## Facts

- The California Dental Association (CDA), a voluntary nonprofit trade association with roughly 19,000 of California’s 26,000 licensed dentists as members, required compliance with a Code of Ethics and advertising guidelines as a condition of membership.
- CDA’s guidelines prohibited “false or misleading” advertising, and CDA issued interpretations and enforcement actions governing members’ advertising.
- The guidelines restricted price advertising by effectively precluding many truthful discount or low-price claims.
- The guidelines restricted quality advertising by generally preventing claims that a dentist’s services were superior to others.
- CDA investigated alleged violations and could discipline members, including through peer-review mechanisms.
- The Federal Trade Commission (FTC) brought an administrative action alleging CDA’s restrictions unreasonably restrained truthful, non-deceptive advertising in violation of § 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1).
- After earlier appellate proceedings and a Supreme Court remand requiring fuller rule-of-reason review, the Ninth Circuit reconsidered whether the FTC had proved competitive harm from CDA’s restrictions.

## Issues

1. Whether the FTC proved, under a full rule-of-reason analysis, that CDA’s advertising restrictions produced substantial anticompetitive effects in a relevant market in violation of § 5 of the FTC Act.
2. Whether the FTC’s evidence of likely higher prices or reduced price competition was sufficient given that CDA did not include all California dentists and participation in CDA was not required for licensure.

## Decision

- The Ninth Circuit held that the FTC failed to carry its initial rule-of-reason burden to show CDA’s restrictions were anticompetitive.
- The court vacated the FTC’s order.
- The case was remanded with instructions for the FTC to dismiss its complaint against CDA.

## Legal Principles

- Under the rule of reason, the government must first prove a restraint has substantial anticompetitive effects in a relevant market (e.g., higher prices, reduced output, diminished quality, or other harm to competition).
- If substantial anticompetitive effects are shown, the burden shifts to the defendant to offer procompetitive justifications, followed by weighing competitive harms against benefits.
- Where the competitive effects of professional advertising restraints are plausibly ambiguous, abbreviated analysis is inappropriate; a fuller rule-of-reason inquiry is required.
- Inferential or theoretical predictions of harm, without adequate support showing market-wide competitive effects, may be insufficient to satisfy the government’s initial burden.

## Conclusion

On remand, the Ninth Circuit concluded the FTC did not prove that CDA’s restrictions on price and quality advertising caused substantial anticompetitive effects under the rule of reason, so the court vacated the FTC’s order and directed dismissal of the agency’s case.


Cal. Dental Ass'n v. FTC, 224 F.3d 942 (9th Cir. 2000)