Community Blood Bank of the Kansas City Area, Inc.

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IN THE MATTER OF COMlVU ITY BLOOD BA K OF THE KANSAS CITY AREA INC., ET AL.

ORDER, OPINIONS , ETC. , IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 851.9. Compluint, July !J JWi2-Decision, Sept. , 1966* Order requiring a commlmity blood bank, an area hospital association, its hospital members, anu hospital pathologists, all in the Kansas City area The Court of Appeals, Eighth Circuit, 405 F. 2d 1011 (1969) (8 S. &D. 8G5), held that evidence established nc lJondent5 , a bospital assodiition iind a blood ban!, association, were nonprofit corporations and exempt from provisions of tbe Federal TJ'ade Commission Act. COMMUNITY BLOOD BANK, KANSAS CITY AREA , INC., ET AL. 729 728 Complaint to cease restraining interstate commerce in human whole blood by restricting any commercial blood bank flom supplying- any hospital or other user, or preventing any such user from receiving such blood, OT exc1uding any such blood bank from 111cmbership in any association, or hindering the canying out of contracts for the supply of blood. COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act the Federal Trade Commission, having reason to believe that the corporations, and individuals named in the caption hereof; and more fully described hereinafter; have been, and are now violating the provisions of said Act and that a proceeding in respect thereto would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: PARAGRAPH 1. Community Blood Bank of the Kansas City Area Inc., hereinafter sometimes refelTed to as Community is a corporation organized and existing under and by virtue of the laws of the State of Missouri with its home offce and principal place of business located at 4040 Main Street, Kansas City, Missouri. The governing body of Community is composed of five offcers, twelve board members, and a corporate body of thirty-nine. The corporate body is composed of thirteen (13) individuals chosen thirteenfrom the medical profession in the Kansas City area, (13) representatives of hospitals in the Kansas City area selected by the Board of Directors of the Kansas City Area Hospital Association and thirteen (13) representatives chosen from outside the medical community and commonly known as public members. Eleven (11) of the medical members are elected by the county medical societies in the Kansas City area which includes Kansas City, Missouri aud Kansas City, Kansas. These eleven electees choose two more medical members. The thirteen public members must be approved by the medical and hospital members and elected by members of the corporation. Each of these groups of thirteen chooses foul from its group to be on the Board of Directors which consists of twelve members. The Board of Directors annually elects offcers. Approximately one third of the positions on the governing body become vacant each year and new members are chosen to fill these vacancies.

individually, Respondents Pelts Morgan and W. W. Henderson, and as administrative director and business manager, respectively, of respondent Community, are managmg offcials and have Complaint 70 F.

held these positions for the past several years and as such are responsible for the administration of the Community s affairs including the giving of direction to the policies and programs of the respondent Community. They have their offces at 4040 Main Street, Kansas City, Missouri.

The parties respondent, named in the caption hereof individually and as offcers, directors and members of Community served in those capacities during 1961 and they, as well as their predecessors and successors, directed, controlled and were responsible for the policies, acts and practices of said corporate respondent including those hereinafter alleged as subject of this complaint. During the past several years the offcers and directors of respondent Community, as well as its membership, have varied from year to year, thus making it impracticable to name a1l such offcers, directors, and members specifically as of a given date. The entire membership can be adequately represented by those offcers, directors and members named as respondents. Accordingly, the Commission names and includes as respondents in this proceeding the aforementioned individuals, both individually, as members, offcers and directors, and as representative of the entire membership of said respondent and al1 such members not named specifically are therefore made parties respondent herein as though they had been named individually. The parties respondent named in the caption hereof individually, as offcers, directors and members, and representatives of the entire membership of Community, were, during 1961 , and are now, variously located as follows:

Adolph R. Pearson, Swedish-American Saving & Loan Association, 1010 Baltimore Ave., Kansas City 5, Missouri. Walter V. Coburn, Bethany Hospital, 51 North 12th Kansas City 7, Kansas.

Hiliard Cohen, Menorah Medical Center, 4949 Rockhil Road Kansas City 10, Missouri.

Carroll P. Hungate, 6845 Oak, Kansas City 13, Missouri. Gilbert C. Murphy, First Presbyterian Church, Gardner, Kansas.

Robert A. Molgren, St. Lul(8 s Hospital, 4400 J. C. Nichols Parkway, Kansas City 10, Missouri.

John Murphy, Tucker, Murphy, Wilson & Siddens, 818 Grand A ve., Suite 831 , Kansas City 6, Missouri, Marjorie Sirridge, 258 Brotherhood Bldg., 754 Minnesota Ave. Kansas City 1 , Kansas.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 731 728 Complaint Arch E. Spelman, Smithvile Community Hospital, Smithvile Missouri.

Meyer L. Goldman, Beacon Printing & Publishing Co. , 1825 Harrison, Kansas City 8, Missouri.

James T. Sparks, Ford Motor Company, P.O. Box 1008, Kansas City 41, Missouri.

Robert F. Zimmer, American Oil Company, Sugar Creek Refinery, Sterling & Standard Sts., Kansas City 21, Mo. Respondent Kansas City Area Hospital Association, hereinafter sometimes referred to as respondent Association, is a corporation organized and existing under and by virtue of the laws of the State of Missouri with its offce and principal place of business located at 3637 Broadway, Kansas City, Missouri. Respondent is a membership corporation and its membership is composed of hospitals located in the Kansas City area.

Respondent Baptist Memorial Hospital is a corporation organized and existing under and by virtue of the laws of the State of Missouri with its home offce and principal place of business located at 6601 Rockhil Road, Kansas City 31, Missouri. Respondent Menorah Medical Center is a corporation organized and existing under and by virtue of the laws of the State of Missouri with its home offce and principal place of business located at 4949 Rockhil Road, Kansas City 10, Missouri. Respondent Sisters of Charity of Leavenworth is a corporation organized and existing under and by virtue of the Jaws of the State of Kansas with its home offce and principal place of business located at Xavier, Leavenworth County, Kansas, and doing business as Providence Hospital at 181S Tauromee A venue, Kansas City 2, Kansas.

Respondent Susan Jenkins, individually, and as Executive Director of respondent Association has her offce at 3637 Broadway, Kansas City, Missouri. She has held this position for the past several years and as such she is responsible for the general administration of Association affairs and for giving direction to the policies and programs of the respondent Association. The parties respondent, named in the caption hereof individually and as offcers and directors of the Association served in those capacities during 1961 and they as weli as their predecessors and successors, directed, controlled and were responsible for the policies, acts and practices of said corporate respondent including those hereinafter alleged as subject of this complaint. .

Complaint 70 F.

They were, during 1961, and are now, variously located as follows:

James D. Marshall, 1016 Baltimore Avenue, Kansas City, Missouri.

Arch E. Spelman, Smithvi1e Community Hospital, Smithvi1e l\fissouri.

Tom J. Daly, 2I05 orth 13th St., Kansas City 4, Kansas. Thomas M. Johnson, 310 West 47th Street, Kansas City, Missouri.

Russell H. Miler, University of Kansas Medical Center, 39th and Rainbow Boulevard, Kansas City 12, Kansas. David T. Beals, First National Bank, 14 West loth St., Kansas City 5, Missouri.

Nathan J. Stark, Hallmark Cards, Inc., 25th and McGee Trafficway, Kansas City 41, Missouri.

Abraham GeJperin, Neurological Hospital, 2625 West Paseo Kansas City 8, Missouri.

Mack Herron, Olathe Community Hospital, Santa Fe at Cooper OJathe, Kansas.

James R. Rich, North Kansas City Memorial Hospital, 2800 Hospital Drive, North Kansas City 16, Missouri. Sister Michaella Marie, St. Joseph Hospital, East Linwood Boulevard, Kansas City 28, Missouri.

William C. Mixson, 4635 Wyandotte St., Kansas City 12, Missouri.

E. B. Berkowitz, Tension Envelope Corporation, 19th and Campbell Street, Kansas City 8, Missouri. . R. Butler, License Department, City Have, Kansas City, Kansas.

Maurice Johnson, First National Bank, 14 West 10th St., Kansas City 5, Missouri.

Walter . Johnson, R.L. S. Auditorium, River and WaJtei' Streets, Independence, Missouri.

Miller Bailey, 2810 West 66th Terrace, Shawnee Mission, Kansas.

Walter A. Reich, A. Reich & Sons, Inc. , 1414 Wyoming, Kansas City, Missouri.

Ralph R. Coffey, 1324 Professional Building, Kansas City 6 Missouri.

Harry M. Walker, SmithviJle Community Hospital, SmithviJle Missouri.

During the past several years the offcers and directors and COMMUNITY BLOOD BANK, KANSAS CITY AREA , INC., ET AL. 733 728 Complaint members of respondent Association have varied from year to year by the addition and withdrawal of members, so that al1 of the members of said Association at any given time cannot be properly described herein for the purpose of naming them as respondents without considerable inconvenience and delay, and also said 1'8pondent membership constitutes a class so numerous as to make it impracticable, without considerable inconvenience and delay, to name them aJl as respondents herein; wherefore, the respondents hereinbefore named as respondents, as such offcers, directors and members, are also made respondents as generally and fairly representative of and as representing a1l of the members of said respondent Association, including those members not herein specifically named.

Respondent O. Dale Smith, individually and as pathologist for Baptist Memorial Hospital has his offce at the Baptist Memorial Hospital, 6601 Rockhi1 Road, Kansas City 31 , Missouri. Respondent HiJlard Cohen, individually, as a pathologist for Menorah Medical Center and as second vice-president of respondent Community, has his offce at the Menorah Medical Center 4949 Rockhill Road, Kansas City 10, Missouri. Respondent Evelyn Peters, individually and as a pathologist for Menorah :\1edicaJ Center, has an offce at the Menorah Medical Center, 4949 Rockhi1 Road, Kansas City 10, Missouri. Respondent D. A. Hoskins, individually and as a pathologist for Osteopathic Hospital, has his offce at the Osteopathic Hospital 926 East 11th Street, Kansas City 6, Missouri. Respondent William J. Sekola, individually and as a pathologist for Osteopathic Hospital, has his offce at the Osteopathic Hospital, 926 East 11th Street, Kansas City 6, Missouri. Respondent Victor B. Buhler, individually and as a pathologist for Queen of the World Hospital has his offce at the Queen of the World Hospital, 3210 East 23rd Street, Kansas City 27, Missouri. Respondent Russell W. Kerr, individually and as a pathologist for St. Joseph's Hospital, has his offce at the St. Joseph's Hospital, 25IO East Linwood Boulevard, Kansas City 28, Missouri Respondent Frank A. Mantz, individually and as a pathologist for St. Joseph's Hospital, has his offce at the St. Joseph's Hospital, 2510 East Linwood Boulevard, Kansas City 28, Missouri. Respondent Ferdinand C. Helwig, individually and as a pathologist for St. Luke s Hospital, has his offce at St. Luke's Hospital 4400 J. C. Nichols Parkway, Kansas City 11, Missouri. Respondent David M. Gibson, individually and as a pathologist .

Complaint 70 F.

for St. Luke s Hospital, has his offce at St. Luke s Hospital, 4400 J. C. Nichols Parkway, Kansas City 11, Missouri. Respondent Angelo Lapi, individually and as a pathologist for St. Mary s Hospital, has his offce at St. Mary s Hospital, 101 Memorial Drive, Kansas City 8, Missouri.

Respondent L. R. Moriarty, individually and as a pathologist for St. Mary s Hospital, has his offce at St. Mary s Hospital, 101 Memorial Drive, Kansas City 8, fiIissouri. Respondent Jack H. Hil, individually and as a pathologist for Trinity Lutheran Hospital, has his offce at Trinity Lutheran Hospital, 31st and Wyandotte Streets, Kansas City 8, Missouri. Respondent G. NT. Bridgens, individually and as a pathologist for the Independence Sanitarium and Hospital, has his offce at the Independence Sanitarium and Hospital, 1509 West Truman Road, Independence, Missouri.

Respondent Wiliam McFee, individually and as a pathologist for North Kansas City Memorial Hospital, has his offce at the North Kansas City Memorial Hospital, 2800 Hospital Drive North Kansas City 16, Missouri.

Respondent Ralph J. Rettenmaier, individually and as a pathologist for Providence Hospital, has his offce at the Providence Hospital, 1818 Tauromee Avenue, Kansas City 2, Kansas. Respondent Robert A. Molgren, individually and as executive director for St. Luke s Hospital, has his offce at St. Luke s Hospital, 4400 J. C. Nichols Parkway, Kansas City 11, Missouri. In his capacity as executive director he has overall direction of the policies and programs of St. Luke s Hospital. Respondent A. Neal Deaver, individually and as administrator of Independence Sanitarium and Hospital, has his offce at the Independence Sanitarium and Hospital, 1509 West Truman Road Independence, Missouri. In his capacity as administrator he has overall direction of the policies and programs of Independence Sanitarium .and Hospital.

PAR. 2. Pathologists are medical doctors with special knowledge and training in pathology. They are employed by the various hospitals in the Kansas City area on a salary or commission basis to direct and supervise certain laboratory operations which include the procurement, handling, testing and transfusion of blood at the hospitals where the pathologists are employed. In said capacity the pathologist receives the orders for a needed blood supply and gives instructions and orders for its procurement, including source, and delivery in the amount needed for a particular patient COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 735 728 Complaint at the hospital. The medical doctors responsible for the care of patients at the hospital rely on the pathologist in securing this blood supply as do the administrative officials of the hospital. There are about twenty-six pathologists employed at hospitals in the Kansas City area. They are members of the Society of Pathologists for the Kansas City area. The blood banks operated by the hospitals in the area, prior to affliation with respondent Community, were under the supervision of the pathologists employed by the hospitals. The pathologists in the Kansas City area serve as medical consultants and on an advisory committee to respondent Community. The respondent pathologists and other pathologists not named serve in a rotation system on said committee. PAR. 3. Since World War II the use of human blood for transfusions has become an increasingly important factor in the care and treatment of the sick. During 1960 more than 511 milion pints of blood were used for such transfusions. The need for such volume has resulted in the establishment of blood banks to maintain and furnish a constant, adequate and safe supply. A blood bank collects, classifies and stores blood which may be so stored, under refrigeration, for a period not to exceed 21 days. There are different blood bank sources in the United States, some of which may be described as:

(a) Hospital blood banks: Those operated by hospitals primarily to meet their own needs and, occasionally, to supply the needs of other hospitals in their areas. Today, there are more than 000 hospital blood banks in the United States. (b) Community blood banks: These usually are nonprofit facilities locally organized and controlled to serve the needs of a majority or of all of the hospitals in a community. Today, there are more than 100 community blood banks in the United States. (c) Red Cross: The blood bank donor program of the American National Red Cross is administered through 55 regional centers. During 1957 the Red Cross provided 47. 69'0 of all blood used for transfusions.

(d) Others: Blood bank programs not patterned within the foregoing categories, such as privately owned blood banks. The Public Health Service Act, approved July 1 , 1944, (58 Stat. 682), requires that a blood bank obtain a license issued by the United States Department of Health, Education and Welfare before it may transport citrated whole blood (human) in interstate commerce. The National Institutes of Health is the agency within the Department of Health, Education and Welfare which Complaint 70 F.

has direct supervision and control over the inspection of blood banks and the issuance of licenses permitting the transportation of blood in interstate commerce.

The American Association of Blood Banks, hereinafter sometimes referred to as AABB , a national organization of blood banks was formed in 1947. The AABB provides technical information on blood banking, encourages research, conducts an inspection and accreditation program for blood banks, sponsors reference laboratories to provide local banks with assistance on seroJogical problems, and conducts a national clearinghouse program to facilitate the exchange of donor replacement credits on a nationwide basis.

The AABB Clearinghouse Program employs a reciprocity system of making returns of blood to a blood bank from any blood bank in the county in payment, or as credit, for blood used in transfusing a patient in any other section of the country. When a blood bank accepts a replacement donation for a patient whose transfusion has been supplied by a facility in another location it forwards a reciprocity credit to the district clearinghouse offce of the AABB where thc transaction is recorded and credit issued to the account of the supplying bank.

The AABB National Clearinghouse program is conducted throup-h five district clearinghouses in the United States. The Kansas City area is within the jurisdiction of the North Central Blood Bank Clearing House, hereinafter sometimes referred to as NCBBCH. There are in excess of 560 blood banks and drawing stations participating in this clearinghouse program which provides such services for more than 2300 hospitals in the United States. One of the requirements for membership of a blood bank in the AABB is that it be endorsed by or acceptable to the local medical society.

The clearinghouse program of AABB faciliates the movement of blood from one bank to another in commerce. It is a source for information at all times for those seeking blood supplies and a means through which blood is bought and sold by blood banks and hospitals.

PAR. 4. The main sources of supply of human blood for the metropolitan Kansas City area from 1955 to 1958, other than the National Red Cross, were the blood banks operated by the various hospitals in the area and blood bank which started operating as the Jackson County Blood and Plasma Service and later became known as the Mid-West Blood Bank and Plasma Center. In 1958 COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 737 728 Complaint two additional blood banks were established in the Kansas City area the World Blood Bank, Inc., and the respondent Community. Respondent Community is a blood bank operator organized to collect, process and supply human blood to hospitals in the Kansas City Area. Respondent Community, formerly known as the Jackson County Community Blood Bank, began operating on April 3, 1958. When respondent Community first began its operation, about six of the major hospitals in the area discontinued their blood banks and turned the function over to Community. Since that date twenty-six more area hospitals have signed agreements with Community under which blood is supplied by Community. Prior to the time the hospitals in the area entered into agreements with respondent Community, many of the hospitals operated their own blood banks and there was some transferring of blood between such blood banks to meet the needs of the different blood banks and hospitals. Respondent Community holds a licease issued by the National Institutes of Health of the Vnited States Department of Health, Education, and Welfare, and is a member of the ~CBBCH and AABB.

Hospitals in both the States of Missouri and Kansas are affJiated with respondent Community and respondent Community ships blood to each of these hospitals as often as blood is required. In addition respondent Community ships blood to other blood banks outside the State of Missouri and on occasion also purchases blood from blood banks outside the State of Missouri generally through the ~CBBCH. There has been and there now is a constant current and course of trade and commerce in blood between respondent Community and other blood banks and hospitals.

PAR. 5. The Midwest Blood Bank and Plasma Center, Inc., hereinafter sometimes referred to as Midwest, is also a blood bank operator in the Kansas City area. It began operating its blood bank in May of 1955 at 2904 Troost Avenue, Kansas City, Missouri, as a partnership under the name of Jackson County Blood and Plasma Service but soon thereafter changed the name to Midwest Blood Bank and Plasma Center. The company was incorporated July 1, 1958, in the State of Missouri. Midwest also has a subsidiary operating under the name of Midwest Blood Distributors, Inc. , 2904 Troost A venue, Kansas City, Missouri, and organized primarily for the purpose of selling Midwest's blood provider programs.

The owners and operators of Midwest also own and operate the .

Complaint 70 F. T.

World Blood Bank, Inc., at 2116 West 39th Street, Kansas City, Kansas, which was incorporated in Kansas on or about September, 1958.

In addition to providing blood to hospitals pursuant to contracts with the hospitals 01' through informal arrangements, Midwest and World Blood Bank Inc., make use of contracts with individuals or groups to assure a supply of blood when needed by the individual or a member of a group. One such plan is the Blood Provider Program onder which the individual or members of a group deposit blood with the blood bank which can be drawn on by the individual or a member of the group when and where needed. Another plan developed by these two blood banks is the Groop Advance Blood Purchase Plan under which a monthly or yearly fee is paid by the individual or members of a group to assure a supply of blood to be furnished by the blood bank when needed by the insured individual or member of the group. Both Midwest and World Blood Bank, Inc., hold licenses issued by the :\ational Institutes of Health of the United States Department of Health, Education, and Welfare thus permittng these two firms to ship in interstate commerce. Midwest is a member of the ~CBBCH. Midwest and World Blood Bank, Inc., perform the same function as respondent Community in that they withdraw blood from donors, process the blood by treating it with a chemical (citration) to prevent coagulation, keep it under propel' refrigeration until it is needed, cross-match it with blood of the patient who is to receive the blood, and deliver the blood in needed quantities to hospitals where the blood is to be used. NIidwest and World Blood Bank, Inc., both ship blood to hospitals and other blood banks located in states other than Kansas or Missouri. These two blood banks also purchase blood from blood banks outside their own state boundaries.

Midwest in 1955, and for some time thereafter, operated the only blood bank in the Greater Kansas City are" that was Jicensed by the Department of Health, Education, and Welfare to ship human blood in interstate commerce. PAR. 6. During 1955, most of the hospitals in the Kansas City area maintained their own blood banks or made arrangements with another local hospital to secure the needed blood supply. These hospitals were in competition with each other for an adequate blood supply and in competition with Midwest and other blood banks for a supply of blood for use in hospitals in the Kansas City area either in the buying or sellng or both. From the COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 739 728 Complaint time respondent Community became active as a blood bank in 1958, those hospitals affliated with Community and respondent Community, became competitors of Midwest and World Blood Bank, Inc., and are such competitors today in both the buying and sellng of blood and blood plasma, except in so far as competition has been hindered, lessened or restrained, by the acts and practices, methods and policies of said respondents as herein set forth. PAR. 7. During 1955 the respondent Kansas City Area Hospital Association, its offcers, directors, Executive Director and members, the respondent Executive Director of St. Luke s Hospital and the respondent Administrator of Independence Sanitarium and Hospital and the respondent pathologists named herein, together with others not named as respondents herein, entered into and have since carried out an agreement, understanding, combination or planned course of action or course of dealing to hamper restrict and restrain the sale and distribution of blood in interstate commerce. Since on or about the time respondent Community was incorporated on April 5, 1957, al1 the respondents named herein, together with others not named as respondents herein continued to carry out the same agreement, understanding, combination or planned course of action or course of dealing to hamper restrict and restrain the sale and distribution of blood in interstate commerce, using respondent Community as an aid and a means in the accomplishment thereof. In carrying out said agreement, understanding, combination, or planned common course of action or course of dealing, respondents have, among other acts done the following:

(a) Agreed between and among themselves not to use blood obtained from Midwest or World Blood Bank, Inc., nor to permit it to be used in the Kansas City area; nor to be accepted or received as replacement for blood previously furnished by Community. (b) Refused to use blood obtained from Midwest or World Blood Bank, Inc., and have refused to permit it to be used in treating patients hospitalized in the Kansas City area hospitals. (c) Have advised customers and prospective customers of Midwest, World Blood Bank, Inc., and Midwest Blood Distributors, Inc., that blood obtained from these firms would not be accepted in exchange for blood obtained from said hospitals or from respondent Community.

(d) Have advised the North Central Blood Bank Clearing House and AABB that the respondents have agreed or have a pol- Complaint 70 F.

icy not to use blood obtained from Midwest or World B100d Bank Inc.

PAR. 8. The capacity, tendency and effect of the aforesaid understandings, agreements, combinations, conspiracies and planned common courses of action, and of the acts, policies, practices and things done thereunder and pursuant thereto by the respondents have:

(a) Hampered, hindered or prevented Midwest and World B100d Bank, Inc., their subsidiaries and agents from sellng or fumishing blood to hospitals and other purchasers located in the States of Missouri, Kansas, and other States; (b) Hampered, hindered or prevented Midwest, World B100d Bank, Inc., and their subsidiaries and agents from sellng blood to or fumishing blood for use of patients hospitalized in hospitals iocated in States other than the State of Missouri or the State of Kansas;

(c) Hampered, hindered or prevented Midwest and World Blood Bank, Inc., and their subsidiaries and agents from carrying on trade in interstate commerce through dealings with the North Central Blood Bank Clearing House;

(d) Hampered, hindered or prevented Midwest and World Blood Bank, Inc., from becoming members of AABB and thus deprived them of the benefits that flow from such membership; (e) Hampered, hindered or prevented Midwest, World Blood Bank, Inc., and their subsidiaries and agents, from carrying out contracts for the fumishing of blood to persons who were entitled thereto and have prevented the use of blood furnished or offered under such contracts as a replacement for blood already given to a patient who was a party to such contracts or entitled to the benefis thereof in the State of Missouri, the State of Kansas, and other States;

(f) Hampered, hindered or prevented or discouraged hospitals blood banks, or other users of blood from dealing with Midwest World B100d Bank, Inc., and their subsidiaries and agents in the States of Missouri, Kansas and other states. PAR. 9. The aforesaid agreements, understanding or planned common course of action and the acts and practices of respondents done pursuant thereto and in furtherance thereof as herein alleged are a11 to the injury of the public and unreasonably restrict and restrain interstate commerce in the exchange, sale and distribution of blood and competition therein and constitute un- . , COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 741 728 Initial Decision fair acts and practices within the intent and meaning of Section 5 of the Federal Trade Commission Act.

Mr. Lee D. Sinclair and Mr. Paul D. Scanlon supporting the complaint.

Mr. Charles E. Holthaus of Hillix, Hall, Hasburgh, Brown and Hoffha'U for Kansas City Area Hospital Association, member hospitals and individuals connected therewith. Mr. Lucian LCLne of Tucker, Murphy, W,:Zson, Lane Kelly, for. Community Blood Bank of the Kansas City Area, Inc. , and its officers, directors and agents.

Mr. Dick H. Woods of St'inson, Mag, Thomson, McEvers and Fizzell for a group of named doctors allegedly specializing in pathology for respondents.

INITIAL DECISION BY WALTER K. BENNETT HEARING EXAMINER JUNE 8 , 1964 INDEX Page PRELIMINARY STATEMENT 744 Pleadings and Prehearing 744 Cooperation of Counsel 747 The Trial Statistics - 747 Extensions of Time to File Findings and Decision 748 Motions to Dismiss 748 Proposed Findings 749 Basis for Decision 749 FINDINGS OF FACT 760 The named Respondents and Relationships Among Them 750 1. Community - 750 2. Area Hospital Association 752 3. The Pathologists-Their Hospital Affliations and Functions - -- 759 Background Information Concerning Rlood Banks, Their Regulations and Interrelations - 759 FACTS RELATING TO THE JURISDICTION OF THE FEDERAL TRADE COMMISSION - - - - 760 The !\Ton-Profit Status of the Respondent Corporations and Their Operations 761 The Subject :\atter of the Alleged Restraint 767 The Existence of Interstate Commerce 772 The Class Sued as Such - - - 773 BACKGROUND OF THE ALLEGED CONSPIRACY 774 The Red Cross Proposals 774 Sporadic Discussions of Central Blood Bank-1953-1955 775 Community Plans for Blood Bank Stalled - - 776 The Basses Start Their Blood Bank: May 1955 776 Mr. John HasLurgn originally appeared fo)" tnese clients. On nis death Mr Hoffhaus appeaJ. . FoJluwing the hearings ),less)"s Lane and Vr'ouds undertook to pl.epare the findings cunclusions and briefs for all,respondents . _ InHial Decision 70 F.

Page FACTS BEARING ON EXISTENCE OF CONSPIRACY CHARGED 778 The Charge Pleaded - - 778 Facts Supporting Charge of Conspiracy or Planned Course of Action 779 Motivation - -- -- - - -- - 779 Meeting of Pathologists and Area Hospital Association Reaction in May 1955 - - 780 Alleged Admissions of Joint Pathologist and Hospital Action by Respondents Helwig and Lapi 781 Doctors Kerr and Buhler Visit and Express Disapproval to Midwest and to Other Pathologists of Midwest' Commercial Policy - - 786 Agreement on Need for Study by Community Studies Inc., of Community, Area Hospital Association and Pathologists - -- - -- - -- -- - -- 787 General Hospital Refuses Midwest Blood on 790 Dr. Buhler s Order -- - I.H. Clearance of Informal Federation Followed by Formal Federation Proposal - - 791 Pathologists and Area Hospitals React to Midwest' Labor Pre-Deposit Plan Solicitation - - 792 :Jidwest Charges Dr. Lapi's St. Mary s Hospital Through Better Business Bureau and Respondent Jenkins Investigates for Area Hospital Association and Mr. Reid 794 Dr. Lapi Criticizes Midwest to j\TCDBBCH 795 The Administrative Council of Area Hospital Association Announces Community Studies Report and the N . I.H. Decision 796 The Conununity Studies Report Recommends Against Commercial Operation and for Non-Profit Central Bank 796 Community Adopts Community Studies Report; Area Hospital Association After Consulting Pathologists Recommends Federation of Hospital Banks Again 797 Dr. Kerr Keeps the Pathologists Informed 802 Disappointment of Church and Labor Groups Seeking to Use Mid\vest Blood 802 Monroe-Jenkins Correspondence with Fourteen Hospitals 803 The Aftermath of the Monroe-Jenkins Correspondence 806 The Thomas Howell Investigation and Pathologists ' Reaction 815 Community Moulded to Pattern of Existing Non-Profit Banks 816 Community Attempts to Placate the Pathologists 817 MUNITY BLOOD BANK, KANSAS CITY AREA , INC., ET AL. 743 728 Initial Decision Pare Midwest's Ostensible Attempts to Capitulate; The August 1957 Meeting With Drs. Buhler, Kerr and Mantz and Its Aftermath - -- 818 Community Completes Its Preparations Securing Civil Defense, Red Cross, Public, NCDBBCH and Pathologists' Backing - 821 In Practical Operation a Hospital's Affliation with Conmmnity Excludes Purchases from Others 824 Community s Position \with Respect to the University of Kansas Medical Center Blood Supply from it and from Red Cross Demonstrates that an Exclusive Arrangement .was Contemplated 825 Reaction to :Mid\vest' s Blood Provider Contracts Demonstrates Widespread A voidance of Dealing by Hospitals and Pathologists - - 826 Contemporaneous Correspondence Written by Hospitals, by Community,- and by Pathologists Demonstrates Consistent Insistence That Midwest BIood be Sent Through the Clearing House to Community and not Delivered as a Replacement to the Affliated Hospital - 828 The Area Hospital Association Warning 833 Refusals to Deal Except Through the Clearing House Continued Even After This Proceeding Commenced 834 Inconsistent BJood Buying Pohcy of Community 835 Community s Donor Fee Policy Set to Attract Midwest Donors - - 836 FACTS CONTROVERTING EXISTENCE OF A CONSPIRACY 837 The Ethical Problem - 837 Denials of Conspiracy - - 839 Refp.rence to Community Blood Bank and the Clearing House Was Natural 841 Feasibility of Commercial Bank Using the Clearing House in Fulfilling Blood Provider Contracts 848 Certain Alleged Incidents of Refusal Were Followed by Acceptance of ::midwest Blood Replacement for Patient or Issuance of Credit to the Patient - - 850 Refusal of Midwest Blood Due to Alleged Knowledge of Defect in Midwest Operation 852 certain SUSPICIOUS CIRCUMSTANCES DID NOT IN THEMSELVES AMOUNT TO PROOF OF CONSPIRACY 856 THE PUBLIC INTEREST n n n n 858 THE PARTICIPATION OF INDIVIDUAL RESPONDE:"TS 860 REASONS FOR DECISION 861 Jurisdictional Issues - - - - 862 The Not-For- Profit Corporations 862 The Commodity or Medical Service Issue 866 Medical 1'loral Argument 869 . .

Initial Decision 70 F.

Pag-e Interstate Commerce 870 The Conspira Issue 870 Motive and Opportunity; Yet Denial of Conspiracy - 870 Records Verslls Recollection 871 Repeated Action and Rapid Joint Reaction Preclude Individual Coincidence 873 The Clearing House Contract Defense 875 The Bad B100d Defense 876 The Objection to Commercialized Blood Banking 877 CONSCIOUS ADHERENCE TO A PLAN KNOWING THAT IT' S OPERATION WOULD RESULT IN RESTRAINING MIDWEST'S TRADE IS ILLEGAL 878 Limitations on Order 879 The Class Suit 879 The Allegedly I11legal Recordings 880 CONCLUSIONS OF LAW 880 ORDER 882 PRELIMINARY STATEMENT Allegations in this proceeding would test the extent to which medical doctors and nonprofit hospitals may combine or conspire with other elements in a community to form a nonprofit blood bank, when as a consequence a commercial blood bank becomes unable to sell blood to the participating hospitals. Placed in issue in addition to the existence of the combination or conspiracy, are jurisdictional questions:

I) Is human whole blood an article of commerce or is the procedure in drawing, processing, shipping and transfusing blood all embraced within the profession of practicing medicine? 2) Are the nonprofit hospitals immune from proceedings initiated by the Federal Trade Commission in the circumstances? At no time in issue was theright of a physician in the individual exercise of his medical judgment to utiize or to refuse to utilize any remedy including blood in the treatment of his patient. His right to combine with others to restrain trade is challenged. Pleadings rtnd Prehertring The Federal Trade Commission issued its complaint July 5 1962. The complaint, mailed July 16, 1962, charged a conspiracy to boycott in violation of Section 5 of the Federal Trade Commission Act. The alleged conspirators J1named as respondents included: a nonprofit hospital association, a community blood bank certain nonprofit hospitals affliated with such organizations, a group of individuals who are alleged to have been offcers, directors and agents of the corporations, and a group of pathologists , , , , COMMUNITY BLOOD BANK, KANSAS CITY AREA , Iron., ET AL. 745 728 Initial Decision associated with hospitals al1 in the Kansas City lVetropolitan Area. The complaint is also brought against other Kansas City hospitals and individuals affliated with them as a class represented by the named respondents.

It is the theory of the complaint that respondents and others engaged in a combination or conspiracy to boycott and otherwise interfere with a commercial blood bank, operating through two corporations (herein referred to as Midwest and World), and that interstate commerce in whole human blood for transfusion was thereby restrained.

For the purpose of representation by counsel respondents divided themselves into three gJ"Ups as follows 1) Kansas City Area Hospital Association (sometimes referred to as Area Hospital Association) and its offcers, directors and agents and the named hospitals and their offcers, directors and agents. ' 2) Community B100d Bank of the Kansas City Area, Inc. (sometimes referred to as Community) and its offcers, directors and agents.

3) The pathologists including: Doctors O. Dale Smith, Evelyn Peters, D. A. Hoskins, William J. Sekola, Victor B. Buhler, Russell W. Kerr (deceased), Frank A. Mantz, Ferdinand C. Helwig, David M. Gibson, Angelo Lapi, L. R. Moriarity, Jack H. Hill James G. Bridgens, William McPhee, and Ralph J. Rettenmaier (collectively referred to as the pathologists). Prior to answer, and on August 7 , 1962, Area Hospital Associa. tion and Community moved for a more definite statement and the pathologists moved to dismiss for lack of jurisdiction or in the alternative for a more definite statement. These motions were denied August 23 1962.

On September 17 , 1962, the Area Hospital Association filed a Reply to the complaint admittng many of the formal allegations 1 The indivjfh1al and ho,pitals named as rpspondent. hecause of their affli1Jtion with the HOF;jJitCil Association and repJ"esented by Hs counsel were: Baptist Memorial Hospital, Jewi Memorial HORjJital Association of Kan as City (l\lenorah lliIeriical Center). Sistel' s of Ch"rity of Leavenworth, James D. :Ylal'shall. Arch E. Spelman, Tom J. Daly, Thomas M. Johnson, Hussr-:J . :\lilier,David T. Beals, Kathan T. Stark, Abraham Gd))Clin, Mack Herron, James R. Rich Sister MichaeJla )'Iarie, William C. ),li:xson, E. n. Berkowitz, T. R. But)er, Maurice ,1ohnsoTl. Waltcr K. JohTlson, :'lillt'j' Bailt'y, \Valter A. Reich, Ralph R. Coffcy, Harry ?II. \Valkcr, Su Jenkins.'The Rol""rtindividualsA. ?llo1gl'ennamed, asandrespondentsA. eal Del1Vel.because of their affliation at Community and repr€senteo by its counsel were: Adolph R. Pearson, \Yaltcr V. Coburn, Hiliard Cohen, Canoil P. Hungate, Gilbcrt C. ?lIurphy, Robert A. Molgrcn John ),lul')hy, iYlarjorie S, Sirridge, Arch E. Spelman . ioney",I' L . Goldman J"mes T. Sparks, Perry Morgan, "V. "V. Henderson, Robert F. Zimmer.

_ Initial Decision 70 F.

thereof but denying commerce and denying all parts of the complaint alleging the existence of a conspiracy. The same date, Community filed an answer admitting a few of the allegations of the complaint but expressly denying those charging the alleged conspiracy and alleging that human blood is not an article of commerce and that the respondents were not for profit corporations and immune from suit. The pathologists, on that day, also fied answer in which they denied substantially all of the allegations of the complaint and set up the same defenses. In a separate document filed with its answer Community moved to dismiss the complaint for want of jurisdiction because blood was not an article of commerce and because the Commission did not have jurisdiction over it as a nonprofit corporation. This motion was denied by the hearing examiner " on October 3, 1962 but on motion 'Of respondent Community permission was granted by the Federal Trade Commission on ~ovember 2, 1962, to file an interlocutory appeal. The other respondents were granted leave to intervene by the Commission on November 29, 1962. The Commission, after hearing argument, on December 18 1962, remanded the matter to the hearing examiner " havingdetermined that the matters raised by said respondents involve substantial public interest based in turn upon factual questions which should be decided only upon a full record. The hearing examiner then ordered a pre hearing conference to be held February 7, 1963. On that day, respondents filed a motion that issues concerning the jurisdiction of the Commission be heard prior to a determination on the merits. The hearing examiner denied that motion by order dated February 18, 1963. At the prehearing conference held February 7, 1963, it was agreed that the initial hearing would be held in Kansas City, Missouri, from May 20, 1963, to May 31, 1963, and then from July 8, to July 26, 1963. It was also agreed that documents and witnesses names would be furnished opposing counsel ten (IO) days in advance that photostats could be used in lieu of originals and that these requirements might be varied for cause shown. Such agreements were embodied in an order dated February 18, 1963. On February 27 , 1963, respondents filed a request for permission to appeal from the hearing examiner s order refusing to hear the jUlisdictional questions in advance of a hearing on the merits. "Hono!'abJf' Abner E. Lipscomb was o,.j inaJly designated hearing examiner in this p)'oceedingatHl continued to act on the prehearing procedure untU April 3, 1963, when the undersigned wa.g designated in his stead.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC. , ET AL. 747 728 Initial Decision This request was denied by the Commission on March 14, 1963, on the basis that the Commission had decided that it desired a full record before deciding the jurisdictional questions. On March 2I , 1963, respondents made application to take the depositions of three offcials of the commercial blood bank allegedly the victim of the conspiracy and to have the records of that competitor produced. This motion was denied March 22 1963, and a request for an interlocutory appeal from such denial was denied by the Commission by order dated May 3, 1963. A motion for a stay pending decision of such appeal was denied as moot May 10, 1963.

In the meantime and on April 5 , 1963 , the hearing examiner called for a pre hearing conference, specifying the matters to be taken up and requesting prehearing memoranda on designated topics. A prehearing conference was held April 24 , 1963, during which a stipulation of facts was executed disposing of noncontroversial matters and a procedure was adopted for prehearing exchange and authentication of documents and the listing of witnesses as well as for the taking of offcial notice of various classes of matters. Kote was taken that the action had abated as to respondents Russell W. Kerr and David T. Beals, and several misspellings of names were corrected. The results of such conference were included in an oreler executed April 26, J 963 , and designated Pre-Hearing Order #2." Offcial notice was taken by subsequent order of statutes and offcial rulings respecting the not for profit character of respondents and the character of blood transfusions. Cooperation of Counsel Counsel for all parties were most cooperative and courteous during this entire proceeding and did much to alleviate by their professional demeanor the emotional atmosphere in the Kansas City Area where considerable resentment was evident because of the community-wide participation in the respondent blood bank. The T,'ial Statistics Pursuant to leave granted by the Commission s order of May 1 1963, noncontinuous hearings were held, the first commencing May 20 and concluding June 7 , 1963, then, the second resuming July 8 and continuing, with only brief intervals of the sort normally involved in judicial proceedings, until September 24, 1963. Almost one hundred witnesses were called and testified and almost one thousand exhibits were offered comprising about ten _ Initial Decision 70 F.

thousand pages of exhibits and over eight thousand pages of transcript. Over 800 pages of briefs and proposed findings were submitted.

Extension of Time to File Decision At the joint request of all counsel, the hearing examiner by order dated September 27, 1963, set up a time schedule for findings and for motions to amend and to strike, conditional upon extension by the Commission of the time of the hearing examiner to enter his Initial Decision until May I, 1964. The Commission granted the examiner s request to extend the time to file the Initial Decision by order dated October 9, 1963. Changes in such timetable not involving the due date of this decision were thereafter approved by order dated November 24, 1963. The Commission further extended the time to issue this decision until June 8 1964, by reason of counsel's need for additional time to file findings and conclusions.

111otions to Dismiss At the conclusion of the case in chief each of the counsel for respondents moved to dismiss this proceeding for failure of proof. Decision was reserved. Thereafter, the hearing examiner requested counsel supporting the complaint to recommend, in light of the evidence received, whether or not the motion should be granted as to certain individuals whose connection with the alleged conspiracy was only that each had held a position in one of the respondent hospitals or associations. As respondents ' case drew to a close counsel supporting the complaint informed the hearing examiner in open hearing that in their opinion the evidence received as to certain individuals was insuffcient on which to base relief. The hearing examiner accordingly ex€rcjsed his reserved right to dismiss the complaint against the following individuals in their individual but not their representative capacity at the pages of the record set opposite their respective names. Facts relating to them are included in findings hereafter made. Miller Bailey Page No. 8327 E. B. Berkowitz T. R. Butler - Tom J. Daly Abraham Gelpcrin Meyer L. Goldman 8328 Mack Herron 8327 Maurice Johnson n _n - COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 749 728 Initial Decision Thomas N. Johnson Walter N. Johnson - - - Sister Michaella Marie James D. Marshall Russell H. Miler Walter A. Reich James R. ich Nathan J. Stark - Harry M. \Valker Gilbert C. 11 urphy 8328 Adolph R. Pearson James T. Sparks Robert F. Zimmer 'Vili am C. Mixson 8457- Ralph Coffey 8462 Willam J. Sekola 8758 The reserved motion to dismiss against the other respondents is denied.

P1'posed Findings and Motion Proposed findings of fact, conclusions, and a proposed order with a brief in support were filed March 15, 1964 and reply briefs and counter proposed findings, conclusions and order were filed Aprij 2, 1964. Argument was heard April 6 and 7, 1964. Respondents, in additjon, filed a formal motion to dismiss on May 29 1964, which is denied for the reasons hereafter given. Basis for Decision On the basis of the entire record, on his observation of the demeanor of the witnesses, and on his study of the exhibits, briefs and proposed findings and conclusions, the hearing examiner makes the following Findings of Fact, Conclusions, and Order." All findings of fact not found in substance or in terms are denied as erroneous or immaterial.

Pursuant to Rule 8. 21 (b) citations to exhibits and to page references of testimony wil be made. The citation of particular references docs not mean that there are no others or in any way detract from the fact that the entire record has been c.onside!'ed. In ma ing citations the following abbreviations and references wil sometimes be used: CX- Commission Exhjbit RX- Respondents' Exhibits TR-Transcript CF-Finding- proposed by counsel SUPTJol'ting complaint (with citations). RF- -Finding pt'oposed by counsel for respondents (with dtations). (Kame of witness) -Reference to entire testimony of such witness. H. Stip. reheaJ'ing Stipulation dated April 24 , 1963 ordered filed by Pre-Hearing Ordet' #2.

Stip. ( ) -Stipulation and exhibit number. Heavy reliance has been placed on counsels' proposed findings for record references due to time limitations.

Initial Decision 70 F. FINDINGS OF' FACT The Named Respondents and Relationships Among Them 1. Community a. Community Blood Bank of the Kansas City Area, Inc. is a not-for-profit corporation organized and existing under and by virtue of the laws of the State of Missouri, Chapter 355, R.S. Mo. 1959. Said corporation is located and has its offce at 4040 Main Street, Kansas City, Missouri. (P. H. Stip. b. The governing- body of Community Blood Bank of the Kansas City Area, Inc. is composed of five offcers, twelve board members and a corporate body of thirty-nine. The corporate body is composed of thirteen individuals chosen from the medical profession in the Kansas City Area, thirteen representatives of hospitals in the Kansas City area selected by the Board of Directors of the Kansas City Area Hospital Association and thirteen representatives chosen from outside the medical community and commonly known as public members. Eleven of the medical members are elected by the county medical societies in the Kansas City area which includes Kansas City, Missouri and Kansas City, Kansas. These eleven electees choose two more medical members. The theirteen public members must be approved by the m'2dical and hospital members and elected by members of the corporation. Each of these groups of thirteen choose four from its group to be on the Board of Directors which consists of twelve members. The Board of Directors annuany ejects offcers. Approximately one-third of the positions on the governing body become vacant each year and new members are chosen to fin these vacancies. (P.H. Stip. c. Respondents Perry Morgan and W. W. Henderson are administrative director and business manager, respectively, of respondent Community, have their offces at 4040 Main Street, Kansas City, Missouri and have held such positions for the past several years. (P.H. Stip.

d. During the past several years the offcers and directors of respondent Community, as wen as its membership, have varied from year to year. (P. l!. Stip.

e. The following individuals named in the complaint were, during 1961 and at the time of the filing of the complaint, located and affliated as indicated below. They served Community in 1961 in the capacities set forth opposite their respective names: y.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 751 728 Initial Decision President Adolph R. Pearson, Swedish-American Saving & Loan Association, 1010 Baltimore Ave., Kansas City 5, Mo.

First Vice- Walter V. Coburn, Bethany Hospital, 51 North President 12th, Kansas City 7, Kansas. Second Vice- Hilliard Cohen, Menorah Medical Center, 4949 President Rockhill Road, Kansas City 10, Missouri. Sec y. Treas. Carroll P. Hungate, 6845 Oak, Kansas City 13, Missouri.

Asst. See Gilbert C. Murphy, First Presbyterian Church Treasurer Gardner, Kansas. Director Robert A. Molgren, St. Luke s Hospital, 4400 J. C. Nichols Parkway, Kansas City 10, Missouri. Director John Murphy, Tucker, )'lurphy, Wilson & Siddens 818 Grand Avenue, Suite 831, Kansas City 6, :VIissouri.

Director :\Iarjorie Sirridge, 258 Brotherhood Bldg. 754 Minnesota Ave., Kansas City 1, Kan.

Director Arch E. Spelman, Smithvile Community Hospital SmithvilJe, Missouri.

Director :\eyer L. Goldman, Beacon Printing & Publishing Co., 1825 Harrison, Kansas City 8, Missouri. Director James T. Sparks, Ford Motor Company, P. O. Box 1008, Kansas City 41, Mo.

Director Robert F. Zimmer, American Oil Company, Sugar Creek Refinery, Sterling and Standard Sts" (P.R. Stip. Kansas City 21 , Mo, f. The following listed members of Area Hospital Association executed contracts with Community (or revisions thereof) on the dates set forth opposite their respective names. Dates followed by the designation (a) mean that the contract called for furnishing human whole blood and related blood products; those followed by (b) mean that a drawing station was established at the hospital and, those followed by (c) mean that the contract was to supply heparinized and citrated whole blood (human) used in extracorporea1 procedures.

Baptist Memorial Hospital January 14, 1960; revised March 10, 1960 (a) Bethany Hospital May 1, 1958; revised February 23, 1960 (a) Cushing Memorial Hospital April 1 , 1959 (b) Excelsior Springs Hospital Dated June 15, 1960 but not signed byCommunity Blood Bank (a) Independence Sanitarium and Hospital May 5, 1958; revised May 12 . 1960 (a) 752 FEDE:RAL TRADE COMMISSION DECISIONS Initial Decision 70 F.

Lakeside Hospital October 23, 1958; revised May II , 1960 (a) Lexington Memorial Hospital - - April 23, 1959 (b) Jewish Hospital Association of Kansas lVIay 27, 1958; revised City (Menorah Medical Center) March 8 , 1960 (a) North Kansas City Memorial Hospital October 24 , 1958; revised June 2 , 1960 (a) Olathe Community Hospital Mareh 29, 1960 (a) Osteopathic Hospital July 1, 1959; revised (Kansas City College of Osteopathy June 2, 1960 (a) and Surgery) Sisters of Charity of Leavenworth July 1, 1958; revised (Providence Hospital) February 20, 1960 (a) Ql1ecn of the \Varld Hospital April 16, 1958; revised May 10, 1960 (a) Research Hospital May 31, 1958; revised February 20 , 1960 (a) Pleasant View Health and - May 8, 1962 (aJ Vocational Institute, Inc.

(Shawnee Mission Hospital) Community Hospital Association - August 9, 1960 (a) (Smithvile Community Hospital) Sisters of Charity of Leavenworth April 6, 1959; revised (St. John s Hospital) January 18, 1960 (b) St. .r oseph Hospital April 9, 1958; revised May 14, 1960 (a) St. Joseph's Hospital December 6 , 1961 (a) St. .Joseph, Missouri - - December 6, 1961 (b) St. Luke s Hospital of Kansas City May '7, 1958; revised February 11 , 1960 (a) Sisters of St. Mary - - - Revised February 20 (St. Maloy s Hospital) 1960 (a) Sweet Springs Community Hospital December 14, 1961 (a) St. Margaret Hospital May,S, 1958; revised February 22, 1960 (a) Trinity Lutheran Hospital April 16, 1958; revised February 25 , 1960 (a) University of Kansas Medical Center July 1 , 1962 (0) \Vheatley-Provident Hospital Dated July 28, 1960 , but not signed by Community Blood Bank (a) Warrensburg Medical Center, Inc. September 15 , 1961 (a) October 13 , 1961 (b) (P.H. Stip. Stip. ex 583) .

2. A Tel H o8pital Association a. Kansas City Area Hospital Association is a not-for-profit corporation organized and existing under and by virtue of the COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 753 728 Initial Decision General Not-For-Profit Corporation Law" of the State of MissOUI'i with offces at 3637 Broadway, Kansas City, Missouri. It was incorporated May 14, 1954. (P.H. Stip. ) (Stip. CX 540). b. Respondent Baptist Memorial Hospital is a corporation organized and existing under and by virtue of Chapter 355 of the 1959 Revised Statutes of the State of Missouri and is located at 6601 Rockhill Road, Kansas City 31, Missouri. c. Respondent Jewish Memorial Hospital Association of Kansas City (Menorah Medical Center) is a corporation organized and existing under and by virtue of Chapter 355 of the 1959 Revised Statutes of the State of Missouri and is located at 4949 Rockhil Road, Kansas City IO, Missouri.

d. Respondent Sisters of Charity of Leavenworth is a corporation organized and existing under and by virtue of Article 17 Chapter 17 of the General Statutes of the State of Kansas and is located at Xavier, Leavenworth County, Kansas. It operates Providence Hospital at 1818 Tal1omee A venue, Kansas City 2, Kansas. (P. H. Stip. ) (Stip. 540 a-e).

e. Respondent Susan Jenkins is now serving, and for the past several years has served, as executive director of the Kansas City Area Hospital Association and in such capacity has her offce at 3637 Broadway, Kansas City 8, Missouri. (P. H. Stip. f. During the past several years the officers, directors and members of respondent Kansas City Area Hospital Association varied from year to year by the expiration of terms and addition of members. (P. H. Stip.

g. The foJ1owing individuals named in the complaint were, during 19Ej1 and at the time of the filing of the complaint (with the exception of Abraham Gelperin, Mack Herron and Sister Michaella Marie), located and affliated as stated below. They served Area Hospital Association in 1961 in the capacities set forth opposite their respective names:

Chairman of the Board James D. Marshall, 1016 Baltimore Avenue Kansas City, Missouri.

President Arch E. Spelman, Smithvile Community Hospital, Smithvi1e, Missouri.

First Vice President - Tom J. Daly, 2105 North 13th Street, Kansas City 4, Kansas.

Second Vice President - Thomas )1. Johnson, 310 "Vest 47 Street, Kansas City, l\lissouri.

Secretary Russe1J II. Miler, "University of Kansas Medical Center, 39th and Rainbow Boulevard, Kansas City 12, Kansas.

Initial Decision 70 F.

Trea'durer David T. Beals (deceased), Fil'"t National Bank 14 \Vest 1 (Jth Street, Kansas City 5, Missouri. Assistant Treasurer Nathan J. Stal' , Hallmark Cards, Inc., 25th and McGee Traffcway, Kansas City 41, Missouri. Director Abraham Gelperin, Neurological Hospital, 2625 \Vest Pasco, Kansas City 8, Missouri.

Director TvTack Herron, Olathe Community Hospital, Santa Fe at Cooper, Olathe, Kansas.

Director James R. Rich, North Kansas City Memorial Hospital, 2800 Hospital Drive, North Kansas City 16, ;vi:'souri.

Director Sister Michaella Marie, St. .Joseph Hospital, East Linwood Boulevard, Kansas City 28 MissoTIri.

Director - \Vil1am C. Mixson, 4635 \Vyandotte Street, Kansas City 12 , Missouri.

Director E. B. Berkowitz, Tension Envelope Corporation, 19th and Campbell Street, Ka11Sas City 8 Missouri.

Director - T. R. Butler, License Department, City Hau, Kansas City, Kansas.

Director - Maurice Johnson, First National Bank, 14 West 10 Street, Kansas City 5, Missouri.

Director - Walter N. Johnson, R.D. S. Auditorium, River and \ValtcT Streets, Independence, Missouri. Director Milcr Bailey, 2810 'Vest 66 Terrace, Shawnee Mission, Kansas.

Director Walter A. Reich, A. Reich & Sons, Inc. , 1414 Wyoming, Kansas City, J\Jissouri.

Director Ralph R. Coffey, 1324 Professional Building, Kansas City 6 , Missouri.

Director Harry :VI. \Valker, Smithville Community Hospital, Smithville, Missouri.

Respondent Abraham Gclperin is not now connected with ~eurological Hospital or any other hospital in the Kansas City area Ilnd at the time of the filing of the complaint resided in the State of Illinois; respondent Sister Michaella Marie was not on the date of the filing of the complaint connected with St. Joseph' s Hospital or any other hospital in the Kansas City area but resided on such date in the State of Michigan; and respondent Mack Herron was not as of the date of the filing of the complaint connected with O1athe Community Hospital or a resident of Olathe, Kansas. (P. H. Stip.

h. Respondent Robert A. Molgren is, and for several years has been, executive director of Sf. L"kc's Hospital and has his offce COMMUNITY BLOOD BANK, KANSAS CITY AREA , INC. , ET AL. 755 728 Initial Decision at St. Luke s Hospital, 4400 J. C. Nichols Parkway, Kansas City , Missouri. (P. H. Stip.

i. Respondent A. Neal Deaver is, and for several years has been, administrator of Independence Sanitarium and Hospital and has an offce at said hospital (P. H. Stip. j. The following hospitals and service agency became members of Area Hospital Association on the dates preceding their names. Those whose names are followed by (a) and (c) were granted tax exemptions under Section 501 (c) (3) and 501 (c) (4), respectively. Those whose names are fo1Jowed by (b) are Instrumentalities of Federal, State, county or local governments. Thompson, Brumm and Knepper Clinic Hospital and Warrensburg Medical Center Inc. , are proprietary corporations, the others listed secure their authority from the agency or under and by virtue of the statutes set forth opposite their respective names. A1l except those whose names are italicized have contracts with Community, as hereinbefore found.

1/ 8/57 Baptist :\cmoriul Hospital - (a) Chapter 355 . RSMo 1959 160 et seq. 9/16/61 Bates County jl1emon (b) Section 205. Hospital RSMo 1959 , Article 17, and 5/11/54 Bethany Hospital (a) Chapter 17 Article 29 , G. S. Kansas 5/14/54 Blue C'r088 H081'fital Se' vice (c) Chapter 355, RSMo 1959 160 et seq. 5/11/56 Camel"On Community Hosp tal - (b) Section 205. RS:vo 1959 11/ 8/60 Can"oll County Memo1'ial Chapter 355, RSMo 1959 Hospital 5/11/54 ChildTcn s Me?" cy Hospital (a) Chapter 352, RSMo 1959 9/30/58 Chfll-cothe Municipal Hospital (b) Section 81.190, RSMo 1959 5/14/54 Cushing Memorial Hospital - (a) Chapter 17 , Article 17, S. Kansas 5/14/54 Douglas Hospital (a) Chapter 17 , Article 29, S. Kansas 5/14/, Excelsior Springs Hospital - (a) Chapter 355, RSMo 1959 5/ 4/57 John Fitzgibbon Mem01-1al Chapter 355, RSMo 1959 Hospital 5/11/54 Kansas City General Hospital - (b) Sections 82. 240, 96.030 and .Wedical Gente'!" RSMo 1959 5/14/54 Memorial Hospital of Ha1''l.i- Chapter 352, RS:\:1o 1959 sonville Association (dissolved) 5/14/54 Cass Cuunty (60) Section 205.160, RSMo 1959 Hospital Memo1'ial 5/14/54 Independence Sanitarium and - (a) Chapter 352, RSMo 1959 Hospital Chapter 33 , Article 2 RSMo 1919 _ Initial Decision 70 F.

1/27/54 Lakeside Hospital - - (a) Chapter 355, RSMo 1959 1/ 7/60 U1' ence Tvlemo?'ial Hospital (b) Article 13, Section 14bol S. Kansas 5/14/54 Lexington Memorial Hospital - (b) Section 205. 160 , RSMo 1959 5/14/54 Jewish Hospital Association - (a) Chapter 355, RSMo 1959 of Kansas City (Menorah Medical Center) Article 19, Section 1801 7/12/56 Miami County Hospital (b) seq, S. Kansas as amended 5/11/;)7 iVew' ological Hospital - (a) Chapter 355, RSMo 1959 3/11/57 North Kansas City Memorial (b) Section 96.150, RSMo 1959 Hospital (City-third class) 5/14/54 Olathe Community Hospital (a) Chapter 17 , Article 29 B. Kansas 1/27/58 Osteopathic Hospital (Kansas (a) Chapter 3, , RS !o 1959 City College of Osteopathy and Surgery) 5/14/54 Sisters of Charity of - - - (a) Article 17, Chapter 17 Leavenworth (Providence S. Kansas Hospital) 5/14/54 Queen of the World - (a) Chapter 352 , RSMo 1959 5/14/54 Rolph Ch,n:c (a) Chapter 355 , RSMo 1959 10/ 2/56 Ray County l1,ienwrial (b) Section 205. 160 et seq. Hospital RSMo 1959 5/14/54 Research Hospital - - - - (a) Chapter 352 , RSMo 1959 8/19/62 Pleasant View Health and - (a) Chapter 17 , Article 29 Vocational Institute, Inc. S. Kansas (Shawnee Mission Hospital) 5/14/, Community Hospital - - (a) Chapter 352, RSMo 1959 Association (Smithvi1e Chapter 32 , Article 10 Community Hospital) Io 1929 5/14/54 Sisters of Charity of - (a) Chapter 17 , Article 17 Leavenworth (St. John S. Kansas Hospital) 5/11/54 St. Joseph Hospital - (a) Chapter 352 RSMo 1959 5/11/51 St. Joseph's Hospital - - (a) Chapter 352 RSMo 1959 (St. Joseph, :\Iissouri) 5/14/54 St. Luke s Hospital of - (a) Chapter 352 RSlIo 1959 Kansas City 5/14/54 Sisters of St. Mary - (a) Chapter 352 , RSMo 1959 (St. 1Iary s Hospital) 5/14/54 St. Margaret Hospital - (a) Chapter 17, Article 29 8. Kansas 12/29/60 Sweet Springs Community - (a) Chapter 352, RSMo 1959 Hospital 5/14/54 Trinity Lutheran Hospital - (a) Chapter 355, RS lo 1959 5/14/54 Vniversity of Kansas - (b) State Gniversity l\Iedical Center COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC. , ET AL. 757 728 Initial Decision 12/19/57 Vetemns Administration (b) 38 U. A. Section 5001 Hospital et seq. 5/14/54 Whcatley Providcnt Hospital - (a) Chapter 35 . RSMo 1959 8/10/62 328th U. F. (Richards- Gebaur) 10/ 3/56 l'homps011 , BTumm and Knepper Clinic Hospital (St. Joseph) 5/14/54 Warremburg Medical Center, Inc. (P.H. Stip. St. exs 540 (Warrensburg, Missouri) 582). 3. The Pathologist-Their Hospital Affliations and Functions a. Respondent Hi1iard Cohen, M.D., is a pathologist for Menorah Medical Center and is second vice-president of respondent Community. He has his offce at the Menorah Medical Center 4949 Rockhi1 Road, Kansas City, 10, Missouri. b. Respondent Evelyn Peters, M. , is a pathologist for NIenorah Medical Center and has an offce at the Menorah Medical Center, 4949 Rockhill Road, Kansas City 10 , Missouri. c. Respondent D. A. Hoskins, M. , is a pathologist for Osteopathic Hospital and has his offce at the Osteopathic Hospital, 926 East 11 Street, Kansas City 6, Missouri. d. Respondent Wiliam J. Sekola was a pathologist for Osteopathic Hospital and had his offce at the Osteopathic Hospital, 926 East 11 Street, Kansas City 6, Missouri. Since the fiing of the complaint he has ceased to be a resident of the Kansas City area and is no longer connected with any hospital in that area. e. Respondent Victor B. Buhler, :\f.D. , is a pathologist for Queen of the World Hospital and has his offce at the Queen of the World Hospital, 3210 East 23rd Street, Kansas City Missouri.

f. Respondent Russell W. Kerr, M. , now deceased, was a pathologist for St. Joseph's Hospital and had his offce at the St. Joseph' s Hospital, 2510 East Linwood Boulevard, Kansas City 28 Missouri.

g. Respondent Frank A. Mantz, M. , is a pathologist for St. Joseph' s Hospital and has his offce at the St. Joseph's Hospital Missouri. 2510 East Linwood Boulevard, Kansas City 28, h. Respondent Ferdinand C. Helwig, M. , is a pathologist for st. Luke s Hospital and has his offce at St. Luke s Hospital, 4400 J. C. !\ichols Part,way, Kansas City 11 , Missouri. i. Respondent David IV!. Gibson, M. , is a pathologist for St. Luke s Hospital and has his offce at St. Luke s Hospital, 1400 J. C. C\ichols Parkway, Kansas City 11 , :\lissouri. ._ Initial Decision 70 F.

j. Respondent Angelo Lapi, M. , is a pathologist for St. 2Ilary s Hospital and has his offce at St. .Ylary s Hospital, 101 Memorial Drive, Kansas City 8, Missouri.

k. Respondent L. R. Moriarity," M. , is a pathologist for St. Mary s Hospital and has his offce at St. Mary s Hospital, 101 Memorial Drive, Kansas City 8, Missouri.

1. Respondent .Tack H. Hil, M. , is a pathologist for Trinity Lutheran Hospital and has his offce at Trinity Lutheran Hospital, 31st and Wyandotte Streets, Kansas City 8, Missouri. m. Respondent .Tames G. Bridgens '" M. , is a pathologist for the Independence Sanitarium and Hospital and has his offce at the Independence Sanitarium and Hospital, 1509 West Truman Road, Independence, Missouri.

n. Respondent Wiliam McPhee "" M. , is a pathologist for North Kansas City Memorial Hospital and has his offce at the North Kansas City Memorial Hospital, 2800 Hospital Drive North Kansas City 16, Missouri.

o. Respondent Ralph .T. Rettenmaier, M. , is a pathologist for Providence Hospital and has his offce at the Providence Hospital 1818 Tauromee A venue, Kansas City 2, Kansas. p. Respondent O. Dale Smith, M. , is a pathologist for Baptist Memorial Hospital and has his office at the Baptist Memorial Hospital, 6601 Rockhil, Kansas City 31 , Missouri. (P.R. Stip. q. Pathologists are medical doctors with special knowledge and training in pathology. Pathologists are associated with various hospitals in the Kansas City area and by virtue of such association direct and supervise certain laboratory operations in the hospitals with which they are associated including the procurement handling, testing and transfusion of blood. (P.H. Stip. r. As of the date of the filing of the complaint herein there were about twenty-six pathologists either employed by or associated with hospitals in the Kansas City area. Such pathologists - u were and are members of the Society of Pathologists for the Kansas City area. The blood banks operated by certain hospitals in the Kansas City area prior to their obtaining their supply of blood from respondent Community were under the supervision of a pathologist or pathologists employed by or associated with such hospitals. Pathologists in the Kansas City area serve as medical consultants to and on an advisory committee of respondent Community and they, and other pathologist not named as respon- Sometimes d(, c1'ibc(l as Laul' en R. 7\1oriarity Erroneom;Jy described in the Complaint as G. )\'1 Bridgens and ",'imam 1'IcFee, respectively. ) .

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 759 728 Initial Decision dents, serve in a rotation system on said advisory committee. (P.R. Stip.

Rackground Information Concerning Blood Ranks, Their1' Regulations and Inten'elations 4. Since World War II the use of human blood for transfusions has become an increasingly important factor in the care and treatment of the sick. During 1960 more than five and one half milion pints of blood were used for such transfusions. The need for such volume of blood has resulted in the establishment of blood banks to maintain and furnish a constant, adequate and safe supply of blood. (P.R. Stip.

5. The blood bank col1acts, classifies and stores blood which except for heparinized blood, may be stored under proper refrigeration for a period not to exceed twenty-one days. There are different blood bank sources in the United States, some of which may be described as (a) Hospital blood banks: those operated by hospitals primarily to meet their own needs and, occasionally, to supply the needs of other hospitals in their areas. Today, there are more than 000 hospital blood banks in the United States. (b) Community blood banks: These usually are non-profit faciJities locally organized ancl controlled to serve the needs of a majority Or of al1 of the hospitals in a community. Today, there are more than 100 community blood banks in the United States. (c) Red Cross: The blood bank donor program of the American JS ational Red Cross is administered through 55 regional centers. During 1957 the Red Cross provided 47.6%of al1 blood used for transfusions.

(d) Others: Blood bank programs not patterned within the foregoing categories, such as privately-owned blood banks (P. Stip.

6. During 1955, most of the hospitals in the Kansas City area maintained their own blood banks or made arrangements with another local hospital to secure some of the needed supplies of blood. (P.R. Stip.

