FTC Staff Comment Before the Georgia State Auditors Office Concerning Sunset Audits of Georgia Boards of Dentistry, Optometry, and Podiatry

FEDERAL TRADE COMMISSION
WASHINGTON. D. C. 	20580 	,.,.
BVl.I.AU or
CONSura.a n.oTI.CTlON
April 	2, 	19B7
C.D. 	Lunsford
Georgia 	State 	Auditor's 	Office
210 	Washington 	Street, 	Room 	207
Atlanta, 	Georgia 	30334
Dear 	Mr. 	Lunsford:
The 	staff 	of 	the 	Federal 	Trade 	Commission 	is 	pleased 	to
respond 	to 	your 	invitation 	to 	participate 	in 	the 	1987 	sunset
audits 	oflthe 	Georgia 	Boards 	of 	Dentistry, 	Optometry and
Podiatry.
In 	this 	letter 	we 	focus 	primarily on 	the 	statutory and 	rule
provisions 	restricting 	advertising 	by 	dentists, 	optometrists 	and
podiatrists. 	Advertising 	provides 	information 	about 	the
individuals 	or 	firms 	offering 	services 	that 	consumers 	may 	wish 	to
purchase. 	This 	advertising 	is 	beneficial 	to 	consumers 	because 	it
facilitates 	informed 	purchase 	decisions 	and 	it 	promotes 	the
efficient 	delivery 	of 	services. 	We 	therefore 	urge 	the 	Auditor's
Office 	to 	seek 	the 	repeal 	of 	those 	laws 	that 	restrict 	the 	use 	of
truthful, 	nondeceptive 	advertising. 	We 	also 	comment 	on 	other
rules 	that 	unnecessarily 	restrict 	the 	manner 	and 	commercial 	form
in 	which 	dentists 	and 	optometrists 	may 	practice. 	Such 	rules
limit 	competition 	among 	professionals 	and 	tend 	to 	raise 	prices,
and 	we 	therefore 	recommend 	that 	the 	Auditor 	seek 	their 	repeal 	as
well.
I. 	Interest 	and 	Experience 	of 	the 	Federal 	Trade 	Commission
The 	Federal 	Trade 	Commission 	is 	empow~red 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. 	Under 	this
statutory 	mandate 	the 	Commission 	encourages 	competition 	among
members 	of 	licensed 	professions 	to 	the 	maximum 	extent 	compatible
with 	other 	legitimate 	state 	and 	federal 	90als. 	For 	several
years, 	the 	Commission 	staff 	has 	been 	investigating 	the
competitive 	effects 	of 	restrictions 	on 	state-licensed
1 	This 	letter 	represents 	the 	views 	of 	the 	FTC's 	Bureaus 	of
Consumer 	Protection, 	Competition, 	and 	Economics, 	and 	not
necessarily 	those 	of 	the 	Commission. 	The 	Commission has,
however, 	voted 	to 	authorize 	submission 	of 	this 	letter.
We 	do 	not 	comment 	in 	this 	letter 	on 	rules 	governing 	any 	of
the 	other 	regulatory 	boards 	listed 	in 	your 	invitation.

professionals, 	including 	optometrists, 	dentists, 	lawyers, 	and
physicians. 	Our 	goal 	is 	to 	identify 	and 	seek 	the 	removal 	of
restrictions 	that 	impede 	competition 	and 	increase 	costs 	without
providing 	significant 	counter~ailing benefits 	to 	consumers.
II. 	Advertising 	Restrictions
The 	Commission, 	as 	a 	part 	of 	its 	efforts 	to 	foster 	competi-
tion 	among 	state-licensed 	professionals, 	has 	examined 	the 	effects
of 	pUblic 	and 	private 	restrictions 	that 	limit 	the 	ability 	of
professionals 	to 	engage 	in 	nondeceptive 	advertising. 2 	Empirical
studies 	have 	shown 	that 	prices 	for 	professional 	goods 	and
services 	are 	lower 	where 	advertising 	exists 	than 	where 	it 	is
restricted 	or 	prohibited.3 	Empirical 	studies 	also 	indicate 	that,
2 	See, 	e.Q., 	American 	Medical 	Association, 	94 	F.T.C. 	701 	(1979),
aff~63~2d 443 	(2d 	Cir. 	1980), 	aff'd 	memo 	by 	an 	equally
alvlced 	Court, 	455 	U.S. 	676 	(1982). 	Tne 	thrust 	of 	the 	AY~
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.Q.,
Zauderer 	V. 	Office 	of 	Disciplinary 	Counsel 	of 	the 	Supr~me Court
of 	Ohio, 	471 	U.S. 	626 	(1985) 	(holding 	that 	an 	attorney 	may 	not 	be
disciplined 	for 	soliciting 	legal 	business 	through 	printed
advertising 	containing 	truth!ul 	and 	nondeceptive 	information 	and
regarding 	the 	legal 	rights 	of 	potential 	clients 	or 	for 	using
nondeceptive 	illustrations 	or 	pictures); 	Ba~es v. 	State 	Bar 	of
Arizona, 	433 	U.S. 	350 	(1977) 	(holding 	a 	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
Consu~er Council, 	425 	U.S. 	748 	(1976) 	(r.olding 	a 	Virginia
prohibition 	on 	advertising 	by 	pharmacists 	invalid).
