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First Look at U.S. Supreme Court's Latest Case on Professionals' Advertising:
California Dental Association v. Federal Trade Commission,
No. 97-1625 (May 24, 1999)

The U.S. Supreme Court's latest pronouncement on advertising by professionals will not clarify much of anything. The majority and dissenting opinions duel about standards applicable to an antitrust challenge to restrictions on dentists' advertising. But in the course of the duel, both opinions endeavor to cast more light on the debate about professional advertising. The case does not involve First Amendment issues or state action.

Instead, California Dental Association v. Federal Trade Commission, No. 97-1625 (May 24, 1999), http://laws.findlaw.com/US/000/97-1625.html, deals with the subject of whether a dental society whose rules against misleading advertising sharply restricted dentists' advertisements from featuring price discount and service quality statements violated antitrust laws.

The Federal Trade Commission concluded that the California Dental Association advertising restrictions violated 5 of the Federal Trade Commission Act, 15 U. S. C. 45, through guidelines intended to restrict two types of truthful, nondeceptive advertising: price advertising, particularly discounted fees, and advertising relating to the quality of dental services.

The Ninth Circuit upheld that FTC ruling but the Supreme Court's review resulted in a remand for further review by the Ninth Circuit.

The Supreme Court majority opinion dealt principally with whether the FTC should have used "rule of reason" analysis instead of a "quick look" approach.

Because of this procedural issue, the majority opinion does not purport to resolve the merits of whether the dental association's advertising restraints violated antitrust laws (although the FTC, the Ninth Circuit, and four dissenters believed that it had been sufficiently demonstrated that they did).

The majority opinion includes some analysis about professional advertising that will be of interest to all professionals for indications of the leanings and analysis of some of the Court's members.

In a long paragraph, the Court majority offered this view:

"In a market for professional services, in which advertising is relatively rare and the comparability of service packages not easily established, the difficulty for customers or potential competitors to get and verify information about the price and availability of services magnifies the dangers to competition associated with misleading advertising. What is more, the quality of professional services tends to resist either calibration or monitoring by individual patients or clients, partly because of the specialized knowledge required to evaluate the services, and partly because of the difficulty in determining whether, and the degree to which, an outcome is attributable to the quality of services (like a poor job of tooth-filling) or to something else (like a very tough walnut). See Leland, Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards, 87 J. Pol. Econ. 1328, 1330 (1979); 1 B. Furrow, T. Greaney, S. Johnson, T. Jost, & R. Schwartz, Health Law 3-1, p. 86 (1995) (describing the common view that "the lay public is incapable of adequately evaluating the quality of medical services"). Patients' attachments to particular professionals, the rationality of which is difficult to assess, complicate the picture even further. Cf. Evans, Professionals and the Production Function: Can Competition Policy Improve Efficiency in the Licensed Professions?, in Occupational Licensure and Regulation 235-236 (S. Rottenberg ed. 1980) (describing long-term relationship between professional and client not as "a series of spot contracts" but rather as "a long-term agreement, often implicit, to deal with each other in a set of future unspecified or incompletely specified circumstances according to certain rules," and adding that "[i]t is not clear how or if these [implicit contracts] can be reconciled with the promotion of effective price competition in individual spot markets for particular services"). The existence of such significant challenges to informed decisionmaking by the customer for professional services immediately suggests that advertising restrictions arguably protecting patients from misleading or irrelevant advertising call for more than cursory treatment as obviously comparable to classic horizontal agreements to limit output or price competition."
Breyer, J., filed an opinion concurring in part and dissenting in part, in which Stevens, Kennedy, and Ginsburg, JJ., joined.

Justice Breyer and his three dissenting colleagues would have upheld the decision that the dental association's advertising restraints violated antitrust laws without any necessity for remand.

Justice Breyer's concurring and dissenting opinion includes the following analysis about the "artificial barrier" and anticompetitive nature of imposing advertising restrictions of professional service quality:

"An agreement not to advertise, say, "gentle care" is anticompetitive because it imposes an artificial barrier against each dentist's independent decision to advertise gentle care. That barrier, in turn, tends to inhibit those dentists who want to supply gentle care from getting together with those customers who want to buy gentle care."

Interestingly, the majority opinion actually praises the Breyer analysis (suggesting that the Ninth Circuit may find it quite useful on remand):

"In light of our focus on the adequacy of the Court of Appeals's analysis, Justice Breyer's thorough-going, de novo antitrust analysis contains much to impress on its own merits but little to demonstrate the sufficiency of the Court of Appeals's review. ... Had the Court of Appeals engaged in a painstaking discussion in a league with Justice Breyer's (compare his 14 pages with the Ninth Circuit's 8), and had it confronted the comparability of these restrictions to bars on clearly verifiable advertising, its reasoning might have sufficed to justify its conclusion."
(Those who hope for fewer words per opinion from the appeals courts will be disheartened to learn that the U.S. Supreme Court counts pages and prefers "painstaking discussion" to brevity.)

While this newest Supreme Court case seems to resolve nothing, the majority's espousal of the view that consumers inherently have great difficulty understanding advertising messages about professionals' prices and services may, with the passage of a few more years, simply seem archaic.

Consumers are bombarded with advertising messages of all sorts. Dealing with advertising in all forms has become a crucial survival skill for the times. Many consumers, patients, (and lawyers' clients) would welcome much more truthful, non-deceptive information than they currently receive about price and service quality as they are selecting professionals with whom to work.

Some might wish that the professions could find better ways to work in cooperation with consumer and client groups to let information flow more freely. Indeed, in the absence of comparative information available at or before the point of selection of a professional, how is a patient (or client) going to be confident he or she has made a carefully reasoned choice?

The "common view", mentioned in the Supreme Court's majority opinion -- that "the lay public is incapable of adequately evaluating the quality of medical services" (or other professional services, for that matter) -- is not nearly so "common" as it once was.


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