FTC Staff Comment Before the Tennessee Board of Dentistry Concerning Proposed Advertising Rules

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UNITED ST.... TES OF A\IER1CA
FEDERAL TRADE CO~1~llSSION
WASHISGTOS. D.C. ::O~80
BU~U,U OF
CONSUMER PROTECTION
April 	30, 	1987
Dr. 	Willian 	A. 	Overton
President, 	Tenn~ssee Board 	of 	Dentistry
283 	plus 	Park 	Blvd.
Nashville, 	rN 	3721~-5407
Dear 	Dr. 	Overton:
We 	are 	pleased 	to 	respond 	to 	your 	request 	for 	our 	comments
on 	the 	advertising 	rules 	that 	the 	Tennessee 	Board 	of 	Dentistry
("Boarj") 	intends 	to 	consider 	at 	its 	rulemaking 	hearing 	on 	May 	1,
1987. 	We 	support 	the 	Board's 	efforts 	to 	broaden 	the 	scope 	of
permissible 	advertising 	by 	dentists, 	and, 	with 	certain
reserv~tions noted 	below, 	we 	urge 	the 	Board 	to 	adopt 	the 	proposeJ
rules.
INTEREST 	AIm 	EXPERIENCE 	OF 	THE 	FEDERAL 	TRADE 	COr-HUSSION
The 	Federal 	Trade 	Commission 	is 	empowered 	under 	15 	U.S.C. 	§§
41 	et~. 	to 	prevent 	unfair 	or 	deceptive 	acts 	or 	practices 	in 	or
affecting 	commerce. 	Under 	its 	statutory 	nandate, 	the 	Commission
encourages 	competition 	among 	members 	of 	licensed 	professions 	to
the 	maximum 	extent 	compatible 	with 	other 	legitimate 	state 	and
,federal 	goals. 	For 	several 	years, 	the 	Commission 	staff 	has 	been
investigating 	the 	competitive 	effects 	of 	public 	and 	private
restrictions 	on 	the 	business 	practices 	of 	dentists, 	optometrists,
lawyers, 	physicians, 	and 	other 	state-licensed 	professionals. 	Our
goal 	is 	to 	identify 	and 	seek 	the 	removal 	of 	restrictions 	that
impede 	competition 	and 	increase 	costs, 	without 	providing
countervailing 	benefits 	to 	consumers.
As 	part 	of 	the 	Commission's 	efforts 	to 	foster 	competition
f 	among 	licensed 	professionals, 	it 	has 	examined 	the 	effects 	of
public 	and 	private 	restrictions 	that 	limit 	the 	ability 	of
1 	These 	comments 	represent 	the 	views 	of 	the 	FTC's 	Bureaus 	of
Consumer 	Protection, 	Competition, 	and 	Economics, 	and 	do 	not
~ecessarily represent 	the 	views 	of 	the 	Commission 	or 	any
individual 	Commissioner. 	The 	Co~~ission has, 	however, 	voted 	to
authorize 	the 	submission 	of 	these 	commen~s.
Bice',t/"nnial of the l'nittd Sta:es Consti;;,;tion

professionals 	to 	engage 	in 	truthful, 	nondeceptive 	advertising. 2
Studies 	indicate 	that 	where 	truthful 	advertising 	is 	permitted,
prices 	for 	professional 	goods 	and 	servic 3s 	are 	lower 	than 	where
advertising 	is 	restricted 	or 	prohibited. 	Studies 	also 	indicate
that 	removing 	restrictions 	on 	~dvertising does 	not 	decrease 	the
quality 	of 	services 	available. 	We 	have 	examined 	various
justifications 	that 	have 	been 	offered 	for 	restrictions 	on
advertising 	and 	have 	concluded, 	as 	the 	courts 	have, 	that 	these
reasons 	do 	not 	justify 	restrictions 	on 	truthful, 	nondeceptive
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Dr. 	William 	A. 	Overton 	Page 	2
2 	See, 	e.g., 	American 	Medical 	Association, 	94 	F.T.C. 	701 	(1979),
affld 	638 	F.2d 	443 	(2d 	Cir. 	1980), 	aff'd 	memo 	by 	an 	equally
divided 	Court, 	455 	U.S. 	676 	(1982). 	The 	thrust 	of 	the 	A~A
decision 	--"that 	broad 	bans 	on 	advertising 	and 	soliciting-are
inconsistent 	with 	the 	nation's 	public 	policy" 	(94 	F.T.C. 	at 	1011)
-- 	is 	consistent 	with 	the 	reasoning 	of 	recent 	Supreme 	Court
decisions 	involving 	professional 	advertising 	regulations. 	See,
e.g., 	Zauderer 	V. 	Office 	of 	Disciplinary 	Counsel 	of 	the 	Supreme
Court 	of 	Ohio, 	105 	S.Ct. 	2265 	(1985) 	(holding 	that 	an 	attorney
may 	not 	be 	disciplined 	for 	soliciting 	legal 	business 	through
printed 	advertising 	containing 	truthful 	and 	nondeceptive
information 	and 	advice 	regarding 	the 	legal 	rights 	of 	potential
clients 	or 	using 	nondeceptive 	illustrations 	or 	pictures); 	Bates
v. 	State 	Bar 	of 	Arizona, 	433 	U.S. 	350 	(1977) 	(holding 	state
supreme 	court 	prohibition 	on 	advertising 	invalid 	under 	the 	First
Amendment 	and 	according 	great 	importance 	to 	the 	role 	of
advertising 	in 	the 	efficient 	functioning 	of 	the 	market 	for
professional 	services); 	Virginia 	State 	Board 	of 	Pharmacy 	V.