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 	Throu 	h 	the 	Professions: 	A Pers 	ective 	on 	Infor~ation
Control, 	18 	J.L. 	& Econ. 	421 	1975; 	Benham, 	The 	Effects 	of
Advertising 	on 	the 	Price 	of 	Eyeglasses, 	15 	J.L. 	& Econ. 	337
(1972).
2

· .
while 	restrictions 	on 	professional 	advertising 	raise 	prices'4they
do 	not 	increase 	the 	quality 	of 	goods 	and 	services 	available.
We 	have 	examined 	various 	justifications 	that 	have 	been
offered 	for 	restrictions 	on 	advertising 	and 	have 	concluded 	that
they 	do 	not 	warrant 	restraints 	on 	truthful, 	nondeceptive
advertising. 	We 	therefore 	believe 	that 	only 	false 	or 	deceptive
advertising 	should 	be 	prohibited. 	Any 	other 	standard 	is 	likely
to 	suppress 	the 	dissemination 	of 	potentially 	useful 	information
and 	contribute 	to 	an 	increase 	in 	prices. 	Below 	we 	discuss
instances 	in 	which 	restrictions 	on 	advertising 	appear
unwarranted.
Advertising 	by 	Podiatrists
Section 	43-35-9 	of 	the 	Podiatry 	Practice 	Act 	provides 	that 	a
podiatrist
may 	advertise 	his 	practice 	to 	the 	public 	only 	by
the 	listing 	of 	his 	name, 	professional 	title,
addre£s, 	telephone, 	and 	office 	hours 	on 	the 	doors
and 	windows 	of 	his 	office, 	in 	letters 	not 	more 	than
three 	inches 	square: 	on 	professional 	cards 	and
stationery; 	and 	in 	the 	personal 	and 	classified
sections 	of 	telephone 	directories.
This 	provision 	is 	clearly 	broader 	than 	necessary. 	It 	will 	result
in 	consumer 	harm 	because 	it 	prohibits 	the 	dissemination 	of 	much
useful 	information 	gbout 	the 	availability, 	nature, 	and 	prices 	of
podiatric 	services.
As 	the 	Supreme 	Court 	noted 	in 	striking 	down 	a 	blanket 	ban 	on
truthful 	advertising 	by 	lawyers, 	advertising 	about 	goods 	and
services 	ftperforms 	an 	indispensable 	role 	in 	the 	allocation 	of
4 	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,
Advertisin 	and 	the 	Price 	and 	ualit 	of 	Le 	al 	Services: 	The
Case 	for 	Legal 	Clinics, 	1979 	Am. 	B. 	Foun 	• 	Researc 	J. 	1
(1979). 	See 	also 	Cady, 	Restricted 	Advertising 	and 	Competition:
The 	Case 	of 	Retail 	Drugs 	(1976).
5 	The 	provision 	also 	forbids 	the 	use 	of 	print 	and 	broadcast
media 	to 	convey 	any 	information 	about 	podiatric 	services. 	Such
methods 	can 	be 	the 	most 	effective 	means 	of 	communicating 	useful
information 	to 	consumers. 	This 	fact 	has 	been 	recognized 	by 	at
least 	one 	federal 	court, 	which 	invalidated 	a 	state's 	statutory
prohibitions 	on 	radio, 	television, 	print 	and 	billboard
advertising 	by 	dentists. 	See 	Baker 	v. 	Registered 	Dentists 	of
Oklahoma, 	543 	F. 	Supp. 	117~W.D. Okla. 	1982).
3

resources 	in 	a 	free 	enterprise 	system.- 6 	The 	lack 	of 	price
advertising 	in 	particular 	-serves 	to 	increase 	the 	(consumer's]
difficulty 	of 	discovering 	the 	lowest 	cost 	seller 	of 	acceptable
ability. 	As 	a 	result 	••• 	[professionals] 	are 	isolat-ed 	from
competiti9n 	and 	the 	incentive 	to 	price 	competitively 	is
reduced.· 	The 	absence 	of 	such 	information 	·serve S to 	perpetuate
the 	market 	position 	of 	established 	professionals.- 	The 	Federal
Trade 	Commission 	has 	similarly 	noted 	that 	"restraints 	on 	the
advertising 	of 	medical 	services 	••• 	have 	a 9dis p roportionate
effect 	on 	the 	poor, 	the 	sick, 	and 	the 	aged." 	These 	decisions
based 	in 	part 	on 	constitutional 	grounds 	-- 	and 	the 	empirical
studies 	cited 	above 	call 	into 	question 	the 	wisdom 	of 	restricting
nondeceptive 	advertising. 	We 	therefore 	urge 	the 	Auditor 	to
recommend 	that 	this 	provision 	be 	amended 	to 	prohibit 	only 	false
or 	deceptive 	advertising.
