FTC Staff Comment Before the Hawaii Office of Auditor Concerning Regulation of Optometric Advertising

FEDERAL TRADE COMMISSION
San Francisco Regional Office
Box 36005
450 Golden Gate Ave.
San Francisco, CA 94102
(415) 556-1270
Mr. 	Owen 	H. 	Yamasaki
Office 	of 	the 	Auditor
465 	S. 	King 	Street 	Room 	500
Honolulu, 	HA 	96813
Dear 	Mr. 	Yamasaki:
COMMISSION~
APPROVED 	j~l
AUG 211986
1
You 	recently 	requested 	comments 	in 	connection 	with 	your
sunset 	review 	of 	statutory 	provisions 	prohibiting 	certain
business 	practices 	by 	members 	of 	the 	optometric 	profession. l
The 	Federal 	Trade 	Commission's 	Bureaus 	of 	Competition, 	Consumer
Protection 	and 	Economics, 	and 	its 	San 	Francisco 	Regional 	Office,
are 	pleased 	to 	respond 	to 	this 	request. 2 	As 	discussed 	below, 	we
strongly 	recommend 	the 	repeal 	of 	statutory 	restrictions 	on
truthful 	advertising, 	such 	as 	the 	laws 	that 	ban 	the 	advertising
of 	discounts 	or 	claims 	of 	superiority. 	We 	also 	recommend 	the
repeal 	of 	laws 	that 	unduly 	limit 	the 	commercial 	formats 	open 	to
optometrists, 	such 	as 	the 	laws 	banning 	trade 	names 	or
affiliations 	with 	lay 	corporations. 	Studies 	conducted 	by 	the
staff 	of 	the 	Federal 	Trade 	Commission 	and 	others 	indicate 	that
such 	restrictions 	are 	likely 	to 	raise 	the 	price 	of 	optometric
goods 	and 	services 	without 	providing 	any 	countervailing 	benefits
to 	consumers.
The 	Federal 	Trade 	Commission 	is 	empowered 	under 	15 	U.S.C.
§~ 	41 	et 	seq. 	to 	prevent 	unfair 	methods 	of 	competition 	and 	unfair
or 	deceptive 	acts 	or 	practices 	in 	or 	affecting 	commerce.
Pursuant 	to 	this 	statutory 	mandate 	the 	Commission 	has 	attempted
to 	encourage 	competition 	among 	members 	of 	licensed 	professions 	to
the 	maximum 	extent 	compatible 	with 	other 	legitimate 	state 	and
federal 	goals. 	For 	several 	years 	the 	Commission 	has 	been
investigating 	the 	competitive 	effects 	of 	restrictions 	on 	the
business 	practices 	of 	state-licensed 	professionals, 	including
Hawaii 	Rev. 	Stat. 	Ann. 	§§ 	459 	et 	seq. 	(1984).
2 	These 	comments 	represent 	the 	views 	of 	the 	Commission's
Bureaus 	of 	Competition, 	Consumer 	Protection 	and 	Economics, 	and
those 	of 	its 	San 	Francisco 	Regional 	Office, 	and 	do 	not
necessarily 	represent 	the 	views 	of 	the 	Commission 	or 	any
individual 	Commissioner. 	The 	Commission, 	however, 	has 	authorized
the 	submission 	of 	these 	comments.

4
optometrists, 	dentists, 	lawyers, 	physicians, 	and 	others. 	Our
goal 	has 	been 	to 	identify 	and 	seek 	the 	removal 	of 	those
restrictions 	that 	impede 	competition, 	increase 	costs, 	and 	harm
consumers 	without 	providing 	countervailing 	benefits.
