United States v. Association of Family Practice Residency Directors; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Association of Family Practice Residency

Directors; Proposed Final Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,

Stipulation, and a Competitive Impact Statement have been filed with

the United States District Court for the Western District of Missouri

in United States v. Association of Family Practice Residency Directors,

Civil No. 96-575-CV-W-2 (W.D. Mo., filed May 28, 1996).

The Complaint alleges that the defendant entered into an agreement

with the purpose and effect of restraining competition, in violation of

Section 1 of the Sherman Act, 15 U.S.C. 1, by limiting competition

among family practice residency programs to employ family practice

residents. The proposed Final Judgment enjoins the continuance or

recurrence of this practice.

Public comment on the proposed Final Judgment is invited within the

statutory 60-day comment period. Such comments and responses thereto

will be published in the Federal Register and filed with the Court.

Comments should be directed to Gail Kursh, Chief; Health Care Task

Force; United States Department of Justice, Antitrust Division, 325

Seventh Street, NW., Room 400; Washington, DC 20530 (telephone: 202/

307-5799).

Rebecca P. Dick,

Deputy Director of Operations.

United States District Court for the Western District of Missouri

Western Division

United States of America, Plaintiff, v. Association of Family

Practice Residency Director, Defendant. Civil Action No.: 96-575-CV-

W-2, Judge Gaitan.

Stipulation

It is stipulated by and between the undersigned parties, by their

respective attorneys, that:

1. The Court has jurisdiction over the subject matter of this

action and over each of the parties hereto, and venue of this action is

proper in the Western District of Missouri;

2. The parties consent that a Final Judgment in the form hereto

attached may be filled and entered by the Court, upon the motion of any

party or upon the Court's own motion, at any time after compliance with

the requirements of the Antitrust Procedures and Penalties Act (15

U.S.C. 16), and without further notice to any party or other

proceedings, provided that the plaintiff has not withdrawn its consent,

which it may do at any time before the entry of the proposed Final

Judgment by serving notice thereof on the defendant and by filing that

notice with the Court; and

3. The defendant agrees to be bound by the provisions of the

proposed Final Judgment pending its approval by the Court. If the

plaintiff withdraws its consent, of if the proposed Final Judgment is

not entered pursuant to the terms of the Stipulation, this Stipulation

shall be of no effect whatsoever, and the making of this Stipulation

shall be without prejudice to any party in this or in any other

proceeding.

[[Page 28892]]

For Plaintiff United States of America:

Anne K. Bingaman,

Assistant Attorney General.

Joel I. Klein,

Deputy Assistant Attorney General.

Rebecca P. Dick,

Deputy Director, Office of Operations.

Gail Kursh,

Chief, Health Care Task Force.

Mark J. Botti,

Attorney.

William E. Berlin,

Attorney, U.S. Department of Justice, Antitrust Division, Health Care

Task Force, Room 450, Liberty Place Bldg., 325 Seventh Street, NW.,

Washington, DC 20530, (202) 307-0827.

Alleen S. VanBebber,

Deputy United States Attorney, Missouri Bar No. 41460, 1201 Walnut St.,

Suite 2300, Kansas City, Missouri 64106, (816) 426-3130.

For Defendant Association of Family Practice Residency

Directors:

James R. Hobbs,

Wyrsch, Atwell, Mirakian, Lee & Hobbs, P.C., 1300 Mercantile Tower,

1101 Walnut, Kansas City, Missouri 64106-2122, (816) 221-0080.

Final Judgment

Plaintiff, the United States of America, having filed its Complaint

on May 28, 1996, and plaintiff and defendant, by their respective

attorneys, having consented to the entry of this Final Judgment without

trial or adjudication of any issue of fact or law, and without this

final Judgment constituting any evidence against or an admission by any

party regarding any issue of fact or law;

Now, Therefore, before the taking of any testimony, and without

trial or adjudication of any issue of fact or law, and upon consent of

the parties, it is hereby ordered, adjudged, and decreed:

I

Jurisdiction

This Court has jurisdiction over the subject matter and each of the

parties to this action. The Complaint states claims upon which relief

may be granted against the defendant under Section 1 of the Sherman

Act, 15 U.S.C. 1.

