In February of 2014, a colleague and I met with Robert Ivy, CEO of the American Institute of Architects (AIA) to ask why the AIA is so ineffectual in promoting better fees and wages for architects. The answer was direct and unambiguous: two antitrust proceedings against the AIA in 1972 and 1990 were so imprinted on the AIA that such discussions were off-limits. Architects, like other professionals, must compete for fees with no discussion or be charged with collusion. But I wondered why architects seemed to compete more and earn less than other professions. Did we interpret antitrust laws with more paranoia than other professions? Was architecture “unfairly” or unevenly treated in antitrust laws? Hence this research.1
Early on, professions such as law, medicine, engineering, and architecture were considered to be exempt from antitrust law. In ruling that medical practitioners “follow a profession and not a trade”—and thus exempted doctors from competing on fees—FTC v. Raladim Co. (1931) merely certified the favored-child view the courts had traditionally held for the professions.2 The initial change in status came with American Medical Association v. United States (1943), in which the Supreme Court upheld the conviction of doctors for conspiring to restrain the business of Group Health Insurance in the District of Columbia. The indictment charged that, to prevent Group Health from carrying out its business, the doctors coerced practicing physicians from accepting employment under Group Health. But the professions were still understood to be different from regular businesses. The Court noted that ethical rules that were not designed to restrain trade, even if they did have that effect incidentally, were legal. Indeed, in United States v. Oregon State Medical Society (1952), the district court, ruling against the government, said that in some instances the State might decide that “forms of competition usual in the business world” might be “demoralizing” to the ethical standards of a profession, and the Supreme Court upheld this verdict.3
The view that professional work is, like commercial activity, subject to antitrust laws continued into the 1980s, with a number of cases in which professions lost at trial. In a 1984 Supreme Court opinion in Arizona v. Maricopa County Medical Society, doctors hoped to establish agreed-upon fees to compete with HMOs; in FTC v. Indiana Federation of Dentists (US), dentists tried to form a “union” to resist insurers demands for copies of X-rays to determine if a procedure was necessary; in FTC v. Superior Court Trial Lawyers Ass’n (1990), lawyers organized a strike demanding higher fees for representing criminals for the District of Columbia. None succeeded, and more recent cases have continued the trend. The limit of professional exclusionary practices was highlighted in North Carolina State Board of Dental Examiners v. FTC (2015), in which the FTC alleged that the North Carolina State Board of Dental Examiners was excluding non-dentists from the market of teeth whitening and was therefore engaged in anticompetitive and unfair methods under the Federal Trade Commission Act.4 And in 2014, a seemingly benign “don’t poach” professional ethics clause requiring members to “respect the integrity of other teachers’ studios” and “not actively recruit students from another studio” was struck down in FTC v. Music Teachers National Association, Inc(MTNA).5
... the most significant case affecting mandated competition between architects is Mardirosian v. American Institute of Architects(1979), a case that transfixed the profession partly because it was a private suit brought by one of the AIA’s own members rather than the DOC or FTC, and partly because of its implications for architectural codes of ethics.
Aram H. Mardirosian was a professional architect stripped of his AIA membership when he was determined to have illegally stolen a project from another architect, Seymour Auerbach. The dispute emerged over architectural services for the alteration and refurbishment of the historic Union Station and National Visitors Center in Washington, D.C. Auerbach was contracted to prepare design and contract documents for the visitors’ center and new station while Mardirosian was responsible for consultations on design and construction. Auerbach’s contract with the railroads consisted of two termination methods. The first was based on failure to fulfill architectural obligations; the second was for the “owner’s convenience.” When in April 1975 the owners terminated Auerbach’s contract for the visitors’ center and asked Mardirosian to take over, Auerbach sued, claiming it violated Standard 9 of the AIA Code of Ethics, which states:
An architect shall not attempt to obtain, offer to undertake or accept a commission for which the architect knows another legally qualified individual or firm has been selected or employed, until the architect has evidence that the latter’s agreement has been terminated and the architect gives the latter written notice that the architect is so doing.6
Under Standard 9, the AIA stripped Mardirosian of AIA membership and he in turn charged the AIA with wrongful suspension of his AIA membership and sought treble damages against the AIA and Auerbach.7 He charged that Standard 9 of the AIA’s Code of Ethics constitutes an unreasonable restraint on trade in violation of the Sherman Act and that in defending it, both Auerbach and the AIA were in the wrong. Mardirosian demanded its removal. Auerbach filed a counterclaim for defamation, interference with contractual relations, and “conspiracy to deprive counterclaimant of his livelihood.”8
- 1. This paper was supported by the 2015 Arnold W. Brunner Grant given by the Center for Architecture in New York City. I am indebted to them for this opportunity to better understand how the profession of architecture is affected by our legal and economic regulations. The research was conducted with the essential contribution of my assistant, Vittorio Lovato, who certainly now knows more about antitrust law than he ever wanted. It was greatly aided by numerous discussions with Professor Alvin Klevorick of the Yale Law School as well as telephone interviews with AIA National Counsel Jay Stephens. I am indebted to these three individuals, although any misrepresentation of the law found in this document is strictly my responsibility.
- 2. Federal Trade Commission v. Raladam Co, 283 U.S. 643, 51 S.Ct. 587, 75 L.Ed. 1324, 79 A.L.R. 1191. 1931. Fastcase. Web. April 17, 2016.
- 3. United States v. Oregon State Medical Soc, 343 U.S. 326, 72 S.Ct. 690, 96 L.Ed. 978. 1952. Fastcase. Web. June 21, 2015.
- 4. The FTC successfully maintained that, because the North Carolina Board included practicing dentists, there was a potential conflict of interest that diminished the Board’s state immunity claims. The issue of state boards having practitioners on them has to do with the different roles state boards vs. practitioners play. State boards advocate for the public while practitioners advocate for their profession. This difference (discussed more later) is found in the tension in architecture between the National Council of Registration Boards (NCARB), which advocates for the public (through requiring licensure), and the AIA, which advocates for the profession.
- 5. The MTNA, with few resources, immediately agreed to not enforce this and other questionable ethics codes in the hope of avoiding a costly investigation. Nonetheless, the FTC imposed a consent decree (similar to the 1990 AIA one) insisting that every MTNA meeting begin with antitrust videos.
- 6. United States v. The American Institute of Architects.
- 7. Mardirosian received legal support from Ralph Nader’s Public Citizen consumer advocacy group. “Aram Mardirosian, Architect, Dies,” Bangor Daily News, April 12, 2013, link.
- 8. Mardirosian v. The American Institute of Architects, 474 F.Supp. 628. 1979. Fastcase. Web. June 22, 2015.