us-ftc-advocacy-filings-2fb33e64fb89013cfd7ffb00f8ff9684•FTC Staff Comment Before the Ohio State Bar Association Concerning Attorney Advertising
FTC Staff Comment Before the Ohio State Bar Association Concerning Attorney Advertising
us-ftc-advocacy-filings-2fb33e64fb89013cfd7ffb00f8ff9684FTC Staff Comment Before the Ohio State Bar Association Concerning Attorney AdvertisingAdvocacy Filing
V890094 UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION CLEVELAND REGIONAL OFFICE Suite 520-A Atrium Office Plaza 668 Euclid Avenue Cleveland, Ohio 44114 (216) 522·4210 Telecopier: 522-7239 November 3, 1989 Albert Bell, Esq. General Counsel Ohio State Bar Association 33 West Eleventh Avenue Columbus, Ohio 43201 Dear Mr. Bell: COMMISSION AUTHORiZE;; The staff of the Federal Trade Commission is pleased to respond to your request for comments on the proposed amendments to the Ohio Code of Professional Responsibility.l These amendments would generally establish more restrictive standards than now exist for attorney advertising and solicitation. 'We believe that several of these proposals may restrict the flow of valuable information to consumers and on balance, may have the potential to impede competition or increase costs without providing countervailing benefits to consumers. THE INTEREST AND EXPERIENCE OF THE FEDERAL TRADE COMMISSION. Congress has empowered the Federal Trade Commission to prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce? Pursuant to this statutory mandate, the Commission and its staff 1 These comments are the views of the staff of the Cleveland Regional Office and the Bureau of Competition of the Federal Trade Commission. They are not necessarily the views of the Commission or of any individual Commissioner. 2 15 USc. § 45 (1982).
Albert Bell. Esq., General Counsel Ohio State Bar Association Page 2 encourage competition among members of licensed professions to the maXImum extent compatible with other legitimate goals? For several years the Commission and its staff. through law enforcement proceedings and in studies, have been evaluating the competitive effects of public and private restrictions on the business practices of lawyers, dentists, optometrists, physicians, and other state-licensed professionals. Our goal has been to identify restrictions that impede competition or increase costs without providing countervailing benefits to consumers. 4 As part of this effort the Commission has examined the effects of public and private restrictions limiting the ability of professionals to contact prospective clients and to advertise truthfully.5 Advertising informs consumers of options available in the marketplace, and encourages competition among firms seekiag to meet consumer needs. 6 Advertising 3 The Commission's staff has previously submitted comments to state governments and professional associations on the regulation of professional advertising, particularly advertising by attorneys. See, e.g., Comments of the Federal Trade Commission Staff on the Florida Rules of Professional Conduct (July 17,1989); Comments of the Federal Trade Commission Staff on the American Bar Association Model Rules of Professional Conduct (Nov. 22.1988); Comments of the Federal Trade Commission staff on the Rules of Professional Conduct of the New Jersey Supreme Court, submitted to the Committee on Attorney Advertising of the New Jersey Supreme Court (Nov. 9, 1987); Comments of the Federal Trade Commission Staff on the Code of Professional Responsibility of the Alabama State Bar, submitted to the Supreme Court of Alabama (March 31, 1987). 4 See, e.g .• Cleveland Regional Office and Bureau of Economics, FTC, Improving Consumer Ac,ess to Legal Services: The Case for Removing Restrictions on Truthful Advertising (1984). 5 See, e.g., American Medical Association. 94 F.T.c. 701 (1979), affd. 638 F.2d 443 (2d Cir. 1980), affd memo by an equally divided Court, 445 U.S. 676 (1982). 6 In several cases, the Supreme Court has held that restrictions on advertising and solicitation violate the Constitution. See, e.g., Shapero v. Kentucky Bar Association, 108 S. Ct. 1916 (1988) (non-deceptive targeted mail solicitation is protected by the First Amendment); Zauderer V. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626 (1985) (an attorney may not be disciplined for seeking legal business through printed advertising containing truthful and non-deceptive information and advice regarding the legal rights of potential clients or for using non-deceptive illustrations or pictures); Bates v. State Bar of Arizona, 433 U.S. 350 (1977) (a state cannot, consistent with the First Amendment, absolutely prohibit (continued_)
