U.S. Supreme Court Catalano, Inc. v. Target Sales, Inc., 446
U.S. 643 (1980) Catalano, Inc. v. Target Sales,
Inc. No. 79-1101 Decided May 27, 1980 446
U.S. 643 ON PETITION FOB WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH
CIRCUIT Held: An alleged agreement
among respondent wholesalers to eliminate short-term trade credit
formerly granted to beer retailers and to require the retailers to
make payment in cash, either in advance or upon delivery, is
plainly anticompetitive as being tantamount to an agreement to
eliminate discounts, and thus falls squarely within the traditional
antitrust rule of per se illegality of price fixing,
without further examination under the rule of reason. Certiorari granted; 605 F.2d 1097,
reversed and remanded. PER CURIAM. Petitioners, a conditionally certified
class of beer retailers in the Fresno, Cal., area, brought suit
against respondent wholesalers alleging that they had conspired to
eliminate short-term trade credit formerly granted on beer
purchases in violation of § 1 of the Sherman Act, ch. 647, 26 Stat.
209, as amended, 15 U.S.C. § 1. The District Court entered an
interlocutory order which, among other things, denied petitioners'
"motion to declare this a case of per se illegality," and
then certified to the United States Court of Appeals for the Ninth
Circuit, pursuant to 28 U.S.C. § 1292(b), [ Footnote 1 ] the Page
446 U. S. 644 question whether the alleged agreement
among competitors fixing credit terms, if proved, was unlawful on
its face. [ Footnote 2 ] The
Court of Appeals granted permission to appeal, and, with one judge
dissenting, agreed with the District Court that a horizontal
agreement among competitors to fix credit terms does not
necessarily contravene the antitrust laws. 605 F.2d 1097 (1979).
[ Footnote 3 ] We grant the
petition for certiorari, and reverse the judgment of the Court of
Appeals. For purposes of decision, we assume the
following facts alleged in the amended complaint [ Footnote 4 ] to be true. Petitioners allege
that, beginning in early 1967, respondent wholesalers secretly
agreed, in order to eliminate competition among themselves, that.
as of December. 1967, they would sell to retailers only if payment
were made in advance or upon delivery. Prior to the agreement, the
wholesalers had extended credit without interest up to the 30- and
42-day limits permitted by state law. [ Footnote 5 ] According to the petition, prior to the
agreement, wholesalers had competed with each other with
respect Page
446 U. S. 645 to trade credit, and the credit terms
for individual retailers had varied substantially. [ Footnote 6 ] After entering into the
agreement, respondents uniformly refused to extend any credit at
all. The Court of Appeals decided that the
credit-fixing agreement should not be characterized as a form of
price fixing. The court suggested that such an agreement might
actually enhance competition in two ways: (1) "by removing a
barrier perceived by some sellers to market entry," and (2) "by the
increased visibility of price made possible by the agreement to
eliminate credit." Id. at 1099. In dissent, Judge Blumenfeld [ Footnote 7 ] expressed the opinion that
an agreement to eliminate credit was a form of price fixing. Id. at 1104. He reasoned that the extension of
interest-free credit is an indirect price reduction, and that the
elimination of such credit is therefore a method of raising
prices: "The purchase of goods creates an
obligation to pay for them. Credit is one component of the overall
price paid for a product. The cost to a retailer of purchasing
goods consists of (1) the amount he has to pay to obtain the goods,
and (2) the date on which he has to make that payment. If there is
a differential between a purchase for cash and one on time, that
difference is not interest, but part of the price. See Hogg v.
Ruffner , 66 U.S. (1 Black) 115, 66 U. S.
118 -119 . . . (1861). Allowing a retailer interest-free
short-term credit on beer purchases effectively reduces the price
of beer, when compared to a requirement that the retailer pay the
same amount immediately in cash; and, conversely, the elimination
of free credit is the equivalent of a price increase." Id. at 1103. It followed, in his view, that the
agreement was just as plainly anticompetitive as a direct agreement
to raise prices. Consequently, Page 446 U. S. 646 no further inquiry under the rule of reason, see National
Society of Professional Engineers v. United States, 435 U. S. 679 (1978), was required in order to establish the agreement's
unlawfulness.

															Our cases fully support Judge Blumenfeld's analysis, and
foreclose both of the possible justifications on which the majority
relied. [ Footnote 8 ] In Broadcast Music, Inc. v. Columbia Broadcasting System,
Inc., 441 U. S. 1 , 441 U. S. 7 -8
(1979), we said:

															"In construing and applying the Sherman Act's ban against
contracts, conspiracies, and combinations in restraint of trade,
the Court has held that certain agreements or practices are so
'plainly anticompetitive,' National Society of Professional
Engineers v. United States, 435 U. S. 679 , 435 U. S.
692 (1978); Continental T.V., Inc. v. GTE Sylvania,
Inc., 433 U. S. 36 , 433 U. S.
50 (1977), and so often ''ack . . . any redeeming
virtue,' Northern Pac. R. Co. v. United States, 356 U. S.
1 , 356 U. S. 5 (1958), that they
are conclusively presumed illegal without further examination under
the rule of reason generally applied in Sherman Act cases.
[ Footnote 9 ] " Page 446 U. S. 647 A horizontal agreement to fix prices is the archetypal example
of such a practice. It has long been settled that an agreement to
fix prices is unlawful per se. It is no excuse that the
prices fixed are themselves reasonable. See, e.g., United
States v. Trenton Potteries Co., 273 U.
S. 392 , 273 U. S.
397 -398 (1927); United States v. Trans-Missouri
Freight Assn., 166 U. S. 290 , 166 U. S.
340 -341 (1897). In United States v. Socony-Vacuum
Oil Co., 310 U. S. 150 (1940), we held that an agreement among competitors to engage in a
program of buying surplus gasoline on the spot market in order to
prevent prices from falling sharply was unlawful without any
inquiry into the reasonableness of the program, even though there
was no direct agreement on the actual prices to be maintained. In
the course of the opinion, the Court made clear that

															"the machinery employed by a combination for price fixing is
immaterial."

															"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. " Id. at 310 U. S.
223 .

															Thus, we have held agreements to be unlawful per se that had substantially less direct impact on price than the
agreement alleged in this case. For example, in Sugar Institute
v. United States, 297 U. S. 553 , 297 U. S.
601 -602 (1936), the Court held unlawful an agreement to
adhere to previously announced prices and terms of sale, even
though advance price announcements are perfectly lawful and even
though the particular prices and terms were not themselves fixed by
private agreement. Similarly, an agreement among competing firms of
professional engineers to refuse to discuss prices with potential
customers until after negotiations have resulted in the initial
selection of an engineer was held unlawful without requiring
further inquiry. National Society of Professional Engineers v.
United States, supra at 435 U. S.
692 -693. Indeed, a horizontal agreement among
competitors to use a Page 446 U. S. 648 specific method of quoting prices may be unlawful. Cf. FTC
v. Cement Institute, 333 U. S. 683 , 333 U. S.
690 -693 (1948). [ Footnote 10 ] It is virtually self-evident that extending
interest-free credit for a period of time is equivalent to giving a
discount equal to the value of the use of the purchase price for
that period of time. Thus, credit terms must be characterized as an
inseparable part of the price. [ Footnote 11 ] An agreement to terminate the practice of
giving credit is thus tantamount to an agreement to eliminate
discounts, and thus falls squarely within the traditional per
se rule against price fixing. [ Footnote 12 ] While it Page 446 U. S. 649 may be that the elimination of a practice of giving variable
discounts will ultimately lead in a competitive market to
corresponding decreases in the invoice price, that is surely not
necessarily to be anticipated. It is more realistic to view an
agreement to eliminate credit sales as extinguishing one form of
competition among the sellers. In any event, when a particular
concerted activity entails an obvious risk of anticompetitive
impact with no apparent potentially redeeming value, the fact that
a practice may turn out to be harmless in a particular set of
circumstances will not prevent its being declared unlawful per
se. The majority of the panel of the Court of Appeals suggested,
however, that a horizontal agreement to eliminate credit sales may
remove a barrier to other sellers who may wish to enter the market.
But in any case in which competitors are able to increase the price
level or to curtail production by agreement, it could be argued
that the agreement has the effect of making the market more
attractive to potential new entrants. If that potential justifies
horizontal agreements among competitors imposing one kind of
voluntary restraint or another on their competitive freedom, it
would seem to follow that the more successful an agreement is in
raising the price level, the safer it is from antitrust attack.
Nothing could be more inconsistent with our cases.

															Nor can the informing function of the agreement, the increased
price visibility, justify its restraint on the individual
wholesaler's freedom to select his own prices and terms of sale.
For, again, it is obvious that any industry-wide agreement on
prices will result in a more accurate understanding of the terms
offered by all parties to the agreement. As the Sugar
Institute case demonstrates, however, there is a plain
distinction between the lawful right to publish prices and terms of
sale, on the one hand, and an agreement among competitors Page 446 U. S. 650 limiting action with respect to the published prices, on the
other.

															Thus, under the reasoning of our cases, an agreement among
competing wholesalers to refuse to sell unless the retailer makes
payment in cash either in advance or upon delivery is "plainly
anticompetitive." Since it is merely one form of price fixing, and
since price-fixing agreements have been adjudged to lack any
"redeeming virtue," it is conclusively presumed illegal without
further examination under the rule of reason.

															Accordingly, the judgment of the Court of Appeals is reversed,
and the case is remanded for further proceedings consistent with
this opinion. It is so ordered. [ Footnote 1 ]

															Title 28 U.S.C. § 1292(b) provides:

															"When a district judge, in making in a civil action an order not
otherwise appealable under this section, shall be of the opinion
that such order involves a controlling question of law as to which
there is substantial ground for difference of opinion and that an
immediate appeal from the order may materially advance the ultimate
termination of the litigation, he shall so state in writing in such
order. The Court of Appeals may thereupon, in its discretion,
permit an appeal to be taken from such order, if application is
made to it within ten days after the entry of the order: Provided, however, That application for an appeal
hereunder shall not stay proceedings in the district court unless
the district judge or the Court of Appeals or a judge thereof shall
so order."