Advertising 	Restrictions
As 	a 	part 	of 	the 	Commission's 	efforts 	to 	encourage
competition 	among 	licensed 	professions, 	it 	has 	examined 	the
effects 	of 	public 	and 	private 	restrictions 	that 	limit 	the 	ability
of 	professionals 	to 	engage 	in 	nondeceptive 	advertising. 3 	Studies
have 	shown 	that 	prices 	for 	professional 	goods 	and 	services 	are
lower 	where 	advertising 	exists 	than 	where 	it 	is 	restricted 	or
prohibited. 4 	Studies 	have 	also 	provided 	evidence 	that
restrictions 	on 	advertising 	raise 	prices 	but 	do 	not 	increase 	the
3 	See, 	e.g., 	American 	Medical 	Association, 	94 	F.~.C. 	701
(1979), 	aff'd 	638 	F. 	2d 	443 	(2d 	Cir. 	1980), 	aff'd 	memo 	by 	an
egually 	divided 	Court, 	455 	U.S. 	676 	(1982) •. The 	thrust 	of 	the
AMA 	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 	regulations. 	See, 	e.g. 	Zauderer
v. 	Office 	of 	Disciplinary 	Counsel 	of 	the 	Supreme 	Court 	of
Ohio, 	U.S. 	, 	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); 	and 	Virginia 	State 	Board 	of 	Pharmacy 	v.
Virginia 	Citizens 	Council, 	425 	U.S. 	748 	(1976) 	(holding 	Virginia
prohibition 	on 	advertising 	by 	pharmacists 	invalid).
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 	~rade Commission, 	Effects 	of
Restrictions 	on 	Advertising 	and 	Commercial 	Practice 	in 	the
Professions: 	~he 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 	Eyeq1asses, 	15 	J.L. 	& Bcon. 	337
(1972) •
2

5
6
quality 	of 	goods 	anQ 	services. 5 	Therefore, 	to 	the 	extent 	that
nondeceptive 	advertising 	is 	restricted, 	higher 	prices 	and 	a
decrease 	in 	consumer 	welfare 	may 	result.
The 	Commission 	has 	examined 	various 	justifications 	that 	have
been 	offered 	for 	restrictions 	on 	advertising 	and 	has 	concluded,
as 	have 	the 	courts, 	that 	these 	arguments 	do 	not 	justify
restrictions 	on 	truthful 	advertising. 	For 	this 	reason, 	only
false 	or 	deceptive 	advertising 	should 	be 	prohibited. 	Any 	other
standard 	is 	likely 	to 	suppress 	the 	dissemination 	of 	potentially
useful 	information 	and 	may 	contribute 	to 	an 	increase 	in 	prices.
Section 	459-9(3A) 	prohibits 	ootometrists 	from 	advertising
optometric 6 Qoods 	at 	discount. 	We 	urge 	the 	elimination 	of 	this
provision. 	This 	section's 	ban 	on 	an 	important 	form 	of 	price
advertising 	clearly 	deprives 	consumers 	of 	information 	central 	to
their 	purchasing 	decision. 	Because 	it 	makes 	comparison 	shopping
on 	price 	verv 	difficult, 	the 	restriction 	limits 	significant 	and
meaningful 	competition 	among 	optometrists. 	In 	economic 	terms,
the 	existing 	ban 	unnecessarily 	increases 	the 	"search 	costs" 	to
optometric 	patients 	of 	identifying 	those 	practitioners 	who 	offer
the 	price, 	quality 	and 	kind 	of 	care 	suited 	to 	the 	patients'
specific 	needs 	and 	desires.
The 	elimination 	of 	the 	present 	ban 	on 	discount 	advertising
will 	not 	inhibit 	Hawaii 	from 	vigorously 	protecting 	consumers 	from
false 	or 	misleading 	advertising. 	We 	note 	that 	~ 	459-9(3B)
condemns 	false 	and 	deceptive 	advertising. 	Should 	a 	discount
advertisement 	be 	found 	deceptive, 	this 	section 	could 	be
successfully 	invoked 	to 	prohibit 	it. 	A total 	proscription 	on 	all
discount 	advertising, 	however, 	has 	the 	effect 	of 	prohibiting
truthful 	advertising 	about 	a 	vital 	subject 	and 	is 	likely 	to
resu'_t 	in 	a 	signficant 	reduction 	in 	consumer 	welfare.
