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such a system are attributable to a weakness in its basic structure, it is
contended that no system works properly unless it is adequately monitored and enforced. A rise in the crime rate due to a lack of police
enforcement of our criminal laws, for example, does not necessarily
indicate a fatal substantive deficiency in that system.
V.
CONCLUSION
Disregard of laws and agreements providing public safeguards is often
popular with those groups who are thereby restrained. In this perspective, it may be seen that the direction of unauthorized practice must not
be determined by the singular objective of convenience; convenience
provides us with an amblyopic perspective, and not a talismanic formula
for reform. The recasting of roles must be planned with reference to the
total needs of the homeowner. The complexion of these laws has frequently changed for convenience sake; and although convenience is
often the motivation for change it is not always the precursor of progressive reform.
KENNETH
G. LORE
Minimum Fee Schedules as Price Fixing: A
Per Se Violation of The Sherman Act
Every contract, combination in the form of a trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states or
with foreign nations, is declared to be illegal.!
It must be accepted that fee schedules are designed to increase a lawyer's
income and that they are 2a means of price fixing and eliminating or
reducing price competition.
Professional services have traditionally enjoyed a judicially implied
exemption from antitrust actions as not constituting trade or commerce
within the meaning of the Sherman Act. The Supreme Court has sought
to constrict the sweep of this exemption by seeking increased regulation
of the commercial aspects of professional organizations under section
I. Sherman Antitrust Act, 15 U.S.C. § 1 (1970).
2. Arnould & Corley, Fee Schedules Should Be Abolished, 57 A.B.A.J. 655, 656
(1971).
440
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 22
one of the Sherman Act, leaving unresolved the question of whether the
professional relationship existing between practitioner and client may
also be reached by this statute. This comment proposes that the implied
exemption which has long been tacitly applicable to the legal profession
is no longer valid. Further, it proposes that a careful examination of the
practice of state bar associations in formulating and implementing minimum fee schedules will result in the determination that the scope of
section one of the Sherman Act includes the commercial aspects of legal
practice, that the establishment and dissemination of minimum fee
schedules is a form of pricefixing, and that as such, it constitutes a per
3
se restraint of trade.
I. MINIMUM FEE SCHEDULES
With few exceptions, it is the practice of state bar associations to
promulgate minimum fee schedules,4 or suggested minimum fee sched-
ules, as they are sometimes called. These listings consist of the lowest
fee, or range of fees, that the bar association has determined should be
charged by attorneys for specific categories of legal services.5
Supporters of minimum fee schedules contend that they do not interfere with the judgment of the individual attorney in setting his fee.' This
position is based upon the American Bar Association pronouncement
that minimum fee schedules are intended to be flexible and not obliga-
tory, and upon similar pronouncements of state bars. The substance of
this position is that since many other factors 7 in addition to the mini3. Prices charged for legal services are undergoing examination in the British as well
as American systems. One British commission characterized minimum fees as a "collective obligation not to compete in price" and found them to be "one of the most efTective
restraints on competition." THE MONOPOLIES COMMISSION, REPORT OF PROFESSIONAL
SERVICES, CMND. No. 4463 (pt. I, I 115,319 (1970). See also Harris, Restrictive Practices in the Professions, 120 NEw L.J. 1021 (1970).
4. Statistics indicate that thirty-four states and the District of Columbia have statewide fee schedules; eleven states have schedules adopted by local bars. Five state bar
associations did not respond. Arnould & Corley, supra note 2, at 656-57.
5. Real estate services are a specialty of legal practice frequently subject to minimum
fees established by bar associations. At present, every state bar association minimum
fee schedule contains fees for various real estate transactions. Emphasis on this area of
legal practice is not to suggest that any justification exists for distinguishing among legal
specialties. This comment proposes that minimum fee schedules are not valid, regardless
of the type of professional service involved.
6. See note 7 infra. ABA COMM. ON PROFESSIONAL ETHICS, OPINIONS No. 302
(1961); id., at No. 323 (1970). See AMERICAN BAR ASSOCIATION, LEGAL ECONOMICS
(1970).
7. These. factors are said to include 1)results obtained, 2) amount of time expended,
PUBLICATION, MINIMUM FEE SCHEDULES-DEVELOPMENT AND UTILIZATION
1973]
COMMENTS
mum fee schedule theoretically contribute to the determination of a fee,
the schedule itself is only a minor consideration interposed between
client and attorney.
The effectiveness of this disclaimer is diluted by the American Bar
Association Code of Professional Responsibility, which states that consistent disregard for minimum fee schedules may be a basis for discipli-
nary action by the bar association.' The language of some state bars is
even stronger. The pertinent Virginia State Bar Opinion' reaffirms an
earlier opinion to the effect that the habitual failure to follow minimum
fee schedules is grounds for disciplinary action. 0 Clearly, the intent of
the bar associations is to insure that fees charged for professional services do not fall below a certain stated level." That the coercive measures
used to implement the minimum fees are veiled or couched in discretion-
ary language does not erase their impact.' 2 The intrusion of the bar
association and its minimum fee schedul6 into an attorney's determina-
tion of the monetary value of his professional services unquestionably
interferes with the freedom of the practitioner to set his fees. He is
3) customary charges of the bar for similar services, 4) complexity of the matter, 5)
importance of the matter to the client, 6) total amount involved, 7) whether the client
is regular or casual, 8) whether acceptance of the case adversely affects the attorney, 9)
general nature of the employment, 10) whether the employment yields prestige to the
firm. Buchanan, Jr., TheArt ofBillingthe Client, LEGAL ECONoMics NEWS, Jan., 1971,
at I.
