavily on the X-rays (i. to the exclusion of oral examinations and other diagnostic aids). A second alleged reason is that insurers reportedly use lay personnel to read X-rays (under conditions discussed later). It is reasonable and indeed should be mandatory, they claim for dentists to refuse X-rays to people who wil only abuse them. The dentists do not usually refer to another possible reason but they must be presumed to intend the natural and probable consequence of refus- 26 An Aetna survey in its.F. Wayne ollce found 20 alternative course reductions in 21 referrals. Tr 1351-52. An Aetna witness claimed this was based on bad statistics but an offcial investigation by the Indiana Insurance Commssioner fOUDd that only 7 percent of aU alternate treatments diocussed by an insurer s dental consultant with the patient's dentist resulted in an " upgrade"- ex 810H. We do not accept Complaint Counsel' s claim in CCPF # 54 that alternate benefits clauses yield higher benefits in up to 25 percent of aU cases. Even Complaint Counsel concede that "it is more usual for dentists to overtreat than to undertreat" (citing Tr 332) and that "when alternate benefits are invoked it usually means that benefits wil be paid for a Jess expensive treatment than that proposed" (citing Tr 619, 915 1379-80 1507) Z1 Tr 272, 276-77, 397, 527- , 979, 9801, 986 1152 1430. VI A top ConDecticutGeneral dcntist/executive could recail no instance ofintentioual or fraudulent misrepresentation which that insurer had reported to any agency in the State of Indiana. Tr 562. 29CX394G.

31 CX 47K.

CX47J 32Tr2714 33 This is a frequent phrase in the record here-&e e. CX 397 A. Initial Decision 101 F. ing the X-rays to insurers: to make it harder for insurers to secondguess dentists.

Be that as it may, insurers serving Indiana have found it much harder to get dentists to give up their patients' X- (18) rays there than elsewhere.3' This complaint was brought by the Federal Trade Commission to find out why. If dentists' refusals to turn over X-rays to insurers have been based simply on dentists' individual decisions there is probably no antitrust offense. Contra, however, if these refusals reflect even in part the influence of a concerted refusal to dealgroup boycott-""me of the most heinous offenses known to the antitrust law. Klor's Inc. v. Broadway-Hale Stores, Inc. 359 U.s. 207 (1959).

In summary, what is in issue here is not whether dentists or insurers are right about what treatment is needed, either generally or in particular cases, nor even whether;t;s fair for dentists to individually withhold from insurers the X-rays which are so important in deciding on a proper treatment plan. The issue here is, rather, whether the Indiana dentists have unlawfully organized a collective effort-a group boycott-to try and keep those X-rays out of insurers' hands. III. FINDINGS OF FACT A. Respondent 1. The sole Respondent, Indiana Federation of Dentists C'IFD"), is an unincorporated association of Indiana dentists formed on August , 1976. Article II, Section 2 of its constitution and by-laws makes membership open to any licensed Indiana dentist who endorses IFD' purposes and those of the American Federation of Physicians and Dentists, with which it is affliated and to which each IFD member must belong.

2. The "objectives" of IFD, as set forth in Article I, Section 2 of its constitution and by-laws, are essentially "to represent the economic interests ofIndiana dentists as a (19) labor organization. 37 In pertinent part Section 2 reads:

Section 2. Objectives:

The Indiana Federation shall represent, protect, maintain, and advance, through activities accomplished by relevant techniques which may lawfully be engaged in by 11 Tr 290-92, 1471 , ex 563A. The American Dental A&'iciation, for example, has never opposed submission of rays to insurers (Tr 306, 1003-4) 35 ex 477C; ex 22A . ex J3C. It further provides that an IFD memher must not be affliated with any other colleclive bargaining agent for dentists 1"1 ex 13A-B. Also quoted in Par. 105, below U'. LHru,o. ,(' J'UI'nrtllVl'\ VI' Ur.l'llli::Ui: Initial Decision a labor organiztion, the interests orihe dentists within its jurisdiction. The objectives of this Federation shall include, but not be limited to the following: a.) To represent dentist.', in all socio-economic matters, negotiations and grievances with employers, third, and fourth parties or any group that is involved in financing or delivery of dental care. The ultimate purpose being to promote better patient care and to prevent abuses and correct inequities in the delivery of dental care to the public; b.) To seek to insure adequate compensation and proper working conditions for dentists commensurate with their training and skill and the responsibility they bear for the life and health of their fellow human beings; ) The establishment or approval of appropriate utilization review or peer review procedures which do not interfere with the doctor-patient relationship and the maintenance of the highest quality of dental care; d.) To associate together all dentists for their mutual benefit and protection; To unite the efforts of dentists in obtaining and preserving the individual freedom of action necessary for the success of their professional endeavors; 3. Although IFD is open to dentists throughout Indiana, its membership has been and is stil largely concentrated in three localities of that state.3S As of (20) June 1979 there were 46 members around Anderson (Madison County)39 27 members around Lafayette (Tippecanoe County)40 and 19 members around Ft. Wayne (Allen County). Obviously these are fairly small numbers in comparison with the 100 licensed dentists in Indiana42 or the almost-as-large membership of the Indiana State Dental Society.43 What IFD' s members lack in numbers, however, they make up in the strength of their convictions. Immediately after issuance ofthis complaint each member was assessed a thousand dollars for litigation costs here (in addition to usual dues of two hundred dollars per year). 4. Respondent has argued that the Commission has no jurisdiction over this unincorporated association because it is not organized to carryon business for its Own profit. However, the merest consideration of its objectives46 makes it clear that IFD is not a charitable organization but is organized to carryon business in substantial part for the profit of its members. Accordingly, it falls within the definition of "corporation" as provided by Section 4 of the Federal Trade Commission Act, 15 V. C. 44 (1976).

5. Numerous cases support this Commission s jurisdiction over purportedly non-profit organizations such as trade associations which Ja SeeRPF2 IPF 116, 117.

cx 811A (including 100 percent of all dental specialists in the area). .0 CX 811B (including 67 percent of all dental specialists in the area). " Statistics on specialists are not available for Ft. Wayne because this Chapter was not fonned until 1978 (CX 566A- 1'1' 226l.

.3 The IDA mlliling list is said to miss only 12-15% of all Indiana dentist: (CX 303E). .. CX 12.

\ Respundent' s Answer to Complaint, Par. 17 46 See objectives" set forth in Par. 2, above. Note also that IFD' s application to the Internal Revenue Service for recogritjon of a federalincome tax exemption was based on a claim that IFD is a labor organzation rather than that it was a charitable association. ex 33A- Initial Decision IOI F. FTChowever, promote the economic interests of their members. , 690 (1948); Fashion OriginatorsCement Institute 333 (21) U.S. 683 Guild of America v. Federal Trade Commission 312 U.S. 457 (1941); National Commission on Egg Nutrition 88 F. C. 89, 175-177 (1976), , 1977), cert. den. 439 U.s. 821 (1978); FTCaffd. 570 F.2d 157 (7th Cir. v. National Commission on Egg Nutrition 517 F.2d 485, 487-88 (7th Chamber of CommerceCir. , 1975), cert. den. 426 U. S. 919 (1976); FTC 13 F.2d 673, 684 (8th Cir. , 1926); National Harness Mfgrs. Assn. v. FTC, 268 F. 705, 708-9 (6th Cir., 1920). Only one non-charitable purpose is necessary to give the Commission jurisdiction. American Medical Association FTC Docket No. 9064, slip opinion of Commission issued 10/12/79, at page 5, fn. 5 (94 F. C. 701 at 984J. 6. Respondent IFD is not and never has been a labor union within the meaning of Section 6 and 20 of the Clayton Act (15 U. C. 17 and 29 U. C. 52) which exempt genuine labor unions from the provisions ofthe federal antitrust laws. Similar associations of independent businessmen, including private practice physicians, organized for the purpose of dealing with powerful customers have been held not entitled to the benefit ofthe Clayton Act exemption. Columbia River Packers American Medical Assn. v. Unit- Assn. v. Hinton 315 U. S. 143 (1942); ed States 317 U.S. 519 (1943). Evidences of efforts to dress IFD up as a labor union thus have no significance here except as they may tend to show guilty consciousness by IFD's founders that their activities would probably be unlawful under the Federal antitrust laws. 7. Respondent IFD is obviously not engaged in the business of in surance-however defined-within the meaning of the McCarran-Ferguson Act, 15 U. C. 1012, 1013(b), which makes the Federal antitrust laws inapplicable to the insurance business, except insofar as it is not regulated by State law. The insurers to whom Respondent's members have allegedly refused X-rays (thereby restraining their trade) are technically not engaged in the business of insurance either, because the Supreme Court has recently called risk-spreading and underwriting the essential elements of "insurance Group Life Health Insurance Co. v. Royal Drug Co. 440 U.S. 205, 211 (1979) whereas the insurers" involved here typically operate on a cost-plus basis, passing the risk back to the group covered (e. all General Motors employees).'8 Even, however, if the kind of claims servicing functions performed by the !(insurers" here be treated as ((insurance" within the meaning of the McCarran-Ferguson Act, that Act expressly pro- 11 See Par. 94, below.

4. Under the Connecticut General/General Motors Plan the premium equals anticipated benefit payments during the coming year plus administration expense, shllre (Jfoverhead and profit (Tr 507-08). Under the Aetna/Interltltional Harv€Rtcr Plan, HarvI;ster transfers funds to Adna to take care of claims up to a certain limit b",yond which Actna a38ure the risk. "Premium" is defined in this contract to mean the sum of Aetna g administrative costs plus anticipated daims (Tr 1079-O).

. . . ._ . . Initial Decision vides that (22) nothing in it shall render the Federal antitrust laws inapplicable to any "agreement to boycott, coerce, or intimidate, or act of boycott, coercion or intimidation. " 15 U. C. 1013(b). Thus the same proof of participation in an organized boycott which would tend to establish a boycott in violation of the antitrust laws would at the same time lift the prohibition of the McCarran-Ferguson Act against action by this Commission to end such a boycott. B. Interstate Commerce 9. Under the Magnuson-Moss Warranty-FTC Improvement Act of 1975 (Title II, Sec. 201(a)) amending 15 U. C. 45, unfair methods of competition and unfair trade practices are within the jurisdiction of the Commission if they are in or affect interstate commerce. The practice of dentistry in Indiana is obviously not in interstate commerce. However, much if not most of the business of dental health care insurance carried on in Indiana is in interstate commerce under the tests laid down in United States v. Southeastern Underwriters Association, 322 U. S. 533 (1944). The boycott alleged in the complaint is by its very nature designed to affect such interstate commerce in insurance adversely by depriving insurers of the X-rays they need in order to determine the least costly adequate treatment for their insureds.

10. The necessary effect on commerce must be substantial and " is not suffcient merely to rely on identification of a relevant local activity and to presume an interrelationship with some unspecified aspect of interstate commerce. McLain v. Real Estate Board of New Orleans 444 U.S. 232 (1980) (Docket No. 78-1501, slip opinion of 1/8/80, page 9). However, Federal jurisdiction for purposes ofinjunctive relief is not defeated by Complaint Counsel's " failure to quantify the adverse effect of respondent's conduct" or even by " inability to prove that concerted activity has resulted in (any) legally cognizable damages. Ibid. page 10. The correct formula, as laid down (23) by the Supreme Court in McLain is that: To establish the jurisdictional element ofa Sherman Act violation it would be suffcient for petitioners to demonstrate a substantial effect on interstate commerce generated by respondents' activity. Petitioners need not make the more particularized showing of an effect on interstate commerce caused by the alleged conspiracy. or by those other aspects of respondents' activity that are alleged to be unlawful. Ibid. page 9. 11. In this case, while Complaint Counsel do not attempt to quantify the extent to which Respondent IFD's boycott campaign has in fact affected commerce in interstate insurance, the record is replete with evidence of the magnitude of business done by interstate insurers Indiana under dental health insurance contracts with predetermina- (, Initial Decision 101 F. tion and alternate benefits provisions. For this purpose we adopt and attach hereto as Figure 1, a tabulation prepared by Complaint Counsel49 from evidence specified in detail in Complaint Counsel's Proposed Findings of Fact # 39 through # 44, now incorporated herein by reference. Figure 1 shows that during 1976 and 1977 more than a half dozen well-known interstate insurers made benefit payments of almost $13 milion into Indiana under dental plans with predetermination and alternate benefis features. An organized boycott attacking interstate business of this magnitude is a "substantial" restraint on such trade, whether or not the boycott ever succeeds. (24) CCPF, page 20.

If establishing jurisdiction required a showing that the unlawful conduct itself had an effect on interstate commerce, jurisdiction would be defeated by a dcmonstration that the alleged restraint failed to have its intended anticompetitive effect TIlis is not the rule of OUT ca Ibid pages 9-10- See also Goldfarbv- Virginia State Bar 421 U.S. 773, 785 (1975): ''Te fact that there was no shewing that. . . buyers were discouraged by the challenged activities does not mean that interstate commerce was not affected- Otherwise the magnitude of the effect would control and our caoos have shown that ODce an effect is shown, no specific magnitudtJ DtJtJd to be proved. " (Citing United Statesv. McKesson Robins 351 U.s, 305, 310 (1956), :./ !! 453, 11, 11--1 Wllyne"r". Ft.

151.

S1.

rel 1977 ,n, 111, 1J"i Laflypttll U4 170 431. n, 441. 39 r.t.. cpr crv. CPt!! In 100 100 \ltll 60:), 600, I 1976. 12. 11, Cto, Conhln",d of 1 416 I:I"S J'/IU "ndp'fllonl\'f". nl 141.100 111, lS2, btC'dllber Jr - f Figure 12. C'''Pllny 1976-77 the or Jul)' IlIunt. 000 000 000 187 000 &00 417 'f !! 250, 707 139, 3&5. 175, 215 "nl)' Thl! 1.171, $2, ..h1"hpyfor Tabulation h Indiana 45. yellt!. Pbnll 000 800 000 522 0(10 750 Into 2, .ydh unlluU""l... tl!atu..I!" 875, J2 2&4, 499, 440. 456, !. cl1"ndar "I!_ 1977 ntlll $1, JntputatePIV'nU TI61::2 Ind. Jnc!. Payment. Ine. l"Iii i"l1 "enr.f1t. (01' Undt'r Dcnefit. Dati P'fe,Jetermin.tion Rl"ll"vant PBul policy!:Uth iter"aU / Intl!rllht"IndianaWith Aptnll Hl!tropoUUn Tuvple'f8rndpntIal tqullat.11! otl'l'f!)nul ,"pter(trank'ort., Tohn8-".".lllelJ\le".!1'd'fia,'!Utl Initial Decision 101 F. (25) C. The IDA Boycott 12. The Supreme Court recently defined a "boycott" this way: The generic concept of boycott refers to a method of pressuring a party with whom one has a dispute by withholding, or enlisting others to withhold patronage or services from the target. St. Paul Fire Marine Ins. Co. v. Barry, 438 U.S. 531, 541 (1978). Unlike some legal definitions, this one conforms closely to the common understanding of the same word. Our immediate task is to determine whether the record here fairly establishes a boycott and if so, what if any role Respondent has played in organizing it and/or keeping it going.

13. The allegation of the complaint in Pars. 9-10 is that Respondent Indiana Federation of Dentists, when formed in late August 1976 simply took over a going conspiracy organized by IDA to keep dental X-rays out of insurers hands. When dawning consciousness of ilegality led IDA to give up the fight, IFD was organized as a "labor union by the old leaders to continue the same boycott in a new guise, Paragraph 11 of the complaint charges. A mass of evidence supports this allegation.

14. Indiana Dental Association (IDA) is a "constituent society" of the American Dental Association.52 Its membership in 1974 encompassed about 85 to 88 percent53 of the state s 3 100 licensed dentists. Its members automatically belong to 14 affliated " component" (i. local) dental societies 55 which elect representatives to (26) the state association s governing body, known as the House of Delegates. IDA's top executives including a President, Secretary and Board of Trustees, are elected statewide annually. 57 15. Sometime before 1970, in response to the appearance ofindustrial and other group dental insurance plans, IDA had set up a Council On Dental Care Programs (CDCPJ composed of representatives from each of the 14 local societies.58 It was its duty, among other things, to formulate Association policies, standards and principles for evaluating group-funded dental care programs (public and private) subject to approval of the House of Delegates. 59 The three areas (Anderson Lafayette and Ft. Wayne) where anti-insurer sentiment was strongest 01 "To combine against a landlord, trade.'man, employer or other person, to withhold sodal or business inter. course from him and to deter others from holding such intercourse. " Webster s New Internatiolltll Dictionary,vilk boycott"

5Z ex 798E; ex 799E.

1 ex 303E.

, Tr 2261.

55 ex 38, ex 4B, ex 5B, ex 68, ex 7C, ex 88, ex 9B, ex lob, ex lib. 5" ex 798G; ex 799G / ex 798L; ex 799 I.

'.B ex 3D; CX 72C; CX 99D; ex 133 59 cx 798Q; ex 799M.

.L....Hu'.n .L UJ.I'-_ H.llj.J.\_ n'l U.I U-Dl'1l.l.ulu Initial Decision and which would eventually give birth to the three chapters of IFD were always well-represented on CDCP. Future offcials of IFD who sat on IDA's Council On Dental Care Programs during the 70's are shown in Figure 2. (27) Figure Future IFD Oficials Who Served On IDA Council On Dental Care Programs Evidentiary References IFD ede Year Name Area Membership Positions 1970-71 Dr. Robert Gayle Ft. Wayne ex 21 ex 3D Dr. Richard Harrison Anderson ex 18A ex 3D 1971 Dr. Robert Gayle Ft. Wayne ex 21 ex 4D Dr. Richard Oliver Lafayette ex 208 ex 4D Dr. Paul Van Darn Anderson ex 188 ex 4D 1 972 Dr. Robert Gayle Ft. Wayne ex 21 ex 6D Dr. Richard Oliver Lafayette ex 208 ex 6E Dr. Paul Van Dorn Anderson ex 188 ex 6D 1974 Dr. Robert Gayle Ft. Wayne ex 21 ex 7D Dr. Richard Oliver Lafayette ex 208 ex 7E Dr. Dan Rohn Anderson ex 188 ex 7D Dr. Paul Van Dorn Anderson ex 188 ex 7D 1975-76 Dr. Richard Fontaine Lafayette ex 19A ex 8E Dr. Karl Gossweiler Anderson ex 18A ex 8D Dr. Dan Rohn Anderson ex 188 ex 8D Dr. David Steele Anderson ex 188 ex 8D 1976-77 Dr. Richard Fontaine Lafayette ex 19A, 20A ex 9D Dr. David McClure Anderson ex 18A ex 9D Dr. Dan Rohn Anderson ex 188 ex 9D Dr. Charles Sabel Lafayette ex 19A, 208 ex 9D Dr. David Steele Anderson ex 188 ex 9D 1977 Dr. David McClure Anderson ex 18A ex 10D Dr. Charles Sabel Lafayette ex 19A, 208 ex 10D Dr. David Steele Anderson ex 188 ex tod 1. 978 Or. David McClure Anderson ex 18A ex 11D Dr. Charles Sabel Lafayette ex 19A, 208 ex 11D Dr. David Steele Anderson ex 188 ex 110 (28) Initial Decision 101 F. Attention should be called to the prominent roles played in the Council during much of the '70's-even after the formation ofIFD-by Dr. Dan Rohn (Vice Chairman and then Chairman, 1974-1977) and Dr. David McClure (Consultant at Large, I976-1979), the two principal figures in IFD.

16. These roles have been in addition to other significant positions in IDA held by these future IFD offcials, all as shown in CX 2A-E. Dr. Rohn, for example, was President of the Indiana Dental Association for 1972-73 and Dr. McClure was Secretary of the Indiana Dental Association from 1970 until 1976 (the year that IFD was formed with McClure as President and Rohn as Vice President). Drs. Rohn McClure and Oliver, along with Dr. James Frey of the Ft. Wayne area another future IFD offcial, made up half of a special six-dentist "task force" on Dental Care Programs set up to supplement the work of CDCP during the critical 1976-77 period. Dr. Rohn chaired both the Council and the task force.

17. IDA's attitudes and policies toward dental health insurance plans have long been embodied in an offcial "Manual On Group Funded Dental Care Programs. 62 It first appeared in January I968; a second edition was published in November 1969; and revisions were made thereafter in May 1972, May I974 and May 1976. The "Manual" is one ofthe most important pieces of evidence here because it lays out so clearly and completely the IDA policies on which the boycott was based. It begins with an introduction by CDCP: The purpose of this manual is to give Indiana Dentists and their assisting staff an appropriate and useful guide to follow when providing dental care to patients having group funded dental care plan (public or private). By making this information readily available to Indiana dentists the Association policies and standing rules regarding group funded programs wil be more (29) meaningful; followed more uniformly; and result in better services to patients and dentists alike. (emphasis added)64 18. Part II of the "Manual" ("Policy and Information ) covers LD.A. Policy Regarding Group Dental Care " reciting adoption by A.'s House of Delegates on 5/22/62 and amendments by the same authority dated 1965, 1966 and 1972. (The last revision in this record (I976) also recites amendments adopted in 1970, 1973, 1974 and 1975.)66 It begins with a section on "LD.A. Policy Regarding Group Dental Care " subtitled "Principles for Determining the Acceptability 00 ex 106, ex 490B.

(" ex 106 ""(,'X47 CX 72, ex 99 63 ex 47 A, ex 72A and CX 99B. This record contains no later editionsor revisions. &1CX47C 6.\ CX 47E.

_. _.._ Initial Decision of Plans for the Group Purchase of Dental Care" (more commonly called "the Principals of Acceptability 67 These "principles" cover a number of matters such as IDA participation (but without contractual commitment) in the development of such plans; maintenance of a high standard of dental treatment and compliance with IDA's Code of Ethics; freedom of patients to choose their dentists and vice versa; eligibility of all licensed dentists to participate, etc.68 19. Of particular importance here is Principle Number 6, which reads as follows:

6. The areas of responsibility involved in the administration of the plan must be recognized and properly evaluated.

a. The administration of the professional phases of the plan should be entirely within the control of professional personnel. Professional standards and treatment should not be controlled by non.d.ental administrators. b. The method of authorization of dental health care under pre-payment plans should be limited to determining the eligibility of the patient and (30) extent of liability of the plan and should prevent any interference with the dentist-patient relationship or with the judgment and decision of the dentist. The plan must not require the dentist to submit 9 radiographs (X-rays) to a third party. (emphasis in original) c. The submission ofa total estimate is acceptable i( requested by the patient. (emphasis in original)70 20. Note well that while Principle Number 6 is clearly opposed to insurance contracts which compel production of a dentist's X-rays at the request of the insurer, this Principle does not take the next step: directing dentists to refuse to submit X-rays to third parties on request. However, a subsequent part of the "Manual" contains a form letter to be sent by dentists on I.D.A. stationary "To All My Patients which does, indeed, take the next step. Paragraph Number 5 reads: Dental radiographs (X-rays) are a part of the dentist's legal health records. They are available for valid review by a qualified representative(s) of your insurance company in this oflce. Radiographs (X.rays) will not be submitted to third parties (or their use in determination of benefits(e. least expensive adequate procedure or optional course of treatment) because a determination of an adequate treatment plan can only be made after a knowledge of the following:

A. Complete patient evaluation B. Radiographs C. Additional diagnostic procedures as required. (emphasis added)71 (31) 21. Paragraph 5 of the form letter "To All My Patients" plainly directs Indiana dentists not to send X-rays to insurers for the only purpose insurers would want them: to determine insurance benefits. 67 ex 47E.

""CX47E.

Later revisions inserted here "either pre or post operative. !';ee ex 99F. eX47E 71 ex 47G. See also ex 72F and CX 99 I (same wording in later revisions of Manual) , . . .

Initial Decision 101 F. It can be argued-that the provision permitting "qualified" insurance personnel to come to the dentist' s offce to study X-rays prevents the passage in question from amounting to a total blockage of access to the X-rays?2 However, there is unchallenged testimony in this record to the effect that it is not economically feasible and in any event it would be a terrible waste of time to have insurers' professional dental consultants constantly travellng from offce to offce to talk to dentists (when available) and look at their X-rays.?3 As a practical matter we find that Paragraph 5 of the Manual amounts to a plan by IDA for Indiana dentists to boycott insurers. Whether the boycott could be justified, as attempted in the suggested Paragraph 5, on a theory that working from X-rays alone without "complete patient evaluation and "additional diagnostic procedures" is inadequate for proper determination of a treatment plan is, of course, a separate question, reserved for consideration hereafter.

22. A subsequent section of the Manual is entitled "Uniform Method For Processing Group Funded Dental Care Plans ?5 and goes into great detail on how a dentist should deal with his patients (including giving them copies ofthe "To All My Patients" letter described above). Under "Points to Discuss with Patients" occurs this enlightening advice from IDA to its dentist members:

1. Pre-authorization or predetermination is required by some group-funded dental care programs.7 The dentist (32) wi)l cooperate with this procedure by providing the patient with a treatment plan on the Uniform Report Form ifa. The plan does not interfere with the dentist's professional judgment (i, attempt to dictate to the doctor and his patient what and/or how the service should be performed), b. It is limited to determining the extent of liability of the plan. c. It does not require the submission of preoperative radiographs. 2. Some insurance plans provide for "alternate benefits . Usually, the wording for this in a plan is the least expensive yet adequate treatment. Ifthis is the case, be sure the patient understands that the treatment plan the dentist has proposed may not be accepted by the insurance company. Instead, the company may pay for a less expensive or optional course of treatment which the third party determines to be adequate. In this event the dentist and patient have two options: a. Continue with the original treatment plan with the patient understanding that he will be reimbursed for only part of the cost of treatment. b. If the patient elects the alternate treatment as determined by the insurance company, the dentist should consider the fact that in proceeding with a treatment plan prescribed by a third party, he (the Dentist) is put in the (33) position of justifying, both nthe me invitation to check X-rays in the attending dentist's offce appears in a "sample letter to (insurance) carrier if carrier request: X-rays.... " ex 47X; ex 720; ex 99V. 1 Tr 341-42, 924- , 978 1221, 1232, 138:l4, 1457; ex 303E; ex 316. See Pars- 120-148 below (re reasonableness of the restraint). '5 ex 471 et seq- ex 72H et seq- ex 99K et seq 76 The testimony here was that predeter11nation is usually required for work expected to cost over $100 although inflation has recently been driving that figure up to $125 (Tr 393, 535-36, 980) INDIANA FEDERATION OF DENTISTS Initial Decision morally and legally, the results of this plan, which is not of his own making. And moreover, in subjugating his own professional judgment to a third party, he is negating his claim to a professional status and, in fact, has beome merely a mechanic carrying out a treatment plan designed by someone who has never seen his patient and whose qualifications are unknown. Thirdly, by accepting such third party diagnosis, the denlist wil be setting a dangerous precedent which could have far reaching implications afecting the professionalism of dentistry. 77 (emphasis in original) 23. The strong feeling evident in this passage provides revealing background for the action called for by the next part of the Manual. This instruction is found in an "Attending Dentist's Statement" to be given by a patient to an insurer as a claim form.7B The front and rear are shown here as Figures 3A and 3B respectively: (34) " ex 47J- 73 ex 47L-M; ex 721-J; ex 99M- .,.,.. .. .... . , .. . ..,..,. ..., ! . ,.. . ......... .,. ..,.. .,,.... ., ., ...:;,;:;::;;::;);.. . ,, ,,...,...,. ,. .......,.._ .. :: . ...,..::::::..p.. .. ,....... ) ......_.. , ... ....:.... :::.. ..... : ,.,: . : ., ., :;,: ; : ... Initial Decision 101 F. ATTEHDIHG DE LIST'S STATEMHH BTI"""E ex PRE-TIIEATMHH DEIITlH'S :.Qr"'7'L CllfC: O'U: o JS IF_' o DHHI S .. I, HATE.H;,HJ..,.J!..OFT,..ACTUAL :0' ''''"--- ,....n' ""'0.".'"',"r' .. PLAN N''' "'OO J"'"'OO" "0"'" ,...." C"" ,m,.__....--. . "'p TM T .C . ... ..,C,Q"N'.l:;;=r:::::_'N) "0",,0""'''--''''''..0.,0 ...0..0 " .. P"O" , ""L . H'''.'''' ,..0 .......0...-.0..-.." ..0--0 ",""'NUT' ...0 .. ... O .'''.0- ',"'w .,.n."".o' "00'"

".".0'-0'-.,."" .". "C. '0.

Initial Oral mination Intra-Oral Complete Series C02W Arrlgam'OIesurf ce-p'rffent: 021W (Fi\ E- T""C "O" d... ol.,, ...n ,.1'_''''';'''.''''..'_0",,,'''..' COON" 'N' CATE S'NG TEETH ""0 c.n N'. .'M .'D '..N'" O",-., "N"' Y.C" ..o",-. TD"

.OQ'N 'OC.' 'H' :"",...o T:C::' ""'0 oT. '_'H O'C",'H'C .".O ft" l-:c' 'Q" no,.

,,.O" ftt OU'MO'" O'.MONT H'LT'" "h'C "HC' 'H' .. .o D'H .o.,.".c-. .., ,"'UO 'N.C_ 'u- '"C' L' "' , ,,-,. 0, E '0' 'Qy. n' oY.

_-"",,,.L'O,...C""Y"O"o.',"I(jc_..c. P""-' .c'. I ' '" . _._ Initial Decision l'gure )-B YOUR DENTIST wishes to cooperate with you as his patient in order that you may learn the extent of your dental care insurance coverage and how much wil be paid to you. In order to avoid any misunderanding, we urge you to read the following information: O:.r professional services are rendered on the basis that all costs of treatment wil be paid by the patient.

In some plans, the dental insurance contract is written to provide for the least expensive, adequate procedure as determined by the insurance company. The carrier will request x-rays to make this determination, If your contract is written in these terms, please give special attention to the following:

The Indiana Dental Association does not agree with .such a contract- Trying to determine if a treatment plan is adequate based on x.rays alone is impossible without an in-office examination of the patient.

RAYS Will NOT BE SUBMITTED TO A THIRD PARTY FOR THIS PURPOSE.

Your dental insurance contract is an agreement between YOIJ and/or your employer and their insurance carrier. Indiana dentists are not bound bY" any dental care insurance contract stipulation- Initial Decision 101 F. (36) 24. Figure 3-A is a critically important piece of evidence. It dispels any impression that. IDA is merely expressing an academic disagreement or an academic belief Paragraph 2-C of Figure 3-A is that X-rays willan action sentence. When it says, in standout type, not be submitted to a third party for this purpose (emphasis added) ADA is now telling its dentists to tell their patients that this is the way it is going to be. As in Paragraph 5 ofthe "To All My Patients 79form letter IDA here again makes it clear that Indiana dentists are expected by ADA to join in a boycott of the insurers serving that state. 25. Not only were these identical words still on the back of IDA' claim form in the latest record revision of IDA' s "Manual" in 1976 (the year that IFD was founded),80 but the rule had actually been tightened up in important respects.8! Significantly, the 1976 revision all members oftheofthe " Manual" was systematically distributed to Indiana Dental Association by order of Dr. David McClure for IDA' Council on Dental Care Programs82 during the same time that he was organizing and becoming the first President ofthe Indiana Federation of Dentists.

26. It is now well established that an organization of professionals whose members accept and follow anticompetitive organizational policy declarations may be found to have conspired with its members to that end. United States v. National Society of Professional Engineers 389 F. Supp. 1193, 1201, 1216 (D. , 1974), vacated 422 U. 1031 (1975), affd. on remand 404 F. Supp. 457 (D. , 1975), affd. and modified, 555 F.2d 978 (D.C. Cir. , 1977), affd. 435 U.S. 679 (1978); United States v. Texas State Board of Public Accountancy, 464 F. Supp. 400, 403 (W.D. Tex. , 1978), affd. per curiam as modified, 592 2d 919 (5th Cir. , 1979), cert. denied 48 U.s.L.W. 3283 (10/29/79); American Medical Assn. FTC Docket #9064, slip opinion of 10/ (37) 12/79 at p. 21 (94 F. C. 701 at 998); appeal docketed Civ. No. 79-4214 (2d Cir., 12/3/79). Here there is abundant evidence that IDA' s boycott policy was, in fact, accepted and followed by many if not most of its members. We now review that evidence.

D. The Pledge Project (1973) 27. Perhaps the most striking evidence of the backing which the membership ofIDA has given such leaders as Drs. McClure and Rohn is found in a so-called "pledge project" which these two dentists co- See Pars- 20-21 above BU ex 99N.

