WASHINGTON — For years, it has been standard practice in many states for title insurance companies to get together to determine the fees that they will charge to insure home buyers against the possibility that someone else owns their new homes.
But in January, the Federal Trade Commission shocked the industry by formally charging six major national companies, including three based in California, with illegal price fixing in 13 states.
The title insurance industry is only the latest part of the economy's burgeoning service sector to feel the sting of action by either the FTC or the Justice Department, the government's other antitrust enforcer. Service industries--everything from health care to retailing--now account for about three of every four jobs in the country and, as they have grown, the FTC and the Justice Department have shifted their attention to doctors, lawyers, engineers and trade associations that set industrywide standards and prices for a variety of services.
The new direction, which has evolved over the last decade and has been intensified by the Reagan Administration, represents a major departure for the government, which has traditionally focused its antitrust efforts on manufacturing industries. In the 1970s, the FTC and the Justice Department initiated antitrust actions against American Telephone & Telegraph, International Business Machines and the major oil companies.
"What I see us trying to do is to apply old ideas to new areas," said Timothy J. Muris, director of the FTC's bureau of competition. As the economy shifts from manufacturing to services, Muris said, "antitrust law has to change with it."
But the new approach has raised a storm of controversy. Some antitrust activists charge that the FTC has all but abandoned antitrust prosecutions aimed at manufacturing companies, and the service-sector targets of the FTC's new campaign believe that they are being unfairly singled out.
"The FTC and the Justice Department periodically examined our industry over the past 15 years and never before raised this issue," said Erich E. Everbach, senior vice president and general counsel of Ticor Title Insurance in Los Angeles, one of the six companies named in the FTC complaint.
The title insurance industry, which has vowed to fight the complaint, maintains that its rating procedure is a legitimate part of the "business of insurance" and is a state-regulated activity exempt from antitrust law under the 1945 McCarran-Ferguson Act.
The complaint is pending before an FTC administrative law judge.
The industry takes heart from a March 27 Supreme Court decision. In a case involving a Justice Department challenge to the collective rate-making procedures of trucking companies in four Southern states, the court ruled the Justice Department action invalid because the procedures were supervised by state regulators.
That ruling is unlikely to cool the enthusiasm of James C. Miller III, the FTC chairman who has spearheaded the Reagan Administration's campaign against anti-competitive forces in the service sector. It is no coincidence that Miller is also the first economist to head the commission, and he repeatedly emphasizes the "rational economic underpinnings of our law enforcement priorities."
Under Miller and Muris, the FTC has moved against restrictions on advertising by professional groups, price fixing by real estate brokers and lawyers, and trade association boycotts of manufacturers doing business with discounters. It has launched dozens of investigations of state regulatory boards and looked at several unions, including the Screen Actors Guild for allegedly pressuring advertisers to use union actors in TV commercials.
In addition to the title insurance industry, Miller's FTC:
- Announced a consent agreement last May with the National Assn. of School Music Dealers, which agreed not to interfere with the distribution practices of manufacturers of musical instruments. The commission had charged that the association had urged members to boycott manufacturers that shipped directly to discount mail-order dealers.
- Announced last May that a real estate multiple-listing service in Michigan City, Ind., had agreed to let member brokers charge or advertise fees lower than prevailing rates.
- Issued a complaint last October charging that the Louisiana State Board of Dentistry unlawfully prohibited dentists from advertising discounts.
- Charged in December, 1983, that an association of trial lawyers in Washington had illegally conducted a group boycott of court-assigned cases to coerce the city government into increasing their fees. An FTC administrative law judge dismissed the complaint, but the FTC staff has appealed the case to the full commission.