8. ABA
CODE OF PROFESSIONAL RESPONSIBILITY, ETHICAL CONSIDERATION
2-18
(1970).
9. VIRGINIA STATE BAR, OPINION, No.
170 (1971).
10. Id., No. 98 (1960).
II. See Brown, Some Observations on Legal Fees, 24 Sw. L.J. 565 (1970). See also
Association of N. Cal. Plymouth Dealers v. United States, 279 F.2d 126 (9th Cir. 1960)
wherein the court stated:
The competition between Plymouth dealers and the fact that the dealers used the
fixed uniform list price in most instances as a starting point, is of no consequence.
It was an agreed starting point; it had been agreed upon between competitors; it
was in some instances in the record respected and followed; it had to do with,
and had its effect upon, price.
Id. at 132.
12. The fact that prosecutions of attorneys for consistently charging fees below the
minimum rates are rare does not negate the intent of the bar associations in establishing
schedules. The coercive apparatus is present; that its formal sanctions are not often
applied is reflective only of an ineffective administrative mechanism, not of the intent
of bar associations in adopting schedules. The threat of sanction continues to exist and
the threat itself is coerceive. For an examination of a marketing agreement deemed to
be coercive, see Simpson v. Union Oil Co. of Cal., 377 U.S. 13 (1964); United States
v. Parke, Davis & Co., 362 U.S. 29 (1960).
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THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 22
forced to add an extra factor to his determination, one anchored in peer
group pressure, which militates toward higher fees for the client and
which tends to relieve the practitioner of the responsibility of setting his
own fee. The American Bar Association admits the intended influence
of the fee schedule 3 in stating that "the schedules have been established
by members of the bar who have, after due deliberation and study of
the economic factors, determined that a given fee is the lowest charge a
reasonably competent attorney could make, considering the factors of
skill, time and overhead expense and still earn himself a reasonable
return."' 4
II.
THE PER SE CONCEPT
When applying the Sherman Act, the courts have sought to distinguish between classes of restraints on trade. A practice which constitutes
a restraint is not automatically violative of section one of the Act unless
5
it is within the category of a per se violation. Price fixing has been
found to constitute such a violation. 6 The reason for declaring price
13. The intended use of minimum fee schedules is often foiled. One examination has
found that eighty-seven percent of the attorneys questioned made some use of the
schedules in fee determination, but the 40.3 percent who made greatest use of fee
schedules were among lower income attorneys (less than $20,000 per annum). Obviously
many attorneys exceed the fee schedules, but few set fees below the minimums. Arnould
& Corley, supra note 2, at 660. The fact that such statistical evidence supports the
position that minimum fee schedules are not effective in increasing attorneys' incomes
is irrelevant to the determination that the schedules are an instance of price fixing. See
text accompanying notes 33-35 infra.
14. Minimum Fee Schedules-Neither Fish Nor Fowl, LEGAL ECONOMICS NEws,
May, 1971, at 5.
15. In Northern Pac. Ry. Co. v. United States, 356 U.S. 1(1958), the Court describes
its view of the per se concept:
[T]here are certain agreements or practices which because of their pernicious
effect on competition and lack of any redeeming virtue are conclusively presumed
to be unreasonable and therefore illegal without elaborate inquiry as to the precise
harm they have caused or the business excuse for their use. This principle of per
se unreasonableness not only makes the type of restraints which are proscribed
by the Sherman Act more certain to the benefit of everyone concerned, but it also
avoids the necessity for an 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 undertaken. Among the
practices which the courts have heretofore deemed to be unlawful in and of
themselves
. .
.[is] price fixing. .
..
Id. at 5, citing United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 210 (1940)
(emphasis in original).
16. Id.
1973l
COMMENTS
fixing to be within the per se category is grounded in the public policy
of antitrust. 7 This rationale is powerful enough to support the conclusive presumption that price fixing is an unreasonable restraint of trade.18
On the evils of this practice, the Court has said in United States v.
Trenton Potteries Co.:19
The aim and result of every price fixing agreement, if effective, is the
elimination of one form of competition. The power to fix prices, whether
reasonably exercised or not, involves power to control the market and to
fix arbitrary and unreasonable prices ....20
In United States v. Socony-Vacuum Oil Co.,21 Justice Douglas,
speaking for the Court, broadly defined the type of practice which constitutes price fixing: "under the Sherman Act a combination formed for
the purpose and with the effect of raising, depressing, fixing, pegging,
or stabilizing the price of a commodity- in interstate or foreign commerce is illegal per se. ' 22 This expansive definition of pricefixing has
23
received repeated approval since Socony.
17. An examination of the legislative history of the Sherman Act, leading cases, and
scholarly commentary reveals several general goals of antitrust policy. These include
the protection and preservation of competition, avoidance of the necessity for government intervention in and control of industry to correct and maintain reasonable market
conditions, and the promotion of a marketplace operating at or approaching full efficiency. These specific policy considerations are viewed as methods of achieving the more
general goals of consumer protection and maintenance of an economic system reasonably approximating free enterprise. For the legislative history of the Sherman Act, see
I. TOULMIN, A TREATISE ON THE ANTITRUST LAWS OF THE UNITED STATES chs. 1, 4
(1949); Pogue, The Rationale of Exemptions from Antitrust, 19 A.B.A. ANTITRUST
LAW PROCEEDINGS 313 (1961); Comment, The Anatomy of JudicialExemptions from
Antitrust: A Study in Gap-Filling, 15 WAYNE L. REV. 813 (1969); C. KAYSEN & P.
