FTC Staff Comment to the Hon. Gerry E. Hinton Concerning Louisiana H.B. 631 to Regulate Dental Advertising and Paid Referral Programs

, ..... \ t \
FedflnJ Trad~ Commh.lon
otftoe of tIK- RqlunaJ J)1~T
a.m ElmbtoOk Drive
n..... Tn... 7S2-l7
(214) 767·7050
Senator 	Gerry 	B. 	Hinton,
900 	River.ide 	~ll
State 	Capitol 	Building
senate 	Sub-baae.ent
aaton 	Rouge, 	LA 	70804
Dear 	Benator 	Hintonl
D.C.
The 	Federal 	~ade eon.iaaion 	.taff 	la 	please4 	~ 	have 	thi.
opportunity 	to 	respond 	to 	your 	letter 	of 	June 	3, 	1987, 	reque.ting
our 	comments 	on 	Bouse 	Bill 	631. 1 	This 	bill 	would 	regulate 	dental
advertising 	and 	participation 	by 	dentists 	1n paid 	patient
referral 	programs. 	We 	recognize 	and 	support 	Louisiana's 	intereat
1n preventing 	deceptive 	practices 	by dentists. 	The 	proposed 	bill
represents 	a 	substantial 	improvement 	over 	current 	1 .. by
eliminating 	a 	varIety 	of 	restraints 	on 	truthful, 	ooodeceptive
dental 	advertising, 	and 	thus 	ia 	likely 	to 	benefit 	consumers 	in
Many 	respects. 	Bowever, 	we 	are 	concerned 	that 	the 	bill 	might, 	if
enacted, 	substantially 	inhibit 	price 	advertia~n9 for 	dental
a.rvices 	by 	mandating 	acre 	extensive 	disclosures 	than 	are
necessary 	to 	prevent 	deception. 	We 	also 	identify below 	certain
other'provisions 	that 	appear 	broader 	than 	necessary 	to 	serve
Louisiana's 	interest 	In 	protecting 	consumers 	of 	dental 	services.
INTEREST AND EXPERIENCE 	OF THB 	FBDBRAL 	TRADE COMMISSION
Our 	interest 	1n 	tbis 	legislation 	ste•• 	from 	the 	Commission's
aan~~te to 	enforce 	the 	antitrust 	and 	consu.er 	protection 	laws 	ol
the 	pnlted 	States. 	section 	5 of 	the 	PTe 	Act 	prohibita 	unfair
aetbOda 	of 	oompe~ltion and 	unfair 	or 	deceptive 	acta or
practices. 	In 	enforcing 	this 	st&tute, 	the 	COftnl •• 1on 	stalf 	has
gained 	substantial 	experience 	in 	analYling 	the 	lRPact 	ot 	various
restraints 	on ea-petltion 	and 	the 	costa 	and 	benefits 	to 	conSUMers
of 	such 	reatraln~8.
For 	several 	years, 	the 	COIlIDl!.sion 	bast>een 	inYestlgating 	the
effects 	of 	public 	and 	private 	restrictions 	on 	the 	busineas
practices 	of 	dentists, 	optometrists, 	lawyers, 	phy.icians, 	and
1 The 	co~enta 	represent 	the 	views 	of 	the 	Dallas 	Regional
Office 	and 	the 	Bureaus 	of 	Competition, 	COneuaer 	Protection,
and 	Econo_lcB 	of 	the 	Federal 	Trade 	Commission and 	are 	not
necessarily 	those 	of 	the 	C~i8sion itself. 	The 	Co.-iasion
has, 	~owever, voted 	to 	authorize 	ua 	to-present 	theae 	comment.
to you.

P.03
. other- .tate-licensed profe.elonals. 	A. 	part 	of 	the 	~l•• lon'a
efforts 	to 	foster 	competition 	among 	liceneed 	professlonal. 	DOre
generally, 	it 	haa 	exa.ln~ the 	effects 	of 	publio 	and 	private
restrictions 	that 	li.it 	the 	ability 	of 	prof.aalonal. 	to 	engage 	in
noft~eoeptiv. adv~rtia1n9.2 	The 	COBai •• lon 	staff bas 	subaitted
nuaerous 	written co.ments 	to 	.tate 	legislatures 	and 	state 	boards 	of
dentistry 	analysing 	the 	effects 	on 	consu.er 	weltare 	of 	various
regulations 	governing 	advertising 	and 	other 	praotices 	by denti.ts.]