We 	also 	recommend 	the 	elimination 	of 	that 	part 	of 	§ 	459-
9(3B) 	which 	prohibits 	claims 	of 	superiority 	by 	optometrists.
This 	restriction 	clearly 	lessens 	rivalry 	among 	competing
sellers. 	~he effects 	of 	the 	restriction 	will 	depend 	on 	how 	it 	is
interpreted 	and 	applied. 	At 	a minimum, 	a 	prohibition 	on
Bureau 	of 	Economics, 	Federal 	Trade 	Commission, 	Effects 	of
Restrictions 	on 	Advertising 	and 	Commercial 	Practice 	in 	the
Professions: 	The 	Case 	of 	Optometry 	(1980): 	Muris 	and 	McChesney,
Advertising 	and 	the 	Price 	and 	Quality 	of 	Lega' 	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).
A similar 	ban 	on 	discount 	advertising 	was 	held 	to 	be 	an
unconstitutional 	infringement 	of 	First 	Amendment 	rights 	in 	Terry
v. 	California 	State 	Board 	of 	Pharmacy, 	395 	F. 	Supp. 	94 	(N.D. 	Cal.
1975), 	affirmed, 	426 	u.S. 	913 	(1976).
3

7
advertisements 	that 	contain 	claims 	of 	superiority 	restricts
comparative 	advertising, 	which 	can 	be 	a 	highly 	effective 	means 	of
informing 	and 	attracting 	customers 	and 	an 	important 	competitive
force. 	When 	a 	seller 	cannot 	truthfully 	compare 	the 	attributes 	of
his 	service 	to 	those 	of 	his 	comoetitors, 	the 	incentive 	to 	improve
or 	offer 	different 	products, 	services, 	or 	prices 	is 	likely 	to 	be
reduced.
A ban 	on 	claims 	of 	superiority 	is 	likely 	to 	be 	even 	more
injurious 	to 	competition 	and 	consumers 	if 	interpreted 	to 	prohibit
a 	wider 	range 	of 	truthful 	claims. 	Virtually 	all 	statements 	about
a 	seller's 	qualifications, 	experience, 	or 	performance 	can 	be
considered 	to 	be 	implicit 	claims 	of 	superiority. 	A ban 	on 	all
such 	claims 	would 	make 	it 	very 	difficult 	for 	a 	seller 	to 	provide
consumers 	with 	truthful 	information 	about 	the 	differences 	between
his 	services 	and 	those 	of 	his 	competitors.
We 	also 	recommend 	the 	repeal 	of 	~ 	459-9(3C) 	which 	prohibits
advertising 	that 	identifies 	an 	optometrist 	in 	conjunction 	with
any 	"nonlicensed 	person 	or 	groups 	of 	individuals." 	A ban 	on
advertising 	of 	lawful 	affiliations 	between 	optometrists 	and
retail 	sellers 	of 	optical 	g000S 	denies 	consumers 	information
about 	"non-traditional" 	and 	potentially 	efficient 	forms 	of
providing 	eye 	care 	goods 	and 	services. 	It 	can 	pose 	a 	barrier 	to
entry 	by 	large 	optical 	establishments 	and 	reduce 	the 	pressure 	on
other 	sellers 	of 	eye 	wear 	to 	compete, 	not 	only 	with 	respect 	to
price, 	but 	also 	as 	to 	convenience 	of 	service~ 	It 	can 	thereby
injure 	consumers 	through 	higher 	prices 	and 	reduce 	consumer
choice.
