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UNITED STATES v. NATIONAL SOCY. OF PROFESSIONAL EN

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA


November 26, 1975

UNITED STATES OF AMERICA, Plaintiff
v.
NATIONAL SOCIETY OF PROFESSIONAL ENGINEERS, Defendant

John Lewis Smith, Jr. United States District Judge.

The opinion of the court was delivered by: SMITH, JR.

Memorandum Opinion

John Lewis Smith, Jr. / United States District Judge.

 This case is before the Court on remand from the Supreme Court "for further consideration in light of Goldfarb v. Virginia State Bar, 421 U.S. 773, 44 L. Ed. 2d 572, 95 S. Ct. 2004 (1975)." 422 U.S. 1031, 95 S. Ct. 2646, 45 L. Ed. 2d 686 (1975). *fn1" The issue confronting the Court has been well stated by the parties in their briefs: Was the Supreme Court's action, as defendant asserts, in effect a reversal of this Court's decision and a directive to analyze defendant's ban on competitive bidding under the rule of reason rather than under the per se doctrine? Or, as plaintiff claims, did the Supreme Court directly uphold this Court in Goldfarb and routinely remand for consideration of this intervening precedent -- as well as to allow for appellate review under a new antitrust statute, 15 U.S.C.A. § 29(a) (1975)? Having carefully examined the Goldfarb case and the memoranda and arguments presented by the parties, this Court finds Goldfarb supportive of its analysis and accordingly reaffirms its previous decision. [ United States v. National Soc. of Professional Engineers, 389 F. Supp. 1193 (D.D.C. 1974)] *fn2"

 The Goldfarb case held that a minimum fee schedule for lawyers published by a county bar association and enforced by a state bar association violated § 1 of the Sherman Act, 15 U.S.C. § 1. The Court's opinion focused on four areas: whether respondents had engaged in price fixing, whether the activities affected interstate commerce, whether there was an antitrust exemption for activities involving a "learned profession," and whether the "state action" exemption (see Parker v. Brown, 317 U.S. 341, 87 L. Ed. 315, 63 S. Ct. 307 (1943)) was available to respondents. Goldfarb, supra, 421 U.S. at 780. Defendant here has abandoned its arguments concerning the "learned profession" exemption and the "state action" exemption. This leaves for consideration the matters of interstate commerce, defendant's alleged price fixing activities, and the applicable antitrust standard.

 There can be no question that NSPE's activities both are in interstate commerce and have a substantial effect on interstate commerce. It suffices to cite briefly this Court's finding in its previous decision:

 

[Professional engineering] "is an industry often organized on a local, regional, national and even international scale controlling, guiding and shaping the pace and direction of the vast array of interstate transactions needed to carry out much of the nation's construction and manufacture. Fully 50 to 80 percent of the cost of constructing and equipping construction projects is controlled by an engineer's work. A substantial amount of equipment and material is transported in interstate commerce at the specific direction of NSPE members. It would not be hyperbole to observe that professional engineering services are at the very backbone of the major portion of the nation's commerce. " United States v. National Society of Professional Engineers, 389 F. Supp. 1193, 1199 (1974); see also id. at 1203, Findings of Fact Proposed by Plaintiff and Adopted by the Court (FFP) 8-15.

 In determining that the fee schedule in Goldfarb constituted a price fixing practice, the Court emphasized the nature of the restraint, the enforcement mechanism, and the fee schedule's adverse impact upon consumers. Defendant NSPE's ban on competitive bidding, like the minimum fee schedule, is not an advisory measure. It is an absolute prohibition on price competition among defendant's members and requires immediate withdrawal should a client insist upon fee proposals or open bidding. See id. at 1195 n. 1 (text of Section 11(c) of NSPE Code of Ethics). The ban clearly impedes the ordinary give and take of the market place and operates "on its face [as] a tampering with the price structure of engineering fees." Id. at 1200.

 Enforcement of Section 11(c) of the NSPE Code is actively promoted through publications, personal letters, case opinions by defendant's Board of Ethical Review, and state society investigations into alleged misconduct. Conformity with the provision apparently has been achieved as the record reveals no significant resistance by NSPE members to the bidding ban. Id. at 1196; see generally id. at 1205-08, FFP 27-43. Since engineering services are indispensible to almost any construction project and since alternative sources (e.g., non-licensed professional engineers) are non-existent, the impact upon the public of defendant's pricing restraint is plain. Without the ability to utilize and compare prices in selecting engineering services, the consumer is prevented from making an informed, intelligent choice. See, e.g., id. at 1210-11, FFP 56-61; see also Goldfarb, supra, 421 U.S. at 785. The Court therefore finds that the combined character, enforcement, and effect of NSPE's bidding ban constitute a classic illustration of price fixing under Goldfarb.