II

Definitions

As used in this Final Judgment:

(A) ``AFPRD'' means the Association of Family Practice Residency

Directors, each of its successors, divisions, parents, subsidiaries,

and affiliates, each other person directly or indirectly, wholly or in

part, owned or controlled by it, and each partnership or joint venture

to which any of them is a party, and all of their directors, officers,

and employees;

(B) ``Contracting with'' means to negotiate, offer, accept,

execute, or enter into an employment contract or agreement;

(C) ``Current family practice residents'' means persons already

enrolled in, committed to or employed by a family practice or other

residency;

(D) ``Inducements'' means salary, bonuses (signing, retention or

other), loan forgiveness of repayment, housing allowance or subsidy,

transportation allowance or subsidy, moonlighting payment, permissible

moonlighting when on-call, additional payment for required on-call

activity, moving expenses, travel expenses, reimbursement for any

expense in an amount which exceeds the actual receipted expense and any

other employment benefit or incentive;

(E) ``The Match'' means the annual placement process conducted by

the National Resident matching Program through which medical students

and hospital residency programs select and are matched with their

preferences;

(F) ``Person'' means any natural person, corporation, firm,

company, sole proprietorship, partnership, joint venture, association,

institute, governmental unit, or other legal entity; and

(G) ``Prespective family practice residents'' means medical

students or other candidates for residency in a family practice

program.

III

Applicability

This Final Judgment applies to AFPRD and to all other persons who

receive actual notice of this Final Judgment by personal service or

otherwise and then act or participate in active concert with defendant.

IV

Prohibited Conduct

Defendant is enjoined from:

(A) Directly or indirectly prohibiting or restraining any person

offering a family practice residency program from:

(1) Competing to attract, obtain or retain the services of current

or prospective family practice residents by offering or providing any

or differing amounts, types, or combinations of inducements, including

inducements offered or provided to current or prospective family

practice residents in the same residency year;

(2) Offering or providing confidential or non-written terms and

conditions of inducements to current or prospective family practice

residents;

(3) Directly or indirectly soliciting, recruiting or contracting

with current family practice residents of other residency programs; and

(4) Considering applications submitted by current family practice

residents and contracting with those residents without the knowledge or

approval of the program director of any other residency program;

(hereinafter ``practices identified in Section IV(A)'').

(B) Directly or indirectly adopting, disseminating, publishing, or

seeking adherence to any code of ethics, rule, bylaw, resolution,

policy, guideline, standard, manual, or policy statement that has the

purpose or effect of prohibiting or restraining AFPRD members from

engaging in any of the practices identified in Section IV(A) above, or

that states or implies that any of these practices are, in themselves,

unethical, unprofessional, or contrary to any policy of the AFPRD.

V

Compliance Program

Defendant is ordered to:

(A) Within sixty (60) days of the date of entry of this Final

Judgment, amend its code of ethics, rules, bylaws, resolutions,

policies, guidelines, standards, manuals, or policy statements, and

specifically those provisions or parts of provisions located at

Sections 2(B), 2(C), 2(E)(1), 2(E)(2), and 2(E)(3) of the ``AFPRD

Guidelines on the Ethical Recruitment of Family Practice Residents,''

to comply with Section IV above, and provide a copy of the final

amended guidelines to plaintiff;

(B) Send a copy of this Final Judgment, along with a written

statement that there are no longer any AFPRD ethical guidelines or

rules that state or imply that any of the practice identified in

Section IV(A) above are, in themselves, unethical, unprofessional, or

contrary to any policy of the AFPRD, regardless of anything defendant

may have said about these practices in the past, to each current AFPRD

member, within sixty (60) days from the date of entry of this Final

Judgment, and thereafter sending annually such written statement to

each current AFPRD member for a period of five (5) years after the date

of entry of this Final Judgment;

(C) Send a copy of this Final Judgment to each new AFPRD member no

later than ten (10) days after membership in the AFPRD is granted, and

thereafter annually until five (5) years after the date of entry of

this Final Judgment;

(D) Distribute within sixty (60) days from the entry of this Final

Judgment, a

[[Page 28893]]

copy of the Final Judgment and Competitive Impact Statement to all

directors and officers of defendant;

