Unfair Competition in Veterinary Practice
by Jeffrey L. Roth, JD
As discussed in this Matters of Law column previously, the Federal Trade Commission (FTC) has indicated that the "Red Flag Rules” regarding prevention of identity theft apply to veterinary practices. However, that is not the only potential issue that a practicing veterinarian may encounter with that agency.
Section 5 of the Federal Trade Commission Act (FTCA) prohibits "unfair or deceptive acts or practices,” which include combinations, conspiracies, or other anti-competitive conduct in the marketplace between competitors. Such activity could also violate other antitrust laws, including the Sherman Act. Penalties for violations are severe. Depending on what law is violated, both civil and criminal penalties may apply to violations, including treble damages on the civil side, and jail time on the criminal side.
With respect to professionals, unfair competition under the FTCA may be the result of competitor collaboration on anti-competitive terms, including, but not limited to, agreeing to fix prices on services; group boycotts or refusals to deal; and sharing of information regarding prices, costs, and strategic planning that might tend to lessen competition. The opportunity for an alleged violation of Section 5 of the FTCA is enhanced any time there is a formal meeting of competitors, in our case, practicing veterinarians. Practitioners must be very careful, particularly in such public venues, to avoid any anti-competitive collaboration or agreements with other veterinary practices, or even the appearance of such behavior.
In one Alabama case in the early 90s, a county veterinary medical association, as well as some individual practitioners who were members of the association had a complaint filed against them by the FTC. The complaint alleged that certain practitioners agreed to stop participating in, or not participate in, programs offering low-cost spays and neuters, and agreed to restrict the nature of their listings in the Yellow Pages
Although those accused admitted no wrongdoing, both the individual practitioners and the association entered into a consent order agreement with the FTC to settle the matter. This consent order: (1) prohibited an association meeting from continuing after any person mentioned any such refusal to deal or advertising restriction, (2) forbid any such communications to any other practitioner regarding such restrictions or decisions regarding such items, (3) mandated that a copy of the consent order be sent to all members of the association, (4) mandated that for 5 years all new members of the association would get a copy of the consent order, (5) ordered that for 10 years the specific practitioners alleged to have been involved in the conspiracy were ordered not to engage in such behavior, and (6) mandated that a copy of the consent order be sent to BellSouth (Yellow Pages).
Additional examples of anti-competitive discussions that might lead to antitrust violations include discussions among competitors such as:
-- How much do you charge, I'm trying to firm up my price lists?
-- Let's decide to close at 1 PM on Saturdays; that way no one loses any business.
-- I'm tired of those Internet companies selling to my customers at a lower price than my price, so let's don't buy anything from those specific companies.
-- Let's not offer that three-year rabies vaccine, the loss in traffic will seriously hurt us.
--What do you think about taking everything on this side of Main Street, and I'll take the business on the other side?
To prevent allegations of wrongdoing and avoid unwanted scrutiny, practitioners should keep cost and pricing information relating to their practices to themselves and make independent decisions regarding whether or not the practice will participate in low-cost programs, and other such business decisions. Practitioners should not share or discuss cost and pricing data relating to products and services, strategic planning, or make other potentially anti-competitive agreements with other practitioners.
In the event that another practitioner approaches you to suggest an illegal or improper agreement, or if such an agreement is proposed in any public forum, the practitioner should immediately leave, or terminate the meeting. Antitrust law professors in law school recommend that persons in such a situation leave the meeting in a loud and boisterous way, or tip over the donut table or coffee urn to make sure there was notice of their departure. Although I do not necessarily recommend such a demonstration, documenting that you were not part of an alleged combination or conspiracy under antitrust law is important to avoiding potential liability.
On the other hand, meeting colleagues at the local, state, and national level meetings, and sharing important information regarding new technology, techniques, products, services, equipment, and the like should never be discouraged based on fear of unfair competition claims. Such competitor collaboration is necessary, and should be encouraged to help improve practices, make them more efficient, help raise the quality of care provided to patients, and allow practitioners to make new contacts and renew old acquaintances within the profession. The key is to be aware of those types of discussions which can violate the law and bring federal scrutiny for antitrust violations, and avoid them, particularly in the context of group meetings and discussions.