Albert Bell, Esq., General Counsel Ohio State Bar Association Page 3 may be especially valuabl.e for persons first entering a profession, because it enables them to become known to potential clients and develop business more quickly than they otherwise might. Studies indicate that prices for professional services tend to be lower where advertising exists than where it is restricted or prohibited. 7 Empirical evidence also indicates that while restrictions on professional advertising tend to raise prices, they do not generally increase the quality of available goods and services.8 The effects of advertising on price and quality have been found to occur in the provision of legal services as well as in the provision of other professional services. 9 This is not to say that advertising is invariably benign. It may sometimes be unfair or deceptive, or may violate other legitimate goals of public policy. We believe, however, that truthful advertising is generally beneficial. Therefore, you may wish to recommend that the Supreme Court of Ohio impose only restrictions Of' advertising that are narrowly tailored to prevent unfair or deceptive acts or practices, or to accomplish some other significant objective. The remaining sections of the letter will apply these general principles to the specific amendments proposed. 6(_continued) attorney advertising); Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976) (a state cannot prohibit price advertising by pharmacies). 7 Bond, Kwoka, Phelan & Whitten, Effects of Restrictions on Advertising and Commercial Practice in the Professions: The Case of Optometry (1980); Benham & Benham, Regulating Through the Professions: A Perspective 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). 8 Bond, supra note 7, at 3. See also Benham, Licensure and Competition in Medical Markets, draft AEI conference paper (1989); Cady, Restricted Advertising and Competition: The Case of Retail Drugs (1976). 9 See Calvani, Langenfeld & Shuford, Attorney Advertising and Competition at the Bar, 41 Vand. L. Rev. 761 (1988); Schroeter, Smith & Cox, Advertising and Competition in Routine Legal Service Markets: An Empirical Investigation, 35 1. Indus. Econ. 49 (1987); Consumer Access to Legal Services, supra note 4; Muris & McChesney, Advertising and the Price and Quality of Legal Services: The Case for Legal Clinics, 1979 Am. B. Found. Research 1. 179 (1979).
Albert Bell, Esq., General Counsel Ohio State Bar Association Restrictions on Advertising Content: DR 2-10HA)(l), (3)-(6). Page 4 The proposed rules would prohibit "self-laudatory" statements, claims concerning "the quality of the lawyer's legal services," emotional appeals, client testimonials, any claims that are not verifiable, and certain kinds of fee advertisements. These provisions are similar in that they limit what lawyers can say, particularly about the quality of their legal services. Each of these provisions may prohibit truthful claims and therefore appears overbroad. A. Representations of Quality and Self-Laudation. Statements describing the quality of a lawyer's services can convey useful information and may be valued by consumers. Moreover, most advertisements are self-laudatory to some extent. The proposed rules could have the effect of banning virtually all specific claims about the quality of an attorney's work, the convenience of business hours or billing arrangements, and similar matters. A ban on quality and self-laudatory statements could harm consumers in two ways. First, the ban could make it more difficult for consumers to find lawyers who are suited to their needs. Second, it could lessen the beneficial rivalry among competing lawyers. When a lawyer cannot truthfully call attention to the desirable aspects of his or her practice, the incentive to improve or to offer different services or prices is likely to be reduced. We recognize that these rules may be intended to prohibit only a narrow class of overstated and potentially misleading claims. The proposed rules, however, do not seem sufficiently precise to ensure that they will apply only to those cases. As a result, the potential breadth of the restrictions may deter lawyers from engaging in activities that are not intended to be prohibited. The Association may therefore wish to recommend provisions that prohibit only quality claims or self-laudatory statements that are likely to mislead consumers. Alternatively, the Association might consider deleting these provisions entirely, allowing such claims to be covered by the prohibition in the same section against any "false, fraudulent, misleading, deceptive, or unfair" statement. B. Emotional Appeals. It is difficult to determine what is covered under this provision. Advertising often appeals to the emotions and anxieties of some persons. For example, an