Price 	Advertising 	by 	Dentists
Board 	of 	Dentistry 	Rule 	150-11-.02(2) 	limits 	permissible
price 	advertising 	to 	the 	publication 	of 	fees 	for 	routine 	dental
services, 	defin~d 	in 	rule 	150-11-.02 (3) (c) 	as 	services 	that 	are
·performed 	frequently 	in 	the 	dentists' 	practice, 	[are] 	usually
provided 	at 	a 	specific 	fee 	to 	substantially 	all 	patients
receiving 	the 	service, 	and 	[are] 	prOVided 	with 	little 	or 	no
variation 	in 	technique 	or 	materials.· 	Consequently, 	this
prOVision 	apparently 	prohibits 	the 	advertising 	of 	fee 	information
for 	non-routine 	services, 	including, 	for 	example, 	fees 	for 	new 	or
innovative 	techniques 	that 	are 	not 	yet 	widely 	used 	by
practitioners. 	It 	could 	also 	be 	interpreted 	to 	preclude 	any
advertisements 	that 	do 	not 	state 	specific 	prices 	but 	use 	such
terms 	as 	"discount 	prices" 	or 	"low 	cost· 	to 	attract 	consumer
attention 	and 	communicate 	a 	message 	effectively. 	We 	do 	not
believe 	that 	there 	is 	anything 	inherently 	deceptive 	about 	such
advertising. 	To 	the 	contrary, 	the 	advertising 	of 	any 	price
information 	can 	be 	of 	great 	benefit 	to 	consumers. 	We 	therefore
suggest 	that 	the 	Auditor 	recommend 	the 	modification 	of 	this
provision 	to 	allow 	any 	nondeceptive 	fee 	ad~ertising.
Quality 	and 	Superiority 	Claims
Section 	43-11-47(15) 	of 	the 	Dentistry 	Practice 	Act 	prohibits
dentists 	from 	making 	·any 	statement 	in 	advertising 	concerning 	the
6
7
8
Bates 	v. 	State 	Bar 	of 	Arizona, 	433 	U.S. 	350, 	364 	(1977).
Id. 	at 	377.
Id. 	at 	378.
9 	American 	Medical 	Association, 	94 	F.T.C. 	701, 	1011, 	citing
Virginia 	State 	Board 	of 	Pharmacy 	v. 	Virginia 	Citizens 	Consumer
Council, 	425 	U. 	S. 	748, 	763 	(1976).
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quality 	of 	the 	dental 	services 	rendered 	by 	that 	dentist 	or 	any
dentist 	associated 	with 	him," 	whether 	truthful 	or 	not. 	The
Optometry 	Practice 	Act 	contains 	in 	Section 	43-30-9 	the 	same
restraint 	on 	optometric 	advertising. 	In 	addition, 	Rules 	150-11-
.02 (6) (a), 	(6) (c) 	and 	(6) (d) 	promulgated 	by 	the 	Board 	of
Dentistry 	respectively 	forbid 	advertisements 	claiming
·superiority 	of 	a 	particular 	method 	of 	treatment, 	material, 	drug
or 	appliance," 	the 	use 	in 	advertising 	of 	such 	terms 	as 	-quality
dentistry" 	and 	"skilled 	dentists,- 	and 	claims 	of 	superior
facilities, 	including 	such 	statements 	as 	"scientifically 	equipped
office," 	"modern 	methods," 	and 	"latest 	modern 	equipment.-
We 	urge 	the 	Auditor 	to 	recommend 	elimination 	of 	these
provisions. 	Bans 	on 	quality 	and 	superiority 	claims 	clearly
lessen 	competition 	among 	sellers. 	They 	restrict 	man9 	forms 	of
comparative 	advertising, 	which 	can 	be 	a 	highly 	effective 	means 	of
informing 	and 	attracting 	customers. 	When 	sellers 	cannot
truthfully 	compare 	the 	attributes 	of 	their 	services 	to 	those 	of
their 	competitors, 	their 	incentive 	to 	improve 	or 	offer 	different
products, 	services, 	or 	prices 	is 	likely 	to 	be 	reduced.
Bans 	on 	claims 	of 	superiority 	are 	particularly 	likely 	to
injure 	competition 	and 	consumers 	when 	they 	are 	interpreted 	to
prohibit 	a 	wide 	range 	of 	factual 	statements. 	For 	example,
virtually 	all 	statements 	about 	a 	practitioner's 	qualifications,
experience, 	or 	performance 	can 	be 	considered 	to 	be 	implicit
claims 	of 	quality 	or 	superiority. 	Bans 	on 	all 	such 	claims 	would
make 	it 	very 	difficult 	for 	dentists 	and 	optometrists 	to 	provide
consumers 	with 	truthful 	information 	about 	the 	differences 	between
their 	services 	and 	those 	of 	their 	competitors.
Specialization 	Claims
Board 	of 	Dentistry 	Rule 	150-11-.02 (6) (b) 	forbids 	statements
in 	advertising 	that 	a 	dentist
is 	a 	specialist 	or 	specializes 	in 	an~ branch 	of
dentistry, 	unless 	that 	specialty 	is 	recognized 	by 	the
Georgia 	Board 	of 	Dentistry 	and 	the 	dentist 	has 	met 	the
existing 	educational 	requirements 	and 	standards 	for
that 	recognized 	specialty.
We 	have 	two 	concerns 	about 	this 	provision. 	First, 	it
inhibits 	truthful 	claims 	about 	special 	training 	or 	experience 	by
dentists 	who 	have 	not 	obtained 	formal 	certification~ and 	second,
it 	prevents 	truthful 	claims 	about 	such 	i~pertise in 	areas 	not
recognized 	by 	the 	Board 	as 	specialties.