BI In May 1976 IDA added to the form its opposition to the whole alternate treatment concept99G);(CXaffnned that an insurcr g inspector mu t be a duly Indiana licensed denti t. (CX 99W); and insisted that an insurer must pay the treatiug dentist a "consultation fee" (CX 99W). Tr 2500-Dl; ex 104 . ._ Initial Decision chaired in early 1973. The pledge card itself is reproduced here as Figure 4. (38) Figure 4 Name - Address --- --- Component - I.D.A. Member Yes - --- No -- The above mentioned dentist was contacted on - by Dr.

His reason for not signing the pledge card is as follows: PLEDGE As a member afthe dental profession licensed to practice in the state ofIndiana, I am obligated from a professional and legal point of view to provide my patients the best dental care I can deliver. This care is based on a mutual understanding between the patient and the dentist.

Certain group-funded dental plans can interfere with the principle of maintaining a high standard of dental treatment. TherefiJre, I will participate in aji plans within the framework of the Principles of Acceptability approved by the Indiana Dental Association.

(Signature) (Date) (39) 27. 1 In an invitation to certain dentists to attend a project orientation meeting and "leadership training session" the project was explained this way:

As you know, there is significant rapid growth of group-funded dental care programs in Indiana. The I.D.A. has prepared to meet this challenge through the development and implementation of" the "indiana Plan . We know it will work because it has worked successfully for many on-going programs in Indiana. True, there is a major program that is giving us trouble (Aetna-International Harvester- A.W.)85 and this must be resolved.

83 ex 124 and ex 125.

8'CX 126C.

85 HighlgM.s of the Aetna-Harvester- W. strlggJe with I.D.A. are sunarized in Par. 40 et seq. below. Initial Decision 101 F. With the advent of many more programs-particularly the pending U.A.W. Auto Contract -we must make sure the "Indiana Plan" continues to work and work well, or we stand the chance of being dictated to by some distant third party. With this in mind, the I.D.A. Board of Trustees has approved a statewide "Indiana Plan" pledge project program.

What we are asking is that you be one of our key representatives to take the pledge project to the (local) component societies; give them the "pitch"; and bring home the pledges. Once this has been accomplished we can say, with proof, to any third party that Indiana dentists actively support the "Indiana Plan (emphasis added)87 (40) 28. Attendees at the "pledge project" orientation meeting were each given a Htraining kit" containing various materials for canvassers to BB A list ofstudy in preparation for making their "pitch" "ideas for presentation" included a reaffrmation ofIDA' s position that "there are many factors that guide a dentist in his determination of a treatment plan" and that "proper dental treatment is predicated on a diagnosis from many types of examination and not radiographs alone (emphasis added).89 It warned that "if dentists allow thirdparty (insurer) intervention, we wil soon find ourselves technicians rendering a service sold, priced and controlled entirely by a third party. 90 The "pitch" of most importance here was a final appeal for collective action:

The road ahead depends upon the unity that wil be generated among Indiana dentists. It is time to close our ranks and look to the future, Unity=- Negotiating Power. 29. The same occasion brought forth numerous other references to the need for professional solidarity in dealing with the insurers: Dr. Lloyd Phillips (IDA's Trustee in the American DentalAssociation) We have assumed that Indiana s position was and is one of strength because the members ofthe Indiana Dental Association believed in the "Indiana Plan" and supported it with action. We are here today to organize an evangeli.stic brigade to go out and preach the gospel; to explain the principles; give the reasons why they should be supported; and then ask each member to indicate his support and his belief by signing !\ Apparently refet: to the Connecticut General. GeneruJ MOtOT3 - U-A. W- contmct which was to become effective the following year (974)-See Par. 53 et seq- below 1 ex 125.

!1 ex 139A through ex 139-Z4.

CX139M.

g(CX 139M CX 139M . _.._ U''' .L "".L ..L.L Initial Decision a pledge. (emphasis added)92 (41) Dr. David McClure (Secretary of IDA) Two weeks ago G.M. sent their top negotiator to Anderson to meet with Dr. Van Dorn and me.. . . They are very aware of us and would never have sent this typ brass down if they weren t concerned. It boils down to their respect for our unity and I do feel that we can influence our future.

A few weeks ago we met with offcials from Equitable Life Assurance Society. . . . Here again they respect unity. (empha.c;is added)94 Dr. Dan Rohn (President-Elect of IDA) In order to make a profit and be competitive, the (insurance) carrier must have some kind of cost control. The union doesn t want the traditional method of cost control such as a table of allowances, a deductible plan, or any limitation on benefits. The (insurance) carrier then must control costs by controlling the dentist. A fee schedule is one way of doing this. Another is the most recent "gimmick"-a clause which states the least expensive adequate treatment as determined by the carrier/(emphasis in original) What this really means is that the insurance company reserves the right to review the dentist's treatment plan, examine his X-rays, make a diagnosis of oral disease, and alter the treatment plan as they see fit to suit their economic considerations. We know this has been done by untrained, unqualified and unlicensed people. (42) We know this has happened in the past; we know this is happening now; and we know it will continue to happen in the future unless we assert ourselues. (emphasis in original) Just how do we think we can interject ourselves in these negotiations and effect (sic) the way a contract will be written? By showing unquestionable solidarity! (emphasis in original) By obtaining a pledge from every practicing dentist in the State of Indiana stating that he will not provide his professional services with any group funded plan whose procedures and requirements do not meet the standards of the Indiana Dental Association. (emphasis added) If we can get a majority of the practicing dentists in the state to give us this pledge, We can assert ourselves as a fourth interested party. (emphasis added) We can advise local labor and management groups of how much solid support we have for our principles. (empha.c;is added) They have already told us they wil listen. . . . They know that they cannot receive any dental benefits unless we are willing to service their agrement. (emphasis added) To obtain these pledges we must have your cooperation. (emphasis added) We want to face every dentist in the state; explain our position as we have done here today; and ask him to sign a pledge to show support for these principles.

30. The IDA party line during these years-with one eye on the 2 ex 139C.

CX 139G 94 ex 139H, 9' ex 139J- Initial Decision IOI F. Justice Department and a possible charge of restraint of tradeseems to have been that IDA merely determines whether an insurer plan "does not appear to be in the best interests ofthe doctor-patient relationship" and informs "the general membership" of "the general picture " leaving it to the dentists to !treact as individuals . 96 Howev- , the foregoing passages clearly (43) evidence a plan to mobilze Indiana s dentists into an "evangelistic brigade: brandishing a collective not an individual refusal to deal with the insurers serving the state."' 31. IDA' s well-organized "pledge project" to enlist added support for the work of IDA's Council On Dental Care Programs was, in fact, a tremendous success, with several of the association s fourteen local component societies actually achieving 100 percent support for the IDA Principles of Acceptability."8 Dr. Robert Gayle of Ft. Wayne, for example, reported to Co-Chairman Rohn that he had addressed 26 of the 48 members in the Richmond area, all of whom signed a pledge card and agreed to assist in getting the other men that were absent to sign a pledge card. He further reported: I felt a.', though the subject was well received and from the comments made, the concept of unity would be worked for in that area. (emphasis added)100 Overall, CDCP's Chairman reported, more than 85 percent of IDA' membership responded that they would support the Principles Acceptabilty.!O! 32. In IDA's house organ Co-Chairman Rohn, by then President- Elect of IDA, wrote:

In the past year, as we have met with insurance carriers and difierent management representatives, they would often reply that we didn t speak for the IDA membership at large. So the pledge project was concerned with the idea that we must know if we are on the right track when advocating policy that the dentists ofIndiana through their House of Delegates have approved. (44) What does this overwhelming success mean? It means that we have unity (emphasis added) and your leadership can go to insurance carriers, unions and management with these pledge cards in our pocket. We can inform them that the dentisLo: ofIndiana do support their Association s Principles of Acceptability. Any contract that is written fHCX 74A 7 CX 138.

B CX 138.

CX 133.

l00CX 133.

WI ex 74A Initial Decision without taking this into consideration wil have problems in Indiana. 102 It would be hard to imagine a more clear-cut acceptance of IDA' proposed concert of action. The only remaining question is whether the IDA boycott proposed by its leaders and accepted by "a vast majori- "103 of its members was, in fact followed.

E. The Post Card Survey (J 975) 33. Two years after the Pledge Project, IDA's Board of Trustees reaffrmed support for the IDA Principles of Acceptability104 and had the IDA central offce conduct an offcial survey by mail of the membership s thoughts and actions on X-rays and dental insurance prorespondents,!06 Thegrams.!05 No attempt was made to identify questions asked by the survey were as follows: 1. Are you in private practice in Indiana? (If ' ' you need not answer the other questions. Please return the card,) 2. Are you receiving requests from third parties (insurance companies) for X-rays? 3. Are you presently sending X-rays to (45) third parties? 4. If the answers to questions 2 and 3 are ' , would you send X-rays if requested?"107 34. Of 2 000 surveys mailed to IDA's members, 1,342 or 67 percent were returned!OB and of the 1 342 returns 1 268 or 95 percent were from private dentists. 109 The results ofthe survey by component societies, as tabulated by IDA's central offce for IDA' s top leadership at al-the time, are shown in Figure 5.110 They reveal that statewide, though 811 members were getting requests for X-rays from insurers Of anotheronly 133 members were sending X-rays to the insurers.11 407 members who reported neither getting requests nor sending in X-rays, only 29 said they would do so if requested, while 378 said they would refuse,!!2 (46) 102 ex 14ZA.

CX64B 10. ex 144.

lor,cx 145A.

I06CX 144 I07 CX 14SA CX 145A.

"J'CX 145A.

110 CX 145C II! ex 14SG.

111.CX 145C.

00' TOTAL 108 352109134180 RESPONSES 1342 to3you and 378 2answers wouldx-rays the NO, If Yes4.questionsaresendrequested? to 253 101 122 133 1105 present-x-rays you parties? Aresending Yes 133 3.Iythird 438 5 receiv-fromfor you parties requests Figure Are Yes 217 134 811 2.ingthirdx-rays? private inIndiana? youin Are Yes 105 318 105 126 169 1268 1.practice survey 1975) cardComponent SOCIETY 28, postby District (Jan. of Indiana District Valley Indiana Total Central Central Centra! x-rays HUT Centra! District Knapp COMPONENT ResultsonSocieties Ben East Eastern First Greene Indianapolis Isaac North Northwest SouthSoutheastern Wabash West Western Grand UIANA Y!!JJ.r.tl\TIVl VI' U.rl'lll"l;: v'- Initial Decision (47) 35. The percentage of dissidents in the three areas which would later spawn IFD (Anderson, Lafayette and Ft. Wayne) was a little less (6%) than in the state as a whole (16%) but it seems plain that, even viewed statewide, most Indiana dentists were or at least claimed to be refusing insurers' requests for X-rays as of early 1975. The inference is . inescapable and we accordingly find that most Indiana dentists were not only agreeing in theory but following in practice the plan to boycott insurers sponsored by IDA during most of the 1970' 36. The existence of an IDA conspiracy to deprive dental health care insurers of X-rays needed to determine insurance benefits seems wellestablished by the evidence reviewed above and it would seem unnecessary to elaborate further on it. However, Complaint Counsel have asked for additional findings on the subject with which we agree and which we now cursorily adopt. These are as follows. 37. Complaint Counsel point out (in CPF #66) that IDA leaders believed they needed unity to implement the Indiana Plan and the Principles of Acceptability and members were repeatedly so instructed. The record citations113 support this. They point out (in CPF # 67) that IDA offcials repeatedly urged IDA members to refrain from submitting X-rays to third-party payers (or even to dentists' patients) and to refrain from cooperating with any plan requiring predetermination of benefits or alternate benefits features, frequently advising IDA members as to which dental plans were (or were not) in compliance with IDA's Principles of Acceptability. This proposed finding, too, is well-supported by the cited evidence. 114 38. CPF #68 recites how IDA contacted numerous insurers, managements and labor organizations, informing them of IDA's Indiana Plan and that its members did not submit X-rays to insurers. This proposed finding, too, is supported by the record115 as are the proposed findings (48) that IDA's CDCP and offcers attempted to assert as much input as possible into the dental plan of General Motors and the W. prior to that plan s 1974 implementation date116 and that IDA' s CDCP and Board of Trustees urged all members to get their patients to write the Indiana Insurance Commissioner when dental insurance companies paid benefits at a lower level when X-rays were not submitted.!!7 113 ex 39B; ex 62; CX 71B-C; CX 73; ex 104; ex 135; ex 139C-E; cx 459J "' ex 38A; ex 39A-B; ex 43B, D; CX 55; ex 62; ex 648; ex 71A; ex 75A; CX 82A; ex 99G, I, K, L, N; ex t08A B; ex 144; ex 47-Z6.

1\ ex 63A-B; ex 64B; ex 74A-B; CX 84C-D; CX Iola-B; CX 327S- 116 cx 7lA.

117 (,'X 82A , e, D. The Insurance Department apparently received several such patient complaints but anounced in May 1975 that an insurer s reduction ofhenefits when X-rays were not submitted constituted neither II violation of Indiana insurance law nor an "unfair claims practice" (CX 841). Initial Decision 101 F. F. Two Boycott Targets 39. The actual operation of IDA's group boycott is perhaps best understood by tracing its struggles with two leading dental health care insurers, Aetna Life and Casualty Insurance Co. and Connecticut General Life Insurance, both of Hartford, Connecticut, and both substantial, well-known, nation-wide enterprises. Other, smaller insurers had generally gone along with the Indiana dentists' demands.!!8 Not so these two. The result in each case has been was a running battle, with ups and downs, that has lasted several years. Each account is iluminating.

1. Aetna-International Harvester-United Auto Workers 40. Pursuant to a collective bargaining agreement between International Harvester and United Automobile Workers, on July 1, 1971 Harvester s employees in 23 states, including Indiana, came under the coverage of a dental health insurance plan.1l9 Indiana locations affected were Indianapolis, Ft. Wayne and New Albany (on the Ohio River).2o The Aetna-Harvester contract contained both predetermination and alternate benefits featuresl2! (49) and Aetna s practice was to implement the latter by requesting and using X-rays to review benefit claims as necessary.!22 41. Trouble started immediately.!23 A few days before the plan took effect Aetna offcials met with representatives of IDA and its Ft. Wayne area component (known as the Isaac Knapp District Dental Society)124 to discuss how the plan would workl25 but were told by the dentists that the submission of X-rays would violate IDA's Principles of Acceptability.!26 Promptly thereafter (6/30/71) a letter to all Indiana dentists from IDA's Council on Dental Care Programs notified them that the Aetna-Harvester plan did not comply with the Association s Principles and urged all dentists treating Harvester patients not to turn over dental X-rays either to Aetna or the patient. Aetna countered with a letter on 7/1/71 to Indianapolis and Ft. Wayne dentists explaining its position and pointing out that its sole purpose in requesting X-rays, when it dia, was to determine benefits pay- )\8 ex 39B 1)9 'Ir 987 , 1221. And see ex 222C 120Tr 987 1221; ex 222C L21 'Ir 987 12'Tr 975-76 , 987 1219 1238 IZ'Tr987-,9 1212-3.

ex 4B 5 'Ir 1222; ex l!J7A.

L2ftr 989-991 1225; ex 197A. Again, at another meeting wit" Aetna later in July, IDA representatives repeCited that thc plan was unacceptable and that X-rays would not be auumittp.d. 'Ir 1228-0. 12' 'Ir 1234 15; ex 38A Initial Decision able.1 Tbe response was not encouraging.

42. While some Indianapolis dentists did submit X-rays to Aetna '29 strong resistance was encountered in the Ft. Wayne area, where only a small percentage of dentists would submit X-rays to Aetna.1 August the Chairman of IDA's CDCP complimented the Isaac Knapp dentists on their (50) "all-out support" oflDA' s Principles131 and the November issue oflDA' s Journal reported that 90 percent to 95 percent of all Ft. Wayne dentists were cooperating with Isaac Knapp and IDA and not sending X-rays in. (emphasis added)132 43. It should be noted, however, that this near-unanimity of action by the Ft. Wayne dentists cannot be attributed entirely to agreement on the desirability of IDA's boycott policy; some was undoubtedly the result of powerful peer pressure. An Aetna dentist/executive who made the rounds of Ft. Wayne dentists on a special mission late in 1972 or early in 1973'33 testified that when these dentists were requested in the privacy oftbeir offces to submit X-rays to Aetna there were two general reactions: "dentists who said despite the fact that you seem fair, I wil not send X-rays to you; and others who said I would like to but I don t dare to."134 Asked to quantify this division of opinion, the witness estimated that "the reaction ofthose we visited was about fifty-fifty. 135 This estimate tends to confirm that to a substantial extent the conformity achieved by IDA was an unwiling product of peer pressure.

44. In the face of this widespread refusal by Ft. Wayne dentists to submit X-rays to Aetna, how did Aetna deal with such a diffcult situation? In general it proceeded to pay benefits for those dental procedures which were covered by the plan in any event, such as radiographs, prophylaxes, (51) certain filings, root canal procedures etc.1 However, without X-ray proofofloss and generally without any other information on which to base a judgment Aetna declined to pay for various other procedures such as fixed bridge work and certain crowns.1 During the first year under the Aetna-Harvester contract there accumulated something like 600 questionable claims which Aetna would not pay either in whole or in part, for lack of X-ray J?.8 Tr 1238; ex 274A-C.

i2' ex BOA; ex 222C J3( C'X 196B; ex 21:m; ex 222C; ex :!27B; Tr 1243-4. 131 CX39B.

132 ex 196B. The Journal added: "We hope that all ofIndiana dentists wiu follow suit with the IDA principals (principles?) when the situation arises in their area. 133fr 1274 1:'4 Tr 1275 135Tr 1276. NDle that a much larger percentage or the Ft. Wayne dentist. (50%) were telling Aetna that they did not really symp..thi7.e with the boycott than would be suggested by the 1975 claw. for the I aac Knapp Society as reported in Figure 5 above (only 4 ou.t of 101 sel1dil1g in X-rays and only one either dentist sayil1g he weuld have !\l1t in X.raysjfrequested).

13"Tr 1243 1"7 Tr 1243 ,..

Initial Decision 101 F. evidence.!38 It was the consensus of Harvester, U.A. W. and Aetna that many of these 600 claims were probably meritorious and that they had to be taken care of in some way.

45. Since the summer of 1971 Aetna had tried in vain to hire licensed Indiana dentists to review X-rays in its Indianapolis and Ft. Wayne claims offces.!39 To this end it had supplied IDA with a statement of criteria for dental consultants and asked for nominations but never received any.!'o By mid-1972, however, it had found licensed dental consultants: a Dr. Stone for its Indianapolis offce and a Dr. Bohnke for its Ft. Wayne offce.!'! Dr. Stone seems to have had relatively little trouble, so far as this record shows, but Dr. Bohnke had a great deal.

46. Bohnke, who lived about 20 miles from Ft. Wayne but was a member of the Isaac Knapp Dental Society, took on both responsibility for counseling Aetna s current claims work and-to satisfy Harvester and U.A.W.-a special assignment to re-review all of the 600 questionable claims which we have seen had accumulated during the. first year of Aetna s contract because requested X-rays had not been submitted for the claims.!'2 To accomplish the latter "one-time" job it was arranged for him to go to the offce of each dentist concerned and work with the relevant X-rays and any (52) other diagnostic aids in the dentist's fies.!43 This modus operandi of course, came quite close to meeting IDA' s unrealistic terms for insurer access to X-rays: qualified" personnel to come to the treating dentist' s offce.!" However, Dr. Bohnke also appealed to his fellow dentists to submit their X-rays to Aetna on request in the future!" and this predictably evoked bitter enmity among his brethren of the Isaac Knapp Society. 47. On 1/29/73 a Dr. Scheele reported to Dr. James Frey, the Isaac Knapp Society s President-Elect, Chairman of its "Censor" Committee, and a future offcial ofIFD, that he (Scheele) had been approached by Aetna "with a deal to take all their X-rays" (presumably whenever attending dentists declined to turn over their X-rays to AetnaJ and elaborated that "I even received a personal call from their head consultant" (Dr. Bohnke) whom Scheele immediately informed of his own decision not to cooperate with Aetna.!'6 48. On 2/19/73 Dr. Frey reported this approach by Dr. Bohnke to 1OTr 1267 Tr 1264-5.

J40 Tr 1264-5.

'''Tr 1264 Tr 1267.

l1JTr 1267 1274 Seep"r- , above H'Tr 1268 14bCX218.

Initial Decision the Isaac Knapp Society s Board of Directors, which promptly voted on motion duly made and seconded, to recommend that: Harold Bohnke, D.D.s., be censored for encouraging another dentist, Ronald Scheele, D.D. , through cohesion (sic) to participate in dental treatment of patients which directly violate the Indiana Dental Association s Principles of Acceptability. Speifically a deal to take all of Aetna Casualty (sic) Company s dental X-rays, for the purpose of submitting these X-rays to their company.147 (53) 49. Thereafter, (apparently to be entirely sure oftheir legal position before attacking Dr. Bohnke), Isaac Knapp s members on 3/14/73 unanimously amended its "Local Code of Ethics" to read as follows: It shall be considered unethical and not prudent for the legally practicing dentists in the Isaac Knapp District Dental Society to release radiographs from the patient's fie records, no matter what the intent or purpose may dictate, unless these said radiographs are to be sent to another dentist or physician for referral reasons.148 50. On 3/27/73 Dr. Frey wrote Dr. Bohnke a warning letter (Figures 6A and B), reciting the new amendment to the "Local Code of Ethics and charging that "on numerous occasions" Dr. Bohnke had contacted various members of the Society with "a deal to take all of Aetna Casualty Company s dental X-rays for the purpose of submitting these X-rays to their company. 149 Dr. Frey then sternly admonished his colleague:

I would strongly recommend that you do not continue this policy. You would place yourself in a position of being censored for encouraging another Isaac Knapp dentist through cohesion (sic) to participate in dental treatment of patients which directly violates the Code of Ethics of the Isaac Knapp District Dental Soiety and the Indiana Dental Association s Principles of Acceptability.150 (54) 14 ex 215- See also CX 216A remmmendingthe cen80rnhip of Dr. Bohnke and adding: "This apples to IUJY other member of IlicI: Knapp, For similar eflbrt by Isaac Knapp members to discipline a Ft. Wayne dentist named Dr. Don Lloyd who had allegedly "openly submitted" X-rays to third partes,see ex 214A.C and CX 21GB. The complainants wrote Dr, Frey: "We. . . wil not sit jdJy by and let one oral surgeon control the majority of oral surgery performed on Harvester employees and their families, especially when he is doing this by direct vioJatiol1 of the Principles of Acceptability of our Society. " CX 214B. "sCX220A.

14QCX220A I5OCX220A.

. .

Initial Decision IOI F. INDIANA DENTAL ASSOCIATION A Conl1i"'",,' of lb. AmH;r"" Du.I" / 1'!f(U;.I;fH! r,.

b:: !EMANSUR BUILDING. 311. 6311. 1341 . INDIANAPOLIS INDIANA 46204 EST . - . t ::nJa" C.XII)- ,,0-,q Preslcent- lect :1crcfJ 27. ISo?J tigroId li. Bohrutc, D.

orth 12th 3tree.t 461 Decatur, Indiana. 46733 liroid I mentThis letterto the Local1s to Codeinfor:JofyouEthicsof theof tr.erecent15aar.end--,c i-napp District Centsl Society pasaed unanlcously at the March 14 , 1973 buslnesE Deetlng- The amenGwent reads as follows I " It shall be considered unethical and not prudent1n the lsa.lcfor their' napplegallyClstrlctpractlclDentalg Societydent1sts to release radiographs from the patients file records no matter what t e l tent or purpose mry dictate. unless these said radiographs are to be sent to another dentist or physiclan. for referral reasons.

It !12.S b en called to my attention that on numl'rC'!8 occasions you have contacted se"VerCil Isaac Knapp dentists with I II a deal to take all of Aetna C.su.91ity Company s dental x-rGYs fer the purpose of submlttl these x-rays to theer companj, ould strongly recommend that you do not continue this polley, You would place yourself' in a position of being ceOEored for enccur ging anotr.er Isaac napp dentist through cohesion tc rticipate in dental treatment of patients which directly violates the Code of Ethics of the Isaac Knapp District Dent l Society Bnd the Indiana Dental Association s rrlnciples of Acceptlbillty, Initial Deision INDIANA D E, N TAL ASSOCIATION A COrts,;I",,,, of t/u AmH "n DUII"J Aso,i"lion 101 HUIoIE M"'N BUILDING . H7- 1341 . !Ncr!.N"Polls, IND!IINA 46204 cxID- ';';O- PTPS tdent-elect Harold W . Behnke I D.

224 North 12th Street .Box 461 Decqtur, Indiana 46733 Page 2 - continued hope that the contents of this letter are completely clear to you aG member of the Isaac Knapp District Dental Society. If you have ar questions regarding this matter, please feel free to contact me. Cordially your!;.

Dr. Jal'es D. F-rey, D.

IKLDS Chalrnan of Censor and fubl1c Relations JDFfjc cO' Dr. James Dum3s Dr. . Iavld Bleeke Lir. Don Lahrllan Dr. fulph !1erkel Initial Decision WI F.

(56) 51. This record does not indicate that Dr. Bohnke was, in fact ever "censored" but Dr. Frey s stern warning (along, no doubt, with other peer pressure) plainly had its effect. During the rest of the year 1973, under pressure from Harvester and U. !5! Aetna proceeded apace with the program referred to in the Scheele-Frey letter, even buying a portable X-ray machine for the Ft. Wayne offce.!52 This program called for Aetna s local offce to itself begin taking the necessary X-rays (with a copy to the attending dentist) whenever an attending dentist indicated that he would not submit his X-rays to Aetna.!53 (This was to be determined in advance; if the attending dentist had already taken X-rays Aetna did not duplicate the X-rays but did an in-mouth examination).!54 52. This program did not, in fact, get under way until January 1974 largely because Aetna could not until then get a licensed Indiana dentist to act as a dental consultant in its Ft. Wayne offce.!55 Dr. Bohnke understandably declined to take on the new job, giving as his reasons that he feared criticism of his objectivity and an ethics charge by his peers.!56 What Aetna ended up doing was to bring Dr. Stone up from Indianapolis one day a week to read X-rays and make in-mouth examinations. !57 At an estimated extra cost of $47 000 (4,700 examinations (Q $10 per estimation)!58 Aetna managed to keep its Harvester business at Ft. Wayne alive until November 1978, when this Commission s order in Indiana Dental Association Docket No. C-2957 (93 F. C. 392), considerably relieved the pressure of IDA' s (57) X-ray boycott.

2. Connecticut General-General MotorslUnited Auto Workers 53. A collective bargaining agreement between the automotive giant, General Motors Corporation, and United Automobile Workers, negotiated in 1973, provided for a dental health care insurance proto become effective 10/11gram for GM's employees and their families, 74.!60 Among GM' s many plants throughout the United States are several in Indiana, including two in Anderson which employ a large part of that city s population.!6! The embattled IDA dentists exerted themselves to see that the administration of the GMIUA W dental Tr 1277 151 Tr 1276.

JOJ Tr 1277.

\s. Tr 1276 1278 I05Tr 1276 I56Tr 1279.

If,' Tr 1276. In 1975 Dr. Stone W;JS succeeded by ;' Dr. Levy, who ran operation until 1978, when it was apparently no longer needed.

)08 Tr 1278 LOg Tr 1321; and see RPF # l2 (citing Tr 9J 9, 922, 1282). 'bl) Tr 391, 176CJ2; ex 483A- 16J Tr 874- 75; ex 254A; ex 477C; ex 486B. Dr. McClure estimated that 95 percent of his patien were connected with GM. ex 327F; ex 390B.

U.I...:UH.. L".I'-U"".L'J" 'J" .'.L Initial Decision plan was not given to Aetna'62 and, in fact, Aetna was by-passed by GM in favor of Connecticut General Life Insurance Co.'63 54. Anxious to avoid a repetition of the misfortunes which had befallen Aetna '64 Connecticut General started as early as August 1973'65 to meet with IDA to work out a mutually satisfactory way of administering the GM/UA W plan, particularly the troublesome predetermination and alternate benefit provisions thereof.66 After a January 1974 meeting to go over the plan s provisions together a CG representative reported:

The main emphasis of our meeting was the reiteration of the fact that Connecticut General was wiling to work with the Indiana State Dental Association and that we would, in fact, treat them differently than they had (58J been treated by other insurance carriers (Aetna). Our whole thrust, therefore, was to instill in them the feeling that we were an organization that could understand their problems and would respond to them so long as they met us halfway. I think we again accomplished this objective. 167 55. CG's euphoria was justified only to a slight extent. CG wanted IDA' s cooperation in persuading competent dentists to serve as dental consultants'68 and the IDA representatives readily agreed to help select dental consultants.'69 CG at this time also contemplated referring contested alternate benefit questions to a local Peer Review Comand the IDA people agreed to provide information on theirmitteeJ70 14 district Peer Review capabilities.

56. On the critical issue of submitting X-rays, however, there was definitely no meeting of the minds. The four IDA representatives headed by Secretary McClure (future IFD President) reiterated the Association s position that ifit wanted to send a professional dental consultant into IDAers' offces they would be wiling to let him examine the X-rays but the CG representatives protested that this would be a tttremendous waste" of a professional's time and ttno real compromise at all."l72 CG' s spokesmen thought the provision of X-rays when needed as part of the proof of a claim was "legitimate" and "effcient" and, moreover, that there had to be consistent treatment for GM J62Tr224 !63 Tr 39\.

'6. eX312A.

16.\ ex 327D 100 Tr 392, 633 1767 1958 '67 CX 303A. Ths and other ciwtio!1R to the GC minutes of the meeting ofl!9/74 (CX 303A-F) should be read in conjunction with the trial testimony of aD attendant for eG (Chichester) concerning the same meeting, at Tr 401- ,08Tr 402.

,,;9CX 303C.

l?UCX303D 17 CX 303D.

mCX303E Initial Decision IQI F. workers all over the country.!73 However, Dr. McClure remained adamant", indicating that dentists in the Anderson/ (59) Muncie area were stil unwiling to supply insurers with X-rays for pretreatment review!7' and could not be persuaded to release X-rays "even possibly to the Peer Review Committee, never mind a CG consul- 175tant."

57. Despite CG efforts to maintain an aura of good feeling between IDA and CG !76 Dr. McClure wrote CG's Director of National Accounts (Chernyka) on 2/21/74 that he felt they had "gotten offon the wrong footing" and that the dentists were now so "disilusioned" that it would be "virtually impossible to find the type of dental consultant you seek to help in the administration ofthe plan. 17 Without Chernyka s knowledge McClure sent a copy of this letter to UAW and GM who were much upset and told CG to get this straightened out im- 17B In amediately. phone call to McClure, Chernyka greatly regretted that U A Wand GM had been told of the problem; said he was telling McClure things he could not say in an open meeting and that the IDA people should not get upset over quality control (i. the X-ray issue), as "it was just a lot of verbiage and it would be just what we as an association would want to make it."179 !BO at 58. Another meeting was set up for March 19th which the IDA representatives, headed by McClure, agreed to "put together a program of how we (IDA) believe you (CG) would obtain the most cooperation from Indiana dentists."!B! Such a program was outlined in a 4/19/74 letter on IDA stationery from McClure to Chernyka.1 The first "good advice" by Dr. McClure was to remove all mention of radiographs from CG's claim form. He explained: We are certain you observed on March 19 that (60) Indiana dentists have a definite and unified position (emphasis added) with regard to use of radiographs. Indiana denti.o;t, are opposed to the improper use of radiographs by insurance carriers using them for diagnostic purposes as a base for determining alternate courses of treatment which are less costly. 183 59. On the affrmative side, IDA was agreeable to supplying CG with a list of recommended consultants but wanted an opportunity to review annually and submit recommendations regarding the con- PJ Tr 407 m ex a03E.

175 (,'X 303F; Tr 4009 17f;CX327E 11 ex 327F and G 11B CX 327H.

ex 327 1-.

!!ICX327H ISI ex 327L.

'B2 ex 327L.

IR.1 LA 327L.

