Antitrust Law Daily Wrap Up, ANTITRUST—D. Utah: Cosmetic surgeons’ claims based on marketing campaign fail, (Sep 9, 2013)

By Tobias J. Gillett, J.D., LL.M.

Utah cosmetic surgeons failed to state antitrust and false advertising claims over a marketing campaign conducted by several associations of plastic surgeons, allegedly with the intent of eliminating competition from the cosmetic surgeons, the federal district court in Salt Lake City has ruled (Vincent v. Utah Plastic Surgery Society, September 5, 2013, Stewart, T.).

According to a complaint filed by cosmetic surgeons Drake Vincent and Benjamin Dunkley, the Utah Plastic Surgery Society (UPSS), the American Society of Plastic Surgeons (ASPS), and the American Board of Plastic Surgery (ABPS), as well as certain Utah physicians, conducted an advertising campaign intended to prevent cosmetic surgeons from competing with plastic surgeons in the cosmetic surgery market.

Vincent and Dunkley alleged that the defendants had placed billboards along an interstate highway that were intended to appear to be public safety announcements, that contained the statement “I didn’t know … my ‘cosmetic surgeon’ wasn’t a plastic surgeon,” and that displayed UPSS and ABPS logos and a link to a www.safeplasticsurgeryutah.com website. The website also contained the UPSS and ABPS logos and the titles “Cheaper, Faster, Scarier” and “Lack of Training Can be Deadly in Cosmetic Surgery.”

The plaintiffs also alleged that the defendant Dr. Grant A. Fairbanks had given an interview to a Salt Lake City news station in which he stated that “there is a dentist doing breast augmentation and an ob-gyn doing lipo,” and that patients believed such physicians were plastic surgeons when they could not be plastic surgeons without board certification. In addition, the defendants allegedly indicated to Vincent’s spokesman that they intended to conduct a billboard campaign with the slogan “Did you know your Tummy Tuck was done by a dentist?”

Vincent and Dunkley filed suit, alleging antitrust claims under the Sherman Act and false advertising claims under the Lanham Act. The defendants filed motions to dismiss for failure to state a claim, and the ABPS also moved for dismissal on the ground of lack of personal jurisdiction.

Conspiracy claim. However, Vincent and Dunkley failed to allege facts sufficient to demonstrate an unreasonable restraint of trade in violation of Section 1 of the Sherman Act. The court initially determined that they did not allege an agreement “to fix prices, reduce output, allocate territories, or otherwise, control or boycott the cosmetic surgery market,” nor did they allege any demonstrable economic effect of the defendants’ actions other than a “general allegation” that the plaintiffs had “experienced a cooling in their business” after the defendants began their marketing campaign. Therefore, the plaintiffs had not alleged a per se violation of Section 1.

The plaintiffs also failed to state a claim under the rule of reason, according to the court. The plaintiffs did make specific allegations “support[ing] the conclusion that there was an agreement or combination among separate economic interests,” that various defendants had made financial contributions to a marketing campaign aimed at eliminating competition from cosmetic surgeons, and that certain individual defendants had taken specific action to further the campaign. However, the plaintiffs merely alleged that the defendants’ campaign was directed at directing patients away from the plaintiffs and to the defendants. Even if the campaign was deceptive, the plaintiffs failed to allege conduct that harmed competition, rather than particular competitors.

Monopoly claim. The plaintiffs also filed to state a claim for monopolization, attempted monopolization, or conspiracy to monopolize under Section 2 of the Sherman Act. Even assuming the plaintiffs adequately defined the market as the market for cosmetic surgery services in Utah and the Western United States, the plaintiffs failed to allege that the defendants had the power to control prices or exclude competition, and therefore did not allege that the defendants possessed monopoly power.

Moreover, because the plaintiffs did not establish the defendants’ power in the relevant market, the court could not “ascertain the probability that any attempt would result in a monopoly,” and therefore the plaintiffs did not state a claim for attempted monopolization. In addition, the plaintiffs did not allege “facts establishing that there is a dangerous probability that Defendants may monopolize the relevant market.”

Finally, the plaintiffs did not state a claim for conspiracy to monopolize because the plaintiffs did not “provide any factual allegations regarding the market strength of Defendants.” Moreover, although the plaintiffs alleged that the defendants had “agreed to contribute to a general advertising campaign denigrating Plaintiffs’ cosmetic surgery practices,” the plaintiffs failed to allege “the existence of a combination or conspiracy to monopolize the market.”