(1959); Bork, Legislative Intent and the Policy of the
Sherman Act, 9 J. LAW & ECON. 7 (1966).
18. In regard to the per se concept and price fixing, see Note, Price Fixing and the
TURNER, ANTITRUST POLICY
Illegal PerSe Concept, 5 U. RICH. L. REV. 422 (1971); Bork, The Rule of Reason and
the Per Se Concept: Price Fixing and Market Division (pt. 1), 74 YALE L.J. 775 (1965);
Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division
(pt. 2), 75 Yale L.J. 373 (1966); Smposium on Price Competition and Antitrust Policy,
57 Nw. U.L. REV. 137 (1962); Comment, The Per Se Illegality of Price Fixing-Sans
Power, Purpose, or Effect, 19 U. CHI. L. REV. 837 (1952).
19. 273 U.S. 392 (1927).
20. Id. at 396-97.
21. 310 U.S. 150 (1940).
22. Id. at 223.
23. United States v. Container Corp. of America, 393 U.S. 333 (1969); Plymouth
Dealers Associates of N. Cal. v. United States, 279 F.2d 128 (1960); United States v.
McKesson & Robbins, Inc., 351 U.S. 305 (1956); Schwegmann Bros. v. Calvert Distil-
444
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 22
The tendency of the Court in dealing with the earlier cases in which
the existence of price fixing was an issue has been to examine the suspect
practice from a practical standpoint. Does the practice tend to produce
price uniformity?24 To some degree the test is misleading if it is taken
to mean "do the prices charged tend to be the same or similar." When
dealing with minimum fee schedules the test should be rephrased: "[d]o
the fees charged tend to be in compliance with the minimum fee schedule?"'25 This is the type of test used in Socony. The language of "raising,
depressing, fixing, pegging, or stabilizing"2 is general enough to easily
encompass minimum fee schedules which are intended to artificially
raise prices, occasional examples of sub-minimum prices notwithstanding.27
The Sherman Act requirement of a "combination or conspiracy" in
finding a restraint of trade presents no difficulty in the case of state bar
associations' promulgation of minimum fee schedules. The Court has
consistently construed the requirement broadly. The bar association,
which adopts and distributes a minimum fee schedule with the intent to
promote price uniformity, has satisfied the combination or conspiracy
lers Corp., 341 U.S. 384 (1951); Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc.,
340 U.S. 211, 213 (1951); United States v. Univis Lens Co., 316 U.S. 241, 244-45
(1942).
24. Sugar Inst. v. United States, 297 U.S. 553 (1936); Appalachian Coals, Inc. v.
United States, 288 U.S. 344 (1933); Maple Flooring Mfrs. Ass'n v. United States, 268
U.S. 563 (1925); Board of Trade v. United States, 246 U.S. 231 (1918). The difference
between price leadership, an acceptable occurrence wherein the initiative of the individual entrepreneur is not completely usurped when he decides to conform his price to that
of the market, and the strictly prohibited price fixing, has become a more difficult
distinction to draw since United States v. Container Corp. of America, 393 U.S. 333
(1969); see text accompanying notes 27-28 infra. The same can be said for price information exchange and price fixing. See note 28 infra.
25. See note II supra.
26. 310 U.S. 150, 223 (1940).
27. A clear line of cases, not expressly overruled by Socony and its progeny, has not
held certain practices, which had a discernible effect on competition, to be restraints
on trade. There are grounds for distinguishing these cases from the broad sweep of the
Socony-Container Corp. line. See, e.g., Sugar Inst., Inc. v. United States, 297 U.S. 553
(1936) (trade association announcing prices prior to sale); Appalachian Coals, Inc. v.
United States, 288 U.S. 344 (1933) (producers in co-operative selling agreement); Maple
Flooring Mfrs. Ass'n v. United States, 268 U.S. 563 (1925) (anonymous publication of
trade information). In the above line of cases, the determination of price was not made
by a group or association and then distributed to individual purveyors. The decisionmaking process remained at the individual level, while the concerted action focused
primarily on dissemination. Admittedly, this dissemination may have had some effect
on future prices, but the essential point is that the free exercise of judgment remained
1973]
COMMENTS
language. No specific agreement, oral or written, is necessary." "[A]
combination may be inferred from an agreement, either express or im-
plied, or by the use of any means to secure adherence to a minimum
price fixing scheme that goes beyond a unilateral vertical announcement
by a seller and a mere refusal to sell."2 " Illustrative of this position is
the holding of United States v. Container Corporation of America,0
wherein the mere informal exchange of current price information, without adoption of a minimum price schedule designed to affect price, was
said to have affected prices quoted by defendant and chilled competition
to the degree which constituted price fixing."'
The requisite intent to promote price uniformity needed to satisfy the
"combination or conspiracy" language of the Act is often inferred from
the practice itself. 3 The reason for the need to infer is obvious-most
action which may constitute price fixing is not undertaken with the
express declaration that it is intended to h.ffect price. Occasionally there
is a stated intent to affect price, on the theory that the practice is exempt
from the sweep of the Sherman Act by virtue of a statutory or judicially
with the individual. In the Socony-Container Corp. line, that exercise of judgment is
more clearly denied to the individual unit of the marketing apparatus. The minimum
fee set or suggested by the bar association is an example of the imposed-from-above
model of Socony-Container Corp., rather than any hybrid contained in early cases.
