FTC Staff Comment Before the Massachusetts House Committee on Health Care Concerning S.B. 1732 to Regulate Dentist Advertising
us-ftc-advocacy-filings-d0db3a1763f00f318a0fb4c1aeccb749FTC Staff Comment Before the Massachusetts House Committee on Health Care Concerning S.B. 1732 to Regulate Dentist AdvertisingAdvocacy Filing
Matter Number
P864651
APPROVED G @ .J .. I. .'/., / . ,.' (: ; ( . .) l\ ""n; I j( il 1-,(1 (A/U-'·"'J\ ~lr,,·1 H"-l,,n. \L,,-., tiiJ-··ll- I!~II ~ \f1il C,.d, ((,1-: I "::':j.(JIJ~ I June 10, 1986 The Honorc~le John C. McNeil, Chairman Committee on Health Care House of Representatives Room 130 S~ate House nI) S ton,!'IJ.. 0213 3 ATTN: ~s. Ronna Bernstein RE: Senate Bill 1732 1 Dear Mr. Chairman: We are pleased to respond to your April 24, 1986, request ;-h;:,. we comment on Seilf~.e Bill 1732 and hope that ou: remarks will be of assistance. A2.tnough we recognize t~e need to prohi~it cec€ptive advertising practices by dent:sts and dental hygienists, it is our be~ief that a num~er of provisions in the proposed lesislation woule rest:ain truthful co~~~nica~ion and therebv unrEasona~lv inhibit comoetition and in~~re cons~~ers. ~ .J .. _ Yo u r r eque s t for co rom e:'i t s was 1 i :'". i ted to S. :. 7 32, whie h wou~o amena existing stct~tory provisions gover~in9 dentistry. These comments represent ths views of the Boston Regional Office and the Bureaus of Consumer Protection, Economics, ailo Competition of the Federal Trade COIT~ission. Views expresse~ are not necessarily those of the Fece~al TraCE Commission or of any individual Commissioner. The Commission has, hOWEver, reviewed these co~~ents and has voted to authorize their s~brnission.
2 Our comments are thus li~ited to that subject. ?~wever, we note t hat the ex i s tinq s tat ute, Ma s s. Ge n. La wsAn r.. C'"l. 112, S S2A, contains a0ditional restrictions on advertisin~ :y dentists. _ T~ese restrictions, like t'"le ones discussed ~e:c-, raise serious concerns of competitive and consumer inju~y. ~~ would encourage an examination of the existing statute and wo~:: ~e happy to work fur the r wit h you r coIT'JTj t tee 0 rot '"l e r son t h :. s :;- =: t e r . The Federal Trade Commiss:'~n is empowerec ~~der 15 U.S.C. 541 et ~., to prevent unfair methods of co~p~::tion and unfair or deceptive acts or practices in or affecting c~~merce. P~rsuant to its statutory mandate, the Comrr,iss:'c~ has attempted to encourage co~petition among members of lice~~ed professions to the maxim~m extent compatible with other legiti~=te state and fece~al goals. For several years, the Commissic~ has been investigating the competitive effects of restrictions on the advertising and business practices of state-lice~sed professionals, including dentists, optometrists, lawyers, physicians, and others. The Commission's goal is to identify and seek the removal of those restrictions that i~?e:e competition, increase costs, and harm consumers without prov:~ing countervailing ~ene£its. As a part of the Corr~ission's effort to fos:er competition among licensed professionals, it has examined t~e effects of public and private :estrictions thet limit the cjility of Drofessiona1 2 to encac~ in truthful and nondece~tive advertising. In this regard, studies have sho~~ that prlces for professional goods and services are lower w~ere advertising See, e.c., Amer-ican Medical. !'.ssociation, 9~ :.T.C. 701 (1979), a::l~638 :.2d 443 (2d Cir. 1980), aff'd m€:iT.. ::-: an ea~allv divided Co~rt, 455 U.S. 676 (1982). The kW~ decision -- which he16 "~hat ~roac bans on advertising anc soliciting are :'~:~nsistent with the nation's p\J~lic policy" (94 F.T.C. at 1011) -- :::-llo\o,'s the reasoning c: recent Supreme Court decisions involving ?r::::~ssional reculation. See, e.c., Zauoer-er v. Office of D:sciDlinarv Counsel of-the st:~n'emecourtof Ohio, 105 U.2. 559 (1SS:} (holding that an attorney ffiay not be disciplinec :or solicitins :~gal business through printec advertising containing truthful and nondeceptive information regarding the legal rights of pote!l:ial clients or for using nondeceptive illustrations 0: pictures) i Sates v. Sta7e Bar of Arizona, 433 U.S. 350 (1977) (holding a state s~pr-eme cour~ ?:ohibition on advertising invalid under the Fi:st Amendment and according great importance to the role of adve::ising in the efficient functioning of the market for professi~nal SErvices) i anc Virginia State Boare of Pharmacy v. Virginia Ci:izens Council, 425 U.S. 748 (1976) (holcing a Virginia prohibitio:-: on advertising by pharmacists invalid). 2