10 	We 	take 	no 	position 	on 	the 	appropriateness 	of 	the 	state
establishing 	areas 	of 	specialization 	generally, 	or 	on 	the
appropriateness 	of 	the 	eight 	dental 	specialties 	the 	Board 	has
recognized.
5

We 	believe 	it 	is 	important 	that 	a 	general 	dentist 	with
expertise 	or 	experience 	in 	specific 	areas, 	whether 	certified 	or
not, 	be 	allowed 	to 	communicate 	that 	expertise 	or 	experience 	to
the 	public. 	In 	our 	view, 	only 	specialization 	claims 	that 	are
deceptive 	need 	be 	prohibited_. 	Such 	a 	rule 	would 	leave 	dentists
free 	to 	make 	truthful, 	nondeceptive 	claims 	that 	they 	concentrate
in 	a 	particular 	field 	of 	dentistry, 	that 	their 	practice 	is
limited 	to 	a 	particular 	area, 	or 	otherwise 	advirtise 	their
expertise 	in 	a 	particular 	field 	of 	dentistry.l
The 	rule 	also 	restricts 	dentists 	to 	announcing 	only 	the
eight 	areas 	of 	specialization 	approved 	by 	the 	Board 	and 	set 	forth
in 	Rule 	150-11-.01. 	It 	therefore 	prevents 	dentists 	who 	may 	be
experts 	in 	areas 	other 	than 	the 	specified 	eight 	from 	advertising
that 	fact. 	This 	limitation 	unnecessarily 	restricts 	the 	flow 	of
relevant, 	truthful 	informati2n 	that 	is 	likely 	to 	help 	consumers
locate 	providers 	they 	need.
For 	these 	reasons, 	we 	urge 	the 	Auditor 	to 	recommend
eliminating 	Board 	of 	Dentistry 	Rule 	150-11-.02(6) (b).
Vague 	and 	Subjective 	Standards
Rule 	430-4-.01(2) (d) 	of 	the 	Board 	of 	Examiners 	in 	Optometry
deems 	unprofessional 	conduct 	to 	include 	the 	advertising 	of
"improbable 	statements 	or 	flamboyant 	or 	extravagant 	claims
concerning 	the 	[optometrist's] 	skills 	which 	are 	likely 	to 	deceive
the 	public."
This 	rule 	appears 	to 	be 	intended 	to 	proscribe 	deception.
However, 	the 	rule 	may 	also 	inhibit 	nondeceptive 	advertising. 	It
includes 	vague 	criteria 	susceptible 	to 	subjective 	interpretations
that 	may 	have 	little 	to 	do 	with 	the 	truth 	or 	falsity 	of
particular 	statements 	in 	advertisements. 	Such 	standards 	may 	be
overbroad 	and 	may 	serve 	to 	chill 	the 	communication 	of
nondeceptive 	information.
The 	provision 	may 	also 	be 	construed 	to 	inhibit 	the 	use 	of
innovative 	advertising 	and 	marketing 	techniques 	commonly 	used 	by
providers 	of 	other 	goods 	and 	services. 	Techniques 	used 	to 	make
claims 	about 	an 	optometrist's 	skills 	may 	be 	characterized 	as
"flamboyant" 	or 	"extravagant" 	and 	yet 	not 	be 	deceptive. 	They 	can
be 	very 	useful 	to 	advertisers 	to 	attract 	and 	hold 	consumers'
11 	If 	interpreted 	broadly, 	Rule 	150-11-.02(6) (b) 	could 	prohibit
announcements 	of 	practice 	limitation 	that 	use 	such 	terms 	as
"practice 	limited 	to," 	or 	"practice 	concentrates 	in" 	a 	particular
field. 	Such 	claims 	are 	not 	likely 	to 	give 	rise 	to 	public
misunderstanding 	concerning 	certification 	or 	expertise, 	but 	can
be 	extremely 	useful 	to 	consumers 	in 	selecting 	a 	provider.
12 	See 	In 	re 	R.M.J., 	455 	U.S. 	191, 	205 	(1982).
6

attention. 	They 	can 	therefore 	help 	to 	communicate 	messages 	more
effectively 	to 	consumers, 	and 	their 	prohibition 	may 	result 	in
hi gher 	costs 	and 	1 es s 	frequent 	adver tis ing . 	Moreover, .decept i ve
claims 	about 	an 	optometrist's 	skills 	would 	be 	covered 	under 	§ 	43-
30-9 	of 	the 	Optometry 	Practice 	Act, 	which 	bans 	any 	fraudulent 	or
deceptive 	statements 	in 	advertising. 	We 	therefore 	suggest 	that
the 	Auditor 	recommend 	the 	repeal 	of 	this 	provision.