(E) Distribute in a timely manner a copy of the final Judgment and

Competitive Impact Statement to any person who succeeds to a position

described in Paragraph V(D);

(F) Brief annually in writing or orally those persons designated in

Paragraphs V (D) and (E) on the meaning and requirements of this Final

Judgment and the antitrust laws, including penalties for violation

thereof;

(G) Obtain from those persons designated in Paragraphs V (D) and

(E) annual written certifications that they (1) have read, understand,

and agree to abide by this Final Judgment, (2) understand that their

noncompliance with this Final Judgment may result in conviction for

criminal contempt of court and imprisonment and/or fine, and (3) have

reported violations, if any, of this Final Judgment of which they are

aware to counsel for defendant; and

(H) Maintain for inspection by plaintiff a record of recipients to

whom this Final Judgment and Competitive Impact Statement have been

distributed and from whom annual written certifications regarding this

Final Judgment have been received.

VI

Certifications

(A) Within 75 days after entry of this Final Judgment, defendant

shall certify to plaintiff that it has complied with the provisions of

Sections V (A)-(B) above, and that it has made the distribution of the

Final Judgment and Competitive Impact Statement as required by Section

V(D); and

(B) For 10 years after the entry of this Final Judgment, on or

before its anniversary date, defendant shall certify annually to

plaintiff whether it has complied with the provisions of Sections V

applicable to it.

VII

Plaintiff's Access

For the sole purpose of determining or securing compliance with

this Final Judgment, and subject to any recognized privilege,

authorized representatives of the United States Department of Justice,

upon written request of the Assistant Attorney General in charge of the

Antitrust Division, shall on reasonable notice be permitted:

(A) Access during regular business hours of defendant to inspect

and copy all records and documents in the possession or under the

control of defendant relating to any matters contained in this Final

Judgment;

(B) To interview officers, directors, employees, and agents of

defendant, who may have counsel present, concerning such matters; and

(C) To obtain written reports from defendant, under oath if

requested, relating to any matters contained in this Final Judgment.

VIII

Jurisdiction Retained

This Court retains jurisdiction to enable any of the parties to

this Final Judgment to apply to this Court at any time for further

orders and directions as may be necessary or appropriate to carry out

or construe this Final Judgment, to modify or terminate any of its

provisions, to enforce compliance, and to punish violations of its

provisions.

IX

Expiration of Final Judgment

This Final Judgment shall expire ten (10) years from the date of

entry.

X

Public Interest Determination

Entry of this Final Judgment is in the public interest.

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United States District Judge

Competitive Impact Statement

Pursuant to Section 2(b) of the Antitrust Procedures and Penalties

Act, 15 U.S.C. 16(b) (``APPA''), the United States files this

Competitive Impact Statement relating to the proposed Final Judgment

submitted for entry in this civil antitrust proceeding.

I

Nature and Purpose of the Proceeding

On May 28, 1996, the United States filed a civil antitrust

complaint alleging that defendant, the Association of Family Practice

Residency Directors (``AFPRD''), and others entered into an agreement

that restrained competition among family practice residency programs to

employ family practice residents, and constituted a per se violation of

Section 1 of the Sherman Act, 15 U.S.C. 1. The Complaint seeks

injunctive relief to enjoin continuance or recurrence of this

violation.

The United States filed with the Complaint a proposed Final

Judgment intended to resolve this matter. The Court's entry of the

proposed Final Judgment will terminate this action, except that the

Court will retain jurisdiction over the matter for any further

proceedings that may be required to interpret, enforce, or modify the

Judgment, or to punish violations of any of its provisions.

Plaintiff and the defendant have stipulated that the Court may

enter the proposed Final Judgment after compliance with the APPA,

unless prior to entry the plaintiff withdraws its consent. The proposed

Final Judgment provides that it entry does not constitute any evidence

against, or admission by, any party concerning any issue of fact or

law.

The present proceeding is designed to ensure full compliance with

the public notice and other requirements of the APPA. In the

Stipulation to the proposed Final Judgment, the defendant has agreed to

be bound by the provisions of the proposed Final Judgment pending its

entry by the Court.