We 	further 	recommend 	the 	elimination 	of 	~ 	459-9(5), 	which
bans 	the 	use 	of 	house-to-house 	canvassing. 	This 	prohibition 	may
in 	some 	instances 	impede 	the 	flow 	of 	truthful 	commercial
information 	from 	practitioners 	to 	potential 	clients. 	Such
restrictions 	on 	the 	dissemination 	of 	information 	may 	make 	it 	more
difficult 	for 	buyers 	to 	learn 	about 	the 	availability 	of 	goods 	and
services 	and 	differences 	in 	price 	and 	quality, 	thereby 	insulating
competitors 	from 	direct 	competition 	and 	reducing 	the 	incentive 	to
compete 	on 	the 	merits. 	Although 	Hawaii 	may 	have 	a 	legitimate
interest 	in 	preventing 	over-reaching 	by 	canvassers 	in 	general, 	we
believe 	that 	an 	absolute 	ban 	on 	house-to-house 	canvassing,
singling 	out 	optometric 	goods 	and 	services, 	is 	unjustified.
Finally, 	we 	recommend 	the 	repeal 	of 	that 	part 	of 	§ 	459-9(8)
which 	requires 	that 	a~l 	advertising 	identify 	the 	individual
optometrist 	involved. 	This 	provision 	is 	likely 	to 	raise 	the
Section 	459-9(8) 	also 	seems 	to 	prohibit 	the 	use 	of 	trade
names 	by 	optometrists. 	As 	discussed 	more 	fully 	in 	the
"Commercial 	Practice 	Restrictions" 	section 	of 	this 	letter, 	we
recommend 	that 	optometrists 	be 	permitted 	to 	use 	trade 	names. 	The
use 	of 	such 	names 	can 	be 	critical 	to 	the 	establishment 	of 	large
Footnote 	continued
4

costs 	of 	advertising 	for 	optometric 	practices 	involving 	many
members, 	and 	therefore 	to 	inhibit 	advertising 	by 	such
practices. 	As 	a 	consequence, 	consumers 	would 	be 	deprived 	of 	the
benefits 	of 	that 	advertising. 	Consumers 	can 	learn 	the 	identity
of 	the 	optometrist 	who 	is 	responsible 	for 	their 	care 	in 	a 	number
of 	less 	burdensome 	ways. 	For 	example, 	a 	provision 	could 	be
enacted 	to 	require 	that 	the 	names 	of 	all 	optometrists 	practicing
at 	a 	particular 	facility 	be 	clearly 	posted 	at 	that 	location.
This 	alternative 	would 	more 	directly 	inform 	patients 	of 	the
identity 	of 	their 	optometrist 	without 	the 	attendant 	costs 	imposed
by 	£) 	459 -9 (8) •
You 	have 	asked 	whether 	the 	Commission 	has 	modified 	its
position 	on 	advertising 	restrictions 	after 	the 	decision 	in
American 	Optometric 	Association 	v. 	FTC,8 	which 	remanded 	§§ 	456.2
through 	456.6 	of 	the 	Advertising 	of 	Ophthalmic 	Goods 	and 	Services
Trade 	Regulation 	Rule 	("Eyeglasses 	Rule") 	for 	further 	study. 	In
the 	American 	Optometric 	Association 	case, 	the 	court 	determined,
among 	other 	things, 	that 	the 	remanded 	portions 	of 	the 	rule 	were
unnecessary 	in 	li~ht of 	the 	Supreme 	Court's 	decision 	in 	Bates 	v.
State 	of 	Arizona. 	The 	Commission 	has 	not 	altered 	its 	position
that 	restrictions 	on 	truthful, 	non-deceptive 	advertising 	diminish
consumer 	welfare 	and 	should 	be 	vigorously 	opposed. 	In 	harmony
with 	this 	position, 	the 	Commission 	has 	proceeded 	on 	a 	case-by-
case 	basis 	to 	review 	and, 	in 	cert~~n instances, 	challenge 	rules
affecting 	ophthalmic 	advertising. 	.
