## Facts

- The Michigan State Medical Society (MSMS) was a statewide professional association with approximately 8,700 physician members, representing a substantial share of Michigan physicians.
- MSMS operated through county component societies; membership in MSMS was required to join a component society.
- Many MSMS members were physicians in private practice who competed with one another in providing medical services for fees.
- Blue Cross and Blue Shield of Michigan (BCBSM) administered physician reimbursement programs and paid participating physicians under program terms.
- MSMS and its members opposed BCBSM’s reimbursement policies and sought changes to the levels and methods of payment.
- MSMS organized a campaign, through a collective negotiation function, to pressure BCBSM to change reimbursement terms.
- MSMS solicited “letters of withdrawal” from member physicians stating that they would withdraw from BCBSM programs if BCBSM did not change its policies.
- The withdrawal letters were sent to MSMS (not directly to BCBSM) so MSMS could retain and deploy them as leverage in dealing with BCBSM.
- The FTC found MSMS used the coordinated threat of mass withdrawal to coerce BCBSM regarding reimbursement-related terms.

## Issues

1. Whether a professional association of competing physicians violates § 5 of the FTC Act by organizing a concerted boycott or threatened refusal to deal to force a third-party payer to alter reimbursement policies.
2. Whether the conduct constitutes an unlawful restraint of trade even if framed as negotiation over reimbursement “policies” rather than explicit fixing of reimbursement “prices.”

## Decision

- The FTC affirmed liability, concluding MSMS engaged in concerted, coercive conduct amounting to an unlawful boycott and restraint of trade in violation of § 5 of the FTC Act.
- The FTC treated MSMS’s organized solicitation and retention of withdrawal letters, and use of those letters as bargaining leverage, as concerted action among competitors directed at a payer that reimbursed them.
- The FTC rejected the view that illegality depended on proof that MSMS’s campaign succeeded; the unlawful restraint arose from the agreement and coercive threatened refusal to deal.
- The FTC entered a cease-and-desist order prohibiting MSMS from coordinating member conduct to affect reimbursement amounts, methods of calculation, or reimbursement terms, and from coercing third-party payers concerning participation agreement terms.
- The FTC required compliance measures, including dissemination of the order to members and future members.

## Legal Principles

- An agreement among competing providers, carried out through their association, to threaten or implement a collective refusal to deal with a third-party payer to obtain favorable reimbursement terms constitutes an unlawful restraint of trade under § 5 of the FTC Act.
- A concerted refusal to deal directed at an entity that supplies reimbursement to the combining parties may be condemned as an unlawful boycott.
- Liability may rest on the existence of concerted, coercive restraint; proof that the target yielded or that the restraint achieved its objective is not required.
- Characterizing collective action as negotiation over “policies” does not avoid antitrust scrutiny when the coordinated pressure concerns reimbursement-related terms and conditions of dealing.
- Professional associations are subject to antitrust limits when they function as a mechanism for competitors to coordinate bargaining pressure over compensation-related terms.

## Conclusion

The FTC held that MSMS unlawfully coordinated competing physicians to threaten a collective withdrawal from BCBSM programs to force changes in reimbursement-related terms, violating § 5, and ordered MSMS to stop coordinating member conduct affecting reimbursement and to implement member-notification compliance obligations.


In re Michigan State Medical Society, 101 F.T.C. 191 (1983)