Disclosure 	Obligations
Board 	of 	Dentistry 	Rule 	150-ll-.02(4)(a) 	and 	Board 	of
Optometry 	Rules 	430-6-.0l(3)(a) 	and 	(3)(d) 	contain 	provisions
requiring 	certain 	disclosures 	in 	price 	advertisements. 	The
dentistry 	rule 	requires 	that 	"range 	of 	fee" 	advertising 	for 	a
routine 	dental 	service, 	including 	use 	of 	such 	terms 	as 	"from,"
"as 	low 	as," 	or 	"starting 	at," 	must 	disclose 	the 	minimum 	and
maximum 	fees. 	The 	optometry 	rules 	require 	that 	all 	price
advertisements 	for 	eyeglasses 	or 	contact 	lenses 	include: 	(1) 	a
statement 	of 	whether 	or 	not 	the 	cost 	of 	an 	eye 	examination 	is
included 	in 	the 2rice: 	and 	(2) 	a 	"complete 	description 	of 	optical
goods 	and 	services 	included 	in 	that 	price 	and 	any 	extra 	charges
that 	may be 	required 	to 	serve 	the 	consumer's 	health 	and 	visual
needs."
Any 	disclosure 	obligation 	increases 	advertising 	cost, 	either
because 	it 	increases 	the 	length 	of 	the 	message 	or 	requires
practitioners 	to 	forego 	some 	portion 	of 	the 	advertising 	message
they 	would 	have 	delivered 	had 	the 	space 	not 	been 	taken 	by 	the
disclosure. 	Unnecessary 	disclosure 	requirements 	could 	therefore
result 	in 	less 	information 	being 	made 	available 	to 	consumers.
Consequently, 	we 	believe 	that 	disclosures 	should 	be 	mandated 	only
where 	they 	are 	necessary 	to 	prevent 	deception.
The 	last 	disclosure 	requirement 	noted 	above 	is 	particularly
troubling 	because 	it 	could 	be 	interpreted 	to 	require 	detailed 	and
lengthy 	disclosures 	that 	are 	not 	necessary 	to 	prevent 	deception
but 	that 	impose 	extra 	costs 	on 	optometric 	aOvertisers. 	Further,
the 	vague 	language 	of 	the 	provision 	is 	likely 	to 	chill 	legitimate
price 	advertising 	because 	potential 	advertisers 	may 	be 	unsure 	of
its 	meaning 	and 	scope.
For 	these 	reasons, 	we 	suggest 	that 	the 	Auditor 	consider
recommending 	the 	removal 	of 	these 	provisions.
Trade 	Names
Section 	43-11-18 	of 	the 	Dentistry 	Practice 	Act 	requires 	that
all 	promotions 	for 	dental 	firms 	include 	the 	names 	"of 	each
individual 	practicing 	in 	such 	place." 	Similarly, 	Board 	of
Optometry 	Rule 	430-4-.0l(2)(f)1. 	requires 	that 	optometric 	trade
name 	advertising 	include 	"the 	name 	of 	the 	doctor 	of 	optometry
currently 	practicing 	at 	the 	location 	advertised 	who 	will 	provide
[the 	optometric 	services]."
7

These 	provisions 	appear 	to 	inhibit 	advertising 	by 	dental 	and
optometric 	group 	practices 	or 	chain 	firms 	unnecessarily. 	Because
such 	practices 	may 	have 	large 	numbers of 	dentists 	or
optometrists, 	they 	would 	face 	burdensome 	advertising 	costs 	as 	a
result 	of 	the 	requirement 	to 	list 	in 	promotions 	every dentist 	or
optometrist 	associated 	with 	the 	practice 	at 	the 	advertised
location(s). 	The 	rule 	could 	make 	national 	or 	regional
advertisements 	by 	such 	firms 	impractical. 	We 	recognize 	the
necessity 	of 	ensuring 	identification 	and 	accountability 	of
individual 	practitioners. 	However, 	this 	goal 	could 	be
accomplished 	through 	several 	methods 	less 	burdensome 	than 	the
ones 	in 	these 	provisions. 	For 	example, 	the 	Dental 	Practice 	Act
or 	Board 	of 	Optometry 	rule 	could 	require 	that 	the 	names 	of
individual 	practitioners 	be 	conspicuously posted 	in 	the 	reception
area 	of 	dental 	and 	optometric 	offices 	or 	noted 	on 	bills, 	receipts
and 	patient 	records.
In 	addition, 	Section 	43-11-18 	appears 	to 	be 	inconsistent
with 	section 	43-11-47(8) 	of 	the 	Dental 	Practice 	Act, 	which
specifically 	permits 	dentists 	to 	use 	approved 	trade 	names. 	At 	a
minimum, 	one 	presumed 	purpose 	of 	section 	43-11-47(8) 	-- 	to 	allow
dentists 	associated 	with 	high-volume 	practices 	to 	establish 	a
business 	identity 	in 	their 	community, 	as 	other 	businesses 	do 	--
would 	be 	frustrated 	by 	the 	need 	to 	list 	the 	names 	of 	all 	dentists
in 	a 	practice 	every 	time 	their 	trade 	name 	is 	used 	to 	announce 	the
availability 	of 	dental 	services.
For 	these 	reasons, 	we 	urge 	the 	Auditor 	to 	recommend 	repeal
of 	these 	provisions.