You 	also 	ask 	whether 	the 	advertising 	disclosure 	requirements
mandated 	by 	§ 	459-10 	are 	"necessary 	to 	protect 	the 	public's
welfare 	or 	do 	they 	serve 	to 	discourage 	advertising." 	Section
459-10 	is 	adapted 	from 	~ 	456.5 	of 	the 	"Eyeglasses 	Rule." 	That
rule 	authorized 	certain 	permissible 	state 	restrictions 	that 	did
not 	appear 	to 	be 	unreasonably 	burdensome 	limitations 	on
advertising. 	We 	do 	not 	believe, 	however, 	that 	such 	restrictions
are 	necessary 	to 	prevent 	deception. 	Therefore, 	we 	recommend 	the
repeal 	of 	~ 	459-10.
group 	practices 	and 	chain 	operations, 	which 	often 	offer 	lower
prices 	to 	consumers.
8
9
626 	F. 	2d 	896 	(D.C. 	Cir. 	1980).
433 	u.S. 	350 	(1977).
10 	The 	most 	recent 	example 	of 	this 	effort 	is 	the 	Commission's
case 	against 	the 	Massar.husetts 	Board 	of 	Optometry 	(Docket 	No.
9195). 	On 	June 	23, 	1986, 	the 	administrative 	law 	judge 	ruled 	that
the 	board 	may 	not 	prohibit 	the 	advertising 	or 	offering 	of
discounts, 	or 	advertising 	that 	optometrists' 	services 	are
available 	in 	commercial 	establishments; 	or 	restrict 	advertising
that 	uses 	testimonials 	or 	advertising 	that 	the 	board 	considers
sensational 	or 	flamboyant. 	Both 	parties 	have 	appealed 	this
decision 	to 	the 	Commission.
5

Commercial 	Practice 	Restrictions
We 	also 	take 	this 	opportunity 	to 	comment 	on 	several 	current
statutory 	provisions 	that 	limit 	the 	manner 	in 	which 	optometrists
may 	do 	business. 	Section 	459-9(4) 	prohibits 	the 	employment 	of
optometrists 	by 	lay 	persons 	or 	cor.porations. 	Section 	459-9(6)
prohibits 	the 	practice 	of 	optometry 	on 	the 	premises 	of 	a
commercial 	firm, 	and 	restricts 	ownership 	of 	optometric 	practices
to 	licenseo 	optometrists. 	Section 	459-9(8) 	prohibits 	the 	use 	of
trade 	names 	by 	optometrists.
We 	are 	concerned 	that 	these 	provisions 	may 	unnecessarily
hamper 	optometrisII who 	wish 	to 	market 	their 	services 	in 	a 	cost-
efficient 	manner. 	For 	example, 	banning 	the 	practice 	of
optometry 	on 	the 	premises 	of 	a 	commercial 	concern 	prevents
optometrists 	from 	locating 	their 	practices 	inside 	retail 	drug 	or
department 	stores 	where 	they 	can 	establish 	and 	maintain 	a 	high
volume 	of 	patients 	because 	of 	the 	convenience 	of 	such 	locations
and 	a 	high 	number 	of 	"walk-in" 	patients. 	This 	higher 	volume 	may,
in 	turn, 	allow 	professional 	firms 	to 	realize 	economies 	of 	scale
that 	may 	be 	passed 	on 	to 	consumers 	in 	the 	form 	of 	lower 	prices.
This 	restriction 	may 	also 	increase 	costs 	for 	chain 	optical 	firms
by 	requiring 	optometrists 	associated 	with 	such 	firms 	to 	locate 	in
separate 	offices 	or 	to 	establish 	separate 	entrances. 	Such 	higher
costs 	may 	decrease 	the 	number 	of 	chain 	firms, 	resulting 	in 	higher
prices 	for 	consumers.
lIOn 	January 	4, 	1985, 	the 	Commission 	proposed 	an 	Ophthalmic
Practices 	Trade 	Regulation 	Rule 	that 	would 	prohibit, 	among 	other
things, 	state-imposed 	bans 	on 	traae 	name 	usage 	and 	bans 	on
employment 	or 	other 	relationships 	between 	optometrists 	and 	non-
optometrists. 	~he Commission 	stated 	in 	its 	~otice of 	Proposed
Rulemaking 	that 	public 	restraints 	on 	the 	permissible 	forms 	of
ophthalmic 	practice 	appear 	to 	increase 	consumer 	prices 	for
ophthalmic 	goods 	and 	services, 	but 	do 	not 	appear 	to 	protect 	the
public 	health 	or 	safety. 	See 	50 	Fed. 	Reg. 	598, 	599-600 	(1985).