															[ Footnote 2 ]

															In pertinent part, the District Judge's order read as
follows:

															"'In the opinion of the Court, this order involves a controlling
question of law, whether an agreement among competitors to
eliminate the extension of trade credit constitutes a per
se violation of Section 1 of the Sherman Act (15 U.S.C. § 1),
as to which there is substantial ground for difference of opinion,
and that an immediate appeal from the order will materially advance
the ultimate termination of the litigation since this issue is
central to the conduct of discovery and trial of this case.'"

															App. D to Pet. for Cert

															[ Footnote 3 ]

															The District Court had also granted summary judgment against two
plaintiffs for failure to establish injury in fact. Those
plaintiffs appealed separately. The Court of Appeals consolidated
their appeal with the appeal taken pursuant to § 1292(b), and
unanimously reversed that portion of the District Court's order. No
review is sought in this Court of that ruling.

															[ Footnote 4 ] See Record 152.

															[ Footnote 5 ]

															Cal.Bus. & Prof. Code Ann. § 25509 (West Supp. 1980).

															[ Footnote 6 ]

															Pet. for Cert. 4.

															[ Footnote 7 ]

															Senior District Judge for the District of Connecticut, sitting
by designation.

															[ Footnote 8 ]

															Respondents nowhere suggest a procompetitive justification for a
horizontal agreement to fix credit. Their argument is confined to
disputing that settled case law establishes that such an agreement
is unlawful on its face.

															[ Footnote 9 ]

															The quotation from Northern Pacific R. Co. v. United
States, 356 U. S. 1 , 356 U. S. 5 (1958), is drawn from the following passage:

															"[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
. . . -- an inquiry so often wholly fruitless when undertaken.
Among the practices which the courts have heretofore deemed to be
unlawful in and of themselves are price fixing. . . ."

															[ Footnote 10 ]

															The Court there held that an agreement to use a multiple basing
point pricing system was an unfair method of competition prohibited
by § 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, even
though the same conduct would also violate § 1 of the Sherman
Act.

															[ Footnote 11 ] See Fortner Enterprises, Inc. v. United States Steel
Corp., 394 U. S. 495 , 394 U. S. 507 (1969).

															"In the usual sale on credit the seller, a single individual or
corporation, simply makes an agreement determining when and how
much he will be paid for his product. In such a sale, the credit
may constitute such an inseparable part of the purchase price for
the item that the entire transaction could be considered to involve
only a single product." See also G. Lamb & C. Shields, Trade Association
Law and Practice 129 (rev. ed.1971) ("Credit terms are increasingly
viewed as elements of price, and any interference with the elements
of price is regarded as illegal per se under the Sherman
Act"). Cf. P. Areeda, Antitrust Analysis 878 (2d ed.1974)
("To charge cash and credit customers the same price is,
economically speaking, to discriminate against the former"); Hog v.
Ruffner , 1 Black 115, 66 U. S.
118 -119 (1861).

															[ Footnote 12 ] Cf. Cement Mfrs. Protective Assn. v. United States, 268 U. S. 588 , 268 U. S. 600 (1925), in which the Court upheld an exchange of information
concerning credit in order to prevent fraud on the members of the
association, but also noted that

															"[t]he evidence falls far short of establishing any
understanding on the basis of which credit was to be extended to
customers, or that any cooperation resulted from the distribution
of this information, or that there were any consequences from it
other than such as would naturally ensue from the exercise of the
individual judgment of manufacturers in determining, on the basis
of available information, whether to extend credit or to require
cash or security from any given customer." See also Swift & Co. v. United States, 196 U.
S. 375 , 196 U. S. 392 , 196 U. S. 394 (1905); Wall Products Co. v. National Gypsum
Co., 326 F.
Supp. 295 (ND Cal.1971).


U.S. Supreme Court Arizona v. Maricopa County Med. Soc'y, 457
U.S. 332 (1982) Arizona v. Maricopa County Medical
Society No. 80-419 Argued November 4,
1981 Decided June 18, 1982 457
U.S. 332 CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE NINTH CIRCUIT Syllabus Respondent foundations for medical care were organized by
respondent Maricopa County Medical Society and another medical
society to promote fee-for-service medicine and to provide the
community with a competitive alternative to existing health
insurance plans. The foundations, by agreement of their member
doctors, established the maximum fees the doctors may claim in full
payment for health services provided to policyholders of specified
insurance plans. Petitioner State of Arizona filed a complaint
against respondents in Federal District Court, alleging that they
were engaged in an illegal price-fixing conspiracy in violation of
§ 1 of the Sherman Act. The District Court denied the State's
motion for partial summary judgment, but certified for
interlocutory appeal the question whether the maximum fee
agreements were illegal per se under § 1 of the Sherman
Act. The Court of Appeals affirmed the denial of the motion for
partial summary judgment and held that the certified question could
not be answered without evaluating the purpose and effect of the
agreements at a full trial. Held: The maximum fee agreements, as price-fixing
agreements, are per se unlawful under § 1 of the Sherman
Act. Pp. 457 U. S.
342 -357.

															(a) The agreements do not escape condemnation under the per
se rule against price-fixing agreements because they are
horizontal and fix maximum prices. Horizontal agreements to fix
maximum prices are on the same legal -- even if not economic --
footing as agreements to fix minimum or uniform prices. Kiefer-Stwart Co. v. Joseph E. Seagram & Sons, Inc., 340 U. S. 211 ; Albrecht v. Herald Co., 390 U. S. 145 . The per se rule is violated here by a price restraint that
tends to provide the same economic rewards to all practitioners
regardless of their skill, experience, training, or willingness to
employ innovative and difficult procedures in individual cases.
Such a restraint may also discourage entry into the market, and may
deter experimentation and new developments by individual
entrepreneurs. P. 457 U. S.
348 .

															(b) Nor does the fact that doctors, rather than
nonprofessionals, are the parties to the price-fixing agreements
preclude application of the per se rule. Respondents do
not claim that the quality of the professional services Page 457 U. S. 333 their members provide is enhanced by the price restraint, Goldfarb v. Virginia State Bar, 421 U.
S. 773 , and National Society of Professional
Engineers v. United States, 435 U. S. 679 ,
distinguished, and their claim that the price restraint will make
it easier for customers to pay does not distinguish the medical
profession from any other provider of goods or services. Pp. 457 U. S.
348 -349.

															(c) That the judiciary has had little antitrust experience in
the health care industry is insufficient reason for not applying
the per se rule here. "[T]he Sherman Act, so far as
price-fixing agreements are concerned, establishes one uniform rule
applicable to all industries alike." United States v.
Socony-Vacuum Oil Co., 310 U. S. 150 , 310 U. S. 222 .
Pp. 457 U. S.
349 -351.

															(d) The per se rule is not rendered inapplicable in
this case for the alleged reason that the agreements in issue have
procompetitive justification. The anticompetitive potential in all
price-fixing agreements justifies their facial invalidation even if
procompetitive justifications are offered for some. Even when
respondents are given every benefit of doubt, the record in this
case is not inconsistent with the presumption that respondents'
agreements will not significantly enhance competition. The most
that can be said for having doctors fix the maximum prices is that
doctors may be able to do it more efficiently than insurers, but
there is no reason to believe any savings that might accrue from
this arrangement would be sufficiently great to affect the
competitiveness of these kinds of insurance plans. Pp. 457 U. S.
351 -354.

															(e) Respondents' maximum fee schedules do not involve
price-fixing in only a literal sense. Broadcast Music, Inc. v.
Columbia Broadcasting System, Inc., 441 U. S.
1 , distinguished. As agreements among independent
competing entrepreneurs, they fit squarely into the horizontal
price-fixing mold. Pp. 457 U. S.
355 -357.

															643 F.2d 553, reversed.

															STEVENS, J., delivered the opinion of the Court, in which
BRENNAN, WHITE, and MARSHALL, JJ., joined. POWELL, J., filed a
dissenting opinion, in which BURGER, C.J., and REHNQUIST, J.,
joined, post, p. 457 U. S. 357 .
BLACKMUN and O'CONNOR, JJ., took no part in the consideration or
decision of the case. Page 457 U. S. 335 JUSTICE STEVENS delivered the opinion of the Court.

															The question presented is whether § 1 of the Sherman Act, 26
Stat. 209, as amended, 15 U.S.C. § 1, has been violated by
agreements among competing physicians setting, by majority vote,
the maximum fees that they may claim in full Page 457 U. S. 336 payment for health services provided to policyholders of
specified insurance plans. The United States Court of Appeals for
the Ninth Circuit held that the question could not be answered
without evaluating the actual purpose and effect of the agreements
at a full trial. 643 F.2d 553 (1980). Because the undisputed facts
disclose a violation of the statute, we granted certiorari, 450
U.S. 979 (1981), and now reverse. I In October, 1978, the State of Arizona filed a civil complaint
against two county medical societies and two "foundations for
medical care" that the medical societies had organized. The
complaint alleged that the defendants were engaged in illegal
price-fixing conspiracies. [ Footnote 1 ] After the defendants filed their answers, one
of the medical societies was dismissed by consent, the parties
conducted a limited amount of pretrial discovery, and the State
moved for partial summary judgment on the issue of liability. The
District Court denied the motion, [ Footnote 2 ] but entered an order pursuant to 28 U.S.C. §
1292(b), Page 457 U. S. 337 certifying for interlocutory appeal the question

															"whether the FMC membership agreements, which contain the
promise to abide by maximum fee schedules, are illegal per
se under section 1 of the Sherman Act. [ Footnote 3 ]"

															The Court of Appeals, by a divided vote, affirmed the District
Court's order refusing to enter partial summary judgment, but each
of the three judges on the panel had a different view of the case.
Judge Sneed was persuaded that "the challenged practice is not a per se violation." 643 F.2d at Page 457 U. S. 338 560. [ Footnote 4 ] Judge
Kennedy, although concurring, cautioned that he had not found

															"these reimbursement schedules to be per se proper,
[or] that an examination of these practices under the rule of
reason at trial will not reveal the proscribed adverse effect on
competition, or that this court is foreclosed at some later date,
when it has more evidence, from concluding that such schedules do
constitute per se violations." Ibid. [ Footnote 5 ]
Judge Larson dissented, expressing the view that a per se rule should apply and, alternatively, that a rule of reason
analysis should condemn the arrangement even if a per se approach was not warranted. Id. at 563-569. [ Footnote 6 ] Page 457 U. S. 339 Because the ultimate question presented by the certiorari
petition is whether a partial summary judgment should have been
entered by the District Court, we must assume that the respondents'
version of any disputed issue of fact is correct. We therefore
first review the relevant undisputed facts and then identify the
factual basis for the respondents' contention that their agreements
on fee schedules are not unlawful. II The Maricopa Foundation for Medical Care is a nonprofit Arizona
corporation composed of licensed doctors of medicine, osteopathy,
and podiatry engaged in private practice. Approximately 1,750
doctors, representing about 70% of the practitioners in Maricopa
County, are members.