7. The American Association of Blood Banks (herein sometimes referred to as AABB), a national organization of blood banks, was formed in 1947. It provides technical information on blood banking, encourages research, conducts an inspection and accreditation program for blood banks, sponsors reference laboratories to provide local blood banks with assistance on serological 760 FEDERAL TRADE COMMISSIO:\ DECISIONS Initial Decision 70 F. T. problems, and conducts a national clearinghouse program to facilitate the exchange of donor replacement credits on a 11ationwide basis. The AABB clearinghouse program employs a reciprocity system of making retul's of blood either in kind or by way of blood credits to a member blood bank from any member blood bank in the country in satisfaction for blood used in tra11sfusing a patient in any other sedlon of the country. When a blood bank accepts a replacement donation for a patient whose transfusion has been supplied by a facility in another location, it forwards a reciprocity credit to the district clearinghouse office of the AABB where the transaction is recorded and credit issued to the account of the supplying bank. (P.H. Stip.

8. The Public Health Service Act, aproved July 1 , 1944 , (58 Stat. 682), requires that a blood bank obtain a license issued by the United States Department of Health, Education and Welfare before it may transport citrated whole blood (human) in interstate commerce. The ~ational Institutes of Health is the agency within the Department of Health, Education and Welfare which has direct snpervision and c011trol over the inspection of blood banks and the issuance of licenses pe, mitting the transportation of blood in interstate commerce. (P.H. Stip. 9. Respondent Community holds a license issued by the Kational Institutes of Health of the United States Department of Health, Education and Welfare and is a member of the North Central Blood Bank Clearing House (hereinafter sometimes referred to as KCBBCH) and the American Association of Blood Banks. (P.R. Stip.

10. World and Midwest both hold licenses issued by the Kational Institutes of Health of the United States Department of Health, Education and Welfare (CX 1) (1903) and they are members of NCBBCII (CX 10.

FACTS RELATING TO THE JURISDICTION OF Tile FEDERAL TRADE COMMISSION 11. Since the initiation of this proceeding the corporate respondents have vigorousl;' maintained that the Federal Trade Commission had no jurisdiction over their persons (primarily because of their status as non-profit corporations) and that it also had no jurisdiction over the administration of human whole blood (primarily because the whole system of transfusion is allegedly a medical service and constitutes the practice of medicine not commerce and secondarily because human whole blood is living tissue ,:.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 761 728 Initial Decision and thus not a proper subject of barter and sale). (See respondents' brief, pp. 13-65. ) As heretofore pointed out, the Commission, after an interlocutory appeaJ, in remanding to the hearing examiner the jurisdictional questions taken up on a prehearing motion, stated that they should be determined only upon a full record (order dated December 18, 1962).

, accordingly, first marshall the facts found relating to these jurisdictional questions and to the general question whether the activity allegedly restrained was in, and in the course of, interstate commerce under the next following subhead- I1gs.

The Non-Profit Stntu" of the Respondent COf'porrdions and Their?' Ope?'tianB 12. As heretofore pointed out (findings 1 and 2), both Community and Area Hospital Association are organized under notfor-profit statutes. Each of the hospital corporations named as respondents e. Baptist Memorial Hospital, lV enorah Medical Center, and Sisters of Charity of Leavenworth are not-for-profit corporations (finding 2-j). All the foregoing have been granted an exemption under the Internal Revenue Code (id. RX 52, RX 3) , 13. All except two hospital corporations affliated with Area Hospital Association, one of which is affliated with Community, are either not-for-profit corporations or instrumentalities of local county, state or federal governments (findings 1 and 2), The two exceptions are proprietary corporations (p, rr. Stip., CX 540 582). All affliated corporations which are not proprietary corporations 01' governmental instrumentalities have been granted exemptions under the Internal Revenue Code (finding 2-j, P. Stip.

14. The evidence is uncontradicted that in accordance with the applicable statute and their articles of incorporation both Community and Area Hospital Association have no shares of stock and that no part of any funds received has ever been distributed 01' inured to the benefit of any of its members, directors, or offcers (Tf. 2673- , 4545-51; RX 51-52; CX 467, 471; Tr. 8466- 69; 1'1'. 4363; RX 2; CX 582: Tr. 703). The funds of said corporations have been used only for the purposes authorized by Jaw and their articles of incorporation (Tr. 4363, 8466-69). 15. Funds received by Community originated from gifts, loans and grants, replacement blood donations, and payment of respon- 762 FEDERAL TRADE COMMISSIOO: DECISIONS Initial Dccision 70 F.

sibility and processing fees (Tr. 2673, 4545-51; CX 467-471 232). Such receipts have not been suffcient to meet expenses and to repay outstanding loans (Tr. 2674-78; CX 467, 47I; Tr. 8166-69). 16. Funds received by Area Hospital Association originated from grants, Joans, gifts and dues of member hospitals (Tr. 705). 17. Among the stated purposes for which Community was formed ou December 23 , 1953, under the title Community Blood Bank of Jackson County, was:

To create, establish and maintain a permanent blood bank of human blood to cooled whole human blood from voluntary or paid donors, to process, freeze, dry and fractionate the same, to store the same or any of its deriva tives in liquid, frozen, dried plasma or any other form, and generally to collect, process, store, dispose of and dist.ribute the same as the Board of Djrec tors may determine, in Jackson County, Missouri, or elsewhere, and to conduct such charitable, educational, civic, patriotic, scientific and research programs as the Board of Directors may determine necessary, desirable or feasi ole in connection with aU or anyone of the foregoing. (IlX 51.) The articles of association were twice amended. Once to change its name to reflect its broader community interest on April 1 1957, and again, on February 9, 1960 to expatiate on its charitable and non-political status (RX 51).

18. Community became operative as a blood bank on April 3 1958 (Tr. 2568). Prior to that time $87, 840. 21 had been obtained as gifts or loans. This sum was used to place Community in operation as a blood bank (Tr. 4551; CX 232 a-d). Detailed plans for the formation and operation were under consideration for over two years during which the funds were raised, a location was secured and a director and other full time staff were hired (Tr. 4344-60: ex 383-397). Discussion concerning the formation of a community blood bank by the Jackson County )'ledical Association and other persons including the Red Cross and some of the pathologist respondents had been sporadical1y carried on since at least August of 1953 when the Jackson County Medical Association appointed a committee to initiate action for a community blood bank. Two of the six members of the original c:ommittee arc respondents Dr. Hilliard Cohen and Dr. .Jack H. Hill (Tr. 4522; RX 129; CX 354-5; see RF 93- , CF pp. 1-9). Area Hospital Association or its predecessor became involved in these discussions commencing at least in January of 1955 (CX 165). 19. Community carried on its operations under the full time direction of Pelts 1Iorgan, a paid staff member, and the medical guidance of respondent Dr. Ferdinand C. Helwig, the pathologist COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC. , ET AL. 763 728 Initial Decision of St. Luke s Hospital who serves without compensation (P, Stip., RF 165: CX 397). The various pathologists in the Kansas City area including respondents are its technical advisory committee and assist Dr. Helwig by serving in rotation for a twoweek period without compensation as acting medical directors of the blood bank (F.R Stip., pal'. 18; Tr. 2846-7; RF 165, 176; CF p. 340; RX 54 a-b).

20. Dr. Perry Morgan (Ph. ), the director of Community described in detail the operation of Community in the collection, processing and distribution of blood, and its relations to hospitals, other blood banks, drawing stations, the clearing house and the Red Cross (Tr. 2481-2994). The following brief description is deemed adequate for purposes of this decision. a. Community receives its blood direct from donors at its principal offce and it also receives blood from donors bled at drawing stations maintained at hospitals away from the center of Kansas City, Missouri, Blood received at drawing stations, as well as that drawn at Community s offce, is sent to the laboratory in the principal offce and there processed by being typed, tagged and refrigerated in accordance with Community s laboratory procedures (RX 70), Minute procedures are prescribed to insure the quality of the blood and the care of the donor (RX 69). Community untilizes three types of donors: predeposit donors who, generally, belong to donor s groups and create credit for their group by donating blood in advance of needs, replacement donors who donate their blood to wipe out an obligation for some friend or relation who has been transfused, and professional paid donors who uniformly are given a $I5 fee for their services. It also receives Red Cross blood and at times blood from other banks through the American Association of Blood Banks clearing houses. b. Community maintains contractual relations with its drawing stations and with hospitals who do not have drawing facilities (CX 233 and 234), These contracts are form contracts and no variations are permitted (Henderson Tr. 8304). Initially four hospitals, St. Joseph' , St. Mary, Trinity Lutheran, and Queen of the World, signed supply contracts (RF 159; CX 583). Within a month and a half, Bethany, St. ilJargaret's Independence Sanitarium, St. Luke s Menorah Medical Center, and Research hospital entered into agreements and by the end of 1958 there were twelve hospitals so affliated (RF 159; CF p. 340, CX 583, 466). Community refused to undertake to supply the blood requirements for University of Kansas Medical Center in 1958 (Tr. , , Initial Decision 70 F. T, 2719-20; CX 403, 404; RF 160) because it believed it could not meet the blood requirements of an hospitals in the area (CX 542). However, it subsequently entered into a special arrangement to supply heparinized blood only and later became the Medical Center s principal supplier (CX 435, 458). By the time this proceeding was filed, Community had affliations with an but a handful of hospitals in the entire Kansas City area. Thus almost fulfining "the intent and hope of those who planned the Community Blood Bank that an the hospitals of greater Kansas City would become affliated members * " (RX 130. c. In case of the hospitals to which blood is supplied CX 233) Community is required under the terms of its contract to meet the contracting hospitals' requests for blood (Tr. 2723- 24; CX 233; RF 161). While, in terms, the contracts do not expressly require such hospitals to obtain an their blood from Community (CX 233), in practice, many hospitals take the position that they deal exclusively with Community (Findings 151-153) and Community, at least in the case of Kansas t:university Medical Center, refused to accept partial affliation (CX 403, 433; Tr. 2720-2I). It sought moreover, to have even Red Cross blood flow through its laboratory with consequent processing fee charges (CX 372, 366, 361; Tr. 2574).

d. Blood is maintained in the refrigerators at affliated hospitals (Tr. 2696) but title is retained in Community until transfusion to the patient is made (Tr. 2558, 2560, 2697). Community assumes the risk of blood becoming outdated after the passage of 21 days (Tr. 2730-31) and, thus, not available for tranfusion (RF 162). On transfusion, Community charges the contracting hospital a replacement fee of $25 and a processing fee of $9.00 (Tr. 2558), This the hospital passes on to the patient plus whatever laboratory or transfusion fee which its hospital laboratory charges (see RX 126 a-b). The replacement fee of $25 can be eliminated by the recipient presenting a donor at Community or through supplying a donor at any other blood bank which will transfer credit through the American Association of Blood Banks' national clearing house system (Tr. 2565). If the recipient is a member of a predeposit group with a Community affliation or is entitled to Red Cross blood, Community win cancel the replacement fee (Tr. 2573-6; RF 163) and the $9 processing fee will be eliminated if a second pint of blood is supplied by a donor (Tr, 2565 2569; RF 164).

e. The provisions of the Community hospital contract is , COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC.. ET AL. 765 728 Initial Dccision couched in terms of a commercial transaction the hospital agrees. . . to pay in the normal course of business the net amount of the invoices. . . the bank agrees to promptly forward to the hospital any credits. . . ." Where a credit is received after the patient is discharged . . . hospital agrees to refund the credit to the patient by check." (CX 233.

f. The contract with hospitals which act as drawing stations (CX 234) also contains language comparable to that used in business transactions of bargain and sale rather than loan. The personnel of such hospitals are paid by Community when engaged in drawing blood and are subject to yearly retraining by it. g. In addition to its own drawing station and to the hospital drawing stations, Community operates a mobile unit which is set up at factories, churches, etc., in Kansas and in Missouri for the purpose of the convenience of blood donors (e. CX 465 in camera, p. 7).

h. In the operation of its laboratory, Community performs a number of tests in addition to those required by National Institutes of Health regulations (Tl' 2830 39). It also maintains a file on rare blood donors (CX 465 in camera). It performs special laboratory testing pl')cedures and consults on difficult cross match problems (Tr. 2844- , 3621 , 3681 82). It trains medical technologists, students and resident physicians in blood banking procedures (Tr. 2844 , 2876 , 3623).

i. In the operation of its donor area, Community adopts standanls of procedure more stringent than are required by National Institutes of Health standards for the benefit of the donor (Tr. 2842-43; RX 69, 70 , 71).

.i. Community maintains membership in the American Association of Blood Banks and the North Central Clearing House. It also contracts with certain American Red Cross Chapters for the supply of blood to patients to whom the Red Cross has an obligation to supply blood. As to such blood no charge can be made under Red Cross regulations but a processing fee of $6 is charged by Red Cross and Community in turn charges a $9 fee to the hospitals (Tr. 2574).

k. In the early stages, the percentage of paid donors reached Tr. possibly 40% (Tr. 2566). In 1962 it was 25%, (CX 465-a; 2566) and in the intervening year, 1960, reached a low point of 16. 97'0 (CX463 4).

21. Area Hospital Association in its certificate of incorporation filed May 14, 1954, among other matters, was authorized: _ 766 FEDERAL TRADE COMMISSIO!\ DECISIONS Initial Decision 70 F. T. * * * To measure and evaluate the present and future requirements of the area for hospital services, to assist in the procurement and training of necessary personnel and to fogier understanding and cooperation between hospital'! , the medical and para-medical g Oppo and the public. * * * To act as an agency and instl'mentality for or in cooperation with other non-profit organizations, in the general public interest, to provide and extend comprehensive and cordinated planning and financing to strengthen and improve medical care, facilities and services in the area. To do any and all things necessary, proper and consistent with the accomplishment and performance of the above stated purposes. (Emphasis supplied.) (RX 2. 22. Area Hospital Association derives all of its funds for operations solely from grants, loans, gifts and dues of member hospitals (Tr. 705). It serves as an agency to make studies and surveys, co11acts, interprets and analyzes data in the field of hospital activities (Tr. 5101) in the Kansas City area, such as: the adoption of a master plan or program (RX 149 a-k; Tr. 5288), the Community Blood Bank, disaster planning for the four principal municipalities and 83 lesser ones in the area (Tr. 5309), obsoleseence of area hospitals (Tr. 5093), utilization of hospitals (Tr. 5321), hospital costs and patient care, nurse and hospital employee training and recruiting (Tr. 5333-34), and many other similar programs and projects listed in RX 203. It supplies such studies and reports to about 1 000 agencies including hospitals (Tr. 5103, 5295), city and state offcials, the United States Public Health Service (Tr. 5336-37), planning agencies, universities and health information foundations. No charge is made for such reports (Tr. 5338).

23. Participation by hospitals in Area Hospital Association is voluntary (Tr. 5106), Each hospital member is free to follow or reject any matter studied and submitted by Area Hospital Association (Tr. 5369, 5444, 5484). Area Hospital Association has no legal authority (RX 2) to make or direct any policy or decision for any individual hospital (Tr. 712, 4552). All persons serving Area Hospital Association serve without compensation except the small paid staff (Tr. 5060, 8466).

24. Area Hospital Association and its predecessor, its Committees, and its president participated, as hereinafter set forth, in the formation of Community and in the resolving of the conflicting interests and plans of doctors, administrators, pathologists and the public. It continues to nominate the hospital members of the corporate body of Community. On at least two occasions, one involving an infant feeding supplier and the other Community, Area Hospital Association sought to pass on the qualifications of COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 767 728 Initial Decision an enterprise to serve its hospital members. (Tr. 6J4 717; 5044-5187; 5287-5458. ) As heretofore pointed out, Community realizes $3 per pint on Red Cross blood above its payment to Red Cross and either $6 or $16 per pint on all replacements given for the purpose of removing a $9 processing fee dependent upon whether the calculation is made using the replacement fee of $25 or the donor fee of $15 as the minuend.

25. There are 43 member hospitals of Area Hospital Association: 9 located in Missouri and 3 in Kansas are instrumentalities of federal, state, county 01' local governments; 21 are incorporated as religious and charitable associations under Chapter 352 of the Revised Statutes of the General Not-for-Profit Corporation Law, Chapter 355; 8 are incorporated under Articles 29 or J 7 of Chapter 17 of the General Statutes of Kansas. Two member hospitals, Thompson, Brumm and Knepper Clinic Hospital (St. Joseph) and WarrensbUlg Medical Center, Inc. , (Warrensburg, Missouri) are organized as proprietary corporations. Except for the two named corporations, no offcer, director trustee, or corporate member of the hospital members has ever received, or can receive, any profit or thing of value (except reimbursement for expenses actually incurred) from any of those hospital members (Tr. 8466).

The Subject Matter of the Alleged Restraint 26. There is no dispute concerning the physical natUle of blood or of the fluid used in blood transfusions. Nor is there any dispute that human whole blood can only be produced by a human being and that the transfusion of blood is fraught with many dangers some as a result of incompatibility between the blood of the donor and others as the result of disease 01' sensitivities transmitted. Care in the selection of the donor, care in the drawing of the blood, its propel' identification and storage and proper cross matching to determine compatibility are all matters which both sides regard as essential. (See CF pp. J28-130; CX 244; RF 73. ) Improper cross matching can result in a fatal reaction in the recipient (Tr. 3547-9; RX 135, p. 5J). 27. It is common ground that the fluid called whole blood and used in transfusing a human being consists of live human blood which has been collected from the vein of a donor in a bowe or other sterile container. The container has been prefilled to 670 2570 of its useable capacity with an anticoagulant fluid (either ADC or Heparin depending on the use for the blood and the Initial Decision 70 F. T. length of storage desired). (See CX 243 , p, 51. ) This mixture is essential to feed the blood during storage and to prevent coagulation which would result within minutes if the blood were not so diluted (Tr. I063), In the ADC solution the blood remains viable and can be used within 21 days if properly refrigerated (Tr. 4069, 4083; RX 136, p. 60). In the Heparin solution it win tend to coagulate within 48 hours (RX 136, p. 45). 28. Standards for the drawing of blood, its storage, the admixtures to be used with it, its marking and testing have been prescribed in Public Health Service Regulations (CX 243, pp. 50 19, , 15- , 7-8). Standards have also been prescribed by Joint Blood Council, Inc., and American Association of B100d Banks (AABB) (RX 135) and a Handbook of Technical Methods and Procedures has been produced by the latter (RX 136). Much more detail is found in the Handbook than in the Public Health Service Standard which is primarily concerned with laying down general principles to insure the safety of the product for interstate shipment. The greater detail in the Handbook and the AABB Standards are primarily designed to particularize procedures within the generalizations laid down and to insure the health of the donor (Tr. 3787- , 4085-88).

29. Persons engaged in transmitting blood across state lines are required to be licensed by the National Institutes of Health as to the product produced and the establishment in which it is produced (PH Stip" Tl' , 1174-81). Licenses are issued only after inspection repeated once a year or oftener (Tr. 1196-1199; 1966-67). The inspectors exercise their judgment and that judgment is reviewed before licenses are issued (Tr. 1212-13). Formal education of personnel is, however, not necessarily the criterion for issuance (Tl' 1204- 1214), 30, Both Community and the two commercial banks (Midwest and World) operating in the Kansas City area have received appropriate licenses (CX 1 , 2, PH Stip. , CX 3, 243). Respondents produced technical proof concerning the nature of blood, a detailed description of the blood grouping systems, the incjdence of particular groups in various races, the problems 01' heredity and of maniage of persons with incompatable blood types (including blue babies), the specific operations involved in storage, blood typing and cross matching and the effects of incompatible bloods or bloods with varying sensitivities. In large measure these technical descriptions were presented by respondent Hilhard Cohen (Tr, 3490-3694; 3751-3779; 3873-3890) with the aid COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 769 728 Initial Decision of tables and enlarged color microphotographs (RX 101-124). This presentation was both clear and convincing and forms a background of information which was most useful to the hearing examiner in understanding the terms used by the other technical witnesses and the procedures described. Respondents' proposed findings with respect to these matters, while they appear to the hearing examiner not to be essential to a decision in this proceeding, reflect with accuracy the technical discussions. They include the following proposed findings: RF 49, 50 , 51 , 52 , 53 , 54, 55, 56 , 58, 59, 60, 6I, 62, 63, 64, 65, 66, 67, 68 , 69, 70, 71 , which would have been found in terms had it been considered necessary. 31. The following statements in large measure suggested respondents' proposed findings relate, among other things, to their contention that each of the steps from the taking of the medical history and the preparation for the puncture of the donor s vein to the administering of the drawn blood to the recipient, constitutes the practice of medicine and thus is not trade or commerce (E. 3809-3810. ) They also relate to the public interest in this proceeding. (The hearing examiner does not adopt respondents' contention and reaches the contrary factual conclusion that a majority of the steps, while they must be careful11y performed, constitutes the preparation of a product capable of sale and transmission in interstate commerce under proper safeguards (CX 3, 243). The basis for such contrary factual conclusion is the administrative practice of the National Institutes of Health which, pursuant to its interpretation of its statute, issues licenses to blood banks who are in the commercial field and regards technical excellence of personnel, whether or not obtained through the issuance of a degree or certification, cor. ;rolling in their determination whether or not a license should be issued (CX 243, Tr. 1204-1216). The medical practice properly relates to a physician determining the desirability of the particular source, whether further tests are to be required on properly labeled blood, and whether there should be a transfusion at a11 (see Tr. 1211). a. Because of the hazard of transfusion reactions, the correct grouping and typing of blood to be used in transfusion therapy is of the utmost importance (Tr. 4075-77; 4282-83). b. If blood of a different group from that of the blood group of the recipient is transfused, a hemolytic transfusion reaction may result. Any transfusion reaction due to incompatible bloods may be dangerous and in some instances the reaetion may be fatal (Tr. 3547-49; RX 136, p. 51).

770 FEDERAL 'TRADE COMMISSION DECISIONS Initial Decision 70 F. T. c. The grouping and typing of blood is a compiex process that must be done by properly trained personnel. (CX 243; Tr. 3647- 3653, 4816-17.

d. The proper selection of the donor of blood for transfusion therapy is of paramount importance hom the standpoint of the individual receiving the blood (Tr. 3794-3800, 4270- , 4825; CX 243). This is so not only because of incompatibiliy and transfusion reactions but also because diseases and allergies may be transmitted to the recipient by the blood infused (Tr. 3799-3800 4271) .

e. One of the most seriolls disease transmission problems in transfusion therapy is that of serum hepatitis, one of the forms of viral hepatitis (Tr. 3648- , 3800, 3924: CX 243). f, There is no single test known to medical science at this time by which the presence or absence of the hepatitis virus in human blood to be used for transfusion therapy can be detected with a degree of certainty (Tr. 3722, 4072). Liver malfunction can, however, be cheaply ascertained (Tr. 3553; CX 142). A medical history, including any report of the donor s having had hepatitis or jiveI' disease 01' having been jaundiced is the usual method which donors whose blood might transmit the hepatitis virus al' sought to be excluded (Tr. 3722, 5009), g. Because of the danger of hepatitis being transmitted to the recipient of a blood transfusion, a person who hats a history of hepatitis, jaundice or liver disease is disqualified as a blood donor (CX 243, p. 50; RX 136, p. 2).

h, The taking of the medical history from a potential blood donor is thus an important function that should be performed by a person who has received adequate training (Tr. 1204-1216). Some experts contend that medical training is essential (Tr. 3793-94) .

i. The value and reliability of a medical history taken from a potential blood donor depends, to a very great degree, upon the integrity, understanding and motivation of the donor (Tr. 3647-48; RX 136, p, 1; Tr. 7748).

j. Some experts contend that where the donor is of the "skidrow" type receiving 'a monetary consideration for giving his blood, the risk of an incomplete or inaccurate medical history is enhanced (Tr. 3799-3800).

32. Various studies relating to the incidence and fatal effects of hepatitis were presented to the hearing examiner through their authors or coauthors (CX 137-138, 140 , 142, 127-128). It is ap- COMMUNITY BLOOD BAXK, KANSAS CITY AREA, INC., ET AL. 771 728 Initial Decision parent from these articles and from the testimony that the existence of hepatitis virus in any given person cannot be determined with certainty. A healthy canier could not be exposed by taking his history no matter how skillfully. Moreover, science has not produced a reliable test for viral hepatitis and the tests which indicate liver malfunction are RuffcientJy misleading so that a large percentage of the apparently healthy population, in the neighborhood of one-third, should be exc:uded if these were relied upon. One test, the injection of blood from a suspected canier into a volunteer healthy prison inmate, caus€CI such serious results to the inmates that research of this type was discontinued. 33. On the information collected and the statistical studies performed by the experts who testified, the following factual conclusiems appeal' probable:

a. Narcotics addicts tend to have a very high incidence of hepatitis presumably because of the common use of unsterile injection instruments (T,., 3930, 3720: RX 141). b, Malnutrition due to chronic alcoholism or to other causes tends to make a person susceptible to hepatitis (RX 140). c. Donors \vho W€l'e institutionalized either in dormitories or Pl' isons presented a greater risk of transmittng hepatitis than those having a more healthy environment (RX 127, p, 457, RX 140) .

d. Persons from such unhealthy environments are more apt to be aIcoholics and narcotics users, or to suffer from maJnutl'ition and are thus more likely to be chronic caniel's of viral hepatitis than persons from less cl"wded and better nOUlished groups (RX 142) , e. IHany paid donors come from such unhealthy environments (RX 142).

f. Even persons from healthy backgrounds and in an economic status where they are apt to be considered substantial citizens who show no clinical abnormalities suggestive of hepatic disease or the canier state, have been established to be cal'iers (RX 140) .

g. Homeless men, sometimes described as of the skid-row type who have been institutionalized or are chronic alcoholics 01' drug addicts, or intimately associated with such addicts, presumably present a greater risk of being carriers of hepatitis than persons from more fortunate economic circumstances (RX 140-142). 2\Iany persons know!edgcable in the field of human blood and transfusion therapy take a firm position that the voluntary, fam- ) . . . . Initial Decision 70 F. T. ily type of blood donor is a much safer donor than the paid donor from low economic or social groups, so far as the incidence and risk of post transfusion serum hepatitis is concerned (Tr. 3799-3800; 3942- , 7357- , 7748).

34. In the practical operation of a blood bank a varying percentage of paid donors are utilized. In the case of Community this at one time probably reached 40% of the total (Tr. 2566) and has been as little as 16. 970 (CX 463, p. 4). Community also has a donor club in Leavenworth Prison. (See CX 412. Midwest and World, although in the early stages of Midwest's operations sought to form donor clubs (see CX 181). In recent times they relied in large part on paid donors many of whom appeared to be of the "skid-row" type (Tr. 8519-8547).

The Existence of Interstate Commerce Having decided that the facts do not support the contention that alj the steps included in the transfusion of blood from one person to another are included within the practice of medicine and thus could not be commerce (finding 31 supm), we limit the factual findings under this sub-heading to those relating to the interstate character of respondents' operation and that of the alleged victims.

35. Respondent Community holds a license issued by the National Institutes of Health of the United States Department of Health, Education and Welfare (K.I.H.) and is a member of the North Central District Blood Rank Clearing House (:'CDBRCH) and the American Association of Blood Banks (AABB) (Stip. April 24, 1963, paragraph 24).

36. Hospitals in both the States of Missouri and Kansas procure blood from respondent Community and it transports or ships blood to such hospitals as often as blood is required or ordered. Respondent Community also ships blood to other blood banks outside the State of Missouri and on occasion receives blood from blood banks outside the State of Missouri through ~CDBBCH (Stip. April 24, 1963, paragraph 25) or from the Red Cross (RX 464, 465) or by direct purchase (RX 348, 349, 357). 37. Midwest Blood Bank is licensed by :'. I.H. (CX 1 and 2), is a member of North Central District Blood Bank Clearing House (CX JO), and has shipped blood through such clearing house to many points outside the Kansas City area including the Mayo Clinic in Rochester, Minnesota (RX 274-a). It and its affliate World Blood Bank, have also made direct shipments of blood to COMMUNITY BLOOD BANK, KA!\SAS CITY AREA, INC., ET AL. 773 728 Initial Decision points on the East and West Coasts of the United States and to the Gulf (RX 244 in camera). They have also made substantial shipments from points in Kansas to veterans facilities in Missouri and from points in Missouri to veterans facilities in Kansas (RX 256-257) .

38. In the proposed operation of its donor clubs and blood provider programs, Midwest, World and their affliates, contemplated providing for the shipment of blood from their drawing stations in the Kansas City area to locations in other states throughout the United States (RX 278 A- , 280, 281 , 289, 290, 291 , 294). The Cirtss Sued fls Such 39. As Community admits in its answer, it has a corporate body of thirty-nine; five offcers and foul board members. Its offcers, board members and members of the corporate body have varied from year to year (PH. Stip. ). The offcers, directors and members for one year arc named individually and as representatives of the entire membership (Complaint, par. 1). It would be wholly impracticable to name each member offcer and director who served from 1958 to 1962, the date of the service of the Complaint (see RX 53). Insofar as this proceeding is concerned, each of the offcers, directors and members \vho appeared before the hearing examiner tooJ( consistent positions with respect to the operation of Community and each in their representative capacity as offccrs, directors and members constituted a propel' proportion of those made parties by representation and had consistent interests in no way antagonistic to other members of the class. 40. An examination of the membership roster (CX 163, 164) of Area Hospital Association demonstrates that it is impracticable to name each of the many hundreds of persons listed therein. Its offcers, board members, and members have varied from year to year (PH. Stip. ). The offcers and directors fol one year are named and three of the forty-three hospital members are named (Complaint, par. 1). It would be wholly impractical to name each member offcer and director who served at any time from 1955 to 1962, the date of the senice of the complaint. Service on the association was calculated to bring the existence of this proceeding to the notice of each of the corporate members. Insofar as this proceeding is concerned, the offcers, directors and representatives of members who appeared before the hearing examiner took consistent positions with respect to the operation of Area Hospital Association and each in their representative capacity as offcers, direc- Initial Decision 70 F.

tors and members constituted a proper proportion of those made parties by representation and had consistent interests in no way antagonistic to other members of the class. 41. The hospital members despite the diversity of authority under which they were organized (heretofore set forth in detail finding 2-j) and their wide geographical dispersion each had the same position as members of Area Hospital Association and each was equally responsible as a member for its operation and the action which it took and which wi1 hereafter be detailed. BACKGROUND OF THE ALLEGED CONSPIRACY Each of the parties offered extensive proof concerning the events which preceded the opening of the commercial blood bank in Kansas City, Missouri, during 1955. It was variously known as Jackson County Blood and Plasma Service (Tr. 6736), Midwest Blood Bank and Plasma Center, and World Blood Bank (herein. after coj1ectively referred to as Midwest except where special emphasis may be placed on one of the organizations). Complaint counsel claims this proof shows purpose, motive and intent and respondents, that it shows a good faith if lethargic attempt to get the best possible blood supply for Kansas City (Final Argument). The foJ1owing brief recitation seems adequate to this decision. The Red Cross P,'oJJosals 42. As early as 1947, foJ1owing the conclusion of World War II there was some effort to continue the operation of the Kansas City Defense Blood Bank by the opening of a Regional Red Cross Blood Center which would operate for the benefit of the community rather than solely for the Armed Services. Efforts along this line cantin ued up until a Defense Blood Center was again commenced for the purpose of supporting the Korean emergency effort (CX 324-344, 357) .

43. FoJ1owing the conclusion of the Korean emergency, there was again discussion of the opening of a Red Cross regional blood center as a continuation of thc Defense Blood Center in the Kansas City area. On August 6, 1953, the Red Cross passed a resolution urging that this be done (CX 323). This action foJ1owed a number of instances in which requests \were made to the Red Cross to commence the supply of blood for civilian use (CX 345-353). Kone of these efforts was successful and in August 1953 the Jackson County Medical Society formed a community blood bank committee (CX 369). There was some discussion con- COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 775 728 Initial Decision cerning joint sponsorship of a blood bank by the medical society and the Red Cross which was unsuccessful (RX 329) and in December 1953 a non-profit corporation, then known as the Community Blood Bank of ,Jackson County, was organized. It was later completely reorganized to include a greater area and more widespread representation and changed its name to Community Blood Bank of the Kansas City Area, Inc., (Community) (RX 329 z; Tr. 4323 , 4324, 4526-27).

44. Cooperation between the Red Cross and Community did not materialize, among other reasons, because: (a) Red Cross would not authorize participation by its chapter in a community blood bank that made a charge of any kind to the recipient of the blood (RX 19; CX 354 358 , 359; Tr. 1641 1647) ; (b) the use of the Red CI'SS Building with a charge for replacement and processing fee, it ,vas felt, might result in misunderstanding the Red Cross attitude that blood should be "free (Tr. 1646-1647) ;

(c) there was some objection to the downtown location of the Red Cross Building from a civilian defense point of view (CX 358) ;

(d) there \were persons who were concerned about an adverse reaction to Red Cross by former servicemen (CX 354 k) ; (e) some of those concerned with the community blood bank proposal believed that the Red Cross policy of not permitting replacement fees would result in insuffcient replacements (Tr. 5475) ;

(f) the pathologists who opemted hospital blood banks in Kansas City wanted local, not Washington control. Spomclic Discussions of Centra! Bloocl B(m7c-1953 1955 45. There were sporadic discussions concerning the proposal for the establishment of a community blood bank in Jackson County from December 1953 through the spring of 1955 by the medical society and by the administrative group of the hospitals (see RX 113, 127) because it was recognized that a community bank would better be able to handle prcpayment and group donor plans than the individual hospitals (CX 598). A Community Studies Report was considered during this period (RX 365). Community Studies, Inc., was a group which had prepared a number of factual studies for Area Hospital Association and for eleemosynary foundations and trust funds operating in the area. A formal request for cooperation between the Medical Societies and the Initial Decision 70 F. T. Area Hospital Association to support the Community Studies Program was not made however until June of 1955 (RX 161 d). Community PlrLns for Blood BrLl1k Stcdled 46. Although discussions about the formation of a community blood bank had been going on sporadically since Community was organized in 1953, at the time of the formation of Midwest in May 1955 the plans of the Medical Society to form a blood bank through Community in its then form had reached a low ebb. 47. Leslie Reid, the Chairman of the Administrative Council of Area Hospital Association, reported to the February 23 , 1955 meeting-: The Blood Bank Committee had met twice during- Fcbmary 1955, once with representatives of the Jackson County Medical Society. The Committee had reiterated its position that increased cost of blood to the public through a community blood bank would be a very diffcult factor and that industry possibly had some misunderstandings regarding the advantages of a community blood bank. The entire matter of the proposed bank was to be re-submitted to the executive council of the Jackson County Medical Society for further consideration, and that if it was decided the project would not go forward, a joint statement would be made to the press by the :\ledical Society and the Hospital Association (CX 170; RF. 124).

48. At the March 1955 meeting Reid reported that the matter was in status quo (CX 17I; RF 127) 49. Dr. Carroll P. Hungate, President of Community, on :varch 1955 had sought the aid of Community Studies, Inc., to make a survey to determine how best the blood needs of the Kansas City area could be fulfilled (RX 365, RF 125). As Miss ,Jenkins the executive secretary of Area Hospital Association, reported in her confidential memorandum to the Blood Bank Committee in January in 1956, there were no negotiations between February , 1955 and June 1955 regarding blood banking between Community and Area Hospital Association (RX 161-d) and there had been comments about the alleged failure of hospitals and pathologists to cooperate with the Medical Society in implementing Community (RX 161-a).

The Basses Stn?'t Their Blood Bank: ,'rly1.955 50. Prior to 1955, there was no blood bank not affliated with a hospital and operated for pl'fit for its owners in the Kansas City area (Tr. 1624, 1637; PH Stip. 1'1' 7994). Discussion concerning formation of such a bank had been discouraging (Tr. 7308). COMMI!NITY BLOOD BANK, KANSAS CITY AREA , INC., ET AL. 777 728 Initial Decision 5I. A partnership composed of Francis H. Bass, Margaret P. Bass, and H. W. Dolph and his wife (Tr. 6750-51) commenced operation as a commercial blood bank known as Jackson County Blood & Plasma Service at 2904 Troost A venue, Kansas City, :Vlissomi, on :V1ay 17, 1955 (Tr. 67;J6). This later became known as Midwest.

52. Mrs. Bass had worked in the offce of Dr. Wallace Graham prior to 1940 or 1941 (Tr. 6739) and having found from a discussion which he had with a retired doctor that there was no ccntral blood bank operating in Kansas City (Tr. 6723-6724, 6731) and having been an observer in the latter part of 1954 of a blood bank in Houston, Texas (Tr. 6716), Mrs. Bass and her husband, Francis H. Bass, decided to open a blood bank in Kansas City. 53. The Dolphs became financially interested in contributing to the capital of the bank as a result of an advertisement for an investment opportunity (Tr. 6750-51). Neither the Dolphs nor Mr. Bass had had any previous experience in the medical field (Tr. 6754, 6692, 6700) .

54. Dr. J. W. Graham, the father of the physician with whom Mrs. Bass had been associated, volunteered to be the medical director of the blood bank (Tr. 6739-6744) when Mrs. Bass talked with him about it and he became the original medical director (Tr. 6739).

55. Mr. Bass was not a\vare of the fact that Community was in existence until after May 16, 1955 (Tr. 6735, 6736). ,"0 effort was made prior to the opening of Midwest to secure other local medicolor hospital sponsorship (Tr. 6732- , 7993). Mrs. Bass, however, sought membership in the American Association of Blood Banks in April 1955 (CX 13) and invited Dr. Buhler to call on her at the blood bank on May 10, 1955 sometime before it opened on May 17, 1955 (CX 14).

56. No investigation was made concerning Dr. Graham s special qualifications to act in a blood bank (Tr. 6734-36). 57. The medical profession was informed of the opening of Jackson County Blood and Plasma Service (Midwest) by letter dated May 17, 1955 which was circulated to the medical profession and to the hospital administrators (Tr. 6756, 6761). 58. On opening, Midwest employed a medical technician, a nurse and a deliveryman. Original proposed charges were 825 per unit of positive bloods and 35 per unit of negative hlood with no replacement required. There was a credit on a one-for-one basis Initial Decision 70 F.

of $10 for positive bloods and $15 on negative, and $20 on a twofor-one basis and cancellation of the entire charge if replacement was made on a 3-for-1 basis (RX 277). Dr. J. W. Graham, the Medical Director, had been a general practitioner in the Kansas City area, was 78 years old and had received no special training in the field of hematology and immunohematology (Tr. 7309 7507 7987) .

FACTS BEARING ON EXISTENCE OF CONSPIRACY CHARGED The Charge Pleaded 59. Paraphrasing the facts stated in Paragraph Seven of the Complaint, the combination or conspiracy allegedly commenced during 1955 with Area Hospital Assodation and its offcials, pathologists, and two hospital executives plus unknown persons entering into and carrying out "the agreement, understanding, combination or planned course of action or course of dealing to hamper restrict and restrain the distribution of blood in interstate commerce. " With the incorporation of Community about April 5 1957 (sick, al1 respondents joined using Community as an aid. The means of carrying out the conspiracy alleged included: (a) The agreement not to use Midwest blood or to permit it to be used 01' accepted as ,' eplacement of blood furnished by Community;

(b) Refusal to use Midwest blood or to permit it to be used in the Kansas City area;

(c) Advice to prospective customers that Midwest blood would not be accepted;

(d) Advice to North Central Blood Bank Clearing House (NCBBCH) and American Association of Blood Banks (AABB) that respondents had agreed 01' had a policy not to use such blood. The charge was denied jn respondents' answers. 60. During the trial the emphasis appeared to shift as the evidence unfolded, It was established that Community was incorporated in 1953 long before the date charged in the complaint and before 'iJidwest commenced to do business. Moreover, many of the refusals to accept Midwest blood were refusals to accept direct shipments with a statement that credit through the NCBBCH would be accepted, 61. Although opportunity was afforded to amend the language of the complaint to conform to the pl"of, counsel declined to specify how the complaint should be amended stating in their notice , COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 779 728 Initial Decision dated October 30, 1963 it being counsel's view that the present complaint is satisfactory.

In ensuing headings we shall set forth the facts supporting the charge of conspiracy and Jater the position of respondents that the doctors and hospitals were merely following their individual decisions without combination or conspiracy because of a fundamental disagreement with the ethics and methods of procedure as well as the quality of blood supplied by Midwest. By reason of the fact that there was no direct proof available to establish the existence of the combination and conspiracy, the proof offered by counsel supporting the complaint was necessarily circumstantial. Accordingly, the division of the evidence under ensuing headings and subheadings does not mean that any of the evidence can be ignored in determining the existence or lack of existence of the conspiracy charged. All evidence received must be and has been considered although it has been impossible to even summarize it all and still keep this initial decision within reasonable bounds.

Facts Supporting Charge of COrlpiracy or Planned Course of Action 111 otivat'on 62. Apparent throughout the hearings was the adverse reaction by the medical profession, as exemplified by the pathologists and others called as witnesses, to the advertisements, the policies and the personalities engaged in operating Midwest. The original announcement of Dr. J. W. Graham as medical director was made on lVlay 17, 1955 (RX 276). This was resented by the pathologists who felt that a person skilled in pathology or hematology was required to run a blood bank (Tr. 7986). Subsequent advertisements or letters, widely distributed, attacked the medical profession practice of looking to relatives of persons hospitalized for replacements and praised Midwest's qualifications and effciency in a manner not considered appropriate or ethical (RX 278-285). Resented also was the announcement in a newspaper advertisement of Midwest's acceptance as a member in the National Blood Bank Clearing House Program and the implied criticism of the replacement plans allegedly existing among the hospitals (RX 280-281). The physicians steeped in the medical ethic against all advertising were revolted by the display advertising of Midwest (RX 284). On a visit to the Midwest Blood Bank, moreover, Dr. Buhler felt he had been accused of stealing papers (Tr. 7997). _ ..

780 FEDERAL TRADE COMMISSION DECISIO:\S Initial Decision 70 F.

63. The American Association of Blood Banks in its publication criticized the use of so-called insurance plans (CX 25). The American Medical Association and the Red Cross both adopted policies to prevent any "traffcking in blood" (RX 319). Many of the pathologists took the position that the sale of blood was immoral. Dr. Buhler, for example, testified that it was not consistent with the dignity of the human being. There was thus some motivation for doctors holding such beliefs not only to refuse to deal with such an organization themselves but to discuss their attitude with others with a consequent restraint on the business of Midwest.

Meetinq of Pathologists anel Area Hospital Association Reaction - - n in ?via?! 1955 64. Dr. Buhler testified (by refening to the handwritten minute book) about a meeting of the Kansas City Society of Pathologists held l\lay 18, 1955 (Tr. 8074, 8077). (a) At that meeting Dr. Kerr told about the newly formed Jackson County Blood Bank (Midwest) which had opened the day before. Midwest's blood procurement policy including the required unit replacement or choice of replacement by professional donors was also discussed. Dr. Kerr moved that the Society request a meeting \'with hospital administrators and pathologists to discuss blood banking programs under the auspices of the Area Hospital Association.

(b) Dr. IIil1iard Cohen seconded this motion and it was unanimously canied ('fr. 8075).

(c) Dr. Firminger discussed the establishment of a blood bank account agency to facilitate the exchange of blood between the city hospitals.

(d) Dr. Buhler recalled that this was probably the origination of a loose federation of the existing hospital blood banks because Dr. Cohen volunteered, effective May 23 , J 955, to furnish the service necessary to operate the call service for the first month. Parenthetically, this system involved each hospital calling the central hospital and giving an inventory. Then any hospital bank requiring a rare type blood would know where to get it. At the same meeting, Dr. Lapi presented problems as chairman of the Missouri State Blood Bank and concerning the North Central Clearing House (Tr. 8077).

65. It appears from the foregoing that within a day following the announcement by Midwest of its going into business, the COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 781 728 Initial Decision pathologists in the area at their meeting reacted by perfecting an arrangement for the exchange of blood between existing hospital blood banks, discussed the character of operation of Midwest, and heard from Dr. Lapi, the Missouri representative to the Korth Central Blood Bank Clearing House (~CDBB). 66. When the pathologists, on getting a report about the formation of Midwest, decided upon the establishment of an informal telephone check system to be run the first month by Dr. Hilliard Cohen at Menorah (1'1' . 8074-76), and sought a discussion, there was a relatively rapid reaction by the Area Hospital Association. Administrative Council Chairman, Leslie D. Reid, reported to the 19 hospitals represented e at a meeting held :\lay 25 , 1955, that he too had been approached by a commercial bank and in connection with the discussion described an improvement in the reciprocity program between hospitals wherein a telephone check is made each morning of supplies and types of blood in the several hospital banks (CX 172; RF 128).

67. With this improved arrangement, the necessity for seeking blood from a commercial source was reduced because blood of all types was made readily available from other hospital banks (Tr. 7338) .

Alleged Admissions of Joint PrLtholo,gist nnd HospitrL! Action by Respondents Helwig and Lapi 68. There arc two written reports of statements allegedly made by Doctors Helwig- and Lapi which would indicate that an agreement had been reached among pathologists and hospitals to boy- The minutes ist the falla'-vin)!;

Baptist Memorial Hospita! Bethany Hospital Blue Cross Cushing :?Iemorial Hospital E.xr.elsior Springs HO~lJital General J-osvital HalTisonviJle Memorial Indepenuence San:tarium and Ho pita:

Lexington I\'1emorial HosIJita;

yIcTIm"ab ",r('dica Centpi Pl'vidence HO j)ital St. .John HoslJitnl St. Joseph's HosJ,ital St. V.lke s Ho pital St. lYbl'g-arets HosjJital SmithyjJc Community Hospital Trinity Lutheran Hospital f:t. .J osejJh' Kansas Univer ity Medjc j Center (CX In-a).

, , Initial Dccision 70 F. T. cott Midwest at some time prior to November 1955 (CX 160 598). Respondents involved in both instances took the stand and ga ve sworn testimony concerning the statements. 69. The first statement is contained in a Field Report by C. T. Snavely, Attol'ey Adviser of the Kansas City Branch Offce of the Federal Trade Commission (CX 598 a-b) . The Field Report is dated October 4, 1956 and records an interview with Dr. Ferdinand C. Helwig, pathologist at St. Luke s Hospital, held October\' , 1956. This report was offered by complaint counsel at the suggestion of one of respondents' counsel who stated he had no objection to it (Tr. 7342). Mr. Snavely was present during the hearings and would have been available to testify concerning the contents of his report had objection been made to it. In view of this failure to object and in view of the date of the report, it is considered reliable. Dr. Helwig was unable to recall that he had talked to Mr. Snavely in 1956 (CX 598) but indicated he would not deny he had done so. He recalled a second interview in 1961 (CX 599) because it took up his entire after'oon (7333- 34). 70. One of the paragraphs in Mr. Snavely s report of 1956 reads as follows (CX 598) :

Informant sbtcd t.hat he belongs to both the Kansas City and the :\1missouri Patllo1ogica1 Societies. About h\"o years ago at a meeting of the Kansas City Pathological Society he said\ thr1'; cas dl'((uJ1 up a Tesolution stating the Assoc/utimJ S p?'ef(')' ('!cr for nshlrt 1' :plucelllellt donors 1'(/thel' than getting blood froli commercial blood Im'ilk8 because the Association was not 1n accord 'With trol/Jc h, lm1/on blood. The resolution stated, ho\veve1' , that commercial blood should be Llsed in emergencies. He said that he kno\.\s of no one who has tried to "do in " the local commercial blood bank and that he knows of no conspiracy against it and no concerted action to restrain its trade in any way, (eX 598. ) ERmphasis supplied.

71. ln his 1961 Field Report (CX 599), also admitted without objection (Tr. 7342), 111'. Snavely stated: When apprised of the matter of the charges in subject matter informant said That is about the most ridiculous thing' I ever heard of " Indicating that similar charges had been made before he said "Why this harassment? Its be( n Harassment Harassment Harassment!" (eX 599 a) The 1961 Field Report also stated in part: In answer to inquiry informant said that " ve been very careful not to make derogatory statements" about or even have discussions about l\lidwest in mcetings because \Ve don t \vant a kg'al hassle He thought, hon'eve' t.hat must pathologists 1vmdd pnltT blood b' om 1!ohtnt.a?'y donors over' bought blood because voluntary donors are more likely to tell the truth about previous , , , COMMUNITY BLOOD BANK, KANSAS CITY AREA , INC., ET AL. 783 728 Initial Decision diseases, etc. He said further that he didn t know "\vhere Midwest blood comes from but he had heard that Midwest 'i- a comrnercial blood bank, that it was orgnnlzed f01' p1' ont. On the other hand, no proJlt was made by CBB as all revenue is put back into the operation. In ans.wer to inquiry as to why CBB blood apparently costs patients $14. 00 a pint more than Midwest blood, informant said that 11 let your figure that out" and although he reiterated he would say nothing against Midwest, he thought there is " such a thing as skid row blood". Aside from all this he repeated he was happy with "what we have in Community Blood Bank" , (Emphasis supplied. Finally, informant emphasized that he had not the slightest knowledge that there was any element of conspiracy on the part of proposed respondents to act against Midwest (CX 599 c & d). 72. In his testimony, Dr. Helwig, on direct examination, stated when asked whether he had agreed with anyone not to use blood obtained from Midwest or permit it to be used in hospitals: I am sure I "\"ould have to admit this has been discussed as to whether or not we should or shouldn t. I think I may have discussed it with another pathologist. I am sure I have at some time or another hut I have never lined up against anybody or lined us with anybody against anybody, we had our bank ve had a bank that was satisfactory, .we were pleased with it, I don remember ever lining up to boycott, if that is the word you want, another bank. (Tr. 7320.

Asked whether there was any occasion on which he was asked to agree not to use Midwest blood, Dr. Helwig said we have, I think, discussed at times with one another that we would use commercial blood in an emergency. " Then after an interruption he said This is not against the Midwest Blood Bank, it was a matter of preferring not to use bloocl that was sold for profit. (Tr. 7320-21.) When asked if he had knowledge of an understanding or agreement between members of the medical profession that they would not obtain blood from Midwest or permit it to be used in the Kansas City area, Dr. Helwig testified: " I don know of any instance which the medical profession went on record of anything of that kind. " (Tr. 7322. ) He thought it was unlikely" that there was any agreement or understanding or plan of action by Area Hospital Association (Tr. 7322) and had certainly never heard of it.

He denied categorically that he had knowledge of any fact that led him to believe that there was any agreement or plan of action or understanding among members of the medical profession or any members of the Area Hospital Association or representatives of Community that Midwest blood would not be permitted to be used in hospitals in the Kansas City area (Tr. 7322-7323) . , Initial Decision 70 F.

73. On cross-examination, with respect to CX 599 a- (Snaves 1961 Field Report), Dr. Helwig said (Tr. 7377) : A. There is just one thing here, I don t believe is correct, that the hospital had used ::Iidw€st Blood before Community Blood Bank got into operation and a meeting of pathologists the only thing J can recall is that it wasn nnything to do with the Midwest Bank that the patholog/:r;ts cdl felt they 11.:mtld pI'eie?' to use only blood that was not being used fm' profit and we certainly ?uoulel not t'll' dow)/ (Ply kind of blood, commercial bank blood 01' any other!' in an eJitel'ge"ilc)j. If we ever used any blood \VC did accept a pint but we never used it. I don t kno"v of a single instance where our hospital ever used any Midwest blood. If we did I am unaware of it. The rest of that is substantially a brief outline of a very much longer intcrvie\v, what he left out I don t kno\v. I remember one thing he did leave out. He asked me specifically if I would be satisfied to take skid row blood myself I said, "Mr. Snavely, would you be satisfied to take skid row blood?" He said That is not what I am asking you " he said, "\Vould you be satisfied?" I said That is not \vhat I am telling you, would you be satistied?" His answer \vas complete quiet h( never answered and neither did 1. In two or three years' time J can t specifi('ally say whether or not those are my exact words or whether-all I know is this was a much longer interview than goes into those three pages, a great deal is Jeft out. Because he was there over two hOUTS and a half and he was busily writing a11 the time. I think this must a surnmary of llis impressions rather than an actual detailed account of what he lsicJ said. I know it ,vas much, much longer that that, \vhat else was said I haven t the remotest 01' foggip.st remembrance. (Emphasis supplied. When questioned on cross-examination he testified (Tr. 7338): Q. Wasn t it agre.ci among the pathologists that they could buy blood from a commercial blood bank in an emergency? A. Surely.

Q. Rut otherwise- A. (Interposing) We had no reason to buy it unless we ran short. We were being supplied by our banks. Of course we would get blood wherever we could get it under cmergeney circumstances.

He then explained that "awful" short-cuts were necessarily taken in real emergencies.

74. In this answer, quoted in finding 73, Dr. Helwig thus establishes that the informal federation, admittedly agreed upon at the :vay 18, 1955 meeting, placed hospitals in a position where they had no reason to buy blood from a commercial bank. The fact that the meeting described in the 1956 Field Report was placed prior to J 955 is not surprising because Dr. Helwig had a poor recollection of dates of events (see Tr. 7337, 7297 , 7350, 7308, 7310 731 1 , 7317). He had, however, a clear recollection that he had personally been opposed to commercial operations in blood and that he had in 1955 felt costs of blood by a community bank would be higher. These statements are in the 1956 Field Report (( COMMlJ1\ITY BLOOD BANK, KANSAS CITY AREA INC. ET AL. 785 728 Initial Decision and are confirmed by Dr. Helwig s testimony or by other records (see Tr. 7328, 7330; ex 169 b).

75. The second statement admitting an agreement not to use Midwest blood and made by a respondent, this time Dr. Lapi, is contained in a typewritten transcription (CX 158) of the stenographic notes taken by Ardyth Cobb, the Executive Secretary of North Central District Blood Bank Clearing House, at a meeting of its board of directors (CX 160) held November 18, 1955. It fol- Jaws:

Report by Dr. Angelo Lapi 1'e Mid West. Blood Bank, Kansas City, Missouri: It is a blood bank established for profit and they (the o"\"ne1') make no excuse abolJt that. Tllat is its avowed plJrpose-to make money. They have a medical director who is a 78 year old practitioner in t01;v"T. His only experience with blood banking is wit.h this blood bank and they have made less than minimal effort to enlist the cooperation of the city hospitals but rather have resorted to methods which are short of coercion and they have used haJ'assing techniques, telephone calls, threats. They are alled with the Better Business Bureau. A man in the division called the families of sev- ('ral of our patients and asked if they needed legal aid to sue our hospital and several of us have been threatened with suit and the hospitals finnflll got togethe1' ,in the UTea nnd issued statement that we 'Uonld buy blood f?"om them only in an C'rnergency but we dld not feel we were .forced to go bel)Ond 1.hat. We have tried to stay within regular bounds and to resped public opinion and we do not want anyone to feel that they arc being denied blood because we will not buy from them. (Emphasis sur!Jlied. The Mid West B.B. "\vas very evasive about "\vhat their plan is, re blood procurement.

The Mid-\Vest B.B. is NIH licensect. Dr. Graham, the director, is the father of a former pnysician to Harry Truman and obtained KIH approval after t"\VQ weeks of operation.

76. Dr. Lapi acknowledged that he had made statements about everything in Mrs. Cobb' s transcript (CX 158, see finding 75) except the statement that the hospitals finally got together in the area and issued a statement that they would buy blood from Midwest only in an emergency "but we did not feel we were forced to go beyond that. " (Tr. 7619.

Dr. Van Pernis, who presided at the meeting of the board of directors on Nobcmber 18, 1955, upon questioning by the hearing examiner, stated that the statements were made but he could not 556). He recall their having been made at that meeting (Tr. 554- Jater denied that they had been made at all (Tr. 3862). 77. Although Dr. Lapi could recall no meeting of the hospitals it is clear that one was held May 25, 1955 and that the loose telephone call federation which the pathologists had augmented in Initial Decision 70 F.

their May 18, 1955 meeting had also been described to the hospitals. This made it generally unnecessary for any hospital to go beyond the other hospitals to get blood (findings 72-74 inclusive) and may very well have been what Dr. Lapi referred to in his November 18, 1955 Board Meeting and failed to recall when he testified.

Doctors Ke1T "nd Buhler Visit ""d Express Dis"pprov"l to Midwest ""d to Other P"thologists of Midwest's Commercial Policy 78. Early in Aprij 1955, the month before Midwest opened for business, Mrs. Bass attempted to secure for it membership in the American Association of Blood Banks (AABB). The Executive Secretary sent her an application (CX 13) and suggested that she might want to make contact with Dr. Victor Buhler, the AABB state representative (Tr. 7984) and Dr. John R. Schenken of Oma- , the district director (Tr. 7984). A carbon copy of the Executive Secretary s letter was sent to Dr. Buhler (Tr. 7981). Mrs. Bass tried unsuccessfully to reach Dr. Buhler several times and then invited him by letter dated May 10, 1956, a week before the blood bank opened, to visit it (CX 14).

79. Apparently, before he visited Midwest, Dr. Buhler received a telephone call from Dr. James Graham, the Medical Director of Midwest (Tr. 7985-7987). Dr. Graham asked if Dr. Buhler did not think it was "wonderful" that the new blood bank was being opened and Dr. Buhler replied that he though it was "terrible. (Tr. 7986. ) He said he thought what was needed was someone knowledgeable and expert in the field of blood banking. " Dr. Graham admitted he had no special training but pointed out that this was not required by NJ. H. regulations. Dr. Buhler said this would not provide the type of blood banking service that iI\ve" (meaning the pathologists associated with St. Margaret' , Providence and General Hospitals with which Dr. Buhler was associated) felt would best serve the community (Tr. 7987). Dr. Buhler felt he was expressing an opinion by virtue of previous contact and previous discussion with the persons who had to do with the administration and direction of blood banks at Providence, St. Margaret's and General Hospital (Tr. 7989) although not specifically relating to Midwest (Tr. 7991).

80. After writing her letter, Mrs. Bass telephoned Dr. Buhler made a date to see him at his offce and called on him to personally invite him to come over to see the new blood bank and to offer suggestions (Tr. 7991-2). In accordance with this invitation , .

Community BLOOD BANK, KANSAS CITY AREA , INC., ET AL. 787 728 Initial Decision Dr. Buhler with Dr. Russen W. Kerr caned on Midwest in late Mayor June 1955, after finding out by telephone that neither the Area Hospital Association nor the Jackson County Medical Society, nor the pathologists with whom he made contact had been told of Midwest's intention to open a bank (Tr. 7993). According to Dr. Buhler s testimony, he and Dr. Kerr were greeted cordially by Mr. and Mrs. Bass and escorted through the facilities; they did not meet the employees (Tr. 7993-4). After the tour Dr. Kerr and he ascertained that this was a commercial enterprise and that they EMidwestJ did intend to buy blood and to sell it to whomever would buy it." (Tr. 7994. ) They quoted $25 for positive blood and $35 for negative but Mr. Bass told Dr. Buhler it was "none of EhisJ my business what they paid the donor for blood" (Tr. 7995). Dr. Buhler testified: " I personany discussed with Mr. and Mrs. Bass my own concept of blood banking and primarily I discussed what I considered the morality of blood banking. I again told them that I felt it was wrong to buy and sen Jiving human tissue for profit ... * we discussed the medical direction of their bank and we indicated ., . ,. that we did not feel .:. '" Dr. Graham qualified to direct the blood bank." (Tr. 7995. Dr. Buhler also discussed replacements and Mr. Bass said didn t feel that this was necessary in the operation of a bank." Dr. Buhler told Mr. Bass he thought the voluntary type of donor was best. As he was going out Dr. Buhler picked up a piece of paper which he thought was informational material add Mrs. Bass reprimanded him for picking it up without permission. He apologized and left (Tr. 7997).

Dr. Buhler denied on direct examination that he had made the remark that he had kept commercial banks out of Kansas City up to that time (Tr. 7998). He could not recall exactly when but within the next few months "I did indicate to some of the pathologists that a commercial blood bank had been established and that Dr. Kerr and I had visited the blood bank and gave them information concerning our discussions while at the blood bank." (Tr. 7999. ) He was quite confident he had made such a report to Dr. Angelo Lapi and bejieved he had told Dr. Hiliard Cohen about it (Tr. 7999, 8000).

Agreeme11t 011 Need for Study by Commu11ity Studies, Inc. of Community, A ree H ospitnl Association nnd Pathologists 81. Around the time of the visit of Dr. Buhler and Dr. Kerr to Midwest and on June 6, 1955, Joseph M. Welsh, the Secretary- , , 788 FEDERAL TRADE C01!MISSION DECISIONS Initial Decision 70 F.

Treasurer of Community, requested Bishop De Lapp of Area Hospital Association, to cooperate in a survey to be made by Community Studies, Inc. (RX 154). At about this time also, the Pathological Society sought advice from Area Hospital Association about the status of Community. Miss .Tenkins replied .Tune 9, 1955 that the project had not been dropped but merely held in abeyance and that Community Studies was making a survey (RX 155; RF 129).

82. On .Tune 2I , 1955, the board of directors of Area Hospital Association was informed by Dr. Kerr that the pathologists were somewhat divided but would welcome the Community Studies report and the board, after considerable discussion, voted to cooperate with the study but not to finance it (RX 157). At the same meeting, Miss .T enkins was made Executive Secretary. This Jimited undertaking for cooperation was communicated to Mr. Welsh of Community by Miss .Tenkins on .Tuly 15, 1955 (RX 156; RF 130).

83. The day of the meeting of the directors of Area Hospital Association Tune 2I , 1955, The Kational Institutes of Health issued Establishment and Product Licenses to Midwest (CX 1 , 2). 84. The following day, June 22 , 1955, a meeting was held of the Administrative Council of Area Hospital Association (CX 173). (The group was composed of hospital administrators. ) Les- Jie D. Reid, the Administrator of St. Luke s Hospital presided. Mr. Reid explained that the meeting had been requested by pathologists of thc Kansas City area for the purpose of discussing various aspects of blood banking. :vr. Heid briefly reviewed the activities of the Association s blood bank committee in meetings with representatives of the Community Blood Bank oJ Jackson County and said that members of the committee considered the proposed budget for the blood bank to be unrealistic and thought the unit cost of blood to the patient would be increased through the Community Blood Bank program. He also advised that Community Studies had been requested to make a study of the best method of blood banking for the community. Dr. Firminger of the L'university of Kansas School of Medicine and President of the Kansas City Society of Pathologists summarized what had taken place in their group, advising that the proposal for a community blood bank appeared to have come to a stalemate. He believed this probably had occurred because the people most canceled in such a project, hospital administrators and pathologists, had not been consulted early enough or taken COM:IUNITY BLOOD BANK, KA!\SAS CITY AREA, INC. , ET AL. 789 728 Initial Decision into the planning phase. Dr. Firminger l' reported that the pathologists' group had had two meetings on the problem of whether there could be a community blood bank. In his opinion, the present blood transfusion charges at some hospitals ,were unrealistic and needed to be re-evalnated in relation to the cost. He stated that the overall cost to the patient of a unit of blood probably would not go down and believed that the public as a whole probably had the impression a profit was being made from blood, Dr. Firminger also stated that several of the pathologists felt there were definite advantages in a community blood bank but others expressed a contrary view. He indicated that if there was a demonstrated need for a central blood bank, those immediately concerned with the operation should be the ones to do the planning. Among the advantages of a central blood banking operation he mentioned, were: 1) greater availability of different blood types; 2) better service to the smaller hospitals where a blood bank was not economically feasible; 3) research. Dr, Firminger then stated that the pathologists had hoped the meeting with the administ.rators would provide a means for informal discussion and exchange of views which had not previously occurred. The follo\ving is a brief summary of rcmarks reported of certain of the pathologists present:

a. Dr. Russell W. Kerr pointed out there was considcrab1e difference of opinion among pathologists regarding a central blood bank \\;ith some feeling that there should b, u('h a bani;: at any cost and othcl' believing it did not eprcscnt an urgent ,Ieee! l)( ('cause the hospitals .wcrc presently conducting a very effcient blood banking operation adequately meeting the needs of the community. Dr, Kerr st.ated that he del)rmed what seenwd to be u nat7:oral 11'6'nl t.owa?'l the outright purchase 0/ blood ?'uthe?' than TejJluc/:ng it in hind. He also pointed out tJw (liffculties in the sUPl' revision of a central blood hank and said acceptance of such a bank by pathologists \vould depend entirely upon the quality of its personnel. (Emphasis supplied. b, Dr, Jack Hill stated that one of the principal advantages of a community blood bank was the deposit of blood by industries, labor organizations and the hke so employees or members could be served without the need for individual replacement. Dr. Hilt cJ.:plrriilecl the in/ani/o! c clwngc 8!Jste'i1J that had ?' ccently been established between all blood brl?lks in Kansa,8 City permitting each h(87)1Iol blovel bunk to k'iimU eJ:acu1J the q/!o'iJUties and 1?J!C8 WiJui1able ,in each blood bwnk at oil times. IIe thought this had very mucn incrrased the effciency of nospital blood bank operations. \Vhile Dr. Hill felt the cost of blood under a community blood bank opcration might be higher, he nevclthcless believed some of the advantages might offset the increased cost, (Emphasis supplied.

c, Dr. Hilliard Cohen advised that the existing- individual hospital blood 790 FEDERAL TRADE CO:vMISSION DECISIONS Initial Decision 70 F. T. banks were a very fine operation \with pathologists having complete confidence in the quality of blood exchanged between banks. Dr. Cohen reviewed some of the background of the Community Blood Bank and said he felt some years ago the pathologists had approved the idea, and in fact, were rather enthusiastic about it, but the matter brought up during the past year had been turned over to a small group within the Medical Society without the full participation of pathologists and administrators. He said a community blood bank was desirable but not necessarily an urgent need at this time and that one of the advantages of a central blood bank would be an elimination of duplication; also that it would be to the advantage of the smaller hospitals which could not economically operate blood banks, and to nmnicipal hospitals which had a problem in obtaining replacements. Further, Dr. Cohen stated, he thought the research function would be of value and that a greater degree of uniformity in charges would result.

d. Dr. Jack Hill then discussed some of the diffculties he envisioned in the organization of the proposed community blood bank and said the matter of increased cost poseo a very diffcult problem. He also said that in his opinion the existing hospital blood bank operation was a highly satisfactory one and there appeared to be no urgent need for a central blood bank. c. Dr. Victor Buhler stated that at municipal hospitals they had been able for the most part, to supply the blood needed and that no one had suffered from Jack of blood; that a community blood bank ought to be able to supply blood at a hnver cost than that prevailing in Kansas City, and that if it "\were possible to obtain a better quality of blood at a lower cost through the community blood bank it \vould be worth undertaking. Near the conclusion of the meeting, Mr. Reid advised that the board of directors of the Area Hospital Association had agreed to cooperate with Community Studies in its research project and that he thought perhaps the pathologists might want to take similar action. It was resolved that the Administrative Council of the Area Hospital Association go on record as favoring cooperation with Community Studies in furnishing whatever information or data it required for the survey (CX 173 a-g; Tr. 7762; RF 131; CF pp. 19 and 20).