Studies 	suggeat 	that 	price. 	for 	prof••eional goods 	and 	.ervic••
are 	lower 	where 	advertiaing 	exista 	than 	vbere 	it 	1. 	restricted 	or
prohibited. 4 	Although 	sa.e 	concern 	has 	been 	voiced 	that
2
3
See, 	~ 	Aaerican Medical 	A8sociation, 	94 	P.~.C. 	701 	(1979),
~'d~63' P.2d 	443 	(24 	Cir. 	1980), 	aff'd 	.e•• 	by 	an 	equally
~ed Court, 	455 	U.S. 	676 	(1982). 	The 	thrust 	of 	the 	AKA
~that 	broad 	bans 	on 	advertialng 	and 	solicitIng 	are
inoonsistent 	with 	the 	nation'. 	publio polley· 	(94 	F.T.C. 	at
1011) .-- 	18 consistent 	with 	the 	reaaoning 	ot 	recent 	Supreme
Cour~ deci.ions 	involving 	professional 	regulationa. 	~e, 	§~g.,
Zauderer 	v. 	Office 	of 	Disciplinary Counsel 	of 	the Supreme COurt
of 	Ohio, 	471 U.S. 	626 	(1985) 	(bol~ln9 that 	an 	attorney 	may 	not
be 	dieciplined 	for 	soliciting 	legal 	business 	through 	printed
advertising 	con~aining trutbful 	and 	non~.ceptlve infors.tion
and 	advice 	regarding 	the 	legal 	rights 	of 	potential 	clients 	or
for 	using 	nondeceptlve 	illustrations 	or 	pictures), 	Bates 	v.
State 	Bar 	of 	Arizona, 	433 	o.s. 	350 	(1977) 	(holding 	a 	state
supre•• 	court 	prohibition 	on 	advertising 	invalid 	under 	the
Plrst 	Am.n~nt and 	according 	great 	laportance 	to 	the 	role 	of
advertising 	in 	the 	effioient 	functioning 	of 	the 	aarket 	tor
profeseional 	aervices), 	and 	Virginia 	State 	Board of 	Pharaacy 	v.
Virginia Citizens 	Council, 	425 	u.S. 	748 	(1976) 	(holding 	a
Virginia 	prohibition on 	advertising 	by 	pharmacists 	invalid).
~, ~, 	Letter 	to The 	Bonorable 	Harry Bill, 	Klasourl 	State
R,presentatlve 	(May 	12, 	1987), 	Letter 	to 	Dr. 	Willi.. OVerton,
Pre.ident, 	~nneS8ee Board 	of 	Denti.try 	(April 	29,1987),
Letter 	to Ma. 	Gwen Mathews, 	Executive Director, 	Plocida Board
of 	Dentistry 	(April 	23, 	1987), 	Letter 	to MI. 	Raney Peldaan,
Bxecutive Director, 	Virginia 	State 	Board ot 	Dentistry 	(April
23, 	1987), 	Letter 	to 	R. 	B. 	Tha.pson, 	Executive Director,
Kentuoky 	Board of 	Dentistry 	(Nov. 	21,1986).
Cleveland 	Regional 	Office 	an~ Bureau 	of 	Bconoalcs, 	P.~eral
Trade 	Comai.sion, 	I.proving 	CODSu.er 	Acoess 	to Le9al 	Service••
The 	case 	for 	Re.cvlng 	Restrictions 	on 	TruthfUl Advertising
(1984), 	Bureau of 	Boone-Ics. 	Pederal Trade 	eo.aisalon, 	Bffect.
of 	Restrictions 	on 	Adver~i81ng 	and 	C~erclal Practice 	on 	the
Profe •• lona. 	The 	Ca.e 	of 	Optc.etry 	(1980), 	Benham and 	Benham,
Regulation 	through 	the 	Profes.ions: 	A P~r8pectige on 	Intormation
Control, 	18 	J.L•• 	Econ ••21 	(1975), 	8enh.., 	The 	Bffegts 	of
Advertr.lng.on 	the 	Price 	of 	Eyeglasses, 	15 J.L. 	, 	Icon. 	337 	(1912).
