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RULE 20 - PROHIBITED FORMS OF TRADE RESTRAINTS (UNLAWFUL PRICE FIXING, ETC.).2/

It is an unfair trade practice for any member of the industry, either directly or indirectly, to engage in any planned common course of action, or to enter into or take part in any understanding, agreement, combination, or conspiracy, with one or more members of the industry, or with any other person or persons, to fix or maintain the price of any goods or otherwise unlawfully to restrain trade; or to use any form of threat, intimidation, or coercion to induce any member of the industry or other person or persons to engage in any such planned common course of action, or to become a party to any such understanding, agreement, combination, or conspiracy.

RULE 21 - EXCLUSIVE DEALING.

It is an unfair trade practice for any member of the industry to contract to sell or sell any industry product, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the purchaser thereof shall not use or deal in the products of a competitor or competitors of such industry member, where the effect of such sale or contract for sale, or of such condition, agreement, or understanding, may be substantially to lessen competition or tend to create a monopoly in any line of com

merce.

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2/The prohibitions of this rule are subject to Public Law 542, approved July 14, 1952 66 Stat. 632 (the McGuire Act, commonly referred to as the Fair Trade Amendment) which provides that with respect to a commodity which bears, or the label or container of which bears, the trade-mark, brand, or name of the producer or distributor of such commodity and which is in free and open competition with commodities of the same general class produced or distributed by others, a seller of such a commodity may enter into a contract or agreement with a buyer thereof which establishes a minimum or stipulated price at which such commodity may be resold by such buyer when such contract or agreement is lawful as applied to intrastate transactions under the laws of the State, Territory, or territorial jurisdiction in which the resale is to be made or to which the commodity is to be transported for such resale, and when such contract or agreement is not between manufacturers, or between wholesalers, or between brokers, or between factors, or between retailers, or between persons, firms, or corporations in competition with each other.

APPENDIX

Set forth below are copies of the letters of the Department of Justice which are referred to in Note 2 of Rule 7 of the foregoing trade practice rules for the Optical Products Industry.

DEPARTMENT OF JUSTICE

Suite 820, 208 South LaSalle Street
Chicago 4, Illinois

Re: Title of case7

May 28, 1951

Dear Doctor:

I am enclosing a copy of the final judgment which has been approved by the Court and entered in this case. Certain provisions of this judgment are binding upon you as a defendant class doctor and therefore this letter, which has been approved by the Court, is being written to you, in order that you may understand why the judgment is binding upon you, as well as the purpose and effect of the judgment, as it affects you.

Final judgments containing identical provisions forbidding doctors from sharing profits connected with the sale of glasses have been approved and entered in all six of the "Optical Rebating" cases which were brought by the Government. These cases are United States v. Bausch & Lomb Optical Company et al., United States v. American Optical Company et al., United States v. House of Vision-Belgard-Spero, Inc., et al., United States v. Uhlemann Optical Company et al. (all filed in Chicago), United States v. N. P. Benson Optical Company et al. (filed in Minneapolis, Minnesota), and United States v. The White-Haines Optical Company et al. (filed in Columbus, Ohio). These six final judgments directly bind you, and the approximately 4,000 other doctors who were sued in those cases. These judgments were entered with the consent of the parties who had signed them (and for that reason frequently are called "consent decrees"), but they have the same binding effect as a judgment entered by the Court after trial.

When the complaints in this case and the related cases were first filed, the Government anticipated trying them in court. A date was set by the Court for the trial of the first of these cases and the Government made extensive preparations for trial in all six cases. Counsel representing the defendants in the various cases then opened negotiations with the Government with a view to disposing of the cases by consent instead of undergoing what undoubtedly would be lengthy trials. The final judgment which you now have is the result of negotiations which extended over a period of more than two years.

As you know, this case and the five other Optical Rebating cases are "class actions." Only a selected number of doctors (in no one case more than 30) were named in each of the complaints that were filed in the cases, but those were chosen as being representative of a much larger "class" of doctors. This is the authorized procedure where

60-677 O-66-25

a number of persons sued in a case is large. Clearly it would have been impractical to name as individual defendants the approximately 4,000 doctors who we knew had received rebates and to require each one of them to appear in court to file answers and otherwise defend themselves in the suits.

All of the doctors in this case who were sued individually and as representatives of the "class doctors" have consented to the entry of this final judgment. Of the 75 doctors who were sued as representatives of the class doctors in the six cases, all have agreed to the entry of similar judgments. In each of the six cases a considerable number of "class doctors," i. e., those not named as individual defendants in the complaint, voluntarily filed statements submitting to the jurisdiction of the court and agreeing to be bound by whatever judgment might be entered. The remaining "class doctors" were served with "show cause orders" which informed the doctor as to his status in this case. These "show cause orders" also gave him the right, if he objected to being represented by the doctors named as representative defendants in the complaint or to being bound by a final judgment entered in the case, to answer the complaint and defend himself as an individual defendant. It is noteworthy that not a single doctor of the 4,000 involved in the six cases availed himself of the "day in court" afforded by the show cause order.