Initial Decision sultants. " 184 It proposed to replace the insurer s contingent of nonprofessional people screening incoming claims by programming norms such as utilization patterns, frequencies of occurrence, treatment patterns, etc. into a computer; the computer would then "red flag" particular claims for reference to a consultant to in turn consult with the treating dentists and, if stil unresolved, then to be referred to IDA's peer review committee for adjudication-at a fee.'85 (IDA also suggested submission of any other problem cases for peer review. )18"

60. On 5/1/80 the McClure letter of 4/19/80 to Chernyka was answered by another CG offcial, Caffrey, whose attitude and approach seems to have been rather different from Chernyka s. Caffrey thought the proposed consultant program had "a lot of merit " gave "full support" to peer review and agreed to "look into" the possibility of computerized screening.'B7 As for his policy on X-rays, however, it was the mailed fist in the silk glove. "We may have a problem on the question of radiographs " he wrote, in the understatement of the year. 188 61. CG had "agree" with GM and the UA W that radiographs would be reviewed as part ofthe basis for (61) determining benefits.'89 Cam.ey was prepared to assure IDA that this would be done " in a proper manner " which turned out to mean only !!by licensed dentists. 190 (It is not clear whether even this assurance covered !!screening" as distinguished from full-scale "reviewing" ofX-raysj. Nowhere did Caffrey explicitly raise an issue as to whether rays should be viewed in the attending offce or the insurer s claims offce; he quietly assumed the latter: "If the attending dentist would like, he can mail the claim form and radiographs to the attention ofthe dental consult- 191ant.

62. Not surprisingly, Dr. McClure was furious. To the IDA members who had been meeting with Connecticut General and John Sparks of UAW he promptly sent copies of the Caffrey letter and his own reaction thereto:

Cafrey s letter is contrary to everything that was promised or ageed to (at the 3119/74 meeting). . . . I kept telling Chernyka that we couldn t see how they could promise us that there would be no X-rays when it was in black and white in the contract. He kept telling us that all the Union and Management wanted was results. So now we can see 1M CX 327L a..' CX 327L.

I86CX327M.

187 CX 327N.

J&'CX 327N.

189CX 327N CX327N 191 CX327N.

Initial Decision 101 F. that they are really in a bind and maybe they can t deliver on their promises. 192 He further reported that on receiving the Caffrey letter he had immediately called CG headquarters in Hartford, conveyed IDA' s feelings about being "misled", informed them that "there would be no way the Indiana dentists would agree to send X-rays to a consultant" and laid down the law: "r suggested that ifit wanted any cooperation from us they would send a telegram saying the letter was incorrect. !93 He further told Chernyka that IDA would not supply CG with a list of consultants ifChernyka expected them to diagnose from X-rays alone.!94 (62) 63. Although there were divided counsels within CG !95 Chernyka caved in and agreed to send the wire Dr. McClure wanted. At first he worded it so that the X-ray question would be left up to the consultant and the treating dentist but McClure stonewalled and Chernyka thereupon agreed to say that any problems would be resolved before the Peer Review Committee.!96 The wire that was actually sent read: Disregard ref. to radiographs and (in?J Caffrey s 5/l/74 letter. Question of radiographs to be resolved by Peer Review Committee if dental consultant and attending dentist cannot resolve whatever questions there may be.197 64. Dr. McClure was apparently satisfied with CG's promise that there would be no compulsory submission of X-rays. He recognized however, that the apple cart might stil be upset: They will promise us anything to get (keep?) the Union (U.A.W.) from taking the contract away from them. I believe Sparks would take it away if he knew they had promised the no-X-ray bit. We must really zero in on our members and educate them for the big confrontation we will have in the future. The only way we will whip it is by standing firm. (emphasis added)198 65. On 5/23/74 Caffrey formalized CG's request for assistance in selecting dental consultants, specifically asking for two practicing general practitioners to work 6-12 hours a week in CG's Indianapolis claims offce.!99 One oftheir duties was said to be to "advise on benefit determination on claims where there is a question on . . . (63) treatbutment"200 nothing was said about whether they would be reviewing 192 ex 327P .9J ex 327P \9'CX3271' 195 ex 30BA-B; CX 309A- HI6 ex 327P.

197 ex 327R.

19B ex 327Q.

19\ ex 313A '0" ex 313A.

g., INDIANA FEDERATION OF DENTISTS 107 Initial Decision X-rays at CG's offce or at the offces of attending dentists.201 66. On 6/25/74 the Executive Director of IDA, writing for "the IDA Offcers and Trustees representing the areas ofIndiana having major GM plants" submitted to CGF's Caffrey three nominees from the Anderson/Muncie area, including Dr. James Pierce (of whom more later), one from the Kokomo area and one from the Indianapolis area.202 Nothing in IDA's letter of nomination bore one way or the other on the submission of X-rays to CG.

67. All but one of the five nominees were hired.203 On 8/7/74 CG asked Dr. McClure for more Indianapolis nominations204 and on 8/16/ 74 McClure, writing on IDA stationery, nominated two more consultants, of whom one (Dr. Beavers oflndianapolis) was hired by CG. 205 68. By late August IDA's Dr. McClure was hearing disturbing reports from CG's Indianapolis offce manager that he was planning on using consultants to screen X-rays, that visits to dentists' offces were prohibitive" in cost and that people high up in CG were already saying it was a "stupid idea" even to try to run the program without the X-rays.206 Worried IDA leaders agreed among themselves to use the leverage of their consultant arrangements to try and (64) avoid submitting X-rays:

(We wil have to withdraw our support of the consultants ifthey (eG) try to use them to read radiographs in the claims offce. I (Dr. McClure) have contacted the consultants in my area and alerted them to what is going to happen.207 69. The message went to CG's Indianapolis regional manager who testified "(t)hat if we persisted and proceeded along our normal lines and requested X-rays, that they (IDA) would in fact place pressure upon the dentists that were serving as consultants to resign. "208 When the manager discussed this threat with his consultants they explained:

(t)hat they were members of the Indiana Dental Association and although they were reluctant and would not want to resign, that they felt an obligation and because ofthe pressure that would he placed on them to jn fact resign. 209 201 CG' s Indianapolis Manager testified at trial that at tils time Indianapolis conswt.nti! were expected to work in that offce ("physically come into the offce " Tr 654), If they could not work out any benefit problems from the diagnnstic aids sent in with the claim form and by talking by phone with the claimant' s dentist, the matter would be forwarded to the local dental consultant Pierce in Anderson) "for him to get involved in andtv try to resolve. " ITr654) ZI'!CX 314A- Tr 651 2o.CX 311.

205CX378- 20CX316.

20J CX 316.

20Tr 669.

2f Tr 671 Initial Deision IO! F. For whatever reason, the anticipated reversal of X-ray policy by CG did not then materialize.

70. Meanwhile, during the Summer and early Fall of 1974, with the GM plan set to start on 10/1/74, another source of diffculty between CG and IDA emerged. It concerned CG's GM clai form. As early as April Dr. McClure had advised CG to remove all mention of radiographs from its standard claim form.210 The problem was that, contrary to IDA's advice, the form worked up by CG for use in GM plants throughout the country had a request for X-rays on the rear.2ll A CG Vice President on 5/13/74 explained that:

We have desperately tried to avoid having to have separate claim forms and instruc tions for people receiving treatment in the State (65) of Indiana. We have tried very hard. . . to insist on uniform administration throughout the country.212 71. By September CG had apparently made a tentative decision to insert an IDA-approved clause in Indiana clai forms that would read: "The above section in regard to X-rays does not apply to IDA members."2!3 Yet an internal CG memorandum of 9/11/74 reveals CG' s continuing dilemma.214 It was believed on one hand that to proceed with use of the standar claim form without some kind of Indiana exception (and to insist on uniform X-ray submission in Indiana) would probably entail dire consequences such as resignation of the consultants, no Peer Review mechanism, the end of communication with organized dentistry, instructions to all IDA members not to cooperate with CG and perhaps even a full fledged advertising campaign to discredit CG, etc.2l5 On the other hand it was also recognized that the Union (i. e., UA W) position would be decisive and the memorandum closed with a "hope" that CG could get a reaction from A.W. in order to properly evaluate the advisability of "reviewing our position in Indiana. "216 72. A few days later Chernyka called Dr. McClure with a story that somehow word had "leaked out" about insertion of the Indiana exception in the GM claim form and that he had to go to Detroit to explain.217 Gingerly, he asked what the reaction would be in Indiana if CG had to "back down" on this promise.2!8 Dr. McClure replied immediately that the IDA membership would feel that they had been lied to" and that it "certainly wouldn t help Connecticut General's 2JOCX327L mCX316.

2!2CX308A.

2JJ ex 3128 and ex 327B 21' ex 312A- 2j5 CX 312A.

2(GCX312D.

mCX327V.

mCX327V INDIANA FEDERATION OF DENTISTS 109 Initial Deision image in Indiana. "219 (66) 73. Two days later Chernyka was in Indianapolis, direct from his viit to Detroit, with word that General Motors would not counte nance an Indiana exception to the X-ray clause on the back of the GM 22o Still claim form. trying to ride both horses at once, however, Chernyka assured Dr. McClure that, whatever the claim form said, CG would not demand that the dentists send in X-rays. McClure, for his part, decided to "let" CG keep its consultants but to recommend that IDA members use their own model claim form. 221 74. On the strength of these mutual understadings (thereafter known as "the gentlemen s ageement") Dr. McClure assured IDA' membership that "Connecticut General has given us a verbal ageement on no X-rays and if they (CG) do request them, our (IDA) Central Offce should be notified immediately. "222 This precarious arrangement went into effect on 10/1/74.

75. During the first year and a half of experience with the CG-M dental health plan the situation with regard to X-rays was quite complex. GM and UAW continued to insist that CG must have the right to obtain X-rays from dentists on request but CG had made a gentlemen s ageement" with IDA not to exercise this right but, in fact, many Indiana dentists began sending in X-rays, anyway. From the Fall of I974 to the Spring of 1976 the X-ray submission rates gradually increased in those part of the state where CG had much business, except for the three areas that would shortly spawn IFD. 223 76. CG's Indianapolis offce eventually found itself getting about 50 percent of the X-rays it needed,22"-xcept for those coming from the Anderson area, where only a "very low percentage -about 2 to 4 out out of 40 dentists-would ever submit X-rays when requested by CG.225 By the Spring of 1976 CG was getting about 70 percent of needed (67) radiographs from parts of Indiana where it had plants other than Madison County as compared with less than 1 percent from Madison County.226 Moreover, the handful of cooperative dentists in the Anderson area made their submissions only rarely and covertly, for fear ofthe reaction ofthe IDAers.227 Indeed, some Anderson area dentists told CG's Indianapolis manager frankly that "there was really fear that pressure would be placed upon them by dentists 2J9 CX327V.

:!CX327W.

221 cx327W.

= ex 327W.

22 Tr 630, 682-3, 688-9, 732-.

Tr 63, 682-3, 688-9, 732- :,Tr 689.

z: Tr 812-14.

Z2 Tr812-13.

?.;

Initial Decision 101 F. in the community" if they submitted X-rays.228 77. That CG really wanted the X-rays cannot be doubted. At various times during the first year and a half ofthe GM plan CG did raise the subject of requesting X-rays but on such occasions the IDA people would always suggest retaliation, as by withdrawal of IDA approval for CG's consultants.229 In each case CG apparently backed away from such a prospect.

78. As a matter of fact, IDA seems to have held CG in such a vice that CG could not even discipline its consultants without raising a storm. Dr. James Pierce, CG's Anderson consultant, was reluctantly allowed to operate out of his own offce in Anderson instead of CG' Indianapolis claims offce,23o even though this was a cumbersome time-consuming, expensive, unsupervisable arrangement23! which precluded valuable discussions with CG's Indianapolis claims personne1. This was allowed because, in the absence of X-ray submissions the only alternative offered by IDA was to send a consultant to each attending dentist's offce at a professional hourly rate.233 79. Dr. Pierce was a member of the Madison County (68) Dental Society234 and was unconditionally opposed to submitting X-rays to insurers.235 On the stand he conceded that in five years as a dental consultant for CG he had "practically never" requested X-rays from treating dentists and had gone to a treating dentist's offce to review X-rays on only one or two occasions.236 CG could be pardoned for feeling it War getting something less than its money s worth from Dr. Pierce. 237 80. Yet when CG stopped referring claims to Dr. Pierce and tried to process them through its Indianapolis offce, using in-house conthe Anderson area dentists were up in arms239 and thesultants,238 Madison County Dental Society, sparked by Dr. McClure 24o in March 1976 adopted a resolution that CG had not kept its "gentlemen agreement" to use Pierce as a local consultant for that area.24! Again CG bowed to this organized opposition; as of trial Dr. Pierce was still 2:1Tr 684.

:t9 Tr 671.

:!0 Tr 432-3, 816.

23! Tr 690-91, 816-17 :l2Tr433.

Tr 434.

234 Tr 2609.

230 Tr 2598-2600; ex 160B.

236 Tr 2565-72.

231 A CG Vice President testified that CG could not have successuJly CODducted its dental insurance business in other states, using the Silme arrang'emenU! that it had with Dr. Pierce- (Tr 435-7) :.13Tr 692-93 :.1;) ex 327A-C; ex 319 2;U ex 269;CX 270.

2;' ex 27Q , ll'lUJl1l' U-t !'I..l.J Initial Decision handling CG claims in Anderson.242 (CPF # 121 notes that Pierce had told CG's local manager frankly about experiencing "peer pressure" regarding the X-ray issue (Tr 817-18) but then denied this on the stand (Tr 2574). The Administrative Law Judge finds that the testimony of Dr. Pierce, who could remember hardly anything about anything, is entitled to little if any weight for any purpose.) (69) G. The Formation of IFD 81. The earliest reference in this record to the possibilty of organizing a union of Indiana dentists is a letter from an Anderson IDA member, Dr. Paul Van Dorn Oater an IFD organizer), to the Chairman ofIDA's Council on Dental Care Plans, dated 6/28/72.243 In response to the Chairman s request Dr. Van Dorn reviewed his thoughts on how "federation or unionization" should be accomplished. He foresaw nothing but trouble from the public if we involve the state association (IDA) directly in the dealing (sic) of this type" and suggested a separate entity (preferably a corporation) in which each IDA member would be given a "free subscription to the corporation" in the initial phase provided each member would sign a document similar to the document we had the people of Madison County sign, saying they would support the Indiana Plan and wil stick together in adversity. (emphasis added)244 He concluded his discussion with a plea for speed: I think time is running out. The sooner we can get this accomplished the more likely we wil not have trouble in the future. . . . If we have a strong union and our opponent understands this it will not be necessary for them to test our strength. "245 82. Two months later, at an IDA Executive Committee meeting, attended, inter alia by the Anderson area s Drs. Rohn and McClure 246 reference was made to a pending proposal by a Dr. Robillard to form a labor union.247 However, the group agreed that "the timing for such doesn t seem right" and a consensus called for a subcommittee of CDCP to develop the 'blueprint' for such an organization and have it ready when the time was right. (emphasis (70) added)248 Shortly thereafter (9/14/72) a "Robilard contact committee" was appointed, to be chaired by Dr. Van Dorn, who was also to Z'2 Tr 2565.--7 2.3 ex 436Az"CX 436A.

2'5CX 436B.

2.6 cx 5IA 247 ex SIC It seems likely thatthe RobilBrd propmmJ had prompted the requcst for the Van Dorn Jdter of 6/28/72 just described.

24BCX SIC .

Initial Decision 101 F. 249 The CDCPbegin investigating the possibility offorming a "guild" Chairman commented:

Certain areas of Indiana which wil feel the full thrust of overpowering third parties (e. , General Motors) feel that they should be prepared when the action is not in their best interest.250 83. Writing on 9/27/72 for help from a Florida dentist experienced in such matters, Dr. Van Dorn recited his assignment to contact all people interested in unionizing or guilding dentists for more cohen- "251 (emphasis added)sian (cohesion?) in bargaining with third parties and asked particularly for a mechanism of organization, membership 252 The same emphasis onrequirements and ttlegal considerations more effective bargaining with insurers through collective action may be noted in minutes of a 12/13/72 Isaac Knapp (Ft. Wayne) Dental Society meeting:253 Dr. Robert Gayle (offt. Wayne, later an IFD offcials announced that he is on an active working committee on the state level that is looking into the feasibility of forming a dental union that could deal effectively in collective bargaining with 3rd parties. (emphasis added).254 84. On 3/15/73 Dr. Van Dorn reported to CDCP on the progress of the unionization study.255 Despite (71) expressions of skepticism others present as to the feasibility of unionization (e. Can dentists use the ultimate weapon: the strike?), Dr. Van Dorn urged the importance of continuing to study the mechanics of forming a union "now so that it could be implemented promptly "ifneeded."256 CDCP thereupon voted for an "informational Fall Workshop to study the effects of unionization with regard to the dental profession. "257 85. At the Fall Workshop (9/13/73) Dr. Richard Oliver of Lafayette, a member of CDCP and another future IFD organizer 258 shared the podium with an American Dental Association Assistant Executive Director for Legal Affairs for a one hour program on "The U nionization Movement for Self-Employed Health Professionals."259 Whether prepared for this program or for some other occasion, the record contains a statement made by Dr. Oliver about this time (sometime 4"CX 439A.

1.) CX439A.

251 ex 439A 2.\2 ex 440 ex 451B.

M ex 451C.

2S5 ex 459F- See also ex 459N 2.5fCX 459F 2.'1 ex 459F.

2.\a ex 28.

"," ex 464B.

Initial Decision in 1972 or 1973)260 entitled "Why Should A Dental Union Be A Separate Corporation And Not Part Of The Dental Association?"261 86. Dr. Oliver s ultimate conclusion was that while IDA could give a union its blessing and help it with initial financing and organization, nevertheless the union should be designed to operate as a separate corporate body.262 In reaching a subordinate conclusion that professional societies make poor unions, he stressed, inter alia the diversity of interests which subjects members to many pressures when confronted by "third party interference" and would, he thought be " definite handicap in the cohesion necessary for a union to function properly. 263 87. This record does not show what, if anything, came (72) of the Van Dorn Committee s work. During the next two years (1974-75) there was not much activity on the unionization front but the subject was not forgotten. On 9/18/74, during preparations for the GM contract to go into effect, Dr. McClure reassuring a GC Vice President that IDA dentists would not likely refuse to fill out pre-treatment forms for patients:

I told them that I didn t think this would happen because as an association we were cognizant of the antitrust line we have to walk. Although I did explain to them that certain very influential dentists had a contingency plan to immediately form a union to implement such boycott if the screws get too tight. (emphasis added)264 88. This is the earliest evidence in this record tying the reason for unionization to the antitrust problems inherent in a boycott by the state professional association. From contemporaneous evidence it appears that IDA was becoming sensitive to antitrust problems at this time because of its own experience.265 Answering an out-of-state inquiry about the overall purpose of IDA's Principles of Acceptability the Chairman of IDA's CDCP wrote carefully: With recent involvement with the Sherman Antitrust Act. organizations such as the IDA must be very careful in determining what is unacceptable and the manner in which our members are informed of this. There is the potential that we could be charged by the Justice Dept. as being in restraint of trade. As it is now we determine which (dental health insurance) plan does not appear to be in the best interests of the dentist-patient relationship and the general membership is informed of the general picture. 'they have to react as individuals. 266 (73J 2hOCX lZ--.7;Tr2150-2.

'CX455A.

262CX455B.

26"CX455A.

264 CX 327W.

2GSCX 74A.

2r,( CX 74A. The IDA idea of what does not constitute a trade conspiracy i8 furher ilumined later in the same document: "We can, as an organization . mandate anything hiDding on our members-we an only point out deficiencies iD a situation." CX 74D Initial Decision 101 F. 89. During April 1975 IDA's Assistant Executive Director was writing to the American Federation of Physicians and Dentists (a medical union ) to obtain an update on AFPD' s activities, certain written materials used at a collective bargaining seminar at Cornell University and "any suggested reading resources concerning the subject of professional unions. "267 Clearly the thought of unionizing IDA was stil alive, if not robustly so, in the Spring of 1975. 90. Two months later, on 6/I6/75, the U.S. Supreme Court handed down its epoch-making decision in Goldfarb v. Virginia State Bar, 421 S. 773 (1975), which held inter alia that Congress did not intend any sweeping "learned profession" exclusion from the Sherman Act; tightened up the tests for a Parkerv. Brown (state action) defense; and further liberalized the interstate commerce requirement in such cases. The shocking impact of Goldfarb on the thinking of IDA' leaders comes across clearly in an offcial review of events prepared 3 years later by IDA unionization advocate Dr. Oliver of Lafayette for Respondent IFD:268 This fGoldfarbJdecision by the Supreme Court, while nol its main intent, lowered past barriers to antitrust scrutiny of the professions by the Federal Trade Commission. Before the ink was dry on Goldfarb the P. C. began an intensive, nonpublic examination of the health care area, increasingly turning its attention to activities of the professional organizations of the providers of care.269 91. Early in 1976 the Madison County dentists resurrected consideration of unionization for dentists. 27o A committee to study the possibility worked under Dr. McClure for several months, meeting twice in Anderson.27! (74) On 5/24/76 Dr. Rohn, Chairman ofIDA' s CDCP, put an item entitled "Report of Madison County Investigation into a Dental Union" on the agenda for the next quarterly meeting of the Council (tentatively scheduled for 7/29/76 but actually held on 8/14/76). The minutes ofthe Council meeting show that after all other business was taken care of (and reported in some detail) the meeting was adjourned to discuss the Union movement in the Anderson area, regarding which, however, the minutes are totally silent."2 The minutes do state:

6-' ex 467.

260CX583 2r. CX 584Dv"CX 22A.

271 ex 468.

zn ex lOSH INDIANA FEDERATION OF DENTISTS Initial Decision Several (Council Members) pointed out that for months, years we (IDA) have been discussing the radiograph problem and members have been calling for action. It is time some action was taken.273 Ten days later the Indiana Federation of Dentists was born. 274 92. On 8/24/76, 47 dentists from the Anderson area met there; heard Dr. Rohn expound on the pros and cons of unionism; listened to a study committee s report and proposal (delivered by Dr. McClure) for Madison County dentists to form a "union" to be affliated with the American Federation of Physicians and Dentists; and voted 40 to 7 in favor of Dr. Pierce s motion to form such a union.275 A second chapter was thereafter (3/30/77) formed in Lafayette276 and a third somewhat later (4/9/78) in Ft. Wayne.277 93. The Constitutions and By-laws of the State Federation and each of its three local chapters are of (75) record here 278 as are 2/1/79 membership lists for each chapter; Anderson (46 members; about 39 280 and Ft. current"),29 Lafayette (27 members; about 23 "current" Wayne (19 members; "current" members not differentiated).281 On 1/15/77 the American Federation of Physicians and Dentists granted IDF a charter which recited the national federation s credo that; only in and through a united errortcan we be assured of receiving full and just compensation and due appreciation for our services, do hereby band together and establish this national union.282 (emphasis added) 94. The sequence of events just reviewed suggests that it was primarily consciousness of the antitrust risk inherent in IDA's organized boycott of Indiana s dental health care insurers-much magnified by the Supreme Court:" 1975 ruling in Goldfarb-which led to the 1976 Madison County study of unionization and the eventual implementation thereof by the organization of IFD on 8/24/80. There is an abundance of evidence to confirm this inference. 95. IFD' s first press release, on 8/25/76, quoted President McClure (in part);

Noting that unions are exempt from antitrust laws, he says that unionizing wil enable dentists to be heard in negotiating with insurance companies on the Quality of care and conditions oftreatment. Long active in... the Indiana Dental Association, Dr. McClure 21 CX lO8C.

"cx 22A- 215 CX 22A- 2"CX534 271 CX 56GB m ex 13A-Z2; ex 14A-Z; ex 15A-W; ex 16AN.

ex 18A.

280 ex 19A-B; see alSfJ ex 20A-C for past membership (similar). 2iH C'X 21.

2B2 ex 17.

. . .

I16 FEDERAL TRADE COMMISSION DECISIONS Initial Decision 101 F. stated that such organizations are subject to antitrust laws and therefore without the bargaining power of union. (emphasis added)283 96. On 8/27/76 IFD's and IDA's joint public relations (76) counsel284 wrote the Editor of "Dental Economics" in behalf of her client:

(Ujnions are not governed by antitrust laws. . . . The union leaders, I think, view the union as a complement to the Indiana Dental Association with each having its separate function although the general purpose of both is the same. (emphasis added)285 97. Dr. David Yater, an Anderson area dentist and member ofIDA' on 9/8/76 explainedCDCP who had become IFD' s first Secretary,2SG to the Chairman ofCDCP why a union was thought "the most viable alternative Having attended the last two House of Delegates sessions and Council on Dental Care Programs meetings I have been aware that there is a prevailing sense of apprehension in respect lo antitrust liability- The association (IDA) has been consistently warned by legal council (sic) to be very careful in its actions and the wording orally offcial responses to third parties regarding our policies and positions. With the very real spectre of antitrust violation hanging over their head the Council is having increasing diffculty formulating a positive action in behalf of the membership, in view of the recent suit and investigation, and the proposed and anticipated actions of the Justice Department in these areas. One of the major advantages to unionization is the unquestioned immunity to (from?) antitrust liability. (emphasis added)287 (77) 98. In a "status report" to a Ft. Wayne dentist on 10/26/76, Dr. McClure described the labor union front quite colorfully: We have always been very uni(wd in the Anderson area but now we feel much more secure not having the antitrust albatros around our neck. (emphasis added)288 99. This is not to say that there was no other precipitating factor in the organization of IFD. Indeed, it appears that during this period there was a serious concern in the minds of IDA leaders, when installed a new manager in its Indianapolis claims offce, as to whether CG was about to "welch" on its "gentlemen s agreement" not to request X-rays. (See particularly a 6/16/76 letter from Dr. McClure to a CG Vice President reporting these rumors): "I cannot believe you would shake my hand and look me straight in the face and tell me that CX 477A- 2i1 A MR. Barbara Rafferty of the Indianapolis public relalions firm ofCaJdwell & Van Riper was the offcial DA Public Relations Counse!" (CX aL; Tr 769) an.d aso ':erviced IFD when it Wil formed (CX 33G , ex 35A 6A-C, ex 477A- 28CX 476B.

1.CX2c.

CX484A.

ijij CX 489B.

INDIANA FEDERATION OF DENTISTS 111 Initial Decision Connecticut General would work without X-rays in Indiana if you didn t mean it. . . . This was a firm commitment. . . . Have you changed your policy with regard to radiographs in Indiana?"289 101.' McClure simultaneously took his old papers to John Ruckelshaus, Legal Counsel to Madison County Dental Society,290 to see what could be done about enforcing the "gentlemen s agreement" 291 (He eventually learned that there was not much that could be done ).92 At IDA' s CDCP's Summer session (8/14/76) it was reported that CG had changed its position with regard to requesting radiographs while stil using IDA-approved dental consultants but it was decided to "leave the situation as it is" for the present.293 This confrontation between IDA and CG was stil going on when IFD was organized294 a month later and almost certainly contributed to the feeling that it was time for a union. (78) 102. Moreover, a union would no doubt be a good vehicle for IFD' purposes, even if there were no antitrust risks to consider. CDCP member and IFD Secretary Yater, for example, wrote CDCP's Chairman that IDA was "not designed nor intended to represent us in socia-economic or political areas" and (w)e feel that to ask the Indiana Dental Association to continue to expand the scope of involvement into areas it was never intended to enter wil eventually force a reconciliation (resolution?) ofthe issues in a Court of Law with the strong possibility afour receiving an adverse ruling. It is our opinion that a more suitable vehicle is needed present lsic) us in these areas and that a union is the most advantageous choice to satisfy the needs previously mentioned. (emphasis added)295 Dr. McClure put it more pungently in a report to IDA's Board of Trustees on IFD's recent organization:

He noted that about 8 90% of dentist practices in the Anderson area is ..ic) covered by one insurance carrier; therefore the dentists there believe they need more muscle than organized dentistry can give them. (emphasis added) They found that via a union they could go beyond dental association activities. In their opinion the union movement will not weaken the IDA but wil supplement it.296 103. And finally, according to Secretary Yater, it was important: to give our members a new banner around which to rally and to forge new feelings of 289 CX 323A.

. There is no finding numhered 100 29CX 323B.

291 CX327A and C 292 CX108C.

29J CX l08E.

29 CX 328A.

CX 484A- '"CX486B, , I18 FEDERAL TRADE COMMISSION DECISIONS Initial Decision IOl F. unity and purpose.297 (79) This last explanation is particularly revealing. It makes clear that the formal organization might be new but the fight and the fighters were the same: they needed only a new banner and rededication to the cause. As IDA's and IFD' s public relations counsel put it each (has) its separate function" but the general purpose of both is the same. " (emphasis added)298 104. These contemporary expressions ofthe IFD leadership leave no doubt that this organization must be viewed realistically as a new facet of the same old conspiracy to keep dental X-rays out of insurers hands which had been carried on by substantially the same dentists 10 those many years. Stated conversely, the founders of IFD decided to grasp the banner which, in IDA's hands, seemed in danger of fallng. Whether viewed as an "adoption" of IDA's conspiracy or a continuation" thereof makes no practical difference: IFD had joined IDA in the fight.

105. The "objectives" of this new (IFD) facet of the old (IDA) conspiracy are expressed quite clearly in its state and local constitutions.299 As noted earlier, IFD's most significant organizational purposes are as follows:

a.) To represent dentists in all socio-economic matters, negotiations and grievances with employees, third and fourth parties or any group that is involved in financing or delivery of dental care.

) To seek to insure adequate compensation and proper working conditions for dentists commensurate with their training and skill and the responsibilty they bear for the life and health of their fellow human beings; c. The establishment or approval of (80) appropriate utiliztion review or peer review procedures which do not interfere with the doctor-patient relationship and the maintenance of the highest quality of dental care; dJ To associate together all dentists for their mutual benefit and protection; e.) To unite the efforts of dentists in obtaining and preserving the individual freedom of action necessary for the success of their professional endeavors.3on 106. Among the methods of achieving these "objectives" which are contemplated by IFD's Constitution are strikes, job actions, boycotts and other forms of economic pressure. (emphasis added)301 Tellng the 297CX484A.

298CX 47GB :m ex 13A-B (State federation); ex 14A-B (Anderson Chapter); ex 15A-B (Lafayette Chapter); aud ex 16A. :B't. Wa.yneChapter).

:JO CX 13A-B. Als q\1oted iu Par. 2 above.

301 CX 13Q; ex 14Q; ex 15P; CX 16Q.

INDIANA J;' Ul' lt1\Tlu1 Ul' U llu"l'" ....v Initial Decision IDA Board of Trustees on 10/1/76 about the recent formation ofIFD Dr. McClure confided that he "hoped they (lFD) would not have to resort to a strike or economic pressure" but that "if they were to be a true union this may become necessary. "302 107. Membership in IFD is restricted to Indiana-licensed dentists who wil "endorse" the above "objectives. "3D3 A constitutional provision for todiscipline" of IFD members includes censure, fine, suspension or expulsion for ttvalid cause, expressly including, inter alia failure to conform to the Constitution and By-laws" or "any action detrimental to the welfare of the organization. . . "304 108. The specific embodiment ofIFD' s policy with respect to X-rays was formally adopted by the membership after several months study and discussion, on 4/24/77. 305 Known as the "Work Rule " this counterpart of IDA' s "Principles of Acceptability" reads as follows: (81) Proper diagnosis and treatment planning predicates the doctor correlating all diagnostic aids, with a history and with all clinical findings. No one facet of this process is now or ever has been recognized by the profession as a substitute for the complete process. To represent otherwise would subject the patient to sub-standard care. The patient' s dentist, therefore, has a moral and legal responsibility to not allow a determination of his patient s condition to be made for any purpose, without the benefit of a complete examination which takes into account all of the elements described.306 3D? 109. IFD' s Work Rule does not as Respondent now contends merely state a general principle of dental science. The underlined portion above clearly places on a member dentist a duty to act prevent a diagnosis for any purpose (thus including a diagnosis for payment of insurance benefits) without a "complete examination (thus excluding a determination based only on X-rays). This interpretation from the plain language ofthe Work Rule was confirmed by Dr. Rohn, the movant for adoption ofthe Work Rule 3DB in a 7/27/78 letter to an insurer that had requested X-rays:

Counsel for the Indiana Federation of Dentists, of which I am a member, has advised me that by complying with your demands for diagostic radiographs and pre-treatment plans for evaluation I could be in violation of the Indiana statutes that regulate the practice of dentistry. Also, Counsel has advised that such practice does contradict the Union Work Rule on such procedure. 309 (B2J 3n! CX 486B JD3 cx 13C; ex 14C, cx 15C; CX 16C.

:m ex lilt.V; CX 148; CX 15Q; CX J6R- 305 CX537A 3(CX537A.