--2-

advertisIng 	a.y 	lead 	to 	lower 	quality 	.er.lce., 	the 	eapirlcal
evidence 	suggests 	tbat 	adverti.ing 	restrictions 	ral.e 	price. 	but
do 	not 	inore ••• 	the 	quality 	of 	servIce. 	availabl •• S 	!berefore,
to 	the 	extent 	that 	truthful 	and 	nondeceptlve 	adverti.ing 	i.
restricted, 	h19ber 	prlc •• 	and 	a 	decrease 	In 	oon.u.er 	veltare 	are
likely 	to 	result. 	FOr 	tbis 	reason, 	we 	believe 	that 	only 	fal.e 	or
d.ceptl~e adverti.ing 	ahou1d 	be 	prohibited.
DISCLOSURES 	1M PRIes ADVERTISING
At 	pr••ent. 	Louisiana 	apparently 	regulate. 	price 	advertising,
lnoludinV 	disclo.ure. 	in 	such 	agverti.ing, 	only 	to 	tbe 	extent
neo••••ry 	to prevent deception. 	Offers 	of 	fr•••z.,lnatlons 	and
••rvio•• , 	however, 	ar. 	prohibited 	und.r 	current 	1...
Certain provisions 	of 	BB 	631 would 	substantlal1y 	lncreaae 	the
burden. 	ourrently 	lapo.ed 	on 	denti.t. 	who 	provl4e 	price
Inforaat1on 	1n 	~vert181ng. 	Proposed 	Section 	371775(1) (a) 	would
require 	that dentists 	who 	advertise 	fees 	or 	free 	dental 	.ervices
au.t 	disclose 	all 	procedures 	included 	in 	those 	services. 	In
addition, 	propoeed 	section 	371775(8) 	would 	require 	the 	dentist
wbo 	advertises 	denture 	prices 	to 	inolude 	inforaation 	about 	the
.ater1aIs 	used, 	adjustments 	that aay 	be 	necessary, 	and 	charges.
In 	instances 	where 	the 	advertised 	price 	does 	not 	include 	both
upper 	and 	lover 	dentures, 	the 	dentist 	would 	be 	required 	to
dlsolose 	this 	fact 	in 	extra 	large 	type 	or, 	in 	tbe 	case of
broadcast 	advertisements, 	to 	repeat 	such 	infor~atiOQ three 	times.
5
7
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Elt!V24/1987 	12: 24 	FTC 	tR...l.AS ~ t on- **0- 	168e - e ?29 ~ 	P-;ee55------
We 	reOO9nll. 	that, 	In 	general, 	the 	nore 	lntor..~lon that 	1.
available 	to 	coftSu.ers, 	the 	better 	prepared 	they 	will 	be 	to ••ke
vell-rea.oned 	parchaaea. 	We 	believe, 	however, 	that 	the
discloaure. 	reqaired 	by 	BB 	631 	are 	counterproducti... 	By
ineeeaaln; 	a~vertl.1ng costs, 	they 	aay 	dilcourage 	aa.e 	dentists
tra. 	advertising 	and 	thereby 	deny 	consu~r8 u.eful 	intor.ation
respecting 	available 	dental 	services. 8 	we 	therefore 	r.~nd
that 	the 	LouisIana 	Senate 	oonslder 	eli.inating 	the 	abov.-
discus••d 	afflr..tlve 	disclosures 	trom 	the 	proposed 	1egialation,
and 	instead 	require 	only 	those 	disclosures 	that 	are 	necessary 	to
prevent 	deception.