II

Practices Giving Rise to the Alleged Violations

The AFPRD is a national professional association, located in Kansas

City, Missouri, that was established in 1989 to represent the directors

of hospital residency programs in the speciality of family practice

medicine. Currently, the AFPRD has approximately 427 member directors,

who represent approximately 95% of all family practice residency

programs nationwide.

In the late 1980s, competition increased among family practice

residency programs for senior medical students, as well as for

residents already employed by other family practice residencies, to

fill vacancies for first- and second-year positions in those programs.

Family practice residency programs increasingly began actively and

directly to solicit the transfer of first year residents employed by

other family practice residency programs. The solicitations sometimes

took place without the knowledge of the other programs.

During the same period, family practice residency programs also

increasingly began to offer economic inducements to attract both senior

medical students and current family practice residents. These

inducements were sometimes offered to medical students before the

annual placement process, known as the ``Match,'' conducted by the

National Resident Matching Program, in which a computer program matches

the preferences of senior medical students and hospital residency

programs.

Beginning in approximately 1990, the AFPRD began to receive an

increasing number of complaints from its member program directors about

competition

[[Page 28894]]

form other family practice residency programs for both senior medical

students and current residents. For the purpose of eliminating the

growing competition among family practice residency programs to attract

senior medical students and current family practice residents to their

programs, in 1992 the ARPRD promulgated ``Guidelines of the Ethnical

Recruitment of Family Practice Residents'' (the ``Guidelines'').

The Guidelines embody an agreement among the member family practice

residency program directors to limit that competition by: (a) Not

directly soliciting family practice residents from other residencies;

(b) not offering contracts to applicants who are current residents in

other family practice programs without the knowledge of the other

program director; (c) making each incentive and other employment

benefit offered by any applicant available to all applicants; and (d)

not providing any inducements before the Match.

After being distributed to and approved by the AFPRD membership,

the Guidelines were distributed to and endorsed by other organizations

concerned with family medicine or resident recruiting, and since that

time have been provided to members and proxies at the AFPRD's annual

business session, as well as to any individual upon request. In order

to ensure compliance, the AFPRD responds to every complaint regarding a

possible violation of the Guidelines by contacting both the complainant

and the alleged violator to investigate the complaint, and where a

violation has occurred, by informing the program director that his or

her actions have violated the Guidelines.

Since the AFPRD disseminated the Guidelines, competition among

family practice residency programs to attract senior medical students

and current family practice residents to those programs has been

significantly reduced, and the terms and conditions of their employment

have been less attractive than they could have obtained in a free and

competitive market.

Based on the facts described above, the Complaint alleges the AFPRD

and others engaged in a contract, combination, or conspiracy that was

per se unlawful under Section 1 of the Sherman Act, 15 U.S.C. 1, by:

(a) Promulgating and agreeing to the Guidelines governing resident

recruiting by family practice residency programs:

(b) Through those Guidelines, prohibiting the use of certain

recruiting practices such as directly soliciting current residents in

other programs, offering a contract to a resident in another program

without providing notice to that program's director, and regulating or

restricting the payment of certain economic inducements; and

(c) Disseminating and ensuring compliance with the Guidelines.

III

Explanation of the Proposed Final Judgment

The proposal Final Judgment is intended to prevent the AFPRD and

its member program directors from restraining competition in the future

among family practice residency programs seeking to attract senior

medical students and current family practice residents for their

programs for the upcoming year.

A. Scope of the Proposed Final Judgment

Section III of the proposed Final Judgment provides that the Final

Judgment shall apply to the defendant and to all other persons who

receive actual notice of the proposed Final Judgment by personal

service or otherwise and then act or participate in active concert with

the defendant.

B. Prohibitions and Obligations

Sections IV and V of the proposed Final Judgment contain the

substantive provisions of the Judgment.