28. The combination or conspiracy essential to find a violation of the Sherman Act
may be found in a course of dealing or other circumstances, as well as in an exchange
of words. United States v. Schrader's Son, Inc., 252 U.S. 85 (1920). See also United
States v. Parke, Davis & Co., 362 U.S. 29 (1960); American Tobacco Co. v. United
States, 328 U.S. 781 (1946); United States v. Socony-Vacuum Oil Co., 310 U.S. 150
(1940).
29. Comment, Maximum Price Fixing: A PerSe Violation of the Sherman Act, 1969
LAW & SOCIAL ORDER 476, 477 n.6.
30. 393 U.S. 333 (1969).
31. A forerunner to United States v. Container Corp. of America, 393 U.S. 333
(1969), was American Column & Lumber Co. v. United States, 257 U.S. 377 (1921),
where an extensive "open competition" plan, including the exchange of certain price
information, was held violative of the Sherman Act. Regarding the range of permissible
trade association activity, see Monroe, PracticalAntitrust Considerationsfor Trade
Association, 1969 UTAH L. REv. 622 (1969); Note, Guidelinesfor Data Dissemination
Through Trade Associations, 10 WASHBURN L.J. 93 (1970); Note, Antitrust Implications of the Exchange of Price InformationAmong Competitors, 68 MICH. L. REv. 720
(1970). Since ContainerCorporation,the line between information exchange and price
fixing has grown appreciably dimmer.
32. Simpson v. Union Oil Co., 377 U.S. 13 (1964); Schwegmann Bros. v. Calvert
Distillers Corp., 341 U.S. 384 (1951); American Column & Lumber Co. v. United
States, 257 U.S. 377 (1921); United States v. Colgate & Co., 250 U.S. 300 (1919);
United States v. Trenton Potteries, 273 U.S. 392 (1927).
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 22
declared exemption. 33 This is the case with minimum fee schedules.
Bar associations apparently view not merely its noncommercial aspects,
but the entire practice of law as exempt. Consequently, they feel free to
state that two of the justifications for schedules are a desire to eliminate
price competition by uniform or nearly uniform minimum fees, and a
desire to raise attorneys' incomes by means of establishing minimum
fees. 4 A court need go no further in searching for intent. Other bar
33. The exemptions from antitrust form a disorderly patchwork on the statutes. It is
estimated that twenty percent of the national income originates in exempt sectors.
Pogue, supra note 17. See generally Comment, supra note 17; Coleman, Jr., Antitrust
Exemptions, Exempt Areas: LearnedProfessions, 33 ABA ANTITRUST L.J. 48 (1967);
Comment, PersonalServices and the Antitrust Laws, I WAYNE L. REv. 124 (1955);
Comment, Governmental Action and Antitrust Immunity, 119 U. PA. L. REV. 521
(1971); Comment, Immunity From Prosecution Under the Sherman Act, 4 GONZAGA
L. REV. 304 (1969); Costilo, Antitrust's Newest Quagmire: The Noerr-Pennington
Defense, 66 MICH. L. REV. 333 (1967). Judicially declared exemptions from the sweep
of the antitrust statutes include state action. George R. Whitten, Jr., Inc. v. Paddock
Pool Builders, Inc., 424 F.2d 25 (1st Cir. 1970); Hecht v. Pro-Football, Inc., 312 F.
Supp. 472 (D.D.C. 1970); E.W. Wiggins Airways, Inc. v. Massachusetts Port Authority,
362 F.2d 52 (Ist Cir. 1966), cert. denied, 385 U.S. 947 (1966); Stroud v. Benson, 254
F.2d 448 (4th Cir. 1958), cert. denied, 358 U.S. 817 (1958); Parker v. Brown, 317 U.S.
341 (1943); cf Note, The Anthracite Coal Protection Plan, 102 U. PA. L. REv. 368
(1964). Other such exemptions include action by the federal government. Alabama
Power Co. v. Alabama Elec. Co-op, Inc., 394 F.2d 672 (5th Cir.), cert. denied, 393 U.S.
1000 (1968); Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 683 (1949). A
third exemption is the exercise of constitutionally protected rights to attempt to influence the course of government. George R. Whitten, Jr., Inc. V.Paddock Pool Builders,
Inc., 424 F.2d 25, 3 1-34 (1st Cir. 1970); United Mine Workers of America v. Pennington, 381 U.S. 657 (1965); Eastern R.R. Presidents Conference v. Noerr Motor Freight,
Inc., 365 U.S. 127 (1961).
34. The double-pronged argument of exemption based on the "learned profession"
rationale [see text accompanying notes 53-72 infra] and the "state action justification"
is raised by the Virginia State Bar Association in current litigation. Goldfarb v. Virginia
State Bar, Civil No. 75-72A (E.D. Va., filed Feb. 22, 1972). Plaintiffs charge that the
minimum fee schedules of state and local bar associations are a restraint of trade.
