FTC Staff Comment Before the South Carolina Legislative Audit Council Concerning Sunset Audits of Boards of Optometry and Opticianry

IUIl8IIIJ OF
CONSUMER iWiEC110N
. 	('
Mr. 	George 	L. 	Schroeder, 	D1rector
Legislative 	Audit 	Council
state 	of 	South 	Carolina
629 	Bankers 	Trust 	Tower
COlumbia, 	South Carolina 	28201
Dear Mr. 	Schroeder:
The 	staff 	of the 	Federal 	Trade 	Commission 	is 	pleased 	to
respond 	to 	your 	invitation 	to 	participate 	in 	the 	sunset 	audits 	of
tile 	South 	Carolina 	Boards 	of 	Optometry 	and 	Opticianry 	("Boards,,).l
This 	letter 	states 	our views 	on 	the 	manner 	in 	which 	provisions 	in
the 	Optometry 	and Opticianry 	Practice 	Acts 	(IIPractice 	Acts") 	and
regulations 	governing 	these 	Boards 	may 	affect 	competition 	for 	the
delivery 	of 	eye 	care 	service 	within 	the 	markets 	served 	by 	South
carolina 	optometrists 	and 	opticians.
In 	this 	letter we 	focus 	primarily 	on 	the 	statutory 	and 	rule
provisions 	restricting 	advertising 	and 	the 	use 	of 	third-party
solicitors 	by 	optometrists 	and 	opticians. 	Nondeceptive 	adver-
tising 	disseminates 	information 	about 	the 	individuals 	or 	firms
offering 	services 	that 	consumers 	may 	wish 	to 	purchase. 	This
process 	is 	beneficial 	to 	consumers 	because 	it 	facilitates 	pur-
chase 	decisions 	that 	reflect 	true 	consumer 	preferences 	and 	it
promotes 	the 	efficient 	delivery 	of 	services. 	We 	therefore 	urge
the 	Council 	to 	seek 	the 	repeal 	of 	those 	rules 	that 	restrict 	the
use 	of 	truthful, "nondeceptive 	advertising. 	We 	also 	comment 	on 	a
rule 	that 	unnecessarily 	restricts 	the 	commercial 	forms 	in 	which
optometrists 	may practice. 	This 	rule 	limits 	competition 	among
pzofessionals 	and 	may 	tend 	to 	raise 	prices, 	and 	we 	therefore
recommend that 	the 	Council 	seek 	its 	repeal 	as 	well.
The 	Federal 	Trade 	Commission 	is 	empowered 	under 	15 	U.S.C.
tl 	4~ et 	seq. 	to 	prevent 	unfair 	methods 	of 	competition 	and 	unfair
or deceptive 	acts 	or 	practices 	in 	or 	affecting 	commerce. 	Pur-
suant 	to 	this 	statutory 	mandate, 	the 	Commission 	has 	attempted 	to
1 	This 	letter represents 	the views 	of 	the 	FTC's 	Bureaus 	of
Consumer 	Protection, 	Competition, 	and 	Economics, 	and ~ot neces-
sarily 	those 	of 	the 	Commission. 	The 	Commission 	has, 	however,
authorized 	submission 	of 	this 	letter.

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 	inves-
tigating 	the 	competitive 	effects 	of 	restrictions 	on 	the 	business
practices 	of 	state-licensed 	professionals, 	including 	optome-
trists, 	dentists, 	lawyers, 	physicians, 	and 	others. 	The 	Commis-
sion's 	goal 	has 	been 	to 	identify 	and 	seek 	removal 	of 	restrictions
that 	impede 	competition, 	increase 	costs, 	and 	harm 	consumers 	with-
out 	providing 	significant 	countervailing benefits.