Albert Bell, Esq., General Counsel Ohio State Bar Associaticll Page 5 admonition to seek the advice of counsel for work-related accidents might well appeal to the emotions of one recen::y injured on the job. Yet, this type of advertisement may encourage such an individual to explore his or her rights to legal redress by consulting an attorney. The Association may therefore wish to clarify this prOVIsIOn. C. Client Testimonials. The proposed amendments would prohibit any public communication of testimonials of "past or present clients pertaining to the lawyer's capability:'l0 The rule would go beyond the existing Ohio Rule (as well as American Bar Associatioil Model Rule 7.1), which only prohibits testimonials that are false, misleading, or likely to create an unjustified expectation about the results a lawyer can achieve. We believe that consumers may derive useful information from an advertisement featuring an ordinary client asserting truthfully that he received satisfactory service from a particular attorney.1l Public advertising in which clients attest that they use a firm's legal services provides the general public the same type of information that is available to users of legal directories. Similarly, an advertisement in which a famous athlete or actor states truthfully that he or she uses a particular firm or attorney tells consumers that someone who can spend a substantial sum to find an attorney, and who may have significant assets at stake, believes a particular lawyer to be effective. Such testimonials are not inherently misleading, and to prohibit them may impede the flow of valuable information to consumers. We therefore believe that consumers might benefit if the Association were to consider deleting this suggested rule and recomr:-:ead tllat all testimonials be covered under the general prohibition in DR 2-101(AXl) against any "false, fraudulent, misleading, [or] deceptive" statement. Altcrnativclj', the Association may wish to adopt provisions similar to the Federal Trade Commission's Guides Concerning Use of Endorsements and Testimonials in 10 We recognize that the provision does not prohibit the traditional inclusion of a list of clients in legal directories. 11 The restrictions on quality and self-laudatory statements may prohibit valuable testimonials or endorsements by non-clients as well. In its Guide Concerning Use of Endorsements and Testimonials in Advertising, the Federal Trade Commission recognizes the validity of expert a:ld celebrity endorsements. The Commission suggests, however, that "[e]ndorsements must always reflect the honest opinions, findings, beliefs, or experiences of the endorser." 16 c.F.R. § 255.1(a) (1989). See also I d. § 255.2 and § 255.5.
Albert Bell, Esq., General Counsel Ohio St" te Bar Association Page 6 AdvertisingY Essentially, those guides require that testimonials be reflective oE the honest opinions of the endorser,13 that, absent adequate disclosure to the contrar~, the endorser's experience be "representative of what consumers generally achieve[,J" 4 and that paid endorsements be represented as such. 1S D. Non-Verifiable Claims. The proposed rules would also preclude advertising claims that are "not verifiable." Some claims, however, such as "friendlier service" are not capablc of verification. Such claims can be readily judged by any consumer utilizing the service and may not present a significant problem. Such claims may indicate qualities that the attorney seeks to emphasize in his or her practice and that may be important to consumers. Moreover, such communications can attract consumers' attention to the advertising attorney. Even communication that is designed only to attract attention can inform consumers of a lawyer's presence in a community, which is itself useful information. Accordingly, the Association may wish to recommend that these restrictions on advertising content be removed and replaced by requirements that an attorney have a reasonable basis for any material objective claims, and that such claims be truthful and non-deceptive. E. Fee Advertisin~. Proposed Rule 2-101(A)(6) would limit permissible communications relating to legal fees and may essentially prohibit reduced or promotional prices. 16 "Un res trainee subjec~ive characterization of rates" would be prohibited, but "restrained subjective characterizations of rates" would be allowed. 12 16 c.F.R. § 255 (1989). 13 § 255.1. 14 § 255.2. 15 § 255.5. 16 We recognize that proposed rule 2-101(DXl) would permit rate advertising. Insofar as that provision would also require that rate advertising be dignified, it would bear many of the same problems as 2-101(AX6). Therefore, our comments here apply to both provisions.