In 	a 	case 	challenging 	various 	ethical 	code 	provisions
enforced 	by 	the 	American 	Medical 	Association 	("AMA"), 	the
Commission 	found 	that 	AMA 	rules 	prohibiting 	physicians 	from
working 	on 	a 	salaried 	basis 	for 	a 	hospita}. 	or 	other 	lay
institution, 	and 	from 	entering 	into 	partnerships 	or 	similar
relationships 	with 	non-physicians, 	unreasonably 	restrained
competition 	and 	thereby 	violated 	the 	antitrust 	laws. 	American
Medical 	Association, 	94 	F.T.C. 	701 	(1979), 	affld, 	638 	F.2d. 	443
(2d 	Cir. 	1980), 	affld 	mem. 	bv 	an 	eauallv 	divided 	court, 	455 	U.S.
676 	(1982). 	The 	Commission 	concludeo 	that 	the 	Ar~Is prohibitions
kept 	physicians 	from 	adopting 	more 	economically 	efficient
business 	formats 	and 	that, 	in 	particular, 	these 	restrictions
precluded 	competition 	by 	organizations 	not 	directly 	and
completely 	under 	the 	control 	of 	physicians. 	The 	Commission 	also
found 	that 	there 	were 	no 	countervailing 	procompetitive
justifications 	for 	these 	restrictions.
6

12
Similarly, 	the 	use 	of 	trade 	names 	by 	optometrists 	can 	be
essential 	to 	the 	establishment 	of 	large 	group 	practices 	and 	chain
operations 	that 	are 	able 	to 	exploit 	economies 	of 	scale 	and,
consequently, 	to 	offer 	lower 	prices. 	Trade 	names 	are 	chosen
because 	they 	are 	easy 	to 	remember 	and 	may 	also 	identify 	the
location 	or 	other 	characteristics 	of 	a 	practice. 	Over 	time, 	a
trade 	name 	ordinarily 	comes 	to 	be 	associated 	with 	a 	certain 	level
of 	quality, 	service 	and 	price, 	which 	facilitates 	consumer 	search.
Proponents 	of 	such 	restrictions 	say 	that 	the 	restrictions
help 	to 	maintain 	a 	high 	level 	of 	quality 	in 	the 	professional
services 	market. 	~hey claim, 	for 	example, 	that 	employer-employee
and 	other 	business 	relationships 	between 	professionals 	and 	non-
professionals 	will 	diminish 	the 	overall 	quality 	of 	care 	because
of 	lay 	interference 	with 	the 	professional 	judgment 	of
licensees. 	They 	also 	allege 	that, 	while 	lay 	firms 	might 	offer
lower 	prices, 	such 	firms 	might 	also 	encourage 	their 	professsional
employees 	to 	cut 	corners 	to 	maintain 	profits. 	Similarly, 	it
could 	be 	argued, 	that 	professionals 	who 	practice 	in 	traditional,
non-commercial 	settings 	would 	be 	forced 	to 	lower 	the 	price 	and
quality 	of 	their 	services 	in 	order 	to 	meet 	the 	prices 	of 	their
commercial 	competitors.
~he 	Federal 	Trade 	Commission's 	Bureaus 	of 	Economics 	and
Consumer 	Protection 	have 	issued 	two 	studies 	that 	provide 	evidence
that 	restrictions 	on 	commercial 	practice 	by 	optometrists
including 	restrictions 	on 	business 	relationships 	between
ontometrists 	and 	non-optometrists, 	on 	commercial 	locations 	and 	on
t~ade name 	usage 	-- 	are, 	in 	fact, 	harmful 	to 	consumers.