															The Maricopa Foundation was organized in 1969 for the purpose of
promoting fee-for-service medicine and to provide the community
with a competitive alternative to existing health insurance plans.
[ Footnote 7 ] The foundation
performs three primary activities. It establishes the schedule of
maximum fees that participating doctors agree to accept as payment
in full for services performed for patients insured under plans
approved by the foundation. It reviews the medical necessity and
appropriateness of treatment provided by its members to such
insured persons. It is authorized to draw checks on insurance
company accounts to pay doctors for Page 457 U. S. 340 services performed for covered patients. In performing these
functions, the foundation is considered an "insurance
administrator" by the Director of the Arizona Department of
Insurance. Its participating doctors, however, have no financial
interest in the operation of the foundation.

															The Pima Foundation for Medical Care, which includes about 400
member doctors, [ Footnote 8 ]
performs similar functions. For the purposes of this litigation,
the parties seem to regard the activities of the two foundations as
essentially the same. No challenge is made to their peer review or
claim administration functions. Nor do the foundations allege that
these two activities make it necessary for them to engage in the
practice of establishing maximum fee schedules.

															At the time this lawsuit was filed, [ Footnote 9 ] each foundation made use of "relative values"
and "conversion factors" in compiling its fee schedule. The
conversion factor is the dollar amount used to determine fees for a
particular medical specialty. Thus, for example, the conversion
factors for "medicine" and "laboratory" were $8 and $5.50,
respectively, in 1972, and $10 and $6.50 in 1974. The relative
value schedule provides a numerical weight for each different
medical service -- thus, an office consultation has a lesser value
than a home visit. The relative value was multiplied by the
conversion factor to determine the maximum fee. The fee schedule
has been revised periodically. The foundation board of trustees
would solicit advice from various medical societies about the
need Page 457 U. S. 341 for change in either relative values or conversion factors in
their respective specialties. The board would then formulate the
new fee schedule and submit it to the vote of the entire
membership. [ Footnote
10 ]

															The fee schedules limit the amount that the member doctors may
recover for services performed for patients insured under plans
approved by the foundations. To obtain this approval, the insurers
-- including self-insured employers as well as insurance companies
[ Footnote 11 ] -- agree to
pay the doctors' charges up to the scheduled amounts, and, in
exchange, the doctors agree to accept those amounts as payment in
full for their services. The doctors are free to charge higher fees
to uninsured patients, and they also may charge any patient less
than the scheduled maxima. A patient who is insured by a
foundation-endorsed plan is guaranteed complete coverage for the
full amount of his medical bills only if he is treated by a
foundation member. He is free to go to a nonmember physician, and
is still covered for charges that do not exceed the maximum fee
schedule, but he must pay any excess that the nonmember physician
may charge.

															The impact of the foundation fee schedules on medical fees and
on insurance premiums is a matter of dispute. The State of Arizona
contends that the periodic upward revisions of the maximum fee
schedules have the effect of stabilizing and enhancing the level of
actual charges by physicians, and Page 457 U. S. 342 that the increasing level of their fees in turn increases
insurance premiums. The foundations, on the other hand, argue that
the schedules impose a meaningful limit on physicians' charges, and
that the advance agreement by the doctors to accept the maxima
enables the insurance carriers to limit and to calculate more
efficiently the risks they underwrite and therefore serves as an
effective cost-containment mechanism that has saved patients and
insurers millions of dollars. Although the Attorneys General of 40
different States, as well as the Solicitor General of the United
States and certain organizations representing consumers of medical
services, have filed amicus curiae briefs supporting the
State of Arizona's position on the merits, we must assume that the
respondents' view of the genuine issues of fact is correct.

															This assumption presents, but does not answer, the question
whether the Sherman Act prohibits the competing doctors from
adopting, revising, and agreeing to use a maximum fee schedule in
implementation of the insurance plans. III The respondents recognize that our decisions establish that
price-fixing agreements are unlawful on their face. But they argue
that the per se rule does not govern this case, because
the agreements at issue are horizontal and fix maximum prices, are
among members of a profession, are in an industry with which the
judiciary has little antitrust experience, and are alleged to have
procompetitive justifications. Before we examine each of these
arguments, we pause to consider the history and the meaning of the per se rule against price-fixing agreements. A Section 1 of the Sherman Act of 1890 literally prohibits every
agreement "in restraint of trade." [ Footnote 12 ] In United
States Page 457 U. S. 343 v. Joint Traffic Assn., 171 U.
S. 505 (1898), we recognized that Congress could not
have intended a literal interpretation of the word "every"; since Standard Oil Co. of New Jersey v. United States, 221 U. S. 1 (1911),
we have analyzed most restraints under the so-called "rule of
reason." As its name suggests, the rule of reason requires the
factfinder to decide whether, under all the circumstances of the
case, the restrictive practice imposes an unreasonable restraint on
competition. [ Footnote
13 ]

															The elaborate inquiry into the reasonableness of a challenged
business practice entails significant costs. Litigation of the
effect or purpose of a practice often is extensive and complex. Northern Pacific R. Co. v. United States, 356 U. S.
1 , 356 U. S. 5 (1958). Judges often lack the expert understanding of industrial
market structures and behavior to determine with any confidence a
practice's effect on competition. United States v. Topco
Associates, Inc., 405 U. S. 596 , 405 U. S.
609 -610 (1972). And the result of the process in any
given case may provide little certainty or guidance about the
legality of a practice in another context. Id. at 405 U. S. 609 ,
n. 10; Northern Pacific R. Co. v. United States, supra, at 356 U. S. 5 .

															The costs of judging business practices under the rule of
reason, however, have been reduced by the recognition of per Page 457 U. S. 344 se rules. [ Footnote
14 ] Once experience with a particular kind of restraint enables
the Court to predict with confidence that the rule of reason will
condemn it, it has applied a conclusive presumption that the
restraint is unreasonable. [ Footnote 15 ] As in every rule of general application, the
match between the presumed and the actual is imperfect. For the
sake of business certainty and litigation efficiency, we have
tolerated the invalidation of some agreements that a full-blown
inquiry might have proved to be reasonable. [ Footnote 16 ]

															Thus, the Court in Standard Oil recognized that inquiry
under its rule of reason ended once a price-fixing agreement was
proved, for there was "a conclusive presumption which Page 457 U. S. 345 brought [such agreements] within the statute." 221 U.S. at 221 U. S. 65 . By
1927, the Court was able to state that

															"it has . . . often been decided and always assumed that uniform
price-fixing by those controlling in any substantial manner a trade
or business in interstate commerce is prohibited by the Sherman
Law." United States v. Trenton Potteries Co., 273 U.
S. 392 , 273 U. S.
398 .

															"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.
The reasonable price fixed today may, through economic and business
changes, become the unreasonable price of tomorrow. Once
established, it may be maintained unchanged because of the absence
of competition secured by the agreement for a price reasonable when
fixed. Agreements which create such potential power may well be
held to be in themselves unreasonable or unlawful restraints,
without the necessity of minute inquiry whether a particular price
is reasonable or unreasonable as fixed and without placing on the
government in enforcing the Sherman Law the burden of ascertaining
from day to day whether it has become unreasonable through the mere
variation of economic conditions." Id. at 273 U. S.
397 -398.

															Thirteen years later, the Court could report that,

															"for over forty years, this Court has consistently and without
deviation adhered to the principle that price-fixing agreements are
unlawful per se under the Sherman Act, and that no showing
of so-called competitive abuses or evils which those agreements
were designed to eliminate or alleviate may be interposed as a
defense." United States v. Socony-Vacuum Oil Co., 310 U.
S. 150 , 310 U. S. 218 (1940). In that case, a glut in the spot market for gasoline had
prompted the major oil refiners to engage in a concerted effort to
purchase and store surplus gasoline in order to maintain stable
prices. Absent the agreement, the Page 457 U. S. 346 companies argued, competition was cutthroat and self-defeating.
The argument did not carry the day:

															"Any combination which tampers with price structures is engaged
in an unlawful activity. Even though the members of the
price-fixing group were in no position to control the market, to
the extent that they raised, lowered, or stabilized prices, they
would be directly interfering with the free play of market forces.
The Act places all such schemes beyond the pale, and protects that
vital part of our economy against any degree of interference.
Congress has not left with us the determination of whether or not
particular price-fixing schemes are wise or unwise, healthy or
destructive. It has not permitted the age-old cry of ruinous
competition and competitive evils to be a defense to price-fixing
conspiracies. It has no more allowed genuine or fancied competitive
abuses as a legal justification for such schemes than it has the
good intentions of the members of the combination. If such a shift
is to be made, it must be done by the Congress. Certainly Congress
has not left us with any such choice. Nor has the Act created or
authorized the creation of any special exception in favor of the
oil industry. Whatever may be its peculiar problems and
characteristics, the Sherman Act, so far as price-fixing agreements
are concerned, establishes one uniform rule applicable to all
industries alike." Id. at 310 U. S.
221 -222.