Fee-Splitting 	for 	Solicitation 	and 	Referrals
Board 	of 	Optometry 	Rule 	430-4-.01(2)(0) 	prohibits
optometrists 	from 	dividing 	or 	splitting 	fees 	with 	any
nonoptometrist 	for 	"soliciting, 	referring 	or 	bringing 	a
patient." 	This 	provision 	appears 	unnecessarily 	to 	preclude
optometrists 	from 	engaging 	in 	a 	variety 	of 	legitimate 	promotional
activities 	that 	can 	be 	useful 	to 	consumers 	in 	locating 	and
selecting 	suitable 	practitioners. 	We 	therefore 	urge 	the 	Auditor
to 	seek 	the 	repeal 	of 	this 	provision.
For 	example, 	the 	rule 	prevents 	optometrists 	from
participating 	in 	legitimate 	referral 	services 	that 	charge 	a 	fee
for 	participation. 	Such 	services 	refer 	prospective 	patients 	to
one 	or 	more 	providers 	based 	on 	the 	stated 	needs 	of 	the 	patients
and 	the 	qualifications 	or 	prices 	of 	the 	providers, 	and 	may 	thus
be 	valuable 	in 	helping 	consumers 	locate 	appropriate 	optometric
care. 	By 	facilitating 	the 	gathering 	of 	information 	by 	consumers,
referral 	services 	may 	increase 	competition 	among 	health 	care
professionals.
In 	addition, 	this 	provision 	may 	interfere 	both with 	certain
franchise 	arrangements 	whereby 	providers 	pay 	a 	percentage 	of
their 	fees 	to 	a 	franchisor 	in 	return 	for 	marketing, 	advertising
8

services, 	and 	the 	use 	of 	a 	trade 	name, 	and 	with 	lease 	arrange-
ments 	wherein 	rent 	is 	based 	on 	a 	percent 	of 	gross 	revenues. 	As
we 	discuss 	in 	Section 	III. 	below, 	such 	practice 	arrangements 	may
help 	to 	lower 	the 	cost 	of 	optometric 	services, 	and 	do 	not 	pose
any 	inherent 	danger 	of 	reducing 	the 	quality 	of 	services 	provided.
Finally, 	the 	rule 	could 	be 	interpreted 	to 	prohibit
optometrists 	from 	hiring 	third 	parties 	such 	as 	advertising
agencies 	or 	pUblic 	relations 	firms 	to 	assist 	in 	marKeting 	vision
care 	services 	and 	products. 	Restrictions 	that 	prohibit 	all
third-party 	solicitation, 	including 	solicitation 	in 	situations
where 	there 	is 	little 	or 	no 	risK 	of 	coercion, 	harassment, 	or
similar 	abuses, 	unnecessarily 	restrict 	the 	dissemination 	of
truthful 	information 	about 	and 	inhibit 	the 	sale 	of 	vision 	care
services 	and 	goods 	to 	willing 	and 	competent 	purchasers.
Similarly, 	restrictions 	that 	permit 	only 	licensed 	optometrists 	to
engage 	in 	solicitation 	unnecessarily 	limit 	the 	dissemination 	of
information 	about 	their 	services 	that 	is 	beneficial 	to 	consumers
and 	for 	which 	the 	presence 	of 	an 	optometrist 	is 	not 	required.
III. 	Commercial 	Practice 	Restrictions
Section 	43-11-47(7) 	of 	the 	Dental 	Practice 	Act 	prohibits
dentists 	from 	practicing 	as 	an 	employee 	of 	a 	lay 	corporation.
Similarly, 	Board 	of 	Optometry 	Rules 	430-4-.0l(2)(r), 	(s) 	and 	(t)
apparently 	operate 	to 	preclude 	such 	practice 	by optometrists 	as
wel~ ~s 	0i~er business 	associations 	between 	optometrists 	and 	lay
entltles.
13 	These 	rules 	prohibit 	optometrists 	from:
(r) 	Placing 	his 	license 	at 	the 	disposal 	or 	in 	the 	service 	or
control 	of 	any 	person, 	firm, 	association 	or 	corporation
not 	licensed 	to 	practice 	optometry 	in 	this 	state.
(s) 	Entering 	into 	any 	agreement 	that 	allows 	an 	unlicensed
person, 	firm, 	association, 	or 	corporation 	to 	control 	or
attempt 	to 	control 	the 	professional 	judgment, 	the 	manner
of 	practice, 	or 	the 	practice 	of 	a 	doctor 	of 	optometry.
For 	purposes 	of 	this 	section, 	"control 	or 	attempt 	to
control 	the 	professional 	judgment, 	the 	manner 	of
practice, 	or 	the 	practice 	of 	the 	doctor 	of 	optometry"
shall 	include 	but 	not 	be 	limited 	to:
1. 	setting 	or 	attempting 	to 	influence 	the 	professional
fees 	of 	a 	doctor 	of 	optometry;
2. 	restricting 	or 	attempting 	to 	restrict 	a 	doctor 	of
optometry's 	freedom 	to 	see 	patients 	on 	an 	appointment
basis 	.
