California Dental Association v. FTC

The California Dental Association (the association) (defendant) was a trade association for dentists in California. The association required its members to follow a code of ethics, including a rule that dentists were not allowed to publish false or misleading advertisements about their training or services. The association published guidelines and an advisory opinion to help its members comply with the advertising rules and investigated members suspected of violating the code. The Federal Trade Commission (FTC) (plaintiff) filed a complaint against the association, alleging that the association’s advertising guidelines were applied in a way that restricted truthful advertising in violation of § 5 of the Federal Trade Commission Act. For example, the guidelines forbade members from advertising that they charged low or affordable prices. This had the effect of prohibiting advertisements that highlighted the price of services, even if the prices were not false or misleading. The guidelines also prevented members from mentioning the quality of their services in their advertisements, purportedly to prevent members from suggesting that they offered better services than other dentists. An administrative-law judge found that the association’s advertising restrictions were per se violations of § 5. The FTC adopted the administrative-law judge’s findings and, in addition, conducted a quick-look rule-of-reason analysis and found that the association applied its code of ethics in an anticompetitive manner. The FTC believed that the association’s advertising restrictions could increase the price of dental services. The United States Court of Appeals for the Ninth Circuit conducted its own quick-look rule-of-reason analysis and, after determining that the association’s advertising restrictions were unreasonable restraints of trade, affirmed the FTC. The United States Supreme Court granted certiorari and held that the Ninth Circuit erred by conducting a quick-look rule-of-reason analysis without considering whether the association’s restrictions were procompetitive. The Supreme Court remanded the case, ordering the Ninth Circuit to conduct a more thorough rule-of-reason analysis to determine whether the association’s advertising restrictions were, on balance, procompetitive or anticompetitive. To guide the Ninth Circuit, the Supreme Court noted that the association’s advertising regulations might prevent harm to consumers and help the dental profession maintain its legitimacy.