															The application of the per se rule to
maximum-price-fixing agreements in Kiefer-Stewart Co. v. Joseph
E. Seagram & Sons, Inc., 340 U. S. 211 (1951), followed ineluctably from Socony-Vacuum: "For such agreements, no less than those to fix minimum prices,
cripple the freedom of traders and thereby restrain their ability
to sell in accordance with their own judgment. We reaffirm what we
said in United States v. Socony-Vacuum Oil Co., 310 U. S.
150 , 310 U. S. 223 :"

															"Under Page 457 U. S. 347 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. "

															340 U.S. at 340 U. S. 213 .
Over the objection that maximum price-fixing agreements were not
the "economic equivalent" of minimum price-fixing agreements,
[ Footnote 17 ] Kiefer-Stewart was reaffirmed in Albrecht v. Herald
Co., 390 U. S. 145 (1968):

															"Maximum and minimum price-fixing may have different
consequences in many situations. But schemes to fix maximum prices,
by substituting the perhaps erroneous judgment of a seller for the
forces of the competitive market, may severely intrude upon the
ability of buyers to compete and survive in that market.
Competition, even in a single product, is not cast in a single
mold. Maximum prices may be fixed too low for the dealer to furnish
services essential to the value which goods have for the consumer
or to furnish services and conveniences which consumers desire and
for which they are willing to pay. Maximum price-fixing may channel
distribution through a few large or specifically advantaged dealers
who otherwise would be subject to significant nonprice competition.
Moreover, if the actual price charged under a maximum price scheme
is nearly always the fixed maximum price, which is increasingly
likely as the maximum price approaches the actual cost of the
dealer, the scheme tends to acquire all the attributes of an
arrangement fixing minimum prices." Id. at 390 U. S.
152 -153 (footnote omitted).

															We have not wavered in our enforcement of the per se rule against price-fixing. Indeed, in our most recent price-fixing
case. we summarily reversed the decision of another Ninth Page 457 U. S. 348 Circuit panel that a horizontal agreement among competitors to
fix credit terms does not necessarily contravene the antitrust
laws. Catalano, Inc. v. Target Sales, Inc., 446 U.
S. 643 (1980). B Our decisions foreclose the argument that the agreements at
issue escape per se condemnation because they are
horizontal and fix maximum prices. Kiefer-Stewart and Albrecht place horizontal agreements to fix maximum prices
on the same legal -- even if not economic -- footing as agreements
to fix minimum or uniform prices. [ Footnote 18 ] The per se rule "is grounded on
faith in price competition as a market force, [and not] on a policy
of low selling prices at the price of eliminating competition."
Rahl, Price Competition and the Price-fixing Rule -- Preface and
Perspective, 57 Nw.U.L.Rev. 137, 142 (1962). In this case, the rule
is violated by a price restraint that tends to provide the same
economic rewards to all practitioners regardless of their skill,
their experience, their training, or their willingness to employ
innovative and difficult procedures in individual cases. Such a
restraint also may discourage entry into the market and may deter
experimentation and new developments by individual entrepreneurs.
It may be a masquerade for an agreement to fix uniform prices, or
it may in the future take on that character.

															Nor does the fact that doctors -- rather than nonprofessionals
-- are the parties to the price-fixing agreements support the
respondents' position. In Goldfarb v. Virginia State Bar, 421 U. S. 773 , 421 U. S. 788 ,
n. 17 (1975), we stated that the

															"public service aspect, and other features of the professions,
may Page 457 U. S. 349 require that a particular practice, which could properly be
viewed as a violation of the Sherman Act in another context, be
treated differently." See National Society of Professional Engineers v. United
States, 435 U. S. 679 , 435 U. S. 696 (1978). The price-fixing agreements in this case, however, are not
premised on public service or ethical norms. The respondents do not
argue, as did the defendants in Goldfarb and Professional Engineers, that the quality of the
professional service that their members provide is enhanced by the
price restraint. The respondents' claim for relief from the per
se rule is simply that the doctors' agreement not to charge
certain insureds more than a fixed price facilitates the successful
marketing of an attractive insurance plan. But the claim that the
price restraint will make it easier for customers to pay does not
distinguish the medical profession from any other provider of goods
or services.

															We are equally unpersuaded by the argument that we should not
apply the per se rule in this case because the judiciary
has little antitrust experience in the health care industry.
[ Footnote 19 ] The argument
quite obviously is inconsistent with Socony-Vacuum. In
unequivocal terms, we stated that,

															"[w]hatever may be its peculiar problems and characteristics,
the Sherman Act, so far as price-fixing agreements are concerned,
establishes one uniform rule applicable to all industries
alike."

															310 U.S. at 310 U. S. 222 .
We also stated that "[t]he elimination of so-called competitive
evils [in an industry] is no legal justification" for price-fixing
agreements, id. at 310 U. S. 220 ,
yet the Court of Appeals refused to apply the per se rule
in Page 457 U. S. 350 this case in part because the health care industry was so far
removed from the competitive model. [ Footnote 20 ] Consistent with our prediction in Socony-Vacuum, 310 U.S. at 310 U. S. 221 ,
the result of this reasoning was the adoption by the Court of
Appeals of a legal standard based on the reasonableness of the
fixed prices, [ Footnote 21 ]
an inquiry we have so often condemned. [ Footnote 22 ] Finally, Page 457 U. S. 351 the argument that the per se rule must be rejustified
for every industry that has not been subject to significant
antitrust litigation ignores the rationale for per se rules, which in part is to avoid

															"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." Northern Pacific R. Co. v. United States, 356 U.S. at 356 U. S. 5 .

															The respondents' principal argument is that the per se rule is inapplicable because their agreements are alleged to have
procompetitive justifications. The argument indicates a
misunderstanding of the per se concept. The
anticompetitive potential inherent in all price-fixing agreements
justifies their facial invalidation even if procompetitive
justifications are offered for some. [ Footnote 23 ] Those claims of enhanced competition are so
unlikely to prove significant in any particular case that we adhere
to the rule of law that is justified in its general application.
Even when the respondents are given every benefit of the doubt, the
limited record in this case is not inconsistent with the
presumption that the respondents' agreements will not significantly
enhance competition.

															The respondents contend that their fee schedules are
procompetitive because they make it possible to provide consumers
of health care with a uniquely desirable form of insurance coverage
that could not otherwise exist. The features of the
foundation-endorsed insurance plans that they stress are a choice
of doctors, complete insurance coverage, and lower premiums. The
first two characteristics, however, are hardly unique to these
plans. Since only about 70% of Page 457 U. S. 352 the doctors in the relevant market are members of either
foundation, the guarantee of complete coverage only applies when an
insured chooses a physician in that 70%. If he elects to go to a
nonfoundation doctor, he may be required to pay a portion of the
doctor's fee. It is fair to presume, however, that at least 70% of
the doctors in other markets charge no more than the "usual,
customary, and reasonable" fee that typical insurers are willing to
reimburse in full. [ Footnote
24 ] Thus, in Maricopa and Pima Counties, as well as in most
parts of the country, if an insured asks his doctor if the
insurance coverage is complete, presumably in about 70% of the
cases, the doctor will say "Yes," and in about 30% of the cases, he
will say "No."

															It is true that a binding assurance of complete insurance
coverage -- as well as most of the respondents' potential for lower
insurance premiums [ Footnote
25 ] -- can be obtained only if the insurer and the doctor agree
in advance on the maximum fee that the doctor will accept as full
payment for a particular service. Even if a fee schedule is
therefore desirable, it is not necessary that the doctors do the
price-fixing. [ Footnote 26 ]
The Page 457 U. S. 353 record indicates that the Arizona Comprehensive Medical/Dental
Program for Foster Children is administered by the Maricopa
Foundation pursuant to a contract under which the maximum fee
schedule is prescribed by a state agency, rather than by the
doctors. [ Footnote 27 ] This
program, and the Blue Shield plan challenged in Group Life
& Health Insurance Co. v. Royal Drug Co., 440 U.
S. 205 (1979), indicate that insurers are capable not
only of fixing maximum reimbursable prices but also of obtaining
binding agreements with providers guaranteeing the insured full
reimbursement of a participating provider's fee. In light of these
examples, it is not surprising that nothing in the record even
arguably supports the conclusion that this type of insurance
program could not function if the fee schedules were set in a
different way.

															The most that can be said for having doctors fix the maximum
prices is that doctors may be able to do it more efficiently than
insurers. The validity of that assumption is far from obvious,
[ Footnote 28 ] but, in any
event, there is no reason to believe Page 457 U. S. 354 that any savings that might accrue from this arrangement would
be sufficiently great to affect the competitiveness of these kinds
of insurance plans. It is entirely possible that the potential or
actual power of the foundations to dictate the terms of such
insurance plans may more than offset the theoretical efficiencies
upon which the respondents' defense ultimately rests. [ Footnote 29 ] C Our adherence to the per se rule is grounded not only
on economic prediction, judicial convenience, and business
certainty, but also on a recognition of the respective roles of the
Judiciary and the Congress in regulating the economy. United
States v. Topco Associates, Inc., 405 U.S. at 405 U. S.
611 -612. Given its generality, our enforcement of the
Sherman Act has required the Court to provide much of its
substantive content. By articulating the rules of law with some
clarity, and by adhering to rules that are justified in their
general application, however, we enhance the legislative
prerogative to amend the law. The respondents' arguments against
application of the per se rule in this case therefore
are Page 457 U. S. 355 better directed to the Legislature. Congress may consider the
exception that we are not free to read into the statute. [ Footnote 30 ] IV Having declined the respondents' invitation to cut back on the per se rule against price-fixing, we are left with the
respondents' argument that their fee schedules involve price-fixing
in only a literal sense. For this argument, the respondents rely
upon Broadcast Music, Inc. v. Columbia Broadcasting System,
Inc., 441 U. S. 1 (1979).

															In Broadcast Music, we were confronted with an
antitrust challenge to the marketing of the right to use
copyrighted compositions derived from the entire membership of the
American Society of Composers, Authors and Publishers (ASCAP). The
so-called "blanket license" was entirely different from the product
that any one composer was able to sell by himself. [ Footnote 31 ] Although there was little
competition among individual composers for their separate
compositions, the blanket license arrangement did not place any
restraint on the right of any individual copyright owner to sell
his own compositions separately to any buyer at any price.
[ Footnote 32 ] But a Page 457 U. S. 356 "necessary consequence" of the creation of the blanket license
was that its price had to be established. Id. at 441 U. S. 21 . We
held that the delegation by the composers to ASCAP of the power to
fix the price for the blanket license was not a species of the
price-fixing agreements categorically forbidden by the Sherman Act.
The record disclosed price-fixing only in a "literal sense." Id. at 441 U. S. 8 .