307 RPF, page:1 30 ex 537A 30 ex 698 See al. ex 674; ex 696 and ex 705. Initial Decision IOI F. 110. The application offormal sanctions against dissidents for violation ofIFD' s Work Rule has apparently been minimal largely because of lack of necessity for such sanctions. In the three areas of Indiana where anti-insurer feeling was strong enough to spawn IFD it is inferable that collective action has been largely voluntary and even enthusiatic on the part of many if not most dentists. Dr. Yater, the dentist who represented Anderson on IDA's Council on Dental Care Programs and became the first Secretary of IFD 31O confided to the Council' s Chairman on 9/8/76:

We don t anticipate any holdouts and have kept the retaliatory and economic pressures we could apply to non-members very low key and tried not to threaten any of our members. 311 111. Shortly thereafter (9/28/76) Dr. Yater nevertheless raised the question of "policy on possible retaliatory gestures and action that could be taken against dissident members. 312 A committee of four not including Dr. Yater, was appointed to report and recommend upon the question of "such measures that could be taken against dissident members by the Indiana Federation of Dentists. "313 112. Two weeks later (10/12/76) the IFD Executive Committee discussed "discipline or acts of reprisal against non-member dentists and dissident members. 314 The minutes read:

After lengthy discussion the general consensus was that lawful severe measures would be instituted only as a last resort but that the attorney for the organization should be asked to advise the Executive Committee lconcerningJ the lawful measures that could be taken in such (83J cases. " (emphasis added)315 The leadership s silk glove/mailed fist policy to discipline dissidents only as a last resort" could hardly have brought great cheer to any free spirits among the Anderson dentists. Moreover, that "unity" was to some extent enforced as well as inspired can be inferred from the fact that the few Madison County dentists who did occasionally submit X-rays to CG during 1976-1977 frequently followed up with a phone call asking CG to "make sure that nobody else knew they (X-rays) were in fact submitted. . . . 316 (84) JIOCX2C JLj ex 484B.

mCX512A J1J CX512A 1" ex 522.

mCX522.

'LO;Tr813.

'n Footnot.e omitted.

, _._ , . , Initial Decision H. Effectiveness Of The Boycott 113. Whether voluntarily or to some extent involuntarily involved the members ofIFD stand committed to a concerted refusal to furnish their patients' X-rays to dental health insurers. 'Since the offense of trade conspiracy, unlike other kinds of conspiracy, is complete when agreement is reached, with or without commission of any overt acts in furtherance thereof United States v. Socony- Vacuum Oil Co., 310 S. 150, 225 (1940), we might stop here. In this case, however, there is abundant evidence that IFD has actually carried out the IDA/IFD boycott scheme as planned. Accordingly, we now briefly review its unlawful activities pursuant to the conspiracy already established. 114. The primary evidence on this branch of the case is a number of written refusals by members to submit X-rays requested by insurers, most of them (at least after formal adoption ofIFD' s Work Rule) in a form recommended by IFD or otherwise linking the refusal to IDA/IFD policy318 (An ilustration ofthe IFD form is seen in Figure 8).319 While such evidence is not as comprehensive as the earlier IDA compliance surveys (see Pars. 31 and 34), the written IFD refusals in evidence here are suffcient to show widespread compliance by members with the IDA/IFD boycott policy.

115. Other evidence in this record pictures the operation of the boycott since IFD' s formation, from the viewpoint of various insurers employees and labor unions. We cite two examples. (85) 318 ex 622; ex 626; ex 628; ex 633 (in C(1meru);CX 637 (in cumera);CX 641; ex 656; ex 657; CX 658; CX 659; ; cr 1; cr M2; cr 66 ex 664; ex 6 ; ex 666; ex; CX 669; ex 671; ex 672; cr; ex 687; ex ; ex 6 ; ex W; ex 700; ex 712; ex 7ll; ex m ex n4; CX m 319 CX 683.

Initial Decision 101 F. JAMES D. FREY PROFESSIONAL PARK WEST UiOOU. 5-HIGHWAY 24 \\EST FOMTWAVNf, INDLANA 4604 April 18 , 1978 Insured: Ned J. ooy l.n Pacient: Patricia Balan Der Sir:

Reference your request for x-rays for the above named patient. It 1s cbe policy of ths office to provide .:1 diagnostic aids to third parties on an in-office basis and with the consent of the pat.ient. It 1. my belief tht proper diagnosis and trea ent planing predicatcs the doctor correlating all diagnstic aids with a history and all clincal findings. No one facet of is process 1s now. or ever has been, recongini ed by the profession as a subst1tut.e for the coplet.e process. To represent otherse would subject the patient. to substandard care.

If you viii have your consultant - contact =y office to set up an appointmnt . I will furish records and ask e patient to be present for an exnation. If you do not feel 'is 1s possible, the Indiana Federation of Dentists, of which I am a ber, wil help you . if possible, to provide local consultant. ;;1'/c.erely, - ?/f,ARf') .James D. Frey, D. JDF/jg cc:

patient.

Mr. Ronald Fowler, attornS) Indiana Federation of Detists Mr. Ronald Fowler 401 Citi;ens Rank Building Anderson, In. 46016 H'\Ulft '.n "- Initial Decision (86) 116. Connecticut General/General Motors. It will be recalled that CG had a "gentlemens' agreement" with IDA (actually with the IDA dentists who later formed IFD) not to insist on dental X-rays for General Motors workers in Indiana.319 At the time IFD was formed in August 1976 there was concern that CG might be about to breach that agreement320 and, in fact, in January 1977 CG's Indianapolis offce began "testing the waters" by asking for X-rays, to determine whether enthusiasm for the boycott might be warning.321 It quickly found no diminution of enthusiasm.

117. Although not contacted by the IFD member from whom CG had requested the X-rays 322 CG' s manager was called shortly by Dr. Rohn (then Vice President of IFD) and Dr. Pierce, CG's consultant who also sat on IFD's Executive Committee,323 both checking on whether CG's policy had changed. 324 Thereafter IFD also sent a 3 man delegation to determine whether CG was going to require submission toofX-rays,325 which the manager responded that CG intended to do so on occasion.326 The meeting was concluded on such a hostie note that CG's manager refrained from making any further requests for X-rays from Madison County (the Anderson area) for fear of a confrontation which would end all existing cooperation and snarl the pay. ment ofGM workers' claims.327 When CG' s manager left the area in November 1977, the submission of X-rays from Madison County was no greater than ever.328 (87) 118. Metropolitan/Brockway Glass. Metropolitan Life Insurance Co. of New York is the group dental health insurer for Brockway Glass Co. a multi-state employer with 45G-500 employees in its Madison County, Indiana plant.329 X-rays are needed by Metropolitan to administer benefits under the alternate benefits feature of Brock. way s group dental insurance plan.330 However, from April 1976 thru at least January 1978 (when the witness left the area) local dentists refused to submit X-rays to Metropolitan and Metropolitan simply declined to pay on claims when X-ray requests were refused. 331 view of the delay and hardship which this tug of war was causing for Brockway's employees, its Personnel Manager and the President of See Para. 74 ahove.

320 See Para. 99 above 32\ Tr870-72 322Tr 871 890-91.

32. ex 2A; ex 22A.B; Tr 870-72.

324 Tr871.

CX528.

320 Tr 873.

3r. Tr877-87B.

328Tr879.

32'Tr 1611- 1612. Nationa!1y, Brockway has 10 000 employees in 13 plaptg, all covered by the ooe (Metropolitan) dent.! care in9unm.ce plan. Tr 1611.

3JTr 1612-1613- .31\ Tr 1614-1615, 1635 Initial Decision 101 F. the local (Glassblowers) union made efforts to talk IFD' s Dr. McClure into submitting X-rays but were unsuccessful. When the Personnel Manager left the area in early 1978 the impasse had not been re- $0Ived. 333 119. In summary, the record here abounds with convincing evidence that the IDA/IFD conspiracy to boycott the dental health care insurers serving Indiana has actually been carried out until recently. Continuation ofthe boycott must be presumed in the absence of proof to the contrary, which has not been made here.334 (88) 1. Restraint of Trade 120. Under Section 1 of the Sherman Act, 15 U.se. 1, and so under Section 5 of the Federal Trade Commission Act, 15 U. C. 45 , it is per sean unlawful restraint of trade for two or more businessmen to agree not to deal with another businessman. Klors Inc. v. Broadway-Hale Stores, Inc. 359 U.S. 207 (1958). While one businessman may ordinarily decide individually that he does not desire to do business with another United States v. Colgate Company, 250 U.S. 300, 307 (1919),335 "group boycotts or concerted refusals to deal clearly run afoul of Section 1 of the Sherman Act." Times-Picayune v. United States 345 U.S. 594, 625 (1953). This is true even if the boycott is intended to serve what the boycotters conceive to be a laudatory social purpose, as in the noted case of a boycott against so-called "style pirates Fashion Originators Guild of America, Inc. v. Federal Trade Commission 312 U. S. 457 (1941). The rationale of the per se rule against such concerted refusals to deal is that society wil not tolerate private rivals of governmental authority. Except for the statutory exception for labor unions, 15 U. C. 17 and 29 U. C. 52, individuals must generally exercise their economic power individually, not jointly.

121. We have hitherto reviewed in considerable detail the nature and history ofthe boycott charged here. The evidence has shown that for at least the past decade there has been a largely successful organized effort by IFD, IDA and the members of both, to keep Indiana dentists from submitting requested X-rays to dental health care insurers serving that state and particularly the Anderson, Lafayette and Ft. Wayne areas.

122. That neither IFD nor any dentist member stands in the rela- Tr 1620 et seq.

JJJ Tr 1638.

33. "When lhe existence ofan object, couditioD, quality or teodency at 11 given time is in issue, the prior existence of it is in human experience some indicationofit; probable persist.nce or continuance at a later period. " 2 Wigmore on Evidence, 3rd Ed. (1940), 137, p. 413.

33. "In the absence of any purpose to create or maintain Ii monopoly, the (Sherman) Act does not restrict the long recognj ed right of trader cr manufacturer engaged in an entirely private businc:!!1 freely to exercise his own independent di!lcretion H!I to parties!l with whom he wil deal" (p, 307). INDIANA FEDERATION OF DENTISTS 125 Initial Decision tion of competitor to any insurer-a point urged by Respondent336quite immaterial. The target of a boycott need Dot be a competitor of the boycotter:

As the labor-boycott cases illustrate, the boycotters and the ultimate target need not be in a competitive relationship with each other. This (U.S. Supreme) Court also has (89) held unlawful concerted refusals to deal in cases where the target is a customer of some or all of the conspirators who is being denied access to a desired good or service because of a refusal to accede to particular terms set by some or all of the sellers. St. Paul Fire Marine Ins. Co. v. Barry, 438 U.S. 531 (1978). Here there is technically neither a competitor nor a buyer/seller relationship between boycotters add boycottees but there are similar economic relationships susceptible to abuse. The insurers broadly represent the economic interest of the dentists' patients and to that end need access to the patients' X-rays for cost-containment purposes. Group action to shut ofi37 insurers' access to the X-rays is precisely the kind of organized economic squeeze play against which the boycott rule is aimed.

123. That would seem to be the end ofthis case but for a question which has recently evoked much argument and as to which the law is stil in an unsettled state: Do the same antitrust rules apply to professional services as to commodities?In 1975 the Supreme Court in Goldfarb v. Virginia State Bar 421 U.S. 773, 787 (1975) held that professionals are not (as had long been widely believed)338 entirely exempt from the antitrust laws just because they are professionals. On the other hand, the same opinion suggested that what would constitute a per se offense in a trade conspiracy case involving the sale of commodities might require a more extensive economic investigation (i. the "rule of reason" should apply) if professional services are involved: (90) The fact that a restraint operates upon a profession as distinguished from a business , of course, relevant in determining whether that particular restraint violates the Sherman Act. It would be unrealistic to view the practice of professions as interchangeable with other business activities, and automatically to apply to the professions concepts which originated in other areas. The public service aspect and other features of the professions may require that a particular practice, which could properly be viewed as a violation of the Sherman Act in another context be treated differently. We inti- 336 RPF, page 16.

337 "Shut off is not too strong a term under the circu.mataces here. 1t is tre that most dentists have typically expressed their wilingness to Jet insurers qualified" experts come to their (the dentists' ) offces to look at X-rays and other diagnostic aids (CX 99W). However, there is abundant testimony in this record that that is an empty offer because it is not ecorlOmically feasible for the insurers to send experts around to each dentist s offce (Tr 341--2, 924-25, 978, 1121, 1232, 138:11384, 1457; ex 303E, ex 316). 3,0 The point was expressly reserved by the SupremeCourt in American Medical Association v. United Sia/eg 317 U.S. 519 (1943), but wishfu.) thinking on the part of professionals long chose to assume there was 11 problem. See for example, ex 584D.

. (p.

Initial Decision 101 F. mate no view on any other situation than the one with which we are confronted today. Cpp. 788-9, fn. 17) 124. In National Society of Professional Engineers v. United States, 435 UB. 679, 696 (1978), the Court warned that this passage from Goldfarb cannot be read as fashioning a broad exemption under the Rule of Reason for learned professions" but did "adhere " to Goldfarb' view that:

professional services may differ significantly from other business services, and accordingly, the nature of the competition in such may vary. Ethical norms may serve to regulate and promote this competition and thus fall within the Rule of Reason. (p. 696) 125. Assuming, merely for argument, that the Rule of Reason is applicable to the facts of this case, the central question here is not whether there are any pro-competitive factors to be weighed against the anti-competitive factors already established.339 No showing of any pro-competitive factor has been made or even attempted by Respondedt or the State. The question is rather whether a non-competitive factor (i. one which affects competitive conditions neither beneficially nor adversely) may be weighed in the balance. Specifically, the claim here is that the boycott in question promotes the health and (91) safety ofIndiana citizens by preventing insurers from reducing insurance benefits below proper levels, thereby, as a practical matter, it is alleged, probably preventing an unhealthy reduction in actual treatments, too. 340 126. The law on whether health/safety factors may properly be weighed in the balance against evidence of anti-competitive tendency is stil iD process of development and DO sure answer can be given. In Professional Engineers the Supreme Court seemed to emphasize that generally the only evidence admissible in an antitrust case to counter an anti-competitive showing is evidence of a pro-competitive effect: Contrary to its name, the Rule LofReasonJ does not open the field of antitrust inquiry to any argument in favor of a challenged restraint that may fall within the realm of reason. Instead, it focuses directly on the challenged restraint's impact on competitive conditions. (p. 688) 127. Yet, as just noted, in the same opinion the Court also quoted Goldfarb' teaching that: "Ethical norms may serve to regulate and promote this competition add thus fall within the Rule of Reason 696) This pronouncement was footnoted as follows: See discussion inNational Society o( Professiorwl Engineersv, United States 435 L"S, 679, 687--92 (1978) 310 For our skepticism concerningthe alleged nexus between reduced payments al:d reduced treatment, . eePar. 148 below . . .

INDIANA FEDERATION OF DENTISTS Initial Decision Court have, for instance, upheld marketing restraints related to the safety of a product, provided that they have no anticompetitive efiect and that they are reasonably ancilary to the seller s main purpose of protecting public from harm or itself from product liability. See, e.g., Tripoli Co. v. Wella Corp. 425 F.2d 932 (CA31970) (en bane); cr, Continental T V, Inc. v. GTE Sylvania, Inc. 433 U.S. at 55, n.23. (emphasis added) (p. 696, fn.22) 128. Very recent consideration of the question is found in this Commission s decision in American Medical Association D. 9064 (Slip opinion of 10/12/79 at pages 26 and 37) (94 F. C. 701 at 1003, 1012J. Announcing that the Commission was not yet prepared to view restraints on professional price advertising as a per seoffense, Commissioner Clanton wrote: (92) In addition, we recognize that professional services may differ in some respects from other businesses (citing Professional Engineers and Goldfarb). Arguments suggesting that competition is contrary to the public interest are not cognizable under the rule of reason, but other justifications for ethical norms, such as the facilitation ofnon-deceptive advertising, may be procompetitive and must be taken into account. (p. 26) 129. Later, after finding certain of AMA's activities to constitute unreasonable restraints of trade (and so unfair methods of competition) because they bore "little relation" to their professed ethical purpose to "prevent impairment of medical judgment and deterioration of medical care " Commissioner Clanton elaborated as follows: Whatever the extent to which quality of care concerns are cognizable under the antitrust Jaws. the restraints here go far beyond anything that might be reasonably related to the goal of preventing use of improper medical procedures. (p. 37) 130. It is apparent that the proper role of health/safety evidence in rule of reason restraint oftrade cases has yet to be worked out. If, as we have concluded here, a "group boycott" is unlawful per se the health/safety question need not be answered. If, however, this Commission and the courts continue Commissioner Clanton s preference to treat professional boycott cases under the rule of reason, a rule for health/ safety evidence must be settled. Practical considerations point this Administrative Law Judge strongly to consideration of health/ safety factors in such a balancing of equities, even if health and safety factors are really neither pro nor anticompetitive. 131. However, this assumes that the health and safety factors are real and not just the overly broad "ethical principles" which Commissioner Clanton eventually decided should properly be disregarded in AMA. In order to determine what, if any, genuine health/safety factors we should consider here under a rule of reason, we turn now to analysis of the deficiencies in Indiana insurers' medical practices Initial Decision IOI F. alleged by IDA/IFD to justify their members' continuing concerted refusal to submit requested X-rays to such insurers. (93) J. The Medical Issues 132. IDA/IFD' campaign to keep Indiana dentists from turning patients' X-rays over to dental health care insurers has always been based principally on IDA/IFD' claim that the insurers rely largely or even solely on X-rays when making diagnoses that should not be made without recourse to allavailable diagnostic aids (including clinical oral examinations, narrative reports and all the bio-chemical tests now available from commercial laboratories). During the IDA stage ofthe conspiracy that Association s so-called "Principles of Accepta' bility," adopted by it to support development of "a unified position regarding to all third party dental plans 341 included the following provisions:

3. X-rays should not be provided to any patient or third party. a. X rays are part of the dentist's legal health records of the patient. b. rays alone cannot give a third party sufficient information for diagnosis or treatment planning. (emphasis added) c. X-rays in the hands of a third party are another interference with the dentistpatient relationship and the dentist's professional judgment.342 133. In a "missionary" talk in early 1976, Dr. Dan Rohn, a leading figure during all stages of the boycott, explained the so-called "Indiana Plan" to the American Academy of Dental Practice Administration:

The one principle that causes the most problem is our stand on non-submission of radiographs to a third party. . .. First of all we believe the reading of radiographs and making decisions which would alter a treatment is diagnosing dental disease. This is practicing dentistry. It should be done (94) only by the attending dentist and not from radiographs alone. I am sure none of you here would be presumptious enough to look at a set of radiographs alone and make or alter another doctor s treatment plan. You would want more information than just the radiographs. Any good, responsible dentist would. 343 134. Following organization ofIFD in 1976, a committee set out to :lraft its "work rules" and among those considered was one expressly 'pposing dentists' submission of X-rays to insurers. The single "work ule" ultimately adopted, in April 1977, however, referred to nonsubmission of X-rays only obliquely. It did so by proscribing diagnosis nd treatment planning without the assistance of all diagnostic aids '11 ex 39A.

1. L'X 39A.

\J CX 394B' INDIANA FEDERATION OF DENTISTS 1:l" Initial Decision a narrative history and all clinical findings. It then placed on each dentist "moral and legal responsibility" for making sure that his patient' s condition not be determined "for any purpose" without just such a complete examination Proper diagnosis and treatment planning predicates the doctor correlating alj diagnostic aids with a history and with all clinical findings. No one facet of this process is now or ever has been, recognized by the profession as a substitute for the complete process. To represent otherwise would subject the patient to sub-standard care. The patient's dentist, therefore, has a moral and legal responsibility to not allow a determination of his patient's condition to be made for any purpose without the benefit of a complete examination which takes into account all the elements described (above).344 135. During this trial there was a great deal of expert testimony by practicing dentists, (mostly IFD leaders), insurance company executives (with dental (95) expertise) and two academic experts (from Indiana University) concerning what X-rays can and cannot be expected to reveal for dental diagnostic purposes. The testimony on this complex question is summarized for easy reference in Paragraphs 136 through 139.

136. Complaint Counsel adduced evidence of a good many things which a radiograph can reveal to a dentist and much of this went unchallenged by either Respondent or Intervenor. For example, there was no denial of expert testimony by Metropolitan s sometime Director of Dental Relations that an X-ray wil show a dental consultant tooth decay, an abscess, bone loss around the teeth or pathology in the bone itself.345 Nor was there any dissent from testimony by the same witness that an X-ray can even spot dental caries that may not be evidenced through clinical examination.346 An X-ray will also show he explained, ifthere are teeth in opposition to teeth that are present (so as to permit determination of whether the teeth have functioning counterparts). 347 He testified, too, that an X-ray wil show such physiological attributes as bone structure around the teeth, affecting degree of mobilty (backward and forward movement in the teeth) based on bone support."8 (Another of Complaint Counsel' s experts testified that an X-ray does not show a patient's physiological condition but added that this was of slight importance with respect to the mechani- :14 ex 537A &e alsoCX 542B, the back ofIFD' s standard ciaim form lor patients, with the "Work Rule" printed thereun.

345 Tr 1436-37. But cf Dr. Janzarik at Tr 2548 to the effect that an X-ray may not show decay which is maskad by a large silver fjJlng.

'Mt Tr 1515.

J1 Tr 1514 15.

11B Tr 1514 130 EDERAL TRADE COMMISSION DECISIONS Initial Decision 101 F. cal restoration of teeth. )349 137. One area in which there was some conflct of testimony concerns occlusion (the striking angle of the teeth). On one hand an Aetna expert asserted that an X-ray can demonstrate the incidence of traumatic occlusion, depending on the scope of the X-ray, the quality with which it is taken and the angle with which it is taken.35o (96) However, Respondent' s current President testiied that an X-ray alone wil not show an occlusion of the teeth and that a diagnosis of occlusion cannot be made from an X-ray, with or without a claim form. 35! Similarly, the Aetna expert testified that an X-ray can show s bite (i. the pressure exerted) from thethe hardness of a patient' amount of wear in the occlusal surfaces352 but another expert put it differently: an X-ray, he said, does not show the hardness of a person bite, unless there is abrasion on the teeth (and even then X-rays may be indecisive about the wear of the cuSps).353 The same Aetna expert testified that such abnormal habits of a patient as pipe-smoking may not one of the conditionsbe shown by an X-ray;354 but pipe-smoking is to which an X-ray wil point, according to one of Respondent' leaders.355 138. There were certain areas where there seems to be no serious argument that an X-ray alone wil not do the job. Respondent' s current President asserted without challenge that even a trained dentist can not determine the choice of restorative material just by looking at an X-ray, because that choice varies with how well the patient takes care of his teeth, which, in turn, affects how long the restorative material willast.356 Another of Respondent's leaders testified that he would refuse to try and determine from looking at an X-ray what choice of restorative material he should use in his treatment, because there are so many extenuating conditions."357 139. Finally and not too surprisingly, there was general agreement that X-rays wil not show the patient' s mental condition 35B which is said to have considerable (97) bearing on the treatment.359 Respondent' s current President elaborated on this as follows: (A)s you are working with a patient, you are more aware of what they wil tolerate and Tr 323 !.GTr 1322 001 Tr 2548--9. Acmrd:Tr 324 Tr 1322-23 35J Tr325.

;\, Tr 11323-24 1"5 Tr 2448 S6 Tr 2547.

Jh7 Tr 2447.

Tr 326, 1324-25 1514, 2549.

352 Tr 1324-25.

INDIANA FEDERATION OF DENTISTS 1::1 Initial Decision what they wil not tolerate and what they wil take care of and what they will not take care of A typical example is a patient who is missing tooth (sic) on each side of one arch and what I would say is the best treatment is two unilateral bridges. All right. Cheaper but adequate is a partial But ifthis patient is the type that does not really give a darn about his teeth and yet he does brush them I mean he just doesn t take meticulous care-the partial is a food trap. . . . The least (costly?) adequate or alternate mode would be a partial and yet it would destroy the dentition of the patient's mouth.360 140. In addition to all the technical testimony about what a dental X-ray wil or will not reveal, there was conclusionary testimony as to whether a dental diagnosis should ever be based solely on X-rays (or any other diagnostic aid). On this question the experts-on all sidesseemed to agree that an X-ray or other diagnostic aid alone is not enough for an accurate diagnosis.

141. Professor Kasle, for the Intervenor, testified that no one diagnostic aid is suffcient in and of itself for a proper diagnosis and more specifically that "a radiograph can t stand alone."36! A Connecticut General dental consultant said he would have to have additional information beside X-rays before he would invoke alternate treatment: "I cannot make a complete determination from an (98) X- "362 A top ray. Aetna dentist/executive agreed: "I would say that diagnosis should not be made on the basis of X-rays alone."363 142. To say, however, that diagnoses should not rest on X-rays alone does not take the argument very far. How much else is required for a sound determination in the circumstances of a particular case? Respondent's current President not surprisingly would require the use of all diagnostic aids for all determinations: . . . . (S)omeone who is to determine what is right and what is wrong in each particular case must see everything clinically (physically), health history, X-rays and the patient.364 143. Literally applied, such a rule, requiring physical examinations in all cases, would seem to put the insurers out of the dental health care insurance business in Indiana because it is "very, very costly and "unpractical" to perform a physical examination on each patient365 and examinations are "not a practical solution."366 144. More realistic was the opinion of the head of IV's Dentistry 3!; Tr 2549-50. But cf the testimony of a California Dental Service expert who conceded that X.rays will Dot show a mental condition and agreed that oral hygiene is very important but "would not necessrily prescribe a different type offilJng material because the oral hygiene of the patient was questionable. " Tr 326-27. 3"' Tr2716- 17.

362 Tr 947.

36 Tr 1302.

'j, Tr 2546- TIle head of Indiana University s Radiology Department was even more expansive (Tr 2716). 3/;,\ Tr 341--2, 924--925, 978. 1221, 1232, 1383-1384, 1457; ex 303E. ex 316. 360Tr 1220 Initial Decision 101 F. School, who would utilize every diagnostic aid available367 but agreed that it would probably be "proper" to base a diagnosis on a claim form and an X-ray or a claim form and a narrative history, ifnecessary.366 145. An even more pragmatic approach is that of the pioneer California Dental Service, whose long-time head (99) testified here that in Hthe great majority" of California s more expensive cases369 his organization makes its decision on the basis of X-rays but wil make a physical examination if a question about the determination is raised by the attending dentist.37o Only in less than 1 percent of its predetermination (more expensive) cases does California Dental Service find it necessary to supplement X-rays with physical examination.371 146. Unfortunately the record here is substantially deficient in evidence as to just what supplementation of X-rays for diagnoses is the usual practice of the dental health care insurers serving Indiana. That deficiency is plainly the fault of Respondent, which has the burden of establishing that its restraint of such insurers' trade is reasonable.

147. Not knowing how the public health and safety are being affected by the insurers practices here, we have no health/ safety factor to weigh in the balance against the plain anticompetitive and anti-consumer tendencies of Respondent's "group boycott". Our condemnation of the second paragraph of Respondent's vigilante "Work Rule"372 and Respondent's application thereof stands. 148. This disposition of the health/safety question makes it Unnecessary to deal with Respondent's constant assumption that an insurer s change (generally downward)373 in benefit payments translates automatically into a comparable change in treatment plan. The record contains no satisfactory evidence that this is usual. Even if it were, we would have diffculty tracing the change in treatment plan to the change in benefit payments. The patient is always free to make up the difference in cost (100) between what his own dentist recommends and what the insurer s consultant wil approve. The patient is thus an independent, intervening force hreaking the asserted chain of causation between disallowance of a claim and change in treatment plan.

J6' Tr 2692 Tr 2690. This testimony was based OD a rephrafld question and it j nut clear un which basis the question .vas answered :\9 A $100 minimum predetennination guide is appanmtly usual, although infation seems to be driving the rdnimum up to $125 (Tr 393, 534--6 563- 980). o7QTr 339-41. 354.

37! Tr 339-1.

J7 ex 537A- 373 There is no argument that most changes are reductions. An Aetna 3urvey in its Ft. Wayne regional offce r example, found 20 alterl1ate COUfse reductions in 21 referrals (Tr 1351-52) INDIANA FEDERATION OF DENTISTS 133 Initial Decision K. State Action 149. Respondent' s chief defense here (and the reason for the State ofIndiana s intervention) concerns "state action . The tenth amendment to the Federal Constitution reserves to individual states all powers neither expressly nor impliedly374 granted to the Federal government and the Supreme Court has recently interpreted the 10th Amendment quite favorably to the states.375 Many years ago, in Parker v. Brown 317 U.S. 341 (1943) the Supreme Court held that the Sherman Act was never intended by Congress to reach state action regulating intrastate commerce, even though such regulation be anticompetitive in character and thus would be in violation of the federal law against unreasonable restraints of trade if it had been undertaken by a private person (and had the requisite effect on inter-state commerce).

150. A recent trilogy of cases has tightened up the doctrine of Parkerv. Brown in certain respects, notably by insistence on finding real action by a state or private action really required by a state before honoring such a defense.376 While the basic rule of Parker v. Brown that real state regulation of commerce is not a restraint of trade under the Sherman Act-remains intact, nonetheless the genuineness of the state action or state requirement of private action relied on has become a prime issue whenever such a defense is raised. I51. In this case Respondent and Intervenor rely on the "state action" doctrine to defend Respondent' s boycott (101) of insurers as a way of enforcing the Indiana law against unlicensed practice of dentistry . On this branch of the case no attack is made on alleged over-reliance by insurers' dental consultants on X-rays for diagnosis; the attack is rather entirely on the use oflay screening by X-rays. The theory seems to be that insurers break the Indiana law against unlicensed practice of dentistry when they employ unlicensed paraprofessionals to make "diagnoses" from radiographs, even if only for the limited preliminary purpose of "screening, to determine which, if any, X-rays need be sent to an insurance company dental expert for definitive review. That alleged offense, the argument goes, plus Indiana s law against aiding and abetting the commission of such an offense requires Respondent and its dental vigilantes to boycott the 17' The implicatianofpowcrs to the Federal government was one ortbe major advances of the Constitution over the Articles of Confederation, which, in a similar context, reserved to the states aU power! notexpressly granted to the Federal government. The tenth amendment uses neither the word "express" nor the word "implied", Corwin E. S. The Constitutiort of the United Stateso( America 88th Cong. . 1st Sess., Senate Document No. 39 (1964), page 'o Nntianal Leogul' of Citiesv. Usery. 426 US. 833 (976) ?6 Can/orv. Detroit Edison Co. 428 V.S 579 (1976); Batesv. Statp. Bar of Arizona.,433 US 350 (1977); City of Lvlayette, Louisiana v. ol1isiana Pawer Light Co. 43S C.s. 389 (1978) Initial Decision IOl F. s "state action" on theinsurers. We must accordingly review Indiana subject.

152. In 1913 the Indiana Dental Law made it unlawful for any person to "practice dentistry" in Indiana who had not first obtained a license to do so, as provided in the same statute. Indiana Code 25-14-1-1 (in IX 4). The statute provided that the Governor appoint from a list of practicing dentists, submitted by the trustees of the Indiana Dental Association, a nine-man state board of dental examiners. I.C. 25 14-1- et seq. (in IX 4). This state board of dental examiners was charged by the same statute with "administering and enforcing the laws pertaining to the practice of dentistry and of dental hygiene" and it was given the power and authority "to make, promulgate, adopt and enforce rules and regulations for the administration and enforcement of this act, in the manner provided by the law regarding the adoption of rules and regulations by a state agency . I.C. 24-14- 13 (in IX 4). The "manner provided by the law" etc. is now set forth in I.C. 4-22- 2(a) of the Indiana Administrative Procedure Act as follows:

All rules 377 regulations and other documents containing a statement of policy, other than offcial opinions of the Attorney General, which the issuing agency378 intends to have the effect or force oflaw (102) but which are not promulgated, approved and fied as rules in conformity with the provisions ofthis chapter, shall be invalid, void and of no force or effect after the first day of January, 1978.379 (footnotes added). 153. Section 4-22- 5 similarly provides, in pertinent part, that (nJo such rule shall be effective until after compliance with the provisions of this act." The decisional law of Indiana has long been fully in accord. Thus, statements and bulletins issued by state agencies that are not properly promulgated as rules have no legal effect. Indiana State Personnel Boardv. Jackson 192 N.E.2d 740 (Ind. 1963); State V. Edwards, 89 N.E.2d 443 (Ind. 1950). The act requires that before any rule or regulation having the force oflaw is adopted, there be notice and a hearing in which interested persons can participate and that the rules be approved by the Governor and Attorney General J71 The !Ita-tutory defmition of a "rule" jIJdudes "any rule, regulation, standard, classification, procedure, or requirement of any agency. . . interpreting, supplementing or implementing 3-DY statute." Ind. Code Ann. 4--22--2-- (Supp- 1979) (Burns) 37B The statutory definition of an "agency" includes any board or department of the State of Indiana. Ind- Code Ann. -3 (Supp- 1979) (Burns).

