FTC says it’s watching associations’ activities
Posted July 1, 2014
When talk of the veterinary job market has arisen, some have said the AVMA should take action to limit the number of veterinary graduates. Or that the AVMA Council on Education should no longer accredit foreign veterinary schools as a result of perceived workforce issues associated with students graduating from these institutions who come to the U.S. to practice. But recent remarks from the Federal Trade Commission indicate those ideas may be a nonstarter.
Concerns about the effects of veterinary college accreditation on the veterinary workforce here in the United States gained momentum around the time the AVMA COE accredited the National Autonomous University of Mexico School of Veterinary Medicine and Animal Husbandry in Mexico City in 2011. Since then, these issues have been debated endlessly on message boards, at professional meetings, and even among members of the AVMA House of Delegates and Executive Board.
Most recently, Dr. Robert R. Marshak, dean emeritus of the University of Pennsylvania School of Veterinary Medicine, sent a letter this spring to state VMAs asking them to support him in his efforts to persuade the Department of Education’s National Advisory Committee for Institutional Quality and Integrity to recommend that the USDE withhold recognition of the COE as the accrediting body for veterinary medicine until reforms are made to its composition—not mentioning the fact that most of these reforms had already taken place (see JAVMA, Sept. 1, 2013).
In the letter, Dr. Marshak wrote as one of his arguments against the COE: “This proliferation of accredited vocational and foreign schools, and the increase in student numbers to make up for severe cut backs in funding for our traditional state supported schools, are adding significantly to the number of new graduates, many marginally trained, at a time when there is already a surplus of veterinarians and the applicant pool as a whole appears to be diminishing. ... The negative financial impact of the growing workforce surplus on private veterinary practices, especially in an economy that may take decades to recover, cannot be overestimated.” (emphasis in original)
A little friendly competition
According to the FTC, it’s not for the AVMA to decide how many veterinarians are in the marketplace. The FTC issued a release May 1 (available here) stating it continues to focus on trade associations’ compliance with antitrust laws and it is watching their activities.
“It is a fundamental principle of antitrust law that competitors—whether businesses or individuals—cannot join together to limit the way that they offer products or services to potential customers, especially where there is no legitimate business purpose other than avoiding competition. Strictly speaking, competitors are expected to compete,” according to the press release.
The FTC went on to relate how it obtained settlement agreements with two trade associations at the end of 2013 for unreasonable trade association rules. In one case, an association of legal support professionals not only banned comparative advertisements but also prevented members from offering discounted rates to another member’s clients or recruiting another member’s employees without giving prior notice.
In the other case, an association of music teachers’ code of ethics prevented members from soliciting clients from a rival, in effect preventing them from offering services to students who were already taking lessons from another member.
Each association agreed to settle the FTC charges and to change its rules.
“These cases serve as a reminder that the commission, as it was a century ago, remains vigilant about trade association activity that restrains competition among the members without a legitimate business justification. If you are a member of a trade association or provide counsel to one, remember that there are no special antitrust rules for trade associations. Trade association rules, codes, or bylaws that seek to override the normal give-and-take among competing members may interfere with the competitive process and risk antitrust review. When in doubt, trade associations may apply for a staff advisory opinion regarding proposed rules that potentially raise antitrust concerns,” the FTC wrote.
Keeping an eye out
Isham Jones, the AVMA’s general counsel, says there are two important things to note about the FTC’s press release. First, the two associations mentioned were small players, not larger corporations such as Google or IBM that are more likely to make headlines when it comes to antitrust activities, the point being that the FTC does not focus only on big companies but also goes after small nonprofit entities.
Second, Jones noted it was “somewhat odd” that the FTC would issue a press release solely to tell associations that it’s watching their activities.
“It’s more common to say we just did this or will do this initiative. They did issue a press release with the settlements, but this went further. I take this as a lesson that they’re watching what associations do,” Jones said.
He continued, “Associations, unfortunately, are inherently suspect because they’re groups of competitors coming together to better their businesses. For the AVMA, part of what we do is to ask, ‘How can we make veterinary medicine a more profitable endeavor?’ When that is part of the goal, antitrust regulators will watch to see how groups are going to do that without violating the law. There are thousands of ways to do it but equally as many traps they can fall into that raise scrutiny.”
“Associations, unfortunately, are inherently suspect because they’re groups of competitors coming together to better their businesses. For the AVMA, it’s ‘How can we make veterinary medicine a more profitable endeavor?’ When that is part of the goal, antitrust regulators will watch to see how groups are going to do that without violating the law. There are thousands of ways to do it but equally as many traps associations can fall into that raise scrutiny.”
-Isham Jones, AVMA’s general counsel
Applies to practices as well
Individual veterinarians, too, need to watch for violating antitrust rules, which aren’t always intuitive or obvious, Jones said.
“Practitioners shouldn’t be banding together with other practices to say, ‘We’re going to charge a certain amount for a spay or neuter.’ Or say they’re not going to buy (a company’s) products because they’re selling to big-box stores. That’s likely to be viewed as unlawful. Same with dividing up markets; ‘You take everything north of here, and I’ll take everything south of here,’” he said.
Prior to the Veterinary Economics Strategy Committee’s meeting in May, Michael Dicks, PhD, director of the AVMA Veterinary Economics Division, advised committee members to be vigilant that their actions do not restrain competition among AVMA members or prevent new Association members from being able to compete.
“Providing information about supply, demand, and prices is not a problem, but the suggestion by even a single member to constrain supply or set prices is likely to be viewed as attempting to use the power of the association to restrain competition. Thus, we need to be ever vigilant about our comments as VESC members both at the meeting and in public. As an example, discussing workforce issues is not a problem nor is discussing accreditation a problem. However, when the two are talked about together this is a problem,” Dr. Dicks wrote.
He says that veterinarians need to keep in mind the value of the market in its ability to efficiently allocate resources.
“If the resources are not being allocated correctly, it is not our job to fix the market but to remove the factors that prevent it from working efficiently,” he said. “I believe the job of AVMA is to provide the best unbiased information to all market participants so that they can make informed resource allocation decisions. This will reduce the long periods between excessive excess capacity and insufficient capacity, in essence, improving market efficiency.”
The economics division and the Veterinary Economics Strategy Committee have been working on three economic studies. They are as follows:
An elasticity study that will determine the effects of the price of veterinary services and customer disposable income on the demand for veterinary services.
An employment study that will look at how many veterinarians have been unemployed or underemployed and for how long, in addition to whether their status is temporary or permanent and why.
A capacity study that will determine the difference in characteristics between veterinary practices operating at excess capacity and those operating at full capacity.
The results will be announced during the AVMA Veterinary Workforce Summit on Oct. 28. In the meantime, the economics division along with the AVMA Membership and Field Services Division and the Early Career Development Committee is developing a budgeting tool that will help veterinary students and early-career veterinarians develop personal budgets. The goal is to help them understand the effect of various degrees of debt, debt repayment, and income on their budget.
These actions likely won’t satisfy every Association member, but the AVMA recognizes members aren’t the only ones watching what it does.