I. 	ADVERTISING 	RESTRICTIONS
As 	a 	part 	of 	the 	Commission's 	efforts 	to 	foster 	competition
among 	licensed 	professionals, 	it 	has 	examined 	the 	effects 	of 	pub-
lic 	and private 	restrictions 	that 	limit 	the 	ability 	of 	profes-
sionals 	to 	engage 	in 	nondeceptive 	advertising. 2 	Empirical
studies 	have 	shown 	that 	prices 	for 	professional 	goods 	and 	ser-
vices 	are 	lower where 	advertising 	exists 	than 	where 	it 	is
restricted 	or 	prohibited. 3 	Studies 	have 	also 	provided 	evidence
2 	See, 	~., 	American Medical 	Association, 	94 	F.T.C. 	701
(1979), 	aff'd 	638 	F.2d 	443 	(2d 	Cir. 	1980), 	aff'd memo 	by 	an
equally 	divided 	Court, 	455 	U.S. 	676 	(1982). 	The 	thrust 	of 	the
AHA 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, 	~.,
Zauderer v. 	Office 	of 	Disciplinary 	Counsel 	of 	the 	Supreme 	Court
of 	Ohio, 	471 	U.S. 	626 	(1985) 	(holding 	that 	an 	attorney 	may 	not 	be
disciplined 	for 	soliciting 	legal 	business 	through 	printed 	adver-
tising 	containing 	truthful 	and 	nondeceptive 	information 	and
regarding 	the 	legal 	rights 	of 	potential 	clients 	or 	using 	non-
deceptive 	illustrations 	or 	pictures); 	Bates 	v. 	State 	Bar 	of
Arizona, 	433 	U.S. 	350 	(1977) 	(holding 	state 	supreme 	court 	pro-
hibition 	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 	Con-
sumer 	Council, 	425 	U.S. 	748 	(1976) 	(holding 	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 	tor 	Removing 	Restrictions 	on 	Truthtul
Advertising 	(1984); 	Bureau 	of 	Economics, 	Federal 	Trade 	Com-
mission, 	Effects 	ot 	Restrictions 	on 	Advertising 	and 	Commercial
Practice 	in 	the 	Protessions: 	The 	Case 	of 	Optometry 	(1980);
Benham and 	Benham, 	Regulating 	Through 	the 	Professions: 	A Per-
spective 	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).

that 	restrictions 	on 	advertising 	raise 	prices 	but 	do 	not 	increase
the 	quality 	of 	goods 	and 	services. 4 	Therefore, 	to 	the 	extent
that 	nondeceptive 	advertising 	is 	restricted, 	higher 	prices 	and 	a
decrease 	in 	consumer welfare may 	result.
The 	Federal 	Trade 	Commission 	has 	examined various 	justifica-
tions 	that 	have 	been 	offered 	for 	restrictions 	on 	advertising 	and
has 	concluded 	that 	they 	do 	not 	warrant 	restrictions 	on 	truthful,
nondeceptive 	advertising. 	For 	this 	reason, 	the 	Commission 	staff
believes 	that 	only 	false 	or 	deceptive 	advertising 	should 	be 	pro-
hibited. 	Any 	other 	standard 	is 	likely 	to 	suppress 	the 	dissemina-
tion 	of 	potentially 	useful 	information 	and 	contribute 	to 	an
increase 	in 	prices.
Discounts, 	Bonuses 	and 	Premiums
section 	40-37-190 	of 	the 	Optometry 	Practice 	Act 	imposes 	a
flat 	ban 	on 	optometrists' 	"offer[ing] 	eye 	exams 	at 	a 	discount
price 	or 	as 	a 	premium, 	the 	object 	of which 	is 	to 	induce 	the 	sale
of 	ophthalmic 	services 	or 	materials. liS 	In 	addition, 	both 	the
Optometry 	and 	Opticianry 	Practice 	Acts 	(§§ 	40-37-180 	and 	40-38-
70, 	respectively) 	make 	it 	unlawful
to 	offer 	or 	give 	eyeglasses, 	spectacles,
lenses 	or 	any 	part 	used 	in 	connection 	there-
with, 	as 	a 	premium 	or 	bonus 	with 	merchandise
or 	in 	any 	other 	manner 	to 	induce 	trade 	or 	to
give 	or 	offer 	to 	give 	anything 	of 	value
• 	• 	• 	the 	object 	of which 	is 	to 	induce 	the
examination 	of 	the 	eye 	or 	the 	sale 	of 	[oph-
thalmic 	materials].