															This case is fundamentally different. Each of the foundations is
composed of individual practitioners who compete with one another
for patients. Neither the foundations nor the doctors sell
insurance, and they derive no profits from the sale of health
insurance policies. The members of the foundations sell medical
services. Their combination in the form of the foundation does not
permit them to sell any different product. [ Footnote 33 ] Their combination has merely
permitted them to sell their services to certain customers at fixed
prices, and arguably to affect the prevailing market price of
medical care.

															The foundations are not analogous to partnerships or other joint
arrangements in which persons who would otherwise be competitors
pool their capital and share the risks of loss as well as the
opportunities for profit. In such joint ventures, the partnership
is regarded as a single firm competing with other sellers in the
market. The agreement under attack is Page 457 U. S. 357 an agreement among hundreds of competing doctors concerning the
price at which each will offer his own services to a substantial
number of consumers. It is true that some are surgeons, some
anesthesiologists, and some psychiatrists, but the doctors do not
sell a package of three kinds of services. If a clinic offered
complete medical coverage for a flat fee, the cooperating doctors
would have the type of partnership arrangement in which a
price-fixing agreement among the doctors would be perfectly proper.
But the fee agreements disclosed by the record in this case are
among independent competing entrepreneurs. They fit squarely into
the horizontal price-fixing mold.

															The judgment of the Court of Appeals is reversed. It is so ordered. JUSTICE BLACKMUN and JUSTICE O'CONNOR took no part in the
consideration or decision of this case.

															[ Footnote 1 ]

															The complaint alleged a violation of § 1 of the Sherman Act as
well as of the Arizona antitrust statute. The state statute is
interpreted in conformity with the federal statute. 643 F.2d 533,
554, n. 1 (CA9 1980). The State of Arizona prayed for an
injunction, but did not ask for damages.

															[ Footnote 2 ]

															The District Court offered three reasons for its decision.
First, citing Continental T. V., Inc. v. GTE Sylvania
Inc., 433 U. S. 36 (1977), the court stated that

															"a recent antitrust trend appears to be emerging where the Rule
of Reason is the preferred method of determining whether a
particular practice is in violation of the antitrust law."

															App. to Pet. for Cert. 43. Second, "the two Supreme Court cases
invalidating maximum price-fixing, [ Kiefer-Stewart Co. v.
Joseph E. Seagram & Sons, Inc., 340 U.
S. 211 (1951), and Albrecht v. Herald Co., 390 U. S. 145 (1968)], need not be read as establishing a per se rule." Id. at 44. Third, "a profession is involved here." Id. at 45. Under the rule of reason approach, the
plaintiff's motion for partial summary judgment on the issue of
liability could not be granted "because there is insufficient
evidence as to the [purpose and effect of the allegedly unlawful
practices and the power of the defendants.]" Id. at
47.

															The District Court also denied the defendants' motion to dismiss
based on the ground that they were engaged in the business of
insurance within the meaning of the McCarran-Ferguson Act, 15
U.S.C. § 1011 et seq. See App. to Pet. for Cert.
39-41. The defendants did not appeal that portion of the District
Court order. 643 F.2d at 559, and n. 7.

															[ Footnote 3 ]

															The quoted language is the Court of Appeals' phrasing of the
question. Id. at 554. The District Court had entered an
order on June 5, 1979, providing, in relevant part:

															"The plaintiff's motion for partial summary judgment on the
issue of liability is denied with leave to file a similar motion
based on additional evidence if appropriate."

															App. to Pet. for Cert. 48. On August 8, 1979, the District Court
entered a further order providing:

															"The Order of this Court entered June 5, 1979 is amended by
addition of the following: This Court's determination that the Rule
of Reason approach should be used in analyzing the challenged
conduct in the instant case to determine whether a violation of
Section 1 of the Sherman Act has occurred involves a question of
law as to which there is substantial ground for difference of
opinion and an immediate appeal from the Order denying plaintiff's
motion for partial summary judgment on the issue of liability may
materially advance the ultimate determination of the litigation.
Therefore, the foregoing Order and determination of the Court is
certified for interlocutory appeal pursuant to 28 U.S.C. §
1292(b)." Id. at 50-51.

															[ Footnote 4 ]

															Judge Sneed explained his reluctance to apply the per
se rule substantially as follows: the record did not indicate
the actual purpose of the maximum fee arrangements or their effect
on competition in the health care industry. It was not clear
whether the assumptions made about typical price restraints could
be carried over to that industry. Only recently had this Court
applied the antitrust laws to the professions. Moreover, there
already were such significant obstacles to pure competition in the
industry that a court must compare the prices that obtain under the
maximum fee arrangements with those that would otherwise prevail,
rather than with those that would prevail under ideal competitive
conditions. Furthermore, the Ninth Circuit had not applied Keifer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U. S. 211 (1951), and Albrecht v. Herald Co., 390 U.
S. 145 (1968), to horizontal agreements that establish
maximum prices; some of the economic assumptions underlying the
rule against maximum price-fixing were not sound.

															[ Footnote 5 ]

															Judge Kennedy's concurring opinion concluded as follows:

															"There does not now appear to be a controlling or definitive
analysis of the market impact caused by the arrangements under
scrutiny in this case, but trial may reveal that the arrangements
are, at least in their essentials, not peculiar to the medical
industry, and that they should be condemned."

															643 F.2d at 560.

															[ Footnote 6 ]

															Judge Larson stated, in part:

															"Defendants formulated and dispersed relative value guides and
conversion factor lists which together were used to set an upper
limit on fees received from third-party payors. It is clear that
these activities constituted maximum price-fixing by competitors.
Disregarding any 'special industry' facts, this conduct is per
se illegal. Precedent alone would mandate application of the per se standard."

															"I find nothing in the nature of either the medical profession
or the health care industry that would warrant their exemption from per se rules for price-fixing." Id. at 563-564 (citations omitted).

															[ Footnote 7 ]

															Most health insurance plans are of the fee-for-service type.
Under the typical insurance plan, the insurer agrees with the
insured to reimburse the insured for "usual, customary, and
reasonable" medical charges. The third-party insurer, and the
insured to the extent of any excess charges, bears the economic
risk that the insured will require medical treatment. An
alternative to the fee-for-service type of insurance plan is
illustrated by the health maintenance organizations authorized
under the Health Maintenance Organization Act of 1973, 42 U.S.C. §
300e et seq. Under this form of prepaid health plan, the
consumer pays a fixed periodic fee to a functionally integrated
group of doctors in exchange for the group's agreement to provide
any medical treatment that the subscriber might need. The economic
risk is thus borne by the doctors.

															[ Footnote 8 ]

															The record contains divergent figures on the percentage of Pima
County doctors that belong to the foundation. A 1975 publication of
the foundation reported 80%; a 1978 affidavit by the executive
director of the foundation reported 30%.

															[ Footnote 9 ]

															In 1980, after the District Court and the Court of Appeals had
rendered judgment, both foundations apparently discontinued the use
of relative values and conversion factors in formulating the fee
schedules. Moreover, the Maricopa Foundation that year amended its
bylaws to provide that the fee schedule would be adopted by
majority vote of its board of trustees, and not by vote of its
members. The challenge to the foundation activities as we have
described them in the text, however, is not mooted by these
changes. See United States v. W. T. Grant Co., 345 U. S. 629 (1953).

															[ Footnote 10 ]

															The parties disagree over whether the increases in the fee
schedules are the cause or the result of the increases in the
prevailing rate for medical services in the relevant markets. There
appears to be agreement, however, that 85-95% of physicians in
Maricopa County bill at or above the maximum reimbursement levels
set by the Maricopa Foundation.

															[ Footnote 11 ]

															Seven different insurance companies underwrite health insurance
plans that have been approved by the Maricopa Foundation, and three
companies underwrite the plans approved by the Pima Foundation. The
record contains no firm data on the portion of the health care
market that is covered by these plans. The State relies upon a 1974
analysis indicating that the insurance plans endorsed by the
Maricopa Foundation had about 63% of the prepaid health care
market, but the respondents contest the accuracy of this
analysis.

															[ Footnote 12 ]

															"Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal. . .
."

															15 U.S.C. § 1.

															[ Footnote 13 ]

															Justice Brandeis provided the classic statement of the rule of
reason in Chicago Bd. of Trade v. United States, 246 U. S. 231 , 246 U. S. 238 (1918):

															"The true test of legality 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. To determine that question, the court must
ordinarily consider the facts peculiar to the business to which the
restraint is applied; its condition before and after the restraint
was imposed; the nature of the restraint and its effect, actual or
probable. The history of the restraint, the evil believed to exist,
the reason for adopting the particular remedy, the purpose or end
sought to be attained, are all relevant facts. This is not because
a good intention will save an otherwise objectionable regulation,
or the reverse, but because knowledge of intent may help the court
to interpret facts and to predict consequences."

															[ Footnote 14 ]

															For a thoughtful and brief discussion of the costs and benefits
of rule-of-reason versus per se rule analysis of
price-fixing agreements, see F. Scherer, Industrial Market
Structure and Economic Performance 438-443 (1970). Professor
Scherer's

															"opinion, shared by a majority of American economists concerned
with antitrust policy, is that in the present legal framework the
costs of implementing a rule of reason would exceed the benefits
derived from considering each restrictive agreement on its merits
and prohibiting only those which appear unreasonable." Id. at 440.

															[ Footnote 15 ]

															"Among the practices which the courts have heretofore deemed to
be unlawful in and of themselves are price-fixing, division of
markets, group boycotts, and tying arrangements." Northern Pacific R. Co. v. United States, 356 U.S. at 356 U. S. 5 (citations omitted). See United States v. Columbia Steel
Co., 334 U. S. 495 , 334 U. S.
522 -523 (1948).