Section IV describes specific prohibited conduct. Section IV(A)(1)

enjoins the defendant from directly or indirectly barring any family

practice residency program from competing to attract, obtain, or retain

the services of current or prospective family practice residency

programs from offering or providing any inducements to attract current

or prospective family practice residents in the same residency

year.1

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\1\ ``Current family practice residents'' is defined in Section

II a ``persons already enrolled in, committed to, or employed by a

family practice or other residency,'' and ``Prospective family

practice residents'' is defined in that Section as ``medical

students or other candidates for residency in a family practice

program.'' ``Inducements'' is defined in Section II as ``salary,

bonuses (signing, retention, or other), loan forgiveness or

repayment, housing allowance or subsidy, transportation allowance or

subsidy, moonlighting payment, permissible moonlighting when on-

call, additional payment for required on-call activity, moving

expenses, travel expenses, reimbursement for any expense in an

amount which exceeds the actual receipted expense, and any other

employment benefit or incentive.''

---------------------------------------------------------------------------

Section IV(A)(2) enjoins the AFPRD from directly or indirectly

prohibiting any family practice residency program from offering

confidential or spoken inducements in order to attract current or

prospective family practice residents.

Section IV(A)(3) enjoins the defendant from prohibiting any family

practice residency program from directly or indirectly soliciting,

recruiting, or contracting with current family practice residents of

other residency programs. Section IV(A)(4) enjoins the defendant from

prohibiting any person from considering applications submitted by

current family practice residents or contracting with those residents

without the knowledge or approval of the program director of any other

residency program.\2\

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\2\ ``Contracting with,'' as defined in Section II of the Final

Judgment, means ``to negotiate, offer, accept, execute, or enter

into an employment contract or agreement.''

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Similarly, Section IV(B) enjoins the AFPRD from establishing any

guideline, code of ethics, or other standard that prohibits or

restrains AFPRD members from engaging in any of the program director of

any other residency program.\2\

Similarly, Section IV(B) enjoins the AFPRD from establishing any

guideline, code of ethics, or other standard that prohibits or

restrains AFPRD members from engaging in any of the practices

identified in Section IV(A) of the Final Judgment, as described above,

or that states or implies that any of these practices are, in

themselves, unethical, unprofessional, or contrary to any policy of the

AFPRD.

Section V of the proposed Final Judgment contains additional

provisions requiring the defendant to take certain affirmative actions

to publicize the terms of this proposed Final Judgment and to maintain

an antitrust compliance program. Section V(A) requires the AFPRD to,

within sixty (60) days of the date of entry of the Final Judgment,

amend the Guidelines, and specifically those provisions or parts of

provisions located at Sections 2(B), 2(C) 2(E)(1), 2(E)(2), and 2(E)(3)

of the Guidelines, to comply with Section IV above, and provide a copy

of the final amended Guidelines to the plaintiff.

Section V(B) requires the AFPRD to distribute a copy of the Final

Judgment, along with a written statement that there are no longer any

AFPRD ethical guidelines or rules that suggest that any of the

practices identified in Section IV(A), as described above, are in

themselves, unethical, unprofessional, or contrary to any policy of the

AFPRD, regardless of anything defendant may have said about these

practices in the past. The AFPRD is to send this statement and the

Final Judgment to each current AFPRD member within sixty (60) days from

the date of entry of this Final Judgment, and thereafter annually for a

period of five (5) years.

Section V(C) requires the defendant to send a copy of this Final

Judgment to

[[Page 28895]]

each new AFPRD member no later than ten (10) days after it is admitted

to membership, and thereafter annually until five (5) years after the

date of entry of the Final Judgment. Section V(D) requires the AFPRD to

distribute within sixty (60) days from the entry of the Final Judgment,

a copy of the Final Judgment and this Competitive Impact Statement to

all directors and officers of defendant, and Section V(E) requires

defendant to distribute in a timely manner a copy of the Final Judgment

and Competitive Impact Statement to any successor directors and

officers in the future.

Under Section V(F), the defendant must brief annually in writing or

orally its directors and officers or their successors on the meaning

and requirements of this final Judgment and the antitrust laws,

including penalties for violating them, and under Section V(G), obtain

from those persons annual written certifications that they (1) have

read, understand, and agree to abide by this Final Judgment, (2)

understand that their noncompliance with this final Judgment may result

in conviction for criminal contempt of court and imprisonment and/or

fine, and (3) have reported all violations of this Final Judgment of

which they are aware to counsel for defendant. Section V(H) requires

defendant to maintain for inspection by plaintiff a record of

recipients to whom the Final Judgment and Competitive Impact Statement

have been distributed and from whom annual written certifications

regarding the Final Judgment have been received.