This 	restriction 	does 	not 	apply 	to 	g1v1ng 	"ophthalmic 	products
incidental 	to 	the 	use 	of 	the 	product 	being 	offered" 	(such 	as
eyeglass 	cases 	or 	cleaning 	solutions) 	or 	to 	discounts 	for 	vision
care 	products, 	provided 	certain 	disclosures 	are 	made.
We 	urge 	the 	Council 	to 	recommend 	the 	elimination 	of 	these
provisions. 	These 	bans 	on 	discounts, 	premiums 	and 	bonuses
4 	Bureau 	of 	Economics, 	Federal 	Trade 	Commission, 	Effects 	of
Restrictions 	on 	Advertising 	and 	Commercial 	Practice 	in 	the 	Pro-
fessions: 	The 	Case 	of 	Optometry 	(1980): 	Muris 	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).
S 	As 	interpreted 	by 	the 	South 	Carolina 	Attorney 	General,
this 	provision 	forbids 	any 	person 	from 	offering 	any 	discounts 	on
eye 	examinations. 	See 	84 	S.C. 	Ope 	Att'y. 	Gen. 	142 	(19a4).

deprive 	consumers 	of 	an 	important 	form 	of 	price 	competition 	that
can 	readily 	be 	conveyed 	through 	advertising, 	and 	we 	can 	envision
no 	consumer 	benefit 	from 	such 	restrictions. 	Moreover, 	the 	offer-
ing of such price 	terms 	not 	only 	can 	be 	of 	great 	benefit 	to 	con-
sumers, 	but 	also may be 	a 	valuable 	promotional 	tool 	for 	new 	prac-
titioners 	who 	are 	trying 	to 	establish 	themselves.
While we 	recognize 	the 	potential 	for 	deceptive 	schemes 	in
the 	offering 	of 	discounts, 	premiums 	and 	bonuses, 	we 	believe 	total
bans 	on 	such 	offers 	are 	overly 	restrictive 	and 	unnecessary. 	Both
the 	Practice 	Acts 	already 	contain 	appropriate 	general 	prohibi-
tions 	on 	untruthful 	or 	deceptive 	claims. 	Because 	any 	deceptive
schemes 	are 	likely 	to 	involve 	false 	or deceptive 	claims, 	they
would be 	prohibited under 	the 	current 	Acts.
Disclosure 	Obligations
Code 	sections 	40-37-180 	and 	40-38-70 	of 	the 	Optometry 	and
opticianry 	Acts, 	respectively, 	contain 	provisions 	requiring 	cer-
tain disclosures. 	The 	first 	of 	these 	appears 	to 	require 	that
discounts 	from 	a 	"standard" 	price 	other 	than 	the 	offeror's
"regular" 	price may 	be 	advertised 	only 	if 	the 	"standard" 	price
and 	its 	source 	are 	disclosed 	in 	the 	ad. 	If 	interpreted 	in 	this
way, 	this 	provision would 	effectively preclude 	the 	advertising 	of
certain 	across-the-board 	discounts 	(~., 	"ten 	percent 	off 	manu-
facturers' 	list 	on 	all 	frames 	and 	lenses"). 	Since 	it 	is 	imprac-
tical 	to 	state 	in 	an 	advertisement 	the 	standard 	prices 	and 	their
source 	for 	all 	of 	the 	goods 	and 	services 	covered 	by 	such 	an
offer, 	the 	proviso 	likely 	suppresses 	this 	form 	of 	truthful 	and
valuable 	advertising. 	Because 	it 	may 	harm 	consumers 	and
compe~ition, we 	suggest 	that 	the 	provision be 	eliminated. 6
Another provision 	in 	Code 	sections 	40-37-180 	and 	40-38-70
requires 	that 	certain disclosures 	be made 	in 	all 	price 	advertise-
