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decided: June 18, 1982.



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. 357. Blackmun and O'connor, JJ., took no part in the consideration or decision of the case.

Author: Stevens

[ 457 U.S. Page 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

[ 457 U.S. Page 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.


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.*fn1 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,*fn2 but entered an order pursuant to 28 U. S. C. § 1292(b),

[ 457 U.S. Page 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."*fn3

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

[ 457 U.S. Page 338560]

     .*fn4 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.*fn5 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.*fn6

[ 457 U.S. Page 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.


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.*fn7 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

[ 457 U.S. Page 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,*fn8 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,*fn9 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

[ 457 U.S. Page 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.*fn10

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*fn11 -- 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

[ 457 U.S. Page 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.


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.


Section 1 of the Sherman Act of 1890 literally prohibits every agreement "in restraint of trade."*fn12 In United States

[ 457 U.S. Page 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.*fn13

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, 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, 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 609, n. 10; Northern Pacific R. Co. v. United States, supra, at 5.

[ 457 U.S. Page 344]

     The costs of judging business practices under the rule of reason, however, have been reduced by the recognition of per Page 344} se rules.*fn14 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.*fn15 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 fullblown inquiry might have proved to be reasonable.*fn16

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

[ 457 U.S. Page 345]

     brought [such agreements] within the statute." 221 U.S., at 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, 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 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, 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

[ 457 U.S. Page 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 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, 223: 'Under

[ 457 U.S. Page 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 213.

Over the objection that maximum-price-fixing agreements were not the "economic equivalent" of minimum-price-fixing agreements,*fn17 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 non-price 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 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

[ 457 U.S. Page 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).


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.*fn18 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, 788, n. 17 (1975), we stated that the "public service aspect, and other features of the professions, may

[ 457 U.S. Page 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, 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.*fn19 The argument quite obviously is inconsistent with Socony-Vacuum. In unequivocal terms, we stated that, "[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." 310 U.S., at 222. We also stated that "[the] elimination of so-called competitive evils [in an industry] is no legal justification" for price-fixing agreements, id., at 220, yet the Court of Appeals refused to apply the per se rule in

[ 457 U.S. Page 350]

     this case in part because the health care industry was so far removed from the competitive model.*fn20 Consistent with our prediction in Socony-Vacuum, 310 U.S., at 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,*fn21 an inquiry we have so often condemned.*fn22 Finally,

[ 457 U.S. Page 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 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.*fn23 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

[ 457 U.S. Page 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.*fn24 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*fn25 -- 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.*fn26 The

[ 457 U.S. Page 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.*fn27 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,*fn28 but in any event there is no reason to believe

[ 457 U.S. Page 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.*fn29


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 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

[ 457 U.S. Page 355]

     better directed to the Legislature. Congress may consider the exception that we are not free to read into the statute.*fn30


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.*fn31 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.*fn32 But a

[ 457 U.S. Page 356]

     "necessary consequence" of the creation of the blanket license was that its price had to be established. Id., at 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 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.*fn33 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

[ 457 U.S. Page 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.


643 F.2d 553, reversed.


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

[ 457 U.S. Page 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 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.


The Maricopa and Pima Foundations for Medical Care are professional associations of physicians organized by the medical societies in their respective counties.*fn1 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.*fn2 The insurers agree to offer complete

[ 457 U.S. Page 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.*fn3 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.*fn4 Thus, the plan offers complete coverage of medical expenses but still permits an insured to choose any physician.


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, 655 (1962).

[ 457 U.S. Page 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 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 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*fn5 -- i. e., has chosen a medical insurance plan -- he is

[ 457 U.S. Page 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.*fn6 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 "[enabling] the insurance carriers to limit and to calculate more efficiently the risks they underwrite." Ante, at 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.


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

[ 457 U.S. Page 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, 9 (1979).

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

[ 457 U.S. Page 363]

     health and safety. Id., at 693. We refused to accept this defense because its merits "[confirmed] rather than [refuted] 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, 646, n. 8, and 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 8. We nevertheless agreed, unanimously,*fn7 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 20-21. Indeed, the blanket license was itself "to some extent, a different product." Id., at 22.*fn8

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

[ 457 U.S. Page 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 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 9-10; United States v. Topco Associates, Inc., supra, at 607-608 ("It is only after considerable experience with certain business relationships that courts classify them as per se violations").


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 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 356.

In fact, however, the two agreements are similar in important respects. Each involved competitors and resulted in cooperative pricing.*fn9 Each arrangement also was prompted

[ 457 U.S. Page 365]

     by the need for better service to the consumers.*fn10 And each arrangement apparently makes possible a new product by reaping otherwise unattainable efficiencies.*fn11 The Court's effort to distinguish Broadcast Music thus is unconvincing.*fn12

[ 457 U.S. Page 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 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.*fn13 This critical and disputed issue of fact remains unresolved. See Fed. Rule Civ. Proc. 56(c).

[ 457 U.S. Page 367]


I believe the Court's action today loses sight of the basic purposes of the Sherman Act. As we have noted, the anti-trust laws are a "consumer welfare prescription." Reiter v. Sonotone Corp., 442 U.S. 330, 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 injuries 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.