Section VI of the proposed Final Judgment requires the defendant to

certify its compliance with specified obligations of Section V(A) and

(B). Section VII sets forth procedures by which plaintiff may obtain

access to information needed to determine or secure defendant's

compliance with the proposed Final Judgment. Finally, Section IX

provides that the Judgment will expire ten (10) years after the date of

its entry.

C. Effect of the Proposed Final Judgment on Competition

The relief in the proposed Final Judgment is designed to remedy the

violation alleged in the Complaint and prevent its recurrence. The

Complaint alleges that the AFPRD violated Section 1 of the Sherman Act

by agreeing upon and establishing guidelines to govern resident

recruiting that restrained competition among family practice residency

programs to employ family practice residents.

The proposed Final Judgment eliminates the restraint on competition

among family practice residency programs by enjoining the AFPRD from

prohibiting its members from engaging in these competitive recruiting

practices, and from adopting any guidelines, code of ethics, or other

rules which prohibit these practices or which state or imply that they

are unethical. The proposed Final Judgment also requires the AFPRD to

withdraw the provisions from its current Guidelines that prohibit these

resident recruiting practices and to notify its members that it has

done so.

The proposed Final Judgment contains provisions adequate to prevent

further violations of the type upon which the Complaint is based and to

remedy the effects of the alleged conspiracy. The proposed Final

Judgment's injunctions will restore the benefits of free and open

competition to the market for the services of family practice

residents.

IV

Alternative to the Proposed Final Judgment

The alternative to the proposed Final Judgment would be a full

trial on the merits of the case. In the view of the Department of

Justice, such a trial would involve substantial costs to the United

States and defendant and is not warranted because the proposed Final

Judgment provides all of the relief necessary to remedy the violation

of the Sherman Act alleged in the Complaint.

V

Remedies Available To Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any

person who has been injured as a result of conduct prohibited by the

antitrust laws may bring suit in federal court to recover three times

the damages suffered, as well as costs and a reasonable attorney's fee.

Entry of the proposed Final Judgment will neither impair nor assist in

the bringing of such actions. Under the provisions of Section 5(a) of

the Clayton Act, 15 U.S.C. 16(a), the proposed Final Judgment has no

prima facie effect in any subsequent lawsuit that may be brought

against the defendant in this matter.

VI

Procedures Available for Modification of the Proposed Final Judgment

As provided by Sections 2 (b) and (d) of the APPA, 15 U.S.C. 16(b)

and (d), any person believing that the proposed Final judgment should

be modified may submit written comments to Gail Kursh, Chief; Health

Care Task Force; United States Department of Justice; Antitrust

Division; 325 Seventh Street, NW; Room 400; Washington, DC 20530,

within the 60-day period provided by the Act. All comments received,

and the Government's responses to them, will be filed with the Court

and published in the Federal Register. All comments will be given due

consideration by the Department of Justice, which remains free,

pursuant to Paragraph 2 of the Stipulation, to withdraw its consent to

the proposed Final Judgment at any time before its entry, if the

Department should determine that some modification of the Final

Judgment is necessary to protect the public interest. Moreover, Section

VIII of the proposed Final Judgment provides that the Court will retain

jurisdiction over this action, and that the parties may apply to the

Court for such orders as may be necessary or appropriate for the

modification, interpretation, or enforcement of the proposed Final

Judgment.

VII

Determinative Documents

No materials and documents of the type described in Section 2(b) of

the APPA, 15 U.S.C. 16(b), were considered in formulating the proposed

Final Judgment. Consequently, none are filed herewith.

Respectfully submitted,

Mark J. Botti,

Attorney.

William E. Berlin,

Attorneys, Antitrust Division, U.S. Dept. of Justice, 325 Seventh

Street, N.W., Room 450, Washington, D.C. 20530, (202) 307-0827.

Alleen S. Venbebber,

Deputy U.S. Attorney, Missouri Bar No. 41460, 1201 Walnut St., Suite

2300, Kansas City, Missouri 64106, (816) 426-3130.

[FR Doc. 96-14075 Filed 6-5-96; 8:45 am]

BILLING CODE 4410-01-M