ments 	of 	ophthalmic 	goods 	and 	services. 	Such 	ads 	must 	state
whether: 	(1) 	an 	advertised 	price 	for 	eyeglasses 	includes 	single
vision 	or multi-focal 	lenses; 	(2) 	a 	price 	for 	contact 	lenses
refers 	to 	soft 	or hard 	contacts; 	(3) 	a 	price 	for 	ophthalmic 	mate-
rials 	includes 	all 	dispensing 	fees; 	(4) 	a 	price 	for 	ophthalmic
materials 	includes 	an 	eye 	examination; 	and, 	(5) 	a 	price 	for 	eye-
glasses 	includes 	both 	frame 	and 	lenses. 7 	Any 	disclosure 	obliga-
6 	It 	should be 	noted 	that 	at 	least 	one 	court 	has 	invali-
dated on 	First Amendment 	grounds 	similar 	requirements 	that
advertisements 	for 	discounted 	prices 	include 	all 	regular 	non-
discounted 	prices. 	South Ogden CVS 	Store v. 	Ambach, 	493 	F. 	Supp.
374 	(S.O.N.Y. 	1980).
7 	Such 	disclosure 	requirements 	were 	permitted, 	but 	not
required, 	by 	§ 	456.5 	of 	the 	Commission's 	Advertising 	of 	Oph-
thalmic 	Goods 	and Services 	Trade 	Regulation 	Rule 	("Eyeglasses

tion 	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 dis-
closure 	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. 	Because 	we 	do 	not 	believe 	that 	there 	is 	any-
thing 	inherently 	deceptive 	about 	truthful 	price 	advertising, 	we
recommend 	repeal 	of 	these 	provisions.
Superiority 	Claims
Both 	the 	Optometry 	and 	Opticianry 	Boards 	have 	promulgated
regulations 	forbidding 	the 	"slightest 	intimation 	of 	having
superior 	qualifications 	or 	being 	superior 	to 	other 	[licensees]"
(§§ 	95-1-E 	and 	96-20.6, 	respectively).
We 	urge 	the 	Council 	to 	recommend 	elimination 	of 	these 	rules.
Bans 	on 	superiority 	claims 	clearly 	lessen 	competition 	among 	sel-
lers. 	At 	a 	minimum 	they 	restrict 	comparative 	advertising, 	which
can be 	a 	highly 	effective 	means 	of 	informing 	and 	attracting 	cus-
tomers. 	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 	as 	broad 	as 	those
in 	the 	Practice Acts, 	which 	forbid 	even 	the 	"slightest 	intima-
tion" 	of 	superiority. 	Virtually 	all 	statements 	about 	a 	practi-
tioner's 	qualifications, 	experience, 	or 	performance 	can 	be
considered 	to 	be 	implicit 	claims 	of 	superiority. 	Bans 	on 	all
such 	claims 	would make 	it 	very 	difficult 	for 	optometrists 	and
opticians 	to 	provide 	consumers 	with 	truthful 	information 	about
the 	differences 	between 	their 	services 	and 	those 	of 	their 	com-
petitors.
Solicitors
Both 	the 	Practice 	Acts 	impose 	bans 	on 	the 	use 	of 	solicitors
to 	obtain 	patronage 	(§§ 	40-37-220(15) 	and 	40-38-220(15), 	respec-
tively). 	These 	prohibitions 	appear 	to 	unnecessarily 	preclude
optometrists 	and 	opticians 	from 	hiring 	third 	parties 	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,
IfI), 	which 	was 	remanded 	in 	American 	Ootometric 	Association 	v.
~, 	626 	F.2d 	896 	(D.C. 	Cir. 	1980). 	The 	co:rmnission 	has 	chosen
not 	to 	reissue 	the 	remanded 	portion 	of 	Eyeglasses 	I.

