The Federal Trade Commission began a hearing yesterday to determine whether the American Medical Association uses its code of ethics to fix prices and stifle competition among physicians.

The FTC's case, as presented by its staff, charges that state and local medical societies, following the AMA's lead, discipline members who attempt to advertise what they charge for services or who attempt to compete financially with other members by offering to sell their services on a contract basis for less than the going rate.

At the heart of the case is Section 5 of the AMA's Principles of Medical Ethics, which states that a physician "should not solicit patients."

In its brief of the case to be presented during the estimated 10 weeks of hearings before assistant chief administrative law judge Ernest G. Barnes - the FTC staff said it will give examples of how local and state medical societies, acting under the national organization's code of ethics, have restricted the way in which physicians can disseminate information about medical procedures, charges and health delivery plans. The case also is to tell how the societies have disciplined errant members.

The Supreme Court ruled last June [WORD ILLEGIBLE] lawyers may advertise the availabilty and prices of "routine" legal to prices, such as uncontested divorces, [WORD ILLEGIBLE] and personal bankruptcies. [WORD ILLEGIBLE] lawyers for the AMA and for the connecticut State Medical Society [WORD ILLEGIBLE] the New Have County Medical Society, who are named in the FTC complaint along with the AMA, have [WORD ILLEGIBLE] to use that Supreme court involving the Virginia State Bar, in their defense against the FTC complaint.

According to the AMA about 200,000 of the 380,000 physicians in the United States were AMA members and about 239,000 were members of the Connecticut medical society in 1974 the last year for which figures were available. Unlike lawyers - who must belong to a bar assciation to practice - the AMA argues, physicians can practice without being affiliated with local, state or national medical societies.

In its defense, the AMA argues that its disciplinary proceedings affect only members, that membership is voluntary, that it has no control over what portions of its code of ethics state and local medical societies - which are autonomous - enforce or how they enforce them, that it does not prohibit advertising or competition and that it has a right to establish standards for its members.

The AMA's chief counsel in the case, former Federal Communications Commissioner Newton Minow said that the organization is 'against false and deceptive advertising" and that its code of ethics serves to protect the public against quackery and misleading claims.

"We don't think the principles of the market place are necessarily those of the American Medical Association because there's always someone who will do it cheaper and do it worse," Minow said.

Asked why doctors do not advertise if AMA does not prohibit it, William J. Doyle, lawyer for the Connecticut State Medical Society, said physicians "are not used to doing it."

The AMA brief also lists 10 states that prohibit any advertising by physicians, another 8 that bar "unethical" advertising, 4 that severely restrict advertising, 15 that make misleading or deceptive advertising illegal and a scattering of other states that restrict various forms of advertising. Only four states - Indiana, New Hampshire, West Virginia and Montana - do not have statutes concerning advertising by physicians.

In addition to the complaint against the AMA, filed in late 1975, the FTC is investigating whether the AMA has illegally restrained the supply of physicians. The FTC also filed a complaint similar to the one against the AMA against the American Dental Association last January.