Generul Hospitul Refuses Midwest Blood on D1'. Buhle1" S O,.der 85. In the summer of 1955, the supervising blood bank technologist at General Hospital called Dr. Buhler and told him Mr. Bass was there to tender blood. Dr. Buhler testified: " I instructed the technologist by telephone to inform Mr. Bass that we had not ordered the blood and, therefore, suggested that he take the blood with him. " Later, Dr. Buhler ascertained that a member of the family of the patient had accompanied Bass (Tr. 8002). On his return to General Hospital, Mrs. Bass talked to Dr. Buhler on the telephone and was " highly indignant that we had not accepted COMMU1\ITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 791 728 Initial Decision the delivery . Later a member of the patient' s family caJJed and Dr. Buhler told him that "I could not accept blood from any source unless I knew without question that the source of blood was adequate" (Tr. 8002-03). Perhaps a year later this refusal was the subject of a telephone conversation with Thomas Howell, an attorney retained by Midwest, who (according to Dr. Buhler but not Mr. Howev1) threatened suit (Tr. 906; 8008-10). Dr. Buhler informed Doctors Kerr, Lapi and Cohen about this and it became rather common knowledge" among the medical community that Howev1 had threatened suit (Tr. 8010). Dr. Buhler also reported this to Dr. Burns, Commissioner of Hospitals, and Dr. Dwyer Director of Health of Kansas City, Missouri (Tr. 8014). N.lH. Clearance of Informal Federation Followed by Formal Federation Proposal 86. Sometime in August 1955, National Institutes of Health not the opera-presumably on a complaint, questioned whether or tion of the informal arrangement between the hospital blood banks was a violation of law (Tr. 8005). Contact was made with Dr. Lapi and Dr. Buhler (RX 315). When Dr. Buhler explained that it was an informal arrangement to supply blood in an emergency and Doctors Lapi and Bridgens talked to the N.LH. Inspector, the N.LH., by letter dated August 29, 1955, advised that the informal arrangement did not constitute a violation of law (Tr. 8004; RX 315).

87. Early the next month, September 2 , 1955 , Dr. Lapi proposed a federation plan to the Kansas City Society of Pathologists which was to include the neighboring counties (Tr. 8079). On motion it was resolved that this plan be discussed with the hospital administrators (id).

Such a discussion was had at a meeting of the Area Hospital Association held September 28, 1955. According to the minutes (CX 174 b) : " One of the principal advantages of the proposed system of banking was that it would remove hospitals from the position of buying and seJ1ing blood. Dr. Lapi said the pathologists were noticing an increasing trend toward buying of blood rather than replacing, and he pointed out that what blood banks had to have was replacement of blood rather than money. He felt the proposal being made would have a favorable public reaction to there being no price tag on a unit of blood. 88. The actual proposal was set forth in writing and attached to the minutes (CX 174 g-h).

. .

Initial Decision 70 F.

Basically the plan entailed a central clerical offce with a telephone answering service and personnel for the filing of blood donor cards, and possibly messenger service for transfer of blood between hospitals. There would be no replacement fee but hospitals would continue to urge patients to have their relatives and friends donate blood and appeals would be made to the community at large (CX 174 g-h).

89. The Administrative Council took no specific action with respect to this new federation proposal at the meeting because it had agre€' to cooperate with Community Studies. Parenthetically, the informal exchange having survived N.LH. scrutiny, there was no urgency. It was the concensus that a request be made to Community Studies for an early report on its survey, possibly in time for the November 1955 meeting of the council (Tr. 8497; CX 174 a-c).

Pathologists and Area Hospitals React to Midwest' s Labor P"e- Deposit Pl,m SolicitrLtion 90. The next month, October 7 1955, Midwest prepared a letter to labor unions suggesting that they set up advance deposit plans or donor clubs (RX 289).

91. The Pathologists' society reacted the same day and again discussed Dr. Lapi's plan (Tr. 8080) but further development was delayed pending the Community Studies report. 92. Leslie D. Reid, the administrator of St. Luke s and chairman of the Administrative Council of Area Hospital Association reacted more slowly but quite definitely. He called a meeting October 20, 1955 (CX 175 a) stating among other things: "Action wil need to be taken on the position of our hospitals in relation to the Mid-West Blood Bank and Plasma Center now operating in Kansas City. Inquiries from industry and labor groups regarding this commercial bank' s 'blood deposit program' make it essentail that our stand be well defined. Please come prepared to discuss it fu1Jy." The agenda also provided for "Pathologists' recommendation on commercial blood banks.

93. The minutes of the October 26, 1955 meeting are less informative. Dr. Bryant of Community Studies reportedly made a comment about the Blood Bank study-research was completed and he was in process of writing the report." Lnder a marginal heading, Commercial! Blood Banks, the following appeared:

COMMUNITY BLOOD BANK, KANSAS CITY AREA , INC., ET AL. 793 728 Initial Decision There was some djscussion of commercial blood banks and what the posi tiOD of the hospitals operating their own blood banks might be toward them. The Association offce had received some requests from some large labor union groups regarding the position of hospitals. After discussion, it was agreed this was a matter that would have to be decided by each individual hospital rather than by the Association. It was brought out in discussion that there was a serious matter of pubhc relatjons involved, since commercial banks were properly licensed by NIH, and failure to accept blood from them would create a real problem. There was general discussion as to whether an investigation should be made of a specific bank but since D? , Bryant stated this wouldbe covered in the report of his research study, such action would not be necessary. It was agreed that the Council would stand on the statement of awaiting the Community Studies report before taking any action in the matter of blood banking. (Emphasis Supplied. ) (CX 175 d.

94. Respondent Jenkins' stenographic notes of the meeting as transcribed (CX 190 a & b) are more revealing. They indicate that after a letter from Midwest was read there was a discussion by various administrators in substance as follows: a. William B. Schaffrath, the administrator of Menorah, expressed concern that "will put ourselves in an awkward position if we refuse to accept blood from them. Have not a leg to stand on. If no one else comes up with a better program. b. Harry Walker, the administrator of Smithvi1e, said he had used blood from Midwest and complained "the sma1J hospital needs a place to get blood.

c. Leslie Reid, the administrator of St. Luke s and chairman of the Administrative Council, responded that he "believe(dJ the hospitals have been meeting the need" (i. the informal exchange was working out).

d. A. "'eal Deaver, administrator of Independence, said he didn t "like to see something go on without knowing what goes on." He moved the appointment of a committee to study and make a report on the organization.

e. Commissioner of Hospitals. B. 1. Burns, also wanted to inquire about Midwest's qualifications: "If we have to answer should we know the qualifications of the bank and their supervision.

f. Schaffrath took the position that "seems this group could not exercise an opinion over the approval standards." He felt the community wanted a community bank and to give blood on a reciprocity basis and "we must see to it that there is community (participation) .

, . _ Initial Decision 70 F.

g. Reid counseled no action "Tii we get Community Studies report h, Sister Marita (St. Joseph's Superior) had another recommendation: " . . . Kansas City Banks wii now participate in the clearing (house).

i. Reid rejoined awaiting thc survey. . . for each hospital to decide. " This caused Deaver to withdraw his motion. Robert Molgren, then of the University of Kansas Medical Center, suggested should tell we are making available a wider community effort, j. To Bryant' s suggestion that hospitals take out an NJ.H. Jicease came the rejoinder it was 'j an unnecessary nuisance. k. Burns repeated his suggestion that N.I.H. be asked for the qualifications of the personnel operating the bank. Reid responded that it would be "premature." Burns insisted that it should be done before the organization takes any action. Then comes the final note "no action.

Midwest Charges Dr. Lapi' s St. Mary s Hospital Through Better Business Burea" and Respondent Jenkins Investigates for A rea HospitalAssociation and Mr. Reid 95. On November 3, 1955 Mr. Bass of Midwest sought the assistance of the Better Business Bureau to plead his cause (RX 287), charging three instances where St. Mary s had refused to use Midwest blood as a source. Apparently the Better Business Bureau called respondent Jenkins. She got in touch with Leslie Reid, the chairman of the Administrative Council of Area Hospital Association, immediately, reporting trouble with Midwest this time with the Better Business Bureau (CX 587). 96. According to her letter of November 4, 1955, Miss ,Jenkins made an "investigation" of the charge that St, Mary s Hospital had refused to accept Midwest blood and found that while there was no emergency because the patient involved was to have an elective" operation, the hospital' s supply of 0 negative had become exhausted and "the clearing house revealed that there was no 0 negative blood available in the Association of Blood Banks. It was available at Midwest however.

According to Miss Jenkins' Jetter which was written shortly after the cvents, two things had occurred which apparently caused Better Business Bureau s action. Thc first was that a business associate of the patient who had used up all St. Mary s available 0 negative blood was called out of bed at midnight and "er- COMMUNITY BLOOD BANK, KANSAS CITY AREA, INe., ET AL. 795 728 Initial Dccision roneously" told his friend needed blood immediately. The business associate called Midwest and found the blood was available but it would not be accepted. Neither was blood from Osteopathic Hospital acceptable. The second incident was that one of the donors for the second patient went to Midwest and was drawn rather than going to St. Mary s as he had been requested to do. Miss Jenkins expressed astonishment and shock, to use her terms, at Better Business Bureau s representative s suggestion that the wife of the patient should sue St. Mary s for criminal neglect and his allegation that pathologists were prejudiced against Midwest because they got a commission from blood drawn in their blood banks.

97. Miss Jenkins' contemporaneous account was substantially in accord with Dr. Lapi' s testimony (Tr. 7527-7533). He was then pathologist at St. Mary s (Tr. 7498). He too was "appalled" at Better Business Bureau (Tr. 7533). In a follow-up letter the Better Business Bureau warned that an N.I.H. license was required before blood could be transported inter-state and that hospitals should deal with a licensed bank (CX 586). 98. Dr. Lapi related his experience with Midwest and the Better Business Bureau to Dr. Victor Buhler (Tr. 8035, 8036). Dr. Lapi had been appointed Missouri representative to the North Central District Blood Bank Clearing House (Tr. 8097) with the approval of Dr. Buhler who was then President of the Missouri Pathological Society (Tr. 8097) and state representative of American Association of Blood Banks (Tr. 7984). (Surprisingly, Dr. Lapi could not recall who appointed him (Tr. 7608). Dr. Lapi C,.dicizes Midwest to NCDBBCH 99. Following shortly after the incident with the Better Business Bureau, Dr. Lapi attended the board meeting of ~orth Central District Blood Bank Clearing House and admittedly made al1 the statements heretofore quoted in Finding 75, (CX 158), except the statement that the hospitals had gotten together and agreed they would buy blood from Midwest only in an emergency (Tr. 7618). He thus gave NCDBBCH information designed to bring Midwest into disrepute with the doctors there. 100. Moreover, during the summer of 1955, the executive secretary of NCDBBCH had written to Dr. Lapi requesting information about Midwest and some of their requests to the clearinghouse (RX 316). Lapi had replied: "As far as I am aware it is a private blood bank, presumably operated for profit. I personally Initial Decision 70 F.

do not intend to have any dealings with them but cannot advise you since I don t know what your policy is in this regard" (RX 317 a & b). He also said he would write Dr. Mason. Lapi later received a letter from Dr. Coye C. Mason of Uhlein Memorial Hospital in Chicago indicating that there were some good and some bad commercial banks, that the AABB membership committee usually relied on the State representative of the Association (which was Dr. Buhler (Tr. 8097)) and on Jocal medical societies (RX318;CFp. 21).

The Administmtive Council of Area Hospital Association Announces Community Studies Report and the N.IH. Decision 101. Shortly after the NCDBBCH meeting of November 18 1955 , the Administrative Council of the Area Hospital Association had its regular monthly meeting on November 23, 1955 (CX 176). The chairman, Leslie Reid of St. Luke, reported that the Community Studies Report (CX 244) had been released and Dr. Bryant said that copies could be made available for each member hospital and would be put out with a covering letter asking that the administrator make it available to the trustee and medical staff representatives (CX 176 b). Leslie Reid also reported that I.H. had cleared the hospitals of any claims of violation (thus announcing to all present that the way was clear for continuation of the informal blood exchange system inaugurated in May of 1955) .

The Community Studies Report Recommends Against Commercial Operation and for Non-Profit Central Bank 102. Community Studies Report which had been produced with the cooperation of both Community and Area Hospital Association, although not financed by the latter, purported to analyze with impartiality the various proposed methods of supplying the blood needs of Kansas City. After analyzing the operation of other community blood banks and the Kansas City hospitals, it reached the conclusion that a non-Red Cross community blood bank charging a replacement fee was the best solution to the - n problem (CX 244, p. 34).

103. In reaching this conclusion the Report, among other things:

a. Recognized that a commercial blood bank would compete with community banks;

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 797 728 Initial Decision b. Predicted that the Red Cross would experience increasing diffculty in securing adequate blood supplies for civilian use because of the weakness of not penalizing non-replacement, and objected that Red Cross had been unable to develop satisfactory working arrangements with medical societies and hospitals; c. Regarded the hospital federation plan as wasteful and hazardous having the same disadvantage of non-replacement as Red Cross and as being unable to take advantage of donor groups; d. Charged that prices of commercial banks (namely, Midwest and World) were unduly high and would result in large profits that a commercial bank would tend toward monopoly and raising rates with various malpractices, and that though licensed by I.H. would have to be continuously supervised by persons acceptable to the hospital pathologists;

e. Praised the proposed operation of a community blood bank; f. Failed to recognize that the proposal of a community bank might increase blood costs to the patient or that commercial blood banks had utilized donor groups and made charges considerably less than those currently made by hospital banks; g. Inferred it was possible to equate blood qualiy to the amount paid to donors (CX 244, p. 21) ;

h. Urged that:

1. a community bank would be in a better position to secure donors and to supply research and free blood to the indigent; 2. it should be placed in operation immediately with appropriate change in the structure of Community. Community Adopts Community Studies Repo?'t; Area Hospital Association After COnlulting Pathologists Recommends Federation of Hospital Banks Again 104. On November 28, 1955, the board of directors of Community held a meeting at which approval was given to the Community Studies Report, and amendments to the by-laws of the association were adopted. The amendments provided for hospital representation in the membership of the corporation and for a total corporate membership of thirty-nine persons, thirteen of whom should be "Council members " thirteen hospital members and thirteen members representing the general public. Amendments to the bylaws were also approved providing that a total of two directors of the corporation should be elected by the combined vote of the hospital and general members of the corporation (CX 378). These , .

Initial Decision 70 F. T. amendments, while differing in the numbers of directors, provided proportions as recommended by Community Studies Report (CX 244, p. 34). A committee on arrangements was appointed in anticipation of cooperation by Area Hospital Association. 105. Following receipt of the Community Studies Report Bishop DeLapp, the then president of the Area Hospital Association, appointed a Community Blood Bank Committee composed of: Adolph R. Pearson, Leslie D. Reid, A. Neal Deaver, Robert Molgren, Dr. Russell W. Kerr, Dr. Ralph R. Coffey, E. B. Berkowitz, James H. Schuler and Dr. Arch E. Spelman, chairman (Tr. 8497-8500). That Committee (sometimes referred to as the Spelman Committee) was directed to review the report of Community Studies and to make recommendations to the board of Area Hospital Association concerning the type of blood program that would be most desirable (Tr. 8511; RX 161 d). The membership of this Committee consisted of three members from the Trustee Council, three doctors of medicine from the Medica! Staff Council and three hospital administrators from the Administrative Council of Area Hospital Association (Tr. 8497-99; RX 161 d) .

106. The Spelman Committee held two meetings in December 1955. The first was held December 15 , 1955. Dr. Victor Buhler and Dr. H. I. Firminger, representing the Kansas City Society of Pathologists, we1'e present and two committee members Messrs. Berkowitz and Schuler were absent. The second meeting was held on December 29, 1955. All committee members and Bishop De- Lapp, the president of Area Hospital Association, were present (CX 177 and 178). The second meeting was held because there was insuffcient time at the first meeting to reach a conclusion. 107. At the first meeting of the Spelman Committee Drs. Firminger and Buhler outlined modifications of Dr. Lapi' s proposal for a federation of hospital blood banks to include a responsibility fee. The following are summaries of some of the statements made:

a. Dr. Buhler took the position that public pressure for a community bank should be resisted and that hospitals and pathologists should work out their own program without active participation of persons lacking professional or technical knowledge of blood banking. He suggested a $7.50 processing fee and $10 responsibility fee and indicated he and other pathologists would be wiling to advance funds.

b. Mr. Deaver questioned whether existing facilities were not COMMUNITY BLOOD BANK, KANSAS CITY AREA INC., ET AL. 799 728 Initial Decision adequately supplying community needs and the pathologists indicated this was not the case.

c. Dr. Firminger then gave details of his proposed federation The pathologists stressed that there should be no increase in the price of blood to the patient. Under the plan a central registry and multiple drawings at the hospitals were contemplated thus requiring all hospitals to get N.I.H. Ecensee, but reducing the expense entailed if a central bank were set up. 108. At the second meeting, Dr. Spelman reviewed the Committee s assignment. Bishop DeLapp, president of the Association advised it was necessary for the Association to get the facts and determine what might be done in the best interests of the hospitals and the public in the field of blood banking. He stated that the hospitals probably would have to develop a more centralized manner of handling blood in the future, if not immediately. recognized that some interested people beEeved the hospitals should move immediately into a fully centralized blood banking operation but that he personally beEeved such steps should not be taken hastily. He cautioned against being forced into a situation which would not be in the best interest of the hospitals and the public.

The following additional views were expressed: a. Dr. Coffey said that, in his opinion, the Committee should first determine if the centralized blood bank was necessary and should evaluate ho\v real the pressure was for some type of central blood bank and for a pre- deposit plan. He felt there should be an evaluation of how m,uch rL'ilc, 01' harm, if any, might come from the use of commercial bank. He also stated that the Area Hospital Association should be the agency through which any centralized blood bank was established in order to protect the quality and the safety of blood used by the hospitals. He further indicated that if some form of centralized operation was desirable, the proposed federation plan was probably the simplest and most practical one in that it would preserve the existing system of individual hospital blood banks and also provide a means for contracting with industry, labor and fraternal groups desiring to establish blood credits. (Emphasis Supplied. b. Mr. Molgren enthusiastically endorsed the federation proposal because he believed the plan met all community needs, and that it would allow the application of the insurance principle. He hoped it would be accepted. He stated it was necessary for the existing hospital blood banks to continue in operation and thought Initial Dccision 70 F. T. the Community Studies' report revealed they had been very successful in the past and had attained an but 5 % of complete replacement.

c. Mr. Schuler was opposed to a large central community blood bank of any type at the time. He thought the hospitals were getting along rather wen with the present system and pointed out that if the federation plan were adopted, it would require a director and other staff members. He thought the idea of a commercial bank or banks, filling the need, should be considered since they did represent the free enterprise system and could set up a pr' Gram of insurance. In his opinion, if there was proper competition between banks, blood could be provided at a reasonably low price. He questioned whether the federation plan met the needs of the Veterans Administration, university of Kansas Medical Center and the Municipal Hospitals. (Emphasis Supplied, d. Mr. Pearson advised that Trinity Lutheran Hospital, its administrator and pathologist, favored the federation plan. e. Dr. Kerr also supported the federation program. He stated that all should realize that a very serious problem existed in the area under the present system and that a solution was needed; that comme?'cial banks would create p1'oblems by pres","' e on hospitals to UBe their blood and in contracting with industry for the setting up of insumnce programs. He pointed out the special problems of some of the smaller hospitals and stated the existing system was not servicing those hospitals adequately. He thought the federation program would retain the good features of the existing system and would represent an affrmative move toward satisfying the community need, that the Area Hospital Association should be the agency to carry out the project and that the pathologists and participating banks should take care of the technical aspects. The federation could contact business and industry to set up a credit system. (Emphasis Supplied. f. Mr. Deaver believed that, if the federation proposal was acceptable to the pathologists, it would be satisfactory to the hospitals. He felt it would not be necessary for an hospital banks to qualify for an N.I.H. license but if a few could qualify, it would be possible to exchange blood across the state line without any problem. He expressed his support for the federation proposal and felt it might be necessary to have a separate corporate body. He also said that all hospitals should support the program if it would fully the community need at the lowest possible cost. g. Mr. Reid felt the hospitals need not apologize for their blood COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 801 728 Initial Dccision bank operations up to the present time. He believed the Community Studies' report substantiated the fact that they had been doing a very good job, but agreed that the present system did not permit group or individual credits or reciprocity with blood banks in other areas. He also felt a federation offered a better solution to civil defense and that credits must be staggered. These features would be possible under the federation plan. h. Mr. Berkowitz approved the federation proposal but inquired if there was a similar operation elsewhere in the country. Dr. Kerr advised that there were no really comparable programs and that it was a new concept in blood banking which other areas would like to see tried. ;VIr. Berkowitz sb' essed the need for obtaining legal counsel and said that if there were no serious obstacles, he was certain Menorah Medical Center would participate. (Emphasis Supplied.

i. Bishop DeLapp said it would be desirable to have a sub-committee study further the details of the program to obtain the ap" proval of legal counsel and have the plan ready for presentation at the annual meeting of the Area Hospital Association on January 4, 1956. He expressed approval of the approach made by the Committee and appreciation for the thought and effort it had devoted to the matter resulting in what appeared to be a very satisfactory solution to the problem. He said he ivas personally opposed to the idea of a commercial bank, and thought the hospitals, operated non-profit in the communitll interest, should be able to solve their problems without making blood banking a commercial venture. He considered the primary purpose of a blood bank to be service to the community and, in providing such a service hospitals could at the same time safeguard the interests of the public. (Emphasis Supplied.

j. Dr. Spelman, speaking for the small hospitals felt that blood banking did not belong in the commercial field and that the hospitals through the proposed federation could get the job done. He stressed the special problem of the small hospitals and suggested this could be solved by participation in the federation proposal. He felt the Area Hospital Association had a duty to the smaller hospitals and the communities they served in helping to correct an unsatisfactory situation. (Emphasis Supplied. After further unreported discussion, Dr. Coffey moved that the Committee approve the federation plan in principle and so report to the Area Hospital Association at its January 4, 1956 meeting. The motion was adopted and Dr. Spelman appointed a sub-com- Injtial Decision 70 F. T. mittee composed of Dr. Coney, Dr. Kerr and Mr, Reid to refine the report for presentation at that meeting ('fl'. 8500- 07; CX 178 d) .

109. At the annual meeting of the Area Hospital Association held on January 4, 1956 the written report (CX 179 i throug-h k) of the Spelman Committee recommending support of the federation plan was approved in principle and the Committee was authorized to proceed with preparation of the details of the proj ect for final recommendation and report to the board of directors (CX 179 a-e). Dr. Spelman, reporting for the Committee, pointed out that a great deal of community effort had gone into the project through the work of the Community and the Jackson County Medical Society, the latter having defrayed the expense of the survey made by Community Studies, Inc. Dr. Spelman further reported that the Committee was convinced that a community blood bank operation was needed but that there were wide differences of opinion as to how the need should be met. He advised the federation plan (CX 179 i-k) contemplated usin existing hospital blood banks which would, in effect, make each a drawing and processing station with activities eoordinated through a central administrative agency that would be prepared to contract with ,groups in an insurance type of operation. Dr. Bryant of Community Studies warned that a larger and more centralized drawing operation would be required in the future (CX 179 d, e). Dr, Kerr Keeps the Prdhologists Informed 1l0. The Kansas City Society of Pathologists held a meeting on January 6, 1956 which was recorded by Dr. Moriarity. Dr. Buhler was present and Dr. Kerr reported on the l' revised blood bank plan which had been presented after the Community Studies Report (Tr. 8082, 8083).

Disa.ppointment of Clwrch and Labor Groups Seeking To Use Midwest Blood lli. Wilber R. Harrison, a post offce clerk who was interested in blood banking as Chairman of the Blood Bank Committee of Cenhal Labor Union and had secured considerable information about it from Miss Jenkins, in either late 1955 or early 1956 received a letter from Midwest wanting to discuss establishing a service (Tr. 237, 238). He and two of his fellow labor union members were authorized, as a committee, to investigate and report by the Central Labor Union (Tr. 238). The committee ex COMMUNITY BLOOD BANK, KA SAS CITY AREA, INC., ET AL. 803 728 Initial Decision mined the credentials and the facilities of Midwest but were not satisfied with Bass' statement that he could not guarantee acceptance of hospitals (Tr. 240). They told Bass they could not recommend his service (Tr. 240), reported to the Central Labor union and recommended all matters be held in abeyance for further developments (Tr. 241). Rev. Gilbert Murphy, who later became secretary of Community, also prepared a memorandum critical of the pathologists for the Council of Churches (CX 293). 112. Mrs. Warren Hoff, secretary of Tabernacle Baptist Church, which had a contract with Midwest of indeterminate terms (Tr. 2127-28), attempted in early January 1956 to have General Hospital receive replacement blood for Mrs. Babcock one of the church members who had been operated on and was entitled to it (Tr. 2121). Mrs. Hoff made contact with Mr. Bass and he asked her to find out what type of blood was required (Tr. 2122). Mrs. Hoff called the hospital and an unidentified person who was at the hospital blood bank told her that Mrs. Babcock had not yet been typed that she should just send down two donors (Tr. 2122). Mrs. Hoff tried to reach Mrs. Babcock' doctor and after calling him several times on the telephone wrote a letter, dated January 7, 1956 (CX 280), telling him that blood was on deposit at Midwest and asking where he wanted it delivered. It was not requested.

Monme-Jenkins COT1'espondence with Fourteen Hospitals I13. On January 9, 1956, Kenneth Monroe (Tr. 723-763) who was then a clerk at the Main Post Offce in Kansas City and secretary-treasurer of the Post Offce Hospital Employees Association, Inc., sent an inquiry to fourteen hospitals. The hospitals were:

University of Kansas Providence Bethany St. Margaret' s in Kansas City, Kansas General Hospital, Kansas City, Mo.

Research St. Luke St. Mary St. Joseph Menorah Center Trinity 804 FEDERAL TRADE CO !MISSION DECISIONS Initial Decision 70 F. T. Independence Sanitarium ~orth East Osteopathic Hospital (Tr. 727) Wheatley Providence 114. Prior to sending the letters, Monroe had been informed by an unidentified person at St. Margaret's Hospital that the pathologist would not accept Midwest blood as a replacement for blood transfused into his wife (Tr. 739, 740). :VI members of his association had called him stating that "they had not been able to get blood in to the hospital" (Tr. 729). He had then secured authorization to write to the hospitals from the board of control of his association (Tr. 743).

115. The letter sent to each of the 14 hospitals stated (CX 181; RX 195) :

KANSAS CITY, :\MISSOURI POST OFFICE EMPLOYEES HOSPITAL ASSOCIATION INC.

Re-Blood Bank All Hospitals Attn Business Managers In order 'La make our organization a better organization, our board of control is striving to give our members more benefits and more protection. \Ve have been approached by the Mid West Blood Bank and Plasma Center with a proposition to establish a reserve bank of blood for any of our members to use at any time and at any Hospital. Our board of control are investigating a plan whereby we can protect our members and also the Hospitals on replacing blood used. We have investigated the Mid \Vest Blood Bank and Plasma Center and know that they are Federally licensed and inspected. Before our board of control makes their final decision we would like to know what cooperation we can expect from all Hospitals in the greater Kansas City, area. \1. auld you please answer by enclosed return stamped envelope whether your Ho",pital will accept blood from the Mid \Vest Blood and Plasma Center for use of our members or as a replacement for blood used from your blood bank, and aproximately the charge for set-up and etc. Our interest in this is to help protect our members who are unable to get blood donors to replace their needs.

Your cooperation and answer on this matter wil be greatly appreciated. Sincerely yours K.C. MO. EMP. HOSPITAL ASSN., INC.

Kenneth L. Monroe, Secy, Treas.

938 Central Ave. Kansas City, Kans.

116. The afternoon of January 9, 1956, Mr. Monroe had a telephone conversation with Respondent Sue Jenkins. Miss Jenkins told him that she had received calls from hospitals about Mr. JWonroe s letter and that she had sent a special delivery letter to each one of the hospitals asking them not to answer Mr. Monroe letter until they had heard from her. She also said that the COMMUNITY BLOOD BANK, KANSAS CITY AREA INC. ET AL. 805 728 Initial Decision hospital association was having a meeting in a very short time in reference to establishing a community blood bank (Tr. 736- 37) .

1I7. The special delivery letter of Miss Jenkins on the Jetterhead of the Kansas City Area Hospital Association reads as follows: (CX 182.

URGENT TO: ADMINISTRATORS-MEMBER HOSPITALS IN METROPOLITAN AREA AND THE COMMUNITY BLOOD BANK COMMITTEE You may have received a letter by now from :Jr. Kenneth L. Monroe Secretary- Treasurer of the Kansas City Employees Hospital Association, Inc., asking for a reply to specific questions regarding the Mid West Blood Bank and Plasma Center, and also about your own charges for administration of blood. A copy is attached.

Mr. Monroe s organization is a prepayment plan covering the Kansas City Post Offce employees. \Ve \were aware that Post Offce employee groups had been discussing an advance credit plan with the local commercial b100d bank. This letter is to ascertain the hospitals' position on this. Bishop DeLapp, president of the Association, and Mr. Reid, chairman of the Administrative Council urge you not to reply to this letter until we can get out to yon a. suggested statement that wi1 contain assurance that the Area Hospital Association is to announce very soon its own program for meeting the blood needs of the community.

In the meantimc, I have already talked with a representative of the postal employees' group and will be talking with Mr Monroe when I can reach him 1atcr today. We believe the group will be very cooperative about waiting for -' statement from the Hospital Association if it is not unduly delayed. You wi1 have a further report on this, probably within the next OTIC to two days.

It is suggested that all inquiries which may come to you about the commercial blood bank or about the hospitals' position on community blood banking be referred immediately to the Association offce. Sue Jenkins 1/9/56 (Emphasis in original.) 118. Only three replies were received to Monroe s inquiry as follows:

a. On January 10 , 1955, !vir. A. Neal Deaver, Administrator of the Independence Sanitarium and Hospital, wrote to Mr. Kenneth L. Monroe in which he stated in part as follows: I would suggest before you sign \with any such group that you discuss your o\vn proposed needs and desired type of affiliation with the Kansas City Area Hospital Blood Bank organization first (CX 198). b. On January 13, 1955, Mr. Bruce W. Dickson, Jr., Administrator, Bethany Hospital, wrote to Mr. Kenneth L. Monroe, in part as follows:

,.

Initial Decision 70 F.

Bethany Hospital docs not have any agreement nor arrangement assuring the availability or the )'epJaceability of blood from 1Iid Vlest Bood Bank. . . (CX 196).

c. On January 13 , 1955, Mr. Wiliam B. Schaffrath, Administrator, the Menorah C'1medical Center, wrote to Mr. Kenneth L. Monroe in part as follows:

I am sure you have had information about blood bank facilities from the Kansas City Area Hospital Association. This Association of Hospitals is on the verge of reorganizing its blood banking scyvjces. . . . I should prefer not to give a definite answer to your letter but would refer you with all courtesy to Miss Jenkins.. . (CX 197) 119. Closing the correspondence on January 18, 1955 , Miss Jenkins of Area Hospital Association wrote a memorandum to the Administrators of the Kansas City metropolitan area hospitals in which she stated:

We sent you a memo on January 9 regarding- an inquiry about a blood banking matter. We wish it 'were possible to give you today complete detaHs about the Association s program on community blood banking. Ho"cever, discussions are still under ,yay on it though progress is being made and it is hoped a. conclusion may he reached by at least next week. In the meantime, it would appear that the influiry made to you might best be answered by each individual hospital as it may itself determine perhaps ajt'3T colu:!ltnf.on 1with your legal counsel. We have, incidentally, had some conversations with the group making the inquiry to you a nd find them very interested in the Hospital Association plans for helping meet the blood needs of the community. (Emphasis Supplied. ) (CX 183.

By this date :vr. Jacques, an investigator for the Federal Trade Commission, had been in communication with Mr. Momoe (Tr. 752). This circumstance may have caused the reference to consultation with counsel.

The Aftermath of the Monroe-.Jenkins Correspondence 120. Bishop DeLapp and members of a Committee of the Area Hospital Association, including Dr. Coffey, Messrs. Reid and MoJgren, and Miss Jenkins and Dr. Buant, met with the board of directors of Community in the evening of January 9, 1956 the day Monroe dispatched his letter and Miss Jenkins her urgent" memorandum (CX 184; CX 380). At that meeting, according to the minutes:

a. Dr. Spelman presented the recommendations of his Committee and advised the directors of Community that his Committee was empowered to act with in the limits of authority granted it at the Hospital Association s annual meeting on January 4 , 1956.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 807 728 Initial Decision b. Dr. Hungate inquired concerning the report and was advised that the report represented a recommendation developed by the Area Hospital Association Committee in accordance \-with its instructions to investigate and evaluate available material and to make recommendations concerning the blood hank proposal1.

c. It was determined io have a mceting of the members of Community on January 17 1956, at which Dr. Spelman and Dr. Coffey would be present. d. The directors of Community deferred final decision on the recommendations of Dr. Spelman pending the further report anticipated from Dr. Spelman and Dr. Coffey on January 17, 1956 (CX 380 a-c). According to Respondent Jenkins Review of the Community Blood Bank Situation" (CX 184), Bishop DeLapp made "A request that the hospital group implement the plan on at least a pilot basis, since it would mean immediate action." He thus indicated his concern that the matter be expedited (although this request does not appear in Community s minutes). 12I. The Executive Committee of the North Central Blood Bank Clearing House was apparently still concerned about Dr. Lapi' s report at the November 18, 1955 meeting for on January , 1956, the following appears in the minutes: The committee agreed that the Executive Secretary write Dr. Angelo Lapi asking that he make every effort to attend the next Board meeting. In the interim, they would 1ikc for him to obtain a statement from the local medical society as to their opinion of the operation of the Mid-West Blood Bank, and present this statement to the Board. * *' * . (CX 162 b). 122. The following day, January 17, 1956, the members of Community held a special meeting. At this meeting, Dr. Spelman reported on the recommendations of the Committee of Area Hospital Association and replied to the proposals which had been submitted to his Committee by the offcers of Community. Dr. Spelman then asked Dr. Bryant of Community Studies, Inc. , to present the counter-proposals. Both the proposals of the Commitee and the counter-proposals of Dr. Bryant related to the area to be served and the composition of its corporate membership and board of directors. In essence, the proposals of the Area Hospital Committee were: for a blood bank servicing a far greater area than Jackson County; for a change of name to connote its enlarged area of service; for representation in the corporate membership of doctors of medicine from areas outside J ad'8on County; and for a different method of selecting hospital members from that then provided in the blood bank corporation s by-Jaws. , ex- The membership of Community approved the suggestions cept the proposal relating to what doctors of medicine would be . .

808 FEDERAL TRADE COCIMISSION DECISIONS Initial Decision 70 F. T. members of the corporate body. Dr. Spelman and Dr. Coffey were advised of this action and agreed to report the action to the full Committee of Area Hospital Association (CX 381 a-f). Bishop DeLapp was also advised of the results of this meeting (Tr. 85IO) .

Two days later, on January 19 , 1956, the Committee of Area Hospital Association met and received Dr. Spelman s report concerning the negotiations that had been carried on with the offcers and directors of Community. He reported that good faith existed on both sides in a11 their discussions and that neither was trying to take advantage of the other. He advised that neg'btiations had resulted in agreement whereby there would be representation in the corporate membership of thirteen physicians, thirteen hospital members and thirteen public members with no more than six of the physician members from the Jackson County Medical Society. The thirteen public members, who at that time were all from the Jackson County area, would be replaced, as their terms expired, with representatives from the entire area. Dr. Coffey said there had been an attempt to establish a central blood bank as far back as 1950 and that it did not seem unusual to him that a11 of the groups interested and concerned had not been able to agree upon a program prior to the present time. He added that the negotiations just concluded represented the best thinking of a11 those involved.

Dr. Spelman reviewed, point by point, the sub-committee counter-proposal to the proposal of the offcers of the blood bank corporation. Changes were suggested in the method of selecting the physician members and the hospital members, the latter being chosen from anyone of the three councils of the Association; the Administrative Council, the Trnstee CouncD and the lVedical Staff Council, rather than only from the Trustee and Administrative Councils.

The report of the sub-committee was approved with a proviso that the minor changes in the mechanism for selecting the physician and hospital members be made and that Bishop DeLapp be requested to discuss such changes with representatives of Community to make certain that each group was in full agreement (CX 180).

123. On January 23, 1956, Bishop DeLapp met with directors of Community. He reported the Area Hospital Association s Committee s recommendations. Following Bishop DeLapp s statement the directors of Community adopted a resolution approving and accepting the suggested changes in the by-laws of Community. COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 809 728 Initial Decision These changes related to the "compromise" previously adopted January 17, 1956 including a new name denoting an area service and the composition and method of selecting the corporation membership utilizing the various medical societies to secure medical representation (CX 382).

124. F. H. Bass, the business manager of :Midwest, was generally aware of the steps being taken to form the Community Bank for the following day, January 24, 1956, he wrote to J. Harvey Jennett, the president of Jackson County Medical Society, with copies to respondent Jenkins and to a number of others including: Dr. Hungate, Dr. Coburn, Dr. Ferris, Dr. Bryant of Community Studies, and labor, Better Business Bureau, and Red Cross representatives. In his Jetter Bass charged that his "institution has received the most severe, unfah' and mnvarrantcd persecution motivated by those whom we believe to have special interests in mind." He also stated that there have been attempts "to create patterns which would eliminate competition" and asked Dr. Jennett and other physicians to become better acquainted with the service of Midwest which he averred is prepared to meet competition (CX 12).

125. On January 25, 1956, the Administrative Council of Area Hospital Association met and reviewed the blood bank situation. Leslie D. Reid, chairman, recounted the developments to date. Bishop DeLapp thought the Committee had done excellent work and taking into consideration p?'esent and i'l,ture problems, storessed the necessity fat concluding the negotiations. It was suggested that the Administrative Council recommend to the directors of Area Hospital Association that the board adopt the federated plan as proposed by the Association to be operated by the Area Hospital Association. Bishop DeLapp commented that if the federation plan was to be operated exclusively by the Area Hospital Association it would discard a1l that had been achieved by the Committee of the Association in its negotiations with Community. Others concurred that such a result would not be desirable. Bishop DeLapp then reviewed the negotiations between Area Hospital's Committee and Community and advised that Community had made two proposals. One proposal was for the immediate establishment of a central procurement, drawing and processing center. The other proposal, which had been accepted by the Area Hospital Committee, was for the operation of a federation of blood banks by Community.

It was mentioned that the pathologists believed the federated plan should be operated by the Area Hospital Association. Mr. Initial DecitJion 70 F. Molgren agreed that such was the pathologists' view. However he stated that if Community would pursue the federated program, that also might be acceptable, He considered professional control of any blood bank operation should be by pathologists and that the board of directors of Community should be expanded to represent equally the medical profession, hospitals and the public (CX 187 a).

The Administrative Council of Area Hospital Association then approved the proposal for a federation of hospital blood banks to be operated by Community, provided the bylaws of that corporation be further amended to establish a board of directors consisting of four physicians, four hospital members and four public members, and fU?,ther that pathologists from the member hospitals serve on a technl:cal ad'uisory committee fa/' the prof essional minisi'motion of the blood bank (CX 187 b). (Emphasis Supplied. 126, Following the meeting of the Administrative Council and on the same day, January 25, 1956 , the board of directors of Area Hospital Association met. Mr. John evIurphy, of counsel by vote became the representative on the board in place of Sister Mary Placida, and the following additional members of the board were present: Bishop G. L. DeLapp, James H. Schuler, Tom J. Dr. Daly, G. O. Lindgren, Dr. B. 1. Burns, Henry J. Meiners, Malon H. Delp, Dr. Russell W. Ken, and Dr. Arch E. Spelman (CX 186). Bishop DeLapp reviewed the situation regarding negotiations with Community. He said agreement had been leached on the composition of the corporate membership of the blood bank corporation and the area to be served, with area representation both among physician and public members. He further pointed out that the federated plan of operation proposed by the Committee had been accepted by the blood bank corporation. compromise, He beheved that the Dr. Ken did not favor the blood bcmk sho1dd be controlled by the administrato1' and the )Jathologists of the meml)er instiutions of the Area Hospital Association. :\11'. Lindgren differed with Dr, Kerr and said he thought that all interests would be fairly represented. The directors, Dr. Kerr dissenting, approved the compromise with Community, as recommended by the Administrative Council. This was subject, however, to the condition that the board of directors of Community be composed of four physician representatives, foul' hospital representatives and four public representatives with pnJhologists f1' m the member hospiUlls comprising a technical advisory committee (CX 186a). (Emphasis supplied. COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 811 728 Initial Decision 127. Despite the agreement in principle, there were still matters to be worked out (Tr. 5409-10) and Miss Jenkins, with the approval of Bishop DeLapp, called an informal meeting of the administrators and pathologists at St. Luke s Hospital on January , 1956 (RX 162). Miss Jenkins prepared a ten page series of introductory remarks (RX 163a-j). She noted that the hospitals present (which included administrators and pathologists from the following hospitals) were the hospitals involved in the proposed federation whose pathologists and admin.istrators would have to make the plan work: St. Joseph' s Queen of the World, General Trinity Lutheran, St. Luke, St. Margaret' , Providence, Menor- , Independence Sanitarium, Research and Children s Mercy. John l\Iurphy, of counsel for St. Mary, appeared on behalf of Sister Mary Placida, administrator of St. :\Iary s Hospital, and its pathologist who were absent. The administrator of the University of Kansas Medical Center was also not present but that hospital was represented by Dr. Firminger (RX 162a). 128. In her ten page introductory statement (RX 163a-j), Miss Jenkins made it clear that although approved as a compromise with Community by the board of directors, on recommendation of the Administrative Council of Area Hospital Association, the federation plan was disapproved by five of the pathologists representing ten member hospitals, including six operating major blood banks.

She reviewed in some detail the events which had led up to the compromise between the original position of Area Hospital Association that it should operate a federation of blood banks and the original position of Jackson County Medical Society that it should control Community as a single central bank. She then pointed out that there were practical problems of increased load on the centrally located hospitals which might cause a breakdown of operation as well as legal problems of having an alien corporation control hospital operations.

She stressed that the present proposal must work if the hospitals were not to lose public confidence and in that connection referred sympathetica11y to the Federal Trade Commission investigation which had been carried on for the preceding two weeks. She emphasized that the complaints "were in no sense trivial or promoted by one carping critic" and while claiming that the public had erroneous ideas about the hospitals' present operations reiterated that they must not fail in the present endeavor or they would lose completely public confidence, the public , 812 FEDERAL TRADE COM:vISSION DECISIONS Initial Decision 70 F. T. being the user and only producer. Miss Jenkins summarized the then present posture including the following points: a. Community, a corporation with equal representation of doctors and the public, ,vas under the board of directors' decision to start operating the federation.

b. There was some disagreement on legal and functional aspects. c. An expressed feeling on UJe part of several hospitals that a central procurement, dra\ving and processing center is the simplest and most effcient handling devoid of risk to the hospital, both financial and in adverse public relations.

d. The understanding that such a central operation would place blood in the category of other biologicals and sera procured from outside sources. . . but with non-profit status and giving the public the voice they are demanding in blood procurement.

129. Dr. Burns of General Hospital acted as chairman of the January 28, 1956 meeting, which was introduced by Miss Jenkins statement, and urged careful consideration to the point that high quality blood must be secured efficiently at the lowest possible cost. A number of pathologists made statements as follows: a. Dr. Helwig of St. Luke s was " first to speak " and after commending Miss Jenkins stated that he had changed his mind and felt "it would be best to have a central blood bank take over for the hospitals, the procurement, processing and drawing of blood. This would give the public the voice they seem to be demanding and would remove the hospitals from criticism now apparent in thejr blood procurement operation. b. Dr. Kerr spoke against Dr. Helwig s position, stating that he wanted a federation under "total control of hospital administrators and pathologists as initially proposed c. Dr. A1Iebach, pathologist for Research, was agreeable to go a.long with any plan but wanted to "feel our way" into any program.

d. Dr. Cohen of Menorah Medical Center, after praising Miss Jenkins, took the position that while improvement was desirable the hospitals had been able to provide blood as needed and he would like to see the federation tried.

e. Dr. Firminger of University of Kansas agreed with Dr. Cohen.

f. Dr. Buhler approved the idea of a corporation operating a federation of blood banks and said he did not think the federation would work because of the heavy load on certain hospitals and the impracticability of a1l securing ~.I.H. Jicenses. He said he felt criticism was not justified but that if the public demand is as COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 813 728 Initial Decision great as has been thought by some, then there probably should be some type of a community banking operation which should be run by hospital administrators and pathologists. He even suggested withdrawal from the present activity and establishment of a central blood banking program run by pathologists and administrators.

g. Dr. Holman questioned whether the larger hospitals could carry the burden of the federation which, in any event, he felt should not be controlled by a corporation. h. Dr. Bridgens felt the federation would be diffcult to work out.

1. Dr. Hi1 of Trinity Lutheran and president of the Kansas City Pathological Society agreed with Dr. Helwig on the community plan which he said should be financed by the community and not the hospitals.

Then the administrators discussed the matter: j. Mr. Lindgren and Mr. Reid both favored a separate corporation operating a central bank.

k. Reid proposed the hospitals continue to operate as at present for about six months until the central bank could take over but felt "that there should be a specified time limit at which the corporation should be prepared to accept full responsibility for the community handling of blood.

1. Dr. Buhler interjected the suggestion that more study was required and M1' Lindgren replied that the new corporation should go into it and select the best method. m. Mr. Schaffrath claimed that action of the association had been taken foreclosing change of program. He also made other remarks which he asked "not be made a matter of record. n. Mr. Murphy, counsel, representing Sister Mary Placida, favored the central blood bank and said he had Dr. Lapi's expression to that effect in writing.

o. Sister Michaella Marie of St. ,Joseph' s wanted the blood bank under the control of Area Hospital Association without public representation.

p. Sister Mary Mercy of Queen of the World, on the other hand, felt the proposed corporation with representation for pathologists was desirable.

q. Sister Rita Louise said she prefened M1' Reid' s proposal to continue present operation for six months and then turn operations over to a central banking operation. .

Initial Dccision 70 F. T. 1'. Mr. Riley of Research also took substantially the same position.

s. Mr. Deaver of Independence said the future course of action was up to the blood bank corporation as revised by negotiations of the Association s Committee.

Dr. Bums then called for a vote and 16 favored the central banking operation, 2 (Drs. Cohen and Firming8l' ) opposed. There was also a vote concerning public representation. This was favored 11 to 7.

There were no proposals for "offcially presenting opinions as expressed hy the group" (RX 162a-f).

130. Between January 28, 1956 and March 12, 1956, al1 interested groups agreed that the best means of meeting the blood needs of the Kansas City area was through a central blood bank operated by Community with its name changed and revisions in its corporate organization as negotiated between it and the Area Hospital Association (RF 148). This was accomplished by change of name (CX 383-384).

131. Prior to the meeting of March 12, 1956, and on March 8, 1956, there was a meeting presided over by Dr. Bryant of Community Studies of both the old board and the newly appointed board of directors of Community (RX 188). Present at that meeting among many others were: Members of the old board: Carroll P. Hungate, Joseph Welch, Homer Wadsworth; Hospital Association Members: Tom J. Daly, John Murphy, Adolph R. Pearson F. K. Halsby, Leslie D. Reid, Henry J. Meiners, A. Neal Deaver Robert Molgren, Robert E. Adams, Harry M. Walker; ,Jackson County Medical Society; Donald F. Coburn, Harry C. Lapp, James E. j\IcCol1chie, Maurice B. Simpson; Wyandotte County Medical Society: Marjorie Sirridge, Morris Walker; Johnson County Medical Society: H. F. Coulter; Clay County Medical Society: Arch E. Spelman; Member at Large: Joseph S. Cope. Miss Jenkins acted as Secretary. There was discussion about procedural matters and about the powers and composition of the Technical Advisory Committee of Community (RX 188c). It was the consensus, as suggested by Mr. Murphy, that the Technical Advisory Committee should have powers as delegated by the board of directors. The hospitals took the position that al1 pathologists supervising hospital banks should be included on the advisory committee but that would not bar the inclusion of additional persons including hematologists and clinicians. There was no clear cut consensus according to Miss .J enkins. ).

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 815 728 Initial Dccision 132. With respect to the selection of public members for Community, Dr. Bryant met with Dr. Arch E. Spelman, John Murphy, Bishop DeLapp and ;\Iiss Jenkins at Area Hospital Association on March 15, 1956 (RX 189A). According to Miss Jenkins report, the meeting resulted from some difference of opinion expressed in the nominating committee which had been named to discuss public corporate board members of Community. Some problem had arisen about the carryover members from the public members selected prior to the reorganization and the individual1s present agreed upon designees whom Dr. Bryant undertook to notify and to seek information concerning availabilty. The annual meeting of Community was held on March 26, 1956 and Dr. W. D. Bryant of Community Studies acted as chairman pro tem (RX 190A). After reviewing how Community had been reorganized in accordance with the recommendations of Community Studies Report (CX 244), Dr. Bryant urged that "the Board must move very quickly" toward the following: 1) employing a director, 2) determining the type of operation, 3) deciding on geographical location, 4) and 5) formulating contracts with hospitals and blood donor groups, 6) raising capita!, 7) securing civil defense equipment.

In closing, Dr. Bryant said he felt the community "owed a great deal to a small number of people who have spent innumerabJe hours on the blood banking problem (. J ", mentioning: Dr. Hungate, Dr. Spelman, Mr. Leslie Reid, Mr. Robert ;volgren, Mr. Bartelson, and Miss Jenl,ins. At this meeting there were members elected by the board of Area Hospital Association, members named by the medical societies and public members (RX 190B). The Thomas Howell Investigation and Pathologists' Reaction 133. Sometime about March 1956, Midwest employed Thomas Howell, a young attorney, to conduct an investigation and to make recommendations to them (Tr. 768). During the course of his investigation, Mr. Howell talked to Doctors Buhler, Lapi and Upsher (Tl'. 892). He also talked to a young lady who was a pathologist assisting Dr. Sloan Wilson (id. He accompanied Bass on an attempt to make delivery of two pints of blood for replacement for a patient at Research Hospital (Tr. 902). The named pathologists told Howell: that the sale of blood was immoral: that a private corporation organized for profit should not be in the blood banking business, and that the entire operation should be under __ .

Initial Decision 70 F.

the control of a pathologist (T1' 892-899). He denied that he had threatened to sue any doctors or hospitals (Tr. 906), but he did threaten American Association of Blood Banks and ~orth Central District Blood Bank Clearing House with suit (Tr. 906). He reached the conclusion in his report of investigation that while there might be a suit against particular individuals there was insuffcient evidence on which to base a conspiracy action (CX 306; RX 7)' Community Moulded to Pattern of Existing Non-Profit Bnnks 134. On April 16, 1956 the directors of Community B100d Bank of the Kansas City Area, Inc. appointed a steering committee of five composed of Dl' Sloan Wilson, University of Kansas Medical School, chairman, M1' Joseph Welch, vice chairman, Mr. Homer Wadsworth, Mr. Charles Aylward and M1' Alex F. Sachs to study and recommend to the directors at their next meeting a plan of action for the establishment of the Community Blood Bank (CX u - 385; RF 150). 135. At a meeting of the finance committee of the Community Blood Bank on May f), 1956, it was decided that the financial requircments of the ncw blood bank should be met, if possible, by outright contributions. If that effort was unsuccessful, then the that the ini- necessary capital would be borrowed. It was agreed tial effort to raise funds should be directed to the medical societies, Area Hospital Association and unions, but that other interested groups and individuals should be requested to support thc venture financially (CX 386; RF 151) . - n 136. In the period between May 9, 1956 and early February 1957, offcers, directors and members of Community attempted to obtain the necessary funds to establish the blood bank and to develop the details for its operation (Tr. 4545-4552; RF 152). 137. Between Februal' y 27 1957 and March 8, 1957 , 1h. Robert Molgren made a trip during which he visited and inspected the Milwaukee B100d Center at Milwaukee, Wisconsin, the Minneapo- Jis War Memorial Blood Bank, the Blood Bank of Dade County, Florida, and the Topeka Blood Bank, Topeka, Kansas. The purpose of this trip was to obtain information concerning the organization and methods of operation of those blood banks (Tr. 4545 4718-73; RX 194a-f; CX 388; RF 153).

138. At the March 15, 1957 meeting of the Board of Directors 'Both exhibits physical:\y attached and placed at RX 7 in docket. COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 817 728 Initial Decision of Community, Mr. Molgren reported on his inspection visits to the blood banks in Milwaukee, Wisconsin, Minneapolis, Minnesota, and Dade County, Florida (CX 390). Mr. Jlolgren hact made a report to the Planning and Personnel Committee the previous day (CX 392), and was paid his expenses and an honorarium of 50. 00 pel' day by the Board. The planning committee report was adopted and sent to the Chairman of the Public Relations Committee with directions to issue a release to the newspapers the Sunday prior to the annual meeting. According to the minutes of the Planning and Personnel Committee (CX 392), it was concluded, among other things, that the blood bank would require a qualified fuD-time executive ctirector who would be a non-medical person, a part-time medical director who perhaps would serve on a voluntary basis and be responsible for donor screening and other technical aspects including the testing and processing of blood, a business manager, and a donor club director. It was also determined: that Community should deal with hospitals not individuals; that a responsibility fee of between $25. and $30.00 and a processing fee of $7. 50 to $10. , not including cross matching, should be charged; that there be plans set up for individuals, families and groups and a special pre-deposit plan in maternity cases; that hospitals serving the indigent should pool al1 accounts and by replacing twice the number of units transfused would meet their obligations; that donors clubs be asked to transfer credits to indigents and that mobile unit equipment be used at the earliest possible date "consistent with financial ability" (CX392;RF154).

Community Attempts to Placate the Pathologists 139. The adjourned annual meeting of Community was held April 2, 1957 at the offce of counsel and presided over by John Murphy until a new group of offcers was elected including: Robert Molgren, SL Luke s Administrator, President; Rev. Rodney Crewse, a Priest, 1st Vice President; Sloan J. Wilson, M. KUMC, 2nd Vice President; Gilbert C. Murphy, a Minister, Secretary- Treasurer; Adolph Pearson, Assistant Secretary- Treasurer.

A Program Planning and Personnel Committee under the chairmanship of Dr. H. C. Lapp included among its twelve membel's: Drs. Marjorie S. Sirridge, Arch E. Spelman, Russell Ken and Hi1iard Cohen.

.

Initial Decision 70 F. T. A Guidance Committee of ten was appointed under the chairmanship of Dr. Carroll Hungate who was given authority to appoint additional members.

Dr. Sloan Wilson of the Technical Advisory Committee (which also included Drs. Ralph R. Coffey, HiJiard Cohen, Ferdinand Helwig and Jack Hill) was appointed chairman of the Committee-at-Large of Technical Advisors. This committee-at-large consisted "of the physician in charge of the Blood Bank in each hospital located within the represented areas of the Corporation . * ." (RX 196 A-E; see CF p. 334.

Midwest' s Ostensible Attem?,ts to Capitulate; the August 1957 Meeting with Drs. Buhler Kerr and Mantz and Its AfteTmath 140. Mr. Howell, Midwest's attorney, and Mr. Bass called on Drs. Buhler, Kerr and :\lantz at St. Joseph's Hospital on August , 1957 (Tr. 870-874; RX 6; Tr. 8018). Drs. Kerr and Buhler were present during the entire meeting but Dr. Mantz was called out. Dr. Buhler did most of the talking (Tr. 777, 8018). According to respondents' version (RF 315) :

Mr. Bass opened the conversation by asking for advice from the three doctors concerning his blood bank. He indicated he felt Midwest had not been accepted by the medical community, tllat he recognized that perhaps this resulted, or could have resulted, from the iype of medical direction at Midwest and said he wanted to know what could be done to make his blood bank acceptable to the medical community (Tr. 8018). The term "acceptable to the medical community was a term used by Mr. Bass and Dr. Buhler inferred that he meant by it that he had not been able to supply Kansas City hospitals with hlood (Tr. 8019).

Mr. Bass then wanted to know what he could do to interest Dr. Kerr, or Dr. Mantz, 01' Dr. Buhler, or the three of them, in serving as medical directors of Mid-.vest Dr. Buhler told him that he could not act as medical director of a commercial blood bank that bought and sold blood for profit; that he considered the purchase and sale of blood for profit wrong and that the first thing :'1'. Bass would have to do would be to establish a not for-profit type of organization where blood would be procured and dispensed without the profit motive and without purchasing blood for a low price and sellng it at a higher price (Tr. 8019-20).

Dr. Buhler also told Mr. Bass that the bank would have to operate on the basis of voluntary donor" because in his opinion the voluntary donor was the best type of blood donor; that the blood should not be obtained from individuals in economic distress but rather should come from those members of society who were the healthiest and thus permit the bank to obtain the best unit of blood for use in their hospital (Tr. 8020). Mr. Bass indicated that such mig-ht not be too diffcult for him to do. Dr. Buhler said that if ::11'. Bass did establish such a non-profit corporation with COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC. , ET AL. 819 728 Initial Decision the intention to use voluntary donors and would abandon the idea of buying and selling blood, that he ,,-Quid consider acting as medical director (Tr. 8020). :.r. Bass wanted to know whether if Dr. Buhler acted as medical director, or if the three doctors did so, such would insure his being able to get blood into the various Kansas City Hospitals. Dr. Buhler told him that he could give 1,im absolutely no assurance that other hospitals ",vould use Midwest blood and recommended that Mr. Bass discuss the matter with pathologists at other hospitals in Kansas City and also "\with the hospital administrators because they too were responsible for adequate medical care being given at their hospitals (Tr. 8021). Dr. Buhler advised i\Ir, Bass and Mr. Howell that in his opinion the screening of the donor, the drawing of thfO blood, the processing of the hlo()u, the technical examination of the blood, the laboratory procedures involved, the storage and delivery of the blood were all part of a medical service and therefore should be under the direction of a physician and further that in addition to his knowledge and the kno'\vledge of any other pathologist that might want to participate, it '\vould bc necessary to have someone '\vho could offer expert advice in the field of blood banking (Tr. 8021-22). ::II'. Bass seemed receptive to the suggestions, but Dr. Buhler relterated that if such a not-far-profit corporation was established, the income would have to 1)( derived from the processing fee and could not come from the purchase and sale of blood (Tr. 8(22). Mr. Howell's recollection differed somewhat. He testified: CBuhIer J said that they would not permit blood to be brought in from ::Iid-\Vcst Blood Bank and used in St. Joseph' s Hospital unless three conditions \were met, unless, first of all, the Mid-West Blood Bank became a nonprofit corporation; that, second, it had to be approved by the Area Hospital Association of Kansas City; and, third, that it had to be approved by the Jackson County :\Iedical Society. (1'1'. 781; CF p, 338. ) (Bracket supplied, CYr. Howell also testified on cross-examination that during the meeting, as he later wrote the Federal Trade Commission '" '" " three of the pathologists * '" * plainly stated to :\11. Bass in my presence that there was nothing wrong \with his product. (See 'II'. 916- 18. In a Jetter to Mr. Bass dated October 31, 1957 , :Vlr. Howell stated that his notes '" '" '" set out the requirements (of the doctors) in this way. 1. We must be a non-profit corporation.

2. We must be blessed by tJ1C Area Hospital Association and the Jackson County Medical Society, It is upon the performance of these conditions that the gentlemen said they would be willing to serve. (Parenthesis supplied,) (RX 6. In a postscript M1' Howell recalled that: '" '" * the doctors took strong stands as follo\vs: 1. That the drawing and processing of blood is a medkal matter. 2. That paying fol' blood is morally wrong. mote. (RX 6. 3. That a profit-making organization makes blood cost 14J. The hearing examiner concludes from alj of the testimony and the exhibits relating to this meeting: Initial Dccision 70 F.

a) That at the meeting of August 30, 1957, Drs. Buhler, Kerr and Mantz were well aware of the fact that :l1midwest had not been successful in providing blood for the hospitals. b) That Bass and Howell made it known to the pathologists that they wanted to place themselves in a position where Midwest could serve the community as a blood provider. c) That Buhler acting as spokesman for the group made clear that to be acceptable Midwest would have to become a nonprofit organization and in addition would have to sell the hospitals and the doctors who were members of the Area Hospital Association and Jackson County Medical Society (see Finding 125). 142. After the meeting Dr. Buhler discussed the meeting and what had been said with Dr. Ken and Dr. Mantz. Consideration was given to whether they should offer their services as medical directors. Dr. Mantz was skeptical about doing so because he believed that the community blood bank organization had progressed to the point where it would become an operating blood bank. Dr. Buhler said that while he had been in favor of the notfor-profit community blood bank proposal, if the project was not going to get off the ground and his helping Mr. Bass would improve blood banking in the area, he was inclined to be wiling to serve as medical director (Tr. 8023-24; RF 316). 143. About one or two weeks later Dr. Buhler met Mr. Bass at the latter s offce. At that time there was discussion concerning compensation of the medical director and Dr. Buhler advised Mr. Bass that it was contrary to the code of ethics of the College of American Pathologists for a pathologist to receive a salary for being the medical director of a commercial, profit-making blood bank, but that if a non-pl' ofit corporation was operating a blood bank, a pathologist could ethica1ly serve on a fee-for-service or a percentage type basis. Dr. Buhler gave Mr. Bass a copy of the bulletin of the College of American Pathologists in which the ethical principles were stated (Tr. 8025; RF 317). 144. After this meeting at St. Joseph' s and in the fail of 1957 Mr. Bass called on Dr. Bridgens at Independence Sanitarium bought his lunch and asked if Bridgens would be interested in patronizing a blood bank " run on a voluntary non-profit basis with competent medical direction and with capable technologists and providing services for solving transfusion problems " (Tr. 7703). Dr. Bridgens indicated he would give it serious consideration. Bass mentioned that he had already rented space and was contemplating renting more (Tr. 7704).

COM"IUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 821 728 Initial Decision 145. The next meeting between Dr. Buhler and Mr. Bass occurred either in late 1957 or early 1958. At that time Mr. Bass came to Dr. Buhler s offce with the representative or owner of a medical supply house in Lincoln, Nebraska. After introducing this individual Mr. Bass announced he was contemplating utilizing the man s facilities in Lincoln, Nebraska as a depot from which blood could be distributed to areas in the vicinity of Lincoln, Nebraska. Dr. Buhler did not approve of this suggestion and interpreted it as an attempt on Mr. Bass' part to make the contemplated non-profit operation actual1ly a commercial undertaking. The meeting broke up on a rather unfriendly basis (Tr. 8028-30; RF 318). Dr. Briogens heard no more from Mr. Bass after the luncheon meeting about the non-profit plan (Tr. 7704-5) .

Community Completes Its PTepamtions Securing Civil Defense, Red Cross Public, NCDBBCH, and Pathologists' Backing 146. Following the annual meeting of Community, April 2 1957, (Finding 139; RX 196 a-e), the directors and committee had the task of making detailed plans for the operation of the blood bank, the selection of a suitable location and the employment of a director and full time staff as well as the raising of necessary funds (see RF 157; CX 383-397). In addition, it was essential to further placate some of the pathologists who were ready as Jate as August 1957 (see Findings 140-144 inclusive) to consider a rival operation so long as it was operated to conform to ethical as well as medical standards prescribed by them. The selection of a director caused inquiry to be made as far afield as England. Dr. Stratton of Leeds was asked to visit Kansas City in the hope he might accept the position. He declined for personal reasons (see RF 155; Tr. 8738). SecUl' ing the equipment which had been used by the Red Cross during the Korean Emergency and later stored by Civil Defense required additional effort. It was fina1Jy secured from Frank Starr of Civil Defense in September 1957 after Starr attended a meeting of directors and succumbed to the arguments of General Thrasher, who later was made a public member of Community (CX 395 f).

The search for a director and business manager was not concluded until the December 26, 1957 meeting of the directors at which time Dr. Perry II'1organ (not an M. D. but a holder of a 822 FEDERAL TRADE COM:\ISSIOK DECISIONS Initial Decision 70 F. T. Ph.D. degree from the Department of Bacteriology and Immunology of the University of Minnesota (Tr. 2816)), an associate professor at the l:university of Kansas Medical School, was appointed director and William W. Henders(),l, a former aval Offcer, was appointed business manager (CX 393).

At the same meetinwof December 26, 1957, the responsibility fee for blood was set at $25 a unit and the processing fee at $10 (id). (The processing fee was later changed to $9 (CX 396 c). The directors refened to Dr. Morgan, the new director, to the Technical Advisory Committee and to the Program Planning Committee the problem of securing a part time medical director. A medical director was not secured until March 18 , 1958 when the board of directors selected Dr. Ferdinand Helwig, the pathologist at St. Luke s Hospital, as medical director and additional pathologists named by him as associate medical directors (CX 396 d).

147. The significance of the selection of Dr. Helwig as medical director was attested to by Dr. Sloan Wilson, Professor of Hematology at Kansas University Medical Center, when he testified: * * * I think without him saying yes, this entire effort would have fallen by the wayside, primarily by his saying that he would be a medical director \\There they (the pathologists, internists, and surgeons) wiling to bet on a beginning institution to replace a ,vell organized, well run (series of) individual blood banks in this community ('11' 8718 19). (Parenthesis Supplied. 148. At the same meeting of directors held March 18, 1958 at which time Dr. Helwig was selected, the following offcers were rejected:

Robert :YIolgl'en, St. Luke, President Rev. Rodney Crewsc (a Priest), 1st Vice President Dr. Marjorie Sirridge (a hematologist), 2nd Vice President Mr. Gilbert Murphy (a Minister), Secretary-Treasurer ::r. Adolph Pearson, Asst. Secretary-Treasurer An Executive Committee consisting of the offcers and :\1r. John Murphy, of counsel, was also selected and given all the interim powers of the board of directors (CX 396 d). The processing fee was reduced to $9.