3 exists than where it is restricted or prohibi~e:.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 sea:ch costs and ena~ling consumers to make mo:e informed decisions. Therefore, to the extent t~at tr~~~ful and nondeceptive advertising is restricted, highe: prices a~d a decrease in consumer welfa:e are like~y to res~lt. The Co~~iss:on has also exah.ined various justifica~ior.s that have beer. offered for restrictions on advertising a~d has concluded, as the courts have, that, by and large, th~se proffered reasons do not justify restrictions on truthful advertising. For these reasons, only false or deceptive a~vertising s~ould be prohibited. We believe that a simple ?rohibition asai~st false or deceptive advertising is the best means of pro:ecting both consumers and the competitive process. Any m8:e restrictive standard is likely to suppress the disseminati~n of potentially useful information and may contribute to an i~:rease in prices. T. Disadvantages and Costs of the Proposed Legislation It is desirable for consumers to have as ~uch truthful information as possible about the price, quali:y and other attributes of goods and services. The propose~ legislation could reduce the availability of such information a~: thus lessen the opportunity for informed decision making and :~crease consumer search costs. A. Prohibitions on Communication of No~?:ice Information Bureau of Economics and Cleveland Regione: O~fice, Federal Trade Commission, Im?roving Consumer Access to Lega: S~rvices: The Case for Re;;:oving Restrictions on Truthful Acvertis:r-Jg (1984); Bureau of Economics, Federal Trade Co~~ission, Effects cf Restrictions on A~ve::ising an6 Commercial Practice in the Pr::essions: The Case of O?tometry (1980) i Benham and Benham, Reaulati~:: T:-;rouah the Professions: A PersDective on Ir.formation Co~:rol, 18 J.L. & Econ. 421 (2.975) i Benham, The Effects of Ac3vertisinc or. the Price of :Sveclasses, 15 J.L. & Econ. 337 (1972). Bureau of Economics, Federal Trade Commission, Effects of Restrictions on Advertising and Commercial Pr=ctice in the Professions: The Case of Optometry (1980); Ca::y, Restricted Advertising and Co~?etition: The Case of Retail Druss (1976) McChesney anc Muris, The Effects of Advertisi~:: on the Qualitv Lecal Services, 65 l<•• B.A.J. 1503 (2.979) i Muris and McChesney, Acvertisina and the Price and Quality of Leeal Services: The for Lece-I Clinics, 1979 Arr.. B. Found. Researc:-. J. li9 (1979). 3 of Case
A num~er of sections of the proposed legis:ation would appear to prohi~it communication of important ~onprice in:ormation :hat could aid consumers in selecti~g a dentist or dental hygienist. As such, they could unreaso~a~ly inhibit competition and injure consumers. First, Se~tion (1) wo~1d prohibit advertisements by dentists or dental hygienists that "contain a statement of opinion as to the qual::y of dental services." A ban such as this on claims about qc~lity is likely to be injurious to co~?~tition and consumers. Virtually all statements about a se:ler's performance, experience, or qualifications cou:: 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. ~nen sellers cannot compare the quality and related attributes of their services to those of their competitors, the incentive to compete on those a~tributes is likely to be reduced, to the detriment of consumers.~ Second, Section (3) would prohibit advertisements that "refer 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 efficac; of those procedures or products." ~e recognize that disclosures of safety and efficacy ~nformation may be necessary in sc~e circumstances to prevent deception or health fraud. Those circumstances, ho~ever, sho~ld be determined on a case-by-case 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 ~2YS that wo~ld not prohibit or cr.ill nondeceptive advertising. For example, disclos~res to individual p~:ient=, by phone or in person, wou:d provide :he pertinent information to patients l~ ~ set:ins where any ~uestions could be answered directly. T~irc, Section (4) would ban acvertiseme~ts th~t Rcontain statistical data, representations or other information that is not suscepti~le to reasonable verification by t~e public." The intent of this ban is unclear ana, de?ending o~ its interpretation, it could have significant anticompetitive effects. If the intent is to require dentists to have 5 We have not commented on restrictive, it is not aimed appecls to anxiet~. Section (2) because, although at deception but 2: controlling 4