(t) 	It 	is 	the 	intent 	of 	subsection 	(s) 	to 	prevent
(footnote 	continued)
9

These 	provisions 	unnecessarily 	hamper 	dentists 	and
optometrists 	who 	wish 	to 	market 	their 	services 	in 	a 	cost-
efficient 	manner, 	and 	we 	therefore 	urge 	their 	removal.l4 	The
bans 	on 	corporate 	employment 	and 	on 	entering 	agreements-under
which 	a 	lay 	entity 	may 	exercise 	supervisory 	functions 	hinder
dentists 	and 	optometrists 	from 	locating 	their 	practices 	inside
larger 	retail 	stores. 	In 	these 	locations, 	practitioners 	can
establish 	and 	maintain 	a 	high 	volume 	of 	patients 	because 	of 	the
convenience 	of 	the 	location 	and 	a 	high 	number 	of 	"walk-in"
patients. 	In 	addition, 	optometrists 	may 	be 	precluded 	from
association 	with 	retail 	optical 	firms 	where 	they 	can 	see 	a 	high
volume 	of 	patients 	because 	of 	the 	"one-stop 	shopping" 	that 	such
manufacturers, 	wholesalers, 	or 	retailers 	of 	optical
goods 	from 	controlling 	or 	attempting 	to 	control 	the
professional 	judgment, 	manner 	of 	practice 	or 	the
practice 	of 	a 	doctor 	of 	optometry, 	and 	the 	provisions 	of
this 	section 	shall 	be 	liberally 	construed 	to 	carry 	out
this 	intent.
14 	On 	January 	4, 	1985, 	the 	Commission 	proposed 	an 	Ophthalmic
Practices 	Trade 	Regulation 	Rule 	("Eyeglasses 	II-) 	that 	would
prohibit 	state-imposed 	bans 	on 	locating 	in 	retail 	centers, 	bans
on 	employment 	or 	other 	business 	relationships 	between
optometrists 	and 	nonoptometrists, 	bans 	on 	nondeceptive 	trade
names, 	and 	bans 	on 	branch 	offices. 	The 	Commission 	stated 	in 	its
Notice 	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
appea~ to 	protect 	the 	pUblic 	health 	or 	safety. 	See 	50 	Fed. 	Reg.
598, 	599-600 	(1985).
The 	Commission 	staff 	has 	recently 	published 	its 	report 	on 	the
proposed 	rule. 	The 	staff 	concluded 	that 	"the 	rulemaking 	record
demonstrates 	that 	these 	restrictions 	raise 	prices 	to 	consumers
and, 	by 	reducing 	the 	frequency 	with 	which 	consumers 	obtain 	vision
care, 	decrease 	the 	quality 	of 	care 	in 	the 	m~rket." 	The 	staff
also 	concluded 	that 	the 	restrictions 	provide 	no 	quality-related
benefits 	to 	consumers. 	The 	staff 	therefore 	recommended 	that 	the
Commission 	promulgate 	a 	trade 	regulation 	rule 	prohibiting 	these
restrictions. 	Bureau 	of 	Consumer 	Protection, 	Federal 	Trade
Commission, 	Ophthalmic 	Practice 	Rules: 	State 	Restrictions 	on
Commercial 	Practice 	(1986).
While 	the 	Presiding 	Officer 	also 	found 	that 	commercial
practice 	restrictions 	raise 	prices 	to 	consumers 	and 	limit 	access
to 	eyecare, 	he 	did 	not 	believe 	that 	the 	evidence 	cited 	in 	the 	two
Commission 	studies, 	discussed 	infra 	at 	10-11, 	provided 	an
adequate 	basis 	upon 	which 	conclusions 	about 	the 	quality 	of 	care
issue 	could 	be 	drawn. 	Federal 	Trade 	Commission, 	Report 	of 	the
Presiding 	Officer 	on 	Proposed 	T~ade Regulation 	Rule: 	Ophthalmic
Practice 	Rules 	(1986). 	Both 	the 	staff 	and 	Presiding 	Officer
reports 	will 	shortly 	be 	under 	review by 	the 	Co~ission.
10

firms 	could 	offer. 	This 	high 	volume 	may, 	in 	turn, 	allow 	dentists
and 	optometrists 	to 	realize 	economies 	of 	scale 	that 	may 	be 	passed
on 	to 	consumers 	in 	the 	form 	of 	lower 	prices. 	In 	addition, 	these
restraints 	may 	limit 	the 	sources 	of 	equity 	capital 	for_
professional 	practices, 	which 	may 	increase 	the 	cost 	of 	obtaining
capital 	and 	further 	hinder 	the 	development 	of 	high-volume
practices 	that 	may 	be 	able 	to 	reduce 	costs 	through 	economies 	of
scale.
The 	Federal 	Trade 	Commission 	considered 	the 	effects 	of
restrictions 	on 	associations 	between 	professionals 	and
nonprofessionals 	in 	American 	Medical 	Association.lS 	There 	the
Commission 	examined 	the 	AMA 	rules 	prohibiting 	physicians 	from
working 	on 	a 	salaried 	basis 	with 	hospitals 	or 	other 	lay 	entities,
and 	from 	entering 	into 	partnerships 	or 	similar 	business
arrangements 	with 	nonphysicians. 	The 	Commission 	concluded 	that
those 	restrictions 	unreasonably 	restrained 	competition 	and
thereby 	violated 	the 	antitrust 	laws. 	It 	reasoned 	that 	the 	AMA's
restrictions 	kept 	physicians 	from 	adopting 	more 	economically
efficient 	business 	formats 	and 	that, 	in 	particular, 	those
restrictions 	precluded 	competition 	from 	organizations 	not
directly 	and 	completely 	under 	the 	control 	of 	physicians. 	The
Commission 	also 	found 	no 	countervailing 	procompetitive
justifications 	for 	the 	restraints.