 Price fixing is a per se violation of the Sherman Act, requiring no further inquiry by a court into the activities' origin, history, or purpose. United States v. National Association of Real Estate Boards, 339 U.S. 485, 489, 94 L. Ed. 1007, 70 S. Ct. 711 (1950); United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 218, 84 L. Ed. 1129, 60 S. Ct. 811 (1940); United States v. Trenton Potteries Co., 273 U.S. 392, 397-401, 71 L. Ed. 700, 47 S. Ct. 377 (1927). Defendant however claims to detect in the Goldfarb case, particularly Footnote 17, a directive that a profession's activities and code of ethics are to be judged not under the traditional per se doctrine but under the rule of reason. *fn3" Under the rule of reason, the legality of restraints upon trade is determined by weighing factors such as "the history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, [and] the purpose or end sought to be attained . . .." Chicago Board of Trade v. United States, 246 U.S. 231, 238, 62 L. Ed. 683, 38 S. Ct. 242 (1918).

 The Court rejects defendant's contention for a number of reasons. First, such a construction would substantially undermine the Goldfarb Court's denial of a total or partial exemption from antitrust regulation for professions. Neither the nature of an occupation nor any alleged public service aspect provides sanctuary from the Sherman Act. Goldfarb, supra, 421 U.S. at 787. Second, Goldfarb does not rest upon a rule of reason analysis. The Court found price fixing activities and condemned them outright. Third, Footnote 17 apparently distinguishes between a profession's business aspects and its valid self-regulatory "restraints," such as membership requirements or standards of conduct. Price fixing, however, receives no privileged treatment when incorporated into a code of ethics. Fourth, the activities at issue here have a wide-ranging commercial impact and therefore are to be judged by normal antitrust standards applicable to business practices. Fifth, while NSPE claims that its ban on competitive bidding protects public safety and health, the Supreme Court in Goldfarb had before it and rejected similar arguments aimed at preventing "cheap but faulty work" by professionals. *fn4" The age-old cry of ruinous competition, competitive evils, and even public benefit cannot justify price fixing. As Justice Douglas stated in United States v. Socony-Vacuum Oil Co., supra, "Any combination which tampers with price structures is engaged in an unlawful activity." 310 U.S. at 221.

 In view of the foregoing, the Court adheres to its previous decision holding Section 11(c) of defendant's Code of Ethics to be a per se violation of § 1 of the Sherman Act.

 [EDITOR'S NOTE: PAGINATION IN THE HARD COPY SOURCE ENDS AT THIS POINT.]

 JUDGMENT

 Upon consideration of Goldfarb v. Virginia State Bar, 421 U.S. 773, 44 L. Ed. 2d 572, 95 S. Ct. 2004 (1975), this Court's previous decision in United States v. National Society of Professional Engineers, 389 F. Supp. 1193 (1974), the memoranda of points and authorities submitted by the parties upon remand, and the entire record herein; oral argument of counsel having been heard; and for the reasons set forth in the accompanying Memorandum Opinion, it is by the Court this 26th day of November, 1975

 ORDERED, ADJUDGED, and DECREED that this Court's previous Opinion, Findings of Fact and Conclusions of Law are reaffirmed; and it is further

 ORDERED, ADJUDGED, and DECREED that:

 I

 This Court has jurisdiction over the subject matter of this action and the parties hereto.

 II

 The defendant is found to have violated Section 1 of the Sherman Act (15 U.S.C. § 1) by combining and conspiring with its members and state societies to unreasonably restrain interstate trade and commerce in the sale of engineering services.

 III

 The provisions of this Final Judgment which apply to the defendant shall also apply to the defendant's officers, directors, agents, employees, successors and assigns, and to all other persons in active concert or participation with the defendant who receive notice of this Final Judgment by personal service or otherwise.

 IV

 The defendant is enjoined and restrained from participating in or adopting any plan, program or course of action which in any manner prohibits, discourages or limits members of the defendant from submitting price quotations for engineering services at such times and in such amounts as they may choose or which otherwise has the purpose or effect of suppressing or eliminating competition based upon engineering fees among members of the defendant.

 V

 The defendant is ordered and directed, within 60 days of the effective date of this Final Judgment, to amend its Code of Ethics, policy statements, opinions of its Board of Ethical Review, manuals, handbooks, rules, constitution, by-laws, resolutions and any other of its statements, guidelines or publications to eliminate therefrom any provisions, including Sections 9(b) and 11(c) of its Code of Ethics and any references thereto, which in any manner prohibit, discourage or limit the submission of price quotations for engineering services by members of the defendant or which state or imply that the submission of price quotations for engineering services or that competition by members of the defendant based upon engineering fees is unethical, unprofessional, contrary to the public interest or contrary to any policy of the defendant.

 VI

 The defendant is ordered and directed, within 60 days of the effective date of this Final Judgment, to amend its Code of Ethics, policy statements, opinions of its Board of Ethical Review, manuals, handbooks, rules, by-laws, resolutions and any other of its statements, guidelines or publications to eliminate therefrom all references to engineering fee schedules or guides published by any engineering society. The defendant is further enjoined and restrained from adopting, endorsing or promoting any engineering fee schedule or guide.