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Over two years after the show cause orders were issued, one doctor (who shortly thereafter died and whose position was assumed by two doctors) filed a motion attacking the theory and operation of the class action in this case and seeking to have this case dismissed as to all "class doctors. The Court denied the motion and upheld the class suit as being a valid and proper one. A copy of the Court's memorandum opinion on that question is sent you herewith. Considering all the foregoing, it is the Government's opinion that the final judgment in this case is as binding on you as if you had been personally present in court as an individual defendant and had in that capacity given your assent to its entry against you.

Your attention is called particularly to paragraph III of this final judgment and to the relevant definitions contained in paragraph II. These are the provisions which will probably be of greatest interest to you and the other doctors. Paragraph III is the order of the Court enjoining the individual and class defendant doctors from accepting, directly or indirectly, from any dispenser any payment, however described, arising out of or connected with dispensing to any person and further enjoining any entry into or participation in any plan, arrangement, or scheme under which any defendant doctor receives any such payment from any dispenser.

The final judgment does not prevent you from following the normal professional practice and procedure of prescribing lenses for your patients and giving the prescription to the patient, who then takes the prescription to an optical supply company (dispensing optician) to be filled. The optical supply company then fulfills the purely business function of filling the prescription, selling the glasses to the patient,

and making the necessary fitting of the glasses to the patient's face. Doctors continue to be free to follow this procedure. They are, of course, subject to those provisions in the final judgment which prohibit the rebating practice in all its forms.

In our opinion, the provisions of this final judgment would not prevent any individual doctor from doing his own dispensing in his own professional offices (either himself or through a bona fide full time employee) to his own patients only. The same holds true as to doctors who operate through a partnership for purely professional purposes, or in a clinic, or through other similar arrangements involving the occupancy by the doctors in the group of common, or contiguous and inter-connected professional office space, and the sharing of such common facilities as the reception room, telephone operator, receptionist, stenographic help, and the like. Such "group practice" doctors could likewise share in the common utilization of the services of a bona fide employee of such doctors who does dispensing to the patients of such doctors only, in the professional offices of such doctors.

It is clear to us, however, that the individual doctors or "group practice" doctors as described above, who do their own dispensing or use a bona fide employee to do such dispensing to patients of such doctors only, could not enter into any agreement or understanding or concert of action with any other persons, including other doctors or other dispensers, with respect to the prices to be charged for the spectacles and parts thereof dispensed.

It is also clear to us that all forms of arrangements between doctors (other than the above arrangements associated with "group practice'), directed at setting up or utilizing a dispenser whose services shall be shared by more than one doctor and from whom such doctors derive any payments arising out of or connected with such dispensing to their patients, whether such payment be in the form of or regarded as a rebate, credit, credit balance, gift, dividend, participation in or share in profits or otherwise, would be prohibited under the decree.

Sincerely yours,

H. G. Morison

Assistant Attorney General
By Willis L. Hotchkiss
Chief, Midwest Office
Antitrust Division

(TEXT OF DEPARTMENT'S SEPTEMBER 24, 1951
LETTER PERTAINING TO INVESTMENT

BY DOCTORS IN CORPORATIONS
ENGAGED IN DISPENSING)

Your second inquiry concerns the applicability of the Judgments to the investment by doctors in corporations engaged in dispensing. The situation which you describe may be summarized as follows:

Four doctors and a layman form a corporation which is to engage in optical dispensing. Each of these persons pays $2,000 for 20% of the stock. The doctors direct their patients to the company without disclosing their ownership interest therein. Each doctor and the layman receives dividends proportionate to the amount of stock held by each, without regard to the number of referrals. The doctor-stock-holders "have no connection whatsoever with the prices charged.'

It is not our general practice to give our construction of a consent judgment except with respect to the facts of specific and identified cases involving parties to the judgment. However, it is our view that the "stock investment" plan outlined in the preceding paragraph would be in violation of the Optical Rebating Judgments.

Sincerely yours,

H. G. Morison

Assistant Attorney General

(TEXT OF DEPARTMENT'S SEPTEMBER 10,
LETTER ON CHARGE AND SEND PLANS)

1951

Since receiving your letter requesting an opinion on the question whether the final judgment in this case applies to the type of "charge and send❞ plan you describe, we have had a number of inquiries relating to variations of the same plan asking whether such plans are permissible under the final judgments entered in the optical rebating cases. These inquiries have provided us with considerable information on the operation and effect of the various plans.

The basic "charge and send" plan consists of the following procedure:

(a) the doctor makes a refraction for which he charges the patient a professional fee, writes a prescription, and sends the patient to a designated optical house to have it filled;

(b) the optical house makes the necessary measurements, displays the frames and mountings from which the patient makes his selection, quotes the patient the consumer price for the finished glasses, grinds the lenses to the prescription and mounts them;

(c) the patient later returns to the optical house to have the glasses fitted and adjusted, and the optical house then sends the glasses to the doctor rather than turning them over to the patient;

(d) the patient returns to the doctor who turns the glasses over to the patient and collects the consumer price for them, remits to the optical house the wholesale price plus the fitting fee, and

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