149. The newly selected executive committee met :I'Iarch 20, 1958 without Mr. John Murphy but with Dr. Morgan and Mr. Henderson and established finance, publicity, insurance, personnel and program planning, and technical advisory committees . The Technical Advisory Committee consisted of Dr. Ferdinand C. Helwig, Chairman, and the following doctors: Russell Kerr, Victor , COMMUNITY BLOOD BANK, KANSAS CITY AoREA, INC., ET AL. 823 728 Initial Decision Buhler, Frank Mantz, H. K. B. AJlebach, John E. Johnson Lauren Moriarity, Irwin Joffe, .James Bridgens Hil1ial'd Cohen Evelyn Peters, David Gibson, Tom Hamilton, W. W. Sumervi1e Sloan Wilson, Charles Wheeler, Jack Hi1, James Turner, and Angelo Lapi (CX 397).

Thus, by March 20, 1958, a bare two weeks before Community began drawing blood, the pathologists were finally named, not " large, " but the technical advisory committee of Community. And as they were in control of the supply of blood to their hospitals would necessarily be disposed to patronize their own Community bank rather than a commercial onc.

150. Two other matters were completed prior to Community opening its doors on April 3, 1958. The first consisted of making peace with two Red Cross Chapters and the second, was procuring membership in Korth Central District Blood Bank Clearing House (NCDBBCH) and preventing Midwest from securing membership for its non-profi enterprise. Dr. Morgan executed for Community on December 6, 1957 contracts with Wichita Regional Blood Program, American Red Cross (RX 26 a) and with Springfield Regional Blood Program, American Red Cross (RX 22 a) which ran from January 1 , 1958 to January 1 , 1959 and remained in operation, although technically expired, unti the hearings in this matter (CX 362-365) . By these contracts the Regional Red Cross Chapters agreed to replace blood to Community for persons eiigible to receive blood from the Chapters, where Community s blood had been used to transfuse such persons. Community was required to pay a $3 processing fee (later raised to $6). The second matter that involved C\CDBBCH commenced sometime in March 1958 when Dr. Morgan on behalf of Community and 1\11'8. Bass on behalf of her new non-profit organization, Community Blood Bank and Donor Service, both sought membership. The similarity in names caused confusion (RX 326) and so Dr. Pheteplace, the President of NCDBBCH, sought advice from Dr. Lapi (iel). Dr. Lapi wrote March 17, 1958 approving Dr. Morgan s application and staUng \with respect to ::tJrs. Bass' application:

Since the :YIiciwest Blood Bank was not approved for mernbership in the , I doubt whethcl" this new Bass enterprise win be, since to quote from 1\11's. Bass' letter The two banci:S will be working together under the same plan and direction, It is my opinion tllat this proposed new non-profit blood hank operated by l\Irs. Bass is nothing more than a dummy corporation to ( onfuse the public just as you were by the similar names. It ,vas probably designed to rate prior Initial Decision 70 F.

Testing in the telephone directory and by use of the word "Community" to divert unsuspecting donors from the other bank. The simultaneous appearance of two community blood banks was probably not fortuitous. I do not hesitate to recommend that the Community BJood Bank and Donor Service, Inc. of 1115 Grand Avenue be refused membership in the clearing house until they can show membership in the A. B. (RX 328) During the Board of Directors meeting of Community held aso March 18, 1958, at the suggestion of Mr. Henderson and on motion of John Murphy, of counsel, the matter of registering Community as a trade mark to prevent other organizations using the name was referred to Mr. Hovey, an attorney, (CX 396 d). Thus before opening, Community took steps to prevent the non-profit membership corporation which the Basses were attempting to start from using the name chosen by them. In Pmctical Opemtion a Hospital's Affliation with Community Excludes Purchases from Others 151. We have heretofore described Community s method of operation (see Finding 20 a-k). Although Community s contract was not in terms exclusive, Its method had the practical effect of insuring that hospitals would use only blood supplied through Community (id). Only two exceptions were noted. 152. In a number of instances, hospitals in decnning offers to deliver blood by Midwest, have refused to deal with Midwest and have expressly placed their refusal to deal with it on the basis that they secured al1 their blood from Community and that replacements must be made there.

The following are examples of written communications to that effect:

In returning a bill to Harold Hammer, a patient, on February , 1961 showing $25 due, Menorah Medical Center appended the following unsigned note:

In regard to your note on the 2- 61 statement, we have not credited your account with the one unit of blood from Midwest Blood Bank as it has already been explained to you we do not work with the Midwest Blood Bank. Vle work strictly with the Community mood Bank so you are responsible for this bi1. Won t you please clear your account right away? (CX 90 b) On March 28, 1962 , Dr. Ralph Rettenmaier, pathologist at Providence Hospital, wrote James E. Remer, an employee of Midwest, with respect to Mrs. Satter ley, a patient, in part as follows: St. John s Hospital of Leavenworth after refusing Midwest decided to use it in one instaIlce the Hunt mattcl", and Kansas University Medical Center which Community originally was unnbJe to service maintains supplies from Red Cross, Michvcst and Community. (RX 47; ex 233 366-372; Tr. 2773-6; 1753 et aeq. RX 6, COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC. , ET AL. 825 728 Initial Decision As I stated in our conversation, Mrs. Satterley s debt for blood is with the Community Blood Bank of Kansas City, Missouri, from whom "\ve obtained the blood which ,vas given her. The blood cannot be replaced nor the debt satisfied by giving us a pint of blood.

The blood bank of Providence Hospital does not relish the position of being put in the middle of a fight between a commercial blood bank and a non-profit blood bank. It is our position to support the non-profit, community sponsored blood bank. As a participating hospital we have a direct voice in the operations of Community.y Blood Bank and continuous, direct supervision over the handling and the processing of blood.

Since we have no way to be sure that your blood is always, drawn, processed, and otherwise handled in accordance with the strict requirements that we have, (and I might add these are a lot more strict than the N. I.H. requirements) we have decided not to accept yom' blood. (CX 2J3 a) Community s Position with Respect To the University of Ka.nsa.s M medical Center Blood Supply From It o.nd From Red Cross Demonstrates That An Exclusive Arra.71.Qement Was Contempla.ted 153. In 1960, a committee of Community, including: Robert Molgren, Dr. Perry Morgan, Dr. Marjorie Sirridge, Homer Wadsworth, and Dr. Hiliard Cohen; was set up to consider affJiation with the University of Kansas Medical Center (KU. ). Such affJiation had been refused in 1958 because Community did not as yet have the blood pl"viding facilities in an amount necessary to carryon with both KU. C. and the other hospitals (see RX 130 a & b).

After meeting with offcials of KlJ. , the committee reported to the board of directors of Community that KU.JV. would Jike Community to supply their blood needs in part. Dr. Hiliard Cohen then wrote Dr. Miler, the Dean of the University September 1 , 19f;0, stating that adverse action had been taken by the Board of Community (RX 132). He explained: It was the unanimous opinion of the Board that such an arrangement could not be accepted because it was not consonant with our concept of blood banking and with the arrangements of every hospital associated with us. Dr. Cohen agreed, however, to help out when emergency situations arose as in the past.

154. Almost three months later, on December 27, 1960, Dr. C. Arden Miller of KlJ.;vI.C. wrote Dr. Cohen in part as follows: Our current contract with the World Blood Bank does not expire until October of 1962. We have indicated to Mr, Bass our intentions for affliating entirely with the Community Blood Bank and for discontinuing services from , Initial Decision 70 F. T. him as soon as possible. We wil continue to explore with Mr. Bass the possibility of terminating our contract by mutual consent as soon as possible. (RX J 34) Dr. Miler then stated that the World (Midwest) contract did not include blood for cardiac surgery and that they had discussed plans for Community taking this over "In order to hasten and faciJitate our eventual complete affliation with the Community Blood Bank. . . " (RX 134).

155. On October 2, 1962, Dr. Russell T. Eilers of University of Kansas Medical Center wrote to Springfield Regional Blood Center of the Red Cross in part as follows: . . . we at the :Medical Center will appreciate it if blood indebtedncs,; due to Red Cross patients ill our hospital could be transferred to us via the Community B100d Bank of Kansas City, Missouri. As of October 1 , 1962 , "\ve signed an agreement with the Community Blood Bank. The Community Blood Ba,n1c personnel and we at the Gente'!' feel this tJ)ould facilitate our bookkeeping and record keep1:ng at both 1 nstitutions. (Emphasis supplied) (CX 3GB) He then points out that whereas previously the patient only had $4. 50 left in his account on a transfer through Community Blood Bank. . . the patient would. . . be obligated to a $9. processing charge unless a second donor is brought in. " (CX 366) Although this change was not put into effect, due to objections by Red Cross (which continues to make direct shipments to the Medical Center (Tr. 1753)), the letter reflects Community s position in the matter as seen by K. C. As heretofore pointed out Red Cross blood replacements for other Community affliated hospitals went through Community by contract (Finding 150). Reaction to Midwest's Blood Provide,. Contracts De'Ywnstmtes Widespread Avoidance of DeaMng by Hospitals (Lnd Pathologists 156. Early in 1960, James E. Remer was employed by Midwest to sell blood provider contracts. There was an extensive sales promotion of these contracts (see RX 76a-z 18), which in effect provided for the delivery of blood ordered by hospitals in the event the contractee was transfused and needed blood (RX 12a-b; CX 296a-b). Mr. Remer testified in great detail concerning incidents in which he participated either by personally delivering blood to a hospital or to Community which was refused or referred to some other agency (Tr. 2953- , 3141- , 3264-3486, 3966-4049 4197-4222, 5485-5594, 5968-6357, 6450- , 6594-6687). He also described how he personally and through use of telephone and personal solicitors sought to sell these contracts. COMMUNITY BLOOD BANK, KANSAS CITY AREA INC. ET AL. 827 728 InHial Decision Mr. Remer methodical1y kept records of each call he made (see CX 595) and equally methodical1y sent confirmatory letters hospitals, to his customers and to Community. In general, the pattern of behavior of the hospitals and of Community was confirmed by witnesses called by respondents and by documentation. Hence, while there are minor discrepancies in the versions given by Mr. Remer and those by respondents' witnesses, in general Remer was corroborated as to the occurrence of the incidents (RF 329-58 inclusive, pp, 152-204). The incidents described by Mr. Remer aye tabulated in Appendix A hereto attached and made a part of these findings.

157. In addition to attempting direct deliveries on behalf of contract holders, Mr. Remer made a number of telephone calls posing as a Mr. Rogers, a prospective purchaser of a Midwest contract, to ascertain from a number of the hospitals whether or not the hospitals would accejJt processed blood from Midwest, de- Jivered pursuant to one of Midwest's blood provider contracts. These telephone calls were surreptitiously recorded by Mr. Remer by an electronic device attached to his telephone. Respondents, after first objecting to :\11'. Remer s activities as in violation of the Federal Communications Act and Regulations, later caused the tape recordings to be produced and to be transcribed and themselves offered the transcriptions in evidence (RX 258-75). Also transcribed and within the group were transcripts of conversations, similarly recorded, where Mr. Remer, admitting his identity, sought to have one or more of the hospitals accept Midwest blood and thereby secured statements of their position. 158. The following are examples of statements in telephone conversations made ::lay 28, 1960 by several of respondents corroborating the other incidents in demonstrating that hospitals and pathologists regarded affliation with Community as creating an exclusive relationship and as being very widespread in the area: a. Remer, disguised as Rogers, asked Dr. Angelo Lapi if Midwest' s blood provider contract would be recognized by St. Mary Hospital. Then the following transpired: Dr. Lapi: \Vell, \ve "wouldn t use it, no, because we have just onc source for , p. 5) blood and that's the Community Blood Bank. (RX 268 After further discussion:

Mr. Remer: Well, then, it eouicJn t be used originally and neither could it be used as a replflcement, could it? , not at the hospital. We just don t use any Dr. Lapi: No, at least not here blood except from Community Hlood Hank so that any negotiation that you _ Initial Decision 70 F.

want to make in that respect, you would have to do with Community Blood Rank. (RX 268, p. 7) b. Remer, disguised as Rogers when talking to Dr. Victor Buhler, obtained the fonowing answer:

Dr Buhler: Well, we refuse their blood here and it's not because it is not good or any tiling else, it's just because most of the hospitals in Kansas City have been cooperating with the Community Blood Bank and if you want investigate that program, that's fine .' * * (RX 267, p. 9) When asked what hospitals Midwest and Community handle, Dr. Buhler replied:

,"Vell, sir, Midwest, I don t know, I don t know how many )fidwest handles but I think that all of the hospitals in Kansas City are connected, except for the University of Kansas, with the Community Blood Bank. (RX 267 , p. 13) Sti11after in the conversation, Dr. Buhler stated: Any blood we get comes through our Community Blood Bank so that there was any interchange, it would be through our Community Blood Bank being the one at this end that it would be cleared through. (RX 267 , p. 17) c. When talking to Dr. Hi1iard Cohen under the same pretext Mr. Remer procured the fonowing statement: Dr. Cohen: The Community Blood Bank is hospital sponsored by the great majority of the hospitals in this area, great majority, in Kansas City, yes just by almost al1 the hospitals, not all, but almost all. The hospitals are affiliated with Community Bank and this is a manner in which we procure our blood. (RX 268 , p. 1S) d. Sister Robert :l1argaret at St. .J oseph' s in a taped conversation made it clear that she thought they were not avowed legacy to accept blood from any other blood bank except Community (RX 260, p. 7). An unidentified person had stated in another taped conversation that blood would not be accepted from anyone but Community, even the Red Cross. (RX 261) Contempomneous C01'Tespo11dence W,'itten by Hosp'itaI8, by Commun,:ty, and by Pathologists Demonstmtes Consistent Insistence That Midwest Blood be Sent Through the Clearing House to Community and not Delivered as a Replacement to the Affliated Hospital 159. Vti1izing the existence of North Central District B100d Bank Clearing House as a reason to refuse to accept Midwest blood commenced long before Community commenced operating. OriginaHy, Edith Bossom, one of the Technologists of the Vniversity of Kansas Medical Center, objected to the receipt of Midwest blood as a replacement (Tr. 6178-6539) and gave as her excuse that credit should be sent through the NCDBBCH (RX 88). This COMMUNITY BLOOD BANK, KANSAS CITY AREA, INe., ET AL. 829 728 Inital Decision caused considerable confusion on the part of Midwest in dealing with the clearinghouse (RX 82-85). When coupled with Dr. Angelo Lapi's (the Missouri representative to the Blood Bank) obvious antagonism (see CX 308) and the fact that a transaction fee a 2-1 replacement ratio, and a processing fee was in some cases added to cost of Midwest blood, it is quite understandable that the Basses would hesitate to use NCDBBCH particularly when there seemed, to Midwest, no necessity to make contact with a Chicagobased blood bank to replace blood at a non-member hospital in the same community. Moreover, Midwest could never be certain that their membership, often threatened, would not be terminated. (See CX 214A, 158; RX 326-28. ) In addition, they had been told that they were required to make certain shipments directly (CX 214A; RX 85). Dr. Morgan s attempt (RX 72a-b) to secure a definite ruling from NCDBBCH in Midwest's case had never resulted in a firm policy statement requiring that Midwest transfer blood to local non-clearinghouse member hospitals because of their affJiation with Community which had become a member even before it started to draw blood. Despite these uncertainties there was consistent insistence that Midwest not deliver blood directly to the hospital which transfused a patient having a Midwest contract but that it issue replacement credits to Community through NCDBBCH.

160. The following excerpts from the correspondence of Community, of hospitals and of pathologists ilustrate a consistent pattern of insistence by Community, by the hospitals and by pathologists that Midwest cannot replace blood directly to the nonmember hospitals but must do so through the NCDBBCH: a. On June 14, 1960, Mr. Henderson, business manager of Community, wrote to Mr. Bass (Midwest) regarding the George R. Bassett case at Providence Hospital in part as follows: We request that you transfer this credit through the North Central District Clearing House to us so that proper credit may be issued to clear our books (ex 201).

Three days later Dr. Ralph J. Rettenmaier, pathologist at Providence Hospital, wrote regarding the Bassett and Farris cases. After referring to the statement of policies of NCDBBCH Items 3 and 4 and to the fact he had instructed Remer to transfer credits through the clearinghouse, he concluded: In order that our patients may receive the credit which they deserve please transfer these credits through the District Clearing House to Community Blood Bank. As this is an accepted and established policy of blood . . Initial Decision 70 F. T. banks participating in the Clearing House Program, please follow this same procedure on any subsequent occasion (CX 202). . On .July 5, 1960, Helen ;If. Stevenson, Blood Bank Supervisor of Osteopathic Hospital, wrote Midwest:

At the time you first notified us of this credit, you were instructed by telephone and also thru your representative to credit this blood to the Community Blood Bank thru the Clearing House. This is the only way we can help you to cleal' your books as Elmer Fugate s account ,,,ith our B100d Bank is closed (CX I96b).

c. Robert A. Molgren, Administrator of St. Luke s Hospital, on .July 7, 1960, wrote Mr. Remer in response to Remer s letter that he had established 7 units credit for Harry Darling, in part, as follows:

We have authorized the Community Blood Bank of the Kansas City Area, Inc., to accept these credits by transfer through the North Central Bank Clearing House and would request that you implement such transfer (CX 79).

d. On .Tuly 19, 1960, Dr. Ralph .J. Rettenmaier, pathologist at Providence Hospital, wrote to .James Remer at Midwest, in part as fo1Jows:

St. John s Hospital is one of the participating hospitals in the Community Blood Bank Program. In your conversations ,vitb Sister Myra on 7-16she indicated to you that the pl' oller procedure would be to transfer credit for the blood through the District Clearing Bouse to the Community Blood Bank. As you know, this requested transfer of cr('dit is in agreement with the statement of poiicies between the District Clearing House and member blood banks." (CX 57a) e. On August 4, 1960, Mr. Henderson, Business Manager of Community, '''Tote James Remer:

We wi1 be happy to issue credits to Mrs. Genevieve Hunt (patient at St. John s Hospital in Leavenworth, Kansas) upon receipt of the CYIdits transferred via the' North Centxal District Blood Bank Clearing House. (CX 62) A second substantia1Jy identical letter was written August 15 1960 (CX 65).

. On August 12, 1960, Sister Mary Seraphia, Administrator of Sl. Mary s Hospital, wrote Mr. Remer of Midwest, in part, as follows:

Since Saint Mary s Hospital is currently affliated with the Community Blood Bank 01 the Kansas City Area of 4040 Iain Street, "\ve suggest that you arrange to transfer the credits for Miss Frances Dickason to the above named Blood Bank through the North Central District Blood Bank Clearing House of which your bank and the Community Blood Bank of the Kansas City Area are memb(:r banks (CX 134a).

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 831 728 Initial Decision g. Even when the Kansas City Records Center Post Blood Bank Group attempted to donate Midwest blood, held to the credit of that group on its dissolution (CX 579a), John F. Stockwe11 at Mercy on November 11 , 1960, wrote Remer at Midwest, in part: I am enclosing a copy of a letter whicb we have ,written to Dr. Morgan the Community Blood Bank, authorizing him to arrange for the transfer of the credits to the Community Blood Bank. (eX 581a) The enclosed letter (CX 581b), after referring to a conversation between Dr. Morgan and Miss Clark of Children s Mercy relating to the credits for Army Records Center held at Midwest, stated: This is your authorization to arrange for the transfer of these credits through the clearing house, flom the Midwest B100d Bank to the Community Blood Bank for l\'fercy s use. (CX 581b) h. On December 1 , 1960, PeJ'Y Morgan, Director of Community, wrote World Blood Bank referring to a letter that stated II replacement units had been credited to Community by World (Midwest), stating in part:

As you know the Community Blood Bank has no account with your Bank and you have no authority to establish any account for us. While we have no oblig;ation to your Bank, we are in this particular case as our previous concspondcnce \with you has repeatedly indicated, willng to make available the propel' number of credits to Mrs. Hunt upon our receipt of the same number of credits properly transferred through the A. North Central District Blood Bank Clearing House. (CX 70) i. Sister Miriam Leah, Blood Bank Supervisor of Queen of the World Hospital, replied January 4, 1961, to a letter from Remer about a patient, Ruby Lee Gordon, in part, as follows: Koone here has refused to accept delivery of blood, although you have stated that such was Ow case. In response to a telephone message from the World BJood Bank we requested that the credit for the replacement blood for Ruby Lee Gordon be transferred through the usual c1enring house channels to the Community Blood Bank of the Kansas City Area, Inc. Weare a member bank of the Community Bleod Bank, and it is only proper that all transactions for blood replacements be handled by said blood bank. (CX 1(0) j. Perry Morgan, on August 2 , 1961 , wrote (CX 509a) both Midwest and Wodd regarding Gordon E. Wesner and Gertrude LaHue, in part, as follows:

The referen( e in your letter to a p\llported refusal on our part to accept delivery of tendered replacement bloods is wholly inaccurate. We wi1 accept replacement donors at our blood bank who can qualify under onr established procedures, or, as above indicated, we \",ill effect transfen; through the Clearing House. What we \-vill not do is acquiesce in the persistent attempts of your blood banks to dump human blood units on OUT doorstep that we have neither ordered nor have any need for (CX G09a) . . . . .

Initial Decision 70 F. T. k. On August 2, 1961 , Perry Morgan also wrote World Blood Bank (Midwest), in part, as follows:

In the case of Mrs. Hunt and upon the request of Saint John s Hospital we are willng to either accept qualified replacement donors for Mrs. Hunt at our biood bank or other drawing centers operated by us, or upon the request of the hospital we wi1 be wiling to effect transfers through the Clearing House so that credits could be issued to Saint John s Hospital in the name of Ml' Hunt. (eX 147) I. Bothwell Memorial Hospital in Sedalia, Missouri, on Novemher 7, 1961, indicated that it would accept a unit of blood from Midwest (CX 546) and might be wiling to make an affliation with them. However, by December 4, 1961, Dr. Charles M. Edwards, the Administrator, wrote:

This morning I talked with Dr. McPhee, an associate of Dr. Upsher, who is professionally responsible for our laboratory and Blood Bank. I have been advised that they will accept blood replacements from your organization; however, such replacements must go through the Blood Bank Clearing House, in Kansas City (CX 550). Sti1later, on January 26 1962, Edwards wrote: . . . I refer you to the Community Blood Bank of Kansas City Area, Inc., 4040 Main St., Kansas City, Mo.

We have been advised by Dr. A. E. Upsher that clearing may be done through this Blood Bank. (CX 555a). m. On December 11 , 1961, G. Dewitt Brown, Assistant Administrator of Baptist Memorial Hospital, wrote Remer at World telling him that in the case of Wesner s account, the patient had been fully credited but this in no way establishes a precedent to be followed in the future. May we suggest that you advise those with whom you contract that Baptist Memorial Hospital practicipates through the clearing house only, and that blood replacements cannot be made directly to the hospital (CX 545). n. Sister Madeline Maria of Queen of the World Hospital, on January 15, 1962 (CX 499a), in apparent response to a form letter, after thanking Remer for offering an opportunity to meet with him and stating it was not necessary, wrote in part: Our patients' needs for blood are satisfactorily met. Should an emergency arise where we could not obtain blood, we would not hesitate to use your facility since we recognize your qualification. Should there be at any time a deposit made at your World Blood Bank for one who happens to be our patient, this blood could be transferred through ihe Chicago Clearing House (eX 499a).

With respect to a unit of blood which Mr. Remer said was available without charge in a December 16, 1961, letter (CX 498), Sis- . . .

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 833 728 Initial Decision: tel' stated she had intended to use the blood for a patient but he expired before she could do so.

r stiJ intend to request this blood the next time we have a patient in the hospital whose blood replacement would be a problem for him (CX 499a). The Area Hospital Association Warning 161. On May 31 , 1960, three days after Remer s talks, posing as Rogers, with the pathologists, ~athan Stark the chairman of the Legal Advisory Committee of Area Hospital Association sent out a two page warning memorandum to the Administrators of the member hospitals (RX 184 a and b).

This memorandum alerts the member hospitals that questions are being asked, warns that they may not act jointly and at the same time tells them that they are under no obligation individually to deal with any supplier. The memorandum incidentally refers to an informal stipulation which administrators and pathologists had been asked to sign following the Federal Trade Commission investigation in J 957 and J 958. In the initial paragraph the memorandum states in part: Presumably, the b100d bank enters into a contract with its policyholders to furnish blood, but so far as we know the bnnk does not have formal arrangenents with all hospitals to accept the blood. (Emphasis supplied) (RX 184 The description of the Federal Trade Commission proceeding and settlement includes a statement:

Needless to say, such a conspiracy did not exist, nor was formal hearing held by the Federal Trade Commission.

Then the following appears:

It must be clearly understood by our hospitals that any current question regarding dealings with a commercial blood bank cannot be the subject of discussion or joint action by the Kansas City Area Hospital Association, nor by any of its hospitals "\\'working informally together. (RX 184 a) Following the warning, the area of permissible action is set forth:

Each hospital, individually, has eveTY ?'ight to make its own decisions about dealing "\with any supplier of any such product or service used by that hospital. Such decisions (11' e arrived at independently and very properly so. (Emphasis supplied) (RX 184 a) The memorandum further warns not to discuss . . . even verbally with one another, what action you are going to take on this matter" (RX 184 a). And it avers that the Area Hospital Association does not know and does not want to know what the . . .

834 FEDERAL TRADE CO 'I MISSION DECISIONS Initial Decision 70 F.

action is. Finally the association memorandum states what position it has taken:

. . we have advised the callers that we know nothing about the blood insurance program about which they inquire, and that any individual hospital' position regarding procurement of supplies of any type is its own affair. (RX 184 a) A copy of this memorandum was also sent to counsel and to the Board of Directors.

Refusals to Deal Except Through the Clear,in,q House Continued Even After This Proceeding Commenced 162. As shown in Appendix A, incidents continued involving refusal of hospitals to accept Midwest blood directly in replacement of blood transfused into a patient having a contract with Midwest.

163. More significantly, hospitals wrote Midwest concerning their position even following the commencement of hearings in this proceeding.

On May 6, 1963 Walter V. Coburn, Administrator at Bethany Hospital, wrote Remer that he was sorry to have caused him to take two trips. He then explains:

For a number of years Bethany Hospital has not owned blood, but, instead holds a rotating supply provided by another bank, which until the unit is withdrawn from storage is owned by that bank. This eliminates any possibility of b100d outdating on our shelves. (CX 516) He then says he wil give credit to Shrewsbury and Leonard " as soon as we are notified. . . that such replacement has been made." He also suggests credit through the clearing house (CX 516) .

E. H. Best, Controller of St. Luke s Hospital, on June 30, 1963 after the commencement of hearings in this case, wrote to World Blood Bank with respect to Francis Hammett in part as follows: You were advised at least as long ago as July 7 , 1960, that St. Luke s Hospital had authorized the Community Blood Bank of the Kansas City Area, Tnc., to accept credits by transfer through the North Central District Blood Bank Clearing House and that in any instance in which you believed such credits were due, you, as a member of the Clearing: House, should initiate such reciprocity credit" through the Clearing House. (CX 5(4) With respect to Hammett, however, Best stated that the latter had had donors make replacement so that his obligation had been completely satisfied.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 835 728 Initial Decision Inconsistent Blood Buying Policy of Community In the fonowing findings the direct purchases made by Community from banks other than Midwest, together with respondents' explanation of such purchases, are described. No instance of a purchase from Midwest by Community was disclosed. 164. On December 12, 1958, Community Blood Bank ordered 20 units of O-positive blood from Bergen County Blood Bank (Tr. 3255; RX 89) . This was a direct order and did not go through the Clearing House. Community Blood Bank felt itself to be in an emergency situation for the blood ordered because of the possibiJity of running out of that type of blood (Tr. 8224) and it was faster to get blood flown in by air shipment from banks having it already processed than to can in donors and professional personnel to process it. When the Clearing House was open Community Blood Bank always caned to determine what banks were reporting available blood (Tr. 8225). On only one occasion did the Clearing House advise that blood was available at Midwest and on that occasion the blood had already been obtained fl'm Whichita Red Cross (Tr. 8226).

165. On December 14, 1958, an order was placed by Community Blood Bank with Bergen County Blood Bank for 20 units of Apositive blood. When the blood arrived it was completely hemolyzed and useless (Tr. 3258; RX 90 a-b). It was immediately returned to Bergen County Blood Bank. No transaction resulted through the Clearing House or otherwise on this order (Tr. 3258).

166. On September 20 , 1958 and June 4, 1960, orders were placed by Community Blood Bank with Chicago Blood Donor Service for a total of 9 units of A-negative and B-negative bloods (Tr. 8337; RX 348). Both requests were on Saturday when the Clearing House was closed (Tr. 8228). The blood could be obtained by air shipment from Chicago Blood Donor Service faster than Community Blood Bank could secure donors and can technical personnel to its bank. In both cases, Chicago Blood Donor Service was requested to handle the transaction through the Clearing House but refused to do so (Tr. 8229). Rather than be without the blood should an emergency arise, Community Blood Bank ordered and accepted the blood at a cost of $35. 00 per unit (Tr 8228-29) .

167. On Aprij JJ , 1959 , July 18 , 1960 , October 12 , 1960 and January 26, 1962 (RX 349), Community Blood Bank ordered a Initial Decision 70 F, total of 26 units of O-negative blood from Michael Reese Hospital, Chicago, IIinois. In each instance, Community Blood Bank called the Clearing House before calling Michael Reese and the Clearing House could not provide the needed blood (Tr. 8232), Michael Reese did not accept blood through the Clearing House (Tr. 8234-35), and refused to channel these units through the Clearing House although requested to do so. Community Blood Bank was required to pay $35.00 for each unit (Tr. 8235). 168. Between June 6, 1960 and June 12, 1962, Community Blood Bank placed 17 different orders with Southwest Blood Bank, Inc., totaling 73 units of positive and 69 units of negative bloods (RX 35I). In each instance, Community Blood Bank called the Clearing House which could not supply the blood. Community Blood Bank could not locate the blood at Denver, Minneapolis War Memorial or other blood banks that they had previously dealt with through the Clearing House. It was necessary to have these units in inventory to meet possible emergencies and Community Blood Bank obtained the blood from Southwest rather than be without the supply even though the supplying blood bank would not clear the transactions through the Clearing House (Tr. 8236-38).

169. In addition to the units received not through the Clearing House. Community received for the five years until the end of December 1962, 3,914 units of blood through the Clearing House and shipped through that medium 1 253 units. There were a total of 213 separate transactions involving the Clearing House (Tr, 8239).

Community s Donor Fee Policy Set to Attmct Midwest Donors 170, Prior to the formation of Community, fees paid by hospitals to "Professional Donors" in many instances equalled the responsibility fee charged the patient. In such cases, the hospital did not make any gross profit on each unit transfused (CX 244 p. 21) .

171. When Community started drawing blood, it paid individual donors $15 for each unit withdrawn (Tr. 2560) and at the time blood was transfused, placed a charge against the hospital of $25 responsibility fee and $9 processing fee, or $34 (Tr. 2556-2560; RX 469 & note 2). Thus on the transaction there was a "gross profit" of $19 per unit from which, of course, the actual costs of typing, drawing, storage and marking must be deducted. The responsibility fee was eliminated by a donor presenting him- COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 837 728 Initial Decision self to Community and the responsibility fee and processing fee would be cancelled if two donors were presented. The hospital would be credited and it in turn would credit the patient (CX 233 234) .

Midwest had been paying donors $10 less than the price set by Community (CX 244 p. 28). This was known to Community as it was a part of the Community Studies Report (CX 244 p. 28). It charged hospitals $20 per unit (id) , and required three replacement donors to completely obliterate the charge. FACTS CONTROVERSING EXISTENCE OF A CONSPffACY Initially in these findings the hearing examiner discussed facts relating to the jurisdiction of the Federal Trade Commission (Findings 1I-34). These jurisdictional arguments are respondent' s first Jine of defense and although based on facts are primarily concerned with the applicable law. The prime fact which respondents urged in their defense apart from the jurisdictional issues was that there was no conspiracy because each of the doctors and each of the hospitals were merely doing what was natural for them to do in the circumstances and that each did this wholly apart from what someone else was doing. As Mr. Lane expressed it:

That is precisely the point I am getting at now-the question of keeping this entire record in proper perspective, so that a meeting, a chance remark, a letter, does not get so blown up as to become something that obscures what really is the background of this entire situation. (Tr. 9034) This answer was given in response to the hearing examiner question:

I take it that that is the gist of your defense, is it not-that the doctors were merely doing what they thought was appropriate in the circumstances and natural for doctors to do. And that it wasn t a conspiracy at all. (Tr. 9034) In the ensuing findings we shall deal with this factual defense under the subheadings relating to particular facets of that proposition.

The Ethical Problem 172. Respondents point to the facts which have been gathered under the subheading "Motivation" under the heading, "Facts Supporting the Charge of Conspiracy" as a reason why there is no conspiracy (Findings 62 and 63).

, . Initial Decision 70 F.

Respondents also point out that compensation of pathologists may not be considered as a motivating factor. Pathologists either received a straight salary as was the case with Dr. Cohen (Tr. 3886) or a percentage of the earnings applicable to the laboratory as was the case with Dr. Buhler (Tr. 7944). This remained constant no matter where the blood supply was secured. It was regarded as unethical to secure compensation based on transactions involving the transfer of human blood (Tr. 8025). The American Medical Association, the Red Cross, the American Association of Blood Banks, and the AFL-CIO as was brought out in the testimony and exhibits referred to in such findings, all regarded "traffcking in blood" as unethical and immoral (RX 319). Hence, it is the position of respondents that any doctor would avoid utilizing a blood bank which existed for the purpose of enriching its owners through the purchase and sale of blood except of course in emergency situations, where, as Dr. Helwig stated Awful" shortcuts might sometimes be taken (Tr. 7338-39; see Finding 73).

173. The following are some examples of testimony indicating opposition to commercial buying and selling human blood: a. Sister Cornelia of the Governing Board of the Sisters of Charity (Tr. 8674-78; RF 277).

b. Dr. Victor Buhler, pathologist at St. Joseph' s Hospital, testified that he as well as other pathologists in the Kansas City area believe that the purchase and sale of human blood, or any other part of the human body, is wrong (Tr. 8088). (See also the testimony of Dr. Moriarity (7364), Dr. Bridgens (7691-92). c. Dr. Frank A. Mantz recalled that his aversion to the buying and selling of blood stemmed from an incident where his father then a physician, made him pay back the money he had received for donating blood while he was a medical student (Tr. 7881). 174. A similar position is taken by respondents that the character of the approach made by Midwest was so abhorrent and unethical that any doctor would delcine to do business with an organization performing a medical service in this fashion. For example:

a. Dr. Lapi was disturbed because Midwest had borrowed a unit of O-negative blood from the night technologist who was a dental student and had not cleared with him (Tr. 7516-17). Dr. Graham sent a telegram that annoyed Dr. Lapi although it merely offered assistance in supplying a type of blood which a radio broadcast said St. Mary s needed (Tr. 7535). Dr. Lapi assumed that the com- , eOMMliNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 839 728 Initial Decision plaint that had been made to the National Institutes of Health had been made by Midwest (Tr. 7518-23; 7525-33). He also felt that inquiries by the Better Business Bureau, and suggestions of legal action against St. Mary s Hospital, had been made by Midwest (Tr. 7517).

b. Dr. Cohen when he visited Midwest Blood Bank in 1955 or 1956 was irritated by Mr. and Mrs. Bass' refusal to describe the blood bank's donor policy, its fee schedule, and matters of similar nature (Tr. 3884-86).

c. Edith Bossom at the Kansas City Medical Center regarded Mr. Bass' approach as unpleasant and belligerent (Tr. 6497). d. Dr. Moriarity recalled the incident in which (see RX 185) Midwest circulated to the members of the Chamber of Commerce a news article by Drew Pearson which was derogatory of blood banking (Tr. 7383).

e. Dr. Gibson testified that he regarded Midwest' s advertising in the Kansas City Star (RX 281) as misleading advertising and offensive (Tr. 7218).

f. Dr. Jack Kerr was insulted at the charge of profiteering contained in the Kansas City Star advertisements of Midwest (RX 280).

g. Dr. Mantz recalled that he objected to Midwest' s advertisement (RX 284) because he felt this violated the time-honored view that physicians do not advertise (Tr. 7884-85). h. Dr. Morgan related an incident during which Midwest attempted delivery of blood in a beer carton (Tr. 2615). Denials of Conspiracy 175. Doctor Ferdinand C. Helwig, pathologist from St. Luke Hospital and the Medical Director of Community Blood Bank presented testimony which was typical of the attitude of the various pathologists.

He said he had given instructions to his technicians as to what to do when confronted with an attempt by Midwest to deliver blood to the hospital. He said Their instructions were to ask them in a nice way to take it through to the clearing house, that we give credit to a patient if they would send the blood through the clearing house." He denied that this was done with regard to any understanding or agreement with anyone else. He stated After all we had a contract with the Community Blood Bank to have them process our blood for us. We have had 110 experience in which they have been unable to supply us with the type and quan- Initial Decision 70 F. T. tity so there would be no reason for us to go outside unless we got into a spot where we had to have it and they were not able to furnish it" (Tr. 7319).

As to the condition prior to the formation of Community, Dr Helwig testified: "As far as my hospital is concerned we never suffered from lack of blood at St. Luke s Hospital" (id). Dr. Hi1iard Cohen in testifying concerning the delivery of replacement blood testified that he made the decision independently and without consulting and advising with anyone else (Tr. 3882-83), and that his instructions and advice to Mr. Remer that the transaction be cleared through the clearing house represented his own independent individual decision (Tr. 3884). Reverend Paul T. Jackson, the President of the Board of Shawnee Mission Hospital which had occasionally obtained blood from Midwest while it was a nursing home only (Tr. 2261-62), denied that any member of the medical profession or Area Hospital Association or any hospital ever attempted to inftuence Shawnee Mission s decision regarding its source of blood (Tr. 2261). The general feeling of the board of that hospital was favorable to Community Blood Bank because it was the board's opinion that Community Blood Bank was the choice of physicians (Tr. 2251-52) .

This action was taken, however, before the board had selected as its pathologists, Doctors Buhler, Bridgens, and Kerr (Tr. 2252) .

Dr. Buhler testified that he did not know nor had he ever heard of any agreement or common course of action among hospitals hospital administrators, representatives of Community Blood Bank or anyone else, not to use or permit the use of Midwest or World Blood Bank in the hospitals in the Kansas City area (Tr. 8088). The decision Dr. Buhler made concerning the source of blood to be used by hospitals serving him was his own independent decision (Tr. 8087).

Dr. Frank A. Mantz testified that he did not agree, collude or discuss the possibility of colluding to suppress in any way the activities of Midwest and had no knowledge of any specific discussion being held among his colleagues (Tr. 7902). Dr. David M. Gibson testified that he was never required or instructed by any person not to deal with Midwest nor did he ever agree with any of the respondents nor anyone else not to use blood obtained from Midwest or to permit that blood to be used in any of the hospitals in the Kansas City area (Tr. 7223). He also COMMr;NITY BLOOD BANK, KANSAS CITY AREA, I , ET AL. 841 728 Initial Deeision denied knowledge of discussions, agreements, or tacit understanding with respect to the other matters alleged in the complaint. Dr. Angelo Lapi testified that his decision not to use :Vlidwest' blood at his hospital was his own decision (Yr. 7604-5). . D. A. Hoskins, pathologist, Osteopathic Hospital, had nothing to do in determining from whom thc blood to be used at the hospital would be obtained and no one connected with the medical profession of any hospital or Area Hospital Association ever attempted to induce or persuade him to obtain blood from a particularsource (Tr. 7174; 7175; 7176).

Similar denials were made by the other pathologists who testified (Tr. 7271; 7384-86; 7428-29; 7471-73; 7720-21; 7770-72). According- to their testimony, neither Susan B. Jenkins, Executive Director of Area Hospital Association, Robert A. Molgren Director of St. Luke s Hospital, A. Keal Deaver, Director of Independence Sanitarium, Perry Morgan, Director of Community Blood Bank, nor W. W. Henderson, Business Manager of Community Blood Bank, at any time agreed or entered into an understanding not to use or permit the use of Midwest blood in hospitals in the Kansas City area, nor did anyone ever suggest or request them not to use such blood. None of them ever attempted to obtain agreement from other hospitals or members of the medical profession in the Kansas City area not to nse or permit the use in their hospitals of blood from Midwest (Tr. 4787, 5452, 8654- 8260-62) .

Reference to Commuuity Blood Bcmk a/ncl the Clenrinr; House Was lVcdural 176. Substantially all of the recent incidents involving refusals by hospitals or by Community to accept Midwest Blood involved statements that credits would be received from Midwest but they must be received through the North Central District Blood Bank Clearing House (Findings J 63; 159-60 a-n). 177. Respondents point out that NCDBBCII pre-existed the formation of :Vlidwest by at least a year (RX 48 , p. 1I: Tr. 5678- 79), and that it had continuously incorporated in its statements of policy a provision concerning the channeling of a1l transactions through the district clearing house. 178. At the time Midwest joined ~CDBBCII on July 20, 1955 it agreed that it would "abide by and adhere to the basic policies established by the American Association of Blood Banks and its :-ational Committee on Clearing House and by the District Clear- Initial Decision 70 F.

ing House Committee, as set forth on the attached statement or as the same may be hereinafter changed, altered or amended; . . . (RX 60 a).

Attached was a Statement of Policies which contained the following provisions among others:

2. Standard forms provided by the District Clearing House shan be used for an transactions.

3. An transactions shall be channeled through the District Clearing House and not sent directly to the individual bank. 4. Each blood bank shall honor the replacement policies of member blood banks (RX 60 b).

179. At the time Community joined ~orth Central District B100d Bank Clearing House on March 17, 1958 (before it actually drew any blood), the Statement of Policies read in part: 3. Channel 0.11 transactions for other member and affliate banks participating in the national clearing house program and/or in other reciprocal systems with \which there are existing- agreements, through the district clearing house (CX 529. p. 12), 180. By the date World (Midwest's affliate) joined NCDBBCH in ~ovember 1959, subdivision 3 of the Policies read: Channel alltransactioTIs for banks participating in the Xational Clearing House Program through the District Clearing House. Banks indirectly shating reciprocity through affliation with a member bank shall channel all transactions to the District Clearing House through the coordinator bank and vice versa (RX 61 b).

181. While there is ample proof that Dr. Angelo Lapi, the 'JIissouri representative to NCDBBCH, was hostile to :Vlidwest (Findings 75 , 99; CX 158), there is no proof that the basic policies were adoptee! to offer an excuse to Kansas City Area hospitals to refuse to accept diI'ect shipments. There is a clear implication from the testimony of Mrs. Hemphi1 (Tr. 5595-5962 5730-73) and Dr. Mainwaring (Tr. 4794-4854) that there was no such intention. It is equally clear, however, that at the time Community became a member of )\CDBBCH the basic policies had been in operation for several years and on one occasion, that h1vol'ling :VIiss Bossom and K'UJ\C (Finding 159), had been utilized as a means of avoiding acceptance of blood from Midwest. Community s contractual arrangements with hospitals were such that the hospitals felt bound to deal exclusively with Community (Findings 151-155). The blood in the hospital banks, moreover remained the property of Community unti transfused. This made dealing with some other blood bank very diffcult. (See for exam- COMMIJNI'fY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 843 728 Initial Decision pie the means used by St. John s Leavenworth to credit Mrs. Hunt (RX 65q).

182. The principle upon which the clearing house system operates is similar to that followed hy monetary bank clearing houses (Tr. 500, 3190; RX 37a). In essence it contemplates the cancellation of credits and debits between members of the clearing house district with a month-end settlement of any transactions not cancel1ed (Tr. 5660). The member bank, under the clearing house system and rules, is never indebted to or a creditor of another member bank. Instead, al1 debits and credits are between the member bank and the clearing house (Tr. 503). At the end of each month the member blood bank settles its account with the district clearing house either by a monetary payment or by a shipment of blood, whichever of the methods it designated prior to the close of the month (Tr, 501, 5660; RX 48, pp, 39-46; RF 263).

183. The clearing house settles accounts in the following manner. It maintains a daily worksheet for each of its member banks on which are entered al1 transactions handled for the individual bank (Tr. 5759-61). At the end of each month the clearing bouse determines indebtedness by computing- the balance between: (1) the total number of paper credits forwarded to a bank and/or the total number of bloods borrowed (new orders) by that bank; (2) the total number of paper credits received from a bank and/or the total number of bloods loaned (new orders) by that bank. If a bank has received mole donor replacement credits (paper credits) than it has forwarded, and/or loaned more blood than it has borrowed, the clearing house would owe that bank. If a bank has forwarded more donor replacement credits (paper credits) than it has received, and/or borrowed more blood than it has loaned, that bank would owe the clearing house (Tl" 5767-70; RX 227).

A bank is either indebted to the clearing house or the clearing house is indebted to the bank. Blood banks are not indebted to each other.

Indebtedness is cancelled by a payment of donor fees, by a shipment of processed units of blood, or by a combination of the two, This is accomplished pursuant to \\Titten instructions previously received from each member bank indicating to the clearing house how it wishes t.o regulariy seWe its account. The method of settlement may be changed by either the clearing house or the blood bank if t.he ot.hel' party is notifled prior to the first of the month; Injtial Decision 70 F.

however the member bank's request as to method of settlement is adhered to by the clearing house whenever possible (Tr. 5769). All money is forwarded to the clearing house which in turn pays this money to those banks owed by the clearing house who have authorized a monetary settlement.

A bank wishing to settle its indebtedness by a blood shipment is directed by the clearing house, on its monthly statement, to ship blood to a bank owed by the clearing house which has requested settlement by blood shipment. Thus both accounts are cancelled.

Payment of the processing fee is involved only when there is an actual shipment of processed blood. The payment of the processing fee in such instances is based upon the theory that: (1) the bank drawing and shipping the blood is entitled to its processing cost;

(2) if the donors had given at the bank that dispensed the blood, this bank would have borne the cost of dnnving and processing; (3) the bank receiving the processed unit win dispense it to a patient and collcd its o,vn processing fee (Tr. 5754-71; RF 264). 184. Member banks do not have accounts with each other in the operation of the clearing house system. They maintain one account with the clearing house and all credits and indebtedness that arise from transactions with other member banks. The receipt of replacement donations for another blood bank, or from the borrowing and lending of blood, is reduced to a net balance resulting in a bank either being indebted to the clearing house or the clearing house being indebted to the member bank (Tr. 5870 5871; CX 591 e; RF 265).

185. Although the language of paragraph 3 of the Statement of Policies of NCDBBCH appears to be clear and unambiguous (see Findings 178 through 180 inclusive), in practical operation it was not so clear. It was always recognized for example that it did not apply to situations where there had been a pre-existing arrangement between two blood banks (Tr. 433; RX 85). 186. Respondents point to the fact that Mrs. Cobb, who had been caned as a witness by counsel supporting the complaint, testified:

Q: Did you, and by you I mean the Xorth Central District B100d Bank C10aring House, Board of Directors, and you implementing their policy, interpret the word "all" to mean completely all? A. Yes (Tr. 3209).

However, Mrs. Cobb immediately afterward stated that it was , COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 845 728 Initial Decision her opinion that blood bank members of the clearing house program were by-passing the clearing house up until 1963 when she left (Tr. 3214-5), i. , were making transfers directly where there were no pre-existing agreements (Tr. 3215). We need not rely on Mrs. Cobb's opinion, moreover, because Community in its practical operation, when purchasing blood from other banks, which did not desire to go through the clearing house, none the less made the transfers (Tr. 3251-59; RX 348, 349, 351, 89, 90). Its refusals to accept blood from Midwest unless it went through the clearing house, were, accordingly, not wholly consistent with its policy, when purchases were being made by it, of disregarding the clearing house if the other blood bank desired to do so. 187. NIl's. Bass ' early experience with NCDBBCH, which Midwest joined promptly in July 1955 at the suggestion of Marjorie Saunders of American Association of Blood Banks (RX 82-84), was somewhat confusing. She was first told, July 28, 195 (RX 85), that her purchase of blood from Chicago Blood Donor Service does not enter into the picture" and then: To clarify this situation, which comes under #3 in the Statement of Pol icies, all transactions shall be channeled through the District Clearing House and not sent directly to the individual blood bank. A bank may use the clearing house and still maintain their previously established reciprocity with local affliates. If this is done, the clearing house cannot be used for balancing out debits and credits thus incurred. Each bank would have to continue to do this as they have in the past. (Emphasis supplied. ) (RX 85.

When, at :.riss Bossom s insistence, Midwest had sent a reciprocity credit through KCDBBCH for Fred Burns at University of Kansas, Mrs. Bass found that the Center was insisting upon a two for one replacement (RX 86), and wrote NCDBBCH November 14, 1956 for a clarification. Miss Cobb replied December 20 1956 that Midwest must honor the two for one replacement policy of Kansas University and sent a copy to the KUMC (RX 87). On June 20, 1956, after Mrs. Bass had apparently attempted to make a direct replacement of the two additional pints to KUMC, Miss Cobb, sending a copy to Miss Bossom (RX 88), wrote in part: In the future, therefore, please abide by the Statement of Policies Governing Operations Between the Member Banks and its District Clearing House to \which you agreed by executing the Memorandum of Agreement. Shipments of blood are to be made, in settlement of indebtedness, only upon authorization by the North Central District Blood Bank Clearing House. (RX 88) 188. Even respondent Morgan, the Director of Community, was not entirely certain of the proper interpretation to be given to the 8'16 FEDERAL TRADE CO IMISSION DECISIONS Initial Decision 70 F.

NCDBBCH statement of policy. He J(ept inquiring of blood bank clearinghouse offcials but never seemed to get a specific reply which he could utilize (see Tr. 2624-25, 2640-42). 189. On August 4, 1960, respondent Morgan attempted to secure confirmation from Mr. Ray AmbeJang, the President NCDBBCH, that Community s attempt to enforce on "two blood banks" its interpretation of the clearinghouse rules was justified, that IlaJI transactions" included not only transactions between blood banks located at some distance from each other but evell those in the same city. He pointed out in part (RX 72 a-b) : DUJ' ing tJ1e past six months we have had requests from individuals who 1'ecciH'rl tn\1sfnsions in some of our affliated hospitals and would like credit through advance biood purchase plans made with another bank or distributor representing two blood bnnks. These blood banks are members of the North Central District CJearing' House.

\Ve h8.vC 3dvisecl these' patients to notify the distributor' of the plan that tl,(' Community Blood Bank \vould be very happy, as coordinator for QUI' affiiated llOspitals, to transfel' credits in their behalf via the clearing house for proper credit to the patients.

To 011' knowledge tlle distributors of the blood purchase plans have failed tc' n nl;e sued transfers for tl1(, patients via the clearing house. The distributor cf these aovanec blood purchase plans on each occasion has attempted to dclivpr h:oocl directly to our affliated hospitals in order to replace blood used in transfusion. The llospitals have referred the problem to us and have authorized 1 le Community Blood Bank to accept credits by transfer through the Clcoal"ing House Systcrn.

Thrt Dr. Morgan was really not certain at that time of the validity of the excuse which he had been giving Midwest is apparent from the last two paragraphs of his Jetter: The Community Blood Bank feels that member blood banks in the National Clearing House Program are contractually obliged to make al1 transfers t1n-ongh the d('arillg house and desires to do SQ. IVe ,,' ollld appreciate lJO/(1' cOIIsiderat'on ot' his p1'oblern and upon rcsolufirm to l1otii"u nll JJ?mue1' blood buuks in the National Clearing House program. (Emphasis supplied) (RX 72b) Copies of this letter were sent to Mrs. Olsen of Minneapolis War Memorial, to Miss Cobb of NCDBBCH and to Dr. Angelo Lapi Missouri State Representative of NCDBBCH (RX 72a&b). However, there was no proof offered of formal resolution of the problem nor of formal notification of all the members. )()O. Ownership of !\CDBBCH passed on August 16, 1960 to American Association of Blood Banks (RX 72c) . And, on April 3 1962, MI'. Bass was informed by :veJba OJsen, District Coordinat.or of A. , in part as follows: , COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., E'r AL. 847 728 Initial Decision The participation of World Blood Bank in the A. B. Clearinghouse prow gram was discussed at a recent meeting of the National Committee on Clearinghouse, and it was the opinion of the group that the \Vorld Blood Bank is not using the Clearinghouse for the purpose it \vas intended, that is, the exchange of donor replacement credits. (CX 214a) This criticism was because during the period December 26, 1960 through January 26, 1962 World" has transferred only 24 credits and has received none. During the same period, 509 bloods were shipped to the Mayo Clinic as 'new orders' and 199 bloods were received by your bank, but only 43 were in payment of indebtedness, " The letter advised that since 99% of World' s clearinghouse transactions were bloods shipped to Mayo, and it was unable to accept blood shipments in settlement, " . . . any blood supplied to the Mayo Cnnic should be shipped directly to the Mayo Clinic. . - . and not handled as a clearinghouse transaction." (CX 214a) If there were a firm policy of NCDBBCH as a division of A. B.B. that "al1 transactions" should go through the clearing house, it is diffcult to reconcile these instructions World' s to ship directly. It thus appears that the apparent firm policy that all transactions pass through the clearing house was utilized where it suited convenience to do so, but was never enforced or even consistently interpreted to require adherence by its members to what it seemed to require.

191. Midwest's reluctance to become dependent upon the Ameriican Association of Blood Banks or its affliate Korth Central District Blood Bank Clearing House had some basis in the treatment of its attempts to become an institutional member of A. RB. Its application to A. , although made prior to its opening, had been consistently stalled and finally rejected (CX 35). B. had in its by-laws and in its regulations with respect to commercial banks consistently discriminated against such banks. Although not accepted as institutional members, commercial banks \Were to be required to pay as an inspection fee an amount equal to the dues and must be inspected prior to shipping blood. Even when Midwest attempted to become a non-profit operation through the formation of a new corporation, the application of its new corporation was not accepted (see RX 326-28) . Moreover, Midwest was under attack by respondent Dr. Lap! the Missouri representative to KCDBBCH, from the first year of its operation (CX I 58; RX 326-28) .

Respondent Dr. Angelo Lapi' s part in attempting to block one Initial Decision 70 F.

of Mr. Bass' operations is also disclosed by the Doctor s letter to Dr. Schenker dated January 4, 1960 (CX 308). Dr. Lapi wrote in part referring to one of Mr. Bass' operations :

'" '" '" I think I convinced the Clearing House Board that this Bank should not be granted membership.

It would probably pay the AABB to investigate thoroughly this incorporation and learn what tax status they enjoy, The administrator s name should also be revealed.

So far as I am aware Dr. McKee, the medical director, Dr. Eilers, the clinical pathologist at the Univ€rsity of Kansas, and the whole University group are staunch supporters of this bank in spite of the fact that one of their microbiologists on leave of absence (Dr. Perry )'Iorgan) is director of the Community Blood Bank '.",which we support. (CX 308) 192. On the other hand, clearing house witnesses testified without contradiction that if the clearing house is to operate successiuDy and to meet its expenses, it will require more transactions to be put through its books than it secures from interstate or intercity transfers alone (Tr. 4803). And, it is equally clear that it simp1ifies a hospital member s bookkeeping to have a single account with the clearing house, rather than a series with each of the other hospital blood banks (Tr. 4803-04). It also reduces storage requirements and outdating problems to utilize Community. In light .of the necessity for hospitals to reduce bookkeeping and to reduce storage space (see Tr. 7130 et seq. in the absence of the background of hostility to Midwest, it would be wholly expectable, in the opinion of the hearing examiner, for a hospital to utilize the facilities of Community and of the clearing house as a means of reducing overhead due to bookkeeping, the maintenance of blood storage space, and the expense due to outdating of blood. Community absorbed outdated blood because no charge was made until blood was transfused (CX 233 , 234). It also controlled storage of the hospitals' refrigerators. The hospital could rely on Community to supply it if an emergency arose. Feasibility of Com.m.ercial Bank Using the Clearing H01"e in Fulfilling Blood Provide,- ontmcts 193. James E. Remer, an employee of Midwest, testified at considerable length as to the reasons why it was not feasible for Midwest to use the facilities of the clearing house in meeting the responsibility it had under the blood provider agreements its subsidiary had with business firms and individuals (Tr. 3975- COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 849 728 Initial Decision 6199-6204: see also CX 296; CX 475). Acting on the assumption that there would be no offsetting transactions, he calculated that the cost to Midwest of using the c1hearing house would be $28. (i.e. two transaction fees of 351" and two units of blood at $14). 194. Respondents on the other hand point out that a single transaction cannot be used because the very principle of the clearing house is the cancellation of offsetting transactions. Respondents also point out that the overall cost to Midwest on the basis of 50 calls for units of blood in approximately 850 blood provider contracts (Tr. 5587-90; 6083) on the basis of Remer s own calculation of cost would only amount to $1435. (See Respondents Reply Brief, pp. 23-24 a inclusive.

195. The Medical Director of Municipal Blood Bank (Tr. 8386) which had been started by two pharmacists (Tr. 8387) in March 1960 (Tr. 8381) and operated for profit on sale of processed blood to outlying hospitals in small communities around Kansas City (Tr. 8387), testified at respondents' behest that that bank remained in operation until July 1 , 1962 (Tr. 8388). The Medical Di,' ector, who served without pay (Tr. 8387), also testified that he was aware of Community at the time Municipal Bank had started and had advised its pharmacist principals that there was no confiict between Community and Municipal (Tr. 8390). Municipal Bank cleared transactions through NCDBBCH to Community (Tr. 8391; 8392) and never attempted to make direct delivery to it (Tr. 8395). They also cleared blood through the c1hearing house to other blood banks and Red Cross (Tr. 8496). They also made direct sales to K.u.::. C. and to Veterans Administration hospitals without diffculty (Tr. 8397). They had diffculty only on one occasion which was prior to securing an I\T LH. license in offering blood as a donation (Tr. 8398). According to the Director, one of the principals was told by hospitals that they were happy with the services of Community Blood Bank and that they preferred to continue on with them, but if ever Community was not able to fulfill any of their orders they would be glad to order from us " (Tr. 8400). Municipal went out of business because of the diffculty it had collecting their accounts in outlying hospitals (Tr. 8402). According to its former Medical Director, this was not caused by any hospitals or doctors in the Kansas City area (Tr. 8402). Its equipment was sold to Community (Tr. 8402) on a competitive bid (Tr. 8403). Municipal Bank also made some sales directly to Providence Hospital, Chillicothe Hospital, Carroll County Hospital and Wheatley Provident (Tr. Initiai Decision 70 F.

8404). They also exchanged credits through the clearinghouse (Tr. 8405). In view of the difference in the type of operation, i. direct pl1chase as distinct from blood provider plan and the testimony that there was no conflict with Community, the evidence with respect to Municipal Blood Bank appears to the hearing examiner to have little or no bearing on the issues in this proceeding.

Certain Alle,qed Incidents of Refusal Were Followed by Accept"'/r' e of Midwest Blood Replacement for Patient 01' Issuance of Credit to the Patient 196. Respolldents point out that in some instances cited as evidence of a conspiracy to refuse ;Vlidwest blood (see Appendix A), there was either' acceptance of the blood itself, issuance of credit to the patient or the matter was closed on the hospitaJ's books because donors had replaced the blood, Examples of such situations are: contained in ensuing findings.

197. A. Keal Deaver, of Independence Sanitarium, on January , 1962, wrote to Remer at World (Midwest) that they wel' C sorry credit was not given immediately to Mrs. Fjscher but asked that a credit be given rather than making delivery (CX 490). Thus the original refusal to receive the blood was withdrawn. 19R. In connection with the case of Genevieve Hunt \vho was given 16 units of blood at St. John s Hospital at Leavenworth Kansas, on two occasions, August 4 and August 10, 1960, respondent Henderson, business manager of Commlndty, w)'ote Remer of Midwest that credit would be issued " on receipt of credits transferred via North Central Distl'jct Blood Bank Clearing House" (RX 65 b & d). Henderson also wrote Sister Myra at St. John s (RX 65 f).

Some time Jater, Remer wrote on November 3, J 960. to the president of the company by whom Mrs. Hunt was empJoyec1. (Apparently he sent copies to both Henderson and Sister Myra. In this letter he recounted that Henderson had stated thflt their contract does not preclude the hospital accepting blood from other sources (RX 65 g) .

Sister l\fyra prOJnptIy wrote Henderson at Connnunity on November 7, 1960 and asked what he suggested as "the next act in this case" (RX 65 h), Apparently nothing very definite was recommended except to send a carb'Jn copy to St. John s (and blind carbon copies to Dr. Ambelang, 1elba Olsen, find Ardyth Cobb at NCDBBCH) of another letter dated December 1 , 1960 to World , .

COMMUNITY BLOOD BA:\K, KANSAS CITY AREA, INC., ET AL. 851 728 Initial Decision (Midwest) telling them to transfer credits through the clearing house (CX 65 5).

Sister Myra waited until April 10, 1961 and then wrote Dr. Morgan (RX 65 0) in part as follows:

The Hunt care is now in its cig-hth month. It seems to me that Vlorld Blood Bank wo.uld never send credits through the district clearing house for that was not in the contract '\;;;ith Mr. Hunt and \with the $4 a pint clearing house fee tile 'Varld Blood Bank . would not only be out the 16 pints, but also $64 in fees. I do not therefore think they wil ever come through in that matter. Yon have YOU'i' OW1/ n:osons f01' 11M U.S11Jg thi!rr blood even ?vhen you are short so this avenue of solving: our problem i:o closed. (Empha is Supplied. (RX ;;5 0) She then said she was wj1ing to use \Vorld blood and asked how it could be accomplished, Dr. Morgan replied July I, 1961 (RX 65p) and reiterated that Community was ready to receive credits through the clearing house but that " " there is nothing in the contract between St. John s Hospital and Community Blood Bank (which contract embodies our urban blood program) that in any way prevents or prohibits the hospital from ordering Mrs. IIunt's blood requirements from sources other than Community Blood Bank." Sister Myra in July 1961 (RX 65 q) decicled to give (World) Midwest blood to a patient and then when a donor came in to credit the donor s blood to Community and asked to be notified if this procedure did not meet with Community s appl'va1. Apparently that was done as by August 11, 1961 Remer wrote Henderson that the credit of 16 units previously established had been exhausted (RX 65 u).

199, In connection with the case of Mrs, Emma Goff, her obligation was discharged by donations of blood by her son and Waitei' Boyd at Community (TR 1555) .

200. In connection with the Harry Darling case, Dr. Helwig of St. Luke s on November 18 , 1959 directed that the account be credited with the blood tendered by Midwest although the lattel' would not send credits through the clearing house because Dr. Helwig felt "it was too bad if they (DarlingsJ were stuck for seven pints and thought they were getting b100d to replace it" (RX 313; Tr, 7314). Credit was given to the account (RX 333; Tr, 7799).

201. In connection with the case of Elmer Fugate, three friends made blood donations ('l'. 2217) at Community and the obligation was discharged (Tl' 7185- 87). 852 FEDERAL TRADE CO !MISSION DECISIO Initial Decision 70 F. T. 202. In connection with the case of Lola Smith, St. Luke B100d Bank technician received a unit of blood from Midwest. Credit by check was given to Mrs. Smith by St. Luke s (RX 336 a).

203. In connection with the George Bassett case, Midwest transfened a credit to Community via ~orth Central District Blood Bank Clearing House (Tr. 3074-75). 204. In connection with the John Mann case, the blood was actually replaced by transfer of a donation by Mann s son to another blood bank (CX 517 a-b; Tr. 3377). 205. In connection with the Francis Hammet case, donors made replacement at Community and his indebtedness was satisfied (CX 504; Tr. 3293; 7787; RX 330 a-f).

Refusal of M'midwest Blood Due to Alleged Knowledge of Defect in J.l1 irhued Operation 206. Throughout the hearings in this proceeding, attempts were made to introduce evidence concerning the relative merits of Community and Midwest as blood banh and to point to instances in which some practice OJ' qualification of :vidwest was deemed improper OJ' inadequate (see RF 178-252 inclusive). 207. The hearing examiner on a number of occasions took the position that unless such information was shown to have been brought to the attention of respondents in time for them to act upon it in their refusals to accept blood, it was inadmissible to sho\v that there was no conspiracy. Ho\vever, the hearing examiner in most instances peJ'mitted respondents to record the testimony and in other instances counsel supporting the complaint agreed that witnesses if called would testify in accordance with a profler of proof. The material is thus available to the Commission for review (Tr. 8555-6).