Parker v. Brown, 317 U.S. 341 (1943), exempts state-created restraints of trade where
the state has attained an active degree of participation in the subject activity and the
public interest is protected by means other than the antitrust statutes. The position of
the integrated state bar association (one which all attorneys are required by law to join
before being allowed to practice in the state) of which the Virginia Bar Association is
an example, theoretically is secure if the alternative means of protection for the public
are present; however, the standard is a rigorous one. Two local bar associations, those
of Alexandria, and Arlington, have agreed to abolish their fee schedules and have been
severed as defendants. The opinion in Goldfarb v. Virginia State Bar, rendered on
January 5, 1973, distinguishes between the remaining local bars, whose fee schedules
were adjudged a per se violation, and the State Bar, whose fee schedule was validated.
1973]
COMMENTS
association justifications for minimum fee schedules, often said to be
noncommercial in nature, 35 are irrelevant when dealing with a per se
violation.
The breadth of the per se rule is further revealed by the court in
Plymouth Dealers Association of Northern California v. United
States.3 1 Speaking to the question of whether the agreement, once
found to exist, must also be found to affect the price actually charged,
the court said: "[tihe test is not what the actual effect is on prices, but
whether such agreements interfere with the freedom of traders and
thereby restrain their ability to sell in accordance with their own judg37
ment."
In a number of recent cases, the Supreme Court has held various
activities of professional associations to be price fixing. In UnitedStates
v. NationalAssociation of Real Estate Boards,38 the Court enunciated
a number of factors relevant in characteiizing the commission schedule
promulgated by the broker's association as price fixing. Neither the fact
that the rates were not mandatory nor the absence of official sanctions
was said to eliminate the existence of an agreement designed to affect
price. The Court deemed the use of the prescribed rates in a majority
of cases and the tendency of the Board's Code of Ethics to promote
adherence as important indicia of the agreement to fix prices.
The distinction between the two appears to be a dubious one and appeal is likely. See
Leary & Donty, Minimum Fee Schedules and the Antitrust Laws: A Preliminary Analysis (American Bar Foundation Research Memorandum, Series No. 12, 1958).
35. Bar associations contend that there are multiple purposes for establishing minimum fees and that the most important of these are not commercial. See note 7 supra.
The argument that the avoidance of price competition protects the public because it
allows an attorney to focus his attention on professional skills, not competition for fees,
is a position given nominal support by United States v. Oregon Medical Soc'y, 343 U.S.
326 (1952). Reaffirming the Court's position in Semler v. Oregon State Bd. of Dental
Examiners, 294 U.S. 608 (1935), Justice Jackson stated: "[t]his court has recognized
that forms of competition usual in the business world may be demoralizing to the ethical
standards of a profession." 343 U.S. at 336. Reliance on Oregon State MedicalSociety
and Semler to support the position that the public needs protection from shoddy legal
services caused by price competition is misplaced. In point of fact, no positive correlation has been shown between the quality of legal work and the fee charged, at least with
regard to a downward variance. See Coons, Non-Commercial Purpose as a Sherman
Act Defense, 56 Nw. U.L. REv. 705 (1962).
36. 279 F.2d 128 (9th Cir. 1960).
37. Id. at 132, quoting Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 340 U.S.
211, 213 (1951). The issue in Seagram was whether an agreement among competitors
to fix maximum prices violated the Sherman Act. The Court declared that it did,
reaffirming United States v. Socony Vacuum Oil Co., 310 U.S. 150 (1940).
38. 339 U.S. 485 (1950).
THE AMERICAN UNIVERSITY LAW REVIEW
448
[Vol. 22
Northern California PharmaceuticalAssociation v. United States39
approached the price schedule distributed by the Association in a manner similar to that of NationalAssociation of Real Estate Boards. The
suggested prices of the schedule for pre-compounded prescription drugs
reflected the existence of an agreement, and the absence of sanctions to
enforce the agreement did not render its existence nugatory. Further, the
Court held that the very existence of the agreement could be implied
from the operation of the pricing schedule among the members.
In United States v. Utah PharmaceuticalAssociation," the district
court was not at all hesitant in finding the price schedule for prescription
drugs distributed to Association members to be price fixing. Again, the
factors important to the determination included the membership in the
Association of a majority of pharmacists in the state and the consequent
widespread use of the schedule. The absence of sanctions for non-use
was not dispositive.
The parallels between the practices of the associations of the pharmaceutical and brokerage professions and those of state bar associations
are striking. In instances where most practitioners are association members, where the fee schedules are said to be suggested but nevertheless
receive wide use, and where there are no formal or effective enforcement
mechanisms, the courts have found fee schedules to be price fixing. The
criteria appear to apply equally to bar associations as well as other
professional associations.
III.
THE PRACTICE OF LAW
As INTERSTATE COMMERCE
Before a practice may be regulated by the federal statute, the threshold jurisdictional requirements that the activity be both interstate and
consist of trade or commerce must be satisfied.4t Only after these determinations are made is the particular practice examined to ascertain
whether it is a restraint of trade or commerce.
In dealing with professional associations, the Supreme Court has
consistently applied a relatively stringent test to determine whether the
association is engaged in interstate commerce.42 This variance from the
39. 306 F.2d 379 (9th Cir.), cert. denied, 371 U.S. 862 (1962).
40. 201 F. Supp. 29 (D. Utah), aff'd per curiam, 371 U.S. 24 (1962).
41. U.S. CONST. art. 1, § 8, cl. 3.
42. The defense that the subject activity is not interstate commerce has, on occasion,
prevailed. See United States v. Oregon State Medical Soc'y, 343 U.S. 326 (1952);
Spears Free Clinic & Hospital for Poor Children v. Cleere, 197 F.2d 125 (10th Cir.
