Did This “Dream Team” Ever Take Antitrust 101?
The Falstaffian tv news reporter seemed quite excited tonight, when he announced to the New York Capital Region that we’re about to have our own “Dream Team” of lawyers. Four of the biggest names in the local legal community, and biggest personal injury advertisers, were joining together to market themselves as the “Dream Team” — with joint tv ads, billboards, and 1-800 number. Unless a caller to their joint phone number already has a preference among the firms, the prospects will be assigned to each of the joint marketers on a rotating basis. The lawyers will have all the marketing advantages of a partnership while keeping their own firms! (NewsTen, WTEN.com, Albany, NY, reported by John McLoughlin, 8/4/03) The four attorneys are E. Stewart Jones (of the Jones Law Firm, in Troy), Steve Coffey and Tom DiNovo of Albany’s O’Connell & Aronowitz, and Donald Boyajian of Dreyer Boyajian LLP. They are indeed among the best known lawyers in the New York Capital Region.
The story was also covered today in the online version of the Albany Business Review (Local attorneys market themselves as ‘Dream Team’, by Barbara Pinckney, 8/04/03). The Business Review (BizJournal) article quoted a breathless advertising agency representative (who I guess gets credit for the quartet’s very creative name):
“It’s very exiting,” said Ginny Siciliano, a partner in Ad Ease GMP Group, the Schenectady advertising and marketing firm that put the foursome together. “It has never been done anywhere.” . . . “These are the big players, when you think of lawyers in this area,” Siciliano said. “And with a lot of those national 1-800 numbers, you don’t know who you’re calling.” (emphasis added)
The Business Review article continued: “The ad campaign began with eight billboards announcing that “The Dream Team” was coming. On Aug. 6, those billboards will include pictures of the four attorneys and the 1-800 number. The television spots also will begin airing that day.”
Now, I have championed the right of lawyers to advertise since I was in law school 30 years ago, because I believe that truthful advertising can increase competition for legal services and help consumers make intelligent choices. My faith in legal advertising has been shaken over the years — due to incessant, tasteless, content-free ads that insult the consumer’s intelligence and never talk price — but, I still support the right to advertise and am cautiously optimistic that it will someday fulfill its promise.
Nonetheless, I just couldn’t get as excited as Ms. Siciliano. Instead, I thought, “Didn’t any of these guys take an Antitrust class?“ That’s a question I’ve often asked myself about “Main Street” lawyers since leaving my job at the FTC — not because I expect them to be experts in the specialty, but because I believe that every lawyer should at least hear a bell go off when encountering competitors acting jointly in the marketplace (especially when they are themselves the competitors in question).
Of course, I don’t know all the facts, and don’t know if heavy-hitter antitrust lawyers have already advised the Albany-Troy-Schenectay-Saratoga Area “Dream Team” that the project can pass legal muster. But, I’m skeptical that competition is increased by four big advertisers marketing themselves jointly.
- Normally, “coop advertising” where competitors get together to pay for an ad — e.g., neighborhood liquor stores — are allowed because the stores could not otherwise afford to advertise in a newspaper or on tv.
Sure, joint ventures can increase competition, but they are very likely to decrease competition when the members of the joint venture:
- hold a significant joint market share
- do not integrate activities in any substantial way
- make joint decisions on important competitive factors (such as how much to advertise, or whether or not to compete on price or pricing terms in their ads)
- allocate clients rather than competing for them
- increase entry barriers for new competitors, or
- facilitate explicit or tacit collusion, through activities such as disclosing competively sensitive information or increasing market concentration
Some of these factors seem to apply to the Dream Team. If they or their lawyers have not done so already, I suggest that this “Dream Team” read and contemplate the following documents, before the ads hits the airwaves and the billboards are unveiled on August 6th:
DOJ/FTC Joint Venture Guidelines (April, 2000). This 39-page pdf document provides a useful anaylsis of the many issues raised when competitors collaborate in joint business ventures.
FTC v. Polygram Holding Corp et al.