J7 Ind. Code Arm. 4--22-2-2(a) (Supp- 1979) (Burns), as set forth above, replaced the tollowing Janguage AJI rules and regulations heretofore made, adopted or promulgated by any agency of the State of Iudiana which were not promulgated, approved and fied in confonnity with the provisions of chapter 213 of the Aclof 1943, shan be invalid, void and of no force or effect alter the first day of January, 1946. .ll Uln.

Initial Decision within a specified time period and fied with the Secretary ofState.38o I54. The Indiana Dental Law gives the State Board of Dental Examiners the right to place the holder of a license on probation or suspend or revoke his license for any of numerous specified causes, such as obtaining a license by fraud, conviction of a felony, "unprofessional conduct" (of many specified kinds) or failing, neglecting or refusing to obey and comply with any Indiana statute in regard to the practice of dentistry or using or employing in his practice the services of anyone who is violating any provisions of any Indiana statutes relating to dentistry. I.C. 24-14-1-19 (in IX 4). 155. In addition to possessing this power to suspend (103) or revoke existing licenses for specified causes the Board of Dental Examiners along with the Attorney General, local prosecuting attorneys and citizens of the same county, is empowered by the Indiana Dental Law to obtain an injunction against the practice of dentistry "as herein defined" by anyone not possessing a valid license to do so. I.C. 25-14-1 14 (in IX 4). The definition of "practicing dentistry" within the meaning of the Dental Law appears in I.C. 25-14-1- , which includes among several other tests, the following:

Any person. . . who. . . offers to diagnose or professes to diagnose or treats or professes to treat any of the lesions or diseases of the human ora) cavity, teeth, gums, maxillary or mandibular structures. .

156. It is worth noting that this provision does not purport to deal with diagnosis, as distinguished from an Hoffer " or profession" to diagnose and a fairly good argument might, perhaps, be made that the statute was never intended to reach mere diagnosis, absent a holding out as a dentist. However, this section of the law also contains a proviso which does use the word "diagnosis" without qualification: Provided that this section shall not apply to those procedures which a legally licensed and practicing dentist may delegate to competent offce personnel as to which proce. dures the dentist exercises direct supervision and full responsibility, which procedures shall in no event include either 0) those procedures which require professional judgment and skill such as diagnosis and treatment planning. . I.C. 25-14-1:-23 (in IX 4).

Accordingly, we must conclude that the "practice of dentistry, as defined in I.C. 25-14- , was meant to include the simple act of diagnosis, whether or not accompanied by an ofter or profession to diagnose.

157. On the other hand, the same proviso would seem to imply that diagnosis is a non-delegable function of dentistry only insofar as it is one of those procedures "which require professional judgment and 380 I.C. 4-22-2-4, 5 (Burns Supp. 1979).

Initial Decision 101 F. skill." That leaves open the question whether the very limited kind of "diagnosis" made by a paraprofessional in screening X-rays to determine whether or not to refer a particular radiograph to an expert should be deemed "diagnosis" within the meaning of the law against unlicensed practice of dentistry. (104) 158. Whatever the practice in former years, insurers serving Indiana now generally allow lay employees to view X-rays only for the limited purpose of deciding whether there is a problem that seems to call for expert judgment whether to rely on the attending denlist' s opinion as a basis for payment or to send the X-rays to the insurer s own experts for a second opinion. 159. A paraprofessional may process a "simple form. . . . the more common procedures," which represent the overwhelming portion of claims.38! Since, however, the paraprofessional can only allowcannot reduce or deny-the claim, it is hard to see how an insured can ever be prejudiced in such case.382 160. If, however, there is a question a paraprofessional cannot handle, he or she has no authority to deny or reduce the claim but must send it on to a company dentist for expert review.'83 161. A concrete example of how another major insurer serving Indiana deals with this problem is found in a claims guide for internal 384 It recognizes that "it requires a professional consult-company use. ant to read and interpret X-rays for other than the most evident conditions" (specifying several!)385 and thereafter lays down the general rule as stated above:

A lay processor or analyst, upon review of X-rays, can approve benefit.,;, BUT. .. . NO PERSON OTHER THAN A CONSULTANT CAN RECOMMEND THAT BENEFITS BE REDUCED OR DENIED. 386 (105) Association et alv. Commonwealth of Pennsylvania Insurance Department Pa. Cmwlth., 398 A.2d 729 (1979), the Commonwealth Court held that a dental health care insurer would not violate Pennsylvania s statute against unauthorized practice of dentistry by having a lay clerk make a "first review (i. screening) of radiographs to determine whether they satisfy the insurer s standards. The applicable statute provided that "a person engages in the 'Practice of Dentist- ' within the meaning ofthis act who diagnoses. . . any disease, pain or injury. . . of the human teeth, jaws or associated structures. . . (etc.)" 63 P.S. Section 121. The testimony was "clear" that if a clerk 1 Tr 9t3-914, 1320 2 Tr 2704- , 2725-26.

'1 Tr 1416.

'" IX SODA- 'I.1IX 500B (in camera).

1M"IX 5()OC (in c(lilwra) .... . _ ..JUUU -'u.. "".L .L.LU.LU Initial Decision decides that the radiographs do not satisfy Blue Shield standards, the radiographs are then forwarded to a dental examiner for a "final" determination. The Court concluded:

Appellants have not indicated to us, and we are unable to ascertain for ourselves, any aspect of the practice of dentistry as defined in Section 2 (i. 63 P.S. 120) which is violated when a clerk makes the first review of radiographs to determine whether they satisfy Blue Shield standards. page 734.

The Supreme Court of Indiana seems no more likely than the Commonwealth Court of Pennsylvania to find that the word "diagnosis applies to the mere screening of X-rays by paraprofessionals for subsequent analysis by experts who possess "professional judgment and skil." Accordingly on this record there is probably no violation ofthe law against unlicensed practice of dentistry to be "aided and abetted" by sending X-rays to insurers.

163. Even, however, if we were one hundred percent wrong about whether an insurer s paraprofessionals " practice dentistry" within the meaning of the Indiana Dental Act, merely by screening X-rays and even if Respondent' s dentists were found to be aiding and abetting the insurer s offense indiuiduallyjust by sending them X-rays on request, nevertheless the result of this case would be the same. Nothing in the Dental Act suggests either expressly or by implication that dentists are permitted-much less required-to organize a group boycott to help enforce the law-the only offense with which Respondent is charged here.

164. The Act is quite clear about how and under what circumstances public force is to be mobilized to deal with the unlicensed practice of dentistry. We have already referred to the Dental Act' provision for obtaining an injunction against the unlicensed practice of dentistry. I.C. 25-14-1-14 (in IX 4). It is true that such an (106) injunction may be sought not only by the public prosecutors and the Board of Dental Examiners but by "any citizen of any county" where the unlicensed dentistry is alleged to be carried on. A citizen s injunction suit, however, is a horse of a different color from a privately organized vigilante movement.

165. The Indiana injunction statute specifically provides that such an action shall be maintained "in accordance with the laws of the State ofIndiana governing injunctions," I.C. 25-14- 14 (in IX 4) with all the fair-trial and rational-proof safeguards inherent in judicial procedure. In such an action the methods used by insurers mu,t be proved by reliable evidence and a reviewable decision must be carefully reached as to whether the precise facts shown really amount to practicing dentistry." It would be hard to believe that the Indiana legislature-alter setting up such procedural safeguards for an ac- Initial Decision 101 F.T.C. caused-intended to allow a dental vigilante group to enforce the law on its own by way of an organized boycott, free from all the restraints that civilization has built into judicial injunction procedure. 166. The contrast between law enforcement and vigilantism is even more striking in the case of criminal proceedings against unlicensed practice of dentistry and/or "aiders and abettors" thereof, which is provided in the Indiana Dental Act, I.C. 25-14- 25. Is it even conceivable that the organizers of a private boycott would or could apply the presumption of innocence, the reasonable doubt rule and the criminal law s many other refinements to the random mass of un substantiated facts and rumors on which vigilantes commonly act? Vigilantism may have played a useful role in the pioneer West when no other kind of law enforcement was yet available-but the lights of civilization are now presumably brighter than that. The Indiana Dental Law makes clear provision for public action to stop the unlicensed practice of dentistry. It does not contemplate and certainly does not require concerted private action of any kind. 167. When we look beyond Indiana s statutes on the subject of practicing dentistry without a license, we find a few purported administrative actions (by the Board of Dental Examiners and the Department ofInsurance) to which Respondent and Intervenor point as filling the statutory gap. The effort of Respondent and Intervenor to find valid administrative action ofthis sort is strenuous but not convincing. We now review these efforts.

168. The first evidence on which Respondent and Intervenor rely is an "Unoffcial Advisory Letter" dated 3/14/74 from then Deputy Attorney General C.C. Plopper to the (107J President ofthe Indiana Board of Dental Examiners.387 It was written in response to a request from the Board to know whether unauthorized practice of dentistry is involved in "clerks employed by third party insurance companies checking radiographs submitted by a dentist to determine if the proposed treatment by the dentist should be authorized. " Plopper replied:

No clerk, who would be a layman, could possess the knowledge required to make such a diagnosis from radiographs. Neither would such a clerk have the knowledge to determine whether a proposed treatment would be proper, so that it would fau within authorized bounds.

It is my opinion that only a dentist should review radiographs and proposed treatments for third party insurance companies and the use of clerks to make such reviews would be improper and should be proscribed.388 169. The Plopper Jetter shortly thereafter became the basis for a 3B71X5 3!IX 5.

Initial Decision general statement of policy by the Board of Dental Examiners389 and later in the year (10/9/74) the Board advised at least one dental health insurer (Aetna) that it was "taking this (the Plopper) position."390 Some four years later, after the X-ray boycott had resulted in the bringing ofthis complaint, the Board sent a letter to all Indiana dentists reviewing I.C. 25-14-1-23' s definition of "practicing dentist- , citing the relevant criminal law, including I.C. 25-14-1-25 (unlicensed dental practice a misdemeanor) and I.C. 335-41-2-4 (aiding and abetting commission of a crime), and reaffrming (almost verbatim) the gospel according to Plopper (with reference to submitting dental X-rays to dental health insurers).39! There is no evidence, however that the Attorney General ofIndiana or anyone else has ever charged let alone convicted-any layman of practicing dentistry without a (108) license on the ground that such person screened X-rays for a dental health care insurer.

170. Plopper himself recognized that "the views expressed herein (i. in his 'unoffcial advisory letter' of 3/14/74) are those of the writer and are not to be considered to be the opinion of the Attorney General of Indiana nor a precedent of the Attorney General's of: fice. 392 Plainly Mr. Plopper s personal opinion has something less than binding force and constitutes something less than "state action 171. The policy statements of the State Board of Dental Examiners that resulted from Plopper s letter fare little better. Such policy statements are t'invalid, void and of no force or effect unless promulgated approved and fied as rules" in conformity with the provisions of the State Administrative Procedure Act, I.C. 4-22- 2(a). See also I.C. 4-22- 5. That statute requires notice and hearing in which interested persons can participate; approval ofthe rules by the Governor and Attorney General; and fiing with the Secretary of State. I.C. 4-22 2-4 and 5.

172. However, the Board of Dental Examiners never held any hearings, issued any rules or regulations, undertook any administrative proceedings or brought-r even recommended-any enforcement suits concerning submission of X-rays to and review of X-rays by insurers.393 While it is perhaps understandable that Respondent' allies on the Board of Dental Examiners would prefer merely to issue policy statements rather than hold hearings where insurers, customers and customers' employees would all have to be heard, mere policy statements by individuals in public offce are not "state action 389 IX 6.

3'J IX90A.

'1 IX 9, IX IX 9B 92 IX 5. Only "offcial" opinions of the Attorney General have the force of law under Section 4-22--2-2 of the Indiana Administrative Procedure Act 393 Tr 2229, 2281 , 2291- , 2778 Initial Decision IOI F. 173. Neither Plopper s "unoffcial advisory opinion" nor the Board of Dental Examiners' policy statements based thereon had any standing at law; until recently neither even had application to the factual situation that has emerged from the evidence here. Plopper expressly assumed a practice by insurers of having clerks check X-rays "to (109) determine if the proposed treatment ' by the dentist should be authat this is not thethorized. " This evidence here shows, however, prevailing practice among insurers of dental health serving Indiana. Such insurers' paraprofessionals read X-rays only to screen out the large number which need not be referred to one of the insurer dental consultants" for expert examination and determination.395 Even ifPlopper s opinion had had legal standing insofar as applied to a lay diagnosis for treatment or payment, it had no application to a lay determination merely as to whether an expert opinion was called for. Both the Plopper letter and the Board's policy statements are thus immaterial here.

174. We turn now to the Indiana Department ofInsurance, which has plenary authority over any unfair claim practices of insurance companies operating in that state.396 State Insurance Commissioner H. P. Hudson, head ofthe Insurance Department during recent years put in a good deal of time and effort trying to mediate between the IDA/IFD dentists and the dental health insurers serving Indiana. The high point of his efforts at mediation was reached during the first half of 1976, when he planned and promoted a nine-months pilot program for submission of X-rays by dentists to insurers under compromise conditions, the whole to be monitored by his offce.397 The insurers agreed to try the pilot program398 and Hudson then made a personal appeal to the House of Delegates of IDA on 511/75399 but the dentists refused to compromise.400 175. Mediation, however, is very different from state action. Indeed since it merely encourages the parties to settle a dispute voluntarily it could well be thought of(llo) as the opposite of state action. As for evidence of Hudson s participation in the dispute in a governmental capacity-hearing and deciding insurance claim practice cases or otherwise-such evidence is close to zero.

176. Typical is the Indiana Insurance Department' s "Bulletin 37" '01 issued in early or mid- Septemberon the subject of "Dental X-rays 39. We trust that. Plopper understood he was giving an opinion on outhorization of payment, not authorization of treatment.

395 See Pars. 158-162, above.

3%CX81OE 3'" ex 810B.

19BCX Bloc 199 See Hudson s speech to IDA outlining hib proposal in C'X 810et SI'q 100 ex 425 4UJ IX 167 . . .

-u..----- Initial Decision 1979402 on the eve of hearings in this case. Bulletin 37 first recited previous advice to insurance companies offering dental insurance plans that the practice of allowing personnel not licensed as dentists to "evaluate" dental X-rays is a violation of the insurance laws of Indiana governing Unfair Trade Practices and the Indiana Dental Licensing Law (I.C. 25-14-1- et Beq. ) It further recited that "allegations are being made that certain insurance companies are currently utilizing personnel not licensed as dentists to evaluate dental X-rays. Over Commissioner Hudson s signature, Bulletin 37 then made this pronouncement:

The Department reiterates and reaffrms its position opposing such practice. Evidence brought to my attention reflecting this conduct will result in an unfair trade practice hearing against the company so charged. 403 177. It appears, however, that the Commissioner s bark is notably worse than his bite, as cross-examination of his assistant and legal adviser developed at the trial here:

Q. (W)hat status does a bulletin issued by the Department of Insurance have? A. A bulletin is the Department's position on whatever the subject matter is of that bulletin and the Department takes the stance that that bulletin will be enforced by the Department. It does not carry the weight of either statute or regulation but (it) is an interpretation that the Department makes with regard to the subject matter. (111) Q. It has no force of law, is that correct? A. That' s correct.

Q. And this bulletin was not issued pursuant to-no notice to the public to comment on this bulletin or hearings were held prior to its issuance, was there? A. That' s correct,404 178. One other Insurance Department/Dental Board policy statement deserves most careful consideration. Hearings in this matter began on 10/2/79. On that date, in response to an urgent request by the Attorney General's office and the Board of Dental Examiners to issue a strong pronouncement for the FTC proceeding.405 Insurance Commissioner Hudson and Dr. Paul Stephens, long member of the IDA/IFD X-ray conspiracy and by 1979 President of the all-dentist Board of Dental Examiners, together signed a letter addressed to "all Indiana-Licensed Insurers" which was sent to all Indiana-licensed Tr 2774-75 ,0.1 IX 167.

404 Tr 2777 ,U5 A Board member informed the Insurance Department: "The Attorney General's offce is most anxious for these documents to be mailed before October 2 as they want to use them for exhibits in the FTC case" (CX 826A). He reported to the Attorney General' s offce: "Hopefully the Department ofInsurance and the Board wil get copies in the mail to their respective charges by October 2. At any rate the letter could be dated September 24" (CX 827). 142 EDERAL TRADE COMMISSION DECISIONS Initial Decision IOl F. dentists, too.406 This policy statement re-hashed the Plopper opinion recited that "the use of radiographs in any diagnostic capacity whatsoever requires judgment and skill reserved only for licensed dentists " explained how a dentist's submission of X-rays to insurers ttaids and abets" the unlicensed practice of dentistry and warned of possible criminal prosecution for such a violation. Thus far there was nothing very new in the letter.

179. However, there was enclosed with the letter a (112) form affidavit407 to be sent by dentists to insurers and returned with a sworn statement by the insurer that the dentist's X-rays have been screened, read, used for 'benefit determination' and/or any other diagnostic procedure only by specified licensed dentists. Obtaining such an affdavit was recommended to protect the dentist from criminal prosecution as an "aider and abettor" ofthe insurer.4os The theory of this affdavit was expressly stated in the text, as follows: Should an insurance carrier be subsequently suspected of using unlicensed personnel to perform any but the clerical operations of identifying the source or disposition of fims, that carrier wil be subject to investigation and potential prosecution. Operations termed "benefit determination screening, reading, identifying teeth or any such procedures are deemed to be reserved for licensed dentists only. (emphasis added)409 180. Note that this last-minute effort to aid and abet Respondent's state action" defense for the first time sought to bring mere screening of X-rays within the target area of the Indiana Insurance Department/Board of Dental Examiners attack. That the letter went out in response to a plea by Intervenor s Counsel to help win this case410 would alone cast grave doubt on its significance as evidence of "state action, Be that as it may, under cross-examination Commissioner Hudson s legal advisor conceded "that (the Hudson/Stephens joint letter) does not have the force of law. (emphasis added)41 Under the provisions ofIndiana s little AP A cited above, he could hardly have said anything else for it is obvious that Respondent and its alles on the Dental Board and in the Insurance Department were hard pressed enough just to get out the purported evidence of "state action" wanted by Respondent's counsel for this hearing without going through (113) the lengthy hearings and public debate required to make a real rule in Indiana.

181. The testimony of the same offcial confirmed that the Insurance Department has never held hearings or promulgated formal 400 IX 167 aod IX 167A.

'07 IX 1678 through IX J67D.

'OMIX 167C.

'0" IX 167A HU CX 828 '" Tr 2778.

u"n'U'. n ....uL'-'Hn..1.l'..1' '-.1 L'.11..1.1o..0. Initial Decision rules or regulations with respect to the question of submission of radiographs to insurance companies.4!2 Indeed, he explained, the Department has never been engaged in any legal proceeding over the issue of radiographs413 nor have any of the unfair trade practice actions it has brought against insurance companies in the past related to any matter pending here.414 182. As a matter of fact in August 1978 Respondent itself was dissatisfied with what it then considered the substantial failure ofthe State of Indiana and its Board of Dental Examiners to employ the unauthorized practice provisions of the State s Dental Practice Act the Respondent wanted that it (lFD) brought suit against both the State and the Board in the U.S. District Court for the Southern District of Indiana (Civil No. IP 78-98-C) for $25 milion damages.415 183. However, in December 1978 a deal was apparently made for Respondent to drop its suit if the State Board of Dental Examiners would agree to intervene in this (FTC) matter.4!6 On 12/20/78 the District Court, Holder, J., granted Respondent's motion to dismiss its own suit and the following day the State fied its petition to intervene here. 417 184. To summarize the "state action" question, the State ofIndiana has long required dentists to be licensed but the Dental Practice Act specifies nothing as to whether paraprofessionals should be forbidden either to read X-rays or to screen them for reference to experts. (114) 185. Occasional assertions of some state-offcials to the effect that X-rays should not be read by laymen for any purpose and, during trial here, to the effect that X-rays should not even be screened by laymen all turn out to lack offcial standing to define an offense. Without a primary offense of practicing dentistry without a license there can, of course, be no secondary offense of aiding and abetting" the primary offense. Manifestly Indiana dental health care insurers are not required to conform their business practices to the mere personal opinions of Dr. Stephens or Commissioner Hudson any more than to the unofficial advisory opinions" of Mr. Plapper. L. Collateral Estoppel 187. A principal contention of Respondent and Intervenor is that we are not permitted to make our own assessment of the "state action defense, as we have just done. Such consideration is foreclosed under the well-known doctrine of "collateral estoppel", the argument runs mTr2778 4JTr2778 '" Tr 2782 II ex 50BA, D, E, F 416 ex 824.

See Summary of Proceeding above, pp. 4, 5, 6. Initial Decision IOl F. by the prior findings and conclusions of a U.S. District Judge in a suit brought by the State of Indiana and its Board of Dental Examiners to compel this Commission to permit them to intervene in this matter. 188. Under the traditional "mutuality" requirement ofthe collateral estoppel doctrine Respondent probably could not invoke that doctrine here because Respondent WaB not a party to the intervention suit.418 In any event, however, the doctrine of collateral estoppel does not apply for another reason. The findings which Respondent and Intervenor urge us to carryover from the suit to compel allowance of intervention were not necessary or essential to the judgment of intervention, a universally accepted prerequisite to application of collateral estoppel.

189. The most recent restatement of the law by the (115) American Law Institute provides:

68. Issue preclusion-General Rule When an issue of fact or law is actually litigated and determined by a valid and final judgment and the determination is essential to the judgment (emphasis added), the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim. 419 Comment h thereto elaborates on the portion underlined above: Determinations not essential to thejudgment. lfissues are determined but the judgment is not dependent upon the determinations, relitigation of those issues in subsequent action between the parties is not precluded(emphasis added). Such determinations have the characteristics of dicta and may not ordinarily be the subject of an appeal by the party against whom they were made. In these circumstances, the interest in providing an opportunity for a considered determination, which if adverse may be the subject of an appeal, outweighs the interest in avoiding the burden of relitigation.420 190. The rule that a finding unnecessary to a judgment does not raise a collateral estoppel has been unquestioned federal law for over a century. The Supreme Court held in Russell v. Place 94 U.S. 606 608-9 (1876) (116) that:

to render the judgment conclusive, it must appear by the record of the prior suit that the particular matter sought to be concluded was necessarily tried or determined- that , that the verdict in the suit could not have been rendered without deciding that maller (emphasis added) or it must be shown by extrinsic evidence, consistent with the record that the verdict and judgment necessarily involved the consideration and determination of the matter.

Restatement of Jlldgments (1942) 93. But cf Restatement (2d) ofJlldgments 88 (Tent. Draft No. 2, 1975) eliminating the mutuality requirement for application of collateral estoppel.See Haize v. Hanover 1m;. Co. , 536 2d 576, 578, In. 1 (1976) Restatement of ,Jlldgments 2d (Tent Draft Ko. 4, 4/15/77) 68. ,21 Ibid.

. .

".H .uu. "M_ Initial Decision 191. In order to apply this law to the relevant facts it is necessary to review briefly the record here and the nature and history of the extraneous lawsuit where the findings in question were made. Following issuance of this complaint against Respondent Indiana Federation of Dentists in the Fall of I978, the State of Indiana and its Board of Dental Examiners, by its Attorney General, on I2/29/78 petitioned to intervene here to insure an adequate presentation of Indiana position on the Ustate action" question.

192. The Commission s rule concerning intervention (Section 3.14) provides little light on when intervention is justified. It provides: 14 Intervention. Any individual, partnership, unincorporated association, or corporation desiring to intervene in an adjudicative proceeding shall make written application in the form of a motion setting forth the basis therefor. Such application shall have attached to it a certificate showing service thereof upon each party to the proceeding in accordance with the provisions of 4.4(b) of this chapter. A similar certificate shall be attached to the answer fied by any party, other than counsel in support of the complaint, showing service of such answer upon the applicant. The Administrative Law Judge or the Commission may by order permit the intervention to such extent and upon such terms as are provided by law or 3.', otherwise may be deemed proper. (117) 193. The Administrative Law Judge, citing the tests laid down in Firestone Tire Rubber Company, D. 8818, 77 F. C. 1666 (1970), on 1/5/79 denied the petition to intervene (although welcoming any amicus curiae briefs). He did so primarily because no showing had been made that Respondent would not adequately present the State position and there was thus no countervailing consideration to weigh against the likely evil effects of complicating and lengthening the proceeding by permitting intervention.

194. On 1/19/79 the State ofIndiana applied to the Commission for review ofthe Judge s order but on 2/5/79 the Commission, too, denied intervention, primarily for failure to demonstrate how the State would likely improve on the showing to be made by Respondent. On 3/12/79 the Commission denied a petition for reconsideration and soon thereafter the would-be intervenor turned to the Federal courts. 195. On 5/23/79 the State ofIndiana and the Indiana State Board of Dental Examiners fied in the U.S. District Court for the Southern District of Indiana, Indianapolis Division, a complaint (with motion for preliminary injunction) against the United States of America and this Commission, which was then docketed as Civil No. IP-453- 421 Reciting the history ofIndiana s unsuccessful attempts to intervene in this case and pleading various facts relative to the "state action defense here, the State s complaint ended by asserting (Par. 46) that IX 10007 25 else'/- Initial Decision IOI F. the State ofIndiana was "entitled to intervention as ofright in FTC Docket 9118 pursuant to its sovereign right to regulate the dental profession within the State.

196. The prayer for relief which followed, however, did not limit itself to intervention but sought, alternatively, an order dismissing the FTC Complaint for lack of jurisdiction: Wherefore, the State of Indiana and the Indiana State Board of Dental Examiners respectfully request that the Court issue an Order: a) enjoining the F. G from proceeding (118) further, in any way, with the prosecution of docket 9118 unti the resolution of the instant complaint; b) finding that the F. C. lacks jurisdiction to proceed with docket 9118, and order that the cause be dismissed; or, in the alternative c) declaring that the State ofIndiana was wrongfully denied its intervention of right in docket 9118, and order that full intervention be granted immediately; and d) for all other just and proper relief.422 197. On 5/23/79 the United States and this Commission fied a motion (with supporting brief and proposed findings and conclusion) to dismiss this complaint or, in the alternative, for summary judgment on the grounds that (1) the District Court lacked jurisdiction over the subject matter; (2) that the complaint failed to state a claim; and (3) that there was no genuine issue of material fact and defendants were entitled to judgment as a matter oflaw.'23 On 7/10/79 the District Judge set 7/19/79 for a hearing and argument on the State motion for a preliminary injunction but when counsel appeared the District Judge expressed distaste for preliminary injunctions and stated his preference to proceed immediately to trial on the merits under F.R.C.P. Rule 65, to which proposal all counsel agreed. The Judge had Commission counsel orally admit or deny each allegation ofIndiana s complaint, then proceeded to hold an immediate hearing on the merits, which consisted of submission of a few affdavits and general agreement that a few others could be submitted within a few days. The case was thereupon submitted for decision. (The entire record of the hearing, which occupies only 57 pages, is in evidence here for easy reference.)'2' (119) 199. What followed is complicated. The District Judge had no hesitation in denying without opinion the Commission s motion to dismiss Indiana s complaint or in the alternative for summary judgment and did so on 8/17/79.'25 On the same date the District Judge made findmIXIOOUXX.

.1. IX 1000Z-11 .2. See CX 855A thruugh CX 855Z-5 (hearing transcript) and IX 1000G (Cour's entry for 7/19/79) 42.\ IX lOOOZ-4.

INDIANA FEDERATION OF DENTISTS 147 Initial Decision ings and conclusions generally taken from Indiana s proposals 426 and then by mistake entered both of the two judgments which had been proposed by Indiana as alternatives.427 200. One judgment signed by the District Judge ordered the Commission to "immediately grant plaintiff State ofIndiana s petition for leave to intervene in the Federal Trade Commission proceeding. 428 The second judgment signed by the District Judge ordered the Commission to "immediately cease exercising jurisdiction and dismiss the Federal Trade Commission proceeding. "429 It is plain, as recognized in 43o that it would beIndiana s original prayer for "alternative" relief inconsistent to order both the dismissal of the proceeding and the intervention of Indiana at the same time.

201. The mistake in entering both proposed judgments was promptly recognized and corrected sua sponte by the District Judge on 8/23/ 79 by adding the following entry concerning the 8/17/79 judgment of dismissal for lack of jurisdiction:

The above Judgment is vacated as improvidently entered in the belief it was a copy of a Judgment entered the same date. The Judgment permitting intervention of August 1979 is in full force and (120) effect.431 202. This left it that the only surviving judgment was the one compellng intervention. However, it also left a number of findings and conclusions proposed by Indiana and adopted by the District Judge which would tend to support a dismissal but would be unnecessary if not positively irrelevant to the intervention order. Accordingly, on 9/7 /79 the Commission fied a motion to vacate certain findings and conclusions nunc pro tunc to conform to the modified judgment. 203. The findings of fact by the District Judge which the Commission wanted vacated were specified to be as follows: (11) Indiana Code 25-14-1-23 and 25 define the criminal act of practicing dentistry without a license, which includes the diagnosing or reading of X rays.433 (18) Under the mandate ofIndiana Law, Indiana dentists are prohibite from submitting their dental X-rays to third party insurers who employ "dental consultants", who " IX lOOOZ-S through IX lOOOZ-lO i21 IX lOOY.

i2iIX JOOOU.

IX looaV 4aDIX IOOOXX.

4JJ IX IOOOY.

4J2 IXIOOOH- 4J3 IX IOOOZ-7.

Initial Decision 101 F. are not licensed to practice dentistry to read or diagnose the X-rays.434 204. The conclusions of law by the District Judge which the Commission wanted vacated were specified to be as follows: (121) (3) The order proposed by the Secretary of the F. C. would infringe on the State' right to regulate the practice of dentistry within the State under its police powers the Tenth Amendment to the Constitution of the United States (citing cases).'135 (6) The F. C. is proceeding beyond its jurisdiction in attempting to regulate the practice of dentistry in the State ofIndiana and should be enjoined from doing so (citing cases).436 205. The merest reading of these particular findings and conclusions-all ofthem going to the merits ofthe case here-makes it plain that they were originally proposed to support the demanded dismissal of this case on "jurisdictional" grounds and are quite irrelevant or immaterial to the demand for intervention, which turns entirely on procedural considerations and which Judge Holder had already found supportable in his Conclusion of Law # 5.437 The rest of the District Judge s conclusions are clearly unnecessary to the only judgment (intervention) rendered by him and accordingly should have been vacated when the other (mistaken) judgment of dismissal was vacated. not 206. However, the Commission s motion to vacate was granted. In an entry on 10/18/79 the District Judge (122) made an explanatory statement, which is reproduced here as Figures 8A- 438 to the effect that the Commission "has jurisdiction over certain ofthe matters and of the Indiana licensed doctors before it" but asserted on the other hand that "that jurisdiction is limited by the exclusive rights of the State of Indiana under the police power to protect the health of the citizens of Indiana and oversee the dental profession. It is this right " he explained, "that the defendants are enjoined from invading. . . . (See Figures 8A and 8E) 207. The rest of the statement is diffcult to follow and seems little more than a general expression of sympathy for the State s position on the merits here. While closing with an assurance that "the Federal Trade Commission is unhampered by this Court' s ruling of August 17 43' IX lOOZ-.

430 IX lOOZ- lO.

4J6IX 1000Z-1O 437 ' The State mt:t:ts the requirtJments for intervention lis t:stab!ished by the F. C. in the Firestone Tire & 1rubber C"mpany, Dkt. No. 8818, 77 F. C. 1666, 1669 (1970) in that the issues the State seeks to raise cannot be roper!y raised and argued by the current parties to the proceeding and only minimal additional cost and time ill be required by its intervt:ntioIJ." (Conclusion of Law #5) 4:J8 IX lOOOE-F __.

UhU _n.__ Initial Decision 1979 in fulfiling its mission in Docket No. 9118" he nonetheless added: "The findings of fact as found and the conclusions of law thereon are necessary for the relief sought." How findings on the merits of this lawsuit could be necessary to ajudgment in that lawsuit merely allowing intervention here the District Judge did not attempt to explain and we cannot convince ourselves that such could be the case.