208. Evidence that action was taken to refuse Midwest blood because of some deficiency was vague and contradictory. The following examples demonstrate the character of proof which was offered:

a. Dr. Arch Spelman considered visiting :vidwest B100d Bank but decided not to do so because he did not like the people he saw outside (TI'. 4915). Yet his group ordered blood from Midwest as much as six times (1'1'. 4914). He had no problem with the blood (Tr. 4914). Admittedly his recollection was vague on details which occurred in 1955 (see Tr. 4948-49). b. Doctors Buhler and Kerr visited Midwest Blood Bank in late COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 853 728 Initial Decision Mayor June 1955. Dr. Buhler had been invited by Mrs, Bass at the suggestion of Miss Saunders of the A. B. Drs. Buhler and Kerr told Mr. and Mrs, Bass that they regarded selling blood as morally reprehensible and Dr. Buhler became offended when Mrs. Bass obj ected to his picking up a piece of paper from her desk. Dr. Buhler had previously talked to Dr. Graham and told him he thought that the opening of Midwest was terrible and in effect that Dr. Graham (who was considerably his senior) didn t know enough to act as Medical Director of a blood bank (Findings 78-81). Despite this early misunderstanding, Dr, Buhler was willing to discuss with Mr. Bass becoming Medical Director of Midwest (Findings 140-145).

c. Dr. Hilliard Cohen visited Midwest and was disturbed because Mr. Bass would not give him information unless he wanted to sign a contract (Tr. 3884-3886). Yet Menorah Medical Center had purchased blood from Midwest on several occasions (Tr. 3891).

d. The store manager at a Katz Drug Store in the vicinity of the downtown drawing station of Midwest testified that 955f, of the persons who cashed Midwest checks at his pharmacy were winos" of the derelict type (Tr. 8528, 8534). Checks were not cashed there until the fail of 1961 , however (Tr. 8522). Hence the evidence is much later than the refusals which commenced shortly after Midwest opened in 1955. (This material was received for its bearing on the type of order which might issue (Tr. 8527). ) A corroborating witness who made even stronger derogatory statements had been observing Midwest donors a little over a year which would be even later in time (Tr. 8547). e. Several months after the fiJing of the complaint, three young men presented themselves as replacement donors at World (Midwest) for a classmate who was transfused at KUMC. The waiting room was crowded and dirty and there were worms a1l over the floor (Tr. 6370). The donors were dirty and their clothes were dirty (Tr. 6376). The boys left after being discouraged by what they saw and later gave blood at Community Blood Bank (Tr, 6372). The mother of one of the young men corroborated that there were worms all over the floor and stated that she had told Dr. Eilers at KUMC and had called the Board of Health (Tr. 6378, 6382). Generally corroborative evidence was given by another of the prospective donors (Tr. 6386). (This testimony was also received for the character of the order which might be is- , Initial Decision 70 F.

sued). Mr. Bass explained that an exterminator took care of these insects.

f. Betty Jean Brown, an employee of Morton Memorial Hospi. tal at Tulsa, testified that she worked at Midwest and World commencing January 1959 after finishing her schooling in Minneapolis and remained until March of 1960 (Tr. 7648). She had previously worked at Independence Sanitarium as a laboratory receptionist and glassware cleaner (Tr. 7649). She was taught by Irs, Schousc, a registered nurse, how to make venepunctures (Tr. 7659) and the laboratory work by Shirley Fisk and by Mrs. Bass (Tr. 7650-51). Donors were paid $4 for positive and S5 for negative blood (Tr. 7658). Some came from the mission at Grand Street and Mr. Bass or the delivery boy would go there sometimes to get them (Tr. 7658-59). When Mrs. Schouse was at the desk she would refuse known repeaters (Tr. 7659). Mrs. Bass gave instructions that they should get through rapidly (Tr. 7660). Mr. Remer worked only in the offce when Miss Brown was there (Tr. 7661). She never saw Dr. McKee at World and saw nim at Midwest only about once a month (Tr. 7663-4). Dr. McKee never talked to ner about what she was doing or her procedures (Tr. 7663). Mrs. Bass usually was in in the afternoon but not every day (Tr. 7664). Mrs. Bass told Miss Brown that she had been trained as a blood bank technician, that she was a member of A.B.B. and a registered nurse. Miss Brown assumed she got her training in the East in IIinois (Tl' 7665). Miss Brown recalled an incident when vViliiam Fanniel refused to draw a donor whose blood pressure was low. He was drawn by Steven Rogers. When being drawn, the donor got a reaction. There was some suggestion about putting his blood back into him (Tr. 7669). The botte was brought back into the laboratory and was half full so he could not have been transfused (Tr. 7676, 7682). He was later taken out and given something to eat (Tr. 7670). Mr. Bass said My God" or something, "an we need is for someone to die on the premises. Miss Brown didn t speak to any of the doctors in the Kansas City area until about a month before she gave her testimony (Tr. 7670-72). Consequently knowledge of these facts could not have come to their attention.

The hearing examiner struck the testimony with respect to the reaction of a donor on this basis as he had the testimony of Wil- Jiam Fanniel and for the same reason that it was not evidence to disprove the conspiracy (Tr. 7674). Dr. Bridgens later stated that another employee of Independence kept in touch with Miss Brown COMMUNITY BLOOD BANK. KANRAS CITY AREA, INC., ET AL. 855 728 Initial Decision but he could not recall any specific report (Tr. 7774). He presumed he had heard from his colleagues who had had experience with Midwest about direct deliveries (Tr. 7775). g. Dr. Rettenmaier testified that in the warmer part of the year 1957 an unidentified person whom he never saw again threatened him in a filthy manner about a delivery of three units of blood (7438), This blood had a Midwest label and two units were hemolyzed and the third showed a positive serology indicating that it was capable of transmitting syphilis (Tr. 7478-9). Dr. Rettenmaier testified on cross that Midwest was told to pick up the blood because it was clotted but was not told about the positive serology (Tr. 7478). No report was made to N. I.H. concerning the incident (Tr. 7478). On questioning by the hearing examiner, Dr. Rettenmaier said he had only made verbal reports not offcial reports (Tr. 7486). He made some statements about the serology to Dr. Gibson and to Dr. Wheeler but, since he could not prove it because he could not find the papers on it, thereafter said nothing (Tr. 7487).

h. Dr. Rettenmaier testified that he talked with Dr. Majorie Sirridge concerning her brothel'-in-Iaw s experience in being refused as a donor at Midwest because his hemoglobin was too low. In early 1962, Dr. Sirridge said her brother-in-law had a normal hemoglobin and was gJad he was refused because the place was filthy (Tr. 7464).

Dr. Sirridge corroborated this statement so far as the report on low hemoglobin is canceled (Tr. 8287-8). Dr. Rettcnmaier also received a report in March or April of 1962 from an unidentified woman to the effect that her husband had refused to register to give blood at Midwest because the place was dirty (Tr. 7466). Dr. Rettenmaier said a report had been made to the Board of Health and that the local board felt it had no jurisdiction and the N.I.H. inspector had given Midwest a clean bil of health (Tr. 7468). (These statements were received only for the fact that the reports were received by Dr. Rettenmaier not for the truth of the facts stated (Tr. 7469). ) Dr. Rettenmaier said that these reports played a "big part" in his attitude canceling Midwest (Tr. 7470) .

209. The discussions at early meetings of pathologists and hospital administrators indicate that there was no adequate investigation made by pathologists to determine whether or not Midwest blood was properly drawn or processed:

a. Dr. Coffey for example in a meeting of the Spelman Commit- Initial Decision 70' F. tee (Finding 108) wanted to know how much risk might come from use of a commercial blood bank.

b. At the meeting at which there was a discussion of commercial banks held October 20, 1955, it was clear from statements by A. Neal Deaver, Dr. B. 1. Burns and Leslie D. Reid that there had been no investigation of Midwest and that one would be premature (Finding 94).

CERTAIN SUSPICIOUS CIRCUMSTANCES DID NOT IN THEMSELVES AMOUNT TO PROOF OF CONSPIRiICY 210. The Baptist Memorial Hospital conducted an investigation to determine what blood source it would utilize and Dr. O. Dale Smith prepared a report which was concurred in by WaJdo Hil the assistant administrator (RX 193). This investigation report did not mention the relative quality of the blood produced but recommended that Community s proposal be accepted. It concluded in part as follows:

I feel that the policies of the community bank which are in fact welded by the consensus of the hospitals through the Hospital Administrations and through the hospital pathologist, can be more fluid and best reflect the needs of the community hospitals and the community they serve. (RX 193) 211. In connection with the choice of blood provider for Shawnee Mission Hospital, Rev. Paul T. Jackson testified that his organization had used World Blood Bank (Midwest) while it was a nursing home and found the source very satisfactory (Tr. 2242). When the hospital was being organized as a hospital in May of 1962, the board decided to accept Community s offer because: It was the thinking of the board that that would be the choice of the doctors and the pathologists (Tr. 2252). The board's action, however, preceded the selection of the pathologists (Tr. 2252).

212. In an attempt to secure a contract for supplying the blood to Oklahoma Baptist Hospital and Muskogee General Hospital James Remer from l',fidwest had a series of discussions commencing the end of October 1960 and concluding at the end of December (Tr. 4026-4044). These meetings were with administrators and with Dr. Tom S. Gafford, the pathologist for various hospitals in the area (Tr. 8607-8614). Thereafter and on or about December 2, 1960, Mr. Remer and Mr. Bass called on Dr. Gafford with a view to securing his signature to a contract for the various hospitals (Tr. 4044-46, 8619). As was his custom, Remer concommunity BLOOD BANK, KA:\SAS CITY AREA, INC., ET AL. 857 728 Initial Decision firmed his previous conversations by letter stating what he understood had occulTed (CX 558-561).

213. At the meeting of December 2, 1960, according to Remer Dr. Gafford said he would not consummate the contracts and, on questioning by Mr. Bass, reluctantly indicated that Dr. Angelo Lapi and Dr. Victor Buhler had had uncomplimentary things to say about Midwest (Tr. 4044-4046).

214. Mr. Donnell, one of the administrators, in his testimony stated that the reason why they did not sign or recommend the signing of a contract was that the proposal would not have improved the blood supply and did not reach the standards that had already existed and that the costs could not be passed on the the patients 70510 of whom were under the Department of Public Welfare and secured a per diem allowance (Tr. 8633). 215. With respect to the allegation concerning statements by Drs. Lapi and Buhler, Dr. Gafford testified, refelTing to Remer letter, allegedly confirming the visit:

Q. Now, there is in that paragraph the sentence reading, "The statements made to you by Dr. Victor Buhler and Dr. Angelo Lapi certainly are oblivious to the true facts of the services \ve render to the hospitals we serve * * *". In your meeting with :Mr. Bass and Mr. Remer on this occasion did you say to them that you had had any conversations with Dr. Lapi or Dr. Buhler concerning World Blood Bank? A. I certainly did not.

Q. What happened? A. The situation came about, I don t recall the sequence of events, but I believe it was Mr. Bass either asked me if I knew any pathologists, or he specifically asked jf r knew Dr. Lapi 01' Dr. Buhler, I said yes, he asked me if I ever heard any remarks made about the World Blood Bank and I answered yes, and then he asked whether they were derogatory or not, I said they were. As far as my saying that I had direct conversations with Dr. Buhler and Dr. Lapi nothing could be further from the truth because I had had no conversations.

Q. Between the time Mr. Remer first started to talk to you about this proposal that World might supply blood down in ::uskogee and the date of this meeting, had you talked to any pathologists from the Kansas City area con cerning World Blood Bank? A. 1\0 . I had not. (Tr. 8620-21) 216. The hearing examiner finds that Dr. Gafford in answering questions by Mr. Bass unintentionally gave Bass the impression that he had refused to sign a contract with Midwest because of a conversation with Dr. Lapi and Dr. Buhler. No such conversation however, took place and the contracts were not executed primar- Initial Decision 70 F.

ily because the extra cost of securing blood by purchase would not be made up by the Department of Public Welfare for the large number of welfare patients in the Muskogee Hospital (Tr. 8613, 8634). Dr. Gafford had also had a previous experience with Mr. Bass and testified that Bass had offered him a kickback. This he felt was not morally or ethically right (Tr. 8608, 8620). THE PUBLIC INTEREST The hearing examiner takes the position that it is in the public interest to bring a proceeding to prevent collective action by any group, no matter how public spirited, where that group is attempting to usurp legislative or judicial authority to hamper or put out of business any other person who is lawfully in business even though the activities of the latter are deemed unethical or even ilegal. Hence no detailed summary of evidence of this character offered by respondents appears necessary (see RF 178-252; Tr. 8555-6).

On the other hand, it is deemed desirable to make findings of a generalized character, in this area, for whatever value they may have to the parties or, on review, to the Commission. Hence the ensuing findings of fact are made.

217. While the cost of blood to a patient appears to be less when Midwest blood is used (see CX 244), the comparative cost to a hospital of utilizing Community, rather than Midwest, is not entirely clear. Midwest initially required more replacement donors to wipe out replacement costs for blood and processing fees than did Community (RX 279). Community absorbs the cost of outdating (Tr. 2730-31) and supplies services which are not routinely supplied by Midwest in the form of: typing and classifying rare bloods (Tr. 2836) ; maintaining a training operation for hospital technicians, and for interns and residents (Tr. 2844, 2876) ; assisting in making diffcult cross matches (Tr. 2844- , 3621 3681-2) ; and making tests in addition to those required under I.H. regulations (see for example Tr. 2830-39; RX 69 a- , RX 70 a-h). Community also has a definitely prescribed method of taking care of indigent patients (CX 233) . 218. Substantially all of the physicians who testified considered that the direction of Community by Dr. Morgan constituted direction by an outstanding expert in hematology. Similarly, Dr. Ferdinand Helwig, the Medical Director of Community, was highly regarded among physicians as the dean of pathologists (see Tr. 8718-9) and each of the hospital pathologists was auto- , eOMMGNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 859 728 Initial Decision matical1y made a part of the Technical Advisory Committee of Community (Tr. 7729) which tended to insure widespread distribution of experience. Technologists were accredited by the American Society of Pathologists and registered nurses were utilized normally to question donors and to perform the preparation for venepuncture ami to observe donors for reaction. 219. Technical qualifications of personnel at Midwest, although determined to have been suffcient in the opinion of the licensing authorities and Medical Inspectors at C\.I.H. were not clearly established in the proof. Mrs. Bass, who was the technical head of Midwest, was i11 at the time of the hearings and, according to her physician, could not be called nor have her deposition taken (see RX 342 In Camera). She was not licensed as a registered nurse in either Kansas or Missouri (Stip. ). The accreditations which Dr. McKee said she had were from schools that were not associated with hospitals recognized by the American Hospital Association nor by the American Medical Association and were not sanctioned by those associations or the American Society of Clinical Pathologists according to Dr. Buhler s testimony (Tr. 8064-69). None of the Medical Directors of :Iidwest had specialized in blood banking or hematology in their formal training. Mr. Bass, the business manager of Midwest, had been a farmer, a mandolin teacher, a used-car salesman and a commercial photographer before opening Midwest and had had no experience in blood banking (Tr. 6693-6700). James E. Remer who was employed January 4, 1960 (Tr. 5491) after high school and military service had been in the insurance business (Tr. 5487-91). He also had been a bartender (Tr. 5497-8). His training was al1 on the job-so far as processing blood was concerned-and under the supervision of lVII's. Bass (Tr. 6010).

220. The technical qualifications of the Midwest Medical Directors were known to many of the doctors in the Kansas City area. They are a matter of medical record.

221. There is no proof of the comparative hepatitis incidence between Midwest and Community but the evidence received concerning the incidence of hepatitis attribntable to use of Midwest blood in KUMC is extremely low, when compared with the incidence of hepatitis in other sections of the country. This evidence may not be statistical11y important because a large proportion blood used by University of Kansas Medical Center was in connection with multiple transfusions (see Tr. 3960-61). 222. Had :Vlidwest used North Central District Blood Bank Initial Decision 70 F. T. Clearing House its costs of doing so on the basis of 850 blood provider contracts in force and calls for only 50 units of blood would have amounted to at most approximately $1 417. 50 against gross profits of between $6 90D and $7 800 (Respondents' Reply Brief, pp. 24 a-b; Tr. 5587-90, 6200-10). 223. Most of the doctors gave the hearing examiner the impression that given a choice they would prefer blood where the donors were selected and the blood processed and stored by Community over blood offered by Midwest. Donors also preferred Community (see Tr. 6357-6388).

THE PARTICIPATION OF INDTVIDVAL RESPONDENTS 224. Attached hereto and marked Appendix B is a tabulation indicating the attendance of individuals named in the complaint in various meetings which are more fully described under the heading "Facts Bearing on Evidence of Conspiracy Charged supra page 778 et seq. A similar tabulation showing hospital attendance has been marked Appendix C. In addition, there have been tabulated in Appendix A the names of hospitals and individuals who had been involved in particular incidents in which hospitals avoided receiving blood attempted to be delivered in replacement of blood transfused. In this appendix also appear references to the incidents in which Community Blood Bank too took the position that it would not receive blood tendered by Midwest for delivery but it required that such blood be credited to it through credits in the North Central District Blood Bank Clearing House.

225. The hearing examiner finds that each of the following individuals with knowledge of the existence thereof was concerned in action in furtherance of a plan the necessary consequences of which resulted in a restraint of trade:

Dr. G. M. Bridgens Dr. Victor B. Buhler Dr. Hilliard Cohen Dr. David M. Gibson Dr. Ferdinand C. Helwig Dr. Jack H. Hill Dr. D. A. Hoskins Dr. Carroll P. Hungate Dr. Angelo Lapi Dr. Frank A. Mantz Dr. William McPhee Dr. Perry Morgan Dr. L. R. Moriarity Dr. Evelyn Peters Dr. Ralph J. Rettenmaier community BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 861 728 Initial Decision Dr. Marjorie S.Sirridge Dr . O. Dale Smith Dr. Arch E. Spelman Walter V. Coburn A. Neal Deaver W. W. Henderson Susan Jenkins Robert A. Molgren John Murphy 226. The hearing examiner finds, in accordance with recommendations made by counsel supporting the complaint, that the evidence concerning the following individuals is not suffcient to support an order against them in their individual capacities: Miler Bailey E. B. Berkowitz T. R. Butler Tom J. Daly Abraham Gelperin Meyer L. Goldman Mack Herron Maurice Johnson Thomas M. Johnson Walter N. Johnson James D. Marshall Russell H. Miler Walter A Reich James R. Rich Nathan J. Stark Harry M. Walker Gilbert C. Murphy Adolph R. Pearson James T. Sparks Robert F. Zimmer 227. With respect to the following individuals, in accordance with the recommendations of counsel supporting the complaint the hearing examiner finds that such individuals by reason of their removal from the Kansas City area and in some cases also by reason of their present state of health, are no longer in a position where there is any IikeJihood that they may resume activities of the character charged in the complaint and he accordingly finds that as to such individuals the complaint should be dismissed in their individual capacities:

Sister Michaella Marie Dr. Wiliam C. Mixson Dr . Ralph Coffey Dr. Wiliam J. Seko1a REASONS FOR DECISION B Initially, under ensuing headings, we consider questions concerning the jurisdiction of the Commission. Then, we examine the S Pursuant to the provisions of 8 (b) of the Administrative Procedure Act Bnd 21 (b) of the Rules of the Co:mmission.

, .

Initial Decision 70 F.

charge of unfair trade practice consisting of a conspiracy or common plan of action to boycott or otherwise interfere with the op. erations of a commerical blood bank.

1. Jurisdictional Issues A. The Not-For.Profit Corpomtions The stipulated data and the testimony all factually establish that both Kansas City Area Hospital Association (Area Hospital Association) and Community Blood Bank of the Kansas City Area, Inc. (Community) are corporations organized under notfor-profit statutes; that they have tax exemption from the Internal Revenue Service, and that none of their funds are distributed to their members, offcers. or directors. They have a paid staff, but all of the offcers and directors are public spirited volunteers. All but two members of the Area Hospital Association and one affliate of Community are also non-profit corporations (Findings 12 to 24) .

Respondents point to the definition of " Corporation" found in 4 of the Federal Trade Commission Act elaiming that it conelusively delimits the jurisdiction of the Commission. The definition states:

Corporation" shall be deemed to include any company, trust, so-called Mass;:chusetts trust, 01' association, incorporated or unincorporated, which is organized to carryon business for its o\vn profit or that of its members, and has shares of capital or capital stock or certificates of interest, and any company, trust, so-called Massachusetts trust, or association, incorporated 01' unincorporated without shares or capital or capital stock or certificates of interest, except partnerships, \vhieh is organized to carryon business for its own profit or that of its members (15 U. 44). As counsel for respondents ably demonstrated in their brief, by the ample citation of authority, commencing with bibJical references; the terms "organized to carryon business" and "for its own profit or that of its members" are not entirely free from ambiguity in the context in which they are used. Thus, we are free to consider the legislative history of the section, and thc general purpose of the Federal Trade Commission Act as a guide to the resolution of the ambiguity, recognizing at an times that the party asserting jurisdiction must sustain the burden of establishing it.

The legislative history of the particular section demonstrated ; ;

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 863 728 Initial Decision only that amendments were made to insure that trade associations, which up to that time had been involved in conspiracies in restraint of trade to some extent, would be included. Legislation at the same session, the amendments of the Clayton Act, indicate a determination by Congress that Jabor organizations and farm cooperatives, as such, would not be regarded as conspiracies merely because of their joining together theretofore independent persons for legitimate group activity.

The section of the Clayton Act reads in part: That the labor of a human being is not a commodity or article of commerce. 1\ othing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agriculture, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shah such organizations, or the members thereof, be held or construed to be megal combinations or conspiracies in restraint of trade, under the antitrust laws. (15 D. C. SI7) It may be that the incorporation in the Federal Trade Commission Act of the language " organized to canyon business for its own profit or that of its members" was intended to express the reverse concept, that that Act was clearly designed to cover organizations organized to canyon business if either the "corporation" itself or Hs members secured "profit" from its operations. Clearly both Area Hospital Association and Community were (lrganized to carryon business in the broadest sense to maintain a place where their activity is continuously canied out and their articles of incorporation heretofore quoted (Findings 17 and 21) so contemplate. Area Hospital Association is to " act as an agency and instrumentality to assist in the procurement and training of necessary personnel" to provide and extend comprehensive and coordinated planning and financing" among many other things. Similarly, Community was organized expressly " create, establish and maintain a permanent blood bank of human blood * * * to collect * * * to process * * * to store * * *" and to dispose of and distribute the same as the Board of Directors may determine.

Both of the corporations continuously carried on the activities which they were organized to carryon. They had permanent paid staff, a place of business and among other things kept records and n Seo; Duplex Printing Press Co. v, Deering. 254 U. S. 443 (1820), Rnd BedfordC1tt Stone Co. Journeymen Stone Cutter 8 Aasn. 274 U.S. 37 (HIZ7j, for the restricted interpretation ()fthis exception prior to the pa sage of subsequent legiBls.tion. Initial Decision 70 F.

files, collected dues, or fees and, in the case of Community, bought supplies for the processing of blood, maintained an elaborate laboratory and storage facilities, contracted with hospitals for supplying blood and actually received funds in excess of unit costs for blood which was trmlsfused.

Although it is clear that neither Area Hospital Association nor Community ever utilized any funds received for distribution to members or for that matter to offcers and directors, both organizations performed very valuable services for those affliated with it. It was thus in the broadest sense exceedingly profitable for the doctors and for the hospitals to receive the services which were so well performed by both of these organizations. In connection with blood banking, Area Hospital Association was particularly useful to the hospital administrators in working with the J ackson County Medical Society and the Society of Pathologists among others, to provide a reliable source of blood and to relieve the hospitals of the onerous task of securing blood donors and making elaborate borrowing arrangements for rare blood. The association was the forum which resolved the questions raised by the pathologists and it was the medium through which a portion at least of the corporate membership of Community was selected. Community, in addition to providing the means of relieving the hospitals and doctors of part of their responsibility for securing blood donors, actually secured a gross profit on several of its operations. For example, a $3 gross profit was secured on the transfer and storage of Red Cross blood and the return on its entire operation was suffciently in excess of its total expenses so that it was able to repay some of the loans which were made to it at the time of its organization.

The hearing examiner does not consider the decisions under the Revenue Statutes of moment here. The Revenue Act exceptions were designed as subsidies and have nothing to do with the proper regulation of activities designed to, or having the effect of, injuring interstate commerce. He prefers, moreover, to place his decision that the Federal Trade Commission had jurisdiction on the broadest ground, i. , that the Commission could not be expected to accomplish its primary mission, the prevention of substantial restraints of trade or monopolies in their incipiency, " if by the simple expedient of organizing a non-profit corporate shell, persons desiring to engage in a conspiracy in restraint of trade could do so with impunity.

10 See Fashion Originators Guil v. C., 312 U. S. 457, 466 (1941). , COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 865 728 InjtiaI Decision The operative language in 95 (a) (6) of the Act, which empowers the Federal Trade Commission to act, is : The Commission is empowered and directed to prevent persons, partnerships, or corporations, . . . (except classes of no concern here) from using unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce. (15 D. C. 945) This direction, to be effective in preventing incipient restraints of trade, must be construed to cover those types of operation which include exempt corporations and non-exempt persons working together as they did here in a joint venture" or partnership.

It has long been held that a conspiracy in restraint of trade is such a partnership. " Thus under the express direction of the statute the Federal Trade Commission is empowered to order that such a partnership cease and desist its unlawful activity. To do so it acts on the partners.

The Supreme Court in a recent decision 13 has, in considering the jurisdiction of the Federal Trade Commission to act in merger cases, expressed, in dicta, an opinion that Congress had intended to remove all question concerning the Commission power despite some apparently restrictive language in that Act. In the sole case cited on this precise subject, i. , jurisdiction over a non-profit concern Chmnber of Comme?' , et al. v. Federal Trade Commission 13 F. 2d 673 (8 Cir. 1926), Judge Stone dealt with the matter summarily. He said:

The first ground is that the Chamber is not organized for profit. This is true. But it is a legal entity which can and does act and it is legally responsible for its acts and entirely amenable to lawful control. It is capable of entering into a combination or conspiracy or of being an effective instrumentality to execute the purposes of a combination or conspiracy formed by others, (p. 664) He seems thus to recognize that such a combination or conspiracy is itself an entity, i. , a partnership in crime and thus amenable to the control of the Commission.

We have, accordingly, concluded that the circumstance that non-profit organizations are here involved, does not create an immunity from suit 14 particularly since natural persons who are 11 See fo!' example, addre of Hon. Paul Rand Dixon before the Economic Club of Detroit latch 12 , HJ62, and cases there cited.

Hitchman Coal", Colee Co. v. Mitchell, 245 U.S. 229 (1917). 1J United States v. Phil(uJelJ)hia National Banlc 374 U.S. 321 (1963). "It i8 intel'estinp; to note that a bil, S. 2560 , was offered in the United States Senate February 26 , 1964, specifically exempting- dodol's and community blood banks from prosecution under the alltitrust Jaws foi' concerted refusal to accept blood f!'m other blood banks. (Cungressional Record, Feb. 26 , 1964 , pp. 3593-3601.) Initial Decision 70 F.

non-members of the organizations have also joined with such organizations in the pursuit of the alleged boycott. In such circumstances, even the express immunity found in the Clayton Act has been held ineffective."

B. The Commodity or M edieal S81'vice Issue Respondents during the trial appeared to take the position that the process of transfusing blood from one human being to another is a single medical service which cannot be broken down into parts. They further argued that the entire operation constitutes the practice of medicine and that, thus, there can be no restraint of trade because a professional service, not a trade, is involved. Further supporting this position, respondents contend that human whole blood which is to be transfused may not be bought and sold because it consists of living human tissue; it may only be utilized as a part of the practice of medicine. The uncontradicted testimony of the experts makes it clear that human whole blood remains alive during the period in which transfusion may be performed. There is, however, something added before human whole blood can be preserved for use. This addition is an anticoagulant consisting either of a citric acid dextrose solution or heparin. If the additive is not used the blood wi1 coagulate and become useless for transfusion within a very few minutes. Hence the argument that bloocl is living human tissue and thus cannot be an art.icle of commerce fails to take into account the fact that it is human tissue specially treated, carefully refrigerated, and added to a chemical solution quite distinct from the blood itself although completely compatible with the continued existence and growth of some of the living blood cells. It is also the uncontradicted testimony of the experts that several diseases may be transmitted through the transfusion of a donor s blood into a patient. Hence the selection of a donor is an extremely important factor to insure the quality and purity of the blood to be transfused. One particular disease known as viral serum hepatitis, for example, may be carried in the donor s blood without showing clinical signs or symptoms. There is no sure test which can be made on the donor s blood to insure that the virus of hepatitis is not present. The medical profession attempts to reduce the chances of the presence of viral serum hepatitis by United States v. Borden 308 "C. S. 18g (1939): Allen Bradlen v. Local 8. 325 U.S. 797 09'l.i) ;Columbia River Co. v. Hinton 315 U. S. H3 (1942) ; Meat Drivers v. United States, 371 S. 94 (1962).

community BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 867 728 Initial Decision screening the donor to determine his present health and his previous exposure to or symptoms of liver disease. A simple, not conclusive, test which might warn of a possible liver malfunction has not been generally adopted; if it were, % of the population would be excluded. The screening techniques usually employed consist of questioning the donor, testing his temperature, blood pressure and the hemoglobin content of his blood. The administrative practice of the Department of Health, Education and Welfare, however, has treated whole human blood as a product under a Federal Statute. " Hence the suggestion that it cannot legally be sold is contrary to the intent of Congress and to the actions of the licensing authorities charged with regulating the manufacture of therapeutic serum, toxin, antitoxin or analogous products. Congress, in adopting the Public Health Service Act, clearly contemplated that there would be barter, saJe and exchange of virus, therapeutic serums, toxins and analogous products.

The Department of Health, Education and Welfare has issued Public Health Service Regulations !j!j 73.300 to 73.327, whole blood inclusive, which are described as "additional standards; whole blood (human). " The Act specified (42 U. A. !j262 (a)): " person shall seJI, barter or exchange, or offer for sale, barter or exchange '" " *" such products in the District of Columbia or in interstate commerce unless it be made by a licensed establishment. Public Health Service has adopted rules and regulations and prescribed standards for the Jicensing of such establishments including the Jicensing of Community and of the establishments which respondents are charged with having boycotted. Although the language in the Act does not specifically mention whole blood (human) the administrative practice has included it" and this inclusion has been recognized by the courts in Merck & Co. v. Kidd 242 F. 2d 592 (6 Cir. 1957). In this suit under the Food, Drug and Cosmetics Act of Tennessee, the court mentioned the fact that the manufacture of blood plasma was regulated by the Department of Health, Education and Welfare under the Virus, Serum and Toxin Act, 42 U. A. S 262. Certiorari was denied in 355 U. S. 814.

Two cases in the United States District Court for the Southern District of ~ew York have upheld indictments for violation of 16 See Menzies, et 01. v. Federal Trade Commission, 242 F. 2d 81 (4 Cir. 1957), certiorari dellied, 353 U. S. 957.

"42 V. A. 262(a) (d).

JR See Menzies, et ai. v. Federal Trade Commi,ssion, supra. Initial Decision 70 F.

the Public Health Service Act and Federal Food Drug and Cosmetics Act. United States v. Calise 217 F. Supp. 705 (S. 1962). Judge Cashin stated at page 708:

The Government maintains that the term "therapeutic serum" or " analogous products," as used in Section 262 of Title 42 is broad enough to encompass normal human blood. It is defendants' contention, however, that whole human blood is not a serum, and does not come within the purview of Section 262. The same contention has heretofore been rejected in this district. See United States v. Steinschreibel' (218 F. Supp. 426 , May 25, 1962). It cannot be said as a matter of law that the statutory terms do not include any serous fluidused for medical purposes. The scientific facts will have to be determined at trial and of course, such determination wil be dependent upon the expert and authoritative scientific evidence adduced at that time. Judge Cashin also held that blood was a drug. In that connection he stated at page 709 :

There can be no question that the defendants dealt in blood products for their use in the treatment of human dis2ase. I , therefore, hold that the whole human blood referred to in the indictment would constitute a "drug" within the meaning of the statute.

Completely rejecting the defendants' contention that since blood cannot be "propagated" or "manufactured " except in the body of a human being, it could not be one of the products which Congress intended the licensing statute to apply; Judge Cashin said:

Although this argument is truly ingenious, it must be rejected because if it were correct then nothing which is ultimately derived from nature would ever be capable of subsequently being "manufactured and prepared. The second case United States v. Steinschreiber 218 F. Supp. 426 S. Y. (1962) was a decision by Chief Judge Sylvester T. Ryan of the Southern District of New York on a motion to dismiss an indictment against defendants for unlawfully transporting unlicensed "normal human plasma. " Ag-ainst the contention there, that normal human plasma did not fail within the definition of the term of therapeutic serum or analogous product Judge Ryan pointed out that, in the absence of any statutory definition, the terms used must be given their commonly accepted meaning. And continued:

We on this motion are to decide only \vhether as matter of la\v the facts alleged in the indictment are suffcient to charge a crime under the applicable statute. We do not have before us whether as a scientific fact normal human plasma and therapeutic serum are analogous products. This is a matter to be resolved on the trial by the expert and special knowledge of witnesses who may be caJIed by the government or by the defendants. COMMUNITY BLOOD BANK, KANSAS CITY ARE, INC., ET AL. 869 728 Initial Decision Judge Ryan then said after quoting Dorland's dictionary: We cannot say as a matter of law that the terms "therapeutic serum analogous products" do not encompass any serous fluid used for medical purposes.

The court, in addition, pointed out that the regulations 42 C. 731 (b) provided in the definitions:

(5) a product is analogous:

(ii) to a therapeutic serum, if composed of whole blood or plasma or CODw taining some organic constituent or product other than a hormone or an amino acid, derived from whole blood, plasma or serum and intended for administration by a route other than ingestion. After trial, Judge Tyler held that human plasma (not whole blood) was an analogous product United States v. Steinschreiber 219 F. Supp. 373, 382 (S. Y. 1963), hence, to that extent, supporting the administrative interpretation of the Public Health Service. Judge Tyler s decision was affrmed by the Circuit Court of Appeals, 2nd Circuit, in a per curiam opinion (326 F. 2d 759 (1964) ).

Thus, since there has been no scientific testimony to the effect that the regulations of the Department of Health, Education and Welfare are not within the statute and there has been a consistent administrative practice at least since 1955 of licensing establishments for the sale of human whole blood, respondents' contention that human whole blood is not an article of commerce must be rejected.

C. Medical Moral Argument During the course of trial, counsel for respondents emphasized that in the opinion of their experts the practice of medicine requires consultation of one doctor with another, and advice and information with respect to the effcacy and safety of remedies. At final argument, respondents asserted doctors could even agree not to use any particular product. There must be, in the hearing examiner s opinion, no impingement of the free exchange of information among doctors, or the freedom of individual doctors, each independently to exercise judgment as to the use or the avoidance of any particular remedy. However, this does not mean that groups of doctors or doctors and hospitals, under the guise of the practice of medicine, may collectively combine to prevent the operation of an enterprise because of some objection to its method of doing business, no matter how sincere, as they were in this case, the groups may be.

Initial Decision 70 F.

The Supreme Court laid to rest any doubt that the medical profession was cloaked with some tonsure-like immunity and determined that the effort of the American Medical Association to prevent the operation of Group Health was wholly unjusitified. It is equally clear that the fact that the participants sincerely believed that the practices they sought to prevent were immoral does not afford an excuse for a boycott. No group can be permitted to usurp the functions of government by legislating the morals or method of carrying on business of other people through use of an ilegal means, i.e., concerted refusal to deal." Interstate Commerce On the final question, concerning jurisdiction which inheres in al1 Federal Trade Commission cases, i.e. , that the restraint occurs in interstate commerce: it is abundantly clear that in the metropolitan area of Kansas City al1 parties were in interstate commerce. The state line bisects the centers of population, and, although perhaps not entirely equally, separates the hospital facilities which are used interchangeably by persons from the States of Missouri and Kansas. The two states are served by respondent Community and Midwest and World continuously offered their services to hospitals in both states.

Having thus been satisfied of the jurisdiction of the Commission to act in this proceeding, we reach the main issue which is whether or not the conspiracy charged actually took place. II. The Conspiracy Issue A. Motive a.nd Opportunity; Yet Denial of Conspiracy As the facts evolved from the evidence, it was clear that a large number of hospitals in the Kansas City metropolitan areas were members of the Area Hospital Association and that a large number of them were also participants in the blood banking operations of Community. Blood banking operations were under the direction of pathologists in the various hospitals and these pathologists met together in the Kansas City Society of Pathologists and served together on the Technical Advisory Committee of HI United States v. America,n Medical- A8sociatiun, 110 F. 2d 703 (D. C. Cir. ) cert. denied, 310 S. S,H (1939), l () F. 2d :'\3 (D. C. Cir. 1'142), 317 U. S. 519 (1942). See also United States Orb GO!! Medical Society. 343 1:. S. 326 (1951). B1"therhood of Rail1'oad Trainmen v. Virginia ex jci. Virginia State Bar (Supreme Ct. April 20, 1964). :0 Fashion Originat-ots Guild of A.america v. Federal Trade CQ11nlwsion 312 U. S. 457 (1941). S. !'a1"I, .e Davis", Co. 362 U. S. 29 (1950), lorn v. BroadU'all Hale StDT8S 350 U.S. 207 (1958), Fashwn Ori,qimLtoTs (;uild of America v. C., 312 U.S. 457 (1941). COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 871 728 Initial Decision Community. There were thus groups which held frequent meetings (see Appendices B and C), and there was substantial unanimity among them that commercial blood banking was immoral ancl destructive to the sense of community responsibility to share in providing the blood needs of the sick There was also a consistent pattern of avoidance of use of Midwest blood in circumstances where its use might be expected (see Appendix A). These fads are not contested but respondents state, through counsel and as witnesses assert under oath, they each acted individual1ly in their avoidance of the use of Midwest blood and therefore that there was no conspiracy. They pointed out that the program for a community blood bank was launched long prior to the existence of Midwest as a factor in the Kansas City area, that Midwest was offensive in its advertising, aggressive in its attempts to foist its services on the hospitals in the area, and that its management and direction were such that the doctors did not have confidence in its operation.

B. Records Versus Recollection With one or two exceptions hereafter described, the hearing examiner was impressed with what he regarded as the subjective honesty of the witnesses called by the respondents and by their devotion to their profession and to securing the best possible blood supply for Kansas City. It was clear to him, however, that this subjective honesty was colored by a deep-seated abhonence possessed by the medical profession as a whole, and finding expression even in the American ::Vledica1 Association s Journal, against commercial operations in human blood. Moreover, the recollection of many of the witnesses was at variance with the contemporaneous documents, or they had no recollection of some of the recorded events. For example, Bishop De- Lapp, who had been president of the Area Hospital Association during the critical period of the development of Community, had regarded the matter as a closed book when his other obligations diverted his attention. Thus, he disposed of his records as unnecessary and even erased his recollection, so that he could not rcca1l the details of the discussions which contemporaneous documents indicated had occurred. The hearing examiner entertains not the slightest doubt about Bishop DeLapp s integrity and subjective truthfulness. But, the matters concerning which he was questioned had long since lost their importance to him and he did not Initial Decision 70 F.

remember what had occurred, although he made no effort whatever to challenge the recorded material. Dr. Angelo Lapi exhibited a singular lack of recollection of several facts and, even during his testimony, appeared not to recall in the afternoon matters to which he had testified during the morning (see Tr. 7552, 7555, 7640). On the crucial point of whether or not he had told the Board of Directors of the North Central District Clearing House that the hospitals had gotten together in the Kansas City area and decided to do business with IVlidwest only in an emergency,22 his memory was at variance with the record of the transcript of his remarks made by the executive secretary of that organization (CX 158). He recalled in detail the other matters which were contained in the transcript made by the executive secretary and said they had been accurately transcribed. The significant remark he denied. He also denied that Dr. Buhler appointed him as Missouri representative to NCDBBCH (Tr. 7608).

Dr. Van Pernis, who also testified concerning the report made by Dr. Lapi on :\lidwest at KCDBBCH , on questioning by the hearing examiner during the first occasion on which he testified, stated in effect that Dr. Lapi had made the remarks attributed to him but not at the board of directors meeting-on some other occasion. His later denial was wholly unconvincing. , also, concerning the operation of the Society of Pathologists, several pathologists gave the impression that this organization was enp;aged solely in the investigation of scientific problems. However, when the records were produced it was quite clear from Dr. Buhler s testimony that the organization, in several instances took part in much more mundane activities. It was there that the informal federation-which minimized the possibility of any hospital purchasing commercial blood-was adopted. Knowledge was soon spread through action at an Area Hospital Association meetmg.

Thereafter attempts by Midwest to form donor groups failed because blood was not accepted at hospitals and Midwest could not guarantee it would be.

In January of 1956, about six or seven months after Midwest had started its operations, the postal workers, casting about for an organization they could utilize to pool the blood of their mem- 'D)" . Helwig- s testimony while not on all fours with this recorded statement, when c.onsidel'cu as a whoJe, gave the hefll"ing examiner the distinct impression that pathologists, at least, hall gotten together to dt:cry the use of commercial blood. Dr. Helwig- was forthright in his statem€nt that there had been discussions ana that he had pa.rtip.ipated in them. COMMUNITY BLOOD BANK, KANSAS CITY AREA INC. ET AL. 873 728 Initial Decision bers, were seriously considering entering into an arrangement with Midwest. Before doing so, and because of diffculties which they had been told Midwest was having in supplying blood to the hospitals, Monroe, the spokesman of the group, wrote a number of the hospitals seeking advice as to whether or not the blood would be accepted if an arrangement with :Vlidwest was made. Miss Jenkins of the Area Hospital Association became aware of this effort very promptly and immediately reacted, under the direction of Bishop DeLapp, the president of the Area Hospital Association, and Mr. Reid, the head of the Administrative Council to ask the hospitals to delay replying until such time as the Area Hospital Association agreed on a statement. This action, which had the sanction of the Association made up of a large number of hospitals, apparently carried heavy weight. Although there was no legal obligation created, substantially aJ1 of the hospitals avoided making any answer and those which did answer we)'c either non-committal or referred to the Hospital Association (Findings 113-133) .

C. Repeated Action and Rapid Joint Reaction Preclude Indivirhwl Coincidence It was noteworthy also that in a number of instances reaction by representatives of groups of respondents, often in a meeting, foJ1owed rapidly upon some action taken by Midwest, 01' some other event, which might affect its operation, or steps which had limited such operation.

The informal federation was implemented at the meeting of the Society of Pathologists immediately upon Midwest' s announcement that it was opening for business. Area Hospital Association, shortly thereafter at a meeting, broadcast the improved method (Findings 64-67). This action made it unnecessary for a hospital to buy rare blood-or blood of a type it lacked temporarily. It could borrow from another hospital after one caJ1 to the hospital bank which maintained the records.

A formal federation proposal foJ1owed on the heels of the NJ.H. approval of the informal federation (Findings 86-89). The Society of Pathologists reacted to Midwest's Labor proposal the day it was announced and the Area Hospital Association, very soon thereafter, held a meeting designed to hear the pathologists' recommendations and to take action concerning Midwest (Findings 90-94).

Action on :VIonroe s letter to the hospitals seeking information , ,., y. _. Initial Decision 70 F. T. on whether or not they would accept Midwest blood, if the Post Offce group entered into an arrangement with Midwest, was precipitate. Sue Jenkins was told immediately and by special urgent message, after consultation with Bishop DeLapp (the president), and Mr. Reid (the chairman of the Administrative Council, asked the hospitals not to reply. That very evening a committee of Area Hospital Association called on Community and urged that the Area Hospital Plan be implemented on a pilot basis as this would mean immediate action (Findings 115-120). Area Hospital Association sent out II warning to its member hospitals just three days after Mr. Remer, posing as Rogers sought information concerning the acceptability of the Midwest Blood Provider Plan to hospitals (Finding 161). The fact that there was a repetition of this pattern of rapid reaction by the Association, itself a group of hospitals, or by groups including respondents in meetings, is a circumstance which is persuasive that there was concerted action rather than an individual response by a particular doctor or hospital. The succession of these incidents with the other proof is ample justification to disregard the opinion of the individual respondents that they had not made agreements or entered into a con- 2:Jspiracy.

Here is much more than conscious para11eJism " and, there is but a single thread throughout.

Respondents here meant to keep and did keep that hold on the business of blood banking which was possessed by them when the hospital blood banks were operating and continued when each hospital and each doctor became affliated with Community to the exclusion of all others. '" (Findings 151-152. Added to this was the consistent, almost invariable, refusal of hospitals and pathologists to accept or to use Midwest blood. The fact that the evidence primarily concerned one blood bank does not make respondents' activity the less ilegal." Schinf! Theaters v. United States 334 U. S. 110 (1948): United States v. Griffth 334 U. 100 (1948) : Hond Crown and Cork v. Fed.er,,1 Trade CommUlm 176 F. 2d 974, 979 (4 Cir. 49) : Paoli v. United StateB ';2 U. S. 232 , 2:-;6 (1957): KloTs v. Broariwu,1J Hale Stores :J59 S. 207 (1959) ; United States v. Parke Davis", Co. 302 U. S. 20 (1959) ; Si/J.' er v. New York Stuck Exchange 373 U. S. 341 (1963); United States The Singer Manujacturing Company, 374 S. 174 (1\)63); In the Mattc?' of .-mcn:"an C1Janamid Company. ot al. Docket "No. 7211. 'Sce Theatre t.;jClc'IJ1ises . Inc. v. Paula1)jOl'nt Film DiRb- jbuting Corp. 346 U. S. 5:-17 (1954). "' cr. l\otteaJ.os v. United States. 8 U. S. 7;'jO (1946). a See United States v. Aluminum Cu. of .4america. 148 F. 2d 416 . 432 (2 Cit. 1(45) sitting as a cuurt of last resort by Supreme Court reference " See Appendix A.

IOurs v. Broad1(' a)J Hale Stores 359 L. S. 207 (1958) COMMUNITY BLOOD BANK, KANSAS CITY AREA, INe., ET AL. 875 728 Initial Decision D. The Clearing House Contract Defense While the respondents must concede that, from the outset, the hospitals and pathologists were unwilling to utiize the services of Midwest in collecting, processing, and distributing blood and that this continued even after the complaint had been served, they point out that an overwhelming number of the later incidents, in which Ividwest was involved, were not real refusals but merely a refusal to accept blood tendered to the hospital. Usually this was accompanied by a statement that the hospital would be happy to have a credit transferred to Community through the Korth Central District Clearing House of which both Ividwest and Community were members (see Appendix A).

Two factors militate against the acceptance of this explanation as a defense. First, a number of the refusals initially made had nothing whatever to do with the Korth Central District Blood Bank. Second, the evidence is conflicting and confusing concerning the actual obligation of one member of Korth Central District Blood Bank to transfer blood through that clearinghouse system when the transfer was being made to a blood bank in close proximinty to it (Findings 176-195). It was the original concept of the clearinghouse that it would take care of patients who were receiving donations of blood from donors living at a considerable distance. Subsequently, according to some of the testimony, the clearinghouse realized that it could not continue in business solely for the purpose of making long distance transfers. However there was doubt even in Dr. Morgan s mind as late as 1960 whether his interpretation of the rules was the correct one. There was an exception for pre-existing arrangements between blood banks and there were numerous occasions in which b100d banks wholly bypassed the clearinghouse system. Community bought from distant blood banks who did not use the clearinghouse when it refused Midwest. It also received and distributed Red Cross blood.

In addition, the clearinghouse system was taken over by the American Association of Blood Banks. This association held a distinct bias against commercial blood banks and generally refused to permit them to become members on an institutional basis while charging them an amount equal to the dues of members for inspections without which they were to be prevented from full participation and told that their blood would not be shipped. 08fi Even a clear-r.ut contractual Elrrangement may be utilzed as a step in a conspiracy. Richard S. Simpson Union Oil Company Df California. 32 L W 4%4 , April 20 , 1964. 876 FEDERAL TRADE COMMISSION DECISIOXS Initial Decision 70 F.

While the proof does not contain recorded evidence of any adverse AABB action taken which was specifically directed against Midwest, except refusal to make it an institutional member, the character of complaints made against it and the subsequent adoption of the stringent instructions applicable to non-institutional members, which included most commercial blood banks, creates an inference at least that this was part of the general plan to suppress commercial blood banks including Midwest. E. The Bad Blood Defense It was respondents' position also that Midwest was not producing blood of a character and purity which was acceptable to the pathologists of the hospitals. (Findings 206-209). In this connection, for example, Dr. Spelman said he had been going to call on Midwest but when he saw the character of individuals who were standing outside he was unwilling to do so. Evidence was offered also concerning alleged irregularities. The incidents related, in general, occurred much later than the evidence of concerted action which took place prior to Monroe s request for information as to whether the hospitals would accept :Vlidwest blood. Clearly, no thorough inquiry was made by the pathologists or by the hospitals concerning l\Jidwest' s operations, and no complaints were made to N.I.H. In addition, Midwest's record of performance with the University of Kansas Medical Center and with lVlayo Cnnic appears to have been excellent.

The expert testimony concerning the preference of many doctors for the voluntary donor rather than the paid donor " was based, in part at least, on the experience of a Chicago institution with prison inmates as donors. It, of course, must follow that the dope addict would be likely to have a higher incidence of hepatitis if his addiction involved the use of the needle. This has been established statistically. On the other hand, the practice of accepting donors with a screening involving questioning and testing hemoglobin, temperature and blood pressure is no guarantee against acceptance of donors who are carriers of hepatitis. Community itself had a donor group at Leavenworth prison. Even if it were an established fact, which it is not, that :Vlidwest practices created a higher incidence of hepatitis than is the case with Comn':l1ity,. that would not be a justification for any group, no matter how well intentioned, to undertake to legislate concerning the mat- "Des)Jite the contnHliction in terms, throughout the trial those person who were paid for supplying blood were still described as donors. COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 877 728 Initial Decision ter." Congress has entrusted the regulating of the collection and transportation of blood to the Department of Health, Education and Welfare, as we have heretofore pointed out. There has been no showing that this Department was unwiling or unable to take proper steps to insure the quality of blood. In fact, there was no proof that aly respondent ever complained to it about Midwest. An individual doctor mayor may not choose to utilize a blood bank with which he is familiar rather than one he does not know about, but this wil not justify a group of hospitals, acting through its organization, urging non-action when action might well have been expected. That is not to say that there is any duty on any doctor to accept blood simply because it comes from a licensed establishment. He is entirely free to choose whether he will have blood administered at all or whether he wil have it administered from a particular blood banking system. He may not however, take steps with other doctors and the hospitals to prevent any establishment from engaging in business so long as it is not unlawful for it to do so.

F. The Objection to Commercifklized Blood Bfknkin,q Respondents' testimony concerning a meeting which Mr. Bass and Mr. Howell had with Doctors Buhler, Kerr and Mantz demonstrates that the three doctors who attended obviously knew that their activity in their hospitals was causing a diminution of Midwest' s business. The doctors also told Mr. Bass that the first thing he would have to do would be to become a non-profit organization and they discussed with him the kind of direction which they desired. Such activity goes clearly beyond the right of each of the doctors to decide for any reason or no reason that they should deal or refuse to deal with Midwest. The fact that Dr. , ifBuhler testified that he was wiling to go along with Mr. Bass the form of organization were changed and there were proper medical direction, is some indication that it was not a matter the purity of the blood but a matter of the character of the organization and control by a specialist in pathology which was desired.

The doctors' testimony that purchasing blood was abhorrent to them is motivation for their concerted action. Dr. Buhler was transparently honest and forthright in his belief that the pur- 30 Fuahion Originators ' G1dld v. 312 1:. 8. 457 (1941): see Kwr v. BroadwfLJI Hale Stores, 359 U. S. 207 (1959).

India1 Decision 70 F.

chase and sale of blood was immoral, despite the fact that his attempt to explain his belief was less than clear. Similarly, the revulsion which respondent pathologists expressed at the type of advertising direct to the public. which Midwest carried on was reason enough for them to act together to prevent continuation of such activity.

CONSCIOUS ADHEREKCE TO A PLAK KNOWING THAT IT S OPERATION WOULD RESCLT IN RESTRAINING MIDWEST S TRADE IS ILLEGAL As early as the May 18, 1955 pathologists' meeting, when Midwest' s advent was announced, the pathologists agreed on the informal federation-conscious, of course, that this must reduce the need for purchase of blood from commercial banks (see page 780 hereof) .

When Community was ready to open its doors, it already had made it almost impossible for another blood bank to sell blood to its affliates. Jt secured the adherence of all the pathologists, by their appointment to the technical advisol' committee, and it so al'anged its operations that bookkeeping would be complicated if a second blood bank was used as a source. With the background of "harassment" by Midwest in attempting to secure for itself an opportunity to sell whole blood to the hospitals which was well known through meetings of Area Hospital Association and through the casual c.onversations between pathologists, it follows that each knew that the other was entering into a course of action which would inevitably circumscribe opportunities for Midwest to supply blood to the hospitals.

Such knowing adherence to a scheme or plan which will result in a restraint of trade, without more, constitutes unlawful action,n There is, of course, no direct evidence of an express agreement among the doctors, the hospitals, and the associations apart from Dr. Lapi's alleged statement to North Central District Blood Bank Clearing House. That there was any has been expressly denied But, an express agreement js not necessary. There was consciousness that the activity in which each engaged would when joined with the actions of others result in a restraint of trade. With this knowledge the hospital members and the pathologists persisted in their activity.

n This, of course, is not at aji the same religious problem raised in Application of Georqetown (D. C. Cir. Feb. 3. 1964).

Interstate Circuit v. United State:;, 306 C. S. 208 , 221; United States v. Gypsum Co. 328 U. 36. , 39 394 . See also United Stotes v. Parke Davis Co. 362 U. S. 29 (1959): Klor U1'oudway Halc Stores. 35D U. S. 207 (1959) : United States v. The Singer Mfg. Co. 374 U. S. 174 (1963) : Silver v. Ncw York Stock Exchange. 873 U.S. 341 (1963). COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 879 728 Initial Decisiof! The form into which Community was moulded by joint action was also a deterrent to the existence of other blood banks. Community insisted, sometimes unsuccessfuny (as in the case of the University of Kansas Medical Center), that it should be the exclusive conduit for an blood replacements and that it should control the blood in the various hospitals until actuany transfused. The hospitals by reason of this were generally unwiling to take on blood from another source, including Red Cross. The fact that this system was copied from blood banks in other areas is not an excuse. An instrument tried by someone else which wil create a desired effect may wen be adopted for that very reason. Respondents carefully studied the operations of other blood banks and selected what they liked. Certainly, from the point of view of excluding a commercial blood bank, no design could have been much better than the one which was actuany adopted. Pathologists from each of the hospitals were placed on the board of Community. Community controned the blood in the hospital refrigerators and Community attempted to completely control the flow of blood even from the Red Cross. These circumstances, taken with all the other evidence, have led the hearing examiner to determine that the preponderance of creditable evidence establishes the existence of a scheme or plan knowingly entered into by respondents each of whom knew it would, if entered into by others, restrain the trade of Midwest.

III. Limitations on Order By reason of the nature of the medical profession, and our unwilingness in any way to detract from the responsibility that each doctor must bear for the care of his patient, we believe it is essential that in prohibiting conective activity, the order entered be clear that each doctor may independently determine whether he wil utilize blood for transfusion from any source and that his action or inaction in that regard shan not be considered, in the absence of other proof, in violation of the order. IV. The Class Suit We are next concerned with the extension of the order in this case to the member hospitals and to the offcers and directors named as a class. It is charged in the complaint that it is impracticable to name and serve an of the hospital members and an of the persons who served as offcers and directors. Based on the evidence in this case, it is deemed impractiable to name an the members of the class.

q Initial Decision 70 F.

Those who were served were fairly representative of the whole and there was no substantial difference in their attitude or incompatibility between them. The proportion of those served to those in the class was adequate in light of the evidence concerning the substantial unanimity among hospitals as to the course of action adopted.

Under such circumstances the courts have consistently held that a class action is proper.

Advel,tising Specialty National Assn. v. 238 F. 2d 108 (1 Cir. 1956) Chamber of Commel. ce of Minneapolis v. 13 F. 2d 673 (8 Cir. 1926) Moore s Man'Ul Federal Practice and Procedure (1926 ed. ) p. 974 0;14.

The existence of some state, local and federal hospitals in the class of hospitals had given the hearing examiner some concern.. However, since the order adopted is limited to members of Area Hospital Association and Community and their successors, their joint action members rather than as governmental agencies is a1l that is circumscribed.

The Allegedly Ilegal Recordings Since there \vas no connection between the attorneys who conducted the investigation for the Federal Trade Commission or between counsel supporting the complaint and the allegedly ilegal recording of telephone conversations by Mr. Remel, and since respondents themselves offered the transcripts of such recordings in evidence, they are deemed to have waived any irregularity which might otherwise have been claimed" because of Mr. Remer s actions.

CONCLUSIONS OF LAW 1. "Corporation " as used in the Federal Trade Commission Act is limited to corporations organized to carryon business for their own profit 01' the profit of their members. 2. Each of the named respondent corporations is a corporation American Bana.na Co. v. S. Fruit 213 L' S. 347 (1909) : United States v. Sisal Sales COTp., 274 U. S. 268 (1927); Part.'er v. Brown 317 U.S. 341 (1943). " In light of the decision in Ferguson v. 307 F. 2d 787 (10 Cir. 1962) certiorari granted 374 U. S. 805. it is not dear that Remer s action was such as to vitiate even a. criminal proceeding.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 881 728 initial Decision within the meaning of that term as defined in Section 4 of the Federal Trade Commission Act when considered in the broadest sense of the terms used consistent with the purposes of the Federal Trade Commission Act.

3. The non-profit or not-for-profit corporations are subject to the jurisdiction of the Federal Trade Commission despite the restrictive definition of "corporation" contained in Section 4 of the Federal Trade Commission Act (15U. C. 44), because in this case they are engaged in a combination or conspiracy with others and are thus in a partnership expressly subject to the Act, and because they are organized to engage in business and secure a profit for themselves or their members in the broadest sense of those terms.

4. The persons and corporations named as class respondents in the complaint are properJy joined as respondents because (1) the respondents named to represent them fairly insure the adequate representation of the class respondents, and (2) the class respondents are so numerous as to make it impracticable to join them individually.

5. Whole blood (human) is viable human tissue mixed with an anticoagulant in a sterile container which must be stored and refrigerated and the admixture is a commodity and/or an article of commerce under the administrative practice of National Institutes of Health.

6. Whole blood (human), as defined in conclusion No. , is subject to "trade" and "commerce" within the meaning of those terms as used in the Federal Trade Commission Act. 7. The selection of donors, the drawing, processing, storage and distribution of whole blood (human) to be used for transfusion to other human beings must be carefully performed under controlled conditions to insure the purity of the product. Minimum requirements for performing such operations are prescribed by the National Institutes of Health.

8. Respondent corporations are engaged in 'Itrade" or "business" for profit as those terms may properly be construed in the context of this case.

9. Each respondent against whom the complaint has not been dismissed has been shown to have engaged in "commerce" within the meaning of that term as used in the Federal Trade Commission Act.

10. Respondents, as each of them against whom the complaint has not been dismissed, are now, and have been, at some time be- Order 70 F. T.

tween 1955 and the date of the filing of the complaint herein parties to an agreement, understanding, combination and planned common course of action and course of dealing in interstate commerce to unreasonably restrict and restrain interstate commerce in the offer to sell, sale, exchange, and distribution of whole blood (human) .

11. Respondents against whom the complaint has not been dismissed, and each of them, are now engaged in a course of conduct and acts with respect to whole blood (human) that constitute unfair acts and practices within the intent and meaning of Section 5 of the Federal Trade Commission Act.

12. Respondents against whom the complaint has not been dismissed are engaged in a violation of Section 5 of the Federal Trade Commission Act.

13. This proceeding is in the public interest. 14. The following order should issue:

ORDER It is O?'dered That respondents Community Blood Bank of the Kansas City Area, Inc. , a corporation, and its offcers and members: Adolph R. Pearson, President " Walter V. Coburn, First Vice-President, Hilliard Cohen, Second Vice-President, Carroll P. Hungate, Secretary-Treasurer, Gilbert C. Murphy, Assistant Secretary- Treasurer; and its directors and members: Walter V. Coburn, Robert A. Molgren, John Murphy, Hi1iard Cohen, Carroll P. Hungate, Marjorie S. Sirridge, Arch E. Spelman, individually, as offcers and directors, respectively, and as members, and Adolph R. Pearson, Meyer L. Goldman, Gilbert C. Murphy, James T. Sparks, Robert F. Zimmer, as offcers and directors, respectively, and as members, and as representative of the entire membership ; allof Community Blood Bank of the Kansas City Area, Inc. other members of said corporation, as representatives for whom the said members named above were made respondents herein, individually and in their capacities as members, and as representatives of other respondents; Perry Morgan, Administrative Director, and W. W. Henderson, Business Manager, individually and as administrative director and business manager, respectively, of the , Inc. ; KansasCommunity Blood Bank of the Kansas City Area City Area Hospital Association, a corporation, and its members: Baptist Memorial Hospital, a corporation, Menorah Medical Center, a corporation, Sisters of Charity of Leavenworth, a corpora- 3' The offces in all cases are those held just prior to the filing of the complaint. COMMUXITY BLOOD BAXK, KANSAS CITY AREA, INC., ET AL. 883 728 Order tion, d/b/a Providence Hospital, individually, and as members of and as representative of the entire membership of the Kansas City Area Hospital Association; al1 other members of said Association, as representatives for whom the said members named above were made respondents herein, individually and in their capacities as members and as representatives of other respondents; and its offcers: Arch E. Spelman, President, individually, and as an offcer, and James D. Marshall, Chairman of the Board, Tom J. Daly, First Vice-President, Thomas M. Johnson, Second Vice- President, Russell H. Miler, Secretary, Nathan J. Stark, Assistant-Treasurer; and its directors: Abraham Gelperin, IIack Herron, James R. Rich, Sister Michael1a Marie, William C. Mixson E. B. Berkowitz, T. R. Butler, Maurice Johnson, Walter N. Johnson, Miller Bailey, Walter A. Reich, Ralph R. Coffey, Harry M. Walker, as offcers and directors, respectively, of the Kansas City Area Hospital Association, Susan Jenkins, individually and as Executive Director of the Kansas City Area Hospital Association; O. Dale Smith, individually and as pathologist of Baptist Memorial Hospital; Hil1iard Cohen, and Evelyn Peters, individually and as pathologists of Menorah Medical Center; D. A. Hoskins individually and as pathologist of Osteopathic Hospital; Victor B. Buhler, individually and as pathologist of Queen of the World Hospital and St. Joseph's Hospital; Frank A. Mantz, individually and as pathologist of St. Joseph's Hospital; Ferdinand C. Helwig, and David M. Gibson, individually and as pathologists of St. Luke s Hospital; Angelo Lapi, and Lauren R. Moriarity, individually and as pathologists of St. Mary s Hospital; Jack H. Hill, individually and as pathologist of Trinity Lutheran Hospital; James G. Bridgens, individually and as pathologist of Independence Sanitarium and Hospital; William McPhee, individually and as pathologist of North Kansas City Memorial Hospital; Ralph J. Rettenmaier, individually and as pathologist of Providence Hospital; Robert A. Molgren, individually and as Executive Director of St. Luke s Hospital; and A. Neal Deaver, individually and as administrator of Independence Sanitarium and Hospital; their respective successors and assigns, agents, representatives and employees, directly or through any corporate or other device , or in connection with the procurement, the offering for sale sale and distribution in commerce of whole blood and blood plasma (human), as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from entering into, cooperating carrying out or continuing any planned com- Order 70 F.

mon course of action, understanding, agreement or combination between and among any two or more of said respondents, or between anyone or more of said respondents and others not parties hereto, to do or perform any of the following acts and things: 1. Adopting, using, adhering to, or maintaining or attempting to adopt, use, adhere to or maintain any plan, system, method, policy or practice that restricts, hinders, limits prevents or forecloses any blood bank operator licensed to engage in commerce in the sale and distribution of blood by the National Institutes of Health, United States Department of Health, Education, and Welfare, fl"m selling or furnishing blood to any hospital, blood bank, person or other user or purchaser of blood.

2. Adopting, using, adhering to, or maintaining or attempting to adopt, use, adhere to or maintain any plan, system, method, policy or practice that restricts, hinders, Jimits prevents or forecloses any person, firm or corporation from purchasing, acquiring or using blood from any blood bank operator licensed to engage in the sale of such blood, by the National Institutes of Health, United States Department of Health, Education and Welfare.

3. Agreeing upon, arriving at or adopting any plan, device or program or policy for the purpose or with the effect of hampering, hindering or preventing any blood bank operator Jicensed to engage in the business of blood banking in commerce by the National Institutes of Health, United States Department of Health, Education and Welfare, from becoming members of the American Association of Blood Banks the North Central District Blood Bank Clearing House or other clearinghouse sponsored by the American Association of Blood Banks, or from carrying on trade in blood through such clearinghouse system.

4. Adopting, using, adhering to or maintaining or attempting to adopt, use, adhere to or maintain any plan, system, method, policy or practice that hampers, hinders or prevents any blood bank operator licensed to engage in such business by the National Institutes of Health, United States Department of Health, Education and Welfare, from carrying out contracts for the furnishing of blood to any person entitled thereunder, either for use by the contracting patient directly or as replacement blood for blood already given to the patient, or from preventing, hampering, or hindering any COMMU:\ITY BLOOD BA:\K, KANSAS CITY AREA, INC., ET AL. 885 728 Order person from purchasing, obtaining or using blood supplied or furnished under such contracts.

5. Adopting, using, adhering to or maintaining or attempting to adopt, use, adhere to or maintain any plan, system, method, policy or practice that restricts, hinders, limits prevents or discourages any person, firm or corporation from entering into agreements, contracts or arrangements for a supply of blood with any blood bank operator licensed by the National Institutes of Health, United Slates Department of Health, Education and Welfare, or from enjoying the benefits of such contracts, agreements or arrangements for such blood supply.

Nothing contained in this order shall prevent any physician responsible for the care of any patient, from exercising his individual medical judgment to determine what whole blood (human) and from what source, if any, shall be utilized in the care of such patient.

It is further ordered That this case has abated against David T. Beals and Russell W. Kerr.