															[ Footnote 16 ]

															Thus, in applying the per se rule to invalidate the
restrictive practice in United States v. Topco Associates,
Inc., 405 U. S. 596 (1972), we stated that

															"[w]hether or not we would decide this case the same way under
the rule of reason used by the District Court is irrelevant to the
issue before us." Id. at 405 U. S. 609 .
The Court made the same point in Continental T. V., Inc. v. GTE
Sylvania Inc., 433 U.S. at 433 U. S. 50 , n.
16:

															"Per se rules thus require the Court to make broad
generalizations about the social utility of particular commercial
practices. The probability that anticompetitive consequences will
result from a practice and the severity of those consequences must
be balanced against its procompetitive consequences. Cases that do
not fit the generalization may arise, but a per se rule
reflects the judgment that such cases are not sufficiently common
or important to justify the time and expense necessary to identify
them."

															[ Footnote 17 ] Albrecht v. Herald Co., 390 U.S. at 390 U. S. 156 (Harlan, J., dissenting).

															[ Footnote 18 ]

															It is true that, in Kiefer-Stewart, as in Albrecht, the agreement involved a vertical arrangement in
which maximum resale prices were fixed. But the case also involved
an agreement among competitors to impose the resale price
restraint. In any event, horizontal restraints are generally less
defensible than vertical restraints. See Continental T.V., Inc.
v. GTE Sylvania Inc., 433 U. S. 36 (1977); Easterbrook, Maximum Price-fixing 48 U.Chi.L.Rev. 886, 890,
n. 20 (1981).

															[ Footnote 19 ]

															The argument should not be confused with the established
position that a new per se rule is not justified until the
judiciary obtains considerable rule of reason experience with the
particular type of restraint challenged. See White Motor Co. v.
United States, 372 U. S. 253 (1963). Nor is our unwillingness to examine the economic
justification of this particular application of the per se rule against price-fixing inconsistent with our reexamination of
the general validity of the per se rule rejected in Continental T.V., Inc. v. GTE Sylvania Inc., supra. [ Footnote 20 ]

															The health care industry, moreover, presents a particularly
difficult area. The first step to understanding is to recognize
that not only is access to the medical profession very
time-consuming and expensive both for the applicant and society
generally, but also that numerous government subventions of the
costs of medical care have created both a demand and supply
function for medical services that is artificially high. The
present supply and demand functions of medical services in no way
approximate those which would exist in a purely private competitive
order. An accurate description of those functions moreover is not
available. Thus, we lack baselines

															"by which could be measured the distance between the present
supply and demand functions and those which would exist under ideal
competitive conditions."

															643 F.2d at 556.

															[ Footnote 21 ]

															"Perforce we must take industry as it exists, absent the
challenged feature, as our baseline for measuring anticompetitive
impact. The relevant inquiry becomes whether fees paid to doctors
under that system would be less than those payable under the FMC
maximum fee agreement. Put differently, confronted with an industry
widely deviant from a reasonably free competitive model, such as
agriculture, the proper inquiry is whether the practice enhances
the prices charged for the services. In simplified economic terms,
the issue is whether the maximum fee arrangement better permits the
attainment of the monopolist's goal, viz., the matching of
marginal cost to marginal revenue, or in fact obstructs that
end." Ibid. [ Footnote 22 ]

															In the first price-fixing case arising under the Sherman Act,
the Court was required to pass on the sufficiency of the
defendants' plea that they had established rates that were actually
beneficial to consumers. Assuming the factual validity of the plea,
the Court rejected the defense as a matter of law. United
States v. Trans-Missouri Freight Assn., 166 U.
S. 290 (1897). In National Society of Professional
Engineers v. United States, 435 U. S. 679 , 435 U. S. 689 (1978), we referred to Judge Taft's

															"classic rejection of the argument that competitors may lawfully
agree to sell their goods at the same price as long as the
agreed-upon price is reasonable." See United States v. Addyston Pipe & Steel Co., 85
F. 271 (CA6 1898), aff'd, 175 U. S. 175 U.S.
211 (1899). In our latest price-fixing case, we reiterated the
point: "It is no excuse that the prices fixed are themselves
reasonable." Catalano, Inc. v. Target Sales, Inc., 446 U. S. 643 , 446 U. S. 647 (1980).

															[ Footnote 23 ]

															"Whatever economic justification particular price-fixing
agreements may be thought to have, the law does not permit an
inquiry into their reasonableness. They are all banned because of
their actual or potential threat to the central nervous system of
the economy." United States v. Socony-Vacuum Oil Co., 310 U.
S. 150 , 310 U. S. 226 ,
n. 59 (1940).

															[ Footnote 24 ]

															According to the respondents' figures, this presumption is
well-founded. See Brief for Respondents 42, n. 120.

															[ Footnote 25 ]

															We do not perceive the respondents' claim of procompetitive
justification for their fee schedules to rest on the premise that
the fee schedules actually reduce medical fees and accordingly
reduce insurance premiums, thereby enhancing competition in the
health insurance industry. Such an argument would merely restate
the long-rejected position that fixed prices are reasonable if they
are lower than free competition would yield. It is arguable,
however, that the existence of a fee schedule, whether fixed by the
doctors or by the insurers, makes it easier -- and, to that extent,
less expensive -- for insurers to calculate the risks that they
underwrite and to arrive at the appropriate reimbursement on
insured claims.

															[ Footnote 26 ]

															According to a Federal Trade Commission staff report:

															"Until the mid-1960's, most Blue Shield plans determined in
advance how much to pay for particular procedures, and prepared fee
schedules reflecting their determinations. Fee schedules are still
used in approximately 25 percent of Blue Shield contracts."

															Bureau of Competition, Federal Trade Commission, Medical
Participation in Control of Blue Shield and Certain Other
Open-Panel Medical Prepayment Plans 128 (1979). We do not suggest
that Blue Shield plans are not actually controlled by doctors.
Indeed, as the same report discusses at length, the belief that
they are has given rise to considerable antitrust litigation. See also D. Kass & P. Pautler, Bureau of Economics,
Federal Trade Commission, Staff Report on Physician Control of Blue
Shield Plans (1979). Nor does this case present the question
whether an insurer may, consistent with the Sherman Act, fix the
fee schedule and enter into bilateral contracts with individual
doctors. That question was not reached in Group Life &
Health Insurance Co. v. Royal Drug Co., 440 U.
S. 205 (1979). See id. at 440 U. S. 210 ,
n. 5. In an amicus curiae brief, the United States
expressed its opinion that such an arrangement would be legal
unless the plaintiffs could establish that a conspiracy among
providers was at work. Brief for United States as Amicus
Curiae, O.T. 1978, No. 77-952, pp. 10-11. Our point is simply
that the record provides no factual basis for the respondents'
claim that the doctors must fix the fee schedule.

															[ Footnote 27 ]

															In that program, the foundation performs the peer review
function as well as the administrative function of paying the
doctors' claims.

															[ Footnote 28 ]

															In order to create an insurance plan under which the doctor
would agree to accept as full payment a fee prescribed in a fixed
schedule, someone must canvass the doctors to determine what
maximum prices would be high enough to attract sufficient numbers
of individual doctors to sign up, but low enough to make the
insurance plan competitive. In this case, that canvassing function
is performed by the foundation; the foundation then deals with the
insurer. It would seem that an insurer could simply bypass the
foundation by performing the canvassing function and dealing with
the doctors itself. Under the foundation plan, each doctor must
look at the maximum fee schedule fixed by his competitors and vote
for or against approval of the plan (and, if the plan is approved
by majority vote, he must continue or revoke his foundation
membership). A similar, if to some extent more protracted, process
would occur if it were each insurer that offered the maximum fee
schedule to each doctor.

															[ Footnote 29 ]

															In this case, it appears that the fees are set by a group with
substantial power in the market for medical services, and that
there is competition among insurance companies in the sale of
medical insurance. Under these circumstances, the insurance
companies are not likely to have significantly greater bargaining
power against a monopoly of doctors than would individual consumers
of medical services.

															[ Footnote 30 ]

															"[Congress] can, of course, make per se rules
inapplicable in some or all cases, and leave courts free to ramble
through the wilds of economic theory in order to maintain a
flexible approach." United States v. Topco Associates, Inc., 405 U.S. at 405 U. S. 610 ,
n. 10. Indeed, it has exempted certain industries from the full
reach of the Sherman Act. See, e.g., 7 U.S.C. §§ 291, 292
(Capper-Volstead Act, agricultural cooperatives); 15 U.S.C. §§
1011-1013 (McCarran-Ferguson Act, insurance); 19 U.S.C. § 5b
(Reed-Bulwinkle Act, rail and motor carrier rate-fixing bureaus);
15 U.S.C. § 1801 (newspaper joint operating agreements).

															[ Footnote 31 ]

															"Thus, to the extent the blanket license is a different product,
ASCAP is not really a joint sales agency offering the individual
goods of many sellers, but is a separate seller offering its
blanket license, of which the individual compositions are raw
material."

															441 U.S. at 441 U. S. 22 (footnote omitted).

															[ Footnote 32 ]

															"Here, the blanket license fee is not set by competition among
individual copyright owners, and it is a fee for the use of any of
the compositions covered by the license. But the blanket license
cannot be wholly equated with a simple horizontal arrangement among
competitors. ASCAP does set the price for its blanket license, but
that license is quite different from anything any individual owner
could issue. The individual composers and authors have neither
agreed not to sell individually in any other market nor use the
blanket license to mask price-fixing in such other markets." Id. at 441 U. S. 23 -24
(footnote omitted).

															[ Footnote 33 ]

															It may be true that, by becoming a member of the foundation, the
individual practitioner obtains a competitive advantage in the
market for medical services that he could not unilaterally obtain.
That competitive advantage is the ability to attract as customers
people who value both the guarantee of full health coverage and a
choice of doctors. But, as we have indicated, the setting of the
price by doctors is not a "necessary consequence" of an
arrangement with an insurer in which the doctor agrees not to
charge certain insured customers more than a fixed price.

															JUSTICE POWELL, with whom THE CHIEF JUSTICE and JUSTICE
REHNQUIST join, dissenting.