harassment, 	or 	similar 	abuses, 	may 	unnecessarily 	restrict 	the
dissemination 	of 	truthful 	information 	about 	and 	sales 	of 	vision
care services 	and 	goods 	to 	willing 	and 	competent 	purchasers.
Similarly, 	restrictions 	that 	permit 	only 	licensed 	optometrists
and opticians 	to 	engage 	in 	solicitation 	unnecessarily 	limit 	the
ability 	of 	businesses 	to 	disseminate 	information 	that 	is 	bene-
ficial 	to 	consumers 	and 	for 	which 	the 	professional 	expertise 	of
an optometrist 	or optician 	is 	not 	required.
In certain 	circumstances 	third-party 	solicitation 	could
conceivably result 	in overreaching 	or undue 	influence. 	See
Ohralik v. 	Ohio 	State 	Bar Association, 	436 	U.S. 	447 	(1978). 	But
this does 	not 	justify prohibiting 	all 	third-party 	solicitation,
just as 	the 	possibility 	of 	deception 	does 	not 	provide 	a 	legiti-
mate basis 	for 	banning 	all 	advertising. 	The 	Federal 	Trade 	Com-
mission considered 	the 	concerns 	that 	underlie 	the 	Ohralik 	opinion
when 	it 	decided 	American Medical 	Association, 	94 	F.T.C. 	701
(1979), 	aff'd 	638 	F.2d 443 	(2d 	Cir. 	1980), 	aff'd 	memo 	by 	an
equally 	divided 	court, 	455 	U.S. 	676 	(1982). 	After 	weighing 	the
possible 	harms 	and 	benefits 	to 	consumers, 	the 	Commission 	ordered
the AKA 	to 	cease 	and 	desist 	from 	restricting 	solicitation, 	but
peraitted 	the AHA 	to 	proscribe 	uninvited, 	in-person 	solicitation
of persons 	who, 	because 	of 	their 	particular 	circumstances, 	may 	be
vulnerable 	to 	undue 	influence. 	We 	suggest 	the 	Council 	consider
this standard, 	which 	protects 	consumers 	while 	allowing 	them 	to
receive 	information about 	available 	ophthalmic 	goods 	and 	ser-
vices.
Professional 	Affiliations
Both the 	Optometry and 	opticianry 	Boards 	have 	rules 	pro-
hibiting 	the 	use 	of 	positions 	in 	professional 	organizations 	"for
advertising 	purposes 	or 	for 	self-aggrandizement" 	(§§ 	95-1(F) 	and
96-20(7), 	respectively). 	These 	rules 	may 	prevent 	the 	dissemina-
tion of 	information 	about 	eye 	care 	professionals 	that many 	con-
sumers 	would 	find 	helpfUl 	in 	selecting professionals. 	Membership
in organizations 	that 	devote 	time 	and 	resources 	to 	studying 	par-
ticular areas 	of 	vision 	care 	may 	well 	indicate 	skill 	in 	that
area. 	While 	information 	about 	membership 	in 	an 	organization may
be communicated 	in 	a 	deceptive 	manner, 	the 	mere 	possibility 	of
deception 	does 	not 	justify a 	total 	ban. 	The 	Council 	should 	urge
the 	replacement 	of 	this 	broad 	ban 	with 	more 	limited 	restrictions
on deceptive 	statements 	concerning 	one's 	professional 	affili-
ations.