Virginia 	Citizens 	Consumer 	Council, 	425 	U.S. 	748 	(1976) 	(holding
Virginia 	prohibition 	on 	price 	advertising 	by 	pharmacists
invalid).
Bureau 	of 	Economics, 	Federal 	Commission, 	Effects 	of
Restrictions 	on 	Advertising 	and 	Commercial 	Practice 	in 	the
Professions: 	The 	Case 	of 	Optometry 	(1980); 	~uris and 	McChesney,
Advertising 	and 	the 	Price 	and 	Qualitv 	of 	Legal 	Services: 	The
Case 	for 	Legal 	Clinics, 	1979 	Am. 	B. 	Found. 	Research 	J. 	179
(1979). 	See 	also, 	Cady, 	Restricted 	Advertising 	and
Competition: 	The 	Case 	of 	Retail 	Drugs 	(1976); 	McChesney 	and
Muris, 	The 	Effects 	of 	Advertising 	on 	the 	Quality 	of 	Legal
Services, 	65 	A.B.A.J. 	1503 	(1979).
(3 	Cleveland 	Regional 	Office 	and 	Bureau 	of 	Economics, 	Federal
Trade 	Commission, 	Improving 	Consumer 	Access 	to 	Legal 	Services:
The 	Case 	for 	Removing 	Restrictions 	on 	Truthful 	Advertising
(1984); 	Bureau 	of 	Economics, 	Federal 	Trade 	Commission, 	Effects 	of
Restrictions 	on 	Advertising 	and 	Commercial 	Practice 	in 	the
Professions: 	The 	Case 	of 	Optometry 	(1980); 	Benham 	and 	Benham,
Regulating 	Through 	the 	Professions: 	A Perspective 	on 	Information
Control, 	18 	J.L. 	Econ. 	421 	(1975); 	Benham, 	The 	Effects 	of
Advertising 	on 	the 	Price 	of 	Eyeglasses, 	15 	J.L. 	& Econ. 	337
(1972).
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Dr. 	William 	A. 	Overton 	Page 	3
advertising. 	For 	this 	reason, 	we 	believe 	that 	only 	false 	or
deceptive 	advertisin~ should 	be 	prohibited. 	Any 	other 	standard
is 	likely 	to 	suppress 	the 	dissemination 	of 	potentially 	useful
information 	and 	may 	contribute 	to 	an 	increase 	in 	prices 	and 	loss
of 	consumer 	welfar~.
PROPOSED 	RULES
The 	proposed 	rules 	represent 	a 	substantial 	improvement 	over
the 	Board's 	existing 	regulations. 	They 	would 	eliminate 	many
provisions 	that 	now 	appear 	to 	impede 	tge 	communication 	of
nondeceptive 	information 	to 	consumers. 	However, 	we 	believe
there 	are 	certain 	additional 	changes 	that 	would 	still 	further
enhance 	the 	rules' 	benefits 	for 	consumers. 	Our 	specific
suggestions 	are 	discussed 	in 	sequence 	below.
