The central role of Federal trade commission (FTC) is to promote and foster an environment of free and fair competition. This commission is also charged with the responsibilities of taking up:
“reviews mergers and acquisitions, and challenges those that would likely lead to higher prices, fewer choices, or less innovation, seeks out and challenges anticompetitive conduct in the marketplace ( including monopolization and agreements between competitors), promotes competition in industries where consumer impact is high, such as health care, real estate, oil & gas, technology, and consumer goods, and finally provides information, and holds conferences and workshops, for consumers, businesses, and policy makers on competition issues and market analysis”
In line with public policy considerations, FTC take up the most active role in ensuring that Federal Trade and Commission Acts, Clayton and a number of anti trust and consumer protection laws are strictly obeyed. In the consideration of public policy, anti-competitive behavior that FTC seeks to reign on includes but is not limited to: Price fixing, unfair competition, merger prohibition and deceptive practices. This is due to the fact that even though there thrives a total difference in opinion in regard to these guidelines, it is worth appreciating that all sectors of the economy that range from consumers, businessmen and even competitors stand to gain from healthy competition. This means that anti trust policy guidelines forms a fundamental element in public policy consideration as far as anti-competitive behavior is concerned.
The conduct of IPAMG
In an analysis of the IPAMG case, it is seen that its conduct was deemed anti- competitive and against the anti-trust laws. Unfair competition includes instances in which large businesses and corporations use the advantage of their sizes to gain a larger share of the market by providing discounts their suppliers while price fixing are of two types: Vertical and horizontal. Garman, (1997) Illustrates that:
“Vertical price fixing occurs when manufacturers make express or implied agreements with their customers obligating them to resell at a price dictated by the manufacturer and horizontal price fixing occurs when competitors make direct agreements about the quantity of goods that will be produced, offered for sale, or bought”
IPAMG was deeply involved in the horizontal price fixing in that they not only use their size to their advantage but they also obligated their customers to purchase the services at a retail price they themselves suggested. Furthermore, IPAMG conduct was found anti competitive in that the merger between these physicians that led to the formation of Independent Physician Associates Medical Group, Inc was not born to improve the quality of their services but to control the prices that they considered fit for consumers to pay. FTC has the mandate to control and provide policy guidelines on mergers and acquisitions with the aim of downsizing the level of competition and threat posed by big business units to smaller ones. IPAMG came together and thus posed unhealthy price completion to their smaller partners offering similar services.
In the matter before the court, In the Matter of (INDEPENDENT PHYSICIAN ASSOCIATES MEDICAL GROUP, INC., dba ALLCARE IPA,) a California corporation. The nature of the case as revealed in the documents contained in this case was “This matter concerns horizontal agreements among competing physicians, acting through Respondent, to fix prices charged to those offering coverage for health care services (“payors”) in the Modesto, California, area and to refuse to deal with payors”. In this charge sheet, FTC demonstrates that IPMAG had or tended to affect trade by:
“Unreasonably restraining price and other forms of competition among physicians who are members of All Care, increasing prices for physician services, depriving payors (insurers and employers) and individual consumers, of the benefits of competition among physicians, and finally depriving consumers of the benefits of competition among payors”.
It is blatantly evident that one or a combination of the above stated contributes to what is known as unfair competition, price fixing and deceptive practices that all forms the major anti competitive behavior business practices that FTC is mandated to monitor and control.
While documents on this case reveal that there were no direct penalties in terms of direct payments for the violations of anti trust laws committed, a number of orders were put in place. According to the press release by FTC (2008),
“They would prohibit AllCare and BVIPA from entering into or facilitating agreements between or among physicians: 1) to negotiate on behalf of any physician with any payer; 2) to refuse to deal, or threaten to refuse to deal, with any payer; 3) to designate the terms, conditions, or requirements upon which any physician deals, or is willing to deal, with any payer, including, but not limited to price terms; 4) not to deal individually with any payer, or not to deal with any payer through any arrangement other than one involving AllCare or BVIPA, respectively”
Summary and Conclusion
The conditions and orders set forth for Independent Physician Associates Medical Group, Inc. by FTC are very fair in that the provision of medical care and its related services forms a very important part of public health. Such unhealthy completion behavior and practices definitely leads to an upward surge in the prices of these services. Furthermore, to protect consumers, strict measures must be enforced to reign in on business organizations involved in such anti-competitive behaviors.
Business Encyclopedia (2001). Federal Trade Commission Act 1914. Web.
Federal Trade Commission (2008). FTC Settles Price-Fixing Charges Against Two Separate Doctors’ Groups. News. Web.
Garman E. T. (1997). Consumer Economics Issues in America, 5th ed. Houston, TX: DAME Publications.