Office 	Displays
The 	Optometry 	Board has 	adopted 	several 	additional 	rules
that appear to 	restrict 	optometrists' 	business 	practices 	unneces-
sarily but 	provide 	no 	apparent 	consumer 	benefit. 	Rule 	95-1(D)
forbids 	displaying 	licenses, 	diplomas 	or 	certificates 	where 	they
are visible 	outside 	the 	office. 	Rules 	95-1(H) 	and 	(K) ,forbid

displaying 	eyeglass 	signs, 	lenses 	and 	frames 	in 	optometric
offices. 	These 	provisions 	preclude 	the 	use 	of 	office 	space 	to
inform 	consumers 	of 	optometrists' 	educational 	backgrounds 	and
ophthalmic 	products 	available 	for 	sale 	in 	their 	off~ces. 	We 	can
envision 	no 	consumer 	benefit 	from 	such 	restrictions 	and 	recommend
their 	repeal.
II. 	COMMERCIAL 	PRACTICE 	RESTRICTIONS
We 	also 	recommend 	that 	the 	Council 	consider 	revisions 	to 	a
restriction 	on 	the 	commercial 	manner 	in which 	optometrists 	may
practice. 	We 	believe 	that 	this 	restriction 	may 	not 	be 	in 	the
best 	interests 	of 	consumers.
Office 	Locations
Board Rule 	95-1(N) 	forbids 	the 	opening 	of 	optometric 	offices
in business 	establishments 	such 	as 	jewelry, 	department 	or 	other
stores. 	We 	are 	concerned 	that 	this 	provision 	may 	unnecessarily
hamper 	optometrists 	who 	wish 	to 	market 	their 	services 	in 	a 	cost-
efficient manner. 8 	For 	example, 	banning 	the 	practice 	of 	optome-
8 	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 	optome-
trists 	and 	non-optometrists, 	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 	appear 	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 	lithe 	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 	market. II
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 	Pro-
tection, 	Federal 	Trade 	Commission, 	Ophthalmic 	Practice 	Rules:
State 	Restrictions 	on 	Commercial 	Practice 	(1986).
While 	the 	Presiding 	Officer 	also 	found 	that 	commercial 	prac-
tice 	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 	12-14, 	provided 	an
adequate 	basis 	upon 	which 	conclusions 	about 	the 	qualit~ of 	care

try 	on 	the 	premises 	of 	a 	department 	store 	prevents 	optometrists
from 	locating 	their 	practices 	where 	they 	can 	establish 	and 	main-
tain 	a 	high volume 	of 	patients 	because 	of 	the 	convenience 	of 	the
location 	and 	a 	high 	number 	of 	"walk-in" 	patients. 	This 	higher
volume 	may, 	in 	turn, 	allow 	professional 	firms 	to 	realize 	econo-
mies 	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. 	Such higher 	costs 	may
decrease 	the 	number 	of 	chain 	firms, 	resulting 	in 	higher 	prices
for 	consumers.
commercial 	practice 	restrictions 	such 	as 	this 	one 	are 	fre-
quently 	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 	profes-
sionals 	and 	non-professionals 	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, 	contradicts 	these 	contentions. 	Two 	empirical 	studies
conducted 	by 	the 	staff 	of 	the 	Federal 	Trade 	Commission 	indicate
that 	restrictions 	on 	commercial 	optometric 	practice, 	including
restrictions 	on 	mercantile 	location, 	in 	fact 	harm 	consumers 	by
increasing 	prices 	without 	providing 	any 	quality-related 	benefits.
issue 	could 	be 	drawn. 	Federal 	Trade 	Commission, 	Report 	of 	the
Presiding 	Officer 	on 	Proposed 	Trade 	Regulation 	Rule: 	Ophthalmic
Practice 	Rules 	(1986). 	Both 	the 	staff 	and 	Presiding 	Officer
reports 	will 	shortly be 	under 	review 	by 	the 	Commission.
