In my last post on this topic, I discussed Kamakahi v. ASRM, (N.D. Cal, filed April 12, 2011) a federal antitrust class action seeking damages and an injunction in connection with the American Society for Reproductive Medicine’s guidelines for compensating oocyte donors. In that post I addressed questions of how the oocyte donor compensation guidelines arose, how they are enforced, and how the ASRM determined what is reasonable egg donor compensation. In this post, I’d like to address the problems with the ASRM guidelines under antitrust law.
I should say at the outset that antitrust experts, in my experience, don’t consider the antitrust issues raised by the case particularly interesting – it’s a naked horizontal agreement to fix prices and is thus per se illegal under section one of the Sherman Act. What more is there to say? Though they are right, I think they underestimate the romanticism and/or paranoia, for lack of better terms, that tend to distort discussions of this market. In other words, very few observers have analyzed the oocyte trade for what it is – a profitable industry. Instead, the starting assumption seems to be that the egg market must differ from other markets because egg donors are engaged in a form of philanthropy that distinguishes them from suppliers in other industries. As I’ve argued at length here, this framing is not only unhelpful, but harmful.
Why are the ASRM oocyte donor compensation guidelines problematic under antitrust law?
Per se agreements are “agreements whose nature and necessary effect are so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality—they are ‘illegal per se.’” Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 692 (1978). Classifying an agreement as a per se violation dispenses with the need to inquire into market structure, the market power of the violators, or the anticompetitive effects of the behavior. The agreements purporting to limit egg donor compensation are the same types of agreements that have been considered per se illegal in less emotionally-charged settings.
However, courts sometimes analyze alleged anticompetitive behavior by nonprofit or professional associations under a rule of reason or “quick look” analysis, when the same conduct would be considered per se illegal if carried out by business organizations. Such judicial deference is not explicitly a product of the organizational form or nonprofit status of the defendants, but rather of a perception that, in many such cases, the anticompetitive effects of the agreement or the intentions of the alleged violators are not immediately discernable. As elaborated by the Third Circuit in United States v. Brown University, the Supreme Court:
has been more hesitant to condemn agreements by professional associations as unreasonable per se, or to apply a per se rejection to competitive restraints imposed in contexts where the economic impact of such practices is neither one with which the Court has dealt previously, nor immediately apparent.
As I discuss at length in Sunny Samaritans and Egomaniacs: Price Fixing in the Gamete Market, the negative economic impacts of the agreement among fertility professionals to control egg prices are readily apparent, and there are no arguable procompetitive benefits. Accordingly, this is not the type of arrangement deserving of courts’ more detailed rule of reason analysis such as that afforded MIT in Brown or the NCAA in NCAA v. University of Oklahoma. Nonetheless, as I demonstrate in the paper, the oocyte donor compensation guidelines fail even under a detailed rule of reason analysis.
Indeed, it is telling that neither individual fertility-industry collaborators nor ASRM even raise pro-competitive justifications for the agreements, relying instead on social-welfare justifications. This is because, unlike those rare cases in which courts have allowed naked collusion on price or output, collusion on egg prices does not enable an otherwise nonexistent market to operate or enhance the quality or diversity of consumer choice. Indeed the ASRM–SART agreement has exactly the opposite effect: consumers are deprived of both quantity and choice.
Finally, in rare cases (such as Brown), courts have considered social welfare or other noneconomic justifications for anticompetitive behavior. It is important to note that even the Brown court—notable for its unusual embrace of social-policy justifications—insisted that social policy alone was an insufficient justification for anticompetitive behavior.
It is unlikely, therefore, that a court would entertain social policy justifications for the SART–ASRM price-fixing agreements, and even less likely that a court would find them persuasive in the absence of compelling pro-competitive justifications. Even in the unlikely event that a court was willing to entertain social-welfare arguments in support of price restraints in the oocyte market, however, such justifications should not carry the day. Unlike Brown— in which MIT could point to a social policy (equality of educational access) that Congress had supported for many years and that was arguably furthered by its agreements with the Ivy League colleges to set financial aid compensation— Congress has not ever, much less repeatedly, evinced a desire to exert controls on compensation to egg donors. Furthermore, it is implausible that social welfare concerns primarily motivate the price-fixing agreements in question, because the agreements do not have the effect of promoting the purported noneconomic justifications.
In my next post, I will explore what is, for many people, the most interesting question posed by Kamakahi: why do the oocyte pricing guidelines exist? What was the goal? I can think of at least two possibilities, one involving profits, and one involving politics. I will discuss both in my next post, and also explain why the social welfare justifications are implausible.
Related posts:
Politics and Profits in the Egg Business (When Sunny Samaritans Sue IV)
When Sunny Samaritans Sue, Continued
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