FTC Staff Comment Before the Tennessee Comptroller of the Division of State Audit Concerning the Effects of Statutes Governing Fourteen State Agencies

,
"
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON. D.C. 20580
BUREAU OF COMPETITION
April 	13, 	1990
Mr. 	Glen McKay
Assistant 	Director
Division 	of 	State Audit, 	Department 	of Audit
Comptroller of 	the Treasury
State of 	Tennessee
Suite 	1500, 	James 	K. 	Polk Office 	Building
Nashville, 	Tennessee 	37243-0264
Dear Mr. 	McKay:
The 	staff 	of 	the 	Federal 	Trade 	Commission! 	is 	pleased 	to
respond 	to 	the 	invitation of 	the 	Division 	of 	State Audit 	of 	the
State of 	Tennessee 	to 	comment 	on 	the possible 	restrictive 	or
anticompetitive effects 	of 	statutes 	governing 	fourteen 	state
agencies 	attached 	to 	the 	Tennessee 	Department 	of 	Health and
Environment. 2 The 	analysis 	below discusses 	provisions 	governing
nine 	of 	the 	agencies 	that 	may 	have 	anticompetitive 	effects 	and
thereby 	injure 	consumers. J Those 	agencies 	are 	the 	Boards 	of
Chiropractic 	Examiners, 	Dentistry, 	Dispensing Opticians,
Examiners 	in 	Psychology, 	Medical 	Examiners, 	Optometry,
1 	These 	comments 	are 	the 	views 	of 	the 	staff 	of 	the 	Federal
Trade 	Commission's 	Bureau 	of 	Competition. 	They 	are 	not
necessarily 	the views 	of 	the 	Commission 	itself 	or of 	any
individual 	Commissioner.
2 	The 	agencies 	are 	the 	Board of 	Chiropractic 	Examiners, 	the
Board 	of 	Dentistry, 	the 	Board of 	Dietician/Nutritionist
Examiners, 	the 	Board of 	Dispensing Opticians, 	the 	Board 	for
Nursing Horne 	Administrators, 	the 	Board of 	Examiners 	in
Psychology, 	the 	Board of 	Examiners 	in Speech 	Pathology 	and
Audiology, 	the 	Board of 	Medical 	Examiners, 	the 	Board of 	Nursing,
the 	Board of 	Optometry, 	the 	Board of 	Osteopathic 	Examiners, 	the
Board of 	Registration 	in Podiatry, 	the 	Board of 	Veterinary
Medical 	Examiners 	and 	the 	State 	Board of 	Examiners 	for 	Registered
Professional 	Environmentalists.
3 	The 	statute 	governing 	the 	Division of 	Health Related
Boards 	within 	the 	Department 	of 	Health 	and 	Environment, 	Tenn.
Code Ann. 	S 63-1-101 	et 	seg., 	als~ contains 	provisions 	that
appear 	to 	impose 	restraints 	on 	licensees 	of 	the 	above 	boards. 	We
have 	included comments 	on 	these 	provisions, 	as 	well, 	in 	the
following 	analysis.

Osteopathic 	Examiners, 	Registration 	in 	Podiatry 	and Veterinary
Medical 	Examiners. 4
I. 	Interest 	and 	Experience 	of 	the 	Staff of 	the 	Federal 	Trade
Commission
The 	Federal 	Trade 	Commission 	is 	charged by 	statute 	with
preventing 	unfair methods 	of 	competition 	and 	unfair 	or deceptive
practices 	in 	or 	affecting 	commerce. 	15 	U.S.C~ 	S 45. 	Under 	this
statutory mandate, 	the 	Commission seeks 	to 	identify both 	private
and public 	restraints 	that 	impede 	competition and 	thus 	reduce
output 	and 	increase 	prices 	without 	offering countervailing
benefits 	to 	consumers. 	In 	the 	area 	of 	professional 	services, 	as
elsewhere, 	the 	Commission's 	traditional 	approach 	to 	removing 	such
restraints 	has 	been 	the 	initiation 	of 	antitrust enforcement
proceedings. s In 	addition, 	however, 	the 	staff 	of 	the 	Commission
has 	studied various 	facets 	of 	the 	regulation of 	licensed
4 	It 	should be 	noted 	that 	these 	comments 	are 	limited 	in
scope 	in 	several 	respects. 	First, 	your 	invitation was 	for 	us 	to
comment 	on 	the 	above 	statutes. 	In 	light 	of 	this, 	as 	well 	as 	the
volume 	of 	materials 	involved, 	we 	have 	limited our 	comments 	to
these 	statutes; 	we 	have 	not 	addressed 	the 	rules 	and 	regulations
promulgated by 	the 	professional 	boards, 	except where 	necessary 	to
explain or 	illustrate comments 	regarding 	statutory provisions.