In 	a 	case 	challenging various 	ethical 	code 	provisions
enforced 	by 	the 	American Medical 	Association 	("AMA"), 	the 	Com-
mission 	found 	that AHA 	rules 	prohibiting physicians 	from working
on 	a 	salaried 	basis 	for 	a 	hospital 	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), 	aff'd, 	638 	F.2d 	443 	(2d 	Cir. 	1980), 	aff'd memo
by 	an 	equally 	divided 	court, 	455 	U.S. 	676 	(1982). 	The 	Commission
concluded 	that 	the 	AHA's 	prohibitions 	kept 	physicians 	from 	adopt-
ing more 	economically 	efficient 	business 	formats 	and 	that, 	in
particular, 	these 	restrictions 	precluded 	competition by 	organiza-
tions 	not 	directly 	and 	completely 	under the 	control 	of 	physi-
cians. 	The 	Commission 	also 	found 	that there 	were 	no 	counter-
vailing 	procompetitive 	justifications 	for 	these 	restri~tions.

The 	first 	study,9 	conducted with 	the 	help 	of 	two 	colleges 	of
optometry 	and 	the 	chief 	optometrist 	of 	the 	Veterans 	Administra-
tion, 	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 more 	in 	markets 	without 	chain
firms 	than 	in 	markets 	where 	chain 	optical 	firms 	were 	present.
The 	study 	data 	showed 	that 	prices 	were 	almost 	18% 	higher 	in 	mar-
kets 	without 	chains.
The 	study 	also 	provided 	evidence 	that 	commercial 	practice
restrictions 	do 	not 	result 	in 	higher 	quality 	eye 	care. 	The
thoroughness 	of 	eye 	exams, 	the 	accuracy 	of 	eyeglass 	prescrip-
tions, 	the 	accuracy 	and 	workmanship 	of 	eyeglasses, 	and 	the 	extent
of 	unnecessary 	prescribing 	were, 	on 	average, 	the 	same 	in 	restric-
tive 	and 	non-restrictive 	markets.
A second 	stud y10 	of 	cosmetic 	contact 	lens 	fitting 	concluded
that, 	on 	average, 	"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 	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
eyecare 	less 	frequently 	and 	may 	even 	forego 	care 	altogether. 11
9 	Bureau 	of 	Economics, 	Federal 	Trade 	Commission, 	Effects 	of
Restrictions 	on 	Advertising 	and 	Commercial 	Practice 	in 	the 	Pro-
fessions: 	The 	Case 	of 	optometry 	(1980).
10 	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 	ophthal-
mology, 	optometry 	and 	opticianry.
11 	Public 	Health 	Service, 	Eyeglasses 	and 	Contact 	Lenses:
Purchases, 	Expenditures, 	and 	Sources 	of 	Payment, 	National 	Health
Care 	Expenditures 	Study 	4 	(1979); 	Benham 	and 	Benham, 	Regulating
throuah 	the 	Professions: 	A Perspective 	on 	Information 	Control,
18 	J.L. 	& Econ. 	421, 	438 	(1975); 	Kernan, 	u.S. 	Health 	Profile,
Washington 	Post, 	Apr. 	26, 	1979 	at 	p. 	C-1, 	col. 	4.

CONCLUSION
In 	sum, 	the 	evidence 	indicates 	that 	consumers 	are 	harmed 	by
restrictions 	on 	truthful, 	non-deceptive 	advertising 	~nd by
restrictions 	on 	the 	forms 	of 	commercial 	practice 	that 	may be 	used
by eye 	care professionals. 	Such 	restrictions 	raise 	prices 	above
the 	levels 	that 	would 	otherwise 	prevail, 	decrease 	the 	quality 	of
care, 	and do 	not 	provide 	any 	consumer 	benefit. 	We 	recommend,
therefore, 	that 	the 	Council 	seek 	to 	repeal 	or 	amend 	the 	rules
discussed 	above 	to 	remove 	unnecessary 	constraints 	on 	innovative
forms 	of 	ophthalmic 	practice 	and 	advertising.
Thank you 	for 	inviting 	our 	comments. 	If 	you 	would 	like 	to
have 	copies 	of 	any 	studies 	or 	other materials 	referred 	to, 	but
not 	enclosed with this 	letter, 	we 	would 	be 	happy 	to 	supply 	them.
Sincerely 	yours,
0#-.:William MacLeod
Director