Albert Bell, Esq., General Counsel Ohio State Bar Association Page 7 The rule gives examples of both restrained and unrestrained characterizations of rates. Even with these examples, however, the distinction between "restrained" and "unrestrained" is so difficult to make that the rule could be used to deter much advertising that is truthful and beneficial to consumers. It is not clear, for instance, whether "fair-priced" is restrained or unrestrained. Moreover, even some of the examples of "unrestrained characterizations" would be useful to consumers. A tax attorney might want to offer reduced fees on tax preparation for a few weeks prior to the busiest tax season; an attorney might want to offer for a week a "special low price" on preparation of a will. A new attorney might want to announce the opening of his or her practice with "special introductory fees." Under Proposed Rule 2-101(AX6), attorneys would not be permitted to communicate such information to consumers. They may be precluded or deterred from communicating and employing promotional prices, even where such activity would facilitate efforts to enter the legal market or to introduce new and innovative serVIces. We suggest that the Association exercise caution before placing restrictions on price information. Of course, it is well-recognized that communications relating to fees that are false or misleading should be prohibited because they would harm consumers. Proposed Rule' 2-101(AX6), however, precludes non-deceptive communications relating to legal fees. Specific Admonition Concernin2 Reliance on Advertisin~ DR 2-101(A). The proposed amendments apparently would require all public communications (except listings in the telephone, city, or legal directories) to conclude with the following admonition: Deciding whether you need to hire a lawyer and choosing a specific attorney or firm to represent you are very important decisions which should not be made only on the basis of advertising or a lawyer's own claims to be an expert. This admonition is required by the Code of Professional Responsibility for lawyers adopted by the Supreme Court of Ohio. [Emphasis in original.]
Albert Bell, Esq., General Counsel Ohio Statt:: Bar I ...,sociation Page 8 Any disclosure obligation might tend to increase advertising costs - it may increase the length of the message and it may force advertisers to forego some other portion of the message that would have been delivered had the space not been occupied by the disclosure. Unnecessary disclosure requirements can thus result in a decrease in useful information available to consumers. If the Association believes that the kind of disclosure mandated in the proposed rule is warranted in some circumstances, it might consider a rule drawn narrowly to mandate disclosure only in those situations. 17 Alternatively, the Association might consider eliminating the proposed disclosure req u iremen t en tirel y. Prior Approval of Advertisin~ by Court A~encv: DR 2-101(..\). The proposed amendments would require copies of all advertising, if, any form, to be filed with and approved by a court agency (or representative) prior to dissemination. This provision would go beyond the existing Ohio Rule [DR 2-101(D)], which requires only that radio and television advertisements be recorded and kept by the advertising attorney, and it would go beyond the ABA Model Rule (7.2), which requires only that a copy and dissemination record of any adverti~",:._'l.:nt h,... kept by the attorney for two years. The State of Ohio certainly has a legitimate interest in deterring deceptive or misleading advertising by attorneys, and a "prior review" mechanism could be used to further that interest. Prior approval, however, may also result in a restricted flow of truthful, valuable information to consumers for two reasons. First, the reviewing agency may err and disapprove of advertisements that contain ~J false or misleading statements. Second, even if a lawyer's planned advertising would be approved, that approval would be uncertain, and the review process is likely to delay dissemination. Because of the built-in delay in securing approval and the uncertainty of approval, the rule's effect may be to discourage attorneys from advertising. At the very least, th·.; requirement of prior review would raise attorneys' advertising costs, thereby potentially increasing costs to consumers. The ABA has also cautioned against prior review obligations: "A requirement [of prior review] would be burdensome and expensive relative to its possible benefits, and may be of doubtful constitutionality:'18 For these reasons, the Association may prefer to address the issue of deceptive advertising by a general prohibition enforced by sanctions for violations. Such a 17 For example, advertisements containing express or implied claims that a person should make an immediate decision to hire an attorney could arguably warrant a disclosure. 18 Comment, ABA Model Rule 7.2 (as amended, 1989).