propOsed 	S&Ctlon 	37,775(5) 	detine. 	unprofessional 	conduct 	to
include 	-any 	~unlcatlon which 	Is 	likely 	to create 	an
unjustified 	expectation 	about 	results 	the 	dentIst 	can 	achieve. w
This 	provision 	e.ploys 	VQgue 	crlt~r!~ 	ouoooptfhln 	bo 	Kubjectiv.
interpretations 	that 	say have 	little 	to 	do with 	the 	truth 	or
falsity 'of 	particular 	state.ents 	In 	advertiseaenta. 	Por 	exanple,
a 	communication 	by 	a 	denti.t 	that 	having 	your 	teeth 	straightened
could .aka 	you .ore 	i»t.trant:.ivA 	af9hl 	nubjcot 	the 	praotitlon.r 	to
censure, 	although 	the 	stateaent 	is 	not 	deceptive 	or 	.isleading.
Alao, 	the 	standard 	outlined 	In 	Section 	37:775(5) 	may 	serve 	to
chill 	the 	oommunication 	of 	nondeceptive 	intoraatloo. 	Since
false, 	misleadlog, 	or 	deceptive 	statements 	are 	prohibited 	under
proposed 	SectlOD 	371775(3),9 	Section 	37:775(5) 	of 	BB 	631 	appears
to 	be 	unneoessary.
'tJW)B !M§!
proposed 	Section 	37:775(2) 	would 	prohibit 	the 	ase 	of 	any
trade 	naae 	in dental 	adv.rtl....nt. 	·other 	than 	tha~ which
a~ars on 	the 	licens. 	of 	the 	dentist- 	or 	which 	1s 	authorized
under 	the 	law 	relevant 	to dental 	corporations. 	Dental
corporation 	law also 	require. 	tbe 	use 	of 	the 	na.e 	appearing 	on
the 4entl.t'a 	llcen•• 	and 	doe. 	not 	authorile 	trade 	Dames.
8
9
!limlnation of 	the 	disclosure 	requirements 	in 	BB 	631 would
not, 	of 	course, 	preclude 	consumers 	who desire 	socb
InforaatiOD 	fra. 	requestIng 	it 	froa 	the 	advertiser.
•• 	teco_eDd 	that 	the 	reaainc!er 	ot 	section 	371775(3)
prohibiting 	·tbe 	oa1.s1on of .ater1al 	Infor •• tlon 	from 	any
8tate.ent or 	claim 	about 	the 	dentist or 	the 	dentist'.
services- 	be 	aodified 	by 	adding 	at 	the 	end 	the 	phrase
·without 	which 	the 	communication 	would 	be 	dece~ive.- 	We
believe 	this 	change 	is 	appropriate 	to 	prevent 	the 	provision
frotl 	inhibiting 	some 	truthful, 	nond&ceptive 	adyertislng.
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· ~-12':'25- 	FTC 	~ ~ton-- 	**** 	1fal 	e?29 ';1B39f>.~e6Il;-_._--
Trade 	na.es 	can 	perrora 	.everal 	useful 	function.. 	They 	can
be 	•••• ntial 	to 	chains 	or 	group practioe. 	that 	e.ploy 	many
practitioners 	&ad 	provide 	.ervlc. on 	a 	atate-wide 	or 	r.gional
basis. 	'l'h.y 	are 	al~ ea8Y 	to 	ree.ber 	and 	can 	convey 	u.eful
intoraatlon 	8uch 	as 	the 	location 	or 	oth.r 	characterl.tio. 	of 	a
praotice. 	ror 	e.ample, 	Section 	37r775(2) 	would 	prohibit 	&.suaed
n.... 	such 	as 	·Preston 	Road 	Dental 	Clinic· 	or 	-Childr.n's 	Dental
Aa8oclates.- 	o.er 	ti.., 	trade 	na.e. 	oan 	come 	to 	be 	a.sociated
_ith 	a 	oertain 	l.vel 	of 	quality, 	service, 	and 	price. 	Thus,
taollitatin9 	a 	ban on 	trade 	names 	would 	deny 	dentl.ta 	an
iaportant marketing 	tool 	and 	unnecessarily 	increase 	consumer
e.arch coeta.