															The medical care plan condemned by the Court today is a
comparatively new method of providing insured medical services at
predetermined maximum costs. It involves no coercion. Medical
insurance companies, physicians, and patients alike are free to
participate or not as they choose. On its face, the plan seems to
be in the public interest.

															The State of Arizona challenged the plan on a per se antitrust theory. The District Court denied the State's summary
judgment motion, and -- because of the novelty of the issue --
certified the question of per se liability for an
interlocutory appeal. On summary judgment, the record and all
inferences therefrom must be viewed in the light most favorable to
the respondents. Nevertheless, rather than identifying clearly the
controlling principles and remanding for decision on a completed
record, this Court makes its own per se judgment of
invalidity. The respondents' contention that Page 457 U. S. 358 the "consumers" of medical services are benefited substantially
by the plan is given short shrift. The Court concedes that "the
parties conducted [only] a limited amount of pretrial discovery," ante at 457 U. S. 336 ,
leaving undeveloped facts critical to an informed decision of this
case. I do not think today's decision on an incomplete record is
consistent with proper judicial resolution of an issue of this
complexity, novelty, and importance to the public. I therefore
dissent. I The Maricopa and Pima Foundations for Medical Care are
professional associations of physicians organized by the medical
societies in their respective counties. [ Footnote 2/1 ] The foundations were established to make
available a type of prepaid medical insurance plan, aspects of
which are the target of this litigation. Under the plan, the
foundations insure no risks themselves. Rather, their key function
is to secure agreement among their member physicians to a maximum
price schedule for specific medical services. Once a fee schedule
has been agreed upon following a process of consultation and
balloting, the foundations invite private insurance companies to
participate by offering medical insurance policies based upon the
maximum fee schedule. [ Footnote
2/2 ] The insurers agree to offer complete Page 457 U. S. 359 reimbursement to their insureds for the full amount of their
medical bills -- so long as these bills do not exceed the maximum
fee schedule.

															An insured under a foundation-sponsored plan is free to go to
any physician. The physician then bills the foundation directly for
services performed. [ Footnote 2/3 ]
If the insured has chosen a physician who is not a
foundation member and the bill exceeds the foundation maximum fee
schedule, the insured is liable for the excess. If the billing
physician is a foundation member, the foundation disallows
the excess pursuant to the agreement each physician executed upon
joining the foundation. [ Footnote
2/4 ] Thus, the plan offers complete coverage of medical
expenses, but still permits an insured to choose any physician. II This case comes to us on a plaintiff's motion for summary
judgment after only limited discovery. Therefore, as noted above,
the inferences to be drawn from the record must be viewed in the
light most favorable to the respondents. United States v.
Diebold, Inc., 369 U. S. 654 , 369 U. S. 655 (1962). Page 457 U. S. 360 This requires, as the Court acknowledges, that we consider the
foundation arrangement as one that "impose[s] a meaningful limit on
physicians' charges," that "enables the insurance carriers to limit
and to calculate more efficiently the risks they underwrite," and
that "therefore serves as an effective cost containment mechanism
that has saved patients and insurers millions of dollars." Ante at 457 U. S. 342 .
The question is whether we should condemn this arrangement
forthwith under the Sherman Act, a law designed to benefit consumers.

															Several other aspects of the record are of key significance but
are not stressed by the Court. First, the foundation arrangement
forecloses no competition. Unlike the classic cartel
agreement, the foundation plan does not instruct potential
competitors: "Deal with consumers on the following terms and no
others." Rather, physicians who participate in the foundation plan
are free both to associate with other medical insurance plans -- at
any fee level, high or low -- and directly to serve uninsured
patients -- at any fee level, high or low. Similarly, insurers that
participate in the foundation plan also remain at liberty to do
business outside the plan with any physician -- foundation member
or not -- at any fee level. Nor are physicians locked into a plan
for more than one year's membership. See 457
U.S. 332 fn2/1|>n. 1, supra. Thus, freedom to
compete, as well as freedom to withdraw, is preserved. The Court
cites no case in which a remotely comparable plan or agreement is
condemned on a per se basis.

															Second, on this record, we must find that insurers represent
consumer interests. Normally, consumers search for high quality at
low prices. But once a consumer is insured [ Footnote 2/5 ] -- i.e., has chosen a medical
insurance plan -- he is Page 457 U. S. 361 largely indifferent to the amount that his physician charges if
the coverage is full, as under the foundation-sponsored plan.

															The insurer, however, is not indifferent. To keep insurance
premiums at a competitive level and to remain profitable, insurers
-- including those who have contracts with the foundations -- step
into the consumer's shoes with his incentive to contain medical
costs. Indeed, insurers may be the only parties who have the
effective power to restrain medical costs, given the difficulty
that patients experience in comparing price and quality for a
professional service such as medical care.

															On the record before us, there is no evidence of opposition to
the foundation plan by insurance companies -- or, for that matter,
by members of the public. Rather seven insurers willingly have
chosen to contract out to the foundations the task of developing
maximum fee schedules. [ Footnote
2/6 ] Again, on the record before us, we must infer that the
foundation plan -- open as it is to insurers, physicians, and the
public -- has in fact benefited consumers by "enabl[ing] the
insurance carriers to limit and to calculate more efficiently the
risks they underwrite." Ante at 457 U. S. 342 .
Nevertheless, even though the case is here on an incomplete summary
judgment record, the Court conclusively draws contrary inferences
to support its per se judgment. III It is settled law that, once an arrangement has been labeled as
"price-fixing," it is to be condemned per se. But it is
equally well settled that this characterization is not to be
applied Page 457 U. S. 362 as a talisman to every arrangement that involves a literal
fixing of prices. Many lawful contracts, mergers, and partnerships
fix prices. But our cases require a more discerning approach. The
inquiry in an antitrust case is not simply one of

															"determining whether two or more potential competitors have
literally 'fixed' a 'price.' . . . [Rather], it is necessary to
characterize the challenged conduct as falling within or without
that category of behavior to which we apply the label ' per
se price-fixing.' That will often, but not always, be a simple
matter." Broadcast Music, Inc. v. Columbia Broadcasting System,
Inc., 441 U. S. 1 , 441 U. S. 9 (1979).

															Before characterizing an arrangement as a per se price-fixing agreement meriting condemnation, a court should
determine whether it is a "'naked restrain[t] of trade with no
purpose except stifling of competition.'" United States v.
Topco Associates, Inc., 405 U. S. 596 , 405 U. S. 608 (1972), quoting White Motor Co. v. United States, 372 U. S. 253 , 372 U. S. 263 (1963). See also Continental T.V., Inc. v. GTE Sylvania
Inc., 433 U. S. 36 , 433 U. S. 49 -50
(1977). Such a determination is necessary because

															"departure from the rule of reason standard must be based upon
demonstrable economic effect, rather than . . . upon formalistic
line drawing." Id. at 433 U. S. 58 -59.
As part of this inquiry, a court must determine whether the
procompetitive economies that the arrangement purportedly makes
possible are substantial and realizable in the absence of such an
agreement.

															For example, in National Society of Professional Engineers
v. United States, 435 U. S. 679 (1978), we held unlawful as a per se violation an
engineering association's canon of ethics that prohibited
competitive bidding by its members. After the parties had "compiled
a voluminous discovery and trial record," id. at 435 U. S. 685 ,
we carefully considered -- rather than rejected out of hand -- the
engineers' "affirmative defense" of their agreement: that
competitive bidding would tempt engineers to do inferior work that
would threaten public Page 457 U. S. 363 health and safety. Id. at 435 U. S. 693 .
We refused to accept this defense because its merits "confirm[ed],
rather than refut[ed], the anticompetitive purpose and effect of
[the] agreement." Ibid. The analysis incident to the
"price-fixing" characterization found no substantial procompetitive
efficiencies. See also Catalano, Inc. v. Target Sales,
Inc., 446 U. S. 643 , 446 U. S. 646 ,
n. 8, and 446 U. S.
649 -650 (1980) (challenged arrangement condemned because
it lacked "a procompetitive justification" and had "no apparent
potentially redeeming value").

															In Broadcast Music, Inc. v. Columbia Broadcasting System,
Inc., supra, there was minimum price-fixing in the most
"literal sense." Id. at 441 U. S. 8 . We
nevertheless agreed, unanimously, [ Footnote 2/7 ] that an arrangement by which copyright
clearinghouses sold performance rights to their entire libraries on
a blanket, rather than individual, basis did not warrant
condemnation on a per se basis. Individual licensing would
have allowed competition between copyright owners. But we reasoned
that licensing on a blanket basis yielded substantial efficiencies
that otherwise could not be realized. See id. at 441 U. S. 20 -21.
Indeed, the blanket license was itself "to some extent, a different
product." Id. at 441 U. S. 22 .
[ Footnote 2/8 ]

															In sum, the fact that a foundation-sponsored health insurance
plan literally involves the setting of ceiling prices
among competing physicians does not, of itself, justify condemning
the plan as per se illegal. Only if it is clear from the
record that the agreement among physicians is "so plainly Page 457 U. S. 364 anticompetitive that no elaborate study of [its effects] is
needed to establish [its] illegality" may a court properly make a per se judgment. National Society of Professional
Engineers v. United States, supra, at 435 U. S. 692 .
And, as our cases demonstrate, the per se label should not
be assigned without carefully considering substantial benefits and
procompetitive justifications. This is especially true when the
agreement under attack is novel, as in this case. See Broadcast
Music, supra, at 441 U. S. 9 -10; United States v. Topco Associates, Inc., supra, at 405 U. S.
607 -608 ("It is only after considerable experience with
certain business relationships that courts classify them as per
se violations"). IV The Court acknowledges that the per se ban against
price-fixing is not to be invoked every time potential competitors
literally fix prices. Ante at 457 U. S.
355 -357. One also would have expected it to acknowledge
that per se characterization is inappropriate if the
challenged agreement or plan achieves for the public procompetitive
benefits that otherwise are not attainable. The Court does not do
this. And neither does it provide alternative criteria by which the per se characterization is to be determined. It is content
simply to brand this type of plan as "price-fixing" and describe
the agreement in Broadcast Music -- which also literally
involved the fixing of prices -- as "fundamentally different." Ante at 457 U. S.
356 .