Second, 	the 	staff 	has 	reviewed 	the 	statutes 	governing 	the
fourteen 	regulatory boards 	and 	the 	Division of 	Health Related
Boards. 	Given 	the 	volume 	of 	the 	materials 	involved, 	we 	have
focused 	on 	the 	provisions 	that 	we 	believe 	have 	the 	greatest
potential 	for 	anticompetitive 	effects. 	However, 	the 	fpct 	that 	we
do 	not 	address 	certain statutory provisions 	does 	not 	imply 	that
none of 	those 	provisions 	may 	have 	anticompetitive 	effects.
Third, 	we 	do 	not 	intend, 	by 	these 	comments, 	to 	offer 	advice
regarding 	quality of 	care 	or medical 	safety questions. 	We 	do
urge, 	however, 	that 	restraints 	and 	requirements 	related 	to 	these
areas 	be 	no 	more 	restrictive 	of 	competition than 	necessary 	to
protect 	the 	public.
s 	See,~, 	Massachusetts 	Board of 	Registration 	in
Optometry, 	110 	F.T.C. 	549 	(1988); 	Rhode 	Island 	Board of
Accountancy, 	107 	F.T.C. 	293 	(1986) 	(consent 	order); 	Louisiana
State Board 	of 	Dentistry, 	106 	F.T.C. 	65 	(1985) 	(consent 	order);
American Medical 	Ass'n, 	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); 	American 	Dental 	Ass'n, 	94 	F.T.C. 	403 	(1979),
modified, 	100 F.T.C. 	448 	(1982), 	101 	F.T.C. 	34 	(1983) 	(consent
order). 	.
2

professions,6 	and 	has, 	upon 	request, 	submitted comments 	on
various 	issues 	of 	professional 	licensing and 	regulation 	to 	state
legislatures 	and 	administrative 	agencies,7 	including 	the
Tennessee 	Board of 	Dentistry.8 	It 	is 	within 	this 	latter 	context
. that we 	respond 	to 	your 	invitation.
II. 	Analysis 	of 	Statutory Restraints
A. 	Commercial 	Practice
The 	statutes 	governing various 	Tennessee 	health profession
regulatory 	boards 	restrict 	a 	number of 	forms 	of 	commercial
practice 	by professional 	licensees. 	As 	discussed 	below, 	such
restrictions 	can 	cause 	significant 	injury 	to 	consumers 	by 	raising
prices 	of 	professional 	services 	and 	products, 	depriving consumers
of 	necessary 	care, 	restric~ing consumer choice, 	and 	impeding
innovation and 	competition 	in 	the 	health care 	industry.9
6 	See,~, 	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); 	Bureaus 	of 	Consumer Protection 	and 	Economics,
Federal 	Trade 	Commission, 	A Comparative Analysis 	of 	Cosmetic 	Lens
Fitting by Ophthalmologists, 	Optometrists, 	and 	Opticians 	(1983);
Bureau 	of 	Economics, 	Federal 	Trade 	Commission, 	Effects 	of
Restrictions 	on Advertising 	and Commercial 	Practice 	in 	the
Professions: 	The 	Case 	of 	Optometry 	(1980).
7 	See,~, 	Comments 	of 	Federal 	Trade 	Commission Staff 	to
Pennsylvania 	Regulatory Review Commission on Advertising Rules 	of
Pennsylvania 	State Board of 	Dentistry 	(April 	24, 	1989); 	Comments
of 	Federal 	Trade Commission Staff 	to 	South Carolina Legislative
Audit 	Council 	(comments 	provided on 	seven occasions 	from 	February
1987 	through 	November 	1989, 	regarding more 	than 	twenty 	state
agencies).
• 	Comments 	of 	Federal 	Trade 	Commission 	Staff 	on Advertising
Rules 	of 	Tennessee 	Board of 	Dentistry 	(April 	30, 	1987).
9 	The 	Federal 	Trade 	Commission 	recently 	reiterated 	these
conclusions 	in 	the 	course 	of 	adopting 	a 	Trade 	Regulation 	Rule
regarding 	state 	restrictions 	on commercial 	practice by
optometrists. 	See 	generally 	Federal 	Trade 	Commission, 	Trade
Regulation 	Rule, 	Ophthalmic 	Practice 	Rules 	and 	Statement 	of 	Basis
and 	Purpose 	("FTC 	Ophthalmic 	Practice 	Rules"), 	54 	Fed. 	Reg. 	10285
(March 	13, 	1989) 	(appeal 	docketed 	sub 	nom. 	California 	State 	Board
of 	Optometry v. 	FTC, 	No. 	89-1190 	(D.C. 	Cir., 	filed 	March 	17,
1989».
