Price Fixing

Price fixing is defined as, "an arrangement in which two firms coordinate their pricing decisions." (O'Sullivan & Sheffrin, 2003). The price fixing case I chose was regarding Brown and Toland Medical Group. The company is a multi-specialty, for-profit San Francisco-based independent physicians' association (Rauber, 2004).

Brown and Toland Medical Group was charged by the FTC with violating federal antitrust laws by fixing prices and other terms under which it would contract with insurance companies for preferred provider organization (PPO) enrollees. The FTC contends that the company had physicians agree on prices and terms they would enter contracts with heath plans or third-party payers. The company also allegedly told doctors to terminate any pre-existing contracts. Then they asked others to join in their price-fixing agreement. This would raise prices for physician services in their home town San Francisco.

The FTC proposed a consent agreement that bars Brown and Toland from:

* Negotiating with any payer on behalf of any physician.

* Dealing or refusing to deal with any payer based on price or other terms

* Jointly determining price or other terms upon which any physician deals with payers

Another stipulation of the consent agreement is that Brown & Toland to notify the FTC at least 60 days before entering into any arrangement with physicians or contacting any payer, except for those arrangements under which Brown & Toland will be paid a capitated amount, and contains standard recordkeeping provisions to assist the FTC in monitoring the respondent's compliance(www.ftc.gov).

References:

1. O'Sullivan, A. & Sheffrin, S.M. (2003).

Economics: Principles and Tools. Upper Saddle River, NJ:

Pearson Education

2. Rauber, C. (2004). San Francisco Business Times: Brown & Toland settles price-

fixing probe.

Retrieved September 15, 2004

http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2004/02/09/daily11.html