															In fact, however, the two agreements are similar in important
respects. Each involved competitors and resulted in cooperative
pricing. [ Footnote 2/9 ] Each
arrangement also was prompted Page 457 U. S. 365 by the need for better service to the consumers. [ Footnote 2/10 ] And each arrangement
apparently makes possible a new product by reaping otherwise
unattainable efficiencies. [ Footnote
2/11 ] The Court's effort to distinguish Broadcast
Music thus is unconvincing. [ Footnote 2/12 ] Page 457 U. S. 366 The Court, in defending its holding, also suggests that
"respondents' arguments against application of the per se rule . . . are better directed to the Legislature." Ante at 457 U. S.
354 -355. This is curious advice. The Sherman Act does
not mention per se rules. And it was not Congress that
decided Broadcast Music and the other relevant cases.
Since the enactment of the Sherman Act in 1890, it has been the
duty of courts to interpret and apply its general mandate -- and to
do so for the benefit of consumers.

															As in Broadcast Music, the plaintiff here has not yet
discharged its burden of proving that respondents have entered a
plainly anticompetitive combination without a substantial and
procompetitive efficiency justification. In my view, the District
Court therefore correctly refused to grant the State's motion for
summary judgment. [ Footnote 2/13 ]
This critical and disputed issue of fact remains unresolved. See Fed.Rule Civ.Proc. 56(c). Page 457 U. S. 367 I believe the Court's action today loses sight of the basic
purposes of the Sherman Act. As we have noted, the antitrust laws
are a "consumer welfare prescription." Reiter v. Sonotone
Corp., 442 U. S. 330 , 442 U. S. 343 (1979). In its rush to condemn a novel plan about which it knows
very little, the Court suggests that this end is achieved only by
invalidating activities that may have some potential for harm. But
the little that the record does show about the effect of the plan
suggests that it is a means of providing medical services that in
fact benefits, rather than injures, persons who need them.

															In a complex economy, complex economic arrangements are
commonplace. It is unwise for the Court, in a case as novel and
important as this one, to make a final judgment in the absence of a
complete record and where mandatory inferences create critical
issues of fact.

															[ Footnote 2/1 ]

															The Pima Foundation is open to any Pima County area physician
licensed in Arizona. It has a renewable 5-year membership term. A
voluntary resignation provision permits earlier exit on the January
1 following announcement of an intent to resign.

															The Maricopa Foundation admits physicians who are members of
their county medical society. The Maricopa Foundation has a
renewable l-year term of membership. Initial membership may be for
a term of less than a year so that a uniform annual termination
date for all members can be maintained.

															The medical societies are professional associations of
physicians practicing in the particular county. The Pima County
Medical Society, but not the Pima Foundation, has been dismissed
from the case pursuant to a consent decree.

															[ Footnote 2/2 ]

															Three private carriers underwrite various Pima
Foundation-sponsored plans: Arizona Blue Cross-Blue Shield, Pacific
Mutual Life Insurance Co., and Connecticut General Life Insurance
Co. The latter two companies also underwrite plans for the Maricopa
Foundation, as do five other private insurance companies.
Apparently, large employers, such as the State of Arizona and
Motorola, also act as foundation-approved insurers with respect to
their employees' insurance plans.

															[ Footnote 2/3 ]

															The foundations act as the insurance companies' claims agents on
a contract basis. They administer the claims and, to some extent,
review the medical necessity and propriety of the treatment for
which a claim is entered. The foundations charge insurers a fee for
their various services. In recent years, this fee has been set at
4% of the insurers' premiums.

															[ Footnote 2/4 ]

															This agreement provides in part that the physician agrees

															"to be bound . . . with respect to maximum fees . . . by any fee
determination by the [f]oundation consistent with the schedule
adopted by the [foundation physician] membership. . . ."

															App. 31-32. The agreement also provides that foundation
members

															"understand and agree that participating membership in the
[f]oundation shall not affect the method of computation or amount
of fees billed by me with respect to any medical care for any
patient." Ibid. [ Footnote 2/5 ]

															At least seven insurance companies are competing in the relevant
market. See 457
U.S. 332 fn2/2|>n. 2, supra. At this stage of the
case, we must infer that they are competing vigorously and
successfully.

															The term "consumer" -- commonly used in antitrust cases and
literature -- is used herein to mean persons who need or may need
medical services from a physician.

															[ Footnote 2/6 ]

															The State introduced no evidence on its summary judgment motion
supporting its apparent view that insurers effectively can perform
this function themselves, without physician participation. It is
clear, however, that price and quality of professional services --
unlike commercial products -- are difficult to compare. Cf.
Bates v. State Bar of Arizona, 433 U.
S. 350 , 433 U. S.
391 -395 (1977) (opinion of POWELL, J.). This is
particularly true of medical service. Presumably, this is a reason
participating insurers wish to utilize the foundations'
services.

															[ Footnote 2/7 ] See Broadcast Music, Inc. v. Columbia Broadcasting System,
Inc., 441 U.S. at 441 U. S. 25 (STEVENS, J., dissenting in part) ("The Court holds that ASCAP's
blanket license is not a species of price-fixing categorically
forbidden by the Sherman Act. I agree with that holding").

															[ Footnote 2/8 ] Cf. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U. S. 36 , 433 U. S. 54 (1977) (identifying achievement of efficiencies as "redeeming
virtue" in decision sustaining an agreement against per se challenge); L. Sullivan, Law of Antitrust § 74, p. 200 (1977)
( per se characterization inappropriate if price agreement
achieves great economies of scale and thereby improves economic
performance); id. § 66, p. 180 (higher burden might
reasonably be placed on plaintiff where agreement may involve
efficiencies).

															[ Footnote 2/9 ]

															In this case, the physicians, in effect, vote on foundation
maximum fee schedules. In Broadcast Music, the copyright
owners aggregated their copyrights into a group package, sold
rights to the package at a group price, and distributed the
proceeds among themselves according to an agreed-upon formula. See Columbia Broadcasting System, Inc. v. American Society of
Composers, Authors and Publishers, 562 F.2d 130, 135-136 (CA2
1977).

															[ Footnote 2/10 ]

															In this case, the foundations' maximum fee schedules attempt to
rectify the inflationary consequence of patients' indifference to
the size of physicians' bills and insurers' commitment to reimburse
whatever "usual, customary, and reasonable" charges physicians may
submit. In Broadcast Music, the market defect inhered in
the fact that

															"those who performed copyrighted music for profit were so
numerous and widespread, and most performances so fleeting, that,
as a practical matter it was impossible for the many individual
copyright owners to negotiate with and license the users and to
detect unauthorized uses."

															441 U.S. at 441 U. S. 4 -5.

															[ Footnote 2/11 ]

															In this case, the record before us indicates that insurers --
those best situated to decide and best motivated to inspire trust
in their judgment -- believe that the foundations are the most
efficient providers of the maximum fee scheduling service. In Broadcast Music, we found that the blanket copyright
clearinghouse system "reduce[d] costs absolutely. . . ." Id. at 21.

															[ Footnote 2/12 ]

															The Court states that, in Broadcast Music, "there was
little competition among individual composers for their separate
compositions." Ante at 457 U. S. 355 .
This is an irrational ground for distinction. Competition could
have existed, 441 U.S. at 441 U. S. 6 ; see also 562 F.2d at 13135, 138, but did not because of
the cooperative agreement. That competition yet persists among physicians is not a sensible reason to invalidate their
agreement while refusing similarly to condemn the Broadcast
Music agreements that were completely effective in
eliminating competition.

															The Court also offers as a distinction that the foundations do
not permit the creation of "any different product." Ante at 457 U. S. 356 .
But the foundations provide a "different product" to precisely the
same extent as did Broadcast Music's clearinghouses. The
clearinghouses provided only what copyright holders offered as
individual sellers -- the rights to use individual compositions.
The clearinghouses were able to obtain these same rights more
efficiently, however, because they eliminated the need to engage in
individual bargaining with each individual copyright owner. See 441 U.S. at 441 U. S.
21 -22.

															In the same manner, the foundations set up an innovative means
to deliver a basic service -- insured medical care from a wide
range of physicians of one's choice -- in a more economical manner.
The foundations' maximum fee schedules replace the weak cost
containment incentives in typical "usual, customary, and
reasonable" insurance agreements with a stronger cost control
mechanism: an absolute ceiling on maximum fees that can be charged.
The conduct of the insurers in this case indicates that they
believe that the foundation plan as it presently exists is the most
efficient means of developing and administering such schedules. At
this stage in the litigation, therefore, we must agree that the
foundation plan permits the more economical delivery of the basic
insurance service -- "to some extent, a different product." Broadcast Music, 441 U.S. at 441 U. S. 22 .

															[ Footnote 2/13 ]

															Medical services differ from the typical service or commercial
product at issue in an antitrust case. The services of physicians,
rendered on a patient-by-patient basis, rarely can be compared by
the recipient. A person requiring medical service or advice has no
ready way of comparing physicians or of "shopping" for quality
medical service at a lesser price. Primarily for this reason, the
foundations -- operating the plan at issue -- perform a function
that neither physicians nor prospective patients can perform
individually. On a collective -- and average -- basis, the
physicians themselves express a willingness to render certain
identifiable services for not more than specified fees, leaving
patients free to choose the physician. We thus have a case in which
we derive little guidance from the conventional "perfect market"
analysis of antitrust law. I would give greater weight than the
Court to the uniqueness of medical services, and certainly would
not invalidate on a per se basis a plan that may in fact
perform a uniquely useful service.

															Affirmance of the District Court's holding would not have
immunized the medical service plan at issue. Nor would it have
foreclosed an eventual conclusion on remand that the arrangement
should be deemed per se invalid. And if the District Court
had found that petitioner had failed to establish a per se violation of the Sherman Act, the question would have remained
whether the plan comports with the rule of reason. See, e.g.,
United States v. United States Gypsum Co., 438 U.
S. 422 , 438 U. S. 441 ,
n. 16 (1978).