3

1. 	Lay 	Affiliations
Statutes 	governing 	several 	boards 	contain prov~s~ons that
restrict 	business 	associations 	between 	licensees 	and 	non-
licensees. 	These 	restrictions 	take 	the 	form 	of 	restraints 	on
employment 	of 	licensees 	by 	non-licensees, 	and 	ownership 	or
exercise 	of 	control 	over 	the 	business 	aspects 	of 	professional
practices 	by 	non-licensees. 1o
Employment 	of 	licensees 	by persons 	or 	entities 	not 	engaged
primarily 	in 	the 	same 	profession, 	or 	in 	"health care 	delivery,"
is 	prohibited 	or 	restricted by statutes 	governing 	the 	boards 	of
Dentistry, 	Dispensing Opticians, 	Optometry 	and Veterinary Medical
Examiners. 	Tenn. 	Code Ann. 	SS 	63-5-12l(1);'63-14-103(d); 	63-8-
1l3(c)(2); 	63-8-120(13); 	63-12-137. 11 Ownership 	and 	control 	over
business 	aspects 	of 	professional 	practices 	by 	non-licensees 	are
restricted by 	statutes 	governing 	the 	boards 	of 	Dentistry,
Dispensing Opticians 	and Veterinary Medicine. 12
10 	Restraints 	on 	the 	division 	of 	licensees' 	professional
fees 	with 	non-licensees 	can 	also 	restrict 	business 	associations
between 	licensees 	and 	non-licensees. 	See 	Part 	II.B., 	infra 	(Fee
Splitting/Referral 	Fees).
11 	Tenn. 	Code Ann. 	S 	63-14-103(d) 	also 	provides 	that
licensed opticians 	may 	not 	praciice 	under 	the 	"actual 	and
personal 	supervision" 	of 	a 	non-optician. 	In 	addition, 	S 	63-14-
104 	prohibits 	opticians 	from 	acting 	as 	"agent[s] 	or
representative[s] 	of 	any physician or 	optometrist 	on 	any
account"; 	and 	§ 	63-14-103(e) 	makes 	it 	unlawful 	for 	an 	optician
"to 	be 	employed by, 	perform any work 	in, 	or 	have 	any 	financial
interest" 	in 	"any establishment 	•.. 	engage[d] 	in 	the 	business 	of
a 	dispensing 	optician 	in violation of 	this 	chapter 	..•. "
Tenn. 	Code Ann. 	S 	63-12-103(12) 	prohibits 	licensed
veterinarians 	from 	"sharing office 	space with 	any 	person
illegally practicing veterinary medicine." 	We would 	be 	concerned
if 	"illegal 	practice" 	included, 	for 	example, 	practice 	by 	a
veterinarian 	as 	an employee 	of 	a 	non-veterinarian.
12 	Tenn. 	Code Ann. 	S 	63-5-121(2) 	prohibits 	ownership of 	an
active 	dental 	practice 	by other 	than 	a 	licensed dentist.
Tenn. 	Code Ann. 	S 	63-14-103(e) 	prohibits 	dispensing
opticians 	from 	having 	a 	direct or 	indirect 	financial 	interest 	in
any 	establishment 	that 	"undertakes 	... 	the 	business 	of 	a
dispensing 	optician 	in violation of 	this 	chapter 	"We would
be 	concerned 	if 	activities 	"in violation 	of 	this 	chapter"
included, 	for 	example, 	ownership of 	a 	dispensing 	optician
practice by a 	non-optician.