1. 	Range 	of 	Fees
ProDosed 	section 	0460-7-.03(2) 	would 	permit 	the 	advertising
of:a 	ran~e of 	fees, 	provided 	that 	there 	is 	a 	disclosure 	of 	the
"basic 	factors 	on 	which 	the 	actual 	fee 	will 	be 	determined." 	We
support 	the 	Board's 	decision 	to 	expand 	the 	scope 	of 	per~issible
price 	3dvertising. 	However, 	we 	have 	some 	concern 	that 	the
disclosure 	requirement, 	if 	construed 	broadly, 	could 	unnecessarily
burden 	truthful 	advertising. 	Vague 	or 	broad 	disclosure
requirements 	often 	force 	advertisers 	to 	provide 	information 	that
i~ 	only 	marginally 	related 	to 	the 	primary 	message 	of 	the
advertisement. 	Such 	requirements 	can 	nonetheless 	require
significant 	time 	in 	a 	radio 	or 	television 	ad 	and 	space 	in 	a
printed 	ad, 	hence 	greatly 	increasing 	the 	cost 	of 	advertising.
Under 	such 	circumstances, 	advertisers 	may 	be 	deterred 	from 	doing
any 	advertising, 	thus 	depriving 	consumers 	of 	potentially 	useful
information. 	Therefore, 	we 	urge 	the 	Board 	to 	announce 	its
intention 	to 	interpret 	"basic 	factors" 	so 	as 	to 	require 	only
t 	_
5 	~he 	current 	rules 	restrict 	advertising 	in 	a 	number 	of
ways. 	For 	example, 	they 	limit 	price 	advertising 	to 	fixed 	prices
for 	routine 	services; 	they 	ban 	the 	use 	of 	certain 	media 	and
require 	all 	broadcast 	media 	to 	be 	prerecorded; 	they 	specify 	that
certain 	categories 	of 	information 	may 	be 	included 	in 	dental
advertising 	and 	specifically 	ban 	the 	use 	of 	a 	wide 	range 	of
nondeceptive 	statements, 	including 	claims 	of 	superiority 	and
affiliations 	with 	nonprofit 	or 	charitable 	organizations; 	they 	ban
any 	use 	of 	testimonials 	as 	well 	as 	other 	attention-getting
devices 	and 	require 	that 	all 	advertising 	be 	done 	in 	a 	dignified
manner; 	they 	also 	include 	a 	broad 	ban 	on 	in-person 	solicitation,
which 	encompasses 	solicitation 	by 	mail 	or 	telephone. 	Finally,
they 	contain 	two 	potentially 	burde~some disclosure 	provisions
which 	require 	that 	the 	names 	of 	all 	dentists 	in 	a 	practice 	be
listed 	in 	all 	advertisir.g 	~nd 	that 	all 	materials 	used 	and 	their
effect 	on 	prices 	must 	be 	given 	in 	any 	advertising 	that 	includes
prices.

2. 	Referral 	Fees
those 	disclosures 	that 	are 	necessary 	to 	prevent 	deception 	of 	the
public.
Proposed 	section 	0460-7-.04(1)(t) 	would 	prohibit 	a 	licensee
from 	"offering, 	giving, 	receiving, 	or 	agreeing 	to 	receive 	any 	fee
or 	other 	consi~eration to 	or 	from 	a 	third 	party 	for 	the 	referral
of 	a 	patient 	in 	connection 	with 	the 	performance 	of 	professional
services." 	This 	proposed 	rule 	would 	appear 	to 	prevent 	dentists
from 	participating 	in 	independent 	referral 	services 	that 	match
clients 	with 	appropriate 	practitioners. 	Such 	services 	may 	be
valuable 	in 	helping 	consumers 	locate 	needed 	dental 	care. 	Indeed,
by 	facilitating 	the 	gathering 	of 	information 	by 	consumers, 	these
services 	~ay 	actually 	increase 	competition 	among 	health 	care
professionals. 	The 	proposed 	rule 	may 	also 	i~terfere with 	the
operation 	of 	alternative 	health 	care 	delivery 	systems 	(such 	as
PPO!s 	and 	HMO's) 	that 	may 	have 	incentive 	arrangements 	with 	health
ca~e 	professionals 	in 	which 	fees 	are 	divided 	between 	the 	medical
pl~n 	and 	the 	professional.
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Dr. 	William 	A. 	Overton 	Page 	4
w~ 	recommend 	that 	the 	Board 	modify 	this 	proposed 	regulation
so 	that 	dentists 	are 	not 	prevented 	from 	participating 	in
legitimate 	referral 	services 	and 	alternative 	health 	care 	delivery
systems. 	In 	addition, 	a 	general 	provision 	articulating 	that
referrals 	should 	be 	made 	and 	accepted 	based 	on 	professional
considerations 	of 	the 	consumers' 	welfare 	rather 	than 	on 	financi~l
considerations 	may 	also 	be 	appropriate.