208. Respondent and Intervenor now take the position that the District Judge s express statement that his findings were necessary to his judgment is dispositive. But this is contrary both to authority and common sense. Thus a judge s characterization of his judgment as made on the merits is not binding when objective analysis indicates otherwise:

Although the court which renders the judgment states that it is "on the merits," this characterization is not always conclusive in the forum or on other courts which are required to give full faith and credit to the judgment. Nor for purposes of Erie-Tompkin.s is the characterization by the state courts of its judgment as procedural or jurisdictional binding upon the federal courts sitting in that state, which are required to determine independently what is (123) "substantive" for purposes ufthe Rriedoctrine. IE Moore s Federal Practice, n 0.409(7J at 1041-1042 (2d Ed. , 1974). It is well settled. . . that what hm; been adjudicated is to be determined notf"rom the opinion rendered but from a con.sideration of the judgment actually entered in reference to the issues presented for decision. Adamsv. Pearson 41 1111. 431, 104 NE 2d 267, 270 (1952) (emphasis added).

The intention of the court to make a determination on the merits may be important but if" the judgment i.s clearly not on the merits, the court's intention to make it a bar is immaterial. The words "with prejudice" add nothing to the eflect of the judgment in such a case, no matter what light they throw on the intention of the court. Goddard v. Security Title Ins. and Guarantee Co. 83 P.2d 24, 28 (Ca1., 1938) (emphasis added). 209. Such cases merely reflect common sense: no judicial ipse dixit can make black white. There being no serious doubt that the District Judge s findings and conclusions about the merits of this case were not necessary to his only judgment (allowing intervention), the case is clearly governed by the ule of Section 68 of the Restatement of Judgments (2d) denying collateral estoppel where a determination is not essential to the judgment. " Our conclusions above with reference to the doctrine of "state action" and its inapplicability here thus correctly stand on their own two feet, unshackled by the District Judge s expressions of feeling about the merits here. Initial Decision 101 F. The findings of fact proposed by Complaint Counsel, Respondent and the State ofIndiana are all granted insofar as consistent with this Initial Decision and denied insofar as inconsistent herewith. (124) ::,, :; ._:.._ : ::, :?:: ; :.: .;:.,..,,: :::....:,,,.?::: ::,. : : ; , . :.: ::,:, :: . : :: .:: .L""".LA Initial Decision ri "r" S:, S'::" :':8T 0:' I!02.,:J' ;t.

L,_ PJ:2:5: =-,JT= :;OE .f,:E =,:::-;--i.:c f:L.J::::;':'=.: t::. I? 75-- S'il'::L:S :)1 il. ?::C:!.

12:: COK'::.:'::iO!\ XI C::'-.::. ?L?J:SCH"J:: Chc:i=s::" :.l\': m:::Jl;

:.::.c::'n HP.l.'FOli !JJ:U 1-., CUJ;:ON , e.!1C '?C':':;;:::?:T .?:;Tm' r-i2 :)O::-S of :;eaeTe.l 'ITa.c.e Co=iss::G:1 E!\'T?Y he ztteTs of the :f'eno.2.::, -:5 Sept T 7, 1979 matic va::e.ts c:C pto tu.'1C ccrtc. i:ic.L b::; 0: fB.::"c "-::CCO::c:;,c;sicr.s of law to co " to Dodifiec jud ent 2.E 2. :1j86 on 02"co er 9, 1979 -:c sho\.; b81ated service oj" roo ior. 0:: pl2.int.!ffs ' cO':lise: 8.no pl8. ':t::. ' mo:: o,: to .stt.'.1-:" C2.::e 0:- fot le CO"JTt' 5 T'c1lini;, CL'1g duly t5' mctio be ,)('. 2.S h",yc ::y n:':i2::EDi;:Jd ;;l2.:.::iffs on to st ike is MOC; LD by such :rlinb.

Sirr,uJta.neously JJErc;.;2. th t.::e Cou -- if il:.r: i; COP j:lc.;;i2:1t cntTY of AL1gust 17, 1979.

is ap a.T nt th2.t the rcdeY2.:: Trace CO=Jssio!1 h2. sciction aVCT ('",,.t. c:: - :: -: t. ..(' 2.:''0:. -:':: lo, Q.ni; I sse (l'::-::i ST:S o::", it. em ;: le Gt.he:: r-,2.n6. :'!1a jur sc.:l.ction -- s . tee by :,h," CXC!:.lsiVc Y':;.'1:'5 of ths S:'8.t 0: Indi3.Tla. urde:! :.!-,7' !-I'. -:!- 8:' t:I'2 cit:::: ns of' lng-ie-no: , t :,'tc' "'c' ;jC '-l( 'C: -,2S5lX;G t;pon t:,c ! , \, :: :;;: : . ::;: /,( ;, :::.;_.: :.: :;:; . , Initial Decision jO! F. S'-:.o:;s cf lcc. !",' 5 cit:'zcns of B.h greec: :::- con 1.c:; J,::;\i-:e:l a t:::"T"::; c: denl.:'st.'" e.nd ..he Fed.e:cc. ssic ch z. ';c. o-!' 2.n2. had 2.11P:':;, =-"1'= a;:cee!:2::t r'e:;\ :,en -:h:: :Eec2!"E.:' 1T,,de Co!:uassion C:::,i: ;::-c: .::; c:' L'1:ii2.:-c. Q.C:--:;"S7,S rl 6c. ll be in issue ir, the s=-.:::. cc,-.::lc.iI. ::- :'o2l:"':; Ik. 9118. Indian;; ' oS c;:=-:: . :;:: :.:-::.secl:-; c. de,,_:;:'s 0.2=' bre ly h2.mpCTed by suc :;: e:g;;cc::: O:c:;iO:1- The pcwe.: :::' -:he pUTse of the p2.y !".s --ou; W2cer.scd, :L'ncc::? :;e::t personnel could be :;h :.-::'2.-',: 6.8C:.(.:::I;; f2.C Oj in he osis of an Indiana ci ti=e ' oS he :'0; jen:; cate. It should be c ear that the mission::. c:- '" F",js.:",2- '!' !'o-:i2 Co::ssion is not 2-1.ted to the complai.2. t p2. 'e:-s ' 2.:i6. l.,t:-2-"1z. liccnst:G. dentis-:s p:::: "'-:s of view but also r2spe 'the ri';"::;$ :x:: the sovereib' Si:2.'te of' !.c.ianEi. and thus avoid cD!Jple.j..'1a,. t pa:,r d/cr Indiana' s censed den s use o the ?eder l 7ra:it: ComfssiOD proceed E to circumvent the State of Ci2. policing the dental pro ession, the interest-: o e hcalt of i is fj vc llion citizens, The F'edere.: Tr2.de CO=.SSiOD is una pered by t s Court' s ruling of August 17, 1979 in ful il2-L"1g its rrssion in Docket No. 91J ne firHlir.gs of facts as found and the conclusions of law thereon are necessary fat the relief soug.

Dated this day of October, 1979- ,--A'/ , J:-.."eu C?- e,). :-c lc.e" .;'.:ig;o ates District COUy-: South District or I CiaDa Initial Dccision (126) IV. CONCLUSIONS OF LAW 1. The Federal Trade Commission has jurisdiction over the subject matter of this complaint against unfair methods of competition and unfair acts and practices, by virtue of the provisions of Section 5 of the Federal Trade Commission Act, 15 U.8.c. 45. 2. The Commission has personal jurisdiction over Respondent unincorporated association and its members by virtue of the delivery of a copy of the complaint to its offce at 2403 Raible Ave., Anderson Indiana, on 11/13/78 , pursuant to Rule 4.4(a)(iii). 3. Although Respondent is an unincorporated association, for purposes of Section 4 oftheFederal Trade Commission Act, 15 U.8.C. 44 it is a !tcorporation" organized to carryon business for the profit of its members.

4. Respondent is not in the business of insurance and even if the targets of its organized boycott be deemed in the business of insurance, the McCarran-Ferguson Act's exemption of the insurance business from the antitrust laws expressly excludes application of the exemption to a boycott of the business. 15 U. c. 1012, 1013(b). 5. Respondent has billed itself as a labor union or labor organization and thus exempt from the strictures of the antitrust laws under Sections 6 and 20 of the Clayton Act, 15 U. C. 17 , but it is not such a labor organization and its activities are not exempt from antitrust scrutiny.

6. While the businesses of dentists that make up this association are not in interstate commerce, the practices charged in this complaint tend to have an adverse effect on the businesses of dental health care insurers serving Indiana, which are in interstate commerce. 7. Respondent was formed in 1976 to join and continue a concerted refusal by many dentists in Indiana to submit radiographs (X-rays) to dental health insurers either automatically or on request. 8. The concerted refusal of Respondent and its co-conspirators to supply X-rays to dental health care insurers on request is per se unreasonable restraint oftrade within the meaning of Section 1 ofthe Sherman Act, 15 U. C. 1, and an unfair method of competition and an unfair act and practice under Section 5 ofthe Federal Trade Commission Act, 15 U.8. C. 45. (127) 9. Even if such a concerted refusal were not an unreasonable restraint of trade per se there is no proof on this record of any procompetitive effect and no suffcient proof of any beneficial or effect on health/safety to outweigh the plainly anti competitive and anti-consumer effects of the IDA/IFD group boycott of dental health care insurers.

10. Respondent and its co-conspirators have also threatened to pre- Initial Decision 101 F. vent and to some extent have prevented said insurers from getting access to the services of dentist members except on Respondent's terms, as an ancillary weapon in the struggle over submission of X-rays.

11. Respondent' s continuing effort to organize refusals by dentists to supply X-rays requested by insurers is volunteered activity and has never been required by the State ofIndiana. Respondent has no "state action" defense here.

12. The findings and conclusions of the U.S. District Court for the , in State of Indiana v. Pert-Southern District ofIndiana, Holder, J. schuk, et al. (Civ. IP 79-453-C) raise no collateral estoppel here and do not operate to deprive this Commission of jurisdiction over this matter.

13. Respondent has violated Section 5 ofthe Federal Trade Commission Act, 15 U. C. 45.

14. The relief to be granted here wil be in the public interest. V. RELIEF The relief contemplated in the notice attached to the complaint is recited verbatim in the Summary of Proceedings above.439 However Complaint Counsel, as is entirely proper, now recommend following the somewhat difierent IDA consent order (Attachment A to "Complaint Counsel' s Brief Supporting Conclusions of Law ) and point to testimony that "this (IDA) order has been effective against IDA. 440 Even Respondent concedes that "all (insurance) companies apparently experienced a substantial increase (in X-ray submissions) in late 1978 after a consent order was agreed (128) to between the IDA and 44! How-the FTC and the IDA changed its (X-ray submission) policy. ever, Respondent's concession may be undue; the transcript references cited in support refer only to "an increase, not to "a substantial increase. 442 Whether the IDA consent order has really freed up Indiana X-rays significantly is not quite as clear as counsel on both sides would make out.

In any event it is our responsibilty to decide what seems most likely FTC. v. Ruberoid Co. 343 U. to put an end to the violation found FTC. v. All-Lumi- 470 473 (1962) with the least dislocation possible num Products, Inc. 63 F. C. 1268 , 1279 (1963) and to that purpose we have broad discretion Jacob Siegel Co. v. Federal Trade Commission 327 U.S. 608, 611 (1946), so long as the remedy is reasonably related to the offense, Federal Trade Commission v. Ruberoid Co. 343 U. 43" Seepage 4 above "OTr 922; Tr 1282.

HI Rlf #12.

Hl Tr 919 9U, 1282.

Initial Decision 470, 473 (1952). We shall now take up the several operative paragraphs of the IDA consent order one by one. Paragraph IIA ofthe proposed order goes to the heart ofthe case prohibiting IFD from intentionally organizing dentists to refuse to submit X-rays or other diagnostic aids to third-party insurers. Since the principal finding of this proceeding is that Respondent has done precisely what Paragraph IIA(l) would forbid, there can be no objection of substance to this proposal.

Paragraph IIA of Complaint Counsel's proposed order also contains a second sentence which would direct IFD to cease and desist from organizing dentists to "refuse to deal in any particular way with any one or more third-party payers (i. insurers)". This concern to forestall other boycotts for other purposes by members of an association already found to be boycott-prone is entirely reasonable, although we have revised the wording somewhat in our own. order. The Administrative Law Judge has made one important change in Par. IIA. The proposed order assumes that IFD wil remain in existence as an unincorporated association. The Judge sees no good reason for keeping this association in existence as such. Not an ordinary professional association carrying on the usual gamut of professional activities and services like IDA, IFD was conceived simply (129) as a labor union (front for those IDA members (particularly those living in the Anderson, Lafayette and Ft. Wayne areas) who were most concerned with keeping IDA's boycott of dental health insurers alive, even after antitrust prosecution began to loom as a real threat. With our decision forbidding the members ofIFD to continue their insurerboycott, the reason for IFD's being ceases and its continued existence could serve only as a constant temptation to use the organizational shell for the old, meretricious purpose or something like it. Dissolution of an ad hoc organization designed as a vehicle to carry on a venture unlawful under the antitrust laws is the oldest known form of antitrust divestiture. Dissolution ofthe holding company thru which a monopoly had been effected was the very heart ofthe relief in Standard Oil Co. o( New Jerseyv. United States, 221 U.S. 1 (1911). Accordingly, the very first provision of our order here wil be to order dissolution ofIFD within six months and a report to the Commission not more than a month later. In this situation our several cease and desist orders wil be directed to the members ofIFD rather than to the unincorporated association which has served as the vehicle for their unlawful activities and will therefore shortly cease to exist under our order. It is, of course, well established that the Commission can issue orders which are binding on unnamed offcers, agents, representatives and employees. Western Fruit Growers Sales Co. v. F re., 322 2d 67 (9 Cir. , 1963), cert. denied 376 U. S. 907 (1964); Mandel Bros. Initial Decision IOI F. v. F.T.c., 254 F.2d 18, 22 (7 Cir. , 1958), reu d on other grounds, 359 U. 385 (1959). A fortiori as to members of an unincorporated association sued in the association s name.

Paragraph lib of Complaint Counsel's proposed order would forbid IFD to compel or coerce insurers to change any provision of a dental health care benefits program. This situation seems covered by the provision of our own order ((2 2))) just discussed. Accordingly, we omit recommended Paragraph lib.

Paragraph lic would apparently prohibit activity by Respondent which has either of two purposes:

1. inducing patients to choose dentists who do not cooperate" with dental health insurers; or 2. influencing patients to choose dentists on the basis of how such dentists do not cooperate" with insurers.

The provision seems aimed at consumer-level boycotts but it (130) is abstruse and unclear. The key word "cooperate, which could mean many things, is not defined and its presence would make the provision quite diffcult to enforce. Moreover, there would usually seem to be little need for this kind of auxilary prohibition if the association be dissolved and the members be forbidden to pursue the insurer-boycott which is the gist of this case.

Moreover, the only443 cited evidence in this record that IFD has ever tried to mount anything like a boycott at the consumer level is a single incident in the latter part of 1977 and early 1978 involving "Arnie Pizza King" in Lafayette, Indiana.'" When the Lafayette chapter heard that "Arnie" was posting a list of "accepted" and "non-accepted" dentists in Lafayette for its employees' reference, IFD' s Dr. Fontained either was deputized or volunteered (the record is not clear) to discuss removing the list with the owner."'45 Some months later IFD' Union News reported with reference to an unidentified restaurant in Lafayette (which we assume to be "Arnie ) that "it was good to hear that a simple phone call from the IFD remedied the situation. 4'6 The record does not show whether Dr. Fontaine in his phone call engaged in any threats of economic or other pressure or simply relied on a personal friendship or took some other approach unrelated to a boycott threat; nor do we have any evidence of why "Arnie" took down his list.

It seems to the Administrative Law Judge that a broad prohibition W We are at a lOBS to underSland how Complaint Counsel's reference to the Anderson chapter s monopoly of orthodontisw audoral surgeons in that. area could bear on this particular provision and have accordingly disregarded Complaint Counsel's reference tu that fact 41' ex 544A; ex 547 ,,, ex 544A; ex 547.

'''CX563B --._uu.-- ___L' ._u._---- Initial Dccision of consumer-level boycotts such as would be forbidden by recommended Par. IIC should not be based on a single, isolated minor incident (about which we really know very little.) Accordingly we exclude recommended Par. IIC or any equivalent from our order. The last two provisions of Complaint Counsel's proposed order (Paragraphs II-D and II-E) might well be called the (131) "Pierce clauses" for both seem to be aimed at practices involving, among others, Dr. Pierce, the dentist nominated by IDA to be a consultant for CG but who always remained loyal to IDA and IFD. Paragraph II-D of Complaint Counsel' s proposed order would prohibit IFD from trying to induce insurers to select certain dentists as dental consultants for any reason but their expertise, while Paragraph II-E would prohibit IFD from trying to influence dental consultants to render opinions which they do not really believe. Complaint Counsel find need for these provisions firstly because the evidence shows IFD pressuring" CG to make reluctant use oftheir candidate (Dr. Pierce) to review claims in the Anderson area and secondly because Dr. Pierce was, as we have said, a strong IFD supporter who hardly ever requested other dentists' X-rays or even visited local dentists' olIkes to review X-rays there for CG.

The half dozen dental consultants involved here were the product ofa compromise between IFD and CG when the GM-UAW plan started and the compromise somehow kept CG operating in Indiana despite the formidable opposition of the IDA/IFD conspiracy. For various reasons the idea of having IDA nominate these experts to CG (to decide diffcult benefit questions) happened to serve the interests of both parties. This case was not brought to test Dr. Pierce s faithfulness or faithlessness. Efforts to deal with such minor, incidental matters in a Commission order dedicated to freeing up a substantial business beset by an unlawful boycott serve only to confuse the point of the exercise and, accordingly, we decline to be side-tracked into putting ttPierce clauses" in our own order. ORDER The Administrative Law Judge now finds that issuance of the following Order will serve the public interest: 1. All members of the unincorporated association and component chapters known as the Indiana Federation of Dentists shall henceforth cease and desist from associating themselves together in that organization and the offcers of the association shall take all steps necessary to effect its complete dissolution within six months from Opinion 101 FTC.

the date of this order, reporting the details of such dissolution to this (132) Commission in writing within one month thereafter. 2. All persons who have at any time since 8/24/76 been members of the Indiana Federation of Dentists shall henceforth cease and desist from expressly or impliedly agreeing among themselves or with other dentists to:

(1) refuse collectively to submit patients' dental radiographs (or any other diagnostic aids) to dental health insurers who, with the patients' consents, request such radiographs; or (2) refuse collectively to deal with anyone in order to force their wil on the target of such boycott.

3. Respondent wil forthwith mail a copy ofthis decision and order by registered mail to every member of the association at his last known address.

OPINION OF THE COMMISSION By PERTSCHUK Commissioner:

The practice of dentistry is not the selling of salt, aluminum, or tobacco. Dentists provide personal health services, not fungible goods. Moreover, the activities of professional associations contribute to the high level of health care in this country, just as trade associations help improve the quality of goods in many industries. But dentistry is business, and the business practices of dentists are subject to the same antitrust laws as are the business practices of manufacturers, jobbers, and retailers. Conspiracies and boycotts which substantially limit competition are methods of self-regulation that violate the very essence of our antitrust law. In this case, respondent joined and assumed leadership of a conspiracy of Indiana dentists to withhold patient x-rays from dental insurers, thereby frustrating their costcontainment programs. We conclude that its methods were unacceptable and must be forsaken. (2) L SUMMARY The complaint in this case was issued on October 18, 1978, charging that the Indiana Federation of Dentists ("IFD") violated Section 5 of the Federal Trade Commission Act! by engaging in a concerted course of conduct with its members to eliminate or hinder competition among dentists with respect to their cooperation with the implementation of certain kinds of dental insurance programs. The complaint alleged that the conduct ofIFD and its members was a continuation 115 c. 45(a)(I)(1976) .

I.lftl ft l' t:'JJ_n:JJ ft 1 tVt, V1' .uD '.LHJ.LU Opinion ofthe concerted action engaged in by the Indiana Dental Association ("IDA"), its members, and its component societies since at least 1961.

Respondent IFD is an unincorporated association of Indiana dentists formed in August 1976. (CX 477B-; CX 22A)3 Membership IFD is open to any licensed dentist who endorses IFD's purposes and tbose of the American Federation of Physicians and Dentists, with which IFD is affliated and to which each IFD (3) member must belong. (CX 13C) IFD's membership is concentrated in and around the three localities of its chapters: Madison County, Dalevile, and Middletown (Chapter # 1) (CX 14A); Tippecanoe, Clinton, White, and Carroll Counties (Chapter # 2) (CX 15A); and Allen County (Chapter # 3) (CX 16A). As of February 1979, IFD had 84 dues paying members and 8 former members. (CX 12; ID 3) Its affairs are conducted by an eight-member executive committee, which includes a president, vicepresident, secretary, and treasurer. (CX 13G- l) IDA is a "constituent society" of the American Dental Association; most Indiana dentists belong to IDA. (ID 14) The gravamen of the complaint is that IDA, its component societies and their members in agreement among themselves and with IFD and its members, through the distribution of guidelines, the conduct of meetings, workshops, pledge campaigns and other actions, engaged in a course of conduct to eliminate, prevent, or hinder competition among Indiana dentists with respect to their cooperation with third party payers administering dental health care insurance programs containing "predetermination" and "least expensive adequate course of treatment" provisions.' The (4) complaint alleges that IFD has IDA was named as a co-conspirator but not as a respondent At the time the Commission i ued the complaint against IFD , it accepted provisionally a consent order from IDA, 4:1 Fed. Reg. 53767 (1978). That order was finally accepted in 1979 93 F. C. 392 3 The following abbreviations will be used in this opinion: Initial Decision, Finding Number ID Tr1' -- Transcriptlnitial Decision,of Testimony,Page :\umberPage Number CAB - Complaint Counsel's Answering Brief, Page Number RAB - Respondent' s Appeal Brief, Page Number lab - Intervenor s Brief, Page Number CX - Complaint Counsel's Exhibit Numher RX - Respondent' s Exhibit Number IX - Intervenor s Exhibit Number Least expensive adequate course of treatment" provisions limit coveragf' 10 the least expensive treatment that is commonly accepted as providing good dental care The more widely used tJlIne in recent years for this dental program feature is "alternative benefits" coverage. Programs that offer alternative benefits coverage usually allow dentists to submit treatment plans for approval before the treatment is provided, if it wil cost more than a given minimum. Insurance companies ene.ourage dentisw to submit non-emergency expensive treatments for "predetermination " so that the treatment can be discussed and, ideally, disagreement between the dentist and the company as to what would constitutr good care for t,j", patient can be resolved before the treatment is provided. Whether or not agreement is reached, predetermination of benefits at least advises the patient and dentist--before treatment is provided-how much the insurance company will pay for treatment While predetennination of benefiw is encouraged, it is not required by either Connecticut General or Aetna (Tr 779, 1106) or, as far as we can discern from the record, by any other company offering a dental plan in Indiana. (footnote cont'd) ,; g., Opinion IOI F.

sought to hinder competition among dentists by encouraging its members to adopt a uniform course of conduct in dealing with such thirdparty payers and by urging payers, purchasers, and beneficiaries of dental health care plans to eliminate provisions of such plans that it finds unacceptable. Such conduct allegedly restrained competition among dentists, affected the cost of dental health care services in Indiana, deprived consumers ofthe benefits of cost-containment programs and second opinions, and limited the opportunity of consumers to select dentists who cooperate with dental health care benefits programs. At least, it is alleged, the conduct had the tendency or capacity to have such effects. The complaint alleges that these activities constitute unfair methods of competition and unfair acts or practices in violation of Section 5. (5) Following the trials the Administrative Law Judge C'ALJ") concluded that the Commission had jurisdiction over the respondent' practices since: (1) the respondent is a "corporation" within the meaning of Section 4 ofthe FTC Act (ID 4 5); (2) it is not a labor organization within the meaning of the exemptions of Sections 6 and 20 of the Clayton Act (15 C. 17 and 29 V. C. 52) (ID 6); (3) neither it nor the ninsurers" with whom its members have refused to cooperate are engaged in the business of insurance within the meaning of the McCarran-Ferguson Act (15 U. c. 1012, 1013(b)) and, in any event that Act does not exempt from the federal antitrust laws agreements to boycott (ID 7); and (4) respondent's conduct was a " substantial" restraint on interstate commerce. (ID 9-11) With respect to the merits, the ALJ found that respondent IFD was formed for the purpose of adopting or continuing IDA's conspiracy to keep Indiana dentists from submitting x-rays to dental insurers (ID 104) and that widespread compliance by IFD members with the IDA-IFD boycott policy was achieved. (ID 114) Additionally, the ALJ found that IFD and its co-conspirators threatened to prevent and to some extent prevented dental insurers from obtaining access to the services of dentists as dental consultants except on (6) respondent's terms (ID, p. 5), dental insurers encountered diffculty in hiring licensed Indiana dentists to review dental claims and those hired encountered heavy resistance. (See, e. ID 45) The ALJ rejected respondent' s state action defense (ID 149-185) and held that IFD's conduct constituted an unfair method of competition and an unfair practice in or affecting Dental insurers commonly n"'luest copies of pretreatment(i- diagnostic) patient x-rays to use in evaluating dental treatments under alternative benefits coverage, particularly in evaluating more expensive treatments. If the dentist refusc8 to provide such x- rays, a claim for reimbursement may be denied entirely.(See, e. IV 44) ; T!", trico! began on Octobp.J" 2, 1979, and continued through Novemb",r L The record, which includes approximately 41\0 exhibits and 2 785 pag!'s of tnmscript from the !oearing, w,m closed on !\ovemher 16, 1979. Dental consultants" refers to those dentists hired by dent.l insurers for the sp,,,ific purpose of reviewjng nental claims where there is " question as to the lea t expensive adequate cour:;e of treatment. , p.

Opinion commerce in violation of Section 5 of the FTC Act. (lD 120-148; ID 127) The ALJ issued an order that inter alia, provides for the dissolution of respondent within six months from entry of a final order and prohibits all dentists who have been members of IFD from agreeing to refuse collectively to submit consenting patients' x-rays to dental Insurers.

Respondent argues on appeal that its alleged conduct did not have a substantial effect on interstate commerce and is also exempt from Commission scrutiny by virtue of the state action doctrine and collateral estoppel. Respondent claims further that its actions do not support a finding of liability under either a per se or rule of reason analysis, that no conspiracy was established, and that the proceeding is not in the public interest. Finally, with respect to the ALJ' s order for dissolution, IFD maintains that the order is overly broad and not reasonably related to the alleged offense. (7) II. COMMERCE Respondent's sole challenge to the Commission s jurisdiction is its argument that: (1) there is insuffcient evidence to establish the required nexus between IFD's conduct to prevent the submission of x-rays to dental care insurers and the interstate commerce of the insurers, and (2) the record does not show that the alleged conduct of IFD had an effect on the interstate commerce of the insurers. (RAB 56-57) Contrary to respondent's assertions, the ALJ concluded, as do , that there is ample evidence to support the Commission s assertion of jurisdiction in this case.

There is no serious question that the businesses of dental health care insurers, such as Aetna Life and Casualty Insurance Company and Connecticut General Life Insurance, that have been the target of IFD and IDA's activities are in interstate commerce. United States South-Eastern Underwriters Ass n, 322 U.S. 533 (1944). Even the insurance contracts themselves that gave rise to IFD and IDA' s challenged conduct were interstate in character, as they were not mere personal contracts but agreements between national employers (e. International Harvester and General Motors) and national insurance companies. Moreover, it is clear that the volume of business conducted by the companies in Indiana was substantial. (See ID 11 and ID 24.) Thus, the only real issue is whether respondent's (8) conduct has had the necessary connection with and effect on such interstate commerce.

1 Since onlythe interstate commerce challenge to jurisdiction was r"ised in respoadent's poot- trial brief, we regard ils other jurisdictional defenses to have been abandoned Opinion 101 F.

Assuming arguendo that the provision of dental care services wholly intrastate in character, it is nevertheless an integral element in the implementation of dental health care insurance plans. Moreover, unlike the restraint on title search services in Goldfarb v. Virginia State Bar 421 U.S. 773 (1975), that only indirectly affected the interstate financing of mortgages, any restraint on the cooperation of dental care providers with dental health care insurers can directly affect the business ofthose insurers. Indeed, respondent' s conduct was purposely directed toward those businesses. The ALJ concluded, based upon his reading of McLain v. Real Estate Board of New Orleans, Inc. 444 U.S. 232 (1980), that the Commission s jurisdiction was suffciently established by the fact that respondent' s boycott was designed to affect adversely interstate commerce.8 While such a finding alone may be (9) adequate, the record in this case shows that respondent' s activities did in fact "substantially and adversely" affect interstate commerce. Hospital Bldg. Co. Trustees of Rex Hospital 425 U.S. 738, 743 (1976).9 (10) Since, as we will discuss below, IFD continued a conspiracy initiated by IDA, we begin by examining the effect of IDA's activities. A May 1972 edition of IDA's Manual on Group Funded Dental Care Programs declares in its "Principles for Determining the Acceptability of Plans for the Group Purchase of Dental Care" that group dental care plans " must not require the dentist to submit radiographs to a third party." (CX 47E) The Manual' s model "To All My Patients " letter includes the following:

a The McLain decision dealt with an alleged r.n piracy tofix commission rather fof real estate brokers. The ALJ relied on the fonowing language in that opinion To establish the jurisdictional element of 11 Sherman Act violation it would be suffcient fot petitioners to rlcmOtmtrate a substantial effert on interstate commerce generated by respondents' brokerage activity. Peti. tioners need not make the more particuJari..ed showing of an effect on interstate commerce caused by tbe alleged conspiracyto fix connnission rates, or by those other aspects of respondents' activity that are alleged to be unlawful. The validity of t.his approach is confirmed by au toxamination of the case law, If establishil1g jUr!sdjctiou required a showing that the unlawful conduct itselfhad an ellect on interstate commerce, jurisdic. tion would be defeated by a demonstration that the alleged restraint failed to havto its intended anticompetitive toffect. This is not the rule or our cases. 444 UB. at 242--3. He ..apparently read thill passage to support the conclusion that ifthe legitimate dental practices ofrespoDdf!Ot' s individual members atTtocttod interstatto commerce, it was unnecessary tu show that the IDA-IFD conspiracy it.!f"m cted interstate commerce. The ALJ is not alone in concluding th"t the holding Md,ainof w"s that "it was not necessary for the alleged Hl1titrust violations complained ofto have affected interstate commerce a Joug as defendant. ' busines\l activities independent of the violation, affected inlerstate conmlCrce Western Waste Service Systems v. Un.iversal Waste Omtrol 616 F.2d 1094, 1097 (9th Cir.,cert denied,449 U,S. 869 (1980).Also, Bain Henderson 621 F 2d 959 961 (9th Cir. 1980):Classen v. Weller 516 F, Supp. 1243, 1244 (:-.D. Cal. 1981) Contra, Crane v, Intermountain. Hea.lth Care, Inc. 637 F.2d 715 (10th Cir. 1981). However, it is unnecessary forus to decide here whether this is the correct reading ofMcLain or w!,, ther the rule set forth in that case is applicable here, since the more stril1g.,mt jurisdictional standards of(;old(arband Hospital Bldg. Co.v, Tmslees of Rex Hospital,425 U.S. 738, 743 (HI76), disc\1B\led ahove, can besatbfied.

"TIlis and other cases de ided under Section 1 of the Sherman Act havto "nalyzed that A"t to cover practices that "substantially ..nd "dversely" affect interest.ate commerce. Since Se tion 5 of the Frc Act governs practices in or affecting commerce " practices within the Sherman Act'sjurisdiction are nec€sfl'lri!y also suh)ect to the l- Act. However, practices that do not meet the t.est for Sherman Act jurisdiction may nevertheles. be subject to the FTC Act . . . . .. INUIA1'rH\ I'J'-,.LC.Ha.L.L Opinion Dental radiographs are a part of the dentist's legal health records. They are available for valid review by a qualified representative(s) of your insurance company in this office. Radiographs wil not be submitted to third parties for their use in determination of benefits (e. , least expensive adequate procedure, or optional course of treatment) because a determination of an adequate treatment plan can only be made after a knowledge of the following:

A. Complete patient evaluation.

B. Radiographs.

C. Additional diagnostic procedures as required. (CX 47G) (emphasis added) In 1973 IDA sought written pledges of support for its Principles of Acceptability from its members throughout Indiana. (Is membership in 1974 included about 85 to 88 percent of the state s dentists. (CX 303E)) The organization found the project to be a "tremendous success " with 100 percent support in some local societies. (CX 138; ID 27-32) In 1975, a survey of the actual practices of 2 000 of IDA' members, with 1 342 responding, showed that of 811 members receiving requests for x-rays from insurers, only 133 were providing them. (lD 33-34) (11) With respect to two particular dental insurers, Aetna and Connecticut General ("CG"), the record shows that: (1) at IDA's urging, many of its members, particularly in areas where IDA's organization was strongest, refused to provide x-rays for review; (2) through its leadership IDA as an organization pressured the companies not to request x-rays; and (3) the companies were forced to modify their normal practices in processing insurance claims in response to this concerted action in Indiana. This resulted in some cases in claims not being paid to insured patients or in their being delayed, and it also increased the companies' costs in administering their programs. (ID 39-80) At its first annual meeting on April 24, 1977, IFD adopted a "Work Rule" declaring that a dentist "has a moral and legal responsibilty to not allow a determination of his patients (sic) condition to be made for any purpose without the benefit of a complete examination " (CX 537A) (emphasis added) The new organization designed and distributed to its members a form letter for denying requests from insurers for x-rays (CX 586A-B; CX 556A- , F; CX 563G-D), which was widely used. (ID 114) (See, p. 85 for an ilustrative letter.) After seeking x-rays from one Madison County member in early 1977, the manager ofthe CG offce in Indianapolis concluded, on the basis of the reaction he received from IFD's representatives, that CG would have to continue its policy of excepting Madison County dentists from its normal procedures in processing dental claims. (ID 116, 117; Tr 870- 878) The representative of another insurer, Metropolitan Life Insurance Company of New York, testified that his company (12) continued Opinion 101 FTC.

to request x-rays from IFD members and, when refused, did not pay benefits to the insured patient. (Tr 1614-15) From this and other evidence reviewed in the Initial Decision, the Commission concludes that respondent's activities have had a substantial effect on interstate commerce in the provision of dental health care benefits programs. (See, particularly, ID 11 and Figure 1 ID p. 24.