1952). The most notable aberration in antitrust commerce clause interpretation concerns professional baseball. Recent rejection of the view that the sport is interstate
1973]
COMMENTS
modern trend of commerce clause expansion in the commercial field43
reflects an effort by the Court to protect the professional-client relationship. The test of interstate commerce enunciated in Apex Hosiery Co.
v. Leader" focuses on factors having a substantial and direct effect on
interstate commerce. The interstate contacts demonstrated in United
States v. Oregon State Medical Society"s were characterized as "few,
sporadic and incidental."4 This type of connection is insufficient to
bring the professional society within the scope of the commerce clause.
A similar finding was made in Elizabeth Hospital, Inc. v. Richardson,4 7
where the treatment of out of state patients and the purchase of out of
state equipment by the hospital was not found to constitute the direct
and substantial effect on interstate commerce needed to satisfy the commerce clause."
Of primary importance in treating these professional association
cases is the fact that the alleged offenders were found not to be subject
to the antitrust statutes on the basis that they did not satisfy the requirement of interstate commerce. They do not stand for the proposition that
professional associations are exempt merely because they consist of
practitioners of a profession. The viability of the position that fortycommerce within the meaning of the Sherman Act appears in Flood v. Kuhn, 407 U.S.
258 (1972). The Court there indicates that baseball is an isolated exception. Attempts
to extend it to other professional sports have been unsuccessful. Radovich v. National
Football League, 352 U.S. 445 (1957); United States v. International Boxing Club of
N.Y., Inc., 348 U.S. 236 (1955).
43. In purely commercial areas,
[t]he power of Congress over interstate commerce is not confined to the regulation
of commerce among the states. It extends to those activities intrastate which so
effect interstate commerce or exercise of the power of Congress over it as to make
regulation of them appropriate means to the attainment of a legitimate end, the
exercise of the granted power of Congress to regulate interstate commerce.
United States v. Darby, 312 U.S. 100, 118 (1941). Any practice or activity which is
burdensome or has substantial economic effect on interstate commerce is reachable by
the federal government via the commerce clause. Wickard v. Filburn, 317 U.S. 11I, 12425 (1942).
44. 310 U.S. 469 (1940).
45. 343 U.S. 326 (1952).
46. Id. at 339.
47. 269 F.2d 167 (8th Cir.), cert. denied, 361 U.S. 884 (1959).
48. Accord, Riggall v. Washington County Medical Soc'y, 249 F.2d 266 (1957);
Speers Free Clinic & Hosp. for Poor Children v. Cleere, 197 F.2d 125 (10th Cir. 1952).
Interstate contacts which are not substantial, and no more than incidental, will not, in
the instance of professional associations, satisfy the jurisdictional requirement of interstate commerce.
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nine" state bar association minimum fee schedules do not affect interstate commerce is dubious. Fee schedules affect virtually all legal clients
whose cumulative private and corporate affairs constitute the sum and
substance of interstate commerce. 0 To state that the purchase of legal
advice and services does not affect interstate commerce is to deny potor bar associaence to the concept." The fact that one client, attorney,
12
dispositive
not
is
state
single
a
in
located
is
tion
IV.
THE PRACTICE OF LAW
As "TRADE" WITHIN THE SHERMAN ACT
The threshold requirement that the bar association activity consisting
of setting minimum fees is trade within the meaning of the Sherman Act
presents a more difficult issue. The Supreme Court has never ruled
directly on the question of whether the practice of law is trade or commerce, but by analogy to rulings regarding the commercial practices of
other professions and services, it is clear that at least the nonprofessionalaspects of legal practice are within the ambit of "trade or
commerce."
It has been the practice of the Court to broadly construe the jurisdictional "trade" requirement. 53 Moreover, the Court has repeatedly
stated that statutory and judicial exemptions from antitrust are to be
narrowly construed.54 In United States v. NationalAssociation of Real
49. See note 34 supra.
50. United States v. Darby, 312 U.S. 100, 118 (1941); Wickard v. Fillburn, 317 U.S.
I II, 125 (1942). See note 1 supra.
51. The degree of effect on interstate commerce is immaterial. Modern interpretation
of the commerce power focuses on the existence of the effect, not on its magnitude.
United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940); Apex Hosiery Co. v.
Leader, 310 U.S. 469 (1940).
52. It is settled law that Congress can, by virtue of its power over interstate commerce, regulate local or interstate matters which burden that commerce. United States
v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 539 (1944); Local 167 Int'l Bhd.
of Teamsters v. United States, 291 U.S. 293 (1934); NLRB v. Jones & Laughlin Steel
Corp., 301 U.S. 1 (1937). Mandeville Island Farms, Inc. v. American Crystal Sugar
Co., 334 U.S. 219 (1948).
53. The scope of Sherman Act trade has been said to include "every person engaged
in business whose activities might restrain or monopolize commercial intercourse among
the States." United States v. Southern-Eastern Underwriters Ass'n, 322 U.S. 533, 553
(1944). "It is in [the]. . . broad sense that 'trade' is used in the Sherman Act." United
States v. National Ass'n of Real Estate Bds., 339 U.S. 485, 491 (1950).