4

Such 	restrictions 13 can 	prevent 	licensed 	professionals 	from
obtaining capital 	from 	non-licensees 	by entering 	into 	partnership
and 	joint 	ownership 	agreements, 	or other 	associations 	with 	such
persons 	or 	entities. 	Constraints 	on 	capital 	formation, 	in 	turn,
may 	impede 	the 	development 	of 	large-scale 	practices 	that 	can 	take
advantage 	of 	volume 	purchase 	discounts 	and 	realize 	other
economies 	of 	scale. 	By excluding or deterring 	larger 	scale
practitioners 	from 	entering 	the 	market 	and 	by preventing
practitioners 	in 	the 	market 	from 	operating 	at 	the 	most 	efficient
level, 	such restraints 	may contribute 	to 	higher 	prices 	to
consumers. 	Specifically, 	such 	restrictions 	can reduce
competition 	in 	health care markets 	by preventing 	the 	formation
and development 	of 	innovative 	forms 	of 	professional 	practice,
such 	as 	chain 	stores, 	health maintenance 	organizations 	("HMOs")
and 	preferred provider organizations 	("PPOs"), 	that 	offer
competition to, 	and may 	be more 	efficient 	and provide 	comparable
or 	higher quality 	services 	than, 	traditional 	providers. 	As 	a
result, 	these 	restrictions, 	to 	the 	extent 	they go 	beyond
protecting a 	patient's 	privilege 	of 	confidentiality with 	the
health 	care professional, 	can 	harm 	consumers 	by 	raising 	prices
for 	professional 	services 	and 	impeding 	competition 	from
commercial 	firms .14
Tenn. 	Code Ann. 	S 	63-12-137 	requires 	that 	owners 	of
veterinary practices 	must 	be 	veterinarians 	licensed 	in 	the 	State
of 	Tennessee. 	The 	in-state 	licensure 	requirement 	for 	owners
further 	restricts 	competition by 	restricting entry 	into 	the
market 	for 	veterinary medical 	services, 	not 	only by 	non-
licensees, 	but 	by veterinarians 	licensed 	in 	other 	states.
Restrictions 	on 	the 	opportunity 	for 	new 	suppliers 	to 	enter 	the
market 	can 	increase 	prices 	to 	consumers, 	reduce 	the 	output 	of
services 	provided 	and 	limit 	access 	to 	those 	services 	by
consumers.
13 	Requirements 	designed 	to 	provide 	consumers 	with
information 	such as 	the 	licensure 	status 	of 	persons 	or entities
involved 	in professional-lay 	affiliations 	would 	not 	be 	of 	concern
to 	us, 	unless 	such 	requirements 	imposed 	unreasonable 	burdens 	on
the 	formation 	or operation of 	such 	associations. 	See 	Part
II.C.3., 	infra 	(Affirmative 	Disclosures).
14 	FTC 	Ophthalmic 	Practice 	Rules, 	54 	Fed. 	Reg. 	at 	10288-89.
The 	Commission 	also 	considered the 	effects 	of 	restrictions 	on
associations 	between professionals 	and 	non-professionals 	in
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). 	There 	the 	Commission examined 	the 	AHA 	rules
prohibiting 	physicians 	from 	working on 	a 	salaried basis 	with
hospitals 	or other 	lay entities 	(such as 	HMOs), 	and 	from 	entering
into 	partnerships 	or 	similar 	business 	arrangements 	with 	non-
5

2. 	Practice 	in Mercantile 	Locations
Optometrists 	are 	prohibited 	from 	practicing 	or offering 	to
practice 	"in, 	or 	in 	conjunction with, 	any 	retail 	store 	or 	other
commercial 	establishment 	where 	merchandise 	is 	displayed 	or
offered 	for 	sale 	.... " 	Tenn. 	Code Ann. 	§ 	63-8-113(c)(6). 	Such
restrictions 	prevent 	optometrists 	and 	other 	practitioners 	from
locating 	their practices 	inside 	large 	retail 	stores 	where,
because of 	the 	convenience of 	the 	location 	to consumers 	and 	a
high 	number of 	"walk-in" 	patients, 	they could establish 	and
maintain 	a 	high volume 	of 	patients. 	In 	addition, 	the 	above
provision could be 	interpreted to preclude 	optometrists 	from
associating with 	retail 	optical 	firms 	where they 	can 	see 	a 	high
volume of 	patients 	because 	of 	the 	"one-stop-shopping" 	that 	such
firms 	may 	offer. 	A high volume may allow practitioners 	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,
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. 	Such restrictions 	may 	also
impose 	unnecessary 	space, 	construction or 	personnel 	costs 	(~,
where 	an 	optometrist must 	maintain 	an office 	that 	is 	physically
separate 	from 	a 	retail 	establishment with which 	he 	or 	she wishes
to 	affiliate) 	that 	will 	be 	passed on to 	consumers. 1S
3. 	Trade Names
The 	statute 	governing 	the 	Board of 	Registration 	in 	Podiatry
prohibits 	practice 	"under any 	trade 	name 	or 	a 	name 	designating 	a
given 	location or 	the 	name of 	another 	podiatrist 	or 	any 	name
other 	than 	that 	which 	appears 	on 	the 	practitioner's 	license."
Tenn. 	Code Ann. 	S 	63-3-119(15). 	The 	statutes 	of 	the 	boards 	of
Examiners 	in 	Psychology, 	Medical 	Examiners, 	Optometry,
Osteopathic 	Examiners, 	and Veterinary Medical 	Examiners 	prohibit
practice 	under 	a 	"false 	or assumed 	name." 	Tenn. 	Code Ann. 	SS 	63-
11-215(13); 	63-6-214(17); 	63-8-113(b)(2); 	63-9-111(14); 	63-12-
physicians. 	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.