It is further ordered That this proceeding is dismissed against the following persons in their individual but not their representative capacity:

Miler Bailey E. B. Berkowitz T. R. Butler Dr. Ralph Coffey Tom J. Daly Abraham GclPf rjn Meyer L. Goldman Mack Herron Ma urice Johnson Thomas M. Johnson Walter N. Johnson James D. Marshall Sister Michaella Marie Russell H. Miler Dr. William C. Mixson Gilbert C. Murphy Adolph R. Pearsoll Walter A. Reich James R. Rich Dr. Wiliam J. Sekcda Tames T. Sparks Nathan J. Stark Harry M. Walker Robert F Zimmer after Baptist Remer of orderedg:iven Donor by he Remarks club actually involved. accuunt. Helwig: TabernaeleChurch creditlo administeredrelease.club Gratuity Donor Dr. Blood BLOOD Date 1/30/62 6/8/60 2/14/63 1/56 5/19/606/14/60 11/22/61- 1112f1/5!1 8/10/60 6/1-/60 MIDWEST' OF ; nfJ9; 77 1:11; :)076: 245 56; ,313; J1::J()85,- 2,,112074-84; 1122-37;7010; 1- 29;j:J: 21.'52-- :,O:,()-56;8052 480 21;14-- :\06:\-7416-201- 102:,-.,4fJ-553 2:111; 112-14;202 MJ;, References 50--55; 1:)1- . 2H2 3020-29 110:)8- 2:1fJ7; 2412; 7: 1160;7499;7521;8576 7448- g,'i:30%-:n07; ex 1'r. Tr.1'rex 1'r. Tr-Tr. 1'r.ex Tr. RXRX 1'r.cxCX Tr. CX19;1'r. CXex i RECEIPT to to OF to ('..Tl Com- J C'..m- Cum- Com Con. Com- rf'quiredA toand toand toand lu toand toand toand cf;i cemunit.y mllnityNCDHBCH munityNCDnnCII munityNCDRBCH munityNCDBBCH .fcrencemllnityNCDBBCH Release munityNCDBneIIApa;KDIX I Rpference Reference Referent:(- HeferelI acfel'enc" Itcference AVOIDANCE OF 1\Iarie individ- Arc or bNO Conversation _n- 'HI Send Doctor Individual ofLouise Seraphia Rita " .J"an Mary Michaella 1ant7,Kerr Henderson Buhler H.ettenmaier Henderson J\1eI-hce E,!wards Mokrenj("lwie; I,a"i MO'. Buhler Lapi RettenmaierMorgan !"r . , . unidentifierl . ual donors."' Dr.Dr.D,.Sister Dr. Telej)hone DrDr. Sist"r:Vlr D,. Me :\11. Sister Dr. Dr. Mr. I INSTANCE .n- General and/or.... pital pital IIo . Seda:ia IIo Hospital 'L- Memorial City SHOWING Community crh' l.uke !\Iarys :!I"ry LA""!,"'" Ju .Toseph' IIospit,d Hospital St.Community St. Kans" ProvidenceCommunity n"t.hwel1 St. St. SL Providence ! CHART Di" Donahue Farris Patient Hens Baer nassdt DarEn" ka. Habcuck Beemer a ;e \Venir: Dorothy Katherine Wild G"or Leslie Mrs. arTyH Fr"n(,, Eleanor Dorothy ,, for the for and to no paid of credit of of for due re- 489-(0) blood. account. actually so which 05) Leaven- blood made gaveFi8r.her for was the (CX evrntually never s Deaver credit patients donors made Millwestblood friends 10- apologized s bill Glaser Alice John ivcn Nea! $2:'. his placementcharg-eblood. worth,acceptedfromcreditedfromth"irCommunity. AdministratorIndeJ)endenceactuallytoanddelay. Fur;atesdonationscleared(CX A. Three Miss Hammer Dono,' St. )/60 7/1 4/27/60 9/29/6110/10/61 2/19/60 1/18/63 3/2:J/62 12/21/60 1/10/6010/13/6011/7/60 G/5/63 7/16/60 G06 90; !J1; '100. 270 28;;:,; 19; 87; SfiSO -13; 100 73; !)fi; 21:;:J !)g :)O:,- 1:\08- 17- 1fj!)8-1705 ,,0204;:J:;o- 8,1; :nos- 189- 1422 318- :-;i8rJ-!.:;; 104- 3147-;'2;191- :Jl59-72;,1f)4-!.L;;272 317;;-82; 21j()-Ii 77H7- .17101i;3i61-i:J;:ni8Z-R;); 1:-nfi71;326-12;13,')36; 21GO;l'I-i:J 8648; 221(;-3111-45;118,); Tr. CX T,.. CX T,.. Tr UX 1'r.CXCX CX RX Tr. CX '11'. RX Tr. exCXRX 1. to to to Com-tn Cnm- Com- rom-to Com- Com- Com- Com- toand toand tolllirl toand toand toand to to:in,! Coh to munityNCDB!3CH ffunityNCDBRCIf NCD13BCI munity-"CDBHCI! mUf1ity,LIllKCD13BCH munityNCDBBC:r munityNCDBBCH munityNCDHBcn rnunityl\CDBBCH Rderred Hefe\"enc" ncfen,nc'! llefererlceto Rde!"ence Refe,.pnce Ref.!iRdened I Rderenc" Reference (tech Leah (non- ;'1i,'iam Hazem;ahi AdamsonCan-oJ!GoldsberryPenner Pope Mon,:an Stevenson Cohen BuhlerHenderson PetersCohen Bpst HettcnmaicrMon:an Peters G1"iff; responden!_ Dr. MissDr. Miss Dr. Dr.1\11. Sister Dr.D1. M,.. Dr.J),. Dr.ylrs.jl1rs.MissMissMr. or!rJ the Medica! Medical \\' of Luke .Joseph' ,fohn Leavenworth Center lenonthCenter SL QueenCommunity !\IenorahCAmmunity SL Community I'Ienor.1h Independence Osteopathic , ! p.889. ate Gordon Hunt on Claser Hammer Hammett Kurz Hammer Fu! footnote Goodell r.." Fischer M. See G,-nevi"v" Hal'npy Alice Elmer Annelte bmes Ruby BessieHarold ;:;

blood but to accepted. vag-e. a1readyby indicated,to ofson. used. thatr;o be Remarks not Helwig He1wi accorrlingRemer,!lhouldCommunitywouldDr.recollection di!lchargeddonationpatient's Indebtedness moodDr. Date 6/21/61 4/18/634/19/63 4/18/63 12/12/60 3/21/62 3/1R/633/19/63 4/21/60 581;

3402 13; 2;J 2f1: .73; -83; 16 ;H18-24; ,,21;:n4 ;\107-10;:, 126.S2S;:\:H- Refer'nces 3:H3--8; 507-WJ;62 3;!66;511- :\77-87;517- 33\12-94;82261 3.'191-212- 7772 7-1,,(\-i2; 7311- 1'r- exRX Tr.CX Tr.ex Tr-exRX CXexRX Tr,ex Tr, exCXRX . l1'r. to 1(n Com- l to Com- Com-lt to to tu ar.ceptedhlood to tocered toand ,1Id ction! hilled Continued then bter A accepk:d n"e accepted check eDBBCI1 A- - NCDnn.eHmunity ref,'rn,uNCDBi3CII munity munityNcnHi1CH NcnnnCH referredNCDBI3CH Midwest PatientSel1t Reference First Reference Refer' Reference First Technicifln DIX I Apie;,' Henderson Coburn Coburn Hi!! Minter 1'brshall DoctorarIndivinual Riekharl He\wigMi1"r .JohnsonWalter Morg:an Johnson\Valt"r Lapi Morg-lln l1erkeyller:denlOn Rettenmaier .

. . Dr.Dr.Mr-Mr- Dr.Mr. Dr.Gertr1JdeDr. :YissMr. Dr. Dr.Pat pital ami/or Ho C"mmun;ty Lutheran Hospital Mary ,Jos"ph' Luke . Trinity Bethany SL St. Providence nethany LaHue Smith Patient Leon:lrd Mann Martin S..tter1y Shrewsberry Gertrude Clyue John Ann '!ary r.., Lol.. Bloodnofor wroteindebtedncssblood. of lIosjJital Association American of 6/4/63 11/25/60 6/21/61 division a as G6; 260 .

and ' 1250-59; )0':H006; 272-74; :HG:J-53;5:\1- i8-73;2 122-25;2!J8; H052- 347072; 204 1268-69 7262-fi6; 511-545 'Ir ex 1'l". ex 1'r. ex entity I appropriate. ilIid- Inc Com-to Com- where, indppendent toand tothru dc1ivcrY'n'l.nlaJJorat'ry an Tnc.,An' ordered as of Cily Wl' out munityNCDBI3CH munityNCDI3BCH Buhler Rdercnce Reference HOllse Distributors,Kansas t the Margaret Smith ofClearing Mjdwe II1,hler Huber nol1Crt D"-1e BankBank and Buhler r O. ,r. Dr. Blood Dr.K Sist Blood Dr- Bank Blood District Community MemorialBrown World Central ,Toseph' .Joseph' affliated North St. Sl. l:.",tistDeWitt Respondent means ecy, means inc1udeBSt. \V,-sncrCharles Thom;l. Midwest''Community"NCDBnCH" don " Banks. .1, .IYIrs. .John Co, WAS x..rz-t X :; 1.-:5 O(., s ' I ;,,, :g OO--U '0 X X BANKING co.,'=0 8.-x..U., X :c"' BLOOD ' I _ g . o x X X "' g; I - WHICH : i I .- ci I 8 AT T;-";:r Pi1:o X.- xx H X .- ' AREA ::ci I ci:r :I x-u :gH -"' ,-II CITY::::.: 1956 'CO :-E::"1o :? X --r-B. 1 1955- :r cim1:o 1'-"'. I KANSAS X.- X X t-DO IN ._ III: .I Appendix ci :r-t -"':o ;:3X.- XX :g DISCUSSED. 00 I MEETINGS AT Hospital Hospital & REPRESl'NTED Hospit.al MemorialHospital Hospital Hospit.al Hospital Hospital Hospital Center Hospitals Hospital Sanitarium City Hospital Hospital City Memorial HOSPITALS Springs HospitalMemorial Medical Memorial Hospital s Hospital#2 MemorialHospitalMercy KansasComMunity OF 1,IST BaptistBethanyChildrenChillicotheCushing DouglassExcelsiorGeneralGeneralfndepcndence KrestwoodsI,akesidl:LawrenceLexingtonMenorah NeurologicalNorthOJathe X I + X X I I X ' Hospital Center MedicalCenterHospital Hospital Hospital Clinic HospitalHospitalHospitalHospital pital Lutheran World KansasrVledical Hospital Ho Hospital of Hospital Provident Hw Hospital s Community ofFoundalion .Joseph'sLukesJohnMargaret'sJosephMarys OsteopathicProvidence QueenRalphResearchSt.St. St.St.St.St.TrinitySrnithvillc UniversityWarrcnsburg;Wheatley- (;68 'IVHamI" aaVHL NQISSIIIWO:: SNOIS!::aa puaddv ::LIid CBBKCA Meeting EXec. I 3/20/58 397 ex CBBKCA Dirs. Ed. Meeting 3/18/58 aS6 cx 146 CBBKCAHA Dil's. Ed. MiI'Qtes Finding 12/26/57 393A-B cx l" 138 ebb Dil'S. Bd. Minutes Finding 3/15/57 390A-F OX l;: "135Finding CBBKCAHA Comm.5/9/56Fin.386A-Btes ex I I lng ebb Dil'S. Ed. MinQteseX3854/16/56 l'l ! Minutes I L-_.

I 132 CBBKCAH leeting :. Finding I 1903/26/56 RX : ;x logists &Path 125 KCAHA . C Adm. utes .:Iin ! X : 1/25/ 87A-B 1 ex ' 162-631/28/56Finding, T Meeting Dirs. of . B KOAHA I - ;: Finding 1/25/56 186 ex L"r--- ' 123l'indln I CBB.TO Dirs.1/23 382A-DEd. MeetingOX I C" :e Finding KCAHA CBB of Mlnut" 1/19/56 180 CX :- I 1/17/55 ::81A-F exdCO!;t: '122Finding ' CBB meeting Special ' 0": 120 CBB .Jenkins S. of Rpl'. Finding RX AHA JO1/9/56 161A-Em Annual i Finding I KCA1/4/56tinJ4 l79A-K CX I KCAH12129/55 of178B ex ! Findmg FInding i BofKCAmAB :xjcx 12/15/ of Council Admin.

Finding lCJ/26/55 B ex: KCAHA Admin. 1-- r- !:7 t- FinoinKCAHA' of Councils9128 CX ' Finding" , KCAHA Coll1ciJ Adm.1 ex t: 84 6/22/55 i3A-G :J ' '" i Q.r ro :: . I " I rsro r-g-. !: 'O Z ' 2.ro I ' S- 3: ro g I (f ;. :: I -' ,.00'e- :; CD ., 0.:; '" !:ro roro,rq C r; ro -' 0", C;dnnn ::::i::;:; 0' 1 ''''''''''' . : + .. :;;: ; , ; ,. .,\::?:: : ;;::,,,, ::p: .p.::..,:. ;,..:.: ., .. ,. ___ . .. ;,.. .. X I . 1-- t-- X X' + S.

P. M.N. D. C.A. R. J. F. M. A II. A.R T. R. Dale Michaella James L. Robert . H. Carron Marjorie Willam Maurice ThomasWalter Willam Robert Adolph GilbertJohn Perry Susan , , O.JamesArchNathanHarry William Frank Evelyn Russell, Sr. Walter R Angelo James, Jack , , HilHoskinsHungate,Jenkins,Johnson, Johnson,Johnson,LapiMcPheeMantz, Marie,MarshallMiller,MixsonMolg-ren Morgan,Moriarty,Murphy,Murphy,Peters, Pearson,Reich,Rettenmaier,Rich,SekoJa, Sirridge,SmithSparks,Spelman,StarkWalker,Zimmer, 894 FEDERAL TRADE COCIMISSION DECISIONS Opinjon 70 F. T.

OPINION OF THE COMMISSION SEPTEMBER 28 , 196 6 By Dixon Commissioner:

This matter is before the Commission on appeal of respondents from the initial decision of the hearing examiner holding that respondents were engaged in a continuing course of conduct having the effect of unreasonably restraining interstate commerce in the sale and distribution of whole blood (human), in violation of Section 5 of the Federal Trade Commission Act. Generally, the complaint charged that the individual and corporate respondents attempted to hinder the development of two commercial blood banks by agreeing among themselves not to use whole blood (human) supplied by these two banks; not to permit such blood to be used in transfusions in hospitals located in and near Kansas City, :tfissouri, and Kansas City, Kansas; and not to accept or to permit such blood to be accepted as replacement for blood previously obtained from other sources. After extended hearings, the hearing examiner concluded that the respondents were in fact participating in a continuing conspiracy essentially as charged and issued an order designed to halt further concerted act.ion. The order specifically states that nothing contained therein shall prevent any physician responsible for the care of any patient from ex-el'cising his individual medical judgment in determining the source of any whole blood (human) to be utilized in the care of his patient.

For the purposes of this opinion, the respondents may be divided into three groups. The first is composed of the Kansas City Area Hospital Association, hereinafter referred to as the Hospital Association, its offcers, directors, agents, and hospital members. The Hospital Association serves its membership, which is composed of various individuals interested in hospital administration 166 Stat. 632 (1902) , 15 D. C. 45(a) (1) (19(.j cd. The examiner fount1 that the following Were 8ub: ect to the order iI tr.Eir representative capacities as offcers or directors of the Association, but not individually or in Rny other capacity: James D, l'Iarshall, Chairman of the Board: Tom .1. Daly, First Vite-Pr.' sident Thomas 1\1. Johnson, Second Vice. President; Ruosell H. Mill!')'. Scl' etary; r-' Bthan ,J. Stal": Assistant TJ'easurer: and Abraham (;elnc1'in, j\iark Herron, James R. Rich, Sist",r Michlte )'1aric, \Viliam C. Mi"son, E. B. Bcrko\\itz, T, R. But:er, :Ylau1'ice JohnSOJ , Walter N. Johnson Mile Hailc\,. \VaJtel' A. Reir. . Rl1lph R. Coffe, and Jia!'.I Yr. \VaJ;;el', directors. Arch 10 Spelm?_ , Sus!Jn Jenkins, Rouert A, 1\Io1.glen, ar,d A. Neal Deavfr were subject () the o)"le1' inrlividua11y and in their repnsentative c3pacitie . BarJt\,t ::emorja1 Hospital, Mencrah Medica! C"mter, and Sisters of Charity of Lcavpnworth (ProvirJencc HO J1ital) WeJ'e sllbject to th" order indivic111ally, in their capc".:ities as members of the Association, and as repl"('sentatives of all of the h05jJita! membeJ's of the Association. , , COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 895 728 Opinion and most of the hospitals located in Kansas City, by co1Jecting information, making surveys, analyzing data, and providing a forum for discussion and solution of hospital problems. The results of its studies are available to its dues-paying members and to a number of nonmember hospitals and other interested agencies. Membership is voluntary and the Hospital Association has no authority to formulate or direct any of the activities of its member hospitals. Its operations are financed by dues paid by members and by grants, loans, and gifts. The second group of respondents includes the Community Blood Bank of the Kansas City Area, Inc., hereinafter referred to as Community, and its offcers, directors, and members. Community, which began operation in April of 1958 , was organized through the j oint efforts of the Hospital Association and its members, pathologists and other physicians, and a broad segment of public-spirited citizens. ' Money for its operational budget comes from blood processing fees, blood responsibility fees, and from gifts, grants, and loans. In none of the years since it began operation have the funds received by Community from a1J sources been suffcient to pay a1J of its operating expenses and the principal and interest on loans. The corporate body of Community consists of thirty-nine individual members. Each of three groups-the Hospital Association, various local medical societies, and the general public,supplies thirteen of these members. These three groups have equal representation on the twelve man board of directors. Medical advice with respect to the operation of Community is supplied by the Technical Advisory Committee, a majority of which is staffed by pathologists. The third group of respondents consists of pathologists affliated with various hospitals located in Kansas City, Kansas, and Kansas City, Missouri. ' Many of these pathologists are employed J The heal'jn examiner held the foliowing subject to the orr1er j)l their representative capacitit's as offcers or (lil'f'ctors of Community, but not individually or otherwis: Adolph R. Pearson, President: Gilbert C. Murphy, Assistant Senet,, Tn;asure!- ; rVr",yer L Go1dmfln James T. Spark" ,md Robert F. Zimmer, members and directors. The followin" '"ere held amenable to the order individually lind in their repr(' entative clipscities ES offcers or rlirectors of Community: Perry ::rare- lln, Administrative Director: V-., \V. Henderson, Business Mlinar:er, VI' alter V, Coburn, F:rst Vice- President: Hilinrd Cohen, Second Vice-PI' csident: Cf!no1! P. Hungate, Secretary- Treas' lJcr; and Robert A. MoJgren John lJrphy, MarjoriQ S. Sinirlg-p snd Ar h E. Spelmfln, dirf'ctol"S.

4 The follo..vin plitho ogists were held 5ub.if'ct to the order individually and in thd,' I'FTJ1"ESenat;vL' capflciti,, hlJ pital pf!thoiogist,: 0, Dal" Smith (Baptist Memorird Hospital); Hillif!1"d Cohen and Ev.cJyn Peters (Menoral, 1\'1edica: Center) , D . A . Hoskins (Osteopathic Hospital) ; Victor B. Buhler (Queen of thc 'Vorlel lIoopita! and St. Joseph' s Hospital) : Frank A. Mantz (S:, Joseph' s Hospitfll) : Ferdinand C, Helwig and David 1\, Gibson (St. Luke IIospitaJ): Angelo Lapi and Lauren R. ::oriarity (St. ",rary s Hospital); Jack H. HiJ! (Trinity LutheJ' an Hospital): James G, BridgenR (Independf'nr'f' Sanita!"um and Ho,pital): \Villiam 896 FEDERAL TRADE COMMISSIO DECISIONS Opinion 70 F. T.

by particular hospitals and receive salaries from these hospitals. In their positions as hospital pathologists, they are in charge of the laboratories and hospital blood banks and exercise tremendous influence in determining the source of blood used in the hospitals. Many of these pathologists also serve in some capacity with the Hospital Association, and are members, offcers, or directors of Community or serve on Community s Technical Advisory Committee.

The two commercial blood banks affected by the alleged combination are owned by individuals not connected with the local hospitals, the Hospital Association, or Community. The first, a partnership composed of Mr. and Mrs. Francis H. Bass and Mr. and Mrs. H. W. Dolph, began operation as the Jackson County Blood and Plasma Service in Kansas City, Missouri, in May of 1955. Shortly thereafter, its name was changed to Mid-West Blood Bank and Plasma Service. World Blood Bank, a corporation organized by the same individuals, began operation in Kansas City, Kansas, in 1958. Mid-West' s operations were gradually transferred to World and Mid-West ceased to function in 1961. Both Mid-West and World have obtained the appropriate licenses from the National Institutes of Health, United States Department of Health, Education, and Welfare.

Respondents take the position that the Commission lacks jurisdiction over the subject matter of the complaint-the conspiracy to hinder the development of the commercial blood banks arguing that the entire process of hemotherapy, which encompasses the span from the selection of the donor through the administration of the transfusion-constitutes the practice of medicine. As a result, they aver that the commercial banks' efforts to supply the local hospitals with blood are part of the practice of medicine and that the alleged combination to limit these efforts is nothing more than a legitimate attempt by the medical profession to regulate medical matters.

The extent to which the federal antitrust laws may be applied to agreements among physicians which have the effect of restraining the interstate practice of medicine or the interstate rendition of medical services is not yet settled. In United States :McPhee (North Kansas City Memorial Hospital); Ralph J. Rettenmaj(')' (Provi ('nce Hospital). V.' iJJiam ,J. Sekola WBB held responsible only in his \"cpresentative capacity. Some of the above pathologists are also subject to the ordel; by virtue of their activities with the Hospital Association, 85 corporate members of Community, and as members of Community s Technical Advisory Committee.

,.. ?! community BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 897 728 Opinion American Medical Ass an action brought under Section 3 of the Sherman Act " the indictment charged a conspiracy to hinder the operation of Group Health Association, Inc., a nonprofit corporation organized by government employees to provide medical care and hospitalization on a risk-sharing basis. Group Health employed physicians on a full-time basis and attempted to secure hospital facilities for the treatment of members and their families. Because a plan of this nature was contrary to the code of ethics of the American Medical Association and the Medical Society of the District of Columbia, these organizations and their members combined to prevent hospitals in the District of Columbia from providing facilities for the care of patients of Group Health' s physicians, sought to inhibit physicians from accepting employment with Group Health, and attempted to discourage practicing physicians from consulting with physicians employed by Group Health. The defendants argued that the practice of medicine was not a "trade" within the meaning of Section 3. The court of appeals noted that the Supreme Court in Atlantic Cleaners Dyers, Inc. v. United States 286 U.S. 427 (1932), had held that the words "trade" and "commerce" as used in Section 3 of the Sherman Act, which was enacted pursuant to Congress plenary power to legislate for the District of Columbia, have a broader meaning than the same words when used in Section 1 of that Act, which was predicated upon the Commerce Clause of the Constitution.' After examining the common Jaw concepts of profession trade business, " and "restraints of trade " the court concluded that the practice of medicine was a "trade" for purposes of Section 3, and that a restraint imposed upon such practice, and a f01'tiori upon the business of financing such medical services by Group Health, could be a prohibited restraint of trade.

The Supreme Court thought it unnecessary to rule upon whether the practice of medicine was a fjtrade" for purposes of Section 3, since the restraint upon the "business" of Group Health-the procurement of medical services and hospitalization United States v. American Medical Ass 110 F.2d 703 (D. C. Cir. 1940). cert. denied 310 U. S. 644; American Medical Ass v. United States, 130 F.2d 233 (D. . Cir. 1942), aff' 317 C.S. 519 (1943).

26 Stat. 209 (lH90); 1.S U. c. 3 (1964 cd. ). Section 3 states, in pertinent pent: "Every contract, combir;ation in form of trust or otherwise, or conspiracy, in restraint of trade or commerce in any Tf'l'lito!'y of the lJnited States or of the District of Columbia . is hereby declaredileg-al.

United State's v. American Medical .-ss, supra, 110 F. 2d at 708. sid. at 711: see also American Medical Ass United States, supra 130 F.2d at 2::3. ), Opinion 70 F.

on a risk-sharing, prepayment basis-was within the scope of the statute.' There have been no cases which have squarely considered whether the practice of medicine is a "trade" for purposes of Section 1 of the Sherman Act. Those cases which hold that Section 1 of the Sherman Act is inapplicable to restraints upon the practice of medicine have involved factual situations where, contrary to the facts in the present case, the effect of the restraint upon interstate commerce was only incidental, indirect, or remote. See United States v. Oregon State Medieal Society, 343 U. S. 326 (1952); Polhemu. v. American Medical Ass 145 F. 2d 357 (10th Cir. 1944); Spears Free Clinic and Hospital for POOT Children v. Cleere 197 F. 2d 125 (10th Cir. 1952) ; Riggall v. Washington County Medical Soci:ety, 249 F. 2d 266 (8th Cir. 1957), ceTt. denied 355 U. S. 954 (1958) ; Elizabeth Hospital, Inc. v. Richardson 167 F. Supp. 155 (D. Ark. 1958), aff' 269 F. 2d 167 (8th Cir. cert. denied 361 U.S. 884 (1959). Resolution of this issue, however, is not necessary in the present case. The evidence shows that most blood banks, whether commercial or nonprofit, have medical directors ,,,ho exercise general supervision over alj activities " and that medical skils are involved at various points throughout the various phases of acquisition and processing of blood. However, the evidence also shows that the individual steps in this process are routinely performed by persons who are not physicians and who do not function under the immediate supervision of physicians. For example, the first step in the process, the pl'curement of blood, includes the screening and selection of prospective donors and the performance of the phlebotomy (the drawing of the blood). Prospective donors are usually asked a series of predetermined questions to elicit relevant facts about their medical history. Such screening is designed to protect both the donor and the ultimate recipient of the blood. n If the prospective donor s answers show that the performance of a phlebotomy wil adversely affect him 01' that he may be a carrier of disease, the donation is not permitted. Moreover, the prospective donor s pulse and blood pressure must fail within specified Jimits before the donation wil be allowed.'" AI. though the standards for acceptance of a donor are established by physicians, the routine administration of these standards and the A.american Medical AIIs v. United StateB , supra, 317 U. S. at 529. 10 See Tr. 1106 , 1215-16, 3S03.

11 Tr. 3647- , :-J!J70-, 3787-89.

"Tr. 460-67, 3649- , 3787-89.

y. ), COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 899 728 Opinion performance of the phlebotomy itself may be performed by registered nurses, by technologists, or by others subject to the general supervision of physicians or registered nurses. After procurement, the blood must be processed, stored, and ultimately transported to hospitals. The processing, which entails typing of the blood to ascertain blood group, the testing for the presence or absence of the various Rh factors and atypical antibodies, serology tests, and the titration of 0 negative bloods to determine antibody level, must be performed by special1Jy trained technologists or technicians. Although physicians may participate in their training, there is no requirement that the technologists or technicians themselves or their immediate supervisors be physicians.

The Commission does not think that the fact that blood banks may be genera1Jy supervised by physicians and the fact that medical skils may be utilized at various points in the process of acquiring or processing blood before it is transported to hospitals require a finning that the entire process of acquiring, processing, and supplying blood to hospitals, when performed by properly licensed commercial blood banks, constitutes the practice of medicine. cr. United States v. Utah Ph,w'nwcentical Ass 201 F. Supp. 29 (D . Utah), appeal dismissed 306 F. 2d 493 (10th Cir. a.f'd 371 U. S. 24 (1962) ; Northern Calif. Pha1'mnccntical Ass v. United States 306 F. 2d 379 (9th Cir. cert. denied 371 S. 862 (1962). While it is apparent that certain technical procedures must be careful1Jy administered in the acquisition and processing of blood, we think these procedures, which are designed to produce a usable "product" , a properly labeled pint of whole blood (human)-and which are routinely performed by persons who are not physicians, are analogous to those fo1Jowed in the manufacture of drugs. As a result, they are not within the realm of medical practice. Similarly, the requirements for storage and ultimate shipment of the blood at the proper temperatures must be meticulously observed, but again these procedures can hardly be considered to constitute the practice of medicine. The 13 Tr. 1212-15, 3670.

14 Tr. 479- , 1103-05 1212-1ii, 3502-03. The practice of medicine has been defir,ed lis the TJro!:cgs of judging the nature, cha)'acter and symptoms of disease: determining: the proper remedy for the disease'; anrl prescribin", the alJplieatioIl of the remedy to the (1iseas'o. l\ra.1IB City oj Cleveland, lig E. 2d '779 (Court of Common l' leas, Ohio, UJ53): State v. Ca.tellier 1'79 P. 2d 203 (Sup. Ct. Wyo. 1947): eo)J!e v. Tohnersan, 49 N. S. 2d 190 , 194 (Kings County Court, N. " ID4 J: der NOTII' U,1I3 Sanitorium 42 . 2d 41:1 (AppelJatc Ct. Ind. 1942) : State v. HeJ1ernan 100 AU. 60 (Sup. Ct. R.I. 1917): O' Vm"1 y. State, 90 S. \V. 627, 631 (Sup. Ct. Tenn. 1905): Under- /)ood Y. Scott 23 Pac. 942 (Sup. Ct. Kans. 1890). Opinion 70 F.

Commission concludes, therefore, that the acts of acquiring, processing, and supplying whole blood (human) to hospitals, when performed by licensed commercial blood banks, are parts of a business" rather than parts of the practice of medicine. The restraint charged in the present case, which was imposed upon the commercial banks' business of supplying hospitals located in Kansas and Missouri with blood, is thus not a restraint upon the practice of medicine. Moreover, the fact that physicians were among those charged as conspirators does not provide immunity. The Supreme Court disposed of a similar problem in American Medical Ass v. United States, supm as follows: . As the Court of Appeals properly remarked, the calling or occupation of the individual physicians charged as defendants is immaterial jf the pur pose and effect of their conspiracy was such obstruction and restraint of the business of Group Health. The court said: "And, of Course, the fact that defendants are physicians and medical organizations is of no significance, forSec. :3 prohibits ' any person' from imposing the proscribed " 16restraints. . . .

Respondents also contend that the act of supplying whole blood (human) to hospitals, even if not the practice of medicine, nevertheless constitutes the furnishing of a service rather than the sale of a product or commodity and that the Commission thus has no jurisdiction over a restraint imposed thereon. This argument is predicated upon an assertion that the word "commerce" as used in Section 5 of the Federal Trade Commission Act encompasses the sale of products but not the furnishing of services. Contrary to respondents' position, there are many indications that the Commission has jurisdiction over restraints upon the interstate furnishing of services; 17 however, complaint counsel's evidence and '" 317 U. S. at 528-29. \Vice the definitions of the words "trade" or "commerce" as used in Section: of the Sherman Act may differ from the definition of these words as use,l in Section L Atlantic Cleaners D?Jr. , Inc. v. United States 286, U. S. 427 , 435 (1932). the Supreme Court s statements with respect to the lJUrpose and effect of the conspiracy in American Medical Ass v. United States, supra would, we think, apply with equal ffJYCC to C\ reHtl'!int of trade co nizablc under Section j of the Sherman Act or under Section 5 of the Federal Trade Commission Act. Cf, Federal Trade Commission v. Cemcnt Institute, 333 U.S. 683 (1948).

11 Sedion 1 of the Sherman Act and Section ,S of the Federal Trade Commission Act were cnacted pursuant to the l)o\\er conferred upon Congress by the Commerce Clause of the Constitution. Atlu-ntJ c Cleaners 0.- Dyer8, Inc. v. United States 286 U.S. 427 (D.G. Gir. 1932) : Ford . Jotor Co. v. Federal Trade Commission 120 F. 2d 175 (6th Cir. 1!J41). Congress' power to re'rubte commerce is not limited to th., saJe of tan"ibles. United States v. South-EwJtcrn Underwriters A88 S. , 3 (1944). Several! cases have indicated that Section 1 of the Shennan Act prohibits l'estl'ain upon tile marketing of services. See, United StateB Women s Sportswear Ala11ufacturer8 AB8 336 U. S. 460 (1949); Apex Hosiery Co. v. Leader :no U- S. 4G9 (1940); Chn'atiansen v. Mechanical Contractors Bid Depository, 230 F. Supp. 186 (D. Utah 1964). It has been held that practices which run counter to the policy expressed . . .

COMMr;NITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 901 728 Opinion the examiner s decision are predicated upon the position that whole blood (human) may, for purposes of Section 5 of the Federal Trade Commission Act, be considered to be a "product" or a commodity.

In support of their argument that the act of supplying whole blood (human) to hospitals constitutes the furnishing of a service rather than the sale of a product, respondents rely heavily upon a series of cases holding that where a hospital administers blood to a patient, the blood is an incidental part of the over-al1 hospital service for which the patient contracted, rather than a sale entitling the patient to bring suit against the hospital for breach of the implied warranty of fitness. Sionelce?' v. St. Joseph' s Hospital 283 F. Supp. 105 (D. Colo. 1964); Koenig v. MiZ,vaulcee Blood Center, Inc. 127 N. W. 2d 50 (Sup. Ct. Wisc. 1964) : Goelz v. J. K. & Susie Wadley Research Institute Blood Bank 350 S. W. 2d 573 (C. A. Tex. 1961): Dibblee v. DT. W. H. Groves Latter-Day Srunts Hospital 364 P. 2d 1085 (Sup. Ct. Utah 1961) Hidll Stede 143 N. E. 2d 528 (C. Y. 1957); Gile v. Kennewiclc P"blic Hospital District 296 P. 2d 662 (Sup. Ct. Wash. 1956) Peti"",tte,. v. Beth David Hospdal 123 K. E. 2d 792 (C.A.~. 1954). The courts in many of these cases, none of which involved a private commercial blood bank, stressed the public policy argument that charitable and public institutions should not be insurers of the fitness of blood administered to patients and, primarily on this basis, found that the defendants were not selling blood to their patients. In Gile the court concluded that al1 medication supplied to that patient, including not only blood but also penicillin, casts, and bandages, were incidental parts of the service relationship rather than sales. We do not think the courts' conclusions in these cases stand for the proposition that blood and other medication cannot be "products " for any purpose or that commercial processors or manufacturers of these items are not making sales to hospitals.

Respondents also rely on several federal administrative rulings defining the rights of blood donors. The Internal Revenue Service has ruled that a donor of blood is not entitled to a charitable deduction equal to the fair market value of the blood donated because the rlonor, by submitting to a phlebotomy, is considered to be performing a service for which no charitable deduction is alin the ShermaJJ Act are actionable under Section 5 of the Federal Trade Commission Act. Fashion Ori!Jinators ' Gllild 0:1 America. 111C. v. Federal Trade C011mission 312 V. S, ii7 )4J). :\ioreover, then' is no affrmativc indication tha . Congres expressly wishcs to limit the reach of SEction 5 to products or commodities. Opinion 70 F.

lowed, rather than disposing of property. Rev. Rul. 53-162 1953-2 Cum. Bull. 127; see also ~evada Tax Comm n Admin. Bull. No. (Feb. 23 , 1959). The Comptroller General has held that military personnel have no right to be compensated for blood donations for the same reason. 5 Compo Gen. 658; 6 Compo Gen. 888. In addition, respondents argue that since the cells which comprise whole blood (human) can be produced only in the human body and remain living and viable throughout the time during which the blood may be used, such blood cannot be a product" or "property" which is subject to sales We are here concerned with whether a properly labeled bottle of whole blood (human) containing an anticoagulant can be considered to be a "product" when supplied to a hospital by a commercial blood bank. As a result, we do not think that the administrative rulings cited by respondents, which involve the rights of donors of blood, are in point. In addition, respondents' arguments that blood can be produced only in the human body and that its cells remain viable during its useful life do not mitigate against the conclusion that it is a "product." In disposing of an argument that such blood cannot be "manufactured" and thus that Congress could not have intended it to be included among the "biological products" regulated by the Public Health Service Act, the court in ited States V. Calise 217 F. Supp. 705, 709 (S. 1962), stated:

. . Although this argument is truly ingenious it must be rejected because if it were C0rrcct tJWTI nothing which is ultimately derived from nature \vould ever be capable of subsequently bring "manufactured and prepared." The word "manufactured" as employed in this statute obviously \vas intended to include "processing Nor do we find any constitutional barrier which prevents blood from being treated as a "product" or from being purchased and sold merely because it is composed of living, human cells or tissue.

Moreover, we think there is authority for holding that whole blood (human) is a "product. " Section 12 (a) of the Federal Trade Commission Act declares that it is unlawful to disseminate through the mails or in commerce false advertisements which are likely to induce the purchase of food, drugs, devices, or cos- 15 In making the JrlttP1. fl1'gUmpnt l' espomJents assert that its sale is prohibited by the 'fhil' eenth Amencment of the Constitution in the ame manner lis i the sale of human beings. Respondents ' Brief on Appeal. p. 87. COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 903 728 Opinion metics. The definition of "drug," found in Section 15 of the Act states in pertinent part:

(c) The term "drug" means (1) articles recognized in the offcial United States Pharmacopoeia. . . and (2) art.icles intended for use in the diagnosis cure, mitigation, treatment, or prevention of disease in man The Federal Food, Drug, and Cosmetic Act '" which ,:.,lie,. (Ilia prohibits the introduction of misbranded or adulterated drugs into commerce, contains a similar definition of that term. The legislative history indicates that the definition of "drug " which appears in the Federal Trade Commission Act was derived from the bill which subsequently was enacted as the Federal Food Drug, and Cosmetic Act" and that the two Acts were intended to supplement each other.

In determining the scope of the above definition of "drug" in a proceeding brought under the Federal Food, Drug, and Cosmetic Act, the court in United States v. Calise, S1lpra held that the term included whole blood (human). Thus, such blood is a "drug for purposes of Sections 12(a) and 15 of the Federal Trade Commission Act. " We note also that "citrated whole human blood" is listed by The Phat1ncLCopoeia of the United States of Ameriw. Since a violation of Section 12 (a) of the Federal Trade Commission Act constitutes an unfair or deceptive act or practice in cc, whole bloodcommerce within the meaning of Section 5, (human) is a "drug" for purposes of that section also. Moreover, the !\ational Institutes of I-Icalth, United States Department of Health, Education, and Welfare, which, under the Pnblic Health Service Act '" licenses organizations which barter sell, and manufacture "biological products " in commerce, treat. blood as such a product and requires blood banks operating in commerce to secure the appropriate licenses, " In United States Calise, supra the court in denying the motion to dismiss the in- 1!' 52 Stat. 114 (1938): 15 D. C. 52 (1964 cd. o 112 Stat. 1040 (1938) ; 21 U. G. 301 et fief".(1964 ed, "121 L. C. 321 (g) (1964 I'd.

The \Vheeler- Lea Act. which contains Seclions 12-1R of the Federal Trade Commission Ac became.. effective on March, 1938. The F('lervl Food. Drug", and Co metic Act. fl subslanti;, revision of the earlier Act of 1909 , became elYective on June 25, 193iJ. "83 Corp,. Rec. 3252- '16.

Cf. N. LR. B. v. John W. Ca'np/Jcll, Inc. H9 :F.2d 184 (5th Cir. 1847) , J,. Heller i.. Son, IHt" Federal Trade Commission, 191 F. 2d 9,1'1 (7th Cir. 1951) ; Federal Trade C01!!lnission V. R"ed 243 F.2d 30g (7th Ci,' , 1957), cert. denied. 3,:;5 1 S. S23 (1957). "Section 12(\') of the Federal Trade Commission Act states: "The dissemination u)- the caus;ng- Lo be cliss"mimlted of any fedsc advertiserr. ent within the )1provisions of subsection (a) of this section shan be an unia:r or deceptive act 01' p)'actice ir. commerce within the meaning of fjl'rations.

D 58 Stat. 702 (944), 42 U. C. 262 096,. I'd. 27 See 42 C. R. 13. (g-) (5) (ii) ; 73. 300-73. 327. _.

Opinion 70 F.

dictment with respect to alleged violations of the Public Health Service Act on the theory the statute did not apply to whole blood (human), stated that it could not be said as a matter of law that the statutory terms did not include any serous fluid used for medical purposes and that the issue must be determined after receipt of evidence. See also United States v. Steinschreibcr 219 F. Supp. 373 (S. Y. 1963) ; 218 F. Supp. 426 (S. Y. 1962). The Commission is of the opinion, therefore, that there is a suffcient basis in the record for a factual conclusion that whole blood (human) is a "biological product." '" Moreover, the definition of "drug" contained in Section 15 of the Federal Trade Commission Act, and the interpretation of the corresponding definition found in the Federal Food, Drug, and Cosmetic Act by the court in United States v. Cnlise, supra provide a legal basis for treating whole blood (human) as a "drug " and thus a "product" for purposes of Section 5 of the Federal Trade Commission Act. As a result, the commercial blood banks in this case, when acquiring, processing, and supplying such blood to hospitals in other states, are engaged in the business of producing and selling a product in interstate commerce. The Commission clearly has jurisdiction under Section 5 of the Federal Trade Commission Act to proceed against a combination or conspiracy designed to having the effect of hindering the operation of such a business, and we so hold.

The corporate respondents named in the complaint-Community, the Hospital Association, and three of the member hospitals -are organized under state not-far-profit statutes and have been classified by the Internal Revenue Service as organizations which J Corporations are de-are exempt from federal income taxation. fined in Section 4 of the Federal Trade Commission Act, as amended by the Wheeler-Lea Act of 1938;" as follows: Corporation " shall be deemed to inc.udc any company, trust, so-called Massachusetts trust, or association, incorporated or unincorporated, which is organized to carryon business for its own profit or that of its members, and has shares of capital or capital stock or c' ertif1cates of interest, and any company, trust, so-caned Massachusetts trust, or association, incorporated or unincorporated, without shares of capital or capital stock or certifH Rtes of interest, except partnerships, which is organized to carryon business for its own profit or that of its members.

s See "Tr. 1022 , 10r,Z- , 1173- , 5651- "Initial Decision, Findings of Fact, Pa:r . I , 2. 52 Stat. 111 (1938); 15 C. I.,j (1964 cd. , COM:\UNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 905 728 Opinion Each of these corporate respondents takes the position that it cannot be "organized to carryon business for its own profit or that of its members" within the purview of the Act because of their incorporation under state not-for-profit statutes and their tax exempt status.

It has been established that incorporation under a state notfor-profit statute does not always result in federal tax exemption.'" Some state statutes require that the charter contain a clause providing that no part of the income or property may be distributed to the offcers, directors, or members, while others require only that it be organized for a religious, charitable, or other exempt purpose. Some impose both. On the other hand, the Internal Revenue Code taxes a1l corporations except those specifically exempted." Corporations organized and operated for religious charitable, educational, and other specified purposes are exempted from taxation, provided no part of their net income inures to the benefit of any private person."' A corporation which does not distribute income to its shareholders may nevertheless be subject to federal taxation if it is not organized for one of the specified purposes." The requirement in the Federal Trade Commission Actthat the corporation be organized to carryon business for its own profit or that of its members-differs significantly from both of the above tests. As a result, we do not think that incorporation under a state not-far-profit statue and exemption from federal income taxation are the criteria which delineate the Commission jurisdiction. Other factors, including a review of the Jegislative history, must be considered in resolving the issue. The definition of "corporation" found in the Federal Trade Commission Act prior to its amendment by the Wheeler-Lea Act evolved through legislative compromise. The version in the biJ which passed the House on .Tune 5, 1914 " differed from that in the Senate biJ , passed on August 5 , 1914.'" On August , 1914 , before a compromise had been reached, Joseph E. '" See Hetter HilMIneBS Bureau of Washington11 , D. , Inc. v. United States, 326 U. S. 279 (1945) , United States v. Community Services, 111c. 189 F. 2d 421 (4th Cir. 1951). ccrt. denied, 342 U. 2 (19 2) : lIetcrun.. FVH1,dation v. U"ited States 281 F. 2d 912 (loth (ir. 1960). 3: Internal Revenue Code of 1954 , Sec. 11. 33Ib1 Sec. Ol ct seq.

"N. 31 S1(1)ra; see a.lso Roston Terminal Co. v. Gil, 246 Feel. 664 (1st Gir. 1917). Corporation ' means a bnrly incorpOJ'atecl undcl' law, and also joint-stock association!; and aJl other associations having: shares of cajJital 01' cf,pital stor. k or on anized to cary on b1.lsincss with a view to profit. " H. R. Rep. No. 1142 , 63,1 Cong-., 2ct Sess., Sept. 4. 1814 , p. 11. r, "The term ' corjJoration ' or 'corporations' shall include joint-stock associations and all oth fisso"ial;(Jns having- sheen' s of ajJitaJ or Rpital stock, organi7.erl to candy OIl tJ\1siness for profit:' R. Rep. No. 1142 , 63d Cong. , 2d Sess.. Sept. 4, 191 , p. 14. ,,, , , 906 FEDERAL TRADE CO !MISSION DECISIONS Opinion 70 F.

Davies, Commissioner of the Bureau of Corporations, conveyed to Senator Newlands, Chairman of the Committee on Interstate Commerce, certain suggestions with respect to both the House and Senate bils. Among other things, he voiced the opinion that the proposed Trade Commission s jurisdiction did not extend to assoc.ations of manufacturers or dealers (trade associations) many of which were organized "not-far-profit." He stated that the Commission s power ought to be suffciently broad to permit it to inquire into the transactions of such associations, and recommended that the House and Senate definitions of "corporation " be amended by striking out those portions which required that the corporation have shares of capital or capital stock and be organized to carryon business for profit or with a view toward profit and substituting therefor the phrase "whether having shares of capital stock or not. " 37 The definition of "corporation" contained in Section 4, as enacted by Congress in 1914, applied both to incorporated and unincorporated associations, with and without shares of capital or capital stock. However, a corporation he. ving shares of capital or capital stock was included within the definition only if "organized to carryon business for profit." On the other hand, a corporation without shares of capital or capital stock was included if it was oyganized to carryon business for its own pyofitor that of its " 38members.

The legislative history fails to reveal whether Congress attached different meanings to the two above-quoterl phrases. However, there is a fundamental difference between a corporation having capital stock '" or shares of capital'" and one which does not, and this fact lends support to the conclusion that the two phrases have different meanings. By definition, a corporation having capital stock or shares of capital is organized so that any Letter from the Commis ionc,' of COJ'jloJ'fltions to the Cha.irman of the Committee on Interstate Commerce, transmitting certain su "p,'estions relative o the B:ll (U R. 1.';613) to Create R Federal Trade Corrmission. " (i3d Cong. , 2d Sess. :jR Stat. 719 (UI14). That rlefmition \\' "s as follows: "'CorjJoration' mean ny company or a%ociation incorporated or unincorlJorated, which is organize(l to carryon business for profit and he,s shares of capital or capital stoel, . and any company or a ocil'tion . incorporate d or uninco!"l0)'ated, without\' share of capital or capita! stock, except partnership1s. \which is organized to r rry on business fol' its own profit or that of ' its members H 1U "Capib'. slock" is defined as tne amount of rroney, property, or other means authorized by the corjJorate charter and contrilmted or agreed to he contributed by the sharehoiders as the financial uasis fol' the business of the corporation. F'un-inpton v. Tcnnes8e D5 U, S. 679 (IR77) : Hecht v. ,'dalley, 265 U. S. 144 (1924); 18 ,1m. Jur. Corporations, 20S: IH C. ,J. S. Corporations, 193; 6 '''on16 add l'phrases, " Capita Stock." Shares of Capita:" is defm,.d as the proportionate intel"est 01' rights in the manag-e. ment of the corporation, in its surplus profits . and. upon disso:ution, in all of the asset , , , , COMMIJNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 907 728 Opinion profits received may be distributed to shareholders or members in proportion to their capital contributions. The essence of its being is the fact that its shareholders or members own an equity in the corporation and its income, and are entitled to a proportionate distribution of profits while it is in business, and, upon dissolution, to a proportionate share of its assets. Thus, the phrase carryon business for profit " when applied to such corporations should receive its traditional and most generally accepted definition-that the corporation is engaged in some undertaking for the purpose of realizing pecuniary gain which will ultimately be distributed to the shareholders or members. On the other hand, a corporation without capital stock or shares of capital is, by definition, a corporation in which the incorporators or others do not have an equity interest in the corporation or a right to a distribution of the profits. Such a corporation would, therefore, be some sort of nonprofit, municipal, or public corporation. Even if it engages in "business" and realizes an excess of receipts over expenditures, it is not organized so that such amounts can be distributed to its incorporators, offcers directors, or other persons. The phrase "organized to carryon business for its own profit. . ," when applied to such a corporation, must, therefore, have a different meaning from the traditional phrase "organized to carry' on business for profit " which is applied to corporations having capital stock or shares of capital. Since a corporation not having capital stock or shares of capital does not distribute amounts realized to incorporators, officers, directors, or other persons, the words "business" and profit " viThen applied to such corporations, must have broader meanings than those usually ascribed to these words," The only logical meaning which the phrase "organized to carryon business remaining after the payment of debts, Farrington v. Tennessee, 95 U. S. 57\) (1877): 18 Am. J"T. Corporations 208: 18 c.J. Corporations, 194: 3\) \Words and P!wRses Shares of Capital Stock" and "Share of Stoei,- 1 " CaJ'ry on business" or " doing busines " usually means engaging in activities in the pursuit of ga:n 01' doing a series of simi1al' acts for the purpose uf realizing pecuniary IJCnefit, 6 \Words and Phrascs Carryon Business; 13 \Words and Phrases, "Doing Business Restatement, Conflict of Laws 167 (a), " Profit" geneml1y J'refers to economic benefit and hag been defined as the ain from business 0\' investment over and above e;.penditures 01' gain made on busines or investment ",hell both reccijJts oj' paymen!!j are tak!'n into account. See g., R!!bber Cu. v, Cooc!yea1' 76 U. S. 788 , 804 (1%!J) ; Maddo:!: v. Intcr1!ational Paper Co.. 47 F. 8,-lPI'. S29 , 8 O (D. La. 1iJ42) ; 4 'Words and Phrases, " Profit." "A corporation can be engaged in business even though-h the excess of I'cc!,ilJts 0'""1 e;'jJenditures is not distrib\;tnl. See 1JIC1"i"un Medical AS8 v. United States 8"111""-, 130 F. at 2 , n. 15 (D, C. Cjl'. 19,12), illoreover llJofJt " when interpreted broadly, has oeen held tu mean accession of "oud, valuable results, useful cor. eCjuences, and any sort of !,:ain benefi, or advantage. See Union LCWJU6 Club Johnson 115 P. 2d 425, 426 (Sup. Ct. Calif. , , Opinion 70 F, for its own profit. . ." could have when applied to a corporation unable to distribute "profits " realized is that the corporation is organized to engage in some undertaking for which it wi1 receive compensation in the form of fees, prices, or dues and is not prohibited by its charter from devoting any excess of income over expenditmes or other benefit derived from doing business to its own use; for its own self-pcrpetuation or expansion. If the corporation is a trade association, it is subject to the Commission s jurisdiction if it is organized to engage in a business which benefits its members in some manner.

The Federal Trade Commission Act was amended in 1938 by the Wheeler-Lea Act which inter alin, extended the reach of Section 5 to unfair OJ' deceptive acts or practices in commerce. The definition of "corporation" was expanded by providing that it shall be deemed to include " any Htrust" or "so-called Massachusetts trust." There was concern that these entities, which operated businesses in much the same manner as corporations, but which were not generally considered to be corporations under state Jaw, might not be subject to the Commission s jurisdiction under the old definition. " The phrase "organized to carryon business for its own profit or that of its members " which previously had applied only to organizations without shares of capital, capital stock, or certificates of interest '" was made applicable to corporations with shares of capital and the old phrase organized to carryon business for profit " was deleted entirely. The legislative history does not reveal the reason for this latter change or shed any light on what meaning the Seventy-fifth Congress attached to either phrase. However, it is clear that Congress intended to extend the reach of the definition as a whole and, as a result, we think it should be given the broadest possible interpretation consistent with its wording. Again, when applied If) J): C,Hn'itiN" io"'I'r of (',,,,,Iiri,, Park Board of COllntll Com TB. of Weston Cmen/y, 174 P. :!d 402 (Sup. Ct. \\' O. 1(46): La.U1"e/ Hil Cemeter!l Ass v. Citll and Coant1! of San Franc1.co . 2tl liiO (D. Calif. 1847). In addition profit '" may meaTl !i saving of e'qwn e which other' isr. v;ould IH'c€ssarily be incurred. See State ex rei. RltBBell v. Sweeney, 91 N. Eo 2d 13, 16 (Sup. Ct. Ohio 1950) ; Hoston Terminal Co. eil, 246 Feu. 664 (1st Cir. 1917). '" See Mi/l;n, r!1 Creator s Gw, Inc. v. Federal Trade Commission 312 V. S. 46!) (1941): FrIshifJ" Ori!1inatorH' Gund V. Federal Trade Commis.qion, 312 U. S. 457 (1941). Federal Trade Commission v. Pacific States Paper Trade ASB 273 U. S. 52 (1927): Sto.ndaJ'd ContrLlnrr MallnIad"rcrs ' Ass v. Federal Trade Commissioll 119 F. 2d 262 (. th Cir. 1941); ()nalit. Uul.ers of tllenca \c. Federal Trade Commission 2d ,;-\93 (1st Cir. 1940); CrLlifornia LUiI!icT!la1! s Council Federal Trade c.olll1nisHi()! 2d 178 (9th Cir. 1940). H S. Rc)). No. 1705 , 74th Cong. , 2d Sess. (1936): Hearings Befo)'e the Committee on Intel'stiIte Commerce, United States Senate, 74th Cong. , 2d Sess. , on S. 3744 , Fehruary 17 to itJ.'1Ch 10 , 1936, p. Ej: 83 Congo Rei'. 3252--56. "" The phra e " certificates of interest " applicable to :Massachusetts tl'\1sb, was inseJ'ted ill the detinition by the Wheeler-Lea Act. COMMUNITY BLOOD BANK, KANSAS CITY AREA , INC., ET AL. 909 728 Opinion to corporations which do not have shares of capital, capital stock or certificates of interest, and which, therefore, do not distribute any so-called "profits " the phrase "organized to carryon business for its own profit. . . " must mean that the corporation may engage in an undertaking for which it is compensated and is not prevented from applying whatever "profits " or "benefits" it receives to its own self-perpetuation or expansion. If the corporation is a trade association, it must be organized to engage in an undertaking which "benefits" its members in some manner. the other hand, when applied to corporations having capital stock, shares of capital, or certificates of interest, we think the phrase may be interpreted to include not only the narrower, traditional definition of engaging in business for profit, but also the above-stated broader concept."

Turning to the facts in the present case, it appears that Community, the various hospitals named in the complaint, and the Hospital Association are organized under state not-for-profit statutes which permit them to acquire and sell real estate, borrow money, and engage in other commercial activities. In addition their articles of incorporation empower them to perform these and other commercial acts." Community and the hospitals perform their functions in much the same manner as commercial entities such as the commercial blood bank and "for-profit" hospitals "!' and receive compensation for goods supplied and services rendered. Accordingly, they can be considered to be organized to carryon business. Cf. Ame1'icun Medical Ass v. United States supra 130 F. 2d 233, 236-237. The Hospital Association, which among other things, performs studies and supplies the results to dues-paying member hospitals, also carries on business. None are prevented by their articles of incorporation from devoting any profits" received to their own use.,,1 Moreover, the Hospital Association is also engaged in business for the benefit or profit of its members when it supplies to them information and other services ""See N. 43 supra, n Under' some strate statutes, a o-called "non-profit" corporation may be or c;ani7-ed with capital stock 01' shares of capital, but is Jwohibited from distrib\lting- its "profits " to the shareholders. See, C'fl- , G. S. r'nsas Chapter 17 , Articles 1702 , 2802 , 2903, See ex 540: Onl(,l' T.lid'lp; Official Kotice (Tlby 3, 1963), 4U See Appeal and Brief of ResjJondents Community mood Bank of Kansas City Area, Inc. and Others frail' I11ter:orutol'Y Rulir. l' of the Hearinp; Examiner (filerl November 21. 1902) . Joint aYJd Several :'Iotions Re'luestiJl);' Leave to Inlel' \'e11e i11 Interlocutory ATlpeal of the Communily Blood BanI, of the Kansas C;ty Area, Inc, (filed November 20 , 1962). :; Two members of the Hospital Association, ThomjJson, Brumm and Knepper Cinic Hospitnl and \Vanensburg- 1'edic2-: Center, Inc. , are privately owned hospit"l . Initial Decision, :Findings of Fact, Par. 2(J).

J See N. 49 supra..

Opinion 70 F.

which they might otherwise have to gather or render themselves. "' Accordingly, we hold that the corporate respondents named in the complaint are included within the definition of "corporation" found in Section 4 of the Federal Trade Commission Act and, therefore, are subject to the Commission s jurisdiction. In any event, acceptance of the assertion that the corporate respondents named in the complaint are not embraced by the definition of ncorporation" would not prevent the Commission from adjudicating their participation in the alleged conspiracy. On several occasions, the Supreme Court has held that a conspiracy is a continuing partnership for purposes of attributing the overt acts of one conspirator to others and for admitting in evidence the declarations of one conspirator against the others. See United States v. Kissel 218 U.S. 601 , 608 (1910) ; Hitchman Coal & Coke Co. v. Mitchell 245 L. S. 229 249 (1917); United States Socon)j- j7acnl!n Oil Co. 310 U.S. 150 , 253 (1940); Fiswick United Stales 329 L'S. 211, 216 (1946). Although conspiracies in restraint of trade are usually reached by proceedings against the individual conspirators, we think that the Commission may consider the alleged conspiracy in this case as a partnership and proceed against it pursuant to the statutory grant of authority over partnerships.'" Moreover, it has been held that the fact that a corporation is not indictable for the making of an agreement in restraint of trade does not prevent it from being counted as one of the parties to the conspiracy. Standf/lrd Oil Co. v. State 100 S. 705 (Sup. Ct. Tenn. 1907). Thus, the Commission may adjudicate the existence or nonexistence of the alleged conspiracy and determine the identify of the co-conspirators, whether they be individuals or not-for-profit corporations. While we do not think that treating the conspiracy as a partnership bestows individual jurisdiction over the not-for-jJrofit corporations if such jurisdiction is otherwise lacking, the order may be enforced indirectly against any of the not-for-profit corporations found to be participants in the conspiracy by enforcing it against those offcers, directors and employees found to be subject to the order in their individual capacities. " Accordingly, a holding that the not-far-profit corporations named in the complaint are not subject to the Commission s jurisdiction would not compel dismissal of the complaint or 5:; See N. 42, supra.

15 V. C. 45(b), (c).

"See Bennis Watch Co. Inc. v. Federal Trade Cmnmission 352 F. 2d 313 (8th Cir. 1965) ; Standard Distrl:blltors. Inc. Federal Trade Commission 211 F. 2d 7 (2d Cir. 1954). j).

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 911 728 Opinion prevent adjudication of the existence and the extent of the conspiracy.

Finally, it is argued that the action cannot be maintained against the unnamed hospital members of the Hospital Association as members of a class, because such hospitals do not constitute a class for jurisdictional purposes."" The complaint listed three hospitals as representative of the forty-three members of the Hospital Association. Respondents agree that Rule 23 of the Federal Rules of Civil Procedure provides the authority by which the Commission may institute a class proceeding. (' However, in contending that the elements of this rule have not been satisfied respondents state that it would not have been inconvenient to name and join a1l members, that the membership of the Hospital Association is not an appropriate "class " and that neither the Hospital Association nor the named members can determine policy for the unnamed members and thus may not "represent" them in a class action.

The impossibility of joinder of al1 members of a class is not prerequisite to the initiation of a class action. Instead, extreme diffculty or impracticability or joinder is suffcient." Such impracticability has been found where membership in the class numbered seventy- six s and, in another case, only forty. 59 There is no requirement that the named members of the class be agents of the unnamed members in order to represent them in a class action. Instead, representation is considered adequate and is permitted if their interests are coextensive, although not identical, and if the interests are not antagonistic.

In the present case, the evidence showed that the Hospital Association was the medium through which the individual hospitals participated in the community-wide effort to establish a central blood bank and, in fact, was the spokesman for the hospitals at meetings where other segments of the community were represented. In addition, t.he meetings of the Hospital Association provided a forum where the various hospitals voiced their views on community blood problems and, on occasion, discussed the com- , The complaint named indivi(!ually the then current offccrs, directonl, and members of Community as repre,entatives of its entire membership. The 'Use of the class action in thb regard is not contested. Respondents' Brief on Appeal, PIJ. 116- 117. Chamber . of Commerce of iHinneapolis v. Federal Trade- Commissioll 13 F.2d 673 (8th Cir.571926).Barron and Holtwff Fede-ral Pructice a11d Proccdare, 1961 ed., Vol 2, p. 286. ,3 Wiliams v. Humble oa & R€fining Co., 234 F. Supp. \)85 (D. La. 196, ""Citi:ens Banking Co. v. lHonticello State Bank 143 F. 2d 261 (8th Cir. 1()44). 003 Moore s Federal Practi e (2d ed. ), par. 23.07. \ .

Opinion 70 F.

mercial bank. Even though the membership of the Hospital Association was composed of religious, municipal, state, and federal hospitals, a11 participated in the Hospital Association s meetings and in the efforts to establish Community in the same manner and a11 are charged with being parties to a single conspiracy which had its roots in these meetings. As a result, the Commission holds that the membership of the Hospital Association constitutes an appropriate class and that the interests of the named and unnamed hospitals are, with respect to this action, coextensive and nonantagonistic." The inherent diffculty in naming and serving a11 forty-three hospitals presents suffcient impracticabilty to permit use of the class action, and the naming of three of the members and the Hospital Association itself adequately insures proper representation of the interests of the unnamed members. Accordingly, the contention that the proceeding against the unnamed hospital members of the Association must be dismissed is rejected.

In the majority of conspiracy cases, the government is not able to produce direct evidence of the conspiracy and, as a result, must usual11y resort to proof of a number of factors from which the existence of the conspiracy may be inferred. Among these factors are the presence of a motive for a conspiracy, evidence of opportunities for agreement through scheduled meetings of offcial groups, whether the object of the alleged conspiracy was discussed at such meetings, commission of overt acts consistent with the existence of a conspiracy, 2,nd the accomplishment of an end which also is consistent with a conspiracy. Proof of a number of such factors has permitted the conclusion that there has been conscious adherence to a plan, scheme, program, or group consensus which had as its inevitable result the restraint of trade or commerce and has been held suffcient to establish a violation. 01 An additionai indication of the similarity of interests is the fact that the H(jsl)ital s()cir,tion imd the named member hospit1l1s were repre ented as n group by a single Jaw fh' rn. There I;; nothing to indicate that the unnamerl hospitals, which a.re not formally represented in this j1roceec1ing, would have received different representation had they been named in the complaint. Presumably, the al'!,ument that the unnamed hospital members of the i\ssocia;io" are not properh' before the Commission is attributable to the attorneys retained by the Association. The recall dnes not reveal whether these unnamed members have rontribl.term to the Association s defense of the proceeding. r:' .t., United State. Pa1' am01.mt Pict!tr 8, 111c.. 334 U. S. 131 (1948); ral Trade C01l1l;s. lon v. Cement InBtimte 333 U. S. 683 (1948); American Tobcuco Co. v. United States, 328 U. S. 781 (1946); Interstate Circuit, Inc. v. United States 306 U. S. 208 (1\)3\)); Ea.stern States Retait Lumber Dealers ' A88 v. ted States 234 U. S. 600 (1914). E8CO COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 913 728 Opinion In the present case, the evidence offered by complaint counsel established many such factors and, contrary to respondents' position, shows substantially more than "conscious parallelism. Cf. Theatre Enterp1'ises, Inc. v. Pararnount Film Distributing Corp. 346 U. S. 537 (1954). As wi1 subsequently be demonstrated, repondents possessed a motive for joint action-their belief that commercial blood banking was morally wrong or their opinion that commercial blood banks did not supply blood of equal quality with nonprofit banks. There was ample opportunity for discussion and agreement at the various meetings of the Society of Pathologists, the Hospital Association, the meetings of the corporate body of the proposed Community bank, and the joint meetings of representatives of these groups. The commercial blood banks were discussed at some of these meetings. Several affrmative steps by individuals and groups were taken to prevent the commercial banks from establishing donor clubs and otherwise to in. hibit their growth. There was a consistent pattern of reaction to the eommercial banks' efforts to expand and a universal reluctance to use blood supplied by them.

The Commission is of the opinion that all of these threads when \voven together, constitute a suffcient basis for the conclu sian that those individual and corporate respondents found by the examiner to be co-conspirators 1nlOwingly joined in a common cause of action which had as its inevitable result the hindrance of the development of the commercial blood banks listed in the complaint. The existence of this comse of action does not become apparent. until the entire chain of events preceding and following the opening of the commercial blood bank is examined in det.ail. Om discussion of these events will be divided into three periods of time-the period prior to May 1955, when the first commercial bank began operation; the period between May 1955 and April 1958, when Community became operative; and the period after Cmnmunity opened.

The transcript shows that before the opening of the commercial bank, the blood needs of the area were being supplied primar- Cor)). United Swtes, 340 F.2d 1000 ( th Cjr. 1865): Standard Oil Co. of Calif. .'Hoore, 251 .F. d 188 (8th Cjr. 1857) Advertising SlJCcw.ltu i'./atirmn.l A8s v. Federal Trade Commission. 2:J8 F. Zrl 108 (1st Cir. 1956) ; liand C1 01/n CO)' " Co. v. Federal Trade Comj11 ssion, 176 F.Zd 97.1 (4th Cil". 1948); FDrt Howard Pa'fB)' Co. v. Federal Trade Commu18wn 156 2d 899 (7th Cir. 1946).

Opinion 70 F.

ily by hospital blood banks." The American Red Cross Defense Blood Bank operating in Kansas City at that time channeled the blood it acquired to the Armed Forces in Korea."' On August 6 1953, the Board of Directors of the Kansas City and Jackson County Red Cross Chapter passed a resolution addressed to the Jackson County Medical Society, noting that the Defense Bank Was to be closed and offering to assist the Medical Society in sponsoring and operating a local community blood program utilizing the existing Red Cross facilities."" On August 19, 1953, after a Iong and rough session" cc the Jackson County Medical Society adopted a resolution voicing the need of a community bank and approving such a bank along the lines of community banks in other areas."' Ko mention was made in the resolution about the Red Cross offer to cooperate and the Red Cross was not invited to participate in subsequent conferences. '" This may be explained partially by the Red Cross' insistence that no replacement fees be charged, a policy which the local physicians thought unwise, and by the fact that a few physicians thought that the Red Cross did not have a good public image.

A committee composed of six physicbns, three of whom were pathologists, was appointed to implement the decision to form a community bank. () The committee met on a number of occasions between August 27 1953, and Kovember 18 , 1953, to discuss various organizational problems. It decided to request the use of the Red Cross equipment " ami, if it utilizied the location of the Red Cross center, to do 80 only temporarily." The Red Cross was to be limited to no greater role in the proposed bank than any other community service agency, ':' The committee also concluded that "' HosJ,jt"l hood banb:. !Ire open' ,tni as part of the hospital"s Jaboratory fadJities and are slljlcn'i\;€(l by the stalf pathulogist. Be e of their small Rize, such LaJ1k 'l8ually ej"ve only the hosnital wherein locate" /\ patient who j"eceive blood is geneJ'rtlly given the opt-ion of !'c))lncini"' thc blood or JJayin:? a res11'Jnsibiliiy fce which may ran;:e between $2.5 rtnrl $:J.) l1el' pint. The pUrImse of the J'eB))ol1sibility fet' is to e!leourav.e J'ej.lacement of the blood in ldl1l. Such banks sometirne l)u)' chRse blood fl' om wmnwrclrll banks. G'The Red Ct"o r also o)1('1'&.tes civilian bloOll centers ';which serve local communiti",s and the suj"ounding- !"e don . 1t relies chief:y u!Jon voluntary donatior. s for its supply und does not im,JOse a :'es)Jonsij,jjity fee upon JJatients who r€('Eiv€ its blood. The Red C1'Oss will not establish such a (,1Ont,.1' in a community unjpss it 1'ect'ives the 2.)Jjj)'ova\ and cooperation the local mt'oicf\1 weiety (Tr. 99. , 139(;, 1412-14, 16 , 1804). aacx'" CX 32;-;.354(j).