III. CONSPIRACY Respondent does not contest the ALJ' s finding that IDA conspired with its members to boycott dental insurers. However, respondent asserts the absence of suffcient evidence in the record to sustain the ALJ' s finding that IFD members conspired among themselves and with IDA to withhold dental x-rays from dental care insurers. We conclude, however, that the preponderance of evidence in the record supports such a finding.

The record here is rich with evidence from which a "reasonable inference" can be drawn of the adoption and continuation of IDA' activities by respondent and its members. Eastern States Retail Lumber Dealers ' Ass v. United States 234 U. S. 600 (1914); Interstate Circuit, Inc. v. United States 306 U.s. 208 (1939). See also United States v. Cadillac Overall Supply Co. 568 F.2d 1078, 1087 (5th Cir. 1978), cert. denied, 437 U. S. 903 (1978); United States v. Consolidated Packaging Corp. 575 F.2d 117, 126 (7th Cir. 1978). Contrary to respondent' s characterization ofIFD as "a breakaway group of dentists who were dissatisfied with IDA policy" (RAB 58), the record shows that a major impetus for the formation of IFD was a (13) growing apprehension that IDA's activities could be challenged successfully under the antitrust laws, coupled with a misimpression that a "dentists' union" would be immune from such action. (ID 87-98) Some IFD leaders also felt that a union could be more effective than IDA in dealing with dental insurers, and that a union was a "more suitable vehicle" than IDA for such activities. (ID 102) However, their intent was not to set ofrin a new direction, but rather to continue the same activities through a new organizational form. In addition to evidence of this fact found by the ALJ in statements ofIDA and IFD leaders before and immediately after the formation ofIFD, there is evidence in the record that well after IFD was created, its leaders continued to view its mandate as one of continuing the IDA conspiracy. (E. 540A, Tr 1715-16) The record contains evidence not only ofthe declaration of common objectives by the leaders of both organizations, but also of cooperation between members and leaders of both organizations (e. CX 486A-C, CX 490A-B, CX 492A, CX 543A) and leaderg., INDIANA FEDERATION OF DENTISTS 165 . Opinion ship by the same persons in both organizations in the formulation of policies for dealing with third party insurers. (ID 15 and Fig. 2, ID 16 and 25) Hence, we conclude that the record supports a finding of conspiracy between IDA and IFD, notwithstanding IDA's gradual withdrawal during the period that IFD was being organized. (14) With regard to the issue of whether respondent conspired with its members to withhold x-rays, the record is replete with evidence of adherence to common objectives and of coordinated activities by respondent and its members. First of all, a major formal objective of IFD, as stated in its Constitution and by-laws, is "(t)o represent dentists in all socio-economic matters, negotiations and grievances with employers, third, and fourth parties or any group that is involved in financing or delivery of dental care." (CX 13A) Subsequent to IFD' formation, the IFD Work Rule was adopted at an annual meeting of the full membership. (CX 537 A) By direction of the Executive Board (CX 541A), the Work Rule was printed on the back of a claim form created by IFD for its members. (CX 542A-B) This form was used by members refusing to submit x-rays to dental insurers. (CX 680-82; CX 713; CX 718) IFD members also used a common form letter to deny requests for x-rays. (CX 586A-B; ID 114 and ID p. 85) On at least two occasions, IFD' s President responded on behalf of another IFD member in refusing to submit x-rays. (CX 652, 653; CX 654, 655) On another occasion, a request to an IFD member resulted in a call from IFD' Vice President; this call further resulted in a meeting between IFD representatives and a manager ofCG, after which CG refrained from making further requests of Madison County IFD members for x-rays. (lD 117) IFD' s President also represented its members in a meeting with another dental insurer and the union and Madison County employer whose dental plan was administered by that company. (ID 118) He stated that IFD members would not submit x-rays. (Tr 1625) (15) IFD' s policy to withhold x-rays was also expressed by its representatives in meetings with other employers and unions. (E. Tr 1665- 1667, CX 544A.) Hence, we conclude that there is ample evidence in the record to support a conspiracy among members of IFD and between IFD and its members.

IV. SECTION 5 Respondent is alleged to have engaged in unfair methods of competition by conspiring with certain Indiana dentists to refuse to provide x-rays to dental insurers for use in benefits determination. Central to the Commission s complaint is the following charge: PAR. 2, Since September 1976, respondent and its members, in concert and agree- .

Opinion IOl F.

ment among themselves, have acted in furtherance of the agreement and concert of action alleged in Paragraph Nine, and have otherwise engaged in acts, practices, and methods of competition to eliminate, prevent, or hinder competition among dentists with respect to cooperation with dental health care benefits programs containing predetermination and least expensive course of treatment provisions As described in paragraph nine ofthe complaint, the specific acts add practices include: (1) promulgating guidelines and principles for dealing with third-party payers, along with forms and information to facilitate adherence to them; (2) encouraging members to refuse to serve as dental consultants for third-party payers and to refuse to provide x-rays to them for use in benefits determination; and (3) conducting meetings and pledge campaigns among their members to gain the agreement of individual members not to compete with other dentists in dealing with third-party payers. (16) The ALJ found that IFD had engaged in these practices. We agree that the record shows clearly that IFD pursued these practices, principally as a follow-up to the activities of the IDA before IFD was formed. The respondent, in fact, does not appear to dispute vigorously that it engaged in these practices but rests its case primarily on the proposition that the conduct was Dot unlawful under a rule of reason analysis and that it was justified for reasons related to the quality of dental care. In particular, IFD argues that "under the rule of reason the pro-competitive or beneficial effect of respondent' s alleged conduct on health and safety, outweighs any anti-competitive or anti-consumer effects." (RAB 4) The ALJ found that respondent' s conduct amounted to a per violation of Section 5 ofthe FTC Act on the grounds that it constituted a group boycott which is unlawful per se. In addition, however, the ALJ found that IFD's conduct substantially harmed competition under a rule of reason analysis so as to violate Section 5 even under a more far-reaching examination of competitive effects. In reviewing the ALJ's findings, we address first the proper standard of analysis of the reasonableness of the alleged acts and practices. The Supreme Court has stated that some practices which restrain competition should be held per se unlawful without the need for substantial inquiry into their competitive effects. Thus, some practices which have been consistently found to harm competition with little or no competitive justification are held per se unlawful in order to avoid "the necessity for an (17) incredibly complicated and prolonged economic investigation into the entire history of the industry involved, as well as related industries, in an effort to determine at large whether a particular restraint has been unreasonable-an inquiry so often wholly fruitless when undertakeD. Arizona v. Maricopa County Medical Society, 50 U. W. 4687, 4691 (U.S. June 18, INUIAl\lA l'r.UJ 1\.nLLV Opinion 1982), quoting Northern Pacific Railway Co. v. United States 356 U. , 5 (1958).

Accordingly, courts have determined that per se ilegal practices United Statesinclude, for example, horizontal division of markets TopeD Associates, Inc. 405 U.S. 596 (1972); price fixing agreements United States v. Socony- Vacuum Oil Co. 310 U.S. 150 (1940); and v. Feder-group boycotts Fashion Originators' Guild of America, Inc. v. Broadway-al Trade Commission 312 U.S. 457 (1941); Klor s Inc. Hale Stores, Inc. 359 U.S. 207 (1959).

Examination ofthe group boycott cases reveals some which involve agreements between businesses which were designed to exclude or limit actual or potential competitors from the market. For example in Fashion Originators; 312 U.S. at 467-468, wholesale firms with a substantial market share sought to prevent potential competition from so-called "style pirates" by agreeing to implement an elaborate enforcement plan and an agreement not to sell to non-conforming firms. The Supreme Court held, notwithstanding the tortious nature of the conduct of the "pirates " that the wholesalers' boycott agreement and enforcement plan were per se illegal. 312 U.s. at 467--8. In per se ilegal (18) Klor 359 U.S. at 211-212 , the Supreme Court held an agreement by several manufacturers not to sell to a single retailer upon the solicitation not to deal by the retailer s competitor. Other group boycott cases involve practices implemented for the purpose of extracting more advantageous business terms or practices for economic gain. For example, in Paramount Famous Lasky Corp. v. United States, 282 U.S. 30 (1930), an agreement among competing fim distributors to utilize only a standard form contract, which contained binding arbitration of disputes provisions, in transactions with fim exhibitors and an agreement to refuse to deal with non-conforming exhibitors were held to comprise an ilegal concerted refusal to deal. Although the Court had not yet clearly distinguished the per se and rule of reasons approach to analysis of restraints on competition the fim distributors' agreement was found unlawful without an elaborate inquiry about competitive effects. The contract arrangement in Paramount Lasky would have resulted in a highly probable anticompetitive effect because it eliminated competition as to key provisions in contracts with fim exhibitors. The Supreme Court made clear in St. Paul Fire Marine Insurance Co. v. Barry, 438 U. S. 531 (1978), that the concept of "boycott" includes a concerted refusal to deal with another party in an effort to obtain advantageous terms in the commercial relationship. Id. at 541. However, the Court did not decide whether a concerted refusal to deal, as examined in Barry, was subject to the per se test of ilegality. Id. 544. (19) Opinion IOJ F.

Despite the fact that at least some types of group boycotts have been found unlawful per se we disagree with the ALJ that a per se analysis is appropriate here. First, we note that the type of restrictions on competition encountered here have not been the subject of frequent prior antitrust analysis. The conduct by the Indiana dentists involved a group decision to withhold x-rays Irom parties which were neither customers nor competitors. IFD conspired to withhold a tool ofmedical diagnosis, the x-ray, rather than all significant aspects of the dentist-insurer transaction. Finally, this arrangement arose in the context of health providers' bargaining with third-party payers as to the mechanisms which could be used to review claims. Because there has not been extensive analysis by the Commission or the courts of this type of restraint, a per se analysis is less appropriate. Broadcast Music, Inc. v. Columbia Broadcasting System, Inc. 441 U. S. 1 (1979); American Medical Ass v. FTC 94 F. C. 701 , 1003 (1979), aff'd 638 2d 443 (2d Cir. 1980), aff'd by an equally divided Court 50 U. L.W. 4313 (U.S. March 23, 1982).

Second, we observe that the respondent's conduct is not wholly motivated by an anticompetitive purpose. While, as we discuss below the practices do have a significant effect in reducing competition, they arise in the context of proffered justifications for their use and thus are not "naked restraints of trade with no purpose except stifling of competition " which (20J would make a per se analysis more appropriate. Broadcast Music 441 U. S. at 20; White Motor Co. v. United States 372 U.S. 253, 263 (1963).

Third, as discussed above, it is not clear that this type of group boycott should be subject to a per seanalysis, even when viewed as one of a class of restraints with which courts have had long experience. While it limits competition among participants in the boycott, it is not aimed principally at excluding competitors. Thus, while we do not express a view as to whether any boycott which is not aimed at excluding competitors should be analyzed under a rule of reason, the Jack of clear precedent for a per se analysis in this situation is another reason for engaging in an inquiry about competitive effects.!o Therefore, we turn to a consideration of the reasonableness of respondent's no-submission requirement. The test oflegality is " whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. Chicago Board of Trade v. United States 246 U.S. 231 , 238 (1918); National Society of Professional Engi. neers v. United States, 435 U.S. 679, 691 (1978). To assess the legality II We note that the Supreme Court has recentjy stated that fI n.le of reasun anaJysisvot. appropriateis merely beCiluse of the peculiar characteristics of the health can, market or because professionals are parties to the chaUenged condud. Arizona v. Maricopa COlmly Medical Society, 50 U. L.W, ,,I. 4691 ....,, .

rLJ.'rL J. LH.......

Opinion ofthe IFD restrictions under a rule of reason analysis, we must examine their nature, purpose (21) and effect on competition, including an assessment of any possible procompetitive impact. Chicago Board of Trade 246 U. S. at 238.

The f\).11 scope and effect ofIFD' s own practices can be fully understood only by examining also the activities of IDA and IFD' s relationship to IDA.l1 As we discussed in Part II, IDA adopted a manual which was distributed to all IDA members, specifying "Principles of Acceptability" for dental insurance plans, including the condition that these plans not require the submission of x-rays. The manual contained form letters to be given to patients stating that x-rays would be available to insurers only in the dentist's offce and, by inference, directed member dentists not to violate this condition for an "acceptable" dentist-insurer relationship. In addition to distributing this manual, in 1973 IDA conducted a campaign to obtain signed pledge cards from its members by which member dentists promised to comply with the manual's principles. More than 85 percent of the membership promised to comply. (CX 74A) Subsequently, in 1975 IDA conducted a mail survey to determine compliance. (22) Although IDA's offcial policies always focused on the use of x-rays by dental insurers, the record evidences a discernable undercurrent of hostility toward third party payment plans as a whole, and particularly plans that contained alternative benefits limitations. Announcing the organizational meeting for the pledge campaign, the co-chairmen, Drs. Rohn and McClure, began their letter: "As you know, there is significant rapid growth of group-funded dental care programs in Indiana. The IDA has prepared to meet this challenge through the development and implementation ofthe ' Indiana Plan.' " (emphasis added) The letter continued to warn that "we must make sure the 'Indiana Plan' continues to work and work well, or we stand the chance of being dictated to by some distant third party." (CX 125) The back ofthe IDA Approved National Dental Claim Uniform Report Form contained a note to dental patients that included the following:

In some plans, the dental insurance contract is written to provide for the least expensive, adequate procedure as determined by the insurance company. The carrier will request x-rays to make this determination. If your contract is written in these terms please give special attention to the following: II " ate-comers to antitrust congp;ra.cies, who, while krwwjngtheofprior existence of the conspiracy, join it in order to promote the unlawful ubject for whjch it was urganized, are liable for everything done during the period ofthe conspiracy sexistence. In Re Nissa" Motor Corp. Antitrust Liti ation 430 F. Supp. 231 , 232, (S.D. Fla.. 1977) Opinion 101 F.

A. The Indiana Dental Association does not agree with such a contract. (CX 75D) (23) Similarly, the sample letter to insurers contained in the IDA manual included this explanation for the refusal to submit requested x-rays: As you know, the Indiana Dental Association s Principles of Acceptability advise dentists not to submit radiographs to a third party because the use of these (x-rays) interfere (sic) with the dentist' professional judgment by altering or suggesting alternative methods oftreatment, and possible legal involvement ifthe radiographs were lost." (CX 47X) Moreover, it is clear that the concern ofIDA' s members over possible interference in the doctor-patient relationship was not limited to the effect such interference might have on patient welfare. It also extended to issues of professional pride and the economic well-being ofIndiana dentists. Dr. McClure, who later became the first president of IFD, said in a speech to the association s Council on Dental Care Programs in 1974: !! We are fighting an economic war where the very survival of our profession is at stake. (emphasis added) , , , The name of the game is money. The government and labor are determined to reduce the cost of the dental health dollar at the expense of the dentist. There is no way a dental service can be rendered cheaper when the third party has to have its share of the dollar" (CX 372A) Reviewing some ofthe "problems" with existing insurance plans, he predicted: "The fight for x-rays wil continue, although I have reasons to believe they may start oft. without them, they wil eventually switch to this method of (24) determining benefits. This is the only way they can control their costs. (emphasis added) (CX 372E) With the formation ofIFD, the economic motive became more explicit. As IFD's first Secretary explained in a letter to an Evansvile dentist during the formation of the federation: " If you will read the object of the association (ADA) in the constitution and by-laws, you will realize that the association was not designed nor intended to represent us in socio-economic or political areas. '" '" '" It is our opinion that a more suitable vehicle is needed to represent us in these areas and that a union is the most advantageous choice to satisfy the needs previously mentioned. " (CX 484A-B) IFD' s Constitution and By-laws state thirteen objectives for the organization. The first four are the following:

.. ..

INDIANA FEDERATION Ot' UJeNTlSl'S ,lU Opinion (a) To represent dentists in all soclo-emnomic matters negotiations and grievances with employers, third and fourth parties or any group that is involved in financing or delivery of dental care. The ultimate purpose being to promote better patient care and to prevent abuses and correct inequities in the delivery of dental care to the public (b) To seek to insure adequate compensation and proper working conditions for dentists commensurate with their training and skil and the responsibility they bear for the life and health of their fellow human beings, (25) (c) The establishment or approval of appropriate utilization review or peer review procedures which do not interfere with the doctor-patient relationship and themaintenance of the highest quality of dental care (d) To associate tog-either all dentists for their mutual benefit and protection (emphasis added) (CX 14A) These objectives were emphasized in communications among members, For example, the June 1, 1978, newsletter of IFD Chapter II stated: "Those of us in the LF.D, believe that WE are the ONLY organization uniquely set up to protect the socio-economic areas of our members, The working conditions of our members is (sic) important to us and must remain foremost in our actions," (CX 499A) As we discussed more fully in Part III, there is no doubt that IFD was created to follow up on IDA activities and goals, It is equally clear that a major reason for creating IFD was to avoid the antitrust laws under the mistaken impression that IFD would be exempt as a union," (CX 476B; CX 484A; CX 489B) IFD included in its Constitution a procedure for authorizing "strikes, job actions, or other forms of economic pressure" by local chapters to accomplish its objectives. (CX 13Q) Moreover, the Constitution provided for discipline of IFD members for failure to conform to the Constitution and By-laws and for "any action detrimental to the welfare of this organization," (CX 13T -U) While the Constitution did not provide a sanction specifically for failure to participate in a boycott, the Executive Committee considered on at least two occasions the question of "retaliatory gestures against dissident members and (26) clearly considered "severe measures" of reprisal a possibility, albeit as a last resort (CX 512A and CX 522; Tr 2429-31) In 1977 IFD adopted and disseminated the IFD Work Rule, which provided that a dentist has a responsibility to prevent a determination of a patient' s condition without the benefit of a complete dental examination, The clear understanding ofthis rule was that insurance company use of x-rays (without an examination of the patient) in claims review was a form of determination!! of the patient's condition that the dentist was obliged to prevent After formal adoption of IFD' s Work Rule, dentists, using a form prepared by IFD, refused to provide x-rays to third-party payers, Thus, the practical implementation of the Work Rule was to refuse to cooperate with claims review programs which relied upon submission of x-rays, The effect of re- Opinion 101 F.

spondent' s conduct was to reduce competition among dentists to cooperate with dental reimbursement plans and, by doing so, to thwart the efforts of individual insurance companies to contain costs by offering coverage for only the least expensive adequate course of treatment. There is no doubt that IDA's practices, later continued by IFD, had an effect on the way in which dentists cooperated with dental insurance plans. It is quite clear that dental insurance companies were unable to obtain x-rays with the regularity and frequency desired in order to carry out their claims review process. Aetna, for example began a program for employees ofInternational Harvester on July 1 1971. The plan covered employees in primarily 23 states and several foreign countries. (27) (ID 40; RX 99B) Only in Indiana did Aetna experience any diffculty in obtaining x-rays for review of dental treatments. (RX 99B-; Tr 1243) Within one year, there was a backlog of approximately 600 unpaid claims, because of Aetna s inability to verify the maximum allowable benefits. (Tr 1267, 1274) In a one-time effort to eliminate this backlog, the company s dental consultant visited the offces of all the dentists who had refused to submit x-rays and reviewed the claims with them, also urging them to submit x-rays in the future. (Tr 1268) There were two general reactions to his plea: one, dentists who said despite the fact that you seem fair, I will not send x-rays to you; and others who said I would like to, but I don t dare to. " (Tr 1275) In January, I974, Aetna s consultants began doing in-mouth examinations of claimants in its Ft. Wayne offce; they continued this practice until the end of November, 1978. (Tr 1276-79) In that period, the company conducted 4 700 exams at an estimated cost of ten dollars each. (Tr 1279) CG also modified its practices in an effort to deal with IDA' s demands. CG came to a "gentleman s agreement" with IDA whereby the claim form would continue to require x-rays but CG would not insist on the dentist' s compliance. (ID 74) CG also allowed a dental consultant, approved by IDA, to operate out ofthe dentist' s own offce rather than CG's claim offce as a result of IDA pressure. (ID 78) Both ofthese cases illustrate an insurance company, confronted by the economic power of united dentists, responding to that economic power rather than to a (28) dental services market characterized by competition among dentists.

Moreover, it is clear that IFD' s practices continued to have an effect similar to that initiated by IDA; they were, indeed, an effective continuation of the IDA conspiracy. IFD representatives met with CG to discuss CG's x-ray submission policies, a meeting which concluded in CG' s decision not to make further x-ray requests from Madison County dentists. (ID 117) IFD's President, Dr. McClure, also met with a representative of Brockway Glass, an employer located in Madison INDIANA FEDERATION OF DENTISTS 173 Opinion County, which had arranged for employee dental coverage through Metropolitan Life Insurance Company. McClure stated that the federation of dentists he represented would Dot submit x-rays. (ID 118; Tr 1625) In short, the record contains numerous examples where the dentist-insurance company relationship that would have existed in the absence of this market power was altered. There is no doubt that IDA and IFD were able to achieve substantial market power by colluding. In 1974, 85-8 percent ofIDdiana dentists belonged to IDA. (CX 303E) In particular areas, IFD was able to achieve remarkably high degree of participation. In Madison County, 95 percent of all practicing dentists had joined IFD Chapter I by September 8, 1976, according to the chapter s secretary. (CX 484B) The Chapter II news letter reported in September, 1977, that "(aJll but a few dentists iD our four county area are now members ofthe Federation. " (CX 549AJ EveD though the actual total membership ofIFD was small, its market power in some localities was clear (29) from its effect on the behavior of insurers and the functioning ofthe dentist-insurer relationship.I Such concerted activity by competitors resulted in reducing or eliminating competition among dentists as to their policy of dealing with third-party payers. Patients who were covered by dental plans providing for cost-containment programs such as those here found it diffcult to purchase care from dentists who would satisfy the terms oftheir coverage. In the absence of such concerted behavior, individual dentists would have been subject to market forces of competition, creating incentives for them to treat patients and comply with the requests of patients' third-party insurers. By colluding, competitor dentists were freed to some extent from these market forces because they knew other participants in the boycott would also refuse to cooperate. Consequently, the dentist-insurer relationship was determined by economic coercion, not by market competition. The final victim iD this distortion of the market was the patient policyholder who lost the value of his insurance company s efforts to contain costs. (30) Complaint counsel have argued that the conspiracy had other effects on competition, including that insurers were less able to compete OD the basis of cost-containment and that patients were deprived of information that might lead them to switch dentists. As for the effect on competition in the dental insurance market, we agree that a secondary effect of concerted behavior on the part of dentists was to 12As in any rule of reason case ette!ition must be paid to market definition in order to assess competitive effects. No elaborate analysis is required here, since the record shows that under IDA' s leadership, the conspiracy spanned many, if not most, localities in Indiana. t nder the leadership of IFD, it continued to be strong in the local areas covered by that organization s three chapters. The record shows no competitiol1 from out-f-state dentists, except in two localities neflr Louisvile, Kentucky. (CX 1MB; ex 186C; ex 76F) Opinion 101 F.

prevent insurers from implementing cost-containment efforts. This may well have reduced competition among insurers. The record shows that dental insurance grew in significance in Indiana beginning in the mid 1970's as various insurers offered group coverage to employers. Inevitably, a principal concern of both employer and employee groups was the premium. Consequently, both employer and employee groups were concerned about cost-containment measures practiced by insurers. This concern is ilustrated by General Motors' insistence that its claim form continue to require x-rays, despite CG's wilingness to provide an explicit exemption for IDA members. (CX 327W) Similarly, Aetna representatives told IFD representatives that Aetna s market survival required cost-containment measures. (CX 284B) (31) Concerted behavior among competitors which prevents or hinders the marketing of goods or the implementation of services by competitors in another market may harm competition in that other market. Here, respondeDt's efforts to achieve a uniform course of conduct among dentists in their dealings with dental insurers affected a significant aspect of the insurers' businesses the operation of costcontainment efforts through the "alternative benefis" mechanism. The harm to these efforts may have reduced competition among insurers by preventing them from competing on the basis of reduced premiums. Respondent's activities may also have prevented new entrants from obtaining customers by offering innovative and effective cost-containment measures. However, despite complaint counsel' gument, the Commission s complaint did not clearly allege harm to competition in the dental insurance market, and conclusions about competitive harm to this market are unnecessary to our decision. Accordingly, we decline to make such a finding. (32) Respondent makes a variety of contentions that the collective refusal to provide x-rays did not harm competition, including the assertions that there was not an absolute "shut oft" of x-rays to insurance companies (RAB 15-16) add that the benefits of predetermination are not well-established and might cost more than they are worth. (RAB 17) While it is true that respondent was wiling to allow some arrangement whereby x-rays could be examined by insurers-in particular allowing insurers' cODsultaDts to make visits to the dentists' offcesthe record is clear that this was prohibitively expensive. (ID p. 89, fn. 337) Moreover, even if the procedure were feasible at a higher cost coercing parties into adopting such a procedure through collusion of 13 For example, inFaEhion Originators concerted action by manufacturers to protect themselves from competi. tiOD by "style pirates " also harmed competition at the retaij level by narrowing the sources from which retailers could buy dresses. 312V.S at 465. In another case, e boycott by lumber retaiiers of wholesalers that were also competing at retai: affected not only retail competition hut also impeded wholesale trade by reducing the Dumber of potential purchasers from the boycotted companies.Eastern States Retail Lumber Dealers ' Ass United States 234l:.S 600, 614 (1914).

INDIANA FEDERATION OF DENTISTS 1/0 Opinion competitors stil distorts the competitive process. Commercial dealings are structured hy leverage of combined market power rather than by competition.

Finally, we reject the IFD's position that to establish liability, the record must establish that predetermination, or more generally, use of x-rays by dental insurers to determine what services they will pay for under alternative benefits coverage, is effective in containing costs. (RAE 17) We do not require an analysis ofthe actual net impact on the operating costs of insurers or of the actual dollar losses to policyholders or employers in order to conclude that respondent' actions are anticompetitive. The task ofidentifying the precise impact of these types of restrictions and segregating the effects of other forces is likely to be infeasible. See, AMA 94 F. C. at 730. (33) To require such a showing would often impose an impossible burden on complaint counsel and preclude prohibiting plainly anticompetitive restraints until their precise impact could be measured. Moreover, it is not for IFD or the Commission to judge the effciency of the arrangements selected hy insurance companies to control costs. An antitrust violation cannot be justified on the grounds that it sought to remedy a poor business decision by the targets of a boycott. It is enough that the restraint is shown to have significantly distorted the competitive process hy forcing insurers to comply with the demands of united competitors, thereby significantly altering the nature oftheir claims review process and their attempts to implement cost-containment measures.

In summary, we find that IFD' s practices substantially limited competition among dentists in their wilingness to cooperate with dental insurance cost-containment programs.14 We turn now to respondents principal argument in defense-that the restraints on competition resulting from the challenged concerted hehavior resulted in benefits adequate to offset any anticompetitive effect. IFD claims that the restraints had a procompetitive effect which offset any harm to competition and, more broadly, that the restraints resulted in social benefits, particularly an improvement in the quality of dental care. (34) We note at the outset that the burden of proving suffcientjustification for restraints which have been shown substantially to harm competition rests with respondents. Such justifications cannot be speculation only but must be established by record evidence in order to be considered an adequate justification for otherwise anticompetitive behavior. We consider first IFD' s argument that its conduct was procompetitive.

"As for complaint courm l'!1 argument that patients were deprived of information that would lead them to switd dentists, we agree that this is a possible effect ofthe boycott. Based upon the record, however, we cannot infe an adequately significant clIed on competition from this limitation on information- Therefore, we decline to mak a finding on this point Opinion 101 F.

As discussed above, a principal device used by IFD for achieving concerted behavior on the part of member dentists was its Work Rule. The Work Rule in part provided:

The patient's dentist, therefore, has a moral and legal responsibility to not allow a determination of his patients (sic) condition to be made for any purpose, without the benefit of a complete examination, which takes into account all of the element.c; described.

(CX 537 A) It is clear from the record that the principal purpose and effect of this Rule was to refuse to provide x-rays to insurance companies that wished to use them along with other information to review claims for reimbursement.

IFD argues that concerted adherence to the Work Rule actually promoted competition among dentists:

Certainly promoted are novel means of competing concepts of dental care, such as employer or union organized clinics. Competition is naturally promoted among dentists who treat only after total diagnosis, in that their total treatment plan will be more successful from both a preventative viewpoint and long term maintenance of oral health. Error is less likely, thus reducing needed corrective work. Proper diagnosis will promote proper services, and satisfied patients will patronize those dentist!:. (RAB 24-25) (35) As to IFD' s proposition that "novel means of competing concepts of dental care" are promoted, this is simply unsupported by the evidence. IFD has pointed to no record evidence, or even to any logical argument, suggesting that the Work Rule was in any way necessary to promote "total treatment plans" or any other novel form of dental care. Rather, individual dentists were free to offer such plans or not just as they would have been in the absence of the Work Rule. Respondent' s essential point appears to be simply that such plans were permitted by the Work Rule. While this may well be true, it hardly constitutes a showing that the Rule was necessary to achieve some competitive benefit that would have compensated for the Rule s anticompetitive effect.

A similar flaw defeats IFD's second proffered justification, that the Work Rule promoted higher quality care and more satisfied patients. The heart of this position seems to be the contention that the Rule promoted the health ofthe people ofIndiana by preventing insurance companies from reaching erroneous conclusions regarding the lea expensive adequate course of treatment for dental patients. 15 Such 15 There is evidence that some 11member!l of IFD objected to the fundamenta policy of insurers of c-overing only the least expensive adequate course oftreatmenl., preferring dental coverage for the .'best" treatment that could he provided the patient. However, respondent has not sought to justify its actions on the ground that such a policy is harmful. and this does not appear to have been an offdal position of IFD. INDIANA FEDERATION OF DENTISTS I'l Opinion erroneous conclusions would, the argument goes, cause insurance companies to deny claims for adequate treatment and thereby pressure patients, and through them their dentists, to opt for less than adequate (36) treatment. Two practices of insurers could lead, in IFD' s view, to erroneous claims determinations: (1) undue reliance on x-rays, particularly due to the failure to examine the patient personally, and (2) the examination of x-rays by non-dentists. These contentions, too, are lacking in any evidentiary support. IFD has not pointed to any evidence-r even argued-that any consumers have in fact been harmed by alternative benefits determinations or that actual determinations have been medically erroneous. Not a single instance has been cited where any dentist agreed to provide less-than-adequate treatment because of the fear of an erroneous insurance determination. Indeed, with respect to the examination of x-rays by non-dentists, the record shows that non-dentists are authorized by insurers only to approve claims; determinations which deny payment must be made by a dental consultant. (ID 158-61) Consequently, it is diffcult to understand how patients could even possibly be harmed by the insurers' use of non-dentists. (37) Moreover, the courts have properly shown great hesitancy in accepting such justifications for clearly anticompetitive acts. In National Society of Professional Engineers,1 the Supreme Court announced that a rule of reason analysis is confined to an assessment of effects on competition and necessarily excludes a justification that other social values which may be advanced outweigh the loss of competition. In that case, the petitioners, a society of professionals selling engineering services, had argued that competitive bidding by the society members would be dangerous to the public health by reducing the quality of services provided. The Court rejected this type of justification on the basis that "the Rule of Reason does not support a defense based upon the assumption that competition itself is unreasonable. The Court's decisions have not completely clarified this distinction between effects on competition, which should properly be considered under the rule of reason, and other effects which should not be considered. One factor in making this distinction is whether the challenged conduct amounts to a clear attempt to substitute a private association sjudgment about the benefits of competition for a Congressionally-expressed preference in favor of it. This was the case in Professional Engineers where a private association argued that competition itself was (38) undesirable because it led, in that industry, to poor qualitya proposition the Court was unwiling to accept. J6 Respondent'!; primary argumlmt regarding the screening of x-rays by lay persons, that it violates state Jaw wil be discussed in Part V of this Opinion in conn(!ctiun with the state action defenslo )1 ./"a.tic/no! Society of Profession"all.niJineer, v. US. 435 U.s 679 (1978). 1i'ldat696 Opinion 101 F.T.C.