Lanham Act. The court concluded that the plaintiffs did not state a claim for false advertising in violation of the Lanham Act. The claims focused on the statements “I didn’t know … my ‘cosmetic surgeon’ wasn’t a plastic surgeon,” “Cheaper, Faster, Scarier,” and “Lack of Training Can be Deadly in Cosmetic Surgery,” as well as Fairbanks’ comments to a Salt Lake City news station.

The billboard and internet statements were “commercial speech” for purposes of the Lanham Act because they were “advertisements that refer specifically to cosmetic surgery and Defendants have an economic motive in placing such ads.” The statements also met the other factors for “commercial advertising or promotion” because the defendants were in competition with the plaintiffs, one purpose of the marketing campaign was to “influence the purchasing decisions of potential cosmetic surgery patients,” and the statements would be viewed by a sufficiently broad audience to constitute advertising or promotion within the industry. However, Fairbanks’ statement was not commercial speech because it did not “eschew the purchase of a product or service from one source over another.” It also did not directly reference the plaintiffs, nor did it promote the defendants’ products over the plaintiffs’.

The plaintiffs failed to allege that the billboard and website statements were false, according to the court. The statements were not literally false because they merely “encourage[d] awareness on the part of those seeking cosmetic surgery services.” The statements were also not impliedly false because, even when viewed in conjunction with the ABPS and UPSS emblems, the statements did not intimate that the plaintiffs were not qualified to perform cosmetic surgeries, according to the court. Moreover, the statements did not directly target the plaintiffs, even when viewed in connection with Fairbanks’ comments.

Even if the plaintiffs had not failed to allege falsity, the plaintiffs would have failed to state their false advertising claims because they did not adequately plead injury, according to the court. The plaintiffs’ claim that they had experienced a “cooling” of their business following the marketing campaign was “insufficient to establish an actual injury for purposes of Plaintiffs’ Lanham Act claim.”

Personal jurisdiction. The court rejected ABPS’s contention that exercising personal jurisdiction over it would not comport with due process. The court observed that, although the Lanham Act did not provide for nationwide service of process, the federal antitrust laws, in 15 U.S.C. § 22, do provide for statutory nationwide service of process, and that ABPS was subject to § 22 as a non-profit corporation. However, personal jurisdiction was still limited by the Due Process Clause of the Fifth Amendment.

To demonstrate that personal jurisdiction should not be exercised, a defendant would have to show that the exercise would “make litigation so gravely difficult and inconvenient that he unfairly is at a severe disadvantage in comparison to his opponent.” Here, ABPS had no offices, employees, or property in Utah, and was not registered to do business there. ABPS had not conducted the oral portion of its certification examination in Utah since the 1970s, and ABPS carried out written communication with Utah physicians about the certification process, about maintenance of the certification, and through an annual newsletter. ABPS denied involvement in the advertising campaign at issue, although it was allegedly funded in part by money from ABPS.

Under those circumstances, ABPS had “very few contacts with Utah,” according to the court. However, ABPS operated across state boundaries and had access to counsel, and therefore defending in Utah would “not be particularly difficult.” Moreover, “modern advances in technology and transportation” made the distance from Pennsylvania to Utah insufficient to “support a finding of inconvenience,” and judicial economy would favor hearing the claims against ABPS in the same court as the claims against the other defendants. Finally, the court construed the Sherman Act broadly to protect against alleged violations, and “to the extent ABPS was involved in any conspiracy violative of the federal antitrust laws, such actions would be felt beyond the borders of Illinois or Pennsylvania.”

The case is No. 2:12-CV-1048 TS.

Attorneys: Sonny J. Olsen (Axiom Legal) for Drake Vincent. Michael W. Wright (Smith & Glauser PC) for Utah Plastic Surgery Society. Cory D. Sinclair (Parsons Behle & Latimer) for American Society of Plastic Surgeons. Barton H. Kunz, II (Christensen & Jensen PC) for The American Board of Plastic Surgery. Brian A. Mills (Snow Christensen & Martineau) for Dr. Grant R. Fairbanks.

Companies: Utah Plastic Surgery Society; American Society of Plastic Surgeons; American Board of Plastic Surgery

Cases: Antitrust Advertising UtahNews