A review of the US Supreme Court opinion in National Society of Professional Engineers v. United States and its impact on professional engineering ethics and antitrust law. 

The 1978 Supreme Court of the United States opinion in National Society of Professional Engineers v. United States, 435 US 679 (1978) (National Society of Professional Engineers), marked a significant intersection between professional engineering ethics and antitrust law. At issue was whether the National Society of Professional Engineers’ (NSPE) Code of Ethics (the Code) ban on competitive bidding constituted an unlawful restraint of trade under § 1 of the Sherman Act. After a series of considerations by lower courts, ultimately, the Supreme Court (SCOTUS) decided that NSPE should not adopt any opinion or policy that implied competitive bidding was unethical.

The Background: National Society of Professional Engineers v. US

In 1972, the Government filed a complaint against NSPE and sought to invalidate § 11(c) of the Code, which forbade members from engaging in competitive bidding for engineering services.¹ The complaint alleged that the Code’s bidding ban "tamper[ed] with the price structure of engineering fees" and therefore violated § 1 of the Sherman Act, which makes "[e]very contract, combination…or conspiracy, in restraint of trade or commerce" unlawful.² The government contended that by agreeing to uphold § 11(c) of the Code, engineers suppressed price competition and deprived clients of the benefits of a free market.³ Adopted in 1964, § 11(c) of the Code stated, in part, that a professional engineer "shall not solicit or submit engineering proposals on the basis of competitive bidding," broadly defining such bidding to include any form of price comparison before selection.⁴

The US District Court for the District of Columbia held that § 11(c) of the Code facially violated the Sherman Act by interfering with competitive pricing and issued an injunction against its enforcement.⁵ The DC Circuit Court of Appeals affirmed, describing the restriction as "illegal without regard to claimed or possible benefits."⁶ It also prohibited NSPE from adopting any policies implying that competitive bidding was unethical.⁷ The SCOTUS granted certiorari to decide whether the lower courts should have weighed NSPE’s public safety justification before declaring the restraint unlawful.⁸

SCOTUS’ Opinion: The Sherman Act and Rule of Reason

NSPE conceded the basic anticompetitive nature of § 11(c) of the Code, but argued the section was reasonable because encouraging competition among professional engineers was contrary to the public interest and compromises public safety.⁹ NSPE claimed that competitive pressure could incentivize professional engineers to design inefficient or unsafe structures to cut costs, ultimately endangering the public.¹⁰

Under antitrust law, courts generally evaluate such claims using the "rule of reason," which considers whether a restraint promotes or suppresses market competition.¹¹ The inquiry under the rule of reason framework is whether the challenged agreement is one that promotes competition or one that suppresses competition.¹² Some restraints are plainly anticompetitive price agreements, market-division schemes, and the like are per se illegal; others require a fact-intensive rule of reason analysis.¹³

Consequently, NSPE argued § 11(c) of the Code was reasonable on factors other than the ultimate impact of its canon on competition among professional engineers. NSPE claimed that it was often easier and less expensive for an engineer to design less efficient structures and specify more costly methods of construction.¹⁴ Thus, it argued that, although in a given case, competitive bidding might reduce the price of engineering services, it might also reduce the quality of those services and increase the overall cost of the project.¹⁵

The SCOTUS rejected both the argument and implication that other factors other than competition should be weighed under the Sherman Act, stating that the Sherman Act’s primary goal is to safeguard competition, not to protect industries or professions from competitive market forces, even under claims of public welfare or quality control.¹⁶ The SCOTUS explained that any justifications based on the dangers of competition itself were fundamentally incompatible with antitrust laws.¹⁷ The SCOTUS emphasized that, while safety and quality are legitimate concerns, these objectives should be pursued through regulatory standards or qualifications rather than anticompetitive practices that restrain market dynamics.¹⁸

The SCOTUS acknowledged that, while § 11(c) of the Code was not price fixing itself, it found no detailed industry analysis was needed to identify its anticompetitive character.¹⁹ Thus, the SCOTUS applied the traditional per se analysis to § 11(c), foreclosing any further inquiry into justifications for the restraint under the rule of reason.²⁰ Ultimately, the Court affirmed the lower court’s ruling, (1) finding § 11(c) of the Code violated § 1 of the Sherman Act and (2) prohibiting NSPE from adopting any opinion or policy that implied competitive bidding was unethical.²¹

The Impact of the SCOTUS Decision

Following the opinion in National Society of Professional Engineers, NSPE revised the Code by removing the competitive bidding portions of the Code. Specially § 11(c) was deleted and § 11 was altered to delete the words "by competitive bidding" in the first paragraph of the section.²²

The SCOTUS opinion also had an impact beyond NSPE. It was part of a broader wave of antitrust actions heard by the Supreme Court during the 1960s and 1970s.²³ In reaching its opinion, the SCOTUS demonstrated a desire to narrowly interpret the Sherman Act in cases where learned professions are involved. The use of a per se language to define a challenged activity added a new dimension to antitrust litigation involving learned professions and their right to self-regulation.²⁴ The fact that National Society of Professional Engineers involved a learned profession and a restraint of trade that was found to be a per se violation is significant because it indicated that the SCOTUS, by refusing to apply a rule of reason analysis, ignored the value of any noneconomic benefits.²⁵ The opinion advanced the trend favoring tighter control over the deviations that have been permitted under a rule of reason analysis.²⁶

This case’s impact is still observed today in modern antitrust actions. Most recently, in NCCA v. Alston, 594 U.S. 69 (2021) (NCAA), reaffirmed and applied National Society of Professional Engineers, concluding that the proper avenue to appeal for exceptions to the Sherman Act is through Congress.²⁷ In NCAA, the SCOTUS found the National Collegiate Athletic Association’s limits on education-related compensation for college athletes violated § 1 of the Sherman Act, and rejected the association’s defense that such limits were essential to preserving amateurism.²⁸

Evolution of the NSPE Code of Ethics

While changes were made to the NSPE Code in response to the SCOTUS opinion, the Code undergoes periodic reviews by the NSPE Board of Ethical Review (BER). The NSPE Code continues to evolve, addressing contemporary ethical challenges faced by professional engineers. Examples of subsequent changes to the Code include, in 2006, the BER approved a new section (III.2.d) to the Code that read: "Engineers shall strive to adhere to the principles of sustainable development²⁹ in order to protect the environment for future generation."³⁰ Most recently, in 2019, the NSPE House of Delegates approved a new Section III.1.f to the Code, adding: "Engineers shall treat all persons with dignity, respect, fairness and without discrimination."³¹

The SCOTUS’ opinion in National Society of Professional Engineers remains a cornerstone case in antitrust law. While the opinion led to changes to the Code, it affirmed the primacy of federal law over model rules of ethics. The ruling continues to influence how courts evaluate similar restraints professions, establishing a clear boundary between ethical considerations and antitrust compliance.