3. 	Specialty 	Advertising
Section 	0460-7-.05 	of 	the 	Board's 	proposed 	rules 	regulates
the 	advertising 	of 	areas 	of 	specialization 	by 	dentists. 	We
recognize 	that 	Tenn. 	Code 	Ann. 	§ 	63-5-112 	limits 	the 	manner 	in
f 	which 	non-certified 	dentists 	may 	advertise 	their 	expertise.
Within 	these 	statutory 	limits, 	it 	appears 	that 	proposed
regulation 	0460-7-.05(2) 	would 	allow 	a 	general 	dentist 	to 	convey
truthful 	information 	about 	special 	expertise 	that 	he 	or 	she 	has
acquired 	through 	training 	or 	practice 	in 	a 	particular 	field, 	even
though 	this 	has 	not 	led 	to 	formal 	certification. 	However, 	we
draw 	the 	Board's 	attention 	to 	a 	potential 	ambiguity 	in 	this
provision. 	A narrow 	reading 	would 	appear 	to 	allow 	advertisin3 	of
expertise 	only 	by 	those 	general 	dentists 	who 	strictly 	limit 	their
practices 	to 	certain 	branches 	of 	dentistry. 	Because 	we 	believe
that 	consumers 	would 	benefit 	from 	a 	rule 	that 	allows 	all 	dentists
with 	verifiable 	expertise 	to 	communicate 	that 	information 	to 	the
public, 	we 	urge 	the 	Board 	to 	make 	it 	clear 	that 	this 	provision
allows 	such 	advertising. 	Such 	a 	rule 	would 	leave 	dentists 	free
to 	make 	truthful, 	nondeceptive 	claims 	that 	they 	have 	expertise 	in
or 	concentrate 	their 	practice 	in 	a 	particular 	field 	of 	dentistry,
even 	if 	they 	do 	not 'work 	exclusively 	in 	that 	field.

Dr. 	William 	A. 	Overton
4. 	Responsibility. 	for 	Acvertis~.D3..
Page 	5
We 	direct 	our 	final 	comment 	to 	proposed 	:egulation 	0460-7-
.06(1), 	which 	specifies 	those 	individuals 	who 	will 	be 	he:!.d
responsib~e 	for 	the 	form 	and 	content 	of 	dental 	advertising. 	We
understand 	the 	Board's 	need 	to 	establish 	a 	fair 	system 	of
accountability 	for 	denta~ advert~sing decisio~s. 	However,
-hold:ng 	all 	licensed 	professional 	employees 	respons~ble fo~
advertising 	claims-- 	regardless 	of 	their 	actual 	involvement 	in
preparing 	or 	communicating 	these 	claims--cou:!.d 	impose 	undue
hardships 	on 	large 	pract{ces 	where 	many 	~icensed 	employees 	may
play 	no 	role 	at 	all 	in 	advertising 	decisions. 	Therefore, 	we
suggest 	that 	the 	Board 	modi~y 	th~s provision 	~o 	read: 	"Each
licensee 	who 	is 	a 	principal 	partner, 	officer, 	or 	~icensed
professional 	employee 	acting 	in 	~ontrol or 	management 	ofa 	firm
or 	entity 	identified 	in 	any 	advertisement, 	is 	jointly 	and
several~y responsib~e for 	the 	form 	and 	conte~~ of 	any
advertisement." 	In 	this 	way 	only 	those 	emp!oyees 	who 	have 	some
cont~ol over 	advertising 	will 	be 	held 	accountable 	for 	advertising
dec(sions.
with 	the 	except~on of 	the 	reservations 	discussed 	above, 	we
support 	the 	BoaFo's 	adoption 	of 	the 	proposed 	:~les. 	~hey
represent 	a 	significant 	improvement 	over 	the 	exist~ng rules 	and,
if 	adopted 	with 	the 	changes 	we 	have 	proposed, 	~re 	likely 	to
prqvide 	rea! 	and 	substantial 	benefits 	to 	cons~mers. 	They 	wi'~
permit 	public 	access 	to 	a 	wider 	range 	of 	truttful 	information
about 	the 	availability 	of 	dental 	services. 	~~ey 	would 	a~so help
to 	stimulate 	competition 	among 	dentists, 	an~, 	in 	the 	process,
improve 	the 	efficiency 	with 	which 	dental 	servi~es are 	de~ivered,
while 	protecting 	the 	public 	from 	deceptive 	advertising.
We 	thank 	you 	for 	your 	willingness 	to 	consider 	our
c9mments. 	Please 	let 	us 	know 	if 	we 	can 	be 	0f 	further 	assistance.
(
Sincerely 	yours,
W:lliam 	HacLeod
Directo:=
cc: 	Barry 	Turner
Assistant 	Att0rney 	Genera: