us-ftc-advocacy-filings-3405256b1b08dbbbb02d5f1270f49dd5•FTC Staff Comment to the Hon. John C. McNeil Concerning Massachusetts S.B. 1732 to Regulate Dentist Advertising Practices
FTC Staff Comment to the Hon. John C. McNeil Concerning Massachusetts S.B. 1732 to Regulate Dentist Advertising Practices
us-ftc-advocacy-filings-3405256b1b08dbbbb02d5f1270f49dd5FTC Staff Comment to the Hon. John C. McNeil Concerning Massachusetts S.B. 1732 to Regulate Dentist Advertising PracticesAdvocacy Filing
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F('Of'rKI Trade' LOl1lmissioD
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June 10, 1986
The Honorable John C. McNeil, Chairman
Committee on Health Care
House of Representatives
Room 130
State House
Boston, MA 02133
ATTN: ~s. Ronna Bernstein
RE: Senate Bill 1732
Dear Mr. Chairman:
We are pleased to respond to your April 24, 1986, request
t.h::t we comment on Senfte Bill 1732 and hope that our ren-Iarks
will be of assistance. Although we recognize t~e need to
prohibit deceptive advertising practices by dent~sts and dental
hygienists, it is our belief that a number of p~ovisions in the
proposed legislation wo~ld restrain truthful cO~~unica~ion and
thereby unreasonably inhibit competition and injure consumers.
Your request for comments was limited to S. 1732, which
would amend existing statutory provisions gover~ing dentistry.
These comments represent the views of the Boston Regional Office
and the Bureaus of Consumer Protection, Economics, and Competition
of the Federal Trade Commission. Views expresse~ are not
necessarily those of the Fede~a1 Trade Commission or of any
individual Commissioner. The Commission has, however, reviewed
these comments and has voted to authorize their submission.
2 Our comments are thus limited to that subject. 3~wever, we note that the existing statute, Mass. Gen. Laws Ann. c~. 112, SS2A, contains a~ditional restrictions on advertisin~ ~y dentists. _ These restrictions, like the ones discussed ~e:ow, raise serious concerns of competitive and consumer injury. ~~ would encourage an examination of the existing statute and wo~:: be happy to work further with your committee or others on this ~a:ter. The Federal Trade Commissi0n is empowerec ~~der 15 U.S.C. S4l et sec., to prevent unfair methods of comDe::tion and unfair or deceptive acts or practices in or affecting C~l'n1Tlerce. Pursuant to its statutory mandate, the Com.rr,is::c~ has a~tempted to encourage competition among members of lice~sed professions to the maximum extent compatible with other legiti=ate state and federal goals. For several years, the Commissic~ has been investigating the competitive effects of restrictions on the advertising and business practices of state-licensed professionals, including dentists, optometrists, lawyers, physicians, and others. The Commission's goal is to identify and seek the removal of those restrictions that i~?e5e competition, increase costs, and harm consumers without pro,i:ing countervailing ~enefits. As a part of the Commission's effort to fcs:er competition among licensed professionals, it has examinee t~e effects of pu~lic and private ~estrictions that limit the a~ility of professiona1 2 to engag~ in truthful and nondece~:ive advertising. In this regard, s~udies have sho.n that prices for prcfessional goods and services are lower whe:e advertising See, e.o., American Medical Association, 9~ :.T.C. 701 (1979), a::'~638 F.2d 443 (2d Cir. 1980), affld me .... :-.. an ecuallv divided Co~rt, 455 U.S. 676 (1982). The A~ decision -- which he16 "that broad bans on advertising and soliciting are ir.=~nsistent with the nation's public po:icy" (94 F.T.C. at 1011) -- :~llows the reasoning cf recent Supre~e Court decisions involving p:c:essional reoulation. See, e.o., Zauoerer v. Office of D:scio1inarv Counsel of- the St.:?reme Court of Ohio, 105 U.S. 559 (19;:) (holding that an attorney may not be disciplinec for solicitin; :egal business through printec advertising containing truthful and nondeceptive information regarding the legal rights of potential clients or for using nondeceptive illustrations 0: pictures); Bates v. Sta7E: Bar of Arizona, 433 U.S. 350 (l977) (holding a state s::~)feme court prohibition on advertising invalid under the Fi:st Amendment a~d according great importance to the role of adve::ising in the efficient functioning of the market for profess:'onal services) i anc Virginia State Boare of Pharmacy v. Virginia Ci:izens Council, 425 U.S. 748 (1976) (holding a Virginia prohibitior. on advertising by pharmacists invalid). 2
3 exists than where it is restricted or prohibited. 3 Studies have also provided evidence that restrictions on acvertising raise prices but do not increase the quality of services available. 4 Furthermore, truthful advertising benefits co~sumers by redueing search costs and enabling consumers to make mo~e informed decisions. Therefore, to the extent that tr~:~ful and nondeceptive advertising is restricted, highe~ prices and a decrease in consumer welfare are likely to res~lt. The Commiss:on has also exa~ined various justifica:ions that have been offered for restrictions on advertising a~d has concluded, as the courts have, that, by and large, these proffered reasons do not justify restrictions on truthful adver:ising. For these reasons, only false or deceptive advertising s~ould be prohibited. We believe that a simple prohibition asa:~st false or deceptive advertising is the best means of pro:ecting both cons~mers and the competitive process. Any m~~e restrictive standard is likely to suppress the disseminat:~~ of potentially useful information and may contribute to an i~=rease in prices. I. Disadvantages and Costs of the Proposed Legislation It is desirable for consumers to have as much truthful information as possible about the price, quali:y and other attributes of goods and services. The propose: legiElation could reduce the availability ,of such information a~: thus lessen the opportunity for informed decision making and :~crease cor.sumer search costs. A. Prohibitions on Comm~nication of NonF:ice Information Bureau of Economics and Cleveland Regiona: Office, Federal Trade Co~~:ssion, Imp:oving Consumer Access to Lega: S~:vices: The Case for Removing Restrictions on Truthful Aevertis:ng (1984): Bureau of Economics, Federal Trade Commission, Effects c: Restrictions on Adve::ising and Commercial Practice in the Prc:essions: The Case of Optometry (1980) i Benham and Benham, Reoulat:~= ~rough the Pro:ess:o~s: A Persoective on Information Co~:rol, 18 J.L. & Econ. 421 (1975) i Benham, The Effects of Advertisinc on the Price of Eveclasses, 15 J.L. & Econ. 337 (1972). Case 4 Bureau of Economics, Federal Trade Commission, Effects of Restrictions on Advertising and Commercial Prc=tice in the Professions: The Case of Optometry (1980): Caoy, Restricted Advertising and Competition: The Case of Retail Drugs (1976): McChesney and M~ris, The Effects of Advertisi~= on the Quality Leoal Services, 65 A.B.A.J. 1503 (1979): Muris and McChesney, Advertisino and the Price and Quality of Lecal Services: The for Leocl Clinics, 1979 Am. B. Found. Researcr. J. li9 (1979). 3 of
5 A num~er of sections of the proposed legis:ation would appear to prohi~it communication of important nonprice information that could aid consumers in selecti~g a dentist or dental hygienist. As such, they could unreaso~ably inhibit competition and injure consumers. First, Se=tion (1) would prohibit advertisements by dentists or dental hygienists that "contain a statement of opinion as to the qual~ty of dental services." A ban such as this on claims about q~:lity is likely to be injurious to co~p~tition and consumers. Virtually all statements about a se:ler's performance, experience, or qualifications coul~ be interpreted as implying statements of opinion as to quality. A ban on such claims would make it difficult for a seller to provide consumers truthful information about differences between his or her services and those of his or her competitors. When sellers cannot compare the quality and related attr~butes of their services to those of their competitors, the incentive to compete on those a 5tributes is likely to be reduced, to the detriment of consumers. Second, Section (3) would prohibit advertisements that arefer to benefits or other attributes of denta: procedures or products that involve signifir.ant risks but that do not include realistic assessments of the safety and efficacy of those procedures or products." We recognize that disclosures of safety and efficacy :nformation may ce necessary in so~e circumstances to prevent deception or health fraud. Those c::cumstances, however, sho~ld be determined on a case-by-cas~ basis. This provision ~ay be overly broad and may prevent cr chill the communication to consumers of valuable information about new and innovative dental procedures and practices. I: is possible that information concernin~ assessments of safety a~: efficacy could be communicated in other ways that would not prohibit or chill no ..dece?tive advertising. For example, disclos~res to individual patient2, by phone or in person, would provide :he pertinent information to patients in a settins where any questions could be answe~ed directly. T~irG, Section (4) would ban advertisements that ·contain statistical data, representations or other information that is not susceptible to reasonable verification by the public." The intent of this ban is unclear and, de?ending o~ its interpretation, it could have significant anticompetitive effects. If the intent is to require dentists to have We have not commented on Section (2) because, although restrictive, it is not aimed at deception but at controlling appeals to anxiety. 4
-". substantiation for advertising claims, this would be consistent with Federal Txaae Commission deception case law,6 and would not be objectionable. However, the language could be construed much more broadly to require not only that the advertiser have a - reasonable basis for advertising claims, but also that the su~stantiation material be available to and understandable by the general public. This would significantly restrict useful nondeceptive advertising. If a substantiation requirement is desired, a simple requirement that a dentist have a reasonable basis for advertising claims would be preferable to the proposed language. Fourth, Section (7) requires the Rtruthful disclosure of the source and authorship of any message published under a dentist's byline. R This requirement appears to be aimed at Rghostwritten" informational columns, which, like most advertisements, are not written by the advertiser. If such an advertisement's contents a:e accurate and it is not deceptively presented as something other than an advertisement, no deception or other harm to consumers will result. Therefore, we believe that special restrictions aimed at Rghostw:itten R advertising are unnecessary. B. Prohibitions on Communication of Price Information Two sections of the proposed le9islation appear to place unnecessarily broad prohibitions or restrictions on the communication of price information. As the Supreme Court noted in Bates v. State Bar of Arizona, the lack of price information Rserves to increase the [consumer's) difficulty of discovering the lowest cost seller of acceptable ability. As a result ••. rD~ofessionalsJ are isolated from c9mpetition and the in~entive to price com?etitively is reduced." The absence of such information "servers) to pe§petuate the market position of established professionals. R First, Section (5) would ban advertisements that refer to Ra ~ee or fees for dental services and fail to disclose that ac=itional fees may be involved in individual cases." The intent of this language is unclear, and it could be interpreted in such a way as to cbill truthful advertising. For example, it could be read to require that an advertisement that states a fee for a routine dental examination would violate the stat~te if it did 6 See, e.c., National Commission on Egg Nutrition, 88 F.T.C. 89 (1976), affld, 570 F.2d 157 (7th Cir. 1977), cert. denied, 439 U.S. 821, reissued, 92 F.T.C. 848 (1978). 7 8 433 U.S. at 377. 433 U.S. at 378. 5 ...
not disclose that additional fees would be charged for the filling of a cavity found during the examination. We recommend that the above language be clarified to prohibi~ only deceptive advertising claims. S~cond, Section (6) would prohibit dentists and dental hygien:sts from woffering a discount for dental services without disclosing the total fee from which the discoun: will apply.w This section would apparently require dentists to disclose the regular price of each type of service to which an advertised discount would be applicable. Such a require~~~t would effectively preclude the advertising of across-:~e-board discounts (e.a., Wten percent eff all dental services") for general promctional purposes or for specific groups such as senior citizens or students. Since it ~ould often be impractical to state in an advertisement the regular prices of all of the services covered by such an offer, this section would be likely to suppress certain forms of truthful and valua~le advertising, and it ~ould make other forms of nondeceptive acvertising more costly. II. Conclusion As a general matter, the proposed legislation affecting advertising should be directed only at specific forms of prom~tion that are "inherently likely to deceive or [as to which] the record indicates that a particular f~Om or ~ethod of advertising has in fact been deceptive. w Measured by this standard, the sections of the legislation discussed above appear to be overly restrictive of truthful communica::ons. Because the sections are likely to have an adverse effect O~ competition and on consumer welfare, we believe they should be eliminated or mocified in favor of provisions that are focuse: narro~ly on deceptive advertising practices. As we noted earlier, it is the staff's position that a prohibition of false or decepti,e advertising is sufficient to protect consumers. Amendment. See, 493 F. Supp.~4 In re R.M.J., 455 U.S. 191, 202 (1982). 9 Such a requirement may violate the First e.a., South Ognen C\TS Store, Inc. v. Ambach, (S.D.N.Y. 1980). 10 E
· . We thank you for your willingness to consider our comments. We would be happy to supply copies of the studies - referred to above O~ to provide any other assista~ce you desire. Phoebe D. Morse Regional Direc~or Boston Regional Office 7
JOHN C. Mc~t:IL 36T.. ""'IO:;l~£SEX OIS-'RI:::-:- C:'7y 01" l01I 4~O['" OIST.I~ 0 ..... :[ Tn.. 322.4;;:.; !lJ£ ?f:./l'/71C'/lu:£aI1A ~vltaJJado£/L> HOUSE: OF REPRESENTATIVES COMM:TiEE ON HEALTH CARE: OFFICE: OF THE CHAIRMAN 11I00'" 130 STATE MOuSE BOSTON ...... 0:' 33 Tt~. 722·: 130 Mr. ~1ll1a~ P. McDonough Federal Trade COm=i5Sio~ 150 Cause~ay Street Bosto~. ~~ 02114 Dear Mr. McDonou£h: ApT:l 24. 1986 I a~ enclosing a ~O?y 0: S.li32. An Act Rebula:~~; Certai~ Dece?tive AcveTtisi~g B: Dentists. la·..... Trace It is questic~a~le ~he:he~ this bill is consis:e~: ~ith federal The Health Care Co~~it:ee re~uests the opi~io~ c: the Federal Co~~ission O~ t~is ~ct:€=. R.B :c Tha~k you.
( : I , 112 § 52 PROn:5SIO~S A.-.;n OCCt:PATJO~S § 52A. JJI ega I advertising l'o rel;istered dentist, person prac::~:::g dentist.ry, or dental hYbieni.st st...]] include, or ;::.ennit. or cause to b€ i:".:luded. in any newspaper. radio. or tele\-lsion advertisement. or in any 6play si~:. personal solicit.:itior. or o~her manner of advertising. any ~-:::ter. or spoken words or S:4:.€- ments 0: a character tending to decein c:- misiead the pu~lic, or c1aimi.OO:E; professional stJperio~ty or the periol'":':".:o.:::e 0: professional services in a superior manner, or the performance c: rainless operations of a dental or oral surgical na~ure. or shall ao\'ertiH ...-itt. signs or printed adver.ise- ment.s. or by means of show cases. ro:::.aining the representation of a too:~. teeth, den:4l restoration of an:; I;;:,.d or of ..... hatsoever desig-r. or description or any portion of the hurr.a:-. heac 0: neck or photograph of a:'Jy ;:'€~on. or shall make or set for":...:-;:, prorr:ises. guarantees. repre- sen:.a~ior.s. or statement.s that satisfac:i-::. or a cure will result from the petiorrroance of professional services: ?:-:-\·idec. however. that the fore- gOing shall not be construe--: to prt";e::t the publication of tn:th!:.l1 aC·.. enise:7ien:.s concerning the avail.:·:::::; and price of routine dent.<.i se!·....ices by persons subject to :..~is sec':c:.. ~ ot~.ing in the provisions 0: this section shall be construed to apply u: or prohibit. restrict or limi~ the op€rG:ions of the business of a den~: :.:o.:'orawry. The board may. by repla:ion. in a manner consistent v.,t:: :'-.e foregoin&. fur...her reg-ula:.e ac\'ertisir.g by pe!'sons subject to th;~ se-::ion. Adced by S:.l93~. c. 2Sl. Amended by 5~::37. c. 2.52: St.1954. c. 405. § 2; 5:"1965, c. 583. § 8; SUS";'i , c. i57. § 11; 5:":978, c. 50&, § 4.
I SL'ULAR h1AITER FlLEI? DURlt'G PAST SESSION·
S. /73;). By..... Be-·o : a " L" -- - ,- -
__ . ......-. , petltlon '\. i.' t t •••
~:$:~~~.) of Lo~:s P. Be~toi.a::i fo~ leg:slation toe:~:_. :- --.~t
de~e?t:ve adve~tisin; by dentis~s. H~lth ea- ~e6ula.e certain __••e.
JS THE YEAR OSE THOl'SASD l'iISE HVSDRED A~D EICafn-- --
;~ AC~ REG~LA7:NG CE~~h!N DECE?T!\~
AN ACT
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Sf' il tnl;nrd, by Inr Stncu cr:d Housr of RrprrJtnl~ti\'rJ in Crnrra! Coun QJstmbir:.
er:: by ti-:r authority ('If du samt. QS folio ... ·s:
_ ..,. .at~ Section 52h 0: C:'ap-:.er 112 of the General La.....'s as
~~5t =ece~-:'ly amended by Ch2?~er 508 of the Ac:s cf 1978 is
a registered ae~-:'is~, perso~ --=t:>-'''",e--v f..t_ •• ,-_. I
cr ce:: tal hyC; ieni s-:' inc: l ~=e, or perrr:i t, c= cause to be
in racio, or television
acvertise:71ent, . ~ .,. 1or ~n any ~~s?_ay slc;n, persona solicitatio:i
cr other manner of acvertising, any ~ritte~ or spoken ~orcs
or statenents 0: a character that:
(1) contain a state~er:t 0: opi~ion as to the ~~ali-:'y c:
.... ""
.' c . - T·- (2) appeal to an incividual's anxiety in an excessive 0= ~nfai= way, c= which i~ti~idate cr exe=t undue p=essu=e (3) re!e= to benefits 0= othe= att=~utes of cental p=oce=~=es 0= ?=ocucts that involve si~~ificant risks but that do not incluce realistic assess~e~~s of the s~fety and efficacy of those p=oced~=es 0= products; (~) contain statistical data, =ep=esentations, c= othe= info~ation t~at is net susce?~i~le to =easonable ve=ification by the p~blic; (5) =efe= to a fee 0= fees fe= cE~~~l se=vices and fail to cisclose fee s I.,cy be involved in inC:ivic1.:.2.1 cases, if the possibility cf incu==ing such (6) offe= a disceunt fc= dental se~:ices ~it~out (7) fail to !i.ake t=-..:t::ful di5:::10s-..::e of t~e sou:-:::e -- - c:.. ......... b "'~"'oQ ~ -_.. _. ...
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