substantiation for advertising claims, this would be consistent with Federal Trade Commission deception case la w ,6 ~nd would not be objectionable. However, the language could be construed much mo~e broadly to require not only that the advertiser have a reasonable basis for advertising claims, but also that the subs~a~tiation material be available to and understandable by the general public. This would significantly rest~ict useful nondece?tive 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 fttruthful disclosure of the source and authorship of any message published under a dentist's byline. ft This requirement appears to be aimed at ftghostwritten" informational columns, which, like most advertisements, are not ~ritten by the advertiser. If such an advertisement's contents a:e accurate and it is not deceptively presentee as something other than an advertisement, no deception or ot~er harm to consumers will result. Therefore, we believe that special restrictions aimed at ftghostwritten" advertising are unnecessary. B. Prohibitions on Communication of Price Information Two sections of the proposed legislation 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 "serves to increase the [consumer's) difficulty of discovering the lowest cost seller of acceptable ability. As a result. rn~of7ssionalsJ .a~e iso~ated from c9mpetition and the in~entive to prlce COm?etltlvely IS reduced." The absence of such information "servers} to pe§petuate the market position of established professionals." First, Section (5) would tan advertisements that refer to ft a fee or fees for dental services ana fail to disclose that accitional fees may be involved in individual cases." The intent c: this language is unclear, and it could be in:erpreted in such a ~cy as to chill truthful advertising. For example, it could be read to require that an advertisement that states a fee for a !o~tine dental examination would violate the stat~te if it did 6 See, ~, National Commission on Eag Nutrition, 88 F.T.C. (1976), aff'd, 570 F.2d lS7 (7th Cir. 1977), cert. denied, 439 u.s. 821, reissued, 92 F.T.C. 848 (1978). 89 7 8 433 u.S. at 377. 423 U.S. at 378. 5
9 not disclose that additional fees would be cha~9~d for the filling of a cavity found during the examinatio~. We recommend that the above language be clarified to prohibi: only deceptive advertising claims. S'220nC, Section (6) ""ould prohibit dentis:s and dental hygien:sts from ~offering a discount for denta~ services without disclosing the total fee from ""hich the d:scou~: ""ill ap?ly.~ This section would apparently require dentists to disclose the regular price of each type of service to ""hic~ a~ advertised discount would be applicable. Such a requirem~~: would effectively preclude the advertising of across-:~e-board discounts (e.o., ~ten percent c:f all dental services") for gen~ral promctional purposes or for specific groups such as sen i 0 r cit i zen s 0 r stu den t s . Sin c e it ...,0 u 1de: ': e n be i Tn? r act i cal to state in an advertisement the regular prices of all of the services covered by such an offer, this sectio~ would be likely to suppress certain forms of truthful and valua~le advertising, and it ~ould make other forms of nondeceptive advertising more costly. II. Conclusion As a general matter, the proposed legislation affecting advertising should be directea only at specific forms of promotion that are ninherently likely to deceive or [as to which) the record indicates that a narticular f~5m or ~ethod of advertising has in fact been deceptive. n Measured by thlS standard, the sections of the legislation discussed above appear to be overly restrictive of truthful communications. Because the sections are likely to have an adverse effect o~ competition and on consumer welfare, we believe they should be eliminated or modified in favor of provisions that are focuse: narrowly on deceptive advertising practices. As we noted e=rlier, it is the staf:'s position that a prohibition 0: false or deceptive advertising is suf:icient to prote2t consumers. Such a requirement may violate the First ~T.~ndroent. S~e, ~.o., South Ogden CVS Stor~, Inc. v. Ambach, 4S3 F. Supp.~4 (S.D.N.Y. 1980). 10 In re R.~.J., 455 U.S. 191, 202 (1982). E