In addition, 	proposed 	Section 	37:775(9) 	would 	require 	that
all 	advertising 	·contain 	the 	dentist'. 	full 	naae, 	.adresa, 	and
telephone 	nuaber.- 	Such a 	requirement 	could 	iapo•• 	burden.a.e
advertising 	expense. 	on 	tho.e 	cbalns 	or 	group 	praotices 	tbat
include .any 	partners 	or 	associates 	if 	it 	is 	interpreted 	to 	.
require 	di8closure 	of 	each 	individual 	dentist's 	na.e, 	address,
and 	tel.phone 	naaber, 	thereby -aktng 	broadcast 	and 	other 	type. 	of
advertising 	by 	8uch 	firms 	impractical. 	Both 	this 	~ovls!on and
the 	ban.'on 	tra4e 	names 	could 	discourage 	the 	develo~nt of 	such
firms 	by 	effectively prohibiting 	their 	advertising.
Trade 	name 	bans 	and 	disclosure 	requirements 	such 	as 	proposed
Section 	371775(9) 	are 	generally 	defended 	on 	the 	ground 	that 	they
are 	necesaary 	to 	ensure 	the 	identification 	and 	acooantabllity of
the 	individual 	dentists 	who 	practice 	under 	a 	trade 	name.
However, 	there 	aay 	be 	effective 	ways 	to 	achIeve 	this 	goal 	without
1.peding 	the 	development 	of 	group 	pract1ces 	and chains. 	For
example, 	the 	state 	could 	require 	that 	the 	names of 	individual
practitioners 	be 	conspicuously 	posted 	1n 	the 	reception 	area 	of
dental 	offices 	and 	noted 	on 	bills, 	reoeipts, 	or 	patient
reaprds. 	Por 	these 	reasons, 	we 	suggest 	that 	the 	Senate 	consider
r-.ovin; 	this 	pcovislon 	from HB 	631.
SUBSTAlft'IA'l'IOR
Propoa.d 	S.ctlon 	311775(4) Ca) 	would 	prohibit 	waay
communication 	~r 	whicb 	the 	dentist 	does 	not 	have 	sabatantiation
in 	hand 	at 	the 	tl.. 	the 	c1al. 	1s .ade. w 	This 	provision 	also
appears 	to 	be 	broader 	than 	necessary 	to 	prevent deception.
Adverti.ers 	shoa1d 	have 	a 	reasonable 	basIs 	for 	objective 	Claims
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5/24/1987 	12: 26 	FTC- 	tR..l.AS- R.g ion 	.... 	1689 	8 'r.!9 ?939 -- - 	- - 	-P. W1 -
they .ake 	about 	products 	or 	services. lO 	However, 	substantiation
of 	cla!•• 	that 	do 	not 	express 	or 	i.ply 	to consu.ers 	any 	degree 	ot
factual 	support, 	such 	as 	pufting 	claiM., 	is 	not 	necesaari 	to
prevent 	deception. 	lequiring 	substantiation of 	sucb 	cla .. 	aa
·friendlier 	.ervice· 	or 	·convenient 	location· 	could 	unneoessarily
deter 	truthful, 	nondeceptive 	advertising. 	Louisiana, 	therefore,
aay wiah 	to aate 	clear 	that 	its 	substantiation 	requirement. 	will
apply 	to 	cla!.. 	tor 	which 	conauaera 	expect 	that 	advertisers 	have
a 	reasonable 	basis.
RBPBRRAL PBBS
. Propos.d 	Section 	371775(7) 	would 	prohibit 	a 	lic.naee 	fro.
·oftering, 	giving, 	receIving, 	or 	agreeing 	to 	recelve 	any 	fee 	or
otber 	consideration 	to or 	froa 	a 	third 	party 	for 	the 	referral 	of
a 	patient 	in connectlon with 	the 	perforaanoe 	of 	a 	dental
service.- 	Thi. 	proposed 	provision 	would 	appear 	to 	prevent
dentists 	lrom 	partioipating 	in 	referral 	services 	that 	.atch
clients 	with 	appropriate 	practitioners 	an~ charge 	a 	fee 	to 	the
practitloner. 	Such 	services .ay 	be 	valuable 	in 	helping 	consumers
locate 	needed 	dental 	oare. 	Indeed, 	by 	facilitating 	the 	gathering
of 	infor.ation 	by 	consumera, 	theae -services 	may 	increase
competition 	among 	hoalth 	care 	professionals.