 VII

 The defendant is enjoined and restrained from adopting or disseminating in any of its publications or otherwise, any Code of Ethics, opinion of its Board of Ethical Review, policy statement, rule, by-law, resolution or guideline which in any manner prohibits, discourages or limits the submission of price quotations for engineering services by members of the defendant or which states or implies that the submission of price quotations for engineering services or that competition by members of the defendant based upon engineering fees is unethical, unprofessional, contrary to the public interest or contrary to any policy of the defendant.

 VIII

 The defendant is ordered and directed, within 60 days of the effective date of this Final Judgment, to send a copy of this Final Judgment to each of its affiliated state engineering societies and local chapters and to each State Board of Engineering Registration in the United States and territories thereof, and to cause the publication of this Final Judgment in the magazine Professional Engineer and the newsletter Private Practice News, in such a fashion and as prominently as feature articles are regularly published in said magazine and newsletter, and to send a copy of such magazine and newsletter to each member of NSPE and the Professional Engineers in Private Practice section of NSPE. The defendant is further ordered and directed to send a copy of this Final Judgment to each new member of NSPE and to state in any publication of its Code of Ethics that the submission of price quotations for engineering services at any time and in any amount is not considered an unethical practice. The text of such statement shall first be approved by the plaintiff.

 IX

 The defendant is ordered and directed to revoke the NSPE charter of and to refuse NSPE affiliation to:

 (A) any state engineering society which in any manner prohibits, discourages or limits its members from submitting price quotations for engineering services at such times and in such amounts as they may choose or which otherwise participates in or adopts any plan, program or course of action which has the purpose or effect of suppressing or eliminating competition among its members based upon engineering fees; and,

 (B) any state engineering society which has within its organization any local chapter which in any manner prohibits, discourages or limits its members from submitting price quotations for engineering services at such times and in such amounts as they may choose or which otherwise participates in or adopts any plan, program or course of action which has the purpose or effect of suppressing or eliminating competition among its members based upon engineering fees.

 For the purpose of carrying out the provisions of this section the defendant is ordered and directed to require, as a prerequisite for an NSPE charter or continued NSPE affiliation of any state engineering society, that such state engineering society submit to the defendant within 60 days of the effective date of this Final Judgment a written certification by an official of such state engineering society that neither it nor any of its local chapters in any manner prohibit, discourage or limit their members from submitting price quotations for engineering services at such times and in such amounts as they may choose and neither it nor any of its local chapters participate in or have any plan, program or course of action which has the purpose or effect of suppressing or eliminating competition among their members based upon engineering fees. The defendant is further enjoined and restrained from granting or continuing an NSPE charter or NSPE affiliation to any state engineering society which does not comply with the defendant's request for the certification required herein. The defendant shall retain each such certification during the period of the NSPE charter or NSPE affiliation of the state engineering societies submitting it.

 X

 The defendant is ordered and directed to file with the plaintiff 90 days from the effective date of this Final Judgment and on each anniversary date of the effective date of this Final Judgment for a period of five years, a report setting forth the steps it has taken to comply with the provisions of this Final Judgment.

 XI

 For the purpose of securing compliance with this Final Judgment, any duly authorized representative of the Department of Justice shall, upon written request of the Attorney General or the Assitant Attorney General in charge of the Antitrust Division, and on reasonable notice to the defendant, made to its principal office, be permitted:

 (A) access during the office hours of said defendant to all books, ledgers, accounts, correspondence, memoranda, and other records and documents in the possession or under the control of the defendant relating to any of the matters contained in this Final Judgment; and,

 (B) subject to the reasonable convenience of said defendant and without restraint or interference from it, to interview the officers and employees of said defendant, who may have counsel present, regarding any such matters.

 For the purpose of securing compliance with this Final Judgment, the defendant, upon the written request of the Attorney General or the Assistant Attorney General in charge of the Antitrust Division, shall submit such written reports relating to any of the matters contained in this Final Judgment as may from time to time be requested. No information obtained by the means provided in this section shall be divulged by any representative of the Department of Justice to any person other than a duly authorized representative of the Executive Branch of the plaintiff except in the course of legal proceedings to which the United States is a party for the purpose of securing compliance with this Final Judgment, or as otherwise required by law.

 XII

 The plaintiff shall recover the costs of this action from the defendant.

 XIII

 Jurisdiction is retained for the purpose of ordering other specific and further relief herein as the Court upon application of the plaintiff may determine to be necessary or appropriate and consistent with the Opinion of the Court and its Findings of Fact and Conclusions of Law. Jurisdiction is also retained for the purpose of enabling either of the parties to this Final Judgment to apply to the Court at any time for any further orders and directions as may be necessary or appropriate for the construction or carrying out of this Final Judgment, for the modification of any of the provisions thereof, for the enforcement of compliance therewith, and for the punishment of the violation of any of the provisions contained therein or subsequently ordered upon the application of the plaintiff.


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