Peggy Deamer

The Avery Review

May 15, 2016

Introduction

This is a report on how antitrust laws have affected the architectural profession. This research was motivated by the thought that the American Institute of Architects (AIA) and the profession of architecture in general have been more negatively affected by antitrust law than the other professions. It seemed that large law firms, for example, agree on a certain salary for associates, ostensibly wage collusion under antitrust law; and realtors seemed to have an “understood” 6% fee structure, ostensibly fee collusion. ¹ Was it the case that the two antitrust proceedings against the AIA in 1972 and 1990 – which penalized the AIA for inhibiting competition among member architects – had made the profession more conservative with regard to discussion of fees and wages than had other proceedings affecting other professions? Having learned from Robert Ivy, CEO of AIA National, that these consent decrees were the reason that the AIA could not be more aggressive in advocating for higher architectural fees, this was a pertinent question. Was there evidence in antitrust cases indicating as yet undetected options open to architecture to discuss fees and wages without violating antitrust laws?

Clearly the motivation behind these questions was the assumption that architectural fees and wages were undervalued and out of step with the other professions; that if architecture could only have an open discussion about fees and wages, we, as a profession, could address a systemic problem.

The research, conducted over 8 months, was a lesson not only in antitrust law but in the legal system’s capacity to address economic stability through guaranteeing competition in all forms of trade, be it goods or services. In short, we learned that competition is unchallengeable in antitrust cases and the only thing to be argued in a case is whether competition is being best served by behaviors or regulations. ² The cases involving antitrust law follow, historically, changes in the American economy as different sectors and actors emerge as powerful players in economic growth; following antitrust laws bears witness to the government’s evolving interpretation of capitalism’s evolving dynamic. ³ Studying antitrust law was nothing more nor less than following their rhizomatic evolution and often contradictory logic.

Inasmuch as consent decrees have been the Department of Justice’s (DOJ’s) method of directing the AIA away from any form of fee or wage discussion, it also was a focus of this research: What authority underlies the application of antitrust law? Could these authorities be argued against more vigorously? How is architecture faring compared to other professions with its history of consent decrees?
To come to the conclusion quickly, the research indicates that architecture is not “unfairly” or unevenly treated by antitrust law. Indeed, it became clear that this was a naïve framing of the problem. Law doesn’t behave in any wholistic fashion. The Sherman Act enacted only broad, general antitrust principles that make subsequent and specific judicial decisions in different spheres key elements of the legal environment. Architectural cases arise as do others in other professions; some cases affect professions in general and others are specific to a given discipline. But coming from the bottom up, there is no top-down approach for identifying or rectifying comparative cases. In this, architecture is a minor player, and, I believe, a weaker player than professions like law and medicine, but it is not a “victimized” player. Nor are the courts the place to redress any inequities.

The desire to find inconsistencies in antitrust laws that could be exploited by architecture thus began to feel old fashioned. On the one hand, it put this research in alliance with free-trade libertarians for whom antitrust laws were governmental interference with the market. ⁴ On the other, if the antitrust laws were increasingly treating architecture and the other professions like business, who was I to insist that we go back in time to a profession that was gentlemanly, unsullied by economics, and self-protective? The problem perhaps is less the antitrust laws preventing open discussions of fees and wages as it is architecture’s cut-throat internal competition, one that is encouraged by antitrust law but that plays out differently in other professions like law and medicine which seem to have greater respect for the common goals set forth by their professional organizations. ⁵ And finally, antitrust decisions consistently said one thing: no industry or pair of individuals in an industry can discuss fees with the aim of fixing them. This meant that whatever else this research hoped to accomplish (strategies for better relevance and power in our economy), organized advocacy for higher fees was not one of them.

Nevertheless, there is evidence that the DOJ does consider, when examining proceedings against potential offenders, those professions and organizations that make easy cases (read: without resources to fight an extended legal case) (See Section IIIC). And the highly interpretive nature of antitrust law, evidenced by appellate reversals of lower court decisions, as well as changes in the laws themselves – indicates an uncertainty about what, within or beyond competition, is fair. While these facts do not help to fight inequities, it does alert architects to structural disadvantages that should mobilize the profession to represent itself more aggressively in other legal ways. Section V discusses tactics – 3rd party surveys leading to legal (implicit) price leadership and lobbying for legislation (which can authorize seemingly “anticompetitive” behavior) change – that other professions have used. In addition, unionization, as something exempt from antitrust laws, is worth consideration although it is complex in a
profession like architecture.

It is assumed that this document will be read by non-lawyers who need the fundamentals explained. For this reason, there is a fair amount of description – the laying out of the antitrust arena. This is especially true of Section II, which looks at the history of antitrust laws as they relate to the professions in general and to architecture in particular. It also examines the effects of consent decrees on professional architectural behavior. Section III probes antitrust concepts that are of particular interest the professions and architecture. Section IV examines the conditions that struck us as “proof” that there were hitherto unexploited possibilities for repositioning architecture in the context of antitrust laws. These probes divide into 2 sorts: the exemptions to antitrust laws that might be mined for architecture – the learned profession exemption and the state exemption – and the inequities that could possibly be exposed and rectified – the differences between various professions in responding to antitrust rulings and the political nature of antitrust laws. These “deep dives” did yield a great deal of knowledge; they did not, however, yield, solutions. Section V, the most speculative, therefore looks at alternative, legal approaches outside the realm of antitrust to address architectural fees and wages. Section IV offers observations by way of a conclusion. The Appendix gives access to a timeline of antitrust rulings that most affect our profession. It also makes available material pertinent to architecture’s response to antitrust proceedings so that the reader can form an independent opinion about the relationship of antitrust to architecture.

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 inserted in our laws 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 and made it fun for both of us. 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. While this paper attempts to be as comprehensive as one year of inquiry by a non-lawyer allows (I am an architectural educator and practicing architect, with no legal training), it is, I know, scratching the surface of a systemic problem that I hope is picked up by other architects or lawyers.

ENDNOTES

1. We have since learned why these practices are indeed (obviously) legal, but they looked suspicious from an architects point of view, where both of these procedures would be helpful but seem impossible to enact ↩
2. “Statutory policy precludes inquiry into the question whether competition is good or bad.” See Jarod Bona, “Classic Antitrust Cases: National Society of Professional Engineers v. United States, 435 US 679 (1978)” http://www.theantitrustattorney.com/2014/04/10/classic-­antitrust-cases-­national-society-professional-engineers-v-united-states-435-u-s-679-1978/ ↩
3. For example, the 1932 Swift and Co. ruling established what was quickly seen to be a too-restrictive and too-industry-manipulating decree. Swift v United States. 196 US 375. 25 S.Ct 275. 49. L.Ed 518. 1905. Fastcase. Web. 17 April 2016. ↩
4. A free-trade libertarian’s doctrine might depend upon an efficient marketplace that antitrust enforces. But hardcore libertarians who believe that all antitrust laws are governmental interference are very evident in articles and blogs regarding antitrust. ↩
5. This is not a scientific observation, but we did look at membership information for both the ABA and AMA and there are in each a higher percentage of lawyers and doctors who are members of these professional organizations than is the case with architects and the AIA.  In addition, we just asked lawyers and doctors about their respect for their professional organizations and there was overall respect for the ABA and the AMA and the work these organizations did for the overall welfare of their practitioners. ↩