A prohibition 	against 	referral 	tees .ay 	also 	interfere 	with
the 	operation 	of 	alternative 	health 	oare 	delivery 	systems 	suoh 	aa
PPOa 	and 	HMOs 	that 	have 	arrangements 	with health 	care
professionals 	in 	vhloh 	lees 	are 	divided 	between 	the 	aedical 	plan
and 	the 	profe •• lonal. 	Consequently, 	we 	auggest 	considering
-odillcations 	to 	R9 	631 	that 	would 	allow ~entlst. to 	participate
in 	legitimate 	independent 	referral 	services 	and 	alternative
health 	care 	delivery 	aystaas.
COlfCLOSIOlt
.e 	believe 	that 	B8 	631 would 	aore 	effectively 	advance
Loui.iana'. 	legitiaate 	interest 	in 	protecting 	its 	con8uaera 	from
alsleading 	dental 	advertise.ents 	if 	certain aodiflcatlons 	were
10 	For 	example, 	the 	Pederal 	Trade 	Coast•• lon 	requires
substantiation when 	an 	advertisement 	refers 	to 	specific 	facts
or 	tigures. 	Thompson Medical 	eo., 	104 P.T.C. 	648, 	822
(1984), 	.ft'd, 	1986-1 	~rade Cas. 	(OCR) 	• 	67, 	10) 	(D.C. 	Cir.
1986), 	cert. 	denied, 	550.S.L.W. 	3569 	(O.S. 	Peb. 	23,1987),
or 	when an 	a4vertlsement 	expressly or 	laplicltly 	represents
that 	the 	truth 	ol 	a 	clal. 	ia 	scientifioally 	eatablished.
Bristol-Myera 	co., 	102 	P.T.C. 	21, 	318 	(1983), 	aff'd, 	738 	P.2d
554 	(2d 	Cir. 	1984), 	cert. 	denied, 	105 	S. 	Ct. 	960 	(1985). 	See
generall~ FTC 	Policy 	Stateaent 	Regarding 	AdvertisIng
~ub.tantTatlon, 104 	P.T.C. 	839 	(1984).
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incorporated 	into 	the 	propoaed 	bill. 	The 	di.se.ination 	of
truthful 	and 	noDdeceptlve 	infor.ation 	will 	be 	unnece.sarily
ii.ited 	If 	the 	atate 	requires 	extensive 	.rfir.atIYe 	dIsclosures
in 	prioe 	advertising 	or 	prohibits 	referral 	t ••• 	and 	trade 	naaes.
Vague 	and 	subjectlve 	standarda 	aay 	also 	ohill 	the 	di.seaination
of 	nond.ceptive 	lntor.atlon. 	The 	proposed 	section. 	thus 	have 	the
potential 	to 	har. 	consu.er 	welfare 	by 	aaking 	it .ere 	difficult
for 	oon.uaers 	to 	identify 	the 	types 	ot 	dental 	.er.108s 	that 	they
prefer 	and 	by 	increasing 	the 	prices of 	dental 	services. 	For
these 	reasona, 	we 	believe 	that 	the 	public 	interest 	would 	be
better 	.erved 	if 	RB 	631 	were 	aodifled 	In 	the 	aannet 	.uggested
abov••
W. 	appreciate 	this 	opportunity 	to 	provide 	our 	vlew. 	on 	thea.
ISBue.. 	W. have 	ref.rred 	to 	several 	studtea 	and other 	•• terial ••
We 	would 	be 	happy 	to 	supply 	copies 	of 	theee 	if 	you 	SO desire, 	or
to 	provide 	any 	other 	assistance 	tbat 	you say 	find 	helpful.
Sincerely,
.11a Moseley
Regional 	Director
Dallas 	Regional 	Offiee
-7-
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