In other cases, challenged restraints have limited competition in certain ways only to increase it in other ways, for example, by creating a new product to be offered. This was the case in Broadcm;t Music where the Court held the rule of reason applicable to a blanket licensing scheme which necessarily fixed the prices among competing composers. Similarly, restrictions on the timing of transactions have been upheld as contributing to the effciency of organized markets. Thus, an agreement by competing health professionals to allocate admitting privileges at a hospital facility to avoid overcrowding and improve effcient use of the facility could be assessed under a rule of reason. A third category of cases involves restraints which are clearly intended to achieve an end other than a limitation on competition and in which the effect on competition is at most incidental, in light ofthe actual purpose ofthe restraint. For example, sanctions of athletes for gambling in professional sports competition have been upheld. Thus, guidelines promulgated by a professional health association recommending the avoidance of a drug discovered to be dangerous could not be considered an antitrust violation in the absence of any purpose (39) to limit competition. Similar results have been reached where boycotts are clearly political in nature and are not aimed competitors.2l As in the application of any legal standard, some situations wil present diffcult factual questions as to the effect on competition and the true purpose ofthe restraint. Moreover, some cases wil call for the exercise of sound prosecutorial discretion by the Commission in considering how non-competitive values relate to the nature ofthe restraint and the rule of reason analysis set out in Professional Engineers.

Fortunately, we need not resolve all these questions here. Even when self-regulation may have been necessary for some legitimate purpose, the courts have insisted that the restraints go no further than is necessary to achieve the desired goal. We applied this principle in our AMA decision, where we reviewed a professional association s ethical restrictions on price advertising and price competition. We found that an absolute ban on advertising, including non-deceptive advertising, lessened rather than promoted competition, and that the restrictions were much broader than necessary to accomplish the legitimate, pro-competitive goal of preventing deceptive advertising. )4 F. C. at 1010. (40) A fortiori when self-regulation is not actually necessary for any 19 Chicago Board o(Trade v. United Stales 246 U.S. 231 (1918). 20 Deeson v. Professional Golfers ' Ass 358 F.2d 165 (9th Cir. 1966),cert. denied 385lJ.S. 846 (1966);Molina., National Basketball A.o; 190 F. Supp. 241 (ELD. Y. 1961) JJ See Missouriv. NO. W 620 F.2d 1301 (8th Cir. cert. denied 149 U.S. 812 091'0) 2 See e-g., Silver v. New York Stock Exchange 373 U.S. 341 (l963);Radiunt Burners. 1nc- v. Peoples Gris Light Coke Cu. 364 U,S. 656 (1961) INDIANA FEDERATION OF DENTISTS l/v Opinion legitimate purpose and has clear anticompetitive effects, the courts have not hesitated to strike down the restraints. For example, in American Medical Ass v. United States 130 F.2d 233 (D.C. Cir. 1942), aff'd 317 U. S. 519 (1943), an association of physicians attempted to induce hospitals not to deal with doctors who participated in prepaid medical programs. The association argued that its concerted behavior was justified because, in its view, these programs were contrary to the public interest and participation in them was unethical. The Supreme Court refused to review the finding of the court of appeals that this conduct harmed competition and that there were alternative methods by which the association could advance its views about alternative delivery systems.23 317 U.S. 613 (1943). The restraint involved here falls squarely into this category of cases. IFD' s concerted refusal to furnish x-rays to third-party payers substantially harmed competition among dentists by eliminating incentives for individual dentists to cooperate with cost-containment programs ofthird-party payers. This refusal to deal reduced consumer choice and impaired insurance companies' ability to conduct costcontainment programs. IFD has presented no evidence to even suggest that these restraints were necessary to serve any legitimate pro-competitive purpose. There is no basis for concluding that (41) IFD' s concerted refusal to deal encouraged development of new methods of care delivery or otherwise encouraged competition among individual dentists. We therefore find that IFD' s conduct constituted an unfair method of competition in violation of Section 5 ofthe FTC Act. The complaint also alleged that the activities of respondent were unfair acts or practices " within the meaning of Section 5 as well as unfair methods of competition. It is clear that practices may be both unfair methods of competition and unfair practices. For example, in AMA 94 F. C. at 1010, we found that AMA's restrictions on price advertising were unfair because they impeded the flow of information about the availabilty and price of medical services to consumers. In determining whether a practice is unfair, we are concerned primarily with its impact on consumers, principally individuals purchasing a product or service for their own consumption or investment. In brief, consumer injury that is substantial, not reasonably avoidable, and not outweighed by offsetting benefits to competition or consumers is the primary criterion for a finding of unfairness. (See Commission Statement of Policy on the Scope of the Consumer Unfairness Jurisdiction, December 1980.) In addition, the Commission also relies where possible upon established public policy in determining which practices are unfair. Id. (42) 23 See also Michit;rm State Medical Society,Docket No. 9129, l101 F. C. 191) where we addre !'ecl aim.Jar iS3ues and fDached a simijar result.

), Opinion IOl F.

The record in this case contains some evidence of consumer injury in the form of denied or delayed reimbursement for dental care expenditures. However, neither the parties nor the AU have analyzed the issue of unfairness liabilty to any degree. Because our finding of an unfair method of competition in this case is suffcient to support the relief ordered, we decline to decide whether the challenged practices are also unfair.

V. STATE ACTION Respondent and Intervenor, the State ofIndiana, adopting Part IV. D. of respondent's appeal brief as its own, assert that the state action doctrine forecloses antitrust liability for the alleged anticompetitive Parker v. Brownconduct, citing the development of the caselaw in 317 U.S. 341 (1943), Asheville Tobacco Board of Trade, Inc. v. FTC, 263 2d 502 (4th Cir. 1959),24 Cantorv. Detroit Edison Co. 428 U.S. 579 (1976), and City of Lafayette v. Louisiana Power Light Co. 435 U. 389 (1978). That doctrine exempts from federal antitrust law certain state action and actively supervised private action undertaken pursuant to a "clearly articulated and affrmatively expressed" state policy that consciously rejects unrestrained competition in favor of other social values. New Motor Vehicle Bd. of Calif v. Orrin W. Fox Co., 439 S. 96, 107 (1978); California Retail (43) Liquor Dealers Ass Midcal Aluminum, Inc. 445 U.S. 97, 105 (1980). Respondent asserts that the Indiana Dental Law (Indiana Code 25-14-1-1 et seq. which prohibits the unlicensed practice of dentistry, clearly prohibits the lay screening of dental x-rays by employees of dental insurers.25 By virtue of this (44) prohibition, the argument In this case, the court of appeals applied the state action doctrine to the enforcement of the Fi' C Act. While all Supreme Court interpretations of the doctrine have concerned the Sherman Act, we assume for purposes of this decision that the doctrine applies equally to an enforcement action under the FTC Act. when the allegation of unfair methods of competition is baged on Sherman Act principles 2. The law provides in pertinent part"

Sec. 23. Any person shall be said to be practicing-dentistry within the meaning orthi.. chapter who uses the word "dentist" or "dental surgeon" or the letters " 0.8." or " " or other letters or tit.les in connection with dentistry:

or owns or operat.es a dental offce or is manager or conductor of the &lme; or advertises or permits t.o be advertised by sign, card, cirrular, handbil, newspaper, radio, or otherwis. that he can or wil attempt to perform dental operations of any kind; or offers to diagnose or professs to diagnose or treats or profesoos to treat aoy of the lesions or diseases of the human oral cavity, teeth, gums, maxilary or mandibular structures; or extract human teeth or corrects malpositions of the teeth or jaws; or administers dental anesthetics, whether local or general; or makes x-rays pictures of I. he human Le(!th or jaws; or makes impressions or casts of any oral tissues or strctures fDr the purpose of dieoglosisor treatment thereof or the construction, repair, reproduction or duplication of any prosthetic device to aUeviale or cure any oral lesiotJ or replace any lost oral struclures, ti uc, or teeth; or engaged IsicJ in practices included in the curricula of recognized dental colleges . . . INDIANA FEDERATION OF DENTISTS I81 Opinion continues, the collective private actions of IFD and its members to frustrate the lay screening of x-rays is protected from liability under the antitrust laws.

As discussed further below, respondent's "state action" argument fails in several respects. First, and most fundamentally, the Indiana law does not affrmatively express any policy in favor of collusion among dentists in order to prevent or influence the use of x-rays by insurance companies. Respondent, in fact, does not appear to argue that the State ofIndiana has expressed a policy against competition among dentists, which must be the principal concern of a "state action" analysis. Second, it is far from clear that the Indiana statute prohibits lay persons from reading x-rays for purposes of screening dental insurance claims, as opposed to determining treatment. Finally, respondent has not shown that its conduct, which essentially amounted to private enforcement ofthis state statute, was supervised by state authorities. We discuss each of these points in turn. Assuming for a moment that the Indiana statute does prohibit lay persons from reading x-rays and that "dentists who knowingly (sic) submit radiographs (x-rays), or other diagnostic data to third persons including insurance companies that allow lay persons other than licensed dentists to review such data, are aiding and abetting the unlawful practice of dentistry" (RAB 46), such a "state policy to supplant competition" (RAB 39) between dentists and non-dentists is insuffcient to protect the activity (45) at issue in this case. This case concerns concerted actions among dentists regarding their dealings with dental insurers; and the Indiana legislature did not compel authorize, or even contemplate private agreements among dentists not to cooperate with dental insurers that might be using lay persons to read x-rays-or other concerted efforts to influence the business practices of insurers. There simply is no "clearly articulated and affrmatively expressed" state policy concerning such elimination of competition among dentists in their dealings with insurers. Respondent argues that "the Indiana dentists who choose to obey Iridiana Dental Law cannot be in violation of antitrust law." (RAB 48) But this is not a case of individual dentists simply conforming their conduct to state law.26 Apparently, respondent would have us conclude that Congress intended for federal antitrust laws to give way when private parties, by conduct which would otherwise violate the antitrust laws, take it upon themselves to enforce their interpretation of the provisions of any state law. No Supreme Court decision ar- 26 Indeed, Indiana state law Beems actually to have little to do with the activities charged here. Neither IDA' Principles of Acceptability nor IFD' s Work Rule concerned whoat immnmce companies should or should not read x.rays. The focus ofthese policies and the activities ofJDA and IFD was, rather, the notion that x.rays should not be used in any manner without a personal examination of the patient. We can determine no way in which the challenged conduct waslo/iica!)y directed toward compliance with st8te law. Opinion 101 F.

ticulating the state action doctrine can be read to endorse such an interpretation of congressional intent. (46) Furthermore, we cannot accept respondent' s contention that Indiana law clearly prohibits the screening of x-rays by lay employees of insurers for the narrow purpose of referring questionable claims to dental consultants. The Indiana statute does not specifically address such conduct (although it does prohibit lay persons from taking xrays), and the state has never sought to enforce the statute against insurers that use non-dentists in such a way. Indeed, on August 15 1978, IFD brought suit against the state and the Indiana State Board of Dental Examiners alleging that they had "wholly failed, refused or neglected to take any action to enforce the laws of the State of Indiana" as interpreted by IFD. (CX 508A, DJ Therefore, the applicability of the statutory prohibition on the unlicensed "practice of dentistry" to such a situation has not been considered by the Indiana Courts. In Pennsylvania, however, a very similar statute has been held not to prohibit a first review of radiographs by a lay clerk to determine whether they satisfy Blue Shield standards. Pennsylvania Dental Ass v. Comm. Ins. Dept. 398 A.2d 729, 734 (Pa. Cmwlth. 1979).28 Furthermore, an (47) Ilinois appellate court has held that even as performed by a dentist, the act of "merely corroborating the claim presented fby reading an x-ray provided to an insurer) so as to know whether or not payment of the cost thereof should be made" is not the practice of dentistry. Pflugerv. Sundstrand Corp. 405 N.E.2d 12, 16 (Il. App. 1980). Particularly in light ofthese opinions, it cannot be concluded that there is a "clearly articulated and affrmatively expressed" state policy concerning such conduct. In furtherance of its state action argument, respondent has pointed to the issuance of a 1974 unoffcial advisory letter of the Deputy Attorney General ofIndiana (IX-5), various bulletins or letters subse- 27 The suit against the state and the board was dropped when the state agreed to intervene in this case. (ID 183) The Pennsylvania statute provides:

A peron engages in the "Practice of Dentistry," within the meaning of this act, who diagnoses, treats operates on, or prescribcs for any discase, pain or injury, or reguates any deformity or physical condition of the human teeth, jaws, or as. ocjated atructu 5, or conducts a physical evaluation,or administers anesthetic agent., or who fits, COQstructs, and ingert. any artificial appliance, plate, or denture for the human teeth or jaw, or who holds himself or herself out as being able or legally authoril.ed to do so. 63 P.S. 121 , as quoted by the cour at 398 A.2d 734 n.4.

ze Respondent has argued that in addition to constituting an unlawful diagnosis, the reading of x-rays by in"urfUce company employees also violates a pJ"vj ion of the dcmtal code that jncludes in the definition of the practice of dentistry "practices included in the curricuJa of rocogni ed dental colleges. " Indiana Code 2()11-1-23. Radiology is a required subject in the curricula of state dcotal schooh. 828 Indiana Administrative Code 1 1(c) (1979 Ed.). Therefore, respondent argues, the reading of x-rays by unicensed persons violates the statute. Bacteriology, anesthesia, pathology, and "medicine" are also subjects required to be tHughl in the dental schools. Yet, surely respondent would not suggest that they are the exclusive domail1 of dentists. Indeed, as the Supreme Court of Indiana has held, "practices included in the curricula " does not refer tosubjects taught in dent.aJ colleges but to those things which arepracticed (J providedin the curricula, which evidently mean the t.things practiced in the dental clinic Buch as, operative prost.hetic dentistry, crown and bridge work, inlay, arid orthodontia. (emphasis added) Stole Wiliams 5 N.E2d 961 (Ind. 1937). This provision of t.he statute therefore, is of litte independent significance g.

l1'1UlfH .n L LJ""L....._--- Opinion quently issued by the State Board of Dental (48) Examiners (e. , IX 9), and a joint letter issued by the State Board and the Insurance Commissioner on September 24, 1979 (IX 162). In all of these documents, the Indiana Dental Law is interpreted as prohibiting the screening of dental x-rays by lay persons.30 However, as the ALJ has explained, none of these documents constitute action of the state acting as sovereign, since none was developed according to the applicable requirements ofthe Indiana Administrative Procedure Act. (lD 152-153, 167-181)31 Respondent has apparently conceded this point and has argued not that these documents establish the state policy regarding the screening of x-rays, or even that they constitute some evidence of the state policy, but rather that they evidence "state supervision of the scheme chosen to replace the rules of the market place." (RAB 39) Conduct by private parties that would otherwise violate the antitrust laws is not immunized by the state action doctrine unless the activity is "actively supervised" by the state. California Retail Liquor Dealers Ass v. Midcal Aluminum, Inc. 445 U.S. at 105. Because respondent did not address the question of whether its concerted activities were compelled or authorized by a clearly articulated state policy, it also did not consider whether those activities were actively supervised by the state. (49) Instead, it pursued the misguided argument that the practice of dentistry by individual dentists in Indiana was being supervised adequately by the state, through the State Board of Dental Examiners. We need not consider the issue of supervision in this case in any event, because respondent has not satisfied the requirement of establishing a clearly articulated state policy regarding the challenged conduct.

In addition to supporting respondent' s state action arguments, intervenor asserts that in this case the Commission "is clearly attempting to invade the State s sovereign right pursuant to the Tenth Amendment" to regulate the practice of dentistry in Indiana. (lab 7-8) However, as the above discussion reveals, the authority of the State of Indiana has not been questioned by the Commission in this case. The Commission has not questioned the validity of the Indiana Dental Law or the manner in which it has been enforced by the state. The sole focus of this case is the concerted private actions ofIDA, IFD and their members-actions in no way compelled or expressly contemplated by Indiana law. Furthermore, the Commission s Order against respondent wil not interfere with the state s enforcement of the Dental Law, even if it should seek to enforce the interpretation 10 We note that all of these documents postdate some ofIDA 's activities in furtherance afthe IDA-IFD conspiracy most notably its 1973 pledge drive for support of its Principles of Acceptability 11 Since this iR the case, we need not consjder whether the state board is authorized to promulgate substantive regulations definitlgtl,e practice of dentistry Opinion IOl F. of it asserted in this proceeding. The Order does not compel any dentist to cooperate with an insurance company that uses lay persons to screen dental x-rays, nor does it give any form of protection to or approve of such a screening procedure. Therefore, the Commission order does not impinge on the ability of the State of Indiana, acting as sovereign, to (50) regulate the practice of dentistry in the manner the state sees fit.

VI. COLLATERAL ESTOPPEL On July 17, 1979, the Commission was ordered by Judge Care J. Holder, United States District Court, Southern District ofIndiana, to allow the State ofIndiana to intervene in this proceeding. (IX lOOOU) (The background on this order, which the Commission did not appeal is explained in the Initial Decision, findings 191-207.) Respondent and Intervenor, adopting Part IV.E. of respondent's brief as its own assert that various of Judge Holder s findings offact and conclusions oflaw foreclose the Commission from "further litigation of the state action issue." (RAB 49) Respondent claims that the following "findings offact" by the judge are pertinent:

2. Plaintiff Indiana State Board of Dental Examiners (hereinafter Board), pursuant to I.e. 25-14- et seq. has been granted the duty and power by the Indiana General Assembly to administer, supervise and enforce the Indiana Dental Act-which provides for the regulation of dentists and the practice of dentistry within the State. 6. Since at least 1887 the State oflndiana, pursuant to the police power reserved to it as a sovereign state, has had legislation regulating- dentist.';; and the practice of dentistry.

17. The State oflndiana has and is, actively regulating both dentists and the practice of dentistry in the State. (51) 18. Under the mandate oflndiana Law, Indiana dentists are prohibited from submittin their dental X-rays to third party insurers who employ "dental consultants " who are not licensed to practice dentistry, to read ordiagnois (sic) the X-rays. (IX lOOOZ5, Respondent also relies on these conclusions of law: 3. The order proposed by the Secretary of the F. C. would infringe on the State right to regulate the practice of dentistry within the State as reserved to the State under its police powers by the Tenth Amendment to the Constitution of the United States. Linderv. United States 268 U.S. 5 (925). FT.C. v. Simeon Management Corp. 391 F. Supp. 697, 705 IN.D. Ca!. , 1975) aft'd 532 F.2d 708. Cf National League ofCitie, v. Usery, 426 U.s. 833 (19761.

6. The F. C. is proceeding beyond its jurisdiction in attempting to regulate the practice of dentistry in the State of Indiana and should be enjoined from doing so. Opinion Leedom v. Kyne 358 U,S. 184 (1958). Jewel Coso v. Federal Trde Comm. 432 F.2d 1155 (7th Cir., 1970). (IX 1000ZlO) Contrary to respondent' s assertion, these findings, even assuming the doctrine of collateral estoppel applied, would not preclude the Commission from considering here whether the state action doctrine protects respondent's conduct. The court did not consider all of the elements of the state action doctrine; nor did it purport to do SO. s "factual" find-Assuming the Commission were bound by the court' ing # 18, respondent's state action defense would stil be defeated by the fact that its actions were (52) not compelled or expressly contemplated by Indiana law-they were purely private conduct. As to the court' s legal conclusions, they do not appear to have any relevance to a state action analysis. Rather, they pertain to the Commission jurisdiction in this case in light of the state s purportedly exclusive powers to regulate the practice of dentistry in Indiana. Furthermore, we concur with the ALJ's finding that the court's determinations were not essential to the judgment ordered; consequently, the doctrine of collateral estoppel does not apply here. When Judge Holder ordered the Commission to allow the State of Indiana to intervene in this proceeding, he adopted in toto the state proposed findings. (See IX lOOOZ5-1O and CX 853 A-G) However these findings had been offered in support not only of the proposed order ultimately granted by the judge, but also of an order directing the Commission to terminate this proceeding. Obviously, many findings necessary to support the latter order would not be necessary to support the former. (53) Legal conclusions #3 and #6 appear to be two such findings, since they deal with the Commission s jurisdiction. Indeed, it would seem that these conclusions would have compelled the judge to order this proceeding terminated. Thus, we believe that these conclusions were not essential to the judgment entered. The court' s conclusion of law # 5 would seem to have been suffcient: 5. The State meets the req irements for intervention as established by the :FTC in the (sick Firestone Tire and Rubber Company, Dkt. 8818, 77 F.T.C. 1666, 1669 (1970) in that the issues the State seeks to raise cannot be properly raised and argued by the current parties to the proceeding and only minimal additional cost and time wil be required by its intervention. (emphasis added) (IX 1000 ZlO) 31 Indeed, it wuuld have been premature for the court to rule on the applicability of the state adion doctrine to this case before the conclusion ofthe administrative proceeding.California. ex rei, Christensen v. FTC 549 F2d 1321 (9th Cir.J, cert. denied 434lJS 876 (1977). 33 It is beyond dispute that an issue must have been decided necessarily in a first action in order for recunsideration of that issue to be barred in a second proceedingCromwellv. County ofSae 94 U.S. 351 , 354 (1876); Haize v. Hunolwr Ins. Co. 536 F.2d 576, 579 (3d Cir. 1976J. "When an issue of fad or law is actually litigated and determined by a valid and final judgment, and the detennination isessential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim, " (emphasis added) Restatement, Second, Judgments 27 (1982) ), Opinion IOl F. We agree with complaint counsel that it would be anomalous for the court to have ordered the State ofIndiana s intervention, if it intended to foreclose any argument on the issues the state sought to raise. We also agree that the Commission is not required to accept the court's subsequent characterization of all of its findings as necessary for the relief sought 3' when our own analysis compels its rejection. Hartmann v. Time, Inc., 166 F.2d 127, 138 n.17 (3d Cir. cert. denied 334 U.S. 838 (1948). (54) VII. ORDER The ALJ entered an order against IFD, dissolving it as an entity, and against the members of IFD, prohibiting them from collectively refusing to submit x-rays or deal with anyone to "force their wil on the target of such boycott." Complaint counsel did not propose an order dissolving IFD as an organization but did propose additional provisions, including a more general ban on coercion of dental insurers, a prohibition on attempting to influence consumers' choice of dentists based upon the dentist' s cooperation with insurers, and a ban on coercing the insurer s choice of dental consultants or the consultant' s judgment.

We decline to accept the ALJ' s conclusion that an order dissolving IFD is necessary. It is true that the courts have upheld dissolution of organizational entities where they have been principally designed to implement an antitrust violation and where dissolution was the most effective way of preventing the recurrence of the violation.35 We also agree with the ALJ that IFD was created primarily to continue the implementation ofIDA's boycott of dental insurers. However, we note that IFD's constitution and bylaws contain objectives other than coercing dental insurers. Moreover, there are certainly legitimate (55) functions its members may wish to pursue through the vehicle of a special organization such as IFD. Consequently, we believe it is adequate to ban specific activities of IFD and to rely upon compliance with the terms of these restrictions, in order to prevent a recurrence of antitrust violations and to restore competition to the dental market. Only in circumstances where there is no significant function remaining for an organization other than to repeat antitrust viola- 3' The court stated on October 18 , 1979, that the Commi sion "is unhampered by this Court's ruling of August , 1979 in fulfillng its mission in Docket Ko. 9118." But it added, "The findings offact as found and the conclusions oflaw thereon afe necessary for the relief sought." (IX lOaDE-F) The full text of the October 18 order appears on pp. 121-25 of the Initial Decision.

Lvs Angeles Meal Provision Drivers Union Y. United . tules 371 U.s- 94, 98, 103 (1962); Hart(ord.Empire Co. v. United States 323 U.S. 386, 428 (1945) 36 We take no position on the circumstances under which IFD might qualify as a "lflbor orgaruzation " except to note that re pondent. did nut pursue or appeal the argument that its conduct was entitled to immunity from the aotitrustlawRuoderthe "labor exemption.

U'''UUu '4...-__-' Opinion tions, or in which a conduct order would not reasonably be expected to prevent repeating such violations or to restore competition, would a dissolution order be appropriate.

Our prior orders in analogous situations37 have been intended principally to bar collective action by dentists which results in coercion of dental insurers in regard to the dentist-insurer relationship. Here the principal anticompetitive result of IFD's conduct was to achieve a uniformity among its members in their dealings with insurers a concerted refusal to provide x-rays for claims review, thus disrupting insurers' cost-containment programs. More generally, respondent coerced these companies into operating in a certain way. Thus, we include provisions prohibiting activities which have the purpose or effect of collective refusals to submit (56) x-rays or more generally to coerce insurers or their employees to behave in a certain way. This latter provision would necessarily include insurers' choice of consultants and insurers' influencing consultants. This provision would not, however, prevent noncoercive communications between IFD and insurers regarding the manner in which insurers conduct their business. IFD remains free to urge third party payers to adopt or abandon certain practices, so long as it does so in a noncoercive way and avoids suggesting to its members that they refuse to cooperate with those payers that reject its advice.

We also include a provision prohibiting IFD from collectively attempting to influence patients not to choose particular dentists. This provision is justified on the basis of an incident in the record where a person acting for the benefit of IFD did influence a patient group directly by persuading an employer to stop listing dentists who cooperated with third-party payers (see ex 563B), as well as on the basis that this is a fencing-in provision which prohibits IFD from coercing insurers indirectly through influencing patient behavior. As such, it (57)is reasonably related to the unlawful practices.38 In order to make it clear that the order does not apply to dentists acting individually, we have provided that individual dentists may deal with insurers in the way each sees fit. We have also provided that this order does not prohibit IFD from adopting bona fide guidelines concerning the exposure of patients to radiation. IFD has not claimed that any of its activities challenged here were prompted by a concern that complying with the requests of third-party payers would expose dental patients to unnecessary radiation. What little evidence there is in the record indicates that the payers in Indiana request only J) See Indiana Dental Ass 93 F, C. 392 (1979); as Dental Association Docket No 9139 (Nov. 19, 1982) (100 536J.

38 See Jacob Siegel Co.v. FTC, 327 S. 608, 61223 (1946);Lillon lndustriesv. ftc 676 F.2d 364, 370-71 (9th Cir. 1982);Sears Roebuck Cu. v. FT. 676 F.2d 385, 391-92 (9th Cir. 1982);American /lame Produ.cts Corp. ftc, No. 81-2930, slip op. at 45-.';0 (3rd Cir. Dee. 3 , !982) 188 ERAL TRADE COMMISSION DECISIONS Final Order 101 F.

x-rays that are necessary for diagnosis ofthe patient's condition and determination of an appropriate course of treatment x-rays that would normally be taken by the patient's dentist as part of good dental care.39 Nevertheless, in order to avoid any misunderstanding as to the subject of this case or apprehension over the meaning of the order as it pertains to this issue, we have included a specific provision on this point. (58) Finally, we include notification and reporting requirements to insure that individual IFD members are aware of the Order and that the Commission may monitor respondent' s compliance with other order provisions.

FINAL ORDER This matter, having been heard by the Commission upon the appeal of respondent from the Initial Decision, and upon briefs and oral argument thereof and opposition thereto, and the Commission for the reasons stated in the accompanying Opinion having determined to deny the appeal of respondent Indiana Federation of Dentists It is ordered That the Initial Decision of the administrative law judge be adopted as Findings of Fact and Conclusions of Law except to the extent inconsistent with the accompanying Opinion. Other Findings of Fact and Conclusions of Law of the Commission are contained in the accompanying Opinion.

It is further ordered That the following Order to Cease and Desist is hereby entered. (2) It is ordered That the following definition shall apply in this Order: third-party payer means any entity that provides a program of reimbursement for dental health care services to employees or members of any other organization, and any person who provides evaluative services in connection with any such reimbursement program. Testimony of Connecticut Geuera! employee Chichester, Tr 39697, 563-4. G A misunderstanding of the proposed consent order in the Texas Dental Almociation case, Docket 9139 ( , 1982) (100 FTC. 536J, caused the Deputy Commissioner of the Food and Drug Administration to fie a concerned public comment He read the order in that case to require dentist" to \!submit x-rays requested by insurers, eyed if that would mean exposing the patient to needless radiation. FDA' s fears were relieved by the Commissioo s assurance that the order applies only to x.rays that already exist, and it does not prohibit thtl association from adopting professional standards concerning the appropriateness of taking x-rays. 47 Fed. Reg 52993 (Nov. 24, 1982)- Furlhermore, neither that order nor the ooe we are is. using today pertains to the actions of dentists acting individually.

Final Order It is further ordered That respondent, its successors or assigns, and its offcers and representatives shall cease and desist from engaging in any activity, course of conduct, practice, or policy that in whole or in part:

A. Requests, urges, recommends or suggests that dentists, or has the purpose or effect of requiring or organizing dentists to: (1) refuse to submit radiographs or other pre-treatment or post-treatment repayerports, analyses, and materials in response to a third-party request for use in benefit determination; or (2) refuse to deal in any particular way with anyone or more third-party payers; (3) B. Compels, threatens, or coerces any third-party payer to operate or deal in any way in connection with dental health care benefits program; or C. Has the purpose of causing or inducing consumers to choose dentists who do not cooperate with third-party payers, or influencing to any degree consumers' choice of dentists based on the degree or manner of non-cooperation between such dentists and any third-party payer or payers.

It is further ordered, That nothing contained herein shall be deemed: (1) to prohibit members ofIFD, acting individually and not at the encouragement or inducement ofIFD, from dealing with thirdparty payers in the way each sees fit; or (2) to prohibit respondent from adopting bona fide guidelines concerning the exposure of dental patients to radiation. (4) It is further ordered, That, within thirty (30) days after this Order becomes final, respondent shall mail to each ofits members a copy of the Commission Order in this matter, as well as a letter, in the form shown as "Appendix A" to this Order, advising that respondent has abandoned all policies, guidelines, principles, work rules and statements that directly or indirectly request, urge, recommend or suggest that dentists, or have the purpose or effect of requiring or organizing dentists to: (1) refuse to submit radiographs or other pre-treatment or post-treatment reports, analyses, and materials in response to a thirdparty payer s request for use in benefit determination; or (2) refuse to deal in any particular way with anyone or more third-party payers. Final Order IOI F.

The letter shall further advise that dentists are free to choose to deal with any such programs and payers in such manner as they decide individually. Respondent shall also mail a copy of the Order and the letter to every person who joins respondent within three (3) years of the date of service of this Order; (5) It is further ordered That, within sixty (60) days after service ofthis Order, and annually on the anniversary date of the original report for each of the five (5) years thereafter, respondent shall fie with the Commission a report in writing, setting forth in detail the manner and form in which it has complied with this Order. It is further ordered That respondent shall notify the Commission at least thirty (30) days prior to any proposed change in it, such as dissolution or other action resulting in the emergence of a successor organization, which may affect compliance obligations arising out of this Order.

Commissioner Douglas did not participate.

APPENDIX A (Respondent's Letterhead) Dear Doctor:

As you may be aware, the Federal Trade Commission has issued an order against the Indiana Federation of Dentists. This order requires, in essence, that the Indiana Federation of Dentists cease and desist from certain activities that are concerned with dental health care benefits programs and cooperation by dentists with the administrators of such programs. The order also requires that you be sent a copy of the order and this letter.

You are hereby notified that the Indiana Federation of Dentists has abandoned all policies, guidelines, and principles that directly or indirectly request, urge, recommend or suggest that dentists, or have the purpose or effect of requiring or organizing dentists to: (1) refuse to submit radiographs or other pre-treatment or post-treatment reports analyses, and materials in response to a third-party payer s request for use in benefit determination; or (2) refuse to deaJ in any particular way with anyone or more thirdparty payers. You are further notified that you are free to choose to deal with any such payers and programs in such manner as you decide individually. A copy of the FTC' s order is enclosed.

Sincerely, President Enclosure ), MICHIGAN STATE MEDICAL SOCIETY 191 191 Complaint