B'RX 129; Tr. 3754-56.

""Ste ex 354(a), (j); RX 32!1.

au See Tr. 1645-')9: ex 3. S4- ;"i9: RX 1!J. '0 RX U, g; T,'. 3i52-53.

RX J29(A).

"'RX 329(E), (F), and (G).

13RX 329(C).

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 915 728 Opinion the bank should be a community project directed by the Jackson County Medical Society with no other dominant supporting group. " At the September 21 meeting, it was thought that hospital administrators should be asked to participate, but that plans were not yet definite enough to invite them. ,,- Some hospital administrators were invited to the October 20 and subsequent meetings, but it does not appear that they wielded significant influence. '" The pathologists remained the dominant influence and their inability as a group to agree prevented the selection of a site. " At the October 23 and i\ovember 18 meetings, the final form of the proposed bank began to emerge. It would be known as the Community Blood Bank of Jackson County; and, although it would solicit community support, it "would, when opened, be directed and managed by mem bel's of the J\eclical Society. " The organizational meeting, attended by members of the Medical Society, hospital administrators, and other public-spirited citizens was held on December 11 , 1953.

Although the shell of the Community Blood Bank (Community) was organized on December 11, 1953, the bank did not begin operating until April of 195H. Between the organization of Com. munity on December 11 , 1953, and May 16, 1955, the date of the opening of the first commercial blood bank, there were a number of unsuccessful attempts to eliminate the sharp areas of disagreement between the pathologists . the Medical Society, and other groups with respect to control over the proposed bank."" It is apparent that the Medical Society desired to retain control over the bank to the exclusion of other groups. The Red Cross was not asked to participate as a group. Although some hospital administratOls attended the December Il, 1953, organizational meeting and a few prior ones, they were given no voice between that date and November of 1954 " when they were suddenly asked to sign an agreement of participation. There is some indication of resentment by individuals connected with the Hospital Association at being so cxcJuded.

On December 6 , 1954 , Leslie Reid, the administrator of St. 74 Ibid.

RX 329 (F).

RX 329(L).

"RX 329(E) ami (F).

RX 329.

'9RX 329(Z-3J.

BOSce RX 161.

B'Tr. 8188, 8493; RX 161(b); ex 166 (b Tr. 8491-iJ2; RX 161(b).

SJ See RX 161(b).

Opinion 70 F.

Luke s Hospital suggested by letter to Dr. Carroll Hungate, a pathologist and the president of Community, that the entire blood bank proposal be formally submitted to the Hospital Associ2..tion for its consideration.." Hungate extended an invitation to Bishop DeLapp, president of the Association, to meet with representatives of Community.'c, DeLapp asked the chairman of the Association s Administrative Council to appoint a special Blood Bank Committee which would report to the Council.'" That committee met on January 4, 1955, with representatives of Community. Various operational problems were discussed, including" the pJ"cessing and responsibility fees. It was generally agreed that a community bank would not decrease the current cost of blood to the patient and would probably even increase it, but that this disadvantage was counterbalanced by the assmance that such a banl, would have blood available when needed." One hospital representative noted that there was no hospital representative on the Board of Directors of Community." Hungate replied that selection of board members was not yet complete and he felt sure that a hospital administrator would be appointed. After Community representatives left the meeting, the Hospital Association s committee continued discussion. The committee was of the opinion that the hospital blood banks were adequately supplying currently required blood and that there was no compelling need, or for that matter, any particular advantage in establishing a central bank."' The committee concluded that more study was necessary before definitive action could be recommended.'''' This and the other conclusions were conveyed to the Administrative Council of the Association on January 12, 1955, which agreed that the need for a central bank was not acute. The fact that the formation of such a bank would not permit hospitals to release any technical personnel then employed, that such a bank would result in higher charges to patients and the present efflcient operation of hospital banks were important factors in this consideration. The Council decided that additional study was needed. The Hospital Association s Blood Bank Committee continued its study in meetings held on January 20, February 2, and Fcbru- !!RX 161.

8.RX 161 361.

8i Tr. 5472, 8488-89: RX 161 (b), 362 81 ex 165 , p. 3.

ld. at p. 4 Ibid.

l' ld., at p. 5; RX .362 , 363.

CX 166.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 917 728 Opinion ary 22, 1955." At the first of these meetings, there was discussion of the fact that the Medical Society through Dr. Hungate, was employing a "forcing action " to extract support from the Association s B100d Bank Committee by scheduling a public meeting and inviting hospitals without notifying or inviting the committee. It decided to send a special delivery letter to Dr. Hungate stating that the committee was the established group to deal with the project and that it had not had suffcient time to study the matter." Dr. Helwig, the pathologist at St. Luke s attended the last meeting and indicated his opposition and that of St. Luke s staff to a central blood bank, because of the higher charge for blood Hnd the fact that the hospitals would not be able to reduce their staffs of technologists. The committee as a whole felt that the probability of increased costs made the project undesirable. However, it was decided that a final decision would be postponed unti after the Medical Society had conferred with its executive council. If a decision was made to drop the project, a carefully worded joint statement stressing the pi:'mary reason-increased costswould be issued to the press. U4 These conclusions were reported to a meeting of the Administrative Council on February 23 , 1955. No further steps were taken to iron out the areas of disagreement between the Hospital Association and the Medical Society until after the commercial bank opened in May of 1955, and each group acted independently of the other until that time. On :VI arch , 1955, Dr. Hungate of the Medical Society wrote a letter to Community Studies, Inc., an independent research and study group, requesting information relative to the cost of a survey of Kansas City blood needs. '" Reid, the chairman of the Hospital Association s B100d Bank Committee, commented briefly at a meeting of the Administrative Council on March 23, 1955, on the past negotiations between the committee and the Medical Society and stated that the project was currently in statu quo. The minutes of that meeting show that the April meeting of the Hospital Association s Administrative Council was cancelled, so thjs group did not meet again until after the opening of the commercial bank. On March 24, 1955, the Hospital Association s Committee on Association Projects met and reviewed the history of negotiations between the Association and the Medical Society. It was g. ex 167 , 168, 169.

9,CX 167.

M ex 169.

ex 170.

90RX 365.

ilCX 171(b).

Opinion 70 F.

noted that the Medical Society, for reasons unknown, had rejected aJ1 Red Cross offers of cooperation."" The committee decided to recommend to the Association s Board of Directors that fmther study be given to the project.

The foregoing summary of events occurring prior to the opening of the commercial bank is significant because it contrasts dramaticaJ1y with the spurt of cooperation beginning immediately after the commercial bank opened. Quite clearly, the above discussion shows that representatives of the Hospital Association and some or the pathologists saw no mgent need for a central bank and felt that little was to be gained by proceeding with the project. Many were of the opinion that the probability of increased costs to the patient offset whatever advantages were offered by a central bank. The pathologists were not in agreement with the other members of the Medical Society. Joint negotiations between the Hospital Association and the Medical Society had yielded little and these two groups were poles apart in their thinking regarding the feasibility of the central bank. The failmc to achieve a meeting of minds had culminated in the eventual cessation of joint meetings in February. As characterized by Reid the chairman of the Hospital Association s Blood Bank Committee, the blood bank project was in stcdus q1!O in :llarch of 1955 and this project does not appeal' to have been the subject of active discussion in May when the commercial ban1\ opened. :Ylol'cover, the Medical Society, through its reluctance to include the Red Cross in its plans for a central bank in any significant role and its grudging acceptance of the Hospital Association s participation had manifesten an intention to exercise control over any central bank which might be established. In addition, Dr. Helwig, pathologist at St. Luke s Hospital, stated to a Federal Trade Commission attorney-investigator in 1906 that the Society of Pathologists flt a meeting approximately two years earlier had stated in a resolution their preference for using replacement donors rather than obtaining blood from commercial blood ban1(s. The reason assigned for this preference ,vas disapproval of the purchase and sale of human blood, but the resolution indicated that commercial blood "should be used in ernel'gencics.

g;cx 585, ", ex 1,1. Initial Decisiun. Yinri;n;.s of Fact. pal'. 48. 1(') The attorney- in\' estigatur s report, which was admitted in evidence without objection, as ex 598, conta:1l'd the fo 'Jowing paj"1\: iljJh lnfonnant tated that he belonC's to bolo Ihe Kar.6!s City and the Mi soul': Patr.olop;ical Socieriro". About t\\O yntl'S ago at a meetir. g uf the Kansas City Pat:10:O dcal Society he said there was drawn up 11 ,'esoll;tion stating the A ociation s prderence for using , , , , COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 919 728 Opinion The impending opening of the first commercial blood bank was brought to the attention of the Kansas City pathologists when Dr. Victor Buhler, the Missouri representative to the American Association of Blood Banks (AABB) 'c, received a copy of a letter dated April 20, 1955, written by Marjorie Saunders, secretary of AABB, to Mrs. Bass, the administrator of the commercial bank suggesting that Mrs. Bass contact Dr. Buhler with respect to her request for institutional membership.'c, Mrs. Bass invited Dr. Buhler in a letter dated May 10 , 1955, to visit and inspect the bank' s faciliies.'C" Dr. Buhler also received a phone call from Dr. .J. W. Graham, medical director of the commercial bank, concerning its opening. In his conversation with Graham, Buhler expressed vehement opposition to the commercial bank, apparently predicated primarily upon his belief that buying and selling blood was morally wrong "" and secondarily upon the fact that Graham was not a specialist in blood banking.''' Subsequently, Mrs. Bass personally requested Buhler to inspect the bank.'"" Shortly thereafter, Dr. Buhler and Dr. Kerr, a pathologist at St. .Joseph's Hospital, visited the commercial bank and were given a guided tour of its facilities by Mr. and Mrs. Bass. "" Although Dr. Buhler denies it,''' MI'. Bass testified that one of the two pathologists stated rejJ1acement donors rather than getting blood from commercial blood banks because the Association Wf! not in accord with traffc in humaIl blood. The resolution stated, ha\\pver, that commercial blood should be us€(l in emcrgencies. He said that he !,no" s of no one - who ha!; tried to ' do in ' the local camTr.€\'ciaJ blood bank anu. that he knows of no conspiracy against it an(l no concerted action to restrain its trade in any way. "" The American Association of Blood Ranks, a national nonprofit association, jJrovides technical information for and regular':y conducts inspections of blood banks in an effort to improve methods and quality, See ex 2S , 26; '11' 3222-27, 5676. '''" '11'. 7 : ex 1:1. From H) 5 until 1 IS9, commercial blood banks were not admitted to inst.itutiom\l membershil) in AARB. Between 1959 and 1961 , cum mercia I blood banks could he admitted(j to membership if approved or endorsed by the local )T, medical ociety. After 1961, commercial blood ba:lks w('re a!'ain denied in tjtutjonal membership. CX 2;" 26; '11', 'J885 , 5885. Neither of the commercial blood banks ;)1 Kansas City were admitted as institutional members. See CX 15- 22, 28-32.

lDJCX 14; '11'. 7984.

'O! '11'. 7985.- 88. Buhler s testimony on this point is as follows; . . I was calkd to the phone and Dr. Graham greeted me, anr:ounced who he was, and asked if 1 J1ad heard that thel' was a new blood bank that had been estabJish!'d in Kansas City. J announced that I had. The b st I ean recall, he says Isn t that just wonderful?' Anrl I sllid, it is terrible.' He sai(l, is th",t so?' l\IJd I said Yes. And the content of my conversation flom there on, I don t recall exactly, but 1 rlo remember telling In:. Grahar!' that I felt that it was morally wrong to buy and sell Jiving human tissue fol" jJl"ofit and I rliu,, t feel that Ii commercial blood blir.k would be one in which 1 would Jool, UlJon wih great favor " Tr. 7986. See also fn. IH4 infra..

10:; 1'1'. 7986-87, )l' Tr. 7991.

)0' Tr. 7992- 98.

)Clor. 7998.

Opinion 70 F.

that "they had been able to keep commercial blood banks up to this time out of Kansas City."'" Buhler reported his findings to Dr. Angelo Lapi, a pathologist at St. Mary s Hospital, and Dr. Hi1iard Cohen, a pathologist at Menorah Medical Center.'" On May 17, 1955, the commercial bank mailed letters to a number of physicians and hospital administrators announcing its opening. The meeting of the Kansas City Society of Pathologists on May 18, 1955, is characterized by complaint counsel and the examiner as the genesis of the combination charged in the complaint.''' At this meeting, Dr. Kerr reported on the newly formed commercial bank, referred to as the Jackson County Blood Bank. Since Kerr made the report, it is probable that Buhler s and Kerr s inspection of its facilities had been conducted prior to this date. After discussing both the commercial bank and the proposed community bank, Kerr proposed that there be a meeting between the pathologists and the hospital administrators under the auspices of the Hospital Association to proceed with plans for the community bank. The motion, which Cohen seconded, was passed."" The fact that a formal motion was required to institute cooperation between the pathologists and the Association supports the examiner s finding that the central bank project was not being actively pursued when the commercial bank opened. Moreover, such action contrasts with the past positions of the pathologists, some of whom had not been in favor of a central bank ". and most of whom had been reluctant to cooperate either with the Hospital Association or the Medical Society.'" In addition, the pathologists established at this meeting a loose federation among the existing hospital blood banks which would become effective on May 23 lC8Tr. 68B3.

near. 7998-8000.

mTr. 6756 , 6761: RX 276.

112 While there is no list of aU who attended this meeting, the transcript shows that the following" pathologi ts were present-Buhler, Kerr, HiJ, Cohen, Lapi, and Firming-er (Tr. 8074-76).

lUTr. 8075.

l1t Tr. 4533.

The earlier refusal of the pathologists to cooperate with the remainder of the Medical Society is graphically ilustl"ated by the following colloquy between respondents ' counsel and Dr. Philp L. Byers, a witness for respondents: Q. Did it suhscQ.\.HntIy develop in the discussions between members of the medical pro. fession that the Jack of having IJcl'haps consulted with and planned in advance with members who were pathologists have tiny effect upon the community blood bank program'! A. Would you restate your fjuestioll? Q, Did that lack of perhaps prior consultatioll with patholop;ists have anything to do subsequently with the development of the community blood ballk program ill the Kanslls City area? A. Well, yes, I thillk it speaks for itself. There wasn t a pathologist who cDlltrlbute COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL, 921 728 Opinion 1955.'" Under this plan, one hospital would serve as a "clearing house" each week and would keep a record of the various types of blood available at all other local hospital blood banks. When one bank required a particular type which it did not have in stock, it could call the hospital then serving as the "clearing house" and determine immediately where such blood could be obtained, instead of calling each hospital blood bank individually to obtain this information.'" At the May 25 1955 "" meeting of the Administrative Council of the Hospital Association, Reid, the chairman of the Blood Bank Committee, reported that he had been approached by a private commercial blood bank about which little was known except that it was not yet approved by the National Institutes of Health. no As was the case at the meeting of the Society of Pathologists, the improved reciprocity system among the hospital blood banks was described in connection with the discussion of the commercial bank. The examiner found and we agree that the reciprocity plan reduced the possibility that one of the hospital banks would be unable to locate needed blood at another hospital bank and thus reduced the possibility that blood would 120be purchased from commercial sources. On June 8, 1955, a representative of the Society of Pathologists invited the Hospital Association to meet with them to discuss blood problems. '" At the June 21 1955, meeting of the Hospital Association s Board of Directors, Dr. Kelp announced the resumption of joint efforts to establish a central bank when he stated that the pathologists were meeting with the Administrative Council of the Association on the next day to discuss the issue. Several pathologists attended the June 22 , 1955, meeting of the Administrative CuuncilY: Fil'minger summarized the past efforts and indicated that the program had come to a stalemate, primarily because the Medical Society had not included the pathologists and hospital administrators in all phases of the planning. In addione sing-Ie dime to Jackson County Medical Society s efforts to get the Community Blood Bank gooing-. 1 think that question is easily answered. There wasn t a pathologist, the record wi1 show it, who contributed one sin le dime out of his own pocket to getting the Community Blood Bank on its feet. (Tr. 4295-96. 1I6 Tr. 8077.

U7 Tr. 8076.

ll ex 172.

None of the Kansas City hospital blood banks were licensed by JH at this time. See Tr. 8004-07: RX 315.

D Initial Decision, Findings of Fact, :par. 67. 12 See RX 155.

RX 157.

m Firming-er, president of the Kansas City Society of Patho\ogists; Kerr; Cohell: Buhler: and Hil. (CX 173.

922 FEDERAL TRADE COMMISSIOJ\ DECISIONS Opinion 70 F.

bon, he stated that the pathologists would not want to surrender the full responsibility of blood banking to a central bank. Kerr made a statement deploring the national trend toward the purchase and sale of blood, and indicated that acceptance of a central hank by pathologists would depend on its personnel. Others reiterated past objections to the central bank, such as the probability of increased cost, duplication of effort, and the belief that the hospital banks were adequate. The Association agreed to cooperate with Community Studies, Inc., the independent survey and research group which had been engaged by the Medical Society in July of 1955 to conduct a study of the blood needs of the area. The Society of Pathologists met on September 2, 1955, and considered a proposal by Dr. Lapi for an interhospitaJ blood bank.' The plan, which was presented by Lapi to the Administrative Council of the Hospital Association at its September 28 , 1955 meeting, provided for a central clearing house or registry, \vHh retention of the individual hospital's drawing and processing facilities.''" The blood would become the joint property of all the hospitals so that individuals could donate blood at one hospital but receive credit at others. To avoid the criticism of putting a price tag on blood, there were to be no replacement fees. The Administrative Council felt that it would be inappropriate to take action before the Community Studies Report had been completed. However, it was decided that Community Studies would be requested to complete the report in time for the November meetings' Francis H. Bass, business manager and one of the owners of the commercial bank, mailed a letter, dated October 7, 1955, to various labor unions describing a "Blood Deposit Program" designed according to the letter, to create advance deposits, save participants money, and protect those who were unable to donate. The commercial bank also sent a letter to a number of physicians dated October 7, 1955 , describing its various services. '" On the same date, the Society of Pathologists again discussed Lap!' s proposaJ for a cooperative community bank. Further action was delayed, pending receipt of the Community Studies Report. While there is no indication that this meeting was a reaction to the com- Tr. 8079.

mcx 174..

126 See ex 174(G). Oi). mcx 174(Cj. 12RX 289.

9CX 130Tr. 8080.

COMMUKITY BLOOD BANK. KANSAS CITY AREA IXC. ET AL. 923 728 Opinion mercial bank' s letters, a meeting of the Administrative Council announced through a letter dated October 20 , 1955, was clearly such a reaction. The letter stated:

Action wil need to be taken on the position of our hospitals in relation to the Mid-West Blood Bank and Piasma Center (the commercial bank) now operating in Kansas City. Inquiries from industry and labor groups regarding this commercial bank's "blood deposit program" make it essential that our stand be wen denned. Please come prepared to discuss it fully. The minutes reveal that commercial blood banks and the hospitals' position toward them was a topic of discussion at the October 26, 1955, meeting of the Council. Although it was agreed that the position of each hospital would have to be decided individually rather than by the Association, the minutes contain the foJlowing paragraph:

It was brought out in discussion that there was a serious matter of public relations involved, since commtrcial banks were properly licensed by NIH, and a failure to accept blood from them would create a real problem. There was general discussion as to whether an investigation should be made of a specific bank, but since Dr. Bryant stated this would be covered in the report of his research study, such aciion would not be necessary. It was agreed that the Council could stand on the statement of awaiting the Community Studies report before taking any action in the matter of blood banking. The stenographic notes of Susan Jenkins, executive director of the Association, record some of the statements made at this meeting. m The Jetter written by the commercial bank to the labor unions '" was read to the group. Willam B. Schaffrath, administrator of Menorah Medical Center, stated: Wil put ourselves in an awkward position if we refuse to accept blood from them. Have not a leg to stand on. If no one else comes up with a better program.

Burns, Commissioner of Hospitals, suggested asking for the qualifications of the personnel of the commercial bank and, later in the discussion, raised the question of whether the National Institutes of Health could be asked to supply the qualitifactions of the banks. He prefaced this last suggestion by stating: "Laying aside prejudice. . . where do we stand legally on using this bank?" Reid indicated that they were awaiting the Community Studies Report and that the issue was "for each hospital to decide, " :Vlolmex 175(a).

"'ex 175(d). (e).

meee ex 190.

RX 289.

Opinion 70 F.

gren, the administrator of the University of Kansas Medical Center, noted that they should state that they . . . are making available a wider community effort." The stenographic transcript ends " 135with the statement "no action.

This evidence shows that a number of hospital representatives discussed the question of taking some action with respect to the commercial bank. The statement referring to "prejudice" as well as the general tenor of all of the remarks show a definite bias against the commercial bank, and there is a strong implication that those present felt that the only real question was how the use of its blood was to be avoided without being put in an "awkward position. " Both Schaffrath's and Molgren s statements indicate that the possibility of establishing a community bank is to be used as an excuse to reject the commercial bank' s blood. While no action was taken at this time in the name of the Administrative Council, it is clear that most of those present were opposed to using the commercial bank's blood and that they were waiting for the Community Studies Report, which would contain additional information on the instant commercial bank, before considering further action.

The record shows a consistent pattern of refusals to use blood from the local commercial bank during this period. At some time during the summer of 1955, Dr. Buhler, the pathologist at General Hospital, instructed the technologist there not to accept 136 even though blood from the commercial bank as replacement this hospital sometimes had diffculty replenishing its stock and found it necessary to purchase blood from other sources. In the fall of 1955, the blood bank at St. Mary s Hospital, supervised by Dr. Lapi, refused to accept blood from the commercial bank on several occasions when the type required was unavailable at other Jocal hospital banks.' One incident occurred whiJe a Mr. Goddard, a patient at St. Mary s Hospital was scheduled for an operation which was "elective" in the sense that jt was not necessary to operate immediately. Another patient had depleted the supply of 0 negative blood, Goodard' s type, and the hospital requested Goddard' s relatives to acquire the blood needed in advance of his operation. A friend recruited by Mrs. Goddard inadvertently made a donation at the commercial bank rather than at the hospital. The hospital refused to accept this pint or others of the same mcx 190.

m Tr. 8002-03.

1J See ex 173(e).

10 Tr. 7529-33; ex 587; RX 287.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 925 728 Opinion type available at the commercial bank, even though blood of the same type was not currently available from other hospitals. The first paragraph and the last two paragraphs of a letter written by Susan Jenkins, executive director of the Hospital Association, describing this incident and addressed to Leslie Reid, chairman of the Hospital Association s Blood Banking Committee, state: We have run up against trouble again with the Mid-West Blood Bank and this time with the Better Business Bureau of Kansas City, Missouri. The Mid-West Blood Bank has now been advertising in the STAR, and I think we may expect a pickup of these trouble situations. I have a feeling we are just beginning to hear from this blood bank situation, and incidentally, I omitted a pertin2nt point asto how the whole St. Mary thing came up. The wife of the patient in question who needed the nine units for elective surgery was seeking donors. One of her donors that she got was instructed to go to St. Mary s -blood bank but he apparently lived just down the street from this Mid West bank and went there instead and said he wanted to give a pint of blood and gave the name of the patient and the hospital. This -is what brought the situation to a head. If he had gone to St. Mary s as he was requested to do, it probably wouldn t have come up. I can aSSUTe you that I await with a deep and sincere interest Doctor Bryant' s report on the blood bank situation.' In the meantime, Mr. Husser of the Better Business Bureau is going to document what he says is a big num ber of instances where people have complained to them that hospitals withheld blood from patients or put a burden of getting blood on the patient' family because they themselves were completely unable to meet the need. (Emphasis supplied.

The Jetter as a whole expresses the assumption that there are to be no dealings with the commercial bank and its author seems primarily concerned with the problem of avoiding such dealings without incurring public disfavor or legal liabilty. The minutes of the November 18, 1955, meeting of the Board of Directors of the North Central District Blood Bank Clearing House HO contain the following paragraph: REPORT ON THE MID-WEST BLOOD BANK KANSAS CITY, MISSOURI A detailed report was prese1!ted to the Board by Dr. Angelo Lapi, on the IISCX 687. 100 The North Central District Blood Bank Clearing- House, located in Chicago, Ilinois, is a regional cleal"ng house which began operation on March 21, 1965 (Tr. 3188). The purpose of the clearing house system is to enable banks located in different cities or dis. tricts to e),change blood or blood credits among themselves with a minimum of diffculty (Tr. 498, 1061 , 3854-55). The American Association of Blood Banks has operated the clearing- house system since August of 1960 (Tr. 1086-87. 2948, 3189 , 5702). Although-h commercial hluod banks Bre not admitted as institutional members of AABB , such blinks may join and utib;e the fliciliti of' 'the clearing house system, (Tr. 1087). )! :

Opinion 70 F. T.

activities of this blood bank. Action on withdrawing their membership in the clearing house was deferred.

Dr. Lapi, the pathologist at St. Mary s Hospital in Kansas City, and, as previously shown, a pathologist who had refused to utilize blood from the commercial bank, was the Missouri representative to the c1hearing house. An excerpt of the minutes of the above meeting, prepared by Ardyth Cobb, secretary of the c1hearing house, contains the following:

REPORT BY DR. ANGELO LAPI RE !lD-WEST BLOOD BANK KANSAS city, MISSOURI:

It is a b100d bank established for profit and they (the owners) make no excuse about that. That is its avowed purpose-to make money. They have a medical director \vho is a 78 year old practitioner in town. His only experience with blood banking is with this blood bank and they have made less than minimal effort to enlist the cooperation of the city hospitals but rather have resorted to methods \which are short Of coercion and they have used harassing techniques, telephone calls, threats. Theyare alled with the Better Business Bureau. A man in the division called the familes of several of our patients and asked if they needed legal aid to sue our hospital and several of us have been threatened with suit and the hospitals finally got togetherin the area and issued n statement that we would buy blood from them only in an emergency but we did not feel we were forced to go beyond that. We have tried to stay within regular bounds and to respect public opinion and we do not .want anyone to feel that they are being denied blood because \ve wi1 not buy from them. (Emphasis supplied. Lapi admits making all the statements attributed to him by Ardyth Cobb's excerpt except the italicized portion."" However, Dr. Van Pernis, president of the clearing house, testified that he had heard Lapi make such statements at some time.'" Under later questioning by respondents' counsel, Van Pernis denied that he had ever heard Lapi make such a statement '" but we deem this denial unconvincing. As a result, we think that there is a suffcient basis for concluding that Lapi in fact made a statement at the November 18, 1955, meeting of the Clearing House to the effect that the hospitals in the Kansas City area had "gotten together" and indicated that they would buy blood from the commercial bank ' only in an emergency. while this statement does not conclusively establish the existence of an agreement to use commercial blood only in emergencies, it may be considered in CX 160.

Jo2 CX 158.

Tr. 7619.

. Tr. 1554-557.

Tr. 862.

COMMUNITY BLOOD BANK. KANSAS CITY AREA, INC., ET AL. 927 728 Opinion conjunction with the other evidence tending to establish that an agreement to hinder the development of the commercial bank existed among those most intimately connected with established blood banking in Kansas City. '"

Moreover, where there is evidence of meetings participated in by alleged co-conspirators, such evidence is suffcient to provide a foundation for the fntroduction of evidence of other acts on the part of one conspirator in furtherance of the conspiracy which are binding on all. Continental Baking Co. v. United States, 281 2d 137 (6th Cir. 1960) ; Amer;can Tobacco Co. v. United States 147 F. 2d 93 , 118 (6th Cir. 1944), aff'd 328 U.S. 781 (1946). Here, Lapi attended the May 18, 1955, meeting of the Society of Pathologists at which the commercial bank was specifically discussed, the informal reciprocity system among the local hospitals was established, and plans to reinstate negotiations in connection with a central bank were made. '" He also attended the September , 1955, meeting of the Society of Pathologists and the September 28, 1955, meeting of the Administrative Council of the Hospital Association, at which he presented a plan for a central bank.'" Although the record does not reveal whether he attended the October 26 meeting of the Administrative Council of the Hospital Association at which the question of the hospitals' position toward the commercial bank was discussed, St. Mary s Hospital the hospital which he served as pathologist, was represented.''" In addition, the opinion that the commercial bank should be excluded from participation in the Clearing House was not an isolated opinion held by Lapi and was not of short duration. According to Dr. Van Pernis' testimony, Dr. Lapi, at a meeting of the board of directors of the Clearing House, held on February 20, 1956, moved that legal counsel be obtained to interpret the Clearing House constitution and by-laws in regard to the "Kansas City and Beverly B100d Bank problems." m In clarifying what he meant, Van Pernis testified:

As you realize by now we. had been in thi dilemma for a good many months because of the variations in opinions and some had violent opinions, to bar the Mid-West Blood Bank ITom pa?ticipating at all in the clearing house. The motion was made that we get legal advice to properly interpret our constitu- ''' As previously noted, the Society of Pathologists had stated Ii preference at some time prior to the opening uf the commercial bank in May of 1955 for using replacement donors rather than obtaining blood from commercial banks, but had indicated that commercial blood "should be used in emergencies." See ex 598. 147 See in. 112 supra,.

141Tr. 8079; ex 174.

149 CX 175.

Tr. 417-:18.

Opinion 70 F. T.

tion and by-laws to be sure that we were doing the proper thing.'M (Emphasis supplied.

Accordingly, although Lapi testified that he was not representing and could not bind any offciany constituted group, such as the Medical Society, the Society of Pathologists, or the Hospital Assocation in his position as Missouri's representative to the Clearing House " we think there is suffcient basis for concluding that he was generany representing an of those closely associated with established blood banking in Kansas City. In addition, for the reasons stated above, we think that Lapi's participation in the attempt to exclude the commercial bank from the Clearing House may be considered to be an act in furtherance of the conspiracy to hinder the commercial bank's development and is, therefore binding on an who took part in the conspiracy. At the November 23, 1955, meeting of the Administrative Council of the Hospital Association, Reid, the chairman of the committee, stated that the Community Studies Report dealing with the blood problems of Kansas City had been completed and would soon be released to the hospitals.'" On November 28 , 1955 the board of directors of Community Blood Bank, the corporate shen which later became the operating community bank, appointed a committee to cooperate with the hospitals in studying the report.'" This report '" which was eagerly anticipated and carefully studied by an groups interested in the formation of the central bank, listed the advantages and disadvantages of several proposed blood bank plans, including the informal reciprocity system then being used by the hospital blood banks. The report stated that one of the major disadvantages of this plan was the fact that a vigorous commercial bank could offer serious competition to individual hospital banks by organizing blood donor clubs and other insurance plans.'' In discussing the possibility of forming a central bank without Red Cross support, the report indicated that some, but apparently less, competition from commercial banks could be expected. "" The report concluded that a central bank supported by an interested groups-the physicians, the hospitals and the Red Cross-should be established. This report was the focal point for an subsequent discussions concerning the formamTr. 419.

15Tr.mcx 1095,176. 7537-38.

ex 378.

CX 244.

CX 244 , p. 31.

16TCX 244 , p. 38.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 929 728 Opinion tion of a central bank and, according to Dr. Carroll Hungate, it ultimately caused the "crystallzation of opinion among various " 15R groups.

Bishop DeLapp, president of the Hospital Association, appointed a committee, referred to as the Spelman Committee, to study the above report and to report to the Hospital Association its conclusions.""" The committee met on December 15 and December 29, 1955. Doctors Buhler and Firminger, not committee members, were invited to attend the first meeting. Dr. Buhler proposed that a central bank be established, but that its function be essentially supplemental to that of the individual hospital blood banks. He felt that the pathologists and hospital administrators should work out their own program rather than inviting outside participation. Dr. Firminger presented an alternative proposal for a federation of existing hospital banks with a central clearing house or registry, but without central drawing and processing facilities. "" At the second meeting, Dr. Coffey, one of the committee members, suggested that there should be an evaluation of how much risk or harm, if any, would come from using a commercial bank.' Mr. Schuler indicated that the commercial bank should be given some consideration. DeLapp stated that he was opposed to the idea of a commercial bank and Spelman indicated that blood banking should not be a commercial operation. After further discussion, the committee approved the principle of the establishment of a federation of existing hospital banks through a central registry, rather than the establishment of central drawing and processing facilities as recommended by the Community Studies Report. At the annual meeting of the Hospital Association on Tr. 4533-34. Dr. Hungate s testimony is as follows: A. There was a divergence of opinion among pathologists. Some wanted a community type blood bank, some did not want to give up their blood banks at the hospital. Then there was this discussion of 8 federation of hospital blood banks with the authority for operation vested in II separate corporation. Q. But with hospital blood banks reUiining their full operation from donor to transfusion A. Dh, Yes, that's right.

Q. In the two-year period that you were president (of the Medical SocietyJ, were those differences resolved to the point where a single organization could be formed and go ahead? A. Yes, sir, but this crystallization of opinion among various grou:ps, and I am not s:peaking only of the medical :profession, I am speaking of :peo:p!e of Kansas City, I think that crystallzed only after we had requested Community Studies, nationally recognized ethical hig-hly regarded research "org-anization to make a study of the blood needs, both historical and present, in Kansas City, and tu come UP with a recommendation to the medical prufession and the public and the hospitals on just what type of blood bank should have in Kansas City.

" The committee was com:posed of three hospital trustees, three :physicians, and three hospital administrators. Its chairman was Dr. Spelman. 1'1'. 8498-8501; ex 177, 178. 160CX 177.

161 CX 178, Opinion 70 F. T.

January 4, 1956, Spelman s motion that the federation plan be approved in principle, with details to be worked out later, was carried unanimously. 162 The refusals of the hospitals to accept blood supplied by the commercial bank for replacement purposes was preventing the commercial bank from establishing donor clubs during late 1955 and early 1956. During this period, a Mr. Wilbur Harrison, chairman of the blood bank committee of the Central Labor Union in Kansas City, Missouri, considered the possibiliy of organizing a group blood banking service utiizing the facilities of the commercial bank. The inability of the commercial bank to guarantee that its blood would be accepted by local hospitals caused the labor union to abandon the project. Mr. Gilbert C. Murphy of the Council of Churches of Greater Kansas City prepared a memorandum discussing the possibility of forming a blood supply program with the commercial bank, but noted that" (tJhe basic hurdle seems to be the blood committee of the Jackson County Medical Society, which is made up largely of pathologists now employed in the local hospitals." m Pursuant to a group contract between Tabernacle Baptist Church and the commercial bank, the secretary of the church attempted to discharge the debt of a member at General Hospital by informing the hospital that the blood replacement for this patient was on deposit at the commercial bank. The blood was not requested. '" On January 9 , 1956, Kenneth Monroe, the secretary-treasurer of the Kansas City, Missouri, Post Offce Employees Hospital Association, wrote a letter to fourteen hospitals informing them that his group had been approached by the commercial bank with reference to a blood supply program. The letter specifically asJ(ed whether the hospitals would accept blood from the commercial bank as replacement blood. "" :Vlonroe testified that the letter was necessary because he had been informed that some hospitals would not accept blood from the commercial bank.'" Monroe s letter came to the immediate attention of Susan Jenkins, the executive director of the Hospital Association.'"" On the same date, she prepared a letter on Hospital Association stationery which she 2 ex 179(E).

16! Tr. 237-24l.

ex 293.

Ie" Tr. 2122-2127.

le6CX 181, 195: Tr. 726- , 743.

lMTr. 728-29.

lob Tr. 691, 736-9.

COMMUNITY BLOOD BANK, KANSAS CITY AREA , INC., ET AL. 931 728 Opinion sent by special delivery to all Kansas City hospitals.'" The letter addressed to Administrators, Member Hospitals, and The Community Blood Bank Committee, and marked "urgent" contained the following paragraph:

Bishop DeLapp, president of the Association, and Mr. Reid, chairman of the Administrative Council 'Urge you not to reply to this letter until we can get out to you a suggested statement that wil contain assurance that the Area Hospital Association is to announce very soon its own program for meeting the blood needs of the community. In the meantime, I have already talked with a representative of the postal employees' group and wil be talking with Mr. Monroe when I can reach him later today, We believe the group wil be very cooperative about waiting for a statement from the Hospital Association if it is not unduly delayed.

Jenkins also talked to Monroe by telephone concerning the Jetter and told him that the Hospital Association was having a meeting within the near future with reference to establishing a blood program. '" On January 18, 1956, Jenkins sent a follow-up letter to the hospitals, informing them that discussions were continuing on the establishment of a community bank and that each hospital should determine its own response to Monroe s letter after consultation with legal counsel.'" Monroe received replies from only three hospitals, none of which gave a definitive answer on whether commercial blood would be accepted as replacement bloody" Bruce Dickenson, administrator of Bethany Hospital, indicated that Bethany would continue to operate its own blood bank and would accept commercial blood only in emergencies. Wiliam Schaffrath, administrator of Menorah Medical Center and A. Neal Deaver, administrator of The Independence Sanitarium and Hospital, encouraged Monroe to contact Susan Jenkins before entering into any agreement with the commercial bank. As a result, the commercial bank' s attempt to establish a donor club with Monroe s group was effectively thwarted. Although Miss Jenkins testified that she was not instructing the hospitals in her offcial capacity to take particular action the fact that both letters were sent out in the name of the Hospital Association and its offcers to all of its members and concerned See ex 182.

110 Ibid. As previously noted, MoJgl'en, admiY1istl'ator of the Unh'ersity of Kansas Medical Center, had stated at the October 26 , 19.55, meeting of the Administrative Council of the Hospital Association. where the group was considering what action was to be taken with respect to the commercial bank. that the members of the group should indicate that they are making available a wider community effort. " See ex 190. 1111'1', 737.

mCX 1&3.

11 1'1'. 732; ex 196-198.

111'1'. 693-94.

. ., p..

Opinion 70 F. T.

a matter which had been discussed at scheduled meetings compels the conclusion that the letters constituted offcial acts of the Association and were intended to be so regarded by the recipients. In any event, Miss Jenkins had attended the October 26, 1955 meeting of the Administrative Council of the Hospital Association when the question of the hospitals' stand with respect to the commercial bank was discussed and at which it was suggested that an excuse such as the one here offered be used by the hospitals. no As a result, we think that her letters to the hospitals, obviously designed to provide the hospitals with a plausible excuse for refraining from answering Monroe s questions, can be considered to be acts in furtherance of the conspiracy binding on aJl conspirators. Continental Baking Co. v. United States, supra; American Tobacco Co. v. United States, supra. As previously noted, the Hospital Association at its annual meeting on January 4, 1956, had endorsed the federation plan which provided for the retention of individual hospital blood banks united by a central "clearing house, " as the preferable plan for a communtiy blood bank. The Community Studies Report had indicated that a plan of this nature subjected hospital blood banks to severe competition from commercial blood banks through the organization of commercial blood donor clubs. m On January 28 , 1956, shortly after the Jenkins-Monroe incident, which was the commercial bank's strongest bid to establish a large donor club, Miss Jenkins called an informal meeting of the hospital administrators and pathologists.''' In an introductory statement, m she reviewed past negotiations, mentioned the fact that the Federal Trade Commission attorney was investigating the situation, and echoed his statement that the complaints " " 179were in no sense tdvia1 nor promoted by one carping critic, Those present then weighed the advantages and disadvantages of the federation plan against those of the central bank plan, which would entail replacement of the individual hospital banks by a large central bank. At the conclusion of the discussion, sixteen of See fn. 170, supra.

178 Two of the four dis!idvantages of the " Hospital Integration Plan " listed by the Community Studies Report are as follows;

(1) The development and UBe of i!1sul"ance schemes, such as bloorl donor groups, apIJear to be diffcl1lt. if not impussible, under this a1Tan ement. (2) A vigorous commercial blood bank could offer serious competition to individ\.Hll hospital blood banks by organhing blood-donor and other insurance.type groups. (CX 244 31.) mRX 162.

U8RX 163.

11gRX lo3(H).

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 933 728 Opinion the eighteen who voted favored the formation of a central bank.' By March 12, 1956, alj interested groups in Kansas City had concurred in this conclusion.' While there is nothing in the record to indicate that the Jenkins-Monroe incident was discussed at any of the meetings between January 28 and March 12, it is significant that the Hospital Association completely reversed the stand it had taken prior to this incident favoring the federation plan, a plan which the Community Studies Report characterized as subject to competition from commercial banks' donor clubs, and approved instead the central bank plan, a plan which the Community Studies Report described as less subject to such competition. Subsequent meetings . of the Hospital Association, its Administrative Council, and the corporate meetings of the Medical Society s nonoperating Community Blood Bank are devoid of specific reference to the commercial banks.'" Although there was stil some disagreement over details, negotiations continued on a regular basis. In August of 1957, before alj areas of disagreement had been eliminated, Bass, the business manager of the commercial bank, and his attorney, a Mr. Howell, paid a visit to St. Joseph' Hospital and conferred with Doctors Buhler, Kerr, and Mantz, aU of whom are pathologists.' Bass stated that his bank had not been accepted by the medical community, perhaps because of its medical direction, and inquired what could be done to make it acceptable." He also asked whether one of these pathologists would consider acting as medical director. Buhler replied that he would not act as director of a commercial bank which purchased blood from donors and resold it at a profit. However he indicated that if Bass established a nonprofit blood bank which relied on voluntary donors, he would consider acting as medical directory' According to Buhler, such a bank would have to derive its operating income from processing fees. While Buhler did not guarantee that the other hospitals would accept blood from such a bank, he advised Bass to discuss the matter with other pathologists. Howell testified that the three pathologists indicated that 180RX 162(E).

1 Initial Decision, Findings of Fact, par. 130. IS: See Initial Decision, Findings of Fact, pars. 131-150 for II detailed discussion of these meetings.

'" Tr. 870-74, 8018-23; RX 6.

,,;, Buhler s testimony on this point is as follows; Yes, he indicated that this \\ould not be diffcult to do, that he felt that he could establish a llot-fol' -profit c01'JOl"ntion, and I told him that if. hc did establish such a corporation with the intent that he would use voluntary donfltions, would di card Bnd abandon the idea of buying and sellinll human Jiving tissue for profit, that I would consider being the medical direcwr. " (Tr. 8020.

Opinion 70 F. T.

there was nothing wrong with the blood from the commercial bank"" Later in the fan of 1957, Bass approached Dr. Bridgens at Independence Sanitarium and asked whether he would patronize such a nonprofit blood bank Bridgens stated that he would give it " 1S!1 seriousconsidel'ation.

During late 1957 and early 1958 , the groups working on the establishment of Community concluded their negotiations. The result was a central bank designed to take over all drawing and processing operations then performed by the hospital blood banks. The bank's corporate membership of thirty-nine was comprised of thirteen members of the Medical Society, thirteen representatives of the Hospital Association, and thirteen individuals representing the general public. Each of these groups rejected four individuals to serve on the twelve-man board of directors. A technical advisory committee, composed of all of the pathologists who headed hospital blood banks, exercised complete control over the technical operation of the bank'" There is considerable indication that had the pathologists not been granted such authority, they would not have extended approval to the new bank."" Both Community and a proposed nonprofit blood bank to be operated by Mr. and Mrs. Bass, using the name Community Blood Bank and Donor Service, sought membership in the regional Clearing House during March of 1958. The similarity in names caused the president of (he Clearing House to request Dr. Lapi the IVfissoul'i representative, for clarification and a recommendation. '"" Although membership in the American Association of Blood Banks was not a prerequisite to membership in the Clearing House, '"0 Dr. Lapi replied as follows: The que iion of '.vhether Mrs. Bass ' application should be approved or not seems 10 me to depend upon whether or not her bank qualifies fcr membership in the A. RE.

It is my opinion that this proposed new nonprofit blood bank operated by Mi"s. Bass is nothing mOTC than a dummy corporation to confuse the public just as you were by the similar names. It '\vas probably designed to rate prior listing in the telephone directory and by use of the word "Community " to divert unsuspecting donors from the other bank. The simultaneous appearance of hvo community blood banks was probably not fortuitous. 5 1'r. 916-18.

IIiTr. 7703-04.

IS' See ex 383, 384 . 397: RX 190, Hill 1!;'1r. 871S-H).

RX 326-327.

Mill-\Vest. the first commercial blood bank . had been granted membership in the Clearing- House, even though-h not admitted to institutional mewbcrship in A. B. See also 1'1". 1081: RX 326.

COMMUNITY BLOOD BANK, KA,,SAS CITY AREA, INC., ET AL. 935 728 Opinion I do not hesitate to recommend that the Community Blood Bank and Donor Service, Inc. of 11J 3 Grand A venue be refused membership in the clearing house until they can show membership in the B.B. Shortly after the Community Blood Bank began operation on April 3 , 1958, the majority of the large local hospitals entered into blood supply contracts with it and thereupon ceased operating their own blood banks. m The contract does not purport to require that the participating hospitals obtain an of the blood needed for transfusions from Community,1 but the contracting hospitals consider it to be their exclusive source and apparently make no effort to utilize other sources. '" As win subsequently be demonstrated, the interpretation given to this contract by Community and the hospitals, and Community s interpretation of the rules of the ~orth Central Blood Bank Clearing House have been used eJ1"ectively as excuses to reject blood supplied by the commercial banks.

Pursuant to the hospitals' contract with Community, title to blood ordered by the hospitals remains in Community until such time as the blood is used in a transfusion. At that point, the hospital becomes liable for a replacement fee of $25 and bins the patient for this amount. The patient is also charged two processing fees-one of $9 which is paid to Community and another which varies in amount and compensates the hospital for the final cross-matching and any other tests performed. The responsibility fee of 325 is designed to encourage the patient to replace blood and thus can be eliminated. Community s $9 processing fee can also be eliminated by the donation of a second pint of blood. However, the hospital's contract with Community states that the only blood which:h can be used as replacement blood for the purpose of rlischarging either the responsibility fee or the processing fee is THe;blood drawn under Community supervision. Thus, the patient can eliminate these charges only by donations at Community or at one of its approved dla\ving stations. Credit may also be obtained if the patient is a member of one of Community s own blood savings or blood insurance clubs.

Patients who have entered into blood replacement contJ'acts mRX 328.

10, Initial Decision, Findings of Fact, par. 1 (f). mcX 233. MCXSee 233(b).Initial Decision, Findings of Fact, par. 158. Opinion 70 F. T.

with the commercial banks are not permitted to satisfy Communis responsibility fee or its processing fee by having one of the commercial banks supply pints of blood to the hospital which has biled them for the fee. When the commercial banks attempt to make deliveries of blood to the local hospitals in discharge of a patient' s fees, the hospitals usually invoke their contract with Community, stating that its terms require replacement at Community. Community consistently refuses to accept direct blood deliveries from the commercial banks in discharge of its responsibility fees and, in so refusing, takes the position that the commercial banks must send credits through the Clearing House in Com- 19Bmunity s favor.

The purpose of the Clearing House is to facilitate the transfer of blood and credits among member banks located in different cities. It is contemplated that banks needing blood will order it through the Clearing House machinery and those forwarding credits to other banks will do so in the same manner. Banks are never indebted to each other, but instead are indebted to the Clearing House. At the end of each month, the Clearing House determines each bank's balance and requires settlement. Banks with credits are usually permitted to receive at their election either direct shipments of blood from banks indebted to the Clearing House or payment for the blood by the Clearing House. Banks indebted to the Clearing House are also permitted, whenever possible, to elect to sette their accounts either by a direct shipment of blood to a creditor bank or by payment to the Clearing House. '" To keep this machinery in operation, the rules provide that all transactions sha1J be channeled through the Clearing House.'"" Although member banks are discouraged from dealing directly with each other, those which have mutual exchange agreements antedating their membership in the Clearing House may transfer blood and blood credits directly instead of utilizing the Clearing House machinery. '"

Community did not enter into a direct exchange agreement with either commercial bank prior to joining the Clearing House,'" and, as a result, a literal application of the rules required that any exchanges of blood or credits between them be 19C Initial Decision, Findings of Fact, pars. 15!J-16Q. mTr. 5760; HX 88.

'""CX 529; RX 60 , 61.

Tr. 433; RX 85.

oo Prior to its opening-, Community signed mutual exchange agreements with the Red Cross and accepts direct deJjverics of blood from the Red Cruss. ('1'1'. 2573 , 2578, 2643, 2734-35. COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 937 728 Opinion channeled through the Clearing House. An employee of the commercial banks testified that they were reluctant to send credits through the Clearing House, because they usually were requested to make a monetary settlement rather than to supply blood in settlement of their account. For example, a patient having a blood assurance or a blood provider contract with one of the commercial banks would receive a bil from the hospital of $25 for Community s responsibility fee and $9 for its processing fee. If friends or relatives of the patient donated two pints of blood at one of Community s drawing stations, both charges were removed. However, when the patient requested one of the commercial banks to supply two pints to Community to remove the charges, Community would not accept diJ'ect delivery. Instead, it insisted that credits be transferred through the Clearing House in its favor. At the end of the month, the commercial banks were not asked to supply blood to Community to settle the indebtedness, but were requested to pay the required Clearing House fees $14 plus a 35-cent service charge for each pint. When it sent two credits in oJ'der to discharge the patient' s entire obligation to Community, it was required to pay two $14 fees and two 35-cent fees total of $28.70. Since the commercial banks' contracts ""-a with the patients provided that blood would be supplied when requested, the commercial banks were effectively prevented from performing their function as suppliers of blood. If all banks in the Clearing House system were strictly required to adheJ'e to its rules, Community s refusals to accept direct shipments from the local commercial banks after it joined the Clearing House might, as respondents argue, be the result of this rule rather than indicative of the existence of an agreement to hamper the commercial banks' development. However, the record shows a number of instances of direct transfers of blood between member banks which, under a literal interpretation of the rules, would not have been permitted. There was testimony by the former executive secretary of the North Central District Blood Bank Clearing House that a number of blood banks "by-passed" the Clearing House in their dealings with each other even though they had not entered into mutual exchange agreements prior to becoming members."'" On several occasions, Community itself ordered blood directly from other' blood banks even though it had 20) Tr. 3241-47, 3450-51 , 3975-76, 6199-6204 , 6506. 01 Tr. 3214-15.

Opinion 70 F. T.

no prior mutual exchange agreements. Moreover, the Clearing House, through its executive secretary, requested the commercial banks not to use the Clearing House machinery when shipping large orders to the Mayo Clinic, since the commercial banks always desired payment rather than a return shipment of blood in satisfaction of Mayo s indebtedness.''' Despite these general deviations from the rule that all transactions between member banks should be channeled through the Clearing House unless the banks had entered into mutual exchange agreements prior to becoming members, Community strictly construed this rule against the instant commercial blood banks on all occasions and consistently refused to accept direct shipments from them. Community s insistence that all transactions involving the commercial banks be sent through the Clearing House machinery and its refusals to accept direct deliveries from them continued from April of 1958 through the time of the hearings in this case. This policy has effectively prevented the commercial banks from supplying the major hospitals in Kansas City, most of which have contracts with Community and are members of the Hospital Association, and has hampered efforts to form donor clubs and sell blood assurance or blood provider contracts.

Respondents, while recognizing the validity of the legal principle that a combination in restraint of trade need not be established by direct proof, take the position that the evidence of record establishes at most parallel action by each respondent explainable by reference to individual beliefs and personal preferences. Some of the respondent pathologists and hospital administrators testified that they possessed a general belief that the buyo. Initial Decision, :Findings of Fact, pars. 164-169. 00' Tr. 5792: ex 214: RX 23::-236.

00, The commercial banks have supplierl the Kansas City Veterans Administration Hospital and Ii few of the smaller hospitals located in and near Kansas City, most of which are not members of the Hospital Association or do not have contracts with Community. Tr. 904- 05, 55- , 5, ,jL In addition, \Vorld Blood Bank. the second of the two commercial blood banh constituted a Source of supply for all transfusion blood required by the University of Kansas Medica! Centc!' , except that provided by the Red Cro s or by other donor clubs, from October I 1958, until the expiration of the contract on Octuber I , HHi2. Between October 1, 1958, and June , 1863, \Vorlcl supplieri approximately 21.600 pints of blood to the Medical Center. On October , 1%3, the Ger.te" entered intu a cuntl'aet with Community, but has continued to receive some of its needed supply of blood frum \Vorla. Although offcials of the Medical Center have expressed no dissatisfaction with the quality of the blood supplied by World, the Medical Center s orders from \\' orld have declined since the contract with Community was consummated. See Tr. 3978- , 4199-4201; CX 458; RX 46, 47. COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 939 728 Opinion ing and selling of human blood was morally wrong, 01' that they were opposed to the national trend toward commercialization of the blood banking field. Others felt that increased commerciali. zation would reduce the amount or quality of blood available, since individuals financially able to do so would tend to purchase insurance policies which would pay responsibility fees, 01' purchase blood from commercial banks rather than donating their own blood or requesting friends to donate.

Some stated that blood produced by many commercial banks is of inferior quality. This belief is predicated upon the fact that commercial blood banks tend to pay their donors as litte as possible in order to maximize their profits on ultimate resale of the blood. Such small payments attract only low income don01s, some of whom may be alcoholics or drug addicts. There was extensive testimony that such individuals are more likely to be carriers of serum hepatitis than are voluntary donors and, therefure, that voluntary donors were preferred. 06 Since there is no accurate, scientific test which will detect serum hepatitis in blood, reliance must be placed on the questions asked when the donors are being screened. Respundents take the position that such paid donors wil falsify their answers in order to insure that their blood will be accepted and payment wil be forthcoming. Thus, they assert that blood from commercial banks is far more likely to carry serum hepatitis than is blood from a nonprofit bank which does not pay its donors.

Respondents also assert that their individual contacts with the instant commercial banks and their employees were unpleasant and that their refusals to deal are attributable to these incidents. Several pathologists testified that the commercial bank' s early newspaper advertisements and circulars implied that the local hospitals were charging tuu much for blood, were unduly profiting from such charges, and that there was significant wastage of uutdated blood. These respondents stated that such facts were not true and that their resulting irritation over these advertisements was the basis for their subsequent rejections of the commercial bank' s blood.'" Several testified that they were acquainted with the first medical director of the commercial bank and were aware that he was not a pathologist and had no special training in the blood banking field. '" Thus, respondents argue that there were Q6 Tr. 3719-20, 3798- 99, 4122-2:1, 7496 , 7907 , 7937; RX 319. D, Tr. 721",-18, 7251- , 7316- , 7351- , 7690-94, 7882-84, 8033- 35, 8379. 20S Tr. 7216- , 7254- , 7309- 10, 7689 , 7768. 7882-83. Opinion 70 F. T.

numerous reasons for individual opposition to commercial banks generally and to the commercial banks involved in this case in particular, and that these reasons negate any inference of conspiracy.

At the outset, it should be noted that commercial blood banks are used as a source of supply for nonprofit banks '"" and that not all commercial banks are considered to be producers of blood of inferior quality. "" Moreover, there is no indication that the respondents were aware that the instant commercial banks were failing to screen their donors properly or that the personnel who performed this function or the processing were not qualified. Only a few pathologists inspected the first commercial bank prior to the meetings in the fall of 1955 which constitute the core of complaint counsel's evidence. Doctors Buhler and Kerr inspected the facilities in Mayor June of 1955. '" At a later date, Dr. Cohen visited the bank"" Dr. Spelman embarked upon an inspection tour sometime during 1955, but did not actual1ly enter the building because he did not approve of the appearance of persons whom he assumed to be prospective donors waiting outside."" There is no indication that these or later visits resulted in reports that improper procedures were being utilized or unqualified personnel were being employed. Although respondents offered testimony that the commercial banks were not, on some occasions, as careful in their procedures as might be desired, much of this testimony was contradicted by witnesses called by complaint counsel. In any event, there was absolutely no showing that any of these alleged instances were called to the attention of any of the respondents. Thus, the statements of opposition to the commercial banks and the steps taken to limit their growth were not based upon specific knowledge that the personnel operating the banks on a daily basis were not qualified or that improper procedures in screening prospective donors or in pmcessing blood were being used. In any event, the evidence offered by complaint counsel was not limited to instances of nonuse of blood produced or supplied by the commercial banks. Had it been so Jimited, respondents' asser- ()g Tr. 1105-06 , 3949-50.

lD In rE'RpOn e to a letter from Dr. Lapi Dr. Coye C. :'la.on, pathologist at Uihlein Memorial Laboratory in Chicago, stated;

Rcbtive to l'r vate blood banks. I can unly say that they are much like the private€ lehn5ician. I )Jl'CSlinl! that there are gooti and bad ones, " RX 318(b) ; see also '1,' , 1105-06. 11 'II'. 7993 et serl.

l: 'Ir. 3884- 86.

13 'II'. 4915.

"'See Initial Decision, Findings of Fact, par. 208(d), (e). (f), (g). COMMUNITY BLOOD BANK, KANSAR CITY ARRA, rng. , ET .I\L, 941 728 Opinion tions that their individual belief, accounted for their nonuse of such blood might be more convincing. However, complaint counsel's evidence showed that prior to the opening of the first commercial bank, the Society of Pathologists had taken a position favoring voluntary donors" but had agreed to use commercial blood in emergencies. At the May 1955 meeting of the Society of Pathologists, the commercial bank was discussed, the improved reciprocity system among the hospitals was initiated, and attempts to establish a central bank were intensified. The commercial banks were also discussed at subsequent meetings of the Hospital Association s Administrative Council. At the October 26, 1955, meeting of this group, the question of adopting a position with respect to the commercial bank was discussed. Dr. Lapi addressed the November 18, 1955, meeting of the North Central District Blood Bank Clearing House and is quoted as saying that at some earlier date the hospitals had "finally got together" and indicated that they would buy the commercial bank's blood "only in an emergency. " IIis efforts as Missouri representative to this meeting to persuade the Clearing House to revoke the first commercial bank' s membership in 1955 and his later recommendation that a proposed nonprofit affliate of the commercial bank be denied membership constitute positive attempts to hinder the commercial banks' development. The consistent reaction of the Hospital Association through its offcials to efforts of the commercial banks to organize large donor clubs aloe similar actions taken to hinder the development of these banks. Moreover, the Community Studies Report indicated that a federation of hospital blood banks would be extremely vulnerable to competition from commercial banks but that a central community bank could expect less competition. After this report was studied by many of the respondents, the central bank plan was adopted.

In addition to the nonuse of commercial blood, therefore, the evidence showed discussions of the first commercial bank at meetings attended by many of the respondents and subsequent affrmative actions which are consistent with the conclusion that respondents knowingly joined in a course of action which had as its inevitable result the hindrance of the commercial banks' development. Where there is evidence tending to show an illegal combination or agreement, the fact that individual acts committed in furtherance of the combination could be explained by reference to valid business and personal reasons is not excusatory of liability and does not erase the findings of combination. Standard Oil Co. Opinion 70 F.

of Crdifm'nin v. Mom' 251 F. 2d 188 (9th Cir. 1957), ceTt. denied 356 U.S. 975 (I958). We do not think that the various reasons given by the individual respondents in this case for preferring noncommercial blood instead of blood supplied by commercial blood banks, or for being opposed to commercial blood banks in general or the instant ones in particular are suffcient to destroy the inference of j oint action arising from the aforementioned discussions of the commercial banks and the affrmative efforts to limit their growth. The fact that some of these efforts might have been lawful if pursued outside the context of a combination or conspiracy does not prevent them from being counted as integral steps in the conspiracy:y. See Mille rend Ice Crenm Cnn Institute Federal Trade Commission 152 F. 2d 478 (7th Cir. 1946). ;VIoreover, we think that the individual beliefs and preferences of the various respondents, rather than negating the inference of joint action, provide a motive therefor, and we so hold. After examining an of the evidence of record, the Commission is convinced that the only logical conclusion which can be drawn from the entire series of events, beginning shortly after the first commercial bank began operation and continuing through the hearings, is the conclusion that the respondents knowingly joined in efforts to inhibit the developme'lt of the named commercial blood banks. The Commission has carefully considered respondents' professed reasons for engaging in the combination and has assessed the effects of the combination upon the instant commercial blood banks. The combination has obviously had the effect of imposing undue restrictions upon the operation of properly licensed commercial ventures. Accordingly, the Commission concludes that the evidence of record as a whole establishes the combination charged in the complaint and that this combination constitutes an unreasonable l'estmint of trade. Respondents argue that this proceeding is not in the public interest. Although the combination charged in the complaint affected only two commercial blood banks under common ownership, the dispute cannot be considered to be "private, Cf. Federal Trade Commissiun v, Klesnel' 280 U. S, 19 (1929). As the evidence demonstrated, the acts and practices or respondents were executed with scant knowledge of the operating procedures of these banks. This fact compels the conclusion that the respon- \! COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 943 728 Opinion dents would have reacted similarly with respect to any cohlmercial bank which might have attempted to supply the Kansas City hospitals during the relevant period of time. m Nor is the Commission, by issuing an order in this matter expressly approving 01' passing upon the technical proficiency or competence of either commercial blood banks in general or those affected by the instant combination. All blood banks supplying blood "in commerce" are subject to regulation by the National Institutes of Health and must meet on a continuing basis the standards- promulgated by this administrative body."'; Moreover, blood banks which satisfy their Clearing House indebtedness with shipments of blood are inspected on a regular basis by the American Association of Blood Banks, an organization not friendly to commercial banks."" There is no indication that the commercial banks in the IJresent case were found deficient by any inspecting organi- 21B zation.

If the current standards of these inspecting organizations are not suffcient, or if additional regulation is required, there are various administrative and legislative remedies which may be pursued. A group of private citizens, no matter how public spirited or altruistically motivated, may not relegate to themselves the essentially governmental function of determining the standards which will be applied in the interstate operation of blood banks and band together to inhibit the development of licensed commercial banks which meet governmental but not their own self-imposed standards. Nor may they take such action because , This conclusion is sUPIJortc(l by the exp('rienc of Municipal Blood Bank, a wmmercial blood bank owned by two registered lJharrilacists 2nd not affliated in any manner with Mid- cst 01" \' orld. This bank. which heg-an business in March of tD60, did not attem11t to deliver blood directly to Community or Kansas City hospitals having' contracts with Community and thus did not compete with Community. Instead, it concentrated on serving small, rural hospitals. The Uni,' ersity of Kansas Medical Center and the Veterans Adminbtration Hospital wee also customers. The hosl1itals having contract!; with Community indicated that if Community could not sUIJply them, they ,,'ould order from ;VIunicij)ljl. Shortly after it beg;cn business, it requestetl a meeting with Community to discuss blood stflmlards, but this request was rej"cted on ,July 25, 1960, by Community s board of directors. Municipal went out of business in MRrch of 1962 because of an inability to collect accounts 01' to get blood replacement from the rural hospitals. See Tr. 838,,-8408; ex 432(c).

16 Tr. 493-94, 1178-79; ex 312, 313.

"'1'1'. 494 3222- 484.

218 1tespondents offered evidence of various imTllopel' procedure!; employed by the commercial blood banks. See Initial Decisioll, Findings of FRct, pal" 208. However, there is no indication that these practices, if tnle, continued over long- periods or caused disquali'icatior. in any inspection. "1101'eove1", \\"1' note that Community itself did not always maintain the highest standards. The record shows that in Kovembcl' of 1059, one of Community s drawing- stations was temporarily closed after an inspection by tbe ::ational l stitutes of Health because of failure to meet its J'eqlli!'ements. Tr. 2582-83, Ac_co!'ilingly, WI' do not thinl, that" showing ihat the commercifd banks were not always as careful! in their procedures as might he desirell negates the conclusion that this proceeding is in the public interest. Opinion 70 F.

they hold the opinion that the buying and sellng of human blood is morally wrong. Cf. Associated Press v. United States 326 U. 1 (1945) ; Fashion Originators' Guild of America, Inc. v. Federal Trade Commission 312 U. S. 457 (1941); Northern California Pharmaceutical Ass v. United States 306 F. 2d 379 (9th Cir. cert. denied 371 U. S. 862 (1962); American MetlicalAss United States 130 F. 2d 233 (D. C. Cir. 1942), aff' 317 D.S. 519 (1943); United States v. Utah Pharmaceutical Ass 201 F. Supp. 29 (D. Utah), appeal dismissed 306 F. 2d 493 (10th Cir. 1962), aff' 371 U.S. 24 (1962). While the Commission applauds public-sponsored projects, such as Community, and encourages public participation in such projects, it cannot ignore a combination having the effect of limiting the growth of legitimate private competitors to such organizations. As long as commercial blood banks are authorized by law, they are entitled to protection from such a combination or conspiracy, whether inspired by a good faith, but overzealous, effort to insure the success of a community-sponsored bank, a desire to impose more rigid standards upon blood banks than those now existing, or a belief that human blood should not be bought and sold. Accordingly, the Commission holds that the instant proceeding is in the public interest. Finally, respondents aver that they were denied due process of law in three respects. First, they argue that the hearing examiner was biased. The transcript as a whole demonstrates beyond cavil that the examiner conducted the trial of the case in a fair and impartial manner. As a result, respondents' assertions of bias and prejudice are without foundation. Secondly, respondents argue that they were improperly denied the opportunity to take certain pretrial depositions. The examiner s and the Commission s denials of respondents ' original application for subpoenas ad testificandum and duces tecum prior to the trial of the case were correctly denied at that time because unreasonably broad.'" During trial the examiner granted respondents' revised application for requested subpoenas duces tecum subject to certain conditions. Numerous documents were produced pursuant to the examiner ruling and respondents were accorded ample opportunity to cross-examine with respect to these documents. As a result, we do not think that respondents were denied due process of law in this respect. Thirdly, respondents argue that the examiner was in l" See Order Denying Appea!, May 3, 1963. 'o See Order Granting Application For Issuance of Sub:poenliB Duces Teeum on Conditions Set Forth, June 21, 1963.

.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 945 728 Opinion errr in excluding evidence of improper practices on the part of the commercial banks. Since there is no indication that this information was brought to the attention of any of the respondents before this proceeding was instituted, we agree with the examiner that it is not relevant on the question of the existence of a conspiracy. However, as requested by respondents, we have considered this evidence with respect to the question of public interest. Accordingly, we rej ect respondents ' assertions of denial of due process.