Commercial 	practice 	restrictions 	such 	as 	those 	in 	Georgia
are 	frequently 	defended 	on 	the 	grounds 	that 	they help 	to 	maintain
a 	high 	level 	of 	quality 	in 	the 	professional 	services 	market.
Proponents 	claim, 	for 	example, 	that 	business 	relationships
between 	professionals 	and 	nonprofessionals 	are 	undesirable
because 	they 	permit 	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
professional 	employees 	to 	cut 	corners 	to 	maintain 	profits.
The 	available 	evidence, 	including 	comprehensive 	survey
evidence 	in 	the 	optometry 	field, 	contradicts 	the 	contentions 	of
commercial 	practice 	opponents. 	Two 	empirieal 	studies 	conducted
by 	the 	staff 	of 	the 	Federal 	Trade 	Commission 	indicate 	that
restrictions 	on 	commercial 	practice, 	including 	restraints 	on
corporate 	employment 	and 	other 	business 	associations 	between
professionals 	and 	lay 	entities, 	may 	in 	fact 	harm 	consumers 	by
increasing 	prices 	without 	providing 	any 	quality-related
benefits.16
lS 	94 	F.T.C. 	701 	(1979).
16 	Although 	these 	studies 	deal 	specifically 	with 	restrictions 	on
optometric 	practice, 	the 	results 	may 	be 	applicable 	to 	analogous
restrictions 	in 	other 	areas, 	such 	as 	dentistry.
11

The 	first 	study,17 	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 	markets
with 	a 	variety 	of 	regulatory 	environments. 	The 	study 	found 	that
eye 	examinations 	and 	eyeglasses 	cost 	significantly 	mo~e 	in
markets 	where 	business 	associations 	between 	professionals 	and 	lay
entities 	are 	prohibited 	than 	in 	markets 	where 	they 	are 	allowed.
The 	study 	data 	showed 	that 	prices 	were 	almost 	18% higher 	in 	the
restricted 	markets.
The 	study 	also 	provided 	evidence 	that 	restrictions 	on
commercial 	practice 	do 	not 	result 	in 	higher 	quality 	eye 	care.
The 	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 	nonrestrictive 	markets.
A second 	study18 	of 	cosmetic 	contact 	lens 	fitting 	concluded
that, 	on 	average J 	"commercial" 	optometrists 	-- 	that 	is, 	for
example, 	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.
Other 	evidence, 	including 	survey 	evidence, 	indicates 	that
state 	restrictions 	on 	commercial 	practice 	may 	actually 	decrease
the 	quality 	of 	care 	in 	the 	market 	by 	decreasing 	the 	frequency
with 	which 	consumers 	obtain 	care. 	As 	a 	result 	of 	the 	higher
prices 	associated 	with 	the 	restrictions, 	consumers 	tend 	to
purchase 	eye care 	less 	frequently 	and 	may 	even 	forego 	care
altogether.19
17 	Bureau 	of 	Economics, 	Federal 	Trade 	Commission, 	Effects 	of
Restrictions 	on 	Advertising 	and 	Commercial 	Practice 	in 	the
Professions: 	The 	Case 	of 	Optometry 	(1980).
18 	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. 	Its 	findings 	are 	based
on 	examinations 	and 	interviews 	of 	more 	than 	500 	contact 	lens
wearers 	in 	18 	urban 	areas.
19 	Public 	Health 	Service, 	Eyeglasses 	and 	Contact 	Lenses:
Purchases, 	Expenditures, 	and 	Sources 	of 	Payment, 	National 	Health
Care 	Expenditures 	Study 	4 	(1979); 	Benham 	and 	Benham, 	Regulating
throll h 	the 	Professions: 	A Pers 	ective 	on 	Information 	Control,
1 	J.L. 	& Ecan. 	421, 	438 	19 	~ 	; 	Kernan, 	U.S. 	Health 	Pro~lle,
Washington 	Post, 	Apr. 	26, 	1979, 	at 	p. 	C-l, 	col. 	4.
12

IV. 	Conclusion
In 	sum, 	restrictions 	on 	truthful, 	nondeceptive 	advertising
and 	on 	the 	forms 	of 	commercial 	practice 	harm 	consumers. 	Such
restrictions 	raise 	prices 	above 	the 	levels 	that 	would 	otherwise
prevail, 	decrease 	the 	quality 	of 	care, 	and 	fail 	to 	provide 	any
consumer 	benefits. 	We 	recommend, 	therefore, 	that 	the 	Auditor
seek 	to 	repeal 	or 	amend 	the 	rules 	discussed 	above 	to 	remove
unnecessary 	constraints 	on 	innovative 	forms 	of 	dental 	and
optometric 	practice 	and 	advertising 	by 	dentists, 	optometrists 	and
podiatrists.
Thank 	you 	for 	inviting 	our 	comments. 	If 	you 	would 	like 	to
have 	copies 	of 	any 	studies 	or 	other 	materials 	referreQ 	to 	in 	this
letter, 	we 	would 	be 	happy 	to 	supply 	them.
Sincerely 	yours,
Wi 11 iam 	MacLeod
Director
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