(Docket 9298, July 28, 2003). Just last week, in this important “Three Tenors” decision, the FTC found that Vivendi illegally agreed with Warner Communications Inc. to curb discounting and advertising as part of a joint venture.- Chairman Timothy J. Muris emphasized in the opinion that “[N]o analytical exercise is more important to U.S. competition policy than defining the bounds of acceptable cooperation between direct rivals.” Therefore, the opinion gives an extensive history and discussion of the analysis appropriate in determining the legality of joint competitor conduct.
Antitrust and the Learned Professions This chapter, from a monograph by the American Antitrust Institute explains how and why antitcompetitive practices by professionals such as medical doctors, engineers and lawyers came to be recognized as illegal under the antitrust laws.
I don’t know the ultimate antitrust effects or ramifications of the “Dream Team” joint marketing efforts. However, from an ethical perspective, it’s clear that conduct amounting to an antitrust violation is improper, beyond merely breaking a law, as it injures consumers by limiting their choices and raising price. I hope that federal or state antitrust prosecutors will look very closely at this joint venture. At a time when p/i lawyers are trying very hard to avoid competing over the percentage contingency fee they charge, the loss of advertising rivalry is especially worrisome.
David:
The antitrust implications you’ve raised regarding this joing effort are probably heightened given the small upstate market. However, it also occurred to me that these “Dream Team” lawyers may be setting themselves up for increased malpractice exposure through joint marketing – use of terms such as “team” as well as a joint marketing effort can give consumers the impression that these firms all work together, even though the article says they are separate. Thus, it would seem to me that all of the firms have potential exposure to malpractice claims brought by against any one of them.
This type of reasoning has been applied in Massachusetts (maybe NY) in shared office space arrangements where separate firms that shared letter head or office space and gave the impression of being a joint unity have been held accountable for malpractice against the others(see http://www.state.ma.us/obcbbo/space.htm for discussion of the rule – there used to be a link on lexisone.com but I can’t find it) Also, at myshingle, if you search the archives, there’s a case where Johnnie Cochran was dragged into a lawsuit – he has some kind of national advertising arrangement where he later farms cases out to other firms. Someone came to one of the participating firms which screwed up the case and now she is suing Johnnie Cochran as well. I’d like to get your commentary on whether there are in fact potential ethics issues here and then I may post to myshingle.com in case there are lawyers who are thinking about joint ventures such as this.
Comment by Carolyn Elefant — August 5, 2003 @ 10:14 am
David:
The antitrust implications you’ve raised regarding this joing effort are probably heightened given the small upstate market. However, it also occurred to me that these “Dream Team” lawyers may be setting themselves up for increased malpractice exposure through joint marketing – use of terms such as “team” as well as a joint marketing effort can give consumers the impression that these firms all work together, even though the article says they are separate. Thus, it would seem to me that all of the firms have potential exposure to malpractice claims brought by against any one of them.
This type of reasoning has been applied in Massachusetts (maybe NY) in shared office space arrangements where separate firms that shared letter head or office space and gave the impression of being a joint unity have been held accountable for malpractice against the others(see http://www.state.ma.us/obcbbo/space.htm for discussion of the rule – there used to be a link on lexisone.com but I can’t find it) Also, at myshingle, if you search the archives, there’s a case where Johnnie Cochran was dragged into a lawsuit – he has some kind of national advertising arrangement where he later farms cases out to other firms. Someone came to one of the participating firms which screwed up the case and now she is suing Johnnie Cochran as well. I’d like to get your commentary on whether there are in fact potential ethics issues here and then I may post to myshingle.com in case there are lawyers who are thinking about joint ventures such as this.
Comment by Carolyn Elefant — August 5, 2003 @ 10:14 am
Thanks for bringing up this important aspect. I agree that it is an ethical problem to market yourself in a way that implies a connection that does not exist. I can’t go into detail right now, because I’m in the process of transitioning from an old computer to a new one, and the two machines can’t talk to each other. I can’t even get my blog server to recognize me as the editor of this site. Major agita!
Comment by David Giacalone — August 5, 2003 @ 11:23 am
Thanks for bringing up this important aspect. I agree that it is an ethical problem to market yourself in a way that implies a connection that does not exist. I can’t go into detail right now, because I’m in the process of transitioning from an old computer to a new one, and the two machines can’t talk to each other. I can’t even get my blog server to recognize me as the editor of this site. Major agita!
Comment by David Giacalone — August 5, 2003 @ 11:23 am