* Briefs of amici curiae urging reversal were filed for the State of Alabama et al. by Charles A. Graddick, Attorney General of Alabama, and Susan Beth Farmer, Sarah M. Spratling, and James Drury Flowers, Assistant Attorneys General; Wilson L. Condon, Attorney General of Alaska, and Louise E. Ma, Assistant Attorney General; Steve Clark, Attorney General of Arkansas, and David L. Williams, Deputy Attorney General; J. D. MacFarlane, Attorney General of Colorado, and B. Lawrence Theis, First Assistant Attorney General; Carl R. Ajello, Attorney General of Connecticut, and Robert M. Langer, John R. Lacey, John M. Looney, Jr., and Steven M. Rutstein, Assistant Attorneys General; Richard S. Gebelein, Attorney General of Delaware, and Robert P. Lobue, Deputy Attorney General; Jim Smith, Attorney General of Florida, and Bill L. Bryant, Jr., Assistant Attorney General; Tany S. Hong, Attorney General of Hawaii, and Sonia Faust, Deputy Attorney General; Tyrone C. Fahner, Attorney General of Illinois, and Thomas M. Genovese, Assistant Attorney General; Linley E. Pearson, Attorney General of Indiana, and Frank A. Baldwin, Assistant Attorney General; Thomas J. Miller, Attorney General of Iowa, and John R. Perkins, Assistant Attorney General; Robert T. Stephan, Attorney General of Kansas, and Carl M. Anderson, Assistant Attorney General; Steven L. Beshear, Attorney General of Kentucky, and James M. Ringo, Assistant Attorney General; William J. Guste, Jr., Attorney General of Louisiana, and John R. Flowers, Jr., Assistant Attorney General; James E. Tierney, Attorney General of Maine; Stephen H. Sachs, Attorney General of Maryland, and Charles O. Monk II, Assistant Attorney General; Frank J. Kelley, Attorney General of Michigan, and Edwin M. Bladen, Assistant Attorney General; Warren R. Spannaus, Attorney General of Minnesota, and Stephen P. Kilgriff, Special Assistant Attorney General; Bill Allain, Attorney General of Mississippi, and Robert E. Sanders, Special Assistant Attorney General; John Ashcroft, Attorney General of Missouri, and William L. Newcomb, Jr., Assistant Attorney General; Michael T. Greely, Attorney General of Montana, and Jerome J. Cate, Assistant Attorney General; Paul L. Douglas, Attorney General of Nebraska, and Dale A. Comer, Assistant Attorney General; Gregory H. Smith, Attorney General of New Hampshire; James R. Zazzali, Attorney General of New Jersey, and Laurel A. Price, Deputy Attorney General; Jeff Bingaman, Attorney General of New Mexico, and James J. Wechsler and Richard H. Levin, Assistant Attorneys General; Robert Abrams, Attorney General of New York, and Lloyd Constantine, Assistant Attorney General; Rufus L. Edmisten, Attorney General of North Carolina, H. A. Cole, Jr., Special Deputy Attorney General, and R. Darrell Hancock, Associate Attorney General; Robert O. Wefald, Attorney General of North Dakota, and Gary H. Lee, Assistant Attorney General; Jan Eric Cartwright, Attorney General of Oklahoma, and Gary W. Gardenshire, Assistant Attorney General; Dennis J. Roberts II, Attorney General of Rhode Island, and Patrick J. Quinlan, Special Assistant Attorney General; Daniel R. McLeod, Attorney General of South Carolina, and John M. Cox, Assistant Attorney General; Mark V. Meierhenry, Attorney General of South Dakota, and James E. McMahon, Assistant Attorney General; William M. Leech, Jr., Attorney General of Tennessee, and William J. Haynes, Deputy Attorney General; Mark White, Attorney General of Texas, and Linda A. Aaker, Assistant Attorney General; David L. Wilkinson, Attorney General of Utah, and Peter C. Collins, Assistant Attorney General; John J. Easton, Jr., Attorney General of Vermont, and Jay I. Ashman, Assistant Attorney General; Kenneth O. Eikenberry, Attorney General of Washington, and John R. Ellis, Assistant Attorney General; Chauncey H. Browning, Attorney General of West Virginia, and Charles G. Brown, Deputy Attorney General; Bronson C. La Follette, Attorney General of Wisconsin, and Michael L. Zaleski, Assistant Attorney General; and John D. Troughton, Attorney General of Wyoming, and Gay R. Venderpoel, Assistant Attorney General; for the State of Ohio by William J. Brown, Attorney General, and Charles D. Weller, Doreen C. Johnson, and Eugene F. McShane, Assistant Attorneys General; for Chalmette General Hospital, Inc., et al. by John A. Stassi II; and for Hospital Building Co. by John K. Train III and John R. Jordan, Jr.

Briefs of amici curiae urging affirmance were filed by William G. Kopit and Robert J. Moses for the American Association of Foundations for Medical Care; by Richard L. Epstein and Jay H. Hedgepeth for the American Hospital Association; and by M. Laurence Popofsky and Peter F. Sloss for California Dental Service.

Alfred Miller filed a brief for the American Association of Retired Persons et al. as amici curiae.

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