435 U.S. 679, 98 S. Ct. 1355 (1978)
In 1935 the National Society of Professional Engineers was organized to address the nontechnical aspects of engineering practice.1 This included promotion of the professional, social, and economic interests of its members.2 The Society has 69,000 members residing throughout the United States and in some foreign countries.3 Approximately 12,000 members are consulting engineers who offer services to governmental, industrial, and private clients.4
In July 1964 the Society adopted Section 11(c) of its Code of Ethics.5 This section prohibits engineers from soliciting or submitting engineering proposals on the basis of competitive bidding.6 The provision defines competitive bidding as the formal or informal submission or receipt of verbal or written estimates of cost or proposals in terms of dollars, man days of work, percentage of construction cost, or any other measure allowing a prospective client to compare engineering services on a price basis prior to selection of an engineer.7
The Society's Board of Ethical Review has uniformly interpreted the ethical rules as prohibiting submission of any form of price information to a prospective customer that would enable price comparison on engineering services.8 If a client requires such information, the firm must withdraw from consideration.9 This preserves the traditional method under which a client initially selects an engineer on the basis of background and reputation rather than price, after which the parties may negotiate a fee.10
Engineering fees amount to well over $2 billion each year.11 They constitute about 5 percent of total construction costs.12 In any given facility, 50 to 80 percent of the cost of construction results directly from engineering work.13 In 1972 the United States filed a civil antitrust complaint against the Society in the District Court.14 The complaint alleged that members had agreed to abide by canons prohibiting submission of competitive bids for engineering services.15 It claimed this suppressed price competition and deprived customers of the benefits of free and open competition.16 The complaint prayed for an injunction terminating the agreement.17
In its answer the Society admitted the essential facts alleged but asserted that the ethical standard was reasonable because competition among professional engineers was contrary to the public interest.18 Competitive pressure would lead engineers to design inefficient and unnecessarily expensive structures and methods of construction, endangering public health, safety, and welfare.19 The parties compiled a voluminous discovery and trial record.20 The District Court made detailed findings about the engineering profession, the Society, its members' participation in interstate commerce, the history of the ban on competitive bidding, and incidents in which the ban appears to have been violated or enforced.21 The court made no finding on whether or to what extent competition had led to inferior engineering work adversely affecting public health, safety, or welfare.22
The District Court concluded that the prohibition was on its face a violation of Section 1 of the Sherman Act.23 After the initial judgment was vacated for reconsideration in light of Goldfarb v. Virginia State Bar and re-entered, the Court of Appeals affirmed.24 The Supreme Court granted certiorari to decide whether the District Court should have considered the factual basis for the proffered justification before rejecting it.25
Whether the canon of ethics prohibiting competitive bidding by members may be justified under the Sherman Act because it was adopted by members of a learned profession for the purpose of minimizing the risk that competition would produce inferior engineering work endangering the public safety?26
The Rule of Reason requires that the inquiry focus on the challenged restraint's impact on competitive conditions rather than on whether competition itself is reasonable or beneficial.27 The Sherman Act embodies a legislative judgment that competition ultimately produces lower prices and better goods and services, precluding judicial inquiry into the wisdom of that policy even for learned professions.28
No. The Society's agreement operates as an absolute ban on competitive bidding that interferes with the setting of price by free market forces and is therefore illegal on its face under Section 1 of the Sherman Act.29 Section 11(c) of the Code of Ethics prohibits engineers from soliciting or submitting proposals on the basis of competitive bidding. It requires withdrawal if a client demands price information. This preserves the traditional selection method based on reputation rather than price.
The Society's affirmative defense confirms the anticompetitive purpose by assuming the ban maintains price levels to prevent inferior work. This justification rests on the rejected premise that competition is unreasonable and endangers public safety. The Court has never accepted an argument that a restraint on price competition ultimately benefits the public by preventing harm. Exceptions for professional services or dangerous goods would amount to a repeal of the statute.
The canon of ethics may not be justified under the Sherman Act on the asserted public-safety ground.30
Related opinions on this issue
Justice Blackmun concurs in the judgment but declines to join Part II.31 He expresses skepticism that the Rule of Reason as applied to professions can account only for benefits from increased competition.32 He notes that the Society's rule is grossly overbroad because it forbids any simultaneous consultation between a client and several engineers even when the client provides complete project information.33
This inevitably increases the cost of gathering price information and dampens competition without a calibrated role in preventing uninformed bids.34 He would leave greater flexibility for ethical rules that have more than de minimis anticompetitive effects yet serve a profession's proper ordering.35
Whether the District Court should have considered the factual basis for the proffered justification before rejecting it?36
When a restraint is illegal on its face because its nature and necessary effect are plainly anticompetitive, no elaborate study of the industry or factual inquiry into claimed benefits is required before rejecting a defense that competition itself is unreasonable.37
No. The District Court correctly concluded that the ethical prohibition was on its face a tampering with the price structure of engineering fees in violation of Section 1. No findings were needed on whether competition would produce inferior work. The parties compiled a voluminous record with detailed findings on the profession, the Society, interstate commerce, and enforcement of the ban.38 Yet the court found no need to inquire into the likelihood of dire safety consequences.
The agreement restrains trade on its face by impeding the ordinary give and take of the marketplace. It deprives customers of the ability to compare prices. The Court of Appeals affirmed that the agreement was unlawful on its face and illegal without regard to claimed or possible benefits.39 This is consistent with the principle that the purpose of antitrust analysis is to judge competitive significance rather than to decide whether a policy favoring competition is in the public interest.40
The District Court was not required to consider the factual basis for the proffered justification before rejecting it.41
Whether the injunction entered by the District Court as modified by the Court of Appeals abridges the Society's First Amendment rights?42
Once a violation of the Sherman Act is established, a district court may fashion appropriate restraints on future activities to eliminate the consequences of the violation.43 The resulting order may curtail the exercise of liberties that would otherwise be enjoyed so long as the relief represents a reasonable method of remedying the illegal conduct.44
No. The injunction prohibiting the Society from adopting any official opinion or guideline stating that competitive bidding is unethical is a proper remedy that does not violate the First Amendment.45 The District Court was empowered to fashion restraints both to avoid recurrence of the violation and to eliminate its consequences. The Court of Appeals modified the decree to ensure it was not more intrusive than necessary.46 The Society may move for modification if it wishes to adopt a narrower ethical guideline confined to preventing deceptively low bids.47
This adequately protects its interests while remedying the antitrust violation.48
The injunction does not abridge the Society's First Amendment rights.49
Related opinions on this issue
Chief Justice Burger concurs in the judgment sustaining the finding of a Sherman Act violation but dissents from the portion of the judgment that prohibits the Society from stating in its published standards of ethics the view that competitive bidding is unethical.50 He maintains that the First Amendment guarantees the right to express such a position and that this right cannot be impaired under the cloak of remedial judicial action.51