A Tie Too Far: Antitrust Class Action Alleging Physician Association Tied Board Certification to Association Membership Survives Motion to Dismiss
A New Jersey district court recently denied a motion to dismiss in an antitrust class action alleging that a physician association illegally tied board certification to association membership in violation of Section 1 of the Sherman Act. Talone, et. al. v. The American Osteopathic Association, Case No. 1:16-cv-04644 (D. N.J. Jun. 12, 2017). The defendant association moved to dismiss, arguing that plaintiffs, a group of affected doctors, had failed to allege sufficient facts to demonstrate foreclosure of competition or antitrust injury.
The suit was filed in August 2016 by a group of osteopathic doctors against the primary certifying body for osteopathic physicians in the United States. To practice medicine and obtain a medical license in the United States, an osteopathic physician must complete an accredited residency training program after obtaining a Doctor of Osteopathic Medicine degree. The American Osteopathic Association (“AOA”) is the only accrediting agency for osteopathic graduate medical education. A further component of practicing medicine is board certification to signify a particular specialty. The AOA offers board certification for osteopathic medicine. The American Board of Medical Specialties (“ABMS”) also offers board certification, but osteopathic physicians who complete their residencies at AOA accredited programs—the only accredited osteopathic programs—are not eligible for ABMS board certification. The AOA board certification typically cost in excess of $1000 for the examination and administrative fees, plus annual board certification maintenance.
Plaintiffs’ case targeted the fact that starting in 2012, in addition to the annual board certification maintenance fee, the AOA has required all AOA board certified physicians to purchase and maintain annual membership in the AOA—or risk cancellation of their certification.
Plaintiffs’ antitrust tying claim is that the AOA has exploited its control over board certification for the practice of osteopathic medicine to force osteopathic physicians to become members of the AOA. They allege that they are forced to purchase AOA membership even though it serves no purpose with respect to, and has no actual connection with, AOA board certification or their medical practice. Plaintiffs further allege that the AOA’s requirement has reduced the number of osteopathic physicians willing to purchase membership in other physician associations and has thus foreclosed competition in the market for membership in professional physician associations. As a result of the reduced competition, Plaintiffs also claim that the AOA has been able to increase the price of its annual membership dues.
The AOA argued that plaintiffs failed to plead an antitrust injury because plaintiffs are not competitors of the AOA who have lost members due to the alleged tying. The AOA also asserted that plaintiffs’ claim that they were forced to purchase AOA membership does not show that the AOA has market power or that the AOA has foreclosed other physician associations from competition.
The court found that plaintiffs sufficiently stated claims to overcome a motion to dismiss for a per se and “rule of reason” tying antitrust violation. Citing the approximately 32,000 AOA board certified osteopathic physicians who have no choice but to purchase AOA membership in order to maintain their board certification, the court found that the allegations, when taken as true, show that the AOA ties two distinct products—board certification and AOA membership, that it has market power in the tying product market—board certification, and that it affects a substantial amount of interstate commerce. The allegations, when accepted as true, also show that the AOA’s actions substantially lessen competition and prevent other physician associations from competing for members.
The class action also includes claims under New Jersey’s Consumer Fraud Act related to AOA’s alleged promise pre-2000 that its certification would never expire. The court also denied AOA’s motion to dismiss those claims as well as AOA’s motion to transfer venue.