The 	first 	study12, 	conducted 	with 	the 	help 	of 	two 	colleges
of 	optometry 	and 	the 	chief 	optometrist 	of 	the 	Veterans
Administration, 	compared 	the 	price 	and 	quality 	of 	eye
examinations 	and 	eyeglasses 	provided 	by 	optometrists 	in 	cities
with 	a 	variety 	of 	regulatory 	environments. 	~he 	study 	found 	that
eye 	examinations 	and 	eyeglasses 	cost 	significantly 	more 	in 	cities
without 	chains 	and 	advertising 	than 	in 	cities 	where 	advertising
and 	chain 	optical 	firms 	were 	present. 	The 	average 	price 	charged
by 	optometrists 	in 	the 	cities 	without 	chains 	and 	advertising 	was
33.6% 	higher 	than 	in 	the 	cities 	with 	advertising 	and 	chains.
Estimates 	based 	on 	further 	analysis 	of 	the 	study 	data 	showed 	that
prices 	were 	17.9% 	higher 	due 	to 	the 	absence 	of 	chains; 	the
remaining 	price 	difference 	was 	attributable 	to 	the 	absence 	of
advertising.
This 	study 	also 	provides 	evidence 	that 	commercial 	practice
restrictions 	do 	not 	result 	in 	higher 	quality 	eye 	care. 	The
Bureau 	of 	Economics, 	Federal 	Trade 	Commission, 	Effects 	of
Restrictions 	on 	Advertising 	and 	Commercial 	Practice 	in 	the
Professions: 	The 	Case 	of 	Optometry 	(1980).
7

not
We
459-
thoroughness 	of 	eye 	exams, 	the 	accuracy 	of 	eyeglass
prescriptions, 	the 	accuracy 	and 	workmanship 	of 	eyeglasses, 	and
the 	extent 	of 	unnecessary 	prescribing 	were, 	on 	average, 	the 	same
in 	restrictive 	and 	non-restrictive 	markets.
A more 	recent 	study13 	of 	cosmetic 	contact 	lens 	fitting
conducted 	by 	the 	Commission's 	Bureaus 	of 	Economics 	and 	Consumer
Protection 	concluded 	that, 	on 	average, 	"commercial" 	optometrists
-- 	that 	is, 	optometrists 	who 	were 	associated 	with 	chain 	optical
firms, 	used 	trade 	names, 	or 	practiced 	in 	commercial 	locations 	--
fitted 	cosmetic 	contact 	lenses 	at 	least 	as 	well 	as 	other 	fitters,
but 	charged 	significantly 	lower 	prices.
In 	sum, 	restrictions 	on 	commercial 	practice 	and 	prohibitions
on 	the 	use 	of 	trade 	names 	by 	professionals 	all 	tend 	to 	raise
prices 	above 	the 	levels 	that 	would 	otherwise 	prevail, 	but 	do
seem 	to 	raise 	the 	quality 	of 	care 	in 	the 	vision 	care 	market.
suggest, 	therefore, 	that 	you 	consider 	repeal 	of 	§§ 	459-9(4),
9(6), 	and 	459-9(8), 	as 	well 	as 	the 	advertising 	restrictions
discussed 	above.
~hank you 	for 	considering 	our 	comments. 	We 	have 	referred 	to
a 	number 	of 	studies, 	cases 	ana 	other 	materials. 	We 	would 	be
happy 	to 	supply 	copies 	of 	these 	if 	you 	so 	desire. 	Please 	let 	us
know 	if 	we 	may 	be 	of 	any 	further 	assistance.
Very 	truly 	yours,
If.~
Grady
Director
13 	Bureaus 	of 	Consumer 	Protection 	and 	Economics, 	Federal 	Trade
Commission, 	A Comparative 	Analysis 	of 	Cosmetic 	Contact 	Lens
Fitting 	by 	Ophthalmologists, 	Optometrists 	and 	Opticians 	(1983).
This 	study 	was 	designed 	and 	conducted 	with 	the 	assistance 	of 	the
major 	national 	professional 	associations 	representing
ophthalmology, 	optometry 	and 	opticianry.
8