54. See George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 424 F.2d 25,
30 (Ist Cir. 1970); United States v. First City Nat'l Bank, 386 U.S. 361, 368 (1967);
Carnation Co. v. Pacific Westbound Conference, 383 U.S. 213, 217-18 (1966); United
States v. Philadelphia Nat'l Bank, 374 U.S. 321, 350-51 (1963); California v. FPC, 369
U.S. 482 (1962).
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COMMENTS
Estate Boards,5 the Court implied that "trade," as used in the Sherman
Act, encompasses all activity without statutory or judicially construed
exemption. The practice of law has no statutory exemption. 6 The most
that can be argued is an implied judicial exemption from application of
7
the Sherman Act.1
There is some superficial support for the position that the entire
profession should be exempt. The basis for this contention is that the
public interest in maintaining high levels of professional competence
outweighs the adverse affects of potential restraints on trade.5"
Thus, in Federal Trade Commission v. Raladam,59 the Supreme
Court indicated in dicta that the practice of medicine was not a "trade."
Of course, medical practitioners, by some of whom the danger of using
the remedy without competent advice was exposed, are not in competition
with respondent. They follow a profession and not a trade, and are not
engaged in the business of making or vending remedies but in prescribing
them.60
1 the
More recently, in United States v. Oregon State Medical Society,"
Court declined to rule specifically on whether the practice of medicine
is a trade. The issue was whether the Society, through its nonprofit
corporation, restrained trade in the business of prepaid health care. No
refusal to deal with private health organizations could be proved. Again
in dicta the Court commented on the special factors involved in a profession which support at least partial exemption.
We might observe in passing, however, that there are ethical considerations where the historic and direct relationship between patient and physician is involved which are quite different than the usual consideration
prevailing in ordinary commercial matters."
55. 339 U.S. 485 (1950).
56. See, e.g., Federal Aviation Act, 49 U.S.C. § 1384 (1970).
57. On the possible existence of an implied exemption for the legal profession see,
Comment PersonalServices And The Antitrust Laws, 1 WAYNE L. REV. 124 (1955);
Coleman, supra note 30.
58. Regarding fee schedules in general, and for analysis of the various justifications
propounded, see Pietz & Nolden, The Wisconsin Minimum Fee Schedule: A Problem
of Antitrust, 1968 Wis. L. REV. 1237; Arnould & Corley, supra note 2; Miller & Weil,
Let's Improve, Not Kill, Fee Schedules, 58 A.B.A.J. 31 (1972); Note, CriticalAnalysis
of Bar Association Minimum Fee Schedules, 85 HARV. L. REV. 971 (1972); AMERICAN
-BAR AssoCIATION, supra note 6.
59. 283 U.S. 643 (1931).
60. Id. at 653.
61. 343 U.S. 326 (1952).
62. Id. at 336.
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But the argument to the effect that because the contact between the
professional and the client is qualitatively different from that of a more
commercial endeavor, the entire professional practice should be exempt
from the Sherman Act as not a "trade," is simplistic and overprotective.
It is also in direct opposition with the judicial trend in dealing with the
defense of alleged non-trade status in professional antitrust cases."
There is good reason to continue extending the distinction between
commercial and noncommercial aspects of a profession, with only the
latter being exempt. The Court has reached this position by implication
in Oregon State Medical Society, wherein a prepaid medical care plan,
rather than the individual medical service rendered was emphasized.
The distinction was more sharply drawn in a recent lower court decision,
Marjorie Webster Junior College, Inc. v. Middle States Association of
Colleges and Secondary Schools, Inc.64 The court held that the nature
of the act of accreditation by the Association was not of the commercial
character contemplated by the Sherman Act.
[T]he proscriptions of the Sherman Act were "tailored. . . for the business world," not for the noncommercial aspects of the liberal arts and
learned professions. In these contexts, an incidental restraint of trade,
absent an intent or purpose to affect the commercial aspects of the
professions, is not sufficient to warrant application of the antitrust laws."
63. Those more recent cases which have not found professions and professional associations subject to the antitrust laws have been predicated on the fact that the activity
in question was not a trade. The reasoning of FTC v. Raladan, 283 U.S. 643 (1931)
originating in The [Schooner] Nymph, 18 F. Cas. 506 (No. 10,388) (C.C.D. Me. 1834),
seems to stand alone in a legal backwater. Justice Story defined "trade" broadly, then
implied exceptions to the application of the term.
[Tihe word "trade" is often, and indeed generally used in a broader sense, as
equivalent to occupation, employment, or business, .
.
. [wherever such] is car-
ried on for the purpose of profit, or gain, or a livelihood, not in the liberal arts
or in the learned professions. ...
Id. at 507. The judicial trend is toward viewing even professional services as trade for
the purposes of antitrust. See note 66 infra for incidents of services as trade under the
Sherman Act. AMA v. United States, 317 U.S. 519 (1945), approached the distinction
between commercial and noncommercial aspects of the medical profession, but declined
to draw the line. The American Medical Association was found to have restrained the
operation of Group Health Association, Inc., a service providing prepaid health care.
Rather than ruling the practice of medicine a trade, the Court found the occupation of
defendants immaterial where their activity operated to restrain others in commercial
endeavors. Id. at 528.
64. 432 F.2d 650 (D.C. Cir. 1970), wherein plaintiff alleged that refusal by the
Association to accredit the college amounted to a restraint of trade.
65. Id. at 654. (emphasis added) (footnotes omitted).
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COMMENTS
Services, including those rendered by the professions, have been increasingly subjected to the antitrust laws. 6 Each expansion of Sherman
Act "trade" has been predicated upon the awareness that the determining factor in categorizing a course of conduct as within the Act is the
degree of commercialism involved.6 7 In holding that the fixing of brokers' fees by the National Association of Real Estate Boards 8 constituted a per se violation of the Sherman Act, Justice Douglas emphasized
the commercial nature of the activity.
We do not intimate an opinion on the correctness of the application of
the term [trade] to the professions. We have said enough to indicate we
would be contracting the scope of the concept of "trade," in a precedentbreaking manner if we carved out an exemption for real estate brokers.
Their activity is commercial and carried on for profit.69
Although the Supreme Court has not ruled directly on the issue of
66. Fixing prices as well as other unreasonable restraints on trade perpetrated by
those providing personal services have been struck down by the courts. Northern Cal.
Pharmaceutical Ass'n v. United States, 306 F.2d 379 (9th Cir.), cert. denied, 371 U.S.
862 (1962); United States v. Utah Pharmaceutical Ass'n, 201 F. Supp. 29 (D. Utah),
aff'd per curiam, 371 U.S. 24 (1962) (sale of pharmaceutical products); Radovich v.
National Football League, 352 U.S. 445 (1957) (professional football); United States
v. National Ass'n of Real Estate Bds., 339 U.S. 485 (1950) (real estate brokerage);
United States v. Paramount Pictures, 334 U.S. 131 (1948); Schine Shain Theatres v.
United States, 334 U.S. 110 (1948) (production, exhibition and distribution of motion
pictures); Associated Press v. United States, 326 U.S. 1 (1945) (obtaining news); AMA
v. United States, 317 U.S. 519 (1943) (providing medical services); Atlantic Cleaners
& Dyers, Inc. v. United States, 286 U.S. 427 (1932) (cleaning and dyeing of clothing);
United States v. Shubert, 348 U.S. 222 (1955); Hart v. B.F. Keith Vandeville Exch.,
262 U.S. 271 (1923) (production of theatrical attractions).
67. Two lower court cases make the distinction between commercial and noncommercial aspects of the pharmaceutical profession. In United States v. Utah Pharmaceutical Ass'n, 201 F. Supp. 29 (D. Utah), aff'd per curiam, 371 U.S. 24 (1962), the court
found that although professional services, i.e., the noncommercial elements, were included in a drug pricing schedule disseminated to association members, the principle
element in price determination was not professional, but was in fact, commercial. Thus,
where the balance was found to tip toward the commercial aspects of the profession,
the fee schedule was struck down as an instance of price fixing. Northern Cal. Pharmaceutical Ass'n v. United States, 306 F.2d 379 (9th Cir.), cert. denied, 371 U.S. 862
(1962), presented much the same problem. The prescription drug price schedule of the
association was so grounded in the "entrepreneurial" aspects of the profession that no
professional exemption could be said to exist. In both of these cases the court examined
the dual scope of the price schedules, determined that the commercial aspects of each
predominated over the professional, and applied traditional antitrust law, i.e., the concept that price fixing is a per se violation.
68. United States v. National Ass'n of Real Estate Bds., 339 U.S. 485 (1950).
69. Id. at 491-92.
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the practice of law as trade within the Sherman Act, the Oregon State
Medical Society and Marjorie Webster Junior College cases lay a firm
foundation for the Court to distinguish and exempt only the noncommercial aspects of legal practice. They have done so with the medical profession, 7 with pharmacists, 71 and with real estate brokers where
the activity in question was primarily commercial. There is no reason
to anticipate a future constriction of Sherman Act "trade," especially
where the relationship to be preserved, here attorney-client, will be
protected without such constriction. The direction of the law is toward
declaring that commercial aspects of legal practice are "trade" within
the meaning of the Act, while validating a judicial exemption for noncommercial aspects. Once the distinction between commercial and noncommercial aspects of the professions is made, the application of the
Sherman Act to nonexempt portions becomes possible in a manner
consistent with the body of case law applicable to wholly commercial
enterprises.
V.
CONCLUSION
The foregoing analysis reveals the legal hurdles to be negotiated in
eliminating the minimum fee schedules established by bar associations
by means of section one of the Sherman Act. The questions of whether
the practice of law is interstate commerce, and whether the practice of
setting and disseminating minimum fees is price fixing, are not delicate,
innovative, or even particularly difficult legal issues. The suggestion that
minimum fee schedules violate the Sherman Act is not new, although
the schedules have not been treated as per se violations. Statute and case
law abound to aid the courts in deciding the questions. It is the position
of this comment that those issues will be decided in the affirmative. The
core issue is, however, not interstate commerce or price fixing.
Most important is the status of the professions vis-a-vis the antitrust
laws. The present inquiry deals with attorneys and bar associations, but
the resolution of the question has direct consequences for doctors, accountants, architects, and their professional associations, as well as for
any group viewing itself as representing those engaged in a learned
profession.
The schedules violate both the antitrust statutes and the ethical stan70. Levin v. Joint Comm'n on Accreditation of Hosps., 354 F.2d 515 (D.C. Cir.
1965); Elizabeth Hosp., Inc. v. Richardson, 269 F.2d 167 (8th Cir.), cert. denied, 361
U.S. 884 (1959); AMA v. United States, 317 U.S. 519 (1943).
71. See note 67 supra.
72. United States v. National Ass'n of Real Estate Bds., 339 U.S. 485 (1950).