A program of professional self regulation cannot be developed in a vacuum. A professional association must be particularly wary of the degree to which courts will oversee the program and its potential resulting liability to a member who has been disciplined. What follows is an examination of some recent court decisions in two areas: The First Amendment to the Constitution and the Sherman Antitrust Act. Cases have been selected because they are landmark decisions or because they are recent illustrations of established principles.

First Amendment: The First Amendment among other things restrains the government from interfering with individual rights to freedom of speech and the press. It does not restrain private action. Thus a professional association's code of ethics will only be scrutinized under the First Amendment where the association's action can be considered to be "state action." This would be the case where the association has the power to suspend or prohibit individuals from practicing the profession. The court decisions deal primarily with rules prohibiting advertising promulgated by bar associations.

In 1942, in Valentine v. Christensen¹, the Supreme Court upheld the constitutionality of an ordinance which prohibited the distribution of commercial material in the street. The Court indicated that commercial speech was entitled to no First Amendment protection. Subsequent decisions, however, limited Christensen², holding that paid political advertisements and abortion advertisements were protected by the Constitution. Finally, in Virginia Pharmacy Board v. Virginia Citizens Commerce Council³, the Court, emphasizing the consumer's interest in the free flaw of commercial information, extended First Amendment protection to advertising. The Court indicated, however, that advertising could be subjected to reasonable regulations of time, place, and manner where justified by a significant governmental interest such as preventing fraud, and where ample alternative means of communication remain available.

In Bates v. Arizona State Bar, 433 U.S. 350 (1977) the Supreme Court held unconstitutional a bar association canon of ethics which prohibited attorneys from advertising the prices at which routine legal services would be performed. The Court rejected the proffered justification that advertising would adversely affect the professional stature of attorneys. It noted that other professionals advertised without diminishing their reputations and that studies showed that lack of advertising had contributed to public mistrust of lawyers and to a failure to maximize the delivery of legal services. It also rejected arguments that advertising was inherently misleading, would lead to cutting corners and consequently poorer quality work, and would promote frivolous litigation. The Court concluded that these concerns could be addressed by regulation less restrictive than total prohibition. To what extent the Bates decision limits professional self-regulation remains unclear. In Ohralik v. Ohio State Bar Association, 436 U.S. 447 (1978), however, the Court held that a bar association's rule prohibiting in person solicitation of prospective clients did not violate the First Amendment. The Court found the rule to be a reasonable regulation of time, place and manner of speech where applied to solicitation for pecuniary gain under circumstances likely to pose dangers of fraud, undue influence, intimidation or overreaching.

Antitrust: Section one of the Sherman Act prohibits contracts, combinations or conspiracies in restraint of trade. The statute has been interpreted to prohibit only unreasonable restraints of trade. To assess the reasonableness of a restraint, the Court must consider the nature of the restraint, its purpose scope, and effect on competition." Certain restraints inherently have a pernicious effect on competition⁴ and are deemed per se unreasonable. These restraints include price fixing⁵, horizontal divisions of territories or customers⁶, tying dovices, whereby sale of one product is made conditional upon buying other products from the same seller⁷, and group boycotts⁸. Professional associations may violate the Sherman Act because provisions of their codes of ethics unreasonably restrain trade or because their enforcement of ethics codes results in a group boycott of the disciplined members.

Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975). was the first case which applied the Sherman Act directly to regulations set by a professional association. The Court held that a bar association's promulgation and enforcement of a minimum fee schedule fixed prices in violation of the Sherman Act. The Court rejected the argument that learned professions were exempt from the antitrust laws. Three years later in National Society of Professional Engineers v. U.S., 435. U.S. 1(1978), the Court ruled a provision of the National Society of Professional Engineers' Code of Ethics prohibiting competitive bidding to be in violation of the Sherman Act. The Court concluded that the ban inhibited the give and take of the marketplace and rejected the Society's defense that the ban was justified to prevent deceptively low bids resulting in corner cutting and inferior work.

In Mardirosian v. American Institute of Architects, 474 F. Supp. 628 (D.D.C. 1979) the United States District Court for the District of Columbia held that Standard 9 of the American Institute of Architects Code of Ethics violated the Sherman Act. The standard prohibited architects from seeking commissions for work for which they knew another architect had been selected without first ascertaining that the other architect's agreement had been terminated and giving the other architect written notice of intent to seek the commission. The Court found that Standard 9 suppressed competition by making it difficult for an owner negotiating with one architect to negotiate simultaneously with others. It also made it impossible for an owner under contract with one architect to explore possible deals with others unless the owner first terminated the existing contract.

Footnotes
1. 316 U.S. 52 (1992).
2. New York Times v. Sullivan, 376 U.S. 255 (1964), Bigelow v. Virginia 421 U.S. 809(1975).
3. 425 U.S. 746 (7978).
4. Chicago Board of Trade v. U.S., 246 U.S. 231, 238 (1918).
5. See e.g. United States v. Trenton Potteries, 273 U.S. 392 (1927).
6. See e.g. United States v. Tepee Associates, 405 U.S. 596 (1972).
7. See e.g. Northern Pacific Ry. Co. v. U.S., 356 U.S. 1 (1958).
8. See e.K. Kloe's. Inc. v. Broadway-Hale Stores, 359 U.S. 207 (1959).