The order issued by the examiner includes the three hospitals named in the complaint in their individual capacities and as representative of the entire membership of the Hospital Association. However, the record does not show that all of the hospitals which are members of the Hospital Association committed acts in furtherance of the combination or otherwise participated in it. We think that those hospitals which declined to accept blood from the commercial banks after these banks had been discussed at meetings of the Society of Pathologists and the Hospital Association s Administrative Council may be considered to have joined the combination. In addition, Community s contracts with the various hospitals, consummated after Community opened in 1958 provide that blood accepted as replacement for blood originally supplied by Community must be drawn at Community or at one of its approved drawing stations. '" Hospitals having such agreements are thus prevented by the agreements from accepting blood from the commercial banks in discharge of the responsibility and processing fees included in the bil which the hospital sends the patient. We think that these contracts, which were drafted and signed during the heat of the combination, constitute acts in furtherance thereof, and that all hospitals having entered into such contracts may be considered to have joined the combination. :21 See ex 233.

:,,: In addition lo the hospitals listed in tht' complaint, those hospitals which are members of the Hospital Association am1 which either refused to accept blood from the commercial han or have cr tered into a blood supply cont,act with Community are as follows: Bethany HuspitaJ, Excelsior Springs Hospital, Independence Sanitarium and Hospital Lakeside Hospital, North Kansas City Memorial Hospital, Olathe Community Hospital, Osteopathic Hospital, Queen of the World Hospital, Research Hospital, Pleasant View Health and Vocational Institute, Inc. , Community Hospital Association, St. Joseph Hospital, St. Joseph's Hospital, St- Luke s Hospital of 1(ansas City, St. Mary s Hospital (Sisteg of St. Mary), Sweet S!n-ings Community Hospital, St. Margaret Hospital Trinity Ll1therall Hospital, ""heatley-Provident Hospital, Warrensburg Medical Center Inc., Kansas City General Hospital and Medical Center. (Initial Decision, Findings of Fact, par. 1 (f): Appendix A.

Opinion 70 F. T.

Hospitals which did not decline to accept blood from the commercial banks or which did not sign contracts with Community were not otherwise shown to have joined the combination and, therefore, wii not be subject to the terms of the order. The examiner s order also dismissed the complaint as it applied to a number of respondents in their individual capacities, but not in their representative capacities as offcers, directors, members, or employees of the corporate respondents. Since the order is applicable to these corporations and to their current offcers, directors, members, 01' employees, we do not think it necessary to name those individuals who held these positions just prior to the filing of the complaint and who would be included in the order only in their representative capacities. Those respondents held subject to the order in their individual capacities by the examiner were found to have engaged in the furtherance of a plan which had as its necessary consequence a restraint of trade. m Most of these respondents were pathologists or administrators at hospitals which refused to accept blood from the commercial banks. Others were key employees or leaders of Community or the Hospital Association, and in their particular capacities were active in establishing the policies foi1owed by these two corporations. All participated significantly as individuals in furthering the objectives of the common plan to impede the development of the commercial banks. As a result, we agree with the examiner that these respondents should be included in the order in their individual capacities.

Paragraphs 1 and 2 of the order prohibit all respondents from engaging in any concerted action which would hinder any blood bank licensed by the ~ational Institutes of Health from selling or furnishing blood to any hospital or which would hinder anyone from purchasing, acquiring, 01' using such blood. In our opinion these paragraphs require the cancei1ation of the contracts between Community and the hospitals '" since these contracts are generally construed by the hospitals as preventing them fl'm ordering blood from any source other than Community and from accepting blood from any other source in replacement for blood already used. The examiner indicated that the order is not intended to prevent any physician from exercising his individual medical judgment in determining whether a transfusion is necessary, and, if so, the source of the blood to be used in the transfusion. This limitation is, we think, entirely appropriate. 22, Initial Decision, Findings of Fact, par. 225. 22'CX 233.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 947 728 Opinion It has been established that in appropriate circumstances, the Commission may order individual respondents in a conspiracy case to cease doing particular acts which are lawful in themselves in order to prevent a continuation of the effects of a conspiracy. Federal T1'rde Commission v. National Lead Co. 352 U. S. 419 509-510 (1957). We see no necessity for requiring Community to cancel its agreements with the Clearing House. However, the evidence showed that one of the clearinghouse rules provided that al1 transactions between member banks should be channeled through the clearinghouse system unless the banks in question had mutual exchange agreements which antedated their membership in the Clearing House. The Commission is of the opinion that Community must not continue, as it has in the past, to construe this rule of the Clearing House strictly with respect to the instant commercial banks and to use this rule as an excuse to reject direct deliveries from these banks-that is, deliveries of blood which have not been sent through the clearinghouse system if Community accepts such direct deliveries from other blood banks which, as is the case with the instant commercial blood banks, are licensed by the National Institutes of Health. The fact that the Clearing House permits such direct transfers if the blood banks have mutual exchange agreements antedating their membership in the Clearing House is not, we thin!" controlling. As previously shown, Community, prior to joining the Clearing House in 1958, entered into such agreements with other' banks but did not do so with the commercial banks. Moreover, there was evidence that there was direct dealing between member blood banks when there were no such agreements, indicating that the presence or absence of such agreements is not of any real importance. As a result, we think that Community may not use the absence of a mutual exchange agreement with the commercial banks coupled with the clearinghouse rule as a reason for refusing to accept direct deliveries of blood from the commercial banks while simultaneously accepting such shipments from other federally licensed banks. Therefore, the order win specifically prohibit this practice, For the aforementioned reasons, the findings and conclusions of the examiner, as supplemented by the findings and conclusions of the Commission as expressed herein, are adopted as the decision of the Commission, An appropriate order will be issued. Commissioners Elman and Reilly dissented. Commissioner Elman has filed a dissenting opinion, and Commissioner Reilly has filed a dissenting statement.

Dissenting Opinion 70 F. T. Commissioner Jones concurred and has fied a concurring statement.

DISSENTING OPINION SEPTEMBER 28, 1966 By ELMAN Commission,,' In my opinion, dismissal of the complaint in this case is required on several independent grounds. First, the Commission has no jurisdiction, Community Blood Bank and the other corporate respondents al1 being bona fide nonprofit corporations. ' Second, the record does not establish a concerted refusal to deal. Third, in any event, this is not a commercial boycott case, and a per se test of ilegality is inapplicable. Respondents' conduct was entirely the product of professional judgment devoid of any economic or commercial basis or motive.

Section 5 (a) (6) of the Federal Trade Commission Act limits the jurisdiction of the Commission to "persons, partnerships, or corporations, " the last defined in Section 4 of the Act to include any company or association (except a partnership) "which is organized to carryon business for its own profit or that of its members." This language is very different from that found in other antitrust statutes, The Sherman Act, for example, applies by its terms to every "person " which Section 8 of the Act defines " include corporations and associations existing under 01' authorized by the laws of either the United States, the laws of any of the Territories, the laws of any State, 01' the laws of any foreign country." The same language was carried over in Section 1 of the Clayton Act to define the jurisdictional scope of that Act, enacted contemporaneously with the Federal Trade Commission Act. I do not see how we can refuse to give effect to the words "organized to carryon business for. . . profit" in Section 4. The words are plain and unambiguous. L'nless we may completely ignore express language used by Congress, it is inescapable to me that the jurisdiction of the Commission under the Federal Trade Commission Act with respect to corporations is different from 1 The corporate respondents, besides Community Blood Bank, are the Kansas City Area Hospital Association (the Association) and three of its member hospitals. community BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 949 728 Dissenting Opinion and significantly narrower than, the jurisdiction created by the Clayton and Sherman Acts, and does not include genuine nonprofit corporations.

In a number of cases, it is true, the Commission and the courts have refused to recognize any exemption from the Federal Trade Commission Act for nonprofit corporations employed by commercial enterprises as a medium or instrumentality to commit unfair practices. , Chamber' of Commerce v. 13 F. 2d 673 684 (8th Cir. 1926). But, so far as I know, the only such corporations have been trade associations. Trade associations, which bring together firms having common business concerns, have often played a central role in boycotts, price-fixing conspiracies, and other unlawful conduct involving concert of action. See Fashion Originators ' Guild v. 312 U.S. 457. In such a case piercing the nonprofit corporate veil and recognizing the trade association for what it is-a device by which individual profit-making concerns, for private gain, seek to restrain competitiondoes no violence to the Congressional design embodied in Sections 5 (a) (6) and 4 of the Federal Trade Commission Act; failure to pierce the veil, indeed, would elevate form over substance to an unreasonable degree, and lay the path to evasion of the Act wide open.

But it is one thing for the Commission, in order to prevent frustration of the objectives of the Federal Trade Commission Act by transparent evasive devices, to hold liable a nonprofit corporation found to be the tool of corporations organized for profit which these corporations manipulate for evij ends, and quite another to read Section 4 out of the Act altogether and hold, as the Commission does today, that its jurisdiction under the Act embraces all corporations, profit and nonprofit alike, whatever the circumstances. Such is clearly the import of the Commission holding. It is conceded that the corporate respondents are corporations validly organized and existing under nonprofit-corporation statutes; that they have been granted tax-exempt status by the Internal Revenue Service; and that they do not distribute any part of their funds to, and are not organized for the profit of, members or shareholders. Any profit realized in their operations As stated ill Nationa.l Harness Mfrs' Assn. v. 268 Fed. 705, 708-09 (6th Cir. 1920) : The Janguage of the Act affords no SUPPOI't for the thought that individuals. partnerships, and cOl'poratiOJlS can escape restrictions, under the Act, from combini!1g in the use of unfair methods of competition, merely because they employ as a medium therefor an uninwl'pol'atcd voluntary association, without capital and not itself engaged in commercial business, Dissenting Opinion 70 F. T. is devoted exclusively to the charitable purposes of the corporation. They have a paid stan, of course, but none of the offcers or directors is paid. There is no contention that any of the corporate respondents is a device OJ' instrumentality of individuals or firms who seek monetary gain through the nonprofit corporation. The majurityopinion (pp. 909 910) points out that Community Blood Bank conducts its affairs in a businesslike fashion and makes profits on the sale of blood, but that is certainly of no relevance here. A religious association might sell cookies at a church bazaar, 01' receive income fl' om secul'1jes it holds, but so long as its income is devoted exclusively to the pUlposes of the corporation and not distributed to members 01' shareholders, it surely does not cease to be a nonprofit corporation merely because it has income or keeps its books and records (as indeed the law might require it to) in much the same manner as commercial enterprises. Therefor' , the Commission is in effect saying that any corporation charged with a violation of Section 5 is fully subject to the Commission jurisdiction. This would presumably include churches, labor unions, fraternal organizations, and charities of a11 kinds, as \veil as nonprofit blood banks and sectarian and nonsectarian hospitals. Neither the language nor t);e legislative history of the Federal Trade Commission Act leaves room for such a broad interpretation.

Besides the nonprofit corporations, the complaint names as respondents a number of individuals, consisting of offcers and directors of the corpmate respondents and pathologists employed by hospitals in the Kansas City area. (Pathologists are medical doctors \vho are responsible, among other things, for selecting the blood used in the hospital.) Section 5 (a) (6) of the Federal Trade Commission Act applies to all persons. There is no exemption provided for persons not acting fol profit. But obviously the distinction made in the Act between corporations acting for profit and nonprofit Corpol' ations would be erased if al1 the Commission had to do, in order to obtain jurisdiction, was to name the offcers directors, and other personnel of a nonprofit corporation as the respondents. Since a corporation can act only through individuals enjoining its key people can have the same effect as enjoining the corporati()n itself. I do not think the Commission may bring \within its power a corporation over which it has no jurisdiction by the simple expedient of joining its offcers, directors and personnel as respondents, and arguing that they, as individuals, are fully subject to the Commission s jurisdiction. Such a result flouts COMMr;NITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 951 728 Dissenting Opinion the expressed policy of Congress of exempting nonprofit corporations from the Commission s jurisdiction. Thus, I do not see how the Commission can lawfully enter an order against any person who is simply doing the business of the nonprofit corporate respondents, and this includes not only the officers and directors of the corporate respondents but also, I think the respondent pathologists. They were doing the business of the nonprofit hospitals which employed them. There is no indication that these pathologists, in participating .in the alleged boycott the commercial blood banks, were actuated by desire for personal e11ichment, or were using Community Blood Bank, the Association, or the member hospitals as a tool for the furtherance of selfish ends. In the circumstances, entry of a cease and desist order against the pathologists would improperly extend the Commission s jurisdiction over the activities of the corporate respondents, which are plainly not subject to the Commission s statutory jurisdiction. An order against the pathologists would be in practical effect an order against the corporate respondents, since in the critical area of blood procurement and selection-the area of respondents' activities affected by the order-it is the patholo gists who are the responsible personnel of the corporate respondents.

The theory of the complaint and of the Commission s decision is that the p2thologists and hospital offcials in the Kansas City area desired to impair the development of the commercial blood banks in the al' , and to accomplish this end, formed their own blood bank (Community) and agreed not to accept any blood from the commercial banks. Under this theory, it is plainly not enough to show that the hospitals and pathologists in the Kansas City area in fact refused to deal with the commercial blood banks; the element of agreement, tacit or e"pressed, is central to the Commission s case. Nor is it enough to show that respondents exchanged with one another opinions and recommendations on the ethical and medical issues involved in the procurement of blood by the methods used by the commercial banks, Such an exchange would not constitute, or even evidence, a boycott; and grave constitutional problems would be raised if the Commission tried to enjoin communications among medical personnel on professional questions of this kind. Finally, while the formation of Community Blood Bank could be considered a combination by and among Dissenting Opinion 70 F.

the respondents, I do not understand the Commission to suggest that this in itself was unlawful concerted activity. It is not the formation of Community Blood Bank that the Commission finds unfair and unlawful but the alleged efforts by respondents to prevent the commercial blood banks from competing with Community.

In my opinion, the record does not show the existence of an agreement among respondents to boycott or otherwise restrain the operations of the commercial blood banks. Since there was no such agreement, the complaint must be dismissed. The hearing examiner noted-as if there were something sinister in the fact-that pathologists in the Kansas City area met together in professional groups "which held frequent meetings (Initial Decision, p. 871). He also found, and this I think is significant, that at these meetings "there was substantial unanimity among them (the pathologists) that commercial blood banking was immoral and destructive to the sense of community responsibility to share in providing the blood needs of the sick." Id. 871. They felt that the principal commercial blood bank in the Kansas City area (Midwest) "was offensive in its advertising, aggressive in its attempts to foist its services on the hospitals in the area, and that its management and direction were such that the doctors did not have confidence in its operation. Ibid. The picture' that emerges is not one of conspiracy. The pathologists, for reasons suffcient unto themselves-it is immaterial, from the standpoint of whether there was an agreement, what their reasons were-, abhorred commercial blood banks and shrank from doing business with them. As the Commission s opinion says (p. 913), respondents thought that commercial blood banking was "morally wrong" and "did not supply blood of equal quality with nonprofit banks." They organized Community Blood Bank so as to be able to satisfy the need of their hospitals for blood without turning to commercial blood banks. Once Community Blood Bank was in operation, it was natural that the pathologists-whose opposition to commercial blood banking was, as the examiner pointed out unanimous-should refuse to deal with the commercial banks. As I read the record, that refusal to deal, which is the crux of the Commission s case, was not collusive, and not the product of agreement or conspiracy, but stemmed from the unanimously and strongly held views of individual pathologists about the medical and ethical propriety of selling human blood for profit and their concern with the safety of the blood banked by the commercial blood banks.

COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 953 728 Dissenting Opinion An example may help show how far-fetched it is to infer conspiracy from the circumstances of record here. Suppose that a group of farmers got together and bought a grain elevator, and having bought the grain elevator they thereafter ceased doing business with commercial grain elevators in the area. These circumstances, without more, would surely not justify an inference of conspiracy, since the refusal of the individual farmers to do business with the commercial grain elevators could readily be explained in terms of their individual self- interest. Cj. Milgram Loew s Inc., 192 F. 2d 579, 583 (3d Cir. 1961). So it is here. With their deep ethical hostility toward the commercial blood banks, it is hardly surprising that, having formed a noncommercial blood bank to satisfy their needs, the pathologists, and the hospitals for which they worked, should have declined to do business with any commercial blood bank. There is no need to posit a conspiracy. To be sure, even where individual self-interest dictates a uniform response by members of a group, the members may enter into an agreement or combination to effectuate their common purpose. If the pathologists in the Kansas City area entered into a solemn pact to have no truck with commercial blood banking, there would obviously be an element of agreement or conspiracy, as well as of individual decision, in their refusal to deal with such banks. But they testified unequivocally to the contrary; there is no direct evidence of any agreement or conspiracy; and the circumstantial evidence on which the Commission is forced to rely is singularly unp€l'suasive. As already explained, this evidence consists of facts whose significance (whether considered singly or in combination) is wholly indeterminate. The first is that respondents had frequent communications among themselves with regard to the blood-banking problem. This was inevitable, of course, and hardly sinister, since all of the individual respondents are pathologists or hospital offcials directly concerned with blood banking and participants in the Community Blood Bank project. The second is the fact that Community Blood Bank was apparently organized in order to enable respondents to do without the services of commercial bood banks. But if a group of persons are not satisfied with the services rendered them by existing firms they are surely free-without being stigmatized as conspirators against the outside firms-to organize their own enterprise to provide these services. The third is the fact that the hospitals and pathologists in the Kansas City area did refuse (though not without exception) to deal with the commercial blood banks after Dissenting Opinion 70 F. T. Community Blood Bank was organized. But their refusal to deal as I have indicated, was the natural outgrowth of respondents feelings toward commercial blood banking and of the formation of C01nmunity. The rest of the Commission s case seems to me mere bits and scraps of completely inconclusive, wholly speculative, circumstantial evidence.

The hardest question raised by this case is whether, assuming it could be proved that respondents agreed among themselves not to do business with commercial hlood banks, a finding of i1egaJiy would be propel'. Boycotts are considered to fall within the category of practices that are pe1' 8e ilegal under the antitrust laws. See g.. Silver?' v. Ne?u York Stock Exchange 373 U. S. 341 347-48; Klm" s Inc. v. B?'ad' way-Hale Stores, Inc. 359 U. S. 207 212. This means that to establish a violation it need be pl'ved only that respondent in fact engaged in the practice; and, indeed, evidence that in the particular circumstances the practice did not have adverse competitive effects, or was reasonable and justified wijJ not even be admitted, See Fashion Originato?'s ' Guild C" 312 U. S. 'J57. The harsh treatment accorded boycotts under the antitrust laws stems in part from recognition that in the hands of businessmen they are typically a potent and completely unjustifiable method for stifling competition, but even more, perhaps, from a conviction that to allow private groups to wield coercive po\vers is inconsistent with a free, democratic society. See FCLShion Originfdors ' Guild v, F.T. , su.pm at 465. Suppose that the members of an industry got together and agreed to blacklist any member who deviated from certain standards established by the industry. The agreement would be ilegal even if violations of the standards would be unlawful, even if the only competition suppressed by the boycott would be unfair competition. For, it is felt, the app1ieation of sanctions to unethical and even unlawful business conduct should be left to the orderly pl'cesses of the. law, not to vigilante action-however justifiable such action may seem in the circumstances-by private individuals or firms who, acting concertedly, enjoy great power. The principle that boycotts are forbidden without inquiry into either competitive effects or possible justifications is sound. But Jike al1 principles, there are limits beyond which it should not be pushed. The antitrust laws are concerned with the regulation of COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AI,. 955 728 Dissenting Opinion business behavior (ef. Apex Hosiery Co. v. Leader 310 U.S. 469 495 et seq. ; Eastern R. Conference v. Noe/'T Motors :,65 U. S. 127 136); and most hoycott cases have involved such behavior. In the typical case, what is challenged is the conduct of some businessmen in refusing, for business reasons, to deal with other businessmen. This was essentia1Jy the situation in the famous group-health case, which involved the efforts of medical societies to frustrate a plan to provide low-cost medical services to government employees. American Medical Assn. v. United States 130 F. 2d 233 (D. C. Ci,.. 1942), a/f' 317 u. S. 519. Doctors are not businessmen strictly speaking, and the boycott was not a typical restraint of trade; but the motives and purposes of the medical societies were commercial and pecuniary: to discourage a method or pdce competition in the furnishing of medical services. The issues in the case were basically economic.

Much can be said for confining the reach of the antitrust laws to boycotts that arc economic in origin, as in the group-health cm;e. I recognize, however, that courts have occasionally enjoined under the antitrust lav.' boycotts whose origin vms ideological rather' than economic. ' An example is the case of the " Ho1Jywood Ten " who were blacklisted by the motion picture industry because they \were allegedly Communists. Younfj v. Motion Picture Assn., Inc 299 F. 2d 119 (D.C. Cir. 1962). But though there is precedent for applying the antitrust laws to boycotts growing out of other than commercial 01' competitive problems or cOfifiicts, \ve should be cautious in assuming that the same per se rule of illegaliy that is applied to the more usual business boycott is applicable here. Suppose that a group 'of Negroes, in protest B.against segregated busses, boycotted the bus s)'stem. Assuming that the jurisdictional obstacles to bringing a federal antitrust suit could be overcome, I still would not be prepared to say that such conduct was illegal pel" se. Or suppose that the doctors in a medical society agreed among themselves not to prescribe thalidomide to pregnant women, 01' not to Llse a certain scalpel because it was made of inferior steel, or not to send their patients to a substandard private hospital or to one which excluded Negroes from its professional staff. In all these cases, too, I would have diffculty with invoking the per se rule of Klor and Fashion OTignators Guild.

See COllneil of Vcfense v. Inte' i'uz6ullal i\a.qa.zine Co., 267 Fed. 390 (8th Cir. 1920) : Ve. Disl, ilmtonJ v. Chicago() JJoiion Picture Opemtors Unicn 132 F. SUPl). 294 (K. D. IJ. 1955). But see Ruddy Brook Clothes v. British Maritimc Ins. Co. 195 F. 2d 80 (7th Cir. 1\152). Dissenting Opinion 70 F.

While we are on safe ground in assuming that the public policy of this country is opposed to permitting purely economic or business judgments to be delegated to private groups armed with the sanction of a concerted refusal to deal, we are on more tenuous ground in assnming a like public policy where professional and other noncommercial judgments and issues are concerned. For purposes of the present case, it is the professional judgment that is relevant. Professional self-regulation is prevalent in our society. Bar associations and medical societies are permitted to regulate the professional conduct of lawyers and doctors in ways that society does not tolerate in the business sphere. Where challenged group conduct that in other contexts would be struck down out of hand as an ilegal boycott is the product of a professional j udgment, it should, in my opinion, be given a fuller analysis. This brings me to the facts of the present case. It is undisputed that respondents' activities did not have a business motive or objective. The aims and purposes of al1 the respondents were professionall'athel' than commercial 01' economic in character. Two types of professional judgment are disclosed in this record. The first includes such reasons for opposing the commercial blood banks as respondents ' strongly held view that it is immoral to make money from the sale of human blood. Such reasons are not purely "medical" judgments in the strict sense of a judgment based exclusively on concern for what is in the patient's best interest. However, in addition to these ethical or moral reasons involved in respondents' unwillingness to use the blood of commercial blood banks, there was clearly a professional medical basis for their conduct. Respondents believed, and I find no basis in this record for doubting their sincerity, that the blood supplied by the commercial blood banks in the Kansas City area was unsafe. They feared that because these blood banks paid for the blood they banked and, respondents thought, were none too careful about whom they bought it from, and because they lacked (in respondents' view) adequate qualified personnel, their blood was medically unsafe, and created an undue risk of causing hepatitis in users. Respondents-whose professional duty was to protect the health and safety of their patients-did not have confidence in the safety and soundness of the commercial blood banks' operations.

Much of complaint counsel's case was given over to attempting to refute the views of the respondents and prove that the blood of the commercial blood banks was perfectly good and safe-for ex- COMMUNITY BLOOD BANK, KAXSAS CITY AREA, INC., ET AL. 957 728 Dissenting Opinion ample, because they met the minimum standards promulgated by the National Institutes of Health, But it is not for us to decide whether the respondents were exercising sound medical judgment in insisting on higher standards for the blood to be used in treating their1' patients. If a group of doctors have concluded not to use certain blood because of genuine doubts as to its safety and re1iability, they should not be compelled by order of the Federal Trade Commission to accept such blood. This Commission was not established to sit as a board of review over professional medical judgments made by doctors in the course of their practice. There is no question in my mind that the respondents believe, sincerely and honestly, that their professional responsibiliy as doctors requires that they not dispense to their patients blood bought from these commercial blood banks, Whether we agree or disagree with such a medical judgment is irrelevant here. The question is whether the doctors' refusal to accept blood from the commercial blood banks reflected their professional medical judgment, and not whether we think their judgment was wise or unwise. A doctor judgment on medical and health matters is no less a professional judgment because the members of the Federal Trade Commission are not impressed by the grounds on which it is based or the manner in which it was reached. L'nless we are prepared to say, as I am not, that the testimony given by the doctors in this proceeding was false and is not to be believed, their attitude towards the commercial blood banks was shaped by professional medical considerations and nothing else. This case ought to be decided by the Commission on that basis, and not on the basis that these doctors were lying to us or were acting irresponsibly and unprofessionally.

Under the Commission s order in this case the respondent doctors wil not be free to exercise their own professional medical judgment, as they see fit, in accepting or rejecting blood from commercial blood banks, They will not be free to meet, discuss and recommend the use or non-use of such blood. If there should be any such meetings or discussions and if any doctor should refuse to accept blood from a commercial blood bank, he will be subject to $5 OOO- day penalties for violation of the order, The right of the respondent doctors to practice medicine is thus seriously restricted by the order, which deprives them, individually and collectively, of the freedom to exercise a professional medical choice in accepting or rejecting blood to be used in treating their patients.

Dissenting Statement 70 F. T. This case is atypical, to the point of freakishness, of the kind of proceedings this Commission is equipped to bring in the restraint of trade area. It does not involve monopoly or competition in the usual sense. It does not involve conduct having commercial motives or ends; the participants are not business concerns actuated by the profit motive. What this case really involves is an acrimonious private controversy, professional and personal in character and origin, between the pathologists and the commercial blood bankers in Kansas City. The Commission, whose mandate and function is to foster and protect the competitive process should not intrude itself in such a controversy. If there is need for governmental intervention in this matter, the State of Missouri has ample authority to take such regulatory measures as protection of the public interest may require. We should stick to our own job: the elimination of unfair methods of competition in interstate commerce. Regulating the professional conduct of doctors is not QUI' business.

DISSENTING STATE11ENT SEPTEMBER 28 1966 By REILLY Commissioner:

The Commission by its opinion and order in this case would impose upon the medical community of the Kansas City area an obligation to conduct an important phase of its collective health responsibility according to the ethic of the marketplace. I disagree. I find it particularly distressing that the opinion and order will operate to stigmatize a sizable portion of the Kansas City medical community in circumstances where I believe the Federal Trade Commission has neither jurisdiction in law nor warrant in public interest. The hearing examiner found that the respondents had agreed that the best means of meeting the blood needs of the Kansas City area was through a central blood bank operated by Community. I am sure it wil come as a great shock to the doctors and hospitals here involved, who know little and care Jess about the finer points of legal exegesis, to find themselves in the toiJs of the Jaw as a consequence of the joint community-wide efforts at resolving what was a jointly shared community problem peculiarly within their province as medical men.

In short, while it is clear that the commercial blood bank, Midwest, was hampered and trade was thereby restrained by the activity of at least some of the respondents, it does not follow that COMMUNITY BLOOD BANK, KANSAS CITY AHEA, INC., ET AL. 959 728 Dissenting Statement the matter falls within the jurisdiction or competence of the Federal Trade Commission.

In addressing themselves to the problem of the bloo(J needs of Kansas City, respondents brought with them certain preconceptions giving rise to a pronounced prejudice on putative moral and professional grounds against commercial blood banking. These preconceptions which are apparently shared by the medical community at large include:

Commercial blood banking, "the traffcking in human blood " is morally wrong 01' at least professionally unethical; The likelihood of disease transmission through commercially obtained blood is greater because of reliance upon dere1ict "donors" who are less reliable in responding to questions designed to establish the presence of disease;

All blood banks, both commercial and voluntary, should be directed by persons experienced in blood banking and they should have available the services of a pathologist or hematologist; The presence in a community program of commercial blood banks, because of advertising, blood deposit programs and other methods, render less likely the effective operation of a community program based upon a system of voluntary donations and replacement.

There is no question that the commercial bank here involved has been hampered by the mere establishment of Community with its machinery for cooperation among the hospitals, its insistence upon clearance through North Central District Clearing House and the refusal of the participating hospitals to accept direct deliveries from the commercial bank. Moreover, I have little doubt that the discussion of commercial blood banking in general and of Midwest in particular at various professional meetings of respondents served to reinforce individual convictions that Midwest should not be permitted to participate in the joint effort of the medical community.

Kevertheless, if I read the majority opinion correctly, it does not hold that the hindrance or frustration of Midwest was the central objective of the respondents in establishing Community but rather that their effort had "as its inevitable result" the hindrance of Midwest.

It is my position that the action of the respondents had as its intended purpose and result the establishment of an effective blood supply program for their community; that the two results that is, the establishment of a program and hindrance of Mid- Dissenting Statement 70 F.

west, flow from the same course of collaboration among respondents; that an effective blood supply program was respondents sale concern; that the restraint of trade was incidental to this larger professional and public health preoccupation; that the restraint of trade was inevitable because of the conviction on the part of the community that :\midwest should be excluded because participation by a commercial enterprise was incompatible "with an effective blood supply program; that however valid or invalid these convictions might be they were arrived at in good faith on the basis of professional medical judgment not demonstrated on this record to be clearly wrong, and therefore beyond the competence of the Federal Trade Commission to examine. The clear thrust of the Federal Trade Commission Act as well as the Sherman Act is toward the marketplace. They are concerned with the commercial, financial and economic life of the community, in essence, the manufacture, sale and distribution of goods and services. Their aim is the fostering of competition to preserve its benefits, including lower prices, for the economic well-being of the consumer. The expertise of the Federal Trade Commission is confined exclusively to the area of trade regulation. It knows nothing of medicine or of public health. And that is what is involved in this case. The entire context is beyond the commercial realm and thus beyond the jurisdiction of the Commission.

It is important, it seems to me, to recognize at the outset that the physicians and hospitals here involved were engaged as a group in the solution of a pressing problem of public health which they were especially competent as a group to deal with. They were not acting in a commercial context DOl' \were they in any sense a vigilante organization seeking to impose its ideology, morals, beliefs or idiosyncratic notions of patriotism upon the public at large or individual members thereof. Ct. Young. et rt!. v. Motion Picture Association of America, Inc., et ai. 299 F. 2d 119 (C. C. 1962).

The question is not whether the medical profession has " a tonsure-like immunity" but whether in the first instance this is a matter falling within the ambit of the antitrust laws or of the Federal Trade Commission Act. There is here involved no question of exemption but one of initial application. In a clearly business context obviously the Federal Trade Commission would have jurisdiction. In a dearly medical one it would not. The question is what to do in a hybrid situation such as here , , . . ,. COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 961 728 Dissenting Statement where Midwest' s interest is exclusively commercial and the respondents' exclusively medical. The Supreme Court has said " there are ethical considerations where the historic direct relationship between patient and physician is involved which are quite different than the usual considerations prevailng in ordinary commercial matters. This Court has recognized that forms of competition usual in the business world may be demoralizing to the ethical standards of a profession.

In the case to which the Court had reference, one which involved the constitutionality of legislation directed against advertising by dentists, the Court in distinguishing "traders in commodities" from dentists noted that in matters involving " . . . the vital interest of public health. ' . a profession treating bodily i1s (demandsJ different standards of conduct from those which are traditional in the competition of the marketplace. The maj ority relies upon A american Medical Association v. 317 U. S. 519. That case, wherein physicians and medical associations conspired to restrain trade by interfering with the medical practice of a group health organization, turned on the fact that it was entirely a business context within which the alleged conduct occurred. The defendants were fearful of the threat which Group Health represented to their businesses, the practice of medicine and their "main purpose or aim was to obstruct the business of Group Health," The case thus holds that physicians acting in a commercial context enjoy no immunity from prosecution under the Sherman Act " if the p1'rpose and effect of their conspiracy was obstruction and restraint of the business of Group Health. (Emphasis supplied.

In S, v. American Medical Association 1.0 F. 2d 703, 710 (C. C. 1940), cert. denied another, earlier appeal arising out of the same conspiracy, the court held that the Sherman Act was applicable to the practice of medicine because a "profession partakes on its finarlCial side of a commercial business. . . ." (Emphasis supplied.

The factual emphasis in these American Medical Association cases was clearly upon the business of practicing medicine, the livelihood of the physicians involved.

In the instant case Midwest represented no threat in a business sense to the respondents. Theil' sole purpose was one of insuring 1 U.S. v. Oregon Medical Society, et al. 343 U. S. 326, 336. : Semler v. Oregon State Board of Dental Examiners, 294 U. 608 612. 317 U. S. 519, 528.

Dissenting Statement 70 F. an effective blood supply program for their community, a medical and public health matter which by its very nature required collective action by the physicians and hospitals concerned. The hospitals did not stand to profit in any business sense, broad 01' narrow. The program had nothing to do with the livelihoods of the respondents. It was separate and apart from their business concerns and was invested with" non-profit, non-political, community-wide public interest. Moreover, in the cases citied above the activity of the defendants was directly and explicitly aimed at frustrating other doctors in their busi1esses. Here the respondents acted in the public interest and their activities only incidentally operated to the detriment of Midwest.

The maj ority seeks to impose a commercial character upon the matter here involved and thereby would assert jurisdiction by citing some of the indicia of commerce which happen to be present such as the wOI'ds "corporation profit" and "carryon business/' and the question whether blood is a product or commercial commodity. I have no great qual'el with this approach as far as it goes but I feel it represents a fussy attention to trees when the forest is the major conce1'. If, as I insist, the central conce1' of the respondents was a medical one, it does not become commercial merely because some of the organizations involved are corporations or earn profits or carryon business. It seems to me the crucial fact here is that this conduct is not an unfair method of competition or an unfair or deceptive act or practice in C01nm.erce. As to the readiness of respondents to accept Midwest blood in emergencies I do not believe such action places in question either the bona fides 01' the medical wisdom of the respondents' policy in opposition to commercial blood banking. An emergency by definition requires suspension of normal procedures and the employment of normally unacceptable alte1'atives. One final point should be made: the National Institutes of Health in licensing the operation of commercial blood banks have established minimum standal' ds for the selection of donors and the drawing, processing and distribution of blood in order to insure the safety of this process and the purity of the product. Because the respondents set more stringent standards and in effect prevented the participation of Midwest, the majority holds that Community arrogated to itself: " . . , the essentially governmental function of determining the standards which win be applied to the interstate operation of blood banks and band(edJ together to inhibit the development of licensed commercial banks COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 963 728 Concurring Statement which meet government but not their own self-imposed standards.

The answer to this is that III has merely set minimum standards as to safety and pmity but has done nothing to assure Kansas City an effective area-wide program looking to an adequate supply of blood for its hospitals. In the absence of legislation or regulation directed to this need, the medical community not only has the right but indeed the professional obligation in the public interest to establish an effective program. The order issued by the majority in this case will prevent the medieal community from operating a central community blood bank in a way its professional judgment dictates without any corresponding assurance from the Federal Trade Commission that the kind of competition the order seeks will insure Kansas City of an adequate blood supply, I would dismiss the complaint.

CONCURRING STATEMENT SEPTEMBER 28 , 1966 By JONES Com1fzissioner:

The majority holds that respondents ' concerted action over a sustained period of time to hinder and obstruct the operations in their community of Midwest, a commercial blood bank is a violation of Section 5 of the Federal Trade Commission Act. I agree, Commissioner Reily, writing in dissent, however, looks at these concelted activities of respondents as motivated solely by respondents' desire to establish an effective blood supply program in theil' community, as arising out of their professional and public health preoccupations "nd as based solely on their medical i judgment exercised in good faith. He concludes that respondents activities weye "exclusively medical" and because they \were acting "in the public interest" any commercial harm which resulted for Mid\vest--\which he concedes occurred-was only "incidental" and not therefore encompassed by the antitrust laws. Commis- ;ionel' Elman, also writing in dissent, views respondents ' activities vis-a-vis the two commercial blood banks in the Kansas City area as based in part on their ethical and moral "professional" judgment which he concedes is not purely medical "in the strict sense of a judgment based exclusively on concern for what is in the patient' s best interest." He also views respondents' conduct as Concurring Statement 70 F. T. having had, in addition, clearly a medical basis grounded on respondents' belief that commercial blood was unsafe. I do not agree with either dissenter that respondents acted against these commercial blood banks because of their medical judgment that the blood denominated by these banks was medically unsafe, nor that their moral and ethical concerns about trafficking in blood represent their professional and public health preoccupations or in any event should operate to remove their activities from the jurisdiction of the antitrust laws. Finally, I cannot agree with Commissioner Reily s further conclusion that since, as he viewed them, respondents acted in the public interest any resulting restraints of trade are merely incidental and outside the antitrust laws.

I find no distinction in any of the strictures of the antitrust laws against restraining competition between restraints which are "incidentally" imposed and those which are not incidentally imposed. Nor do I find any differences in the application of the antitrust laws based on the good-faith motivations or professions of the persons imposing the forbidden restraints. I agree-and find nothing in the majority opinion to the contrary-that every doctor must be free to exercise his own medical judgment as he sees fit, whether in bad faith or in good faith, and whether the way in which he individually elects to practice medicine restrains the trade of another incidentally or not so incidentally. Presumably every time a doctor prescribes a medicine, orden; a piece of equipment, recommends a particular nurse or doctor to be consulted, or suggests a particular hospital or nursing home for his patients, he is restraining someone s trade. Noone would ever suggest that such action on the part of a doctor is in any way subject to the antitrust laws. Similarly, if a group of doctors in a hospital, or in an association or simply practicing together, meet, discuss and recommend a particular course of treatment involving particular medication or the use of a certain type of medical equipment because in their judgment this is best for the treatment of the patient, no question would or should ever arise as to the applicability of the antitrust laws to such manifestations of the practice of medicine simply because it represents a concerted judgment of these doctors.

But as I read the record in this case, this is not what went on 1 Commissioner Elman aisa dissents to other aspects of the majority opinion relative to the Commission s jurisdiction over non-profit corpo)"ations and the ndequacy of the evidence of consj,i!' acy. I will not discuss these here, as I believe the majority opinion adequately disposes of these issues.

COMMLNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 965 728 Concurring Statement in Kansas City, nor do I believe that there is anything in the majority opinion which could be regarded as even remotely suggesting that such unilateral or concerted activity would be subject to the Federal Trade Commission Act.

The gravamen of the offense with which these respondents are charged and which they have been found to have engaged in is the organization and exercise of their concerted power to hinder the operations of two commercial blood banks of which they did not approve. Respondents impeded the establishment of donor clubs by the two commercial blood banks by refusing to state that their blood would be acceptable at the various hospitals within the area with which respondents were associated; and after the establishment of their own central blood bank, they refused to accept blood offered for replacement purposes from these two commercial blood banks and they interpreted the rules and regulations of the central .clearing house to exclude blood supplied by the commercial blood banks, but not necessarily blood from noncommercial blood bank sources.

I do not agree with either dissenter that in fact respondents acted on the basis of what could in any sense be termed their medical judgment. The record clearly establishes, in my judgment, that while what could be interpreted as medical concerns about the quality of the blood dealt in by commercial blood banks \were voiced by some of the respondents from time to time, none of the respondents were in fact exercising their "medical" judgment in good faith when they concertedly acted together to hinder the oper".tions of these two commercial blood banks in Kansas City. Kor by any stretch of the imagination can respondents' actions in hindering the operations of these two commercial blood banks be regarded as based on any professional or public health preoccupations or could in any sense be said to be in the public interest and deserving of exemption from the antitrust laws. At most, the evidence that respondents were acting on the basis of their medical judgment respecting the quality of this blood consists of various statements made by some respondents in the course of their various discussions about a blood supply program about the lack of qualified personnel at the commercial blood bank, the low character types-presumably donors-who had been obscrved at the premises of the commercial blood banks and the likelihood or possibility that payment of donors might tend to encourage them to conceal any disqualifying information such as whether they had had hepatitis recently. Concurring Statement 70 F. T. Yet aside from these generalized preconceptions about the operations of commercial blood banks, the record is totally silent respecting any attempt by any respondent to go beyond a mere assertion of these preconceptions and to evaluate their validity. Moreover, the record also demonstrates that there was no unanimity of belief among the doctors in Kansas City that blood supplied by commercial blood banks was unacceptable or of poor qualiy. Sometime around 1954 and prior to the organization of one of the commercial banks in Kansas City, the pathologists in Kansas City had gone on record and formally resolved that such blood could be used in an emergency (Op. p. 918). It is axiomatic that to a doctor not even emergency conditions could justify the use of inferior or medically unsafe blood. In 1955, two members of one of the committees established by the respondent Hospital Association to consider the question of establishing a blood supply program for Kansas City, indicated their interest in considering the use of commercially distributed blood and one of these committee members proposed that an evaluation be made of the risk or harm, if any, from using blood from commercial blood banks (Op. p. 929).' Clearly, the making of these suggestions indicates that in fact no one, at least at that time, knew anything about the quality of blood available from commercial blood banks and this discussion by itself certainly conclusively disproves that respondents believed the blood was medically unsafe. At best, the evidence suggests that some of the respondents thought the question should be examined.

The evidence shows that the respondents who were most adamant in their opposition to the use of commercial blood banks for the supply of blood never once made any actual examination or conducted any tests of the blood available at these banks. No effort of any kind-scientific or otherwise-was made by these respondents to verify the accuracy of their preconceptions about the personnel and quality of blood available from commercial blood banks in general or from these two banks in particular. Indeed, when the business manager of the commercial blood bank inquired about what steps the bank should take to make its blood acceptable, he was told by some of the respondents to convert his bank into a nonprofit organization relying on voluntary donors A DJ" Coney, attending as a member the December 29, !lJ55, meeting of the Spelman Committee (appointed by the Hospital Association to consider the report) sugge ted that there should be an evaluation of the risk or hal'il, if any, from using commercially furnished blood. A Mr. Schuler at the same meeting indicated ilat the commercial blood bank should be given some consideration. Qp. p. 920.

COMMr;NITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 967 728 Concurring: Statement (Op. p. 933). Not even passing mention was made in response to this inquiry as to acceptable standards of blood quality or of personnel as conditions prerequisite to approval. If respondents had been motivated in their reaction to these two commercial blood banks by their medical judgments, it would be reasonable to assume that they would have expressed their prerequisites to approval in precise terms of approved standards and procedures for blood collection and dissemination. For professional men who are scientifically trained and accustomed to act on the basis of carefully conducted tests and experiments, this is a glaring omission which in my judgment conclusively demonstrates that respondents were not opposing the commercial blood banks for medical reasons and that the allegedly unacceptable quality of the blood from these banks was not the basis for the actions which they took here to discourage and hinder the operation of these commercial blood banks.

Against this background of what appears to be at best respondents' generalized conviction or "preconceptions " or, at worst blind prejudice about the quality of blood distributed by commer' cial blood banks, there is affrmative evidence in the record respecting the acceptable quality of this blood which further compens the conclusion that respondents' convictions could not have been based on their medical judgments.

The commercial blood banks in Kansas City which were the objects of respondents' boycott continued to supply the blood needs of the L'united States Veterans Administration Hospital in Kansas City, as well as the University of Kansas Medical Center throughout this period. It is inconceivable that the pathologists and administrators of these hospitals would have considered for an instant accepting blood which was in any way contaminated or which was produced under circumstances which might in any way reflect on its quality (Op. p. 938). Moreover, the National Institutes of Health not only issues licenses to commercial blood banks using paid donors so long as they meet specified standards, but ~IH issued such licenses to both the commercial banks which were the subject of respondents' boycott. Again, it is inconceivable that KIH would have so acted, or vlOuld not have immediately revoked such licenses if confronted with any facts suggesting that the blood of these two banks was medically unsafe.

"NhiJe I am of the view that any medical group is wholly within its rights to establish higher rnedicHJ stal1danls than tho,(' used by the NIB, the fact that 1\' 11- certified these t\\O banks, plus Concurring Statement 70 F.

Respondents' failure to make any attempt to evaluate the quality of blood actually produced by these two commercial blood banks or to establish general standards of acceptability for blood and the absence of any other evidence that the blood of these or of any other commercial blood banks was medically unsafe convinces me that the attempts by respondents now to justify their actions on the ground that they constituted an act of medical judgment or were grounded on medical reasons cannot stand up under scrutiny.

The dissenters seem to be of the view that because respondents boycott of the two commercial blood banks was professionally motivated, and hence noncommercial in nature, the antitrust laws do not or should only in rare instances apply to it. The issue as to whether a noncommercial boycott, that is, a group boycott not engaged in for the economic profit of the participants, is or should he subject to the antitrust laws of the United States, has never before been raised under Section 5 of the Federal Trade Commission Act, although it has been raised under Section 1 of the Sherman Act. The underlying policy considerations are of course similar under the two statutes (Fashion Origi11oto1' Guild of America, Inc. , et al. v. Federal Trade Commission 312 U. S. 457, 467- (1941)).

The antitrust laws were enacted in order to protect and promote competition in the marketplace and prevent the establishment of monopoly. Thus, acts which unreasonably restrained a person trade or furthcred a monopoly were early recognized to be within the compass of the antitrust laws. The activity prohibited by the antitrust laws is the restraint of someone s trade, or in the case of a boycott, the restriction of "the liberty of a trader to engage in business. Loewe v. La,ulo?' 208 U.S. 274 , 293 (1908); Binderup Pathe Exchange Inc. 263 U. S. 291 (1923). It is obvious that the intent OJ' design of the restrictive conduct does not constitute the gravamen of the offense. Moreover, the courts have never laid down as a precondition to liability under the antitrust laws that the defendants must receive some commercial benefit from the restrictive activity, although this has frequently been the situation. Thus in Ande,'son v. Ship Owne?'s Associrdion 272 U. S. 359 (1926), the Supreme Court, in holding that the Sherman Act applied to an agreement among shipowners respecting the terms of the fact that respondents made no independent appraisal of these two bank, or in(hed any study in general of the qu"lity of b;ood j)lour1ced by commel" cia) hloo(: banks, thro''''s considerable doubt on the cre(libility find g-ood faith of rcs!)OJH:ents' assertions of this grour.d as a ba.s:s for their concerted refusal to use the facilities of the commercial b:ood bant:. COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 969. 728 Concurring Statement employment under which seamen would be hired, noted that the purpose of the Srlerman Act was to prohibit " contracts or combinations which unduly interfere with the free exercise of their rights by those engaged or who wish to engage in trade and commerce-in a word to preserve the right of freedom to trade. Speaking directly to the question of the motives and objectives of the combination, the Supreme Court said that it is immaterial that:

* * * the object of the combination \vas merely to regulate the employment of men and not to restrain commerce. A restraint of interstate commerce cannot be justified by the fact that tile object of the participants in the combinaion was to benefit themselves in a way which might have been unobjectionable in the absence of ,euch rest.raint (p. 363). More recently, in its opinion in Klors, Inc. v. Blood' wall-Hale Stores Inc. 359 U. S. 207 , 213 (1959) the Supreme Court recognized that while most combinations are engaged in for commercial purposes, this was not an absolute precondition of liability. Thus, the Court "pecifically stated in Klan that while the Sherman Act " is aimed primarily at combinations having commercial objectives/' it nevertheless is applied albeit to " a very limited extent to organizations, like labor unions, which normally have either objectives" (Kote 7 at p. 213).

Several lower federal court decisions have sustained the validity of antitrust complaints against motions to dismiss which charged as illegal combinations and boy.cotts engaged in for admittedly noncommercial purposes. These cases are of importance in this discussion because in a1l of them the Courts have assumed that the challenged boycott, though entered into for noncommercial purposes, could be subject to the antitrust laws if plaintiff' trade was unreasonably restrained.

In other cases the courts have struck down boycotts having noncommercial objectives either because the objective sought was regarded as against public policy or simply because the court did 1.("l7ncil of Defense of State of New Mexico, et nl.v. IntcrnationrLl Ma,gazin6 Co. 267 Fed. 390 (8th Gir. 1(20) (defendfuts ideological boycott of plaintiff' s magazines held a violation of the antitr'-st Jaws eVlOn though defendants admittedly were not acting to advance their own commel'dai 01' economic interests): IPC Distrib1ftors v. Chicago Moving Picture Machine OpenLto,-s Union 132 F. Sup)). 294 (N.D. Ill. 1%5) (injunction under the Sherman Act sustained against union s refusal to IJroject a movie because of its ictcoJogicnl content without discussion of nPllJication of antitrust laws to noncommercial boycotts) ; Screen Write1. ' Guilri Motion Picture . n of A11wrlca 8 FRD 4S7 (S.D. N. . 1!J48) (tn'bIe damage complaint under!' antitJ'\J8t Jaws based on ddendant' s ideolo ically generated blackout of plaintiff dismissed with !cRV" to amend, thus irnpJiodly recognizing v"lidity of basic cause of action pleaded) : Motinal; ".ational Ra81..etba1t ABson'ation IDO F. SUP)). 2,11 (S. D. N.Y. 1961) (treble damage suit based on defcndants' bJflckli8t of vlaintiff dismissed on the merits because basis of blacklisting found to have been reasonable).

, Concurring Statement 70 F.

not agree that such concerted activity interfering with another trade could be permitted.

On the other hand, in several cases the courts have refused to rwld concerted ,activity which restrained another s trade il1egaJ under the antitrust Jaws, An analysis of the courts' decisions in these cases indicates that in every case the defendants were found to be engaged either in exercising some constitutionally protected right or were acting' in furtherance of their Jegitimate purposes for which they were organized of which the challenged restriction was found to be a necessary and reasonable corollary. In the latter instance the defendants were already associated together and their concerted activity was not the result of a combination specially organized in order to take the action charged as restrictive. Rather, the concerted activity engaged in was merely the action of a pre-existing group acting to protect its own existence by a means which the court found reasonably necessary to accomplish the established purposes of the organization. The leading case on this point is Eastern Railroads P' e,cHdents Confer1'ence et al. v. Noel Motor Freight, Inc. , et aI. 365 U. S, 127 (1961). In the Noen- case, the Supreme Court held that no vio- Jation of the Sherman Act could result from mere attempts by defendants to influence the enactment of lavis and pointed out that any other construction of the antitrust laws might raise constitutional problems under the First Amendment protecting the right of petition. The Supreme Court pointed out that concerted activities of this nature hear little if any resemblance to the combinations normally held violative of the Sherman Act, combinations ordinarily characterized by an express or implied ag:reemPT1t 01' understanding that t1w participants ,\'-il1 jointly give up their trade freedom, 01' help one another to take a'\vay the trade :freedoms othrrs through the use of such devices as .. boycotts.. . (p. 136). However, the Supreme Comt was careful to note that its decision ,vas grounded on its finding and conclusion that defendants' activities did not go beyond "the mere atV?mpt" 1;0 influence the enactment of legislation. In discussing whether defendants had gone bc)'ond this and thus brought themselves outside the application of this principle, the Supreme Court spccifica1Jy noted that there A. S. Bed: ShoG Corp. v. Johnson 274 N. . Supp. 946 (N. Y. Sup. Ct. 1934); J-u qhes .'11/):1 '07' COil,1 (l\) 2c1 SSG) (Cal. Sup, Ct. J84S) (:nj'Jnctil'" s\Lsbjnerl again l b()ycott to induce employment of Negroes) : .4meriea' n Mercury. fnc. v. Chase. 13 F. 2d 2 !.4 (D. Mass. 1926) (injunction tajned ap:ain t Jehovah's Wit es thre"t..nin:-, criminal: prosecution of sellers of IYH\gazines dise11'proved by 1"Vitnesses) ; 1)', cf r;U' Ncqro Allamce v. Sanitar!! Grocer!) Co. . :-103 lJS. :;32 (B3n rl 82 F. Zrl 51\) (D, C. Cil' HI,1,) (picketing by empl()y", to induce hi,' irw of g1"es held propp" labor activity and not enjoy:noble). \ , COMMUNITY" BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 971 728 Concurring Statement was no evidence that defendants "attempted directly to persuade anyone not to deal with the truckers" (p. 142). There have been several lower federal ccurt decisions which have also sustained the validity of restrictive group action against charges that it violated the antitrust laws on the ground that the conduct was reasonably designed and necessary to protect the basic existence and function of the boycotting group. A series of state court decisions has involved challenges under a variety of statutes of group boycotts engaged in for religious, political, social or other noncommercial reasons. In most of these cases, the courts have taken an essentially pragmatic approach weighing in each case the basic purpose for which the boycott was entered into, its relationship to the fundamental nature and activity of the group in connection with the impact of the boycott on the plaintiff or the segment of the public most directly affected. None of these cases involved allegations of antitrust violations. A1I of them were brought under some type of tort theory of damage. ~evertheless, it is believed that the approach of the courts to determining the lawfulness of these boycotts is of relevance to the instant problem.

Two of these cases involved boycotts of communication media by religious leaders and both held the boycotts did not give rise to a cause of action for damages because the defendants ' actions were designed to protect the faith of their members and were within the scope (if the church' s discipline. KUTye' r P"u,bli::hing Co. v. Mcss1Ieo. 156 N.W. 948 (Wise. Sup. Ct. 1916) (writing of a pastoral Jetter forbidding communicants to subscribe to plaintiff' newspaper) ; WI/teh Towei' Bihle Tract Soc. v. Do."ghe?'ty, A.2d 147 (Pa. Sup. Ct. 1940) (solicitation by the chmch of letters of protest to be addressed to a radio station which was attacking t.he church) .

Similarly, a college regulation prohibiting students from patronizing noncollege-owned restaurants 7 picketing of a local United Stater v. Unite( States Trotting Association 1960 Trade Cases '160 761 (D. Ohio 1960) (associ:'tion s rules and l'e "ulations ad01Jtcd in ol"de\' to advance anti protect thp 81J01't of harness racin;: held reasonably n( CessHry for this )1'11'1'05(' Rnd hence not illegal under the antitmst la\\s isolin(w ;V"ti(",,'/ Hasl.,etbaU .'Ssociation 1() F. SUPl) . 2-Jl (S. D. . 1(1) (associat;ojl S )"11" 8uojJending piayers for betting held rcasollnble discijJJiol\l"Yme'1St11C necc sal"Y for the nrntcction of the association s 1111"))08('8) ; Dresen v. The Pro/esBioHal G'o!rCJS , I.QBocia(iuii of America 1%6 Trade Causes 706 (Dth Cir. 1966) (l1ssodation s rules rcq\!filing fi\" year experience tu cum pete sustained,j as reasonable u1J l1tional rule) ; cf, Washin.utoli Stalc Bu,din.u Pr(JJJJ"iotor"s ASSQciation, hic. v. l'aci:tc Lancs, ';6 F. 2r1 371 (9th Cir . 1966) (D.ssociation o; rule excluding bo\\lers from 1ourn"ments ,, ho lHJwiell with any group which did not belong defendant s association held violation of Section I of the Sherrr.an Act). Gutt v. Berea College 161 S. W. 20': (Ky. Ct. of Apps. IUISi. Concurring Statement 70 F.

bakery by a consumers group to protest its high prices,' and of a progressive .Jewish butcher by a group of Orthodox .Jewish butchers to protest its sale of some nonkosher meats ' were a1l sustained by the courts either as within the reasonable scope and responsibility of the boycotting institution or as within the normal rights of the defendant citizens to express their views. Several principles emerge from these cases respecting the application of the antitrust laws to group boycotts. In the first place, it is clear that as a general proposition group boycotts are subject to these laws. However, not all group boycotts will be regarded as violative of the law and their lawfulness will depend in part on the objective of the boycott and the reasonahleness of the means used in the light of such objective. Where the boycotters are engaged in commerce and are acting to further their own commercial and economic interests by restricting the trade of others, their actions are held to be il1legal without consideration of the reasonableness of their conduct. Fashion Originators Guild of America v. Fedenrl Trade Commission 312 U. S. 457 (1941); KZo," s Inc. v. Broadway-Hale Stores Inc. , et aZ. 359 U. S. 207 (1959).

Where the boyeotters are acting in order to prevent a legitimate and recognized interest, their action is subject to the antitrust laws, but its lawfulness wil probably be determined on the basis of its reasonableness: MolirlOs v. Nati01wl Basketball Association 190 F. Supp. 241 (S. D. N. Y. 1961) ; Silver?' v. New Yorlc Stock Exchanoe 373 U.S. 341 (1963). Where the group boycott is engaged in solely in furtherance of a constitutionally protected right and does not go beyond the exercise of that right, it wil not be regarded as unlawful under the antitrust laws. Eastern Railoads P?'esidents Conference, et al. v. Noer?' Moto?' Freight Company, et aZ. 365 U.S. 127 (1961) .

In the instant case, none of the factors which have led the courts to exempt concerted boycotts or restrictive conduct from the reach of the antitrust Jaws exist. Respondents here are not taking an act of self-help designed to protect a Constitutional right to which they are entitled, nor is their act an exercise of a constitutionally protected right of petition, speech or religious ex- Julie Babng Company v. Gra)/molld, 274 :;, . Supp. 250 (N.Y. Sup. Ct. 1934). 'I Rosman United Strictly 1, oshcT Butchers 298 N.Y. Supp. 343 (K.Y. Sup. Ct. , 193,) '" Perhaps these. too, in time win become jllegal as other alternative course oi action u)Jpear 1'ali tic and feaB,ble, but at the pre"ent time there is little d(mbt that the use of self-help through the use "f concerted action by racial minorities to defend their own COIls itutional I'rights from encroachment and indeed annihilation i, under' the docninp of ihe Noerr case ;t pr()ptoT and iawful activity free from the prohibitions Df the Sherman Act. COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 973 728 Final Order pression. 1\T or were respondent's acts designed to protect their own existence, nor could they be construed as reasonable rneaeures of self-help taken in order to furnish or protect the basic overall corporate purposes of their association or organization. In no sense can respondents argue that the concerted action which they took here is the only means available to them to implement their own personal views as to the quality or effcacy of commercially disseminated blood. Nor was it the only effcient means available to them to implement their views in their own practice of medicine. Respondents are doctors and hospitals whose basic professional purpose is the care and treatment of their patients. They are the leaders in their community. Their rights to practice medicine or perform other actions are in no way imperilled. Their ability to practice their profession is in no way impaired. Theil' freedom to advise their patients or even to organize a publicity campaign to express their own personal views on the quality of blood disseminated by commercial blood banks or on any other aspect of commercial blood banks is not restricted. But they chose none of these courses of action. They attempted to secure a total elimination of commercial blood banks in Kansas City and succeeded in their aim insofar as their own hospitals and blood banks were concerned. Thus, their concerted activity, which forms the gravamen of their offense, was solely and exclusively directed towards this objective. It was not designed simply to exchange views, make studies 01' reach conclusions on the medical facts related to the collection and dissemination of blood, nor merely to establish their own bank. Respondents were eminently successful and their concerted ac:tivity seriously hindered the commercial trade of Midwest. Such private activity even by doctors was never designed to be left out of the protection of the antitrust laws. I agree with the majority decision that respondents activities have violated Section 5 of the Federal Trade Commission Act.

FII\AL ORDER This matter having been heard by the Commission on the appeal of respondents from the initial decision of the hearing examiner, and upon briefs and argument in support thereof and in opposition thereto; and The Commission having rendered its decision determining that the appeal should be denied and that the findings of fact and con- Final Order 70 F. clusions of the hearing examiner, as supplemented by the accompanying opinion, should be adopted as the finding and conclusions of the Commission:

It is ordel" That the findings and conclusions of the initial decision, as supplemented by the accompanying opinion be, and they hereby are, adopted as the findings and conclusions of the Commission.

It is f1l,ther o1'de1'ed That the following order be, and it hereby is, substituted for the order issued by the hearing examiner: ORDER It ;8 ordered That respondents Community Blood Bank of the Kansas City Area, Inc. , a corporation, and its offcers directors, and members; PClTY Morgan, Administrative Director, and W. \\T. Henderson, Business Manager, individually and as administrative director and business manager respectively, of Community Blood Bank of the Kansas City Area, Inc. ; Walter V. Coburn, John Murphy, and Marjorie S. Sil'idg-e, individually and as directors and members of Community Blood Bank of the Kansas City Area, Inc. ; Kansas City Area Hospital Association, a corporation, and its offcers and directors; Arch E. Spelman, President, and Susan Jenkins, Executive Director, individually and as President and Executive Director, respectively, of Kansas City Area Hospital Association; Baptist Memorial Hospital, a corporation; Menorah Medical Center, a corporation; Sisters of Charity of Leavenworth, a corporation, d/b/a Providence Hospital: Bethany Hospital: Excelsior Springs Hospital; Independence Sanitarium and Hospital; Lakeside Hospital; Korth Kansas City Memorial Hospital; Olathe Community Hospital; Osteopathic Hospital: Queen of the World Hospital; Research Hospital; Pleasant View Health and Vocational lnstitute Inc. : Community Hospital Association; St. Joseph Hospital; St. Joseph's Hospital: St. Luke s Hospital of Kansas City: St. Mary s Hospital (Siste1"s of St. Mary); Sweet Springs Community Hospital; St. Margaret Hospital; Trinity Lutheran Hospital; Wheatley-Provident Hospital; Warensburg Medical Center, Inc. ; Kansas City General Hospital and Medical Center; O. Dale Smith, individually and as pathologist of Baptist :liemorial Hospital; Hi1iard Cohen and Evelyn Peters, individually and as pathologists of :Ylenorah COMMUNITY BLOOD BANK, KANSAS CITY AREA, INC., ET AL. 975 728 Final Order Medical Center; D. A. Hoskins, individually and as pathologist of Osteopathic Hospital; Victor B. Buhler, individually and as pathologist of Queen of the World Hospital and St. Joseph' s Hospital; Frank A. Mantz, individually and as pathologist of St. Joseph's Hospital; Ferdinand C. Helwig and David M. Gibson, individually and as pathologists of St. Luke s Hospital; Angelo Lapi and Lauren R. Moriarity, individually and as pathologists of St. Mary s Hospital; Jack H. Hil, individually and as pathologist of Trinity Lutheran Hospital; James G. Bridgens, individually and as pathologist of Independence Sanitarium and Hospital; Wi1Jiam McPhee individually and as pathologist of North Kansas City Memorial Hospital; Ralph J. Rettenmaier, individually and as pathologist of Providence Hospital: Robert A. Molgren, individually and as Executive Director of St. Luke s Hospital; and A. ~cal Deaver, individually and as Administrator of Independence Sanitarium and Hospital; their agents, representatives and employees, directly 01' through any corporate or other device, in, 01' in connection with, the procurement use, offering for sale, sale, or distribution of whole blood (human), do forthwith cease and desist from entering into, cooperating carrying out or continuing any planned common Course of action, understanding, agreement 01' combination between and among any two OJ' more of said respondents, or between anyone or more of said respondents and others not parties hereto, to do 01' perform any of the following acts and things:

1. To exclude, limit or restrict any hlood bank operatai' licensed to engage in t.he sale and distribution of blood by the ~ational Institutes of Health, United States Department of Health, Education and Welfare, from collecting or from t;selling or furnishing blood to any hospital, blood bank, 01' other user, distributor 01' purchaser of blood.

2. To foreclose or prevent any person, firm or corporation from using, or from purchasing, paying 01' contracting for, any blood furnished by 01' through any blood bank operat01' licensed to engage in the sale or distribution of blood by the National Institutes of Health United States Department of Health, Education and Welfare.

3. To exclude or limit the access of any blood bank 976 FEDERAL TRADE CO !MISSION DECISIONS Final Order 70 F.

licensed by the National Institutes of Health, United States Department of Health, Education and Welfare from becoming members of the American Association of Blood Banks, the :\ orth Central District Blood Bank Clearing House or other clearinghouse sponsored by the American Association of Blood Banks, or from carrying on trade in blood through such clearinghouse system. 1. To hamper, hinder or prevent any blood bank operator licensed to engage in such business by the N ational Institutes of Health, United States Department of Health, Education and Welfare, from entering into carrying out or enjoying the benefits of contracts for the furnishing of blood to any person entitled thereunder either for use by the contracting patient directly or as replacement blood for blood' already given to the patient or that prevents, hampers, or hinders any person, firm or corporation from purchasing, obtaining or using blood supplied 01' furnished under such contracts. It ,is f"TtheT ordered That each of the respondents forthwith cease and desist from re.i acting or refusing to accept direct shipments or deliveries of whole blood (human), shipments 01' deliveries of whole blood (human) which have not been sent pursuant to clearinghouse rules or which have not been sent through the clearinghouse system, from any blood bank licensed by the Xational Institutes of Health United States Department of Health, Education and Welfare in discharge of any obligation to the said respondent, if the said respondent accepts or receives such direct shipments or deliveries from other blood banks licensed by the National Institutes of Health, United States Department of Health Education and Welfare, in discharge of any obligation to the said respondent, !\ othing contained in this order shall operate to prevent any respondent, either individually or in concert with each other or with others, from establishing or participating in the establishment of a blood bank or to prevent any respondent individually from expressing a professional scientific opinion as to the relative merits of various blood banks or from otherwise exercising individual medical judgment in determining whether whole blood (human) shall be utilized in the care of a patient, and, if so, the source from which such blood shall be obtained.

THE CROWELL-COLLIER PUBLISHING CO. ET AL. 977 728 Syllabus It is further ordered That this proceeding be, and it hereby is, dismissed against David T. Beals and Russell W. Kerr, now deceased.

IUs further ordered That the proceeding be, and it hereby is, dismissed as to the following persons in their individual capacities:

Miler Bailey Sister Michaella Marie E. B. Berkowitz Russell H. Miler T. R. Butler Dr. Wiliam C. Mixson Dr. Ralph Coffey Gilbert C. :\furphy Tom J. Daly Adolph R. Pearson Abraham Gelperin Walter A. Reich Meyer L. Goldman James R. Rich Mack Herron Dr. Wiliam J. Sekola Maurice Johnson James T. Sparks Thomas M. Johnson Nathan J. Stark Walter N. Johnson Harry M. Walker James D. Marshall Robert F. Zimmer It is furthe,. ordej' That the respondents herein shall, within sixty (60) days after service upon them of this order, fie with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order. Commissioners Elman and Reilly dissented. Commissioner Elman has filed a dissenting opinion, and Commissioner Rci1y has filed a di senting statement. Commissioner Jones concurred and has filed a concurring statement.