1S FTC 	Ophthalmic 	Practice Rules, 	54 	Fed. 	Reg. 	at 	10289.
6

124(a)(20).16 	If 	interpreted 	to 	preclude 	the 	use 	of 	trade 	names,
these 	provisions 	would 	also 	raise 	concerns.
Provisions 	that 	restrict 	professionals 	from 	practicing under
non-deceptive 	trade 	names 	can 	have 	significant 	anticompetitive
effects. 	Trade 	names 	can be 	essential 	to 	the 	establishment 	of
large 	group practices 	and 	chain 	operations 	that 	can 	offer 	lower
prices. 	Trade 	names 	can be 	chosen 	because 	they 	are 	easy 	to
remember 	and 	because 	they can convey 	useful 	information, 	such 	as
the 	location 	or other characteristics 	of 	a 	practice. 	Over time,
trade 	names 	can 	come 	to 	be 	associated with a 	certain 	level 	of
quality, 	service 	and price, 	thus 	facilitating 	consumer 	search.
If 	trade 	names 	are 	forbidden, 	some 	practices 	lose 	an 	important
marketing 	tool; 	they must 	use 	lengthy 	and 	difficult-to-remember
names 	that 	include 	the 	individual 	names 	of 	all 	the practitioners
or owners 	of 	the 	practice, 	resulting 	in 	less 	information 	being
communicated 	to 	consumers. 	This 	could 	also 	make 	advertising,
which 	is 	essential 	to most 	large 	group prac~ices an~ chains,
prohibitively expensive, 	particularly on 	television or 	radio.
Restrictions 	on 	trade 	names 	are 	often 	intended to 	ensure 	the
identification and 	accountability of 	the 	individual 	licensees 	who
practice 	under 	a 	trade 	name. 	However, 	there may be 	other ways 	to
achieve 	this 	goal. 	For 	example, 	the 	state 	could 	require 	that 	the
names 	of 	individual 	practitioners 	be 	conspicuously posted 	in 	the
reception area 	of 	the 	practices' 	offices, 	or noted on bills,
receipts, 	or 	patient 	records. 	Restrictions 	on 	the 	use 	of 	trade
names 	should 	be 	narrowly 	drawn 	to 	prohibit 	only 	fraud 	or
deception.
4. 	Mobile 	Offices
Optometrists 	may 	not 	"practice 	in 	any 	temporary 	or mobile
office 	except 	as 	authorized 	by 	the 	board 	.... " 	Tenn. 	Code Ann. 	S
63-8-113(c)(7). 	The 	broad 	language 	of 	this 	provision 	could 	allow
for 	the 	imposition of 	anticompetitive 	restrictions 	on 	the
16 	In 	addition 	to 	the 	abcve 	potential 	restrictions 	on 	trade
names, 	Tenn. 	Code Ann. 	S 	63-8-113(d)(1)(D) 	allows 	optometrists 	to
practice 	under 	a 	corporate 	name 	that 	has 	been 	approved by 	the
board, 	provided 	that 	such corporate 	name 	does 	not 	"permit 	or
imply 	action, 	advertising, 	services, 	or 	practices" 	forbidden 	by
the 	optometry 	statute or board 	regulations. 	See 	also 	Tenn. 	Code
Ann. 	SS 	63-8-113(c)(3); 	63-8-120(6). 	The meaning 	of 	this 	phrase
is 	unclear. 	While 	registration 	and 	board approval 	of 	corporate
names 	would 	serve 	the 	legitimate 	state 	interest 	in 	assuring
accountability 	and 	preventing deception by 	providers, 	we 	would 	be
concerned 	if 	this 	provision were 	interpreted 	to 	prohibit 	a
corporate 	name 	that, 	for 	example, 	explicitly or 	implicitly made 	a
truthful, 	nondeceptive 	claim 	of 	a 	type 	addressed 	in 	these
comments 	(~, 	superiority claims).
7

operation of 	mobile 	offices. 	For example, 	the 	Board of 	Optometry
has 	promulgated 	regulations 	regarding 	"itinerant 	offices," 	which
require 	board 	approval 	of 	an 	itinerant 	location 	before 	a 	licensee
may 	begin 	practice 	there. 	Tenn. 	~omp. 	R. 	& Regs. 	S 	1045-2-.05 .
. Such 	a 	provision could be 	interpreted 	to 	require 	a 	licensee
operating a 	mobile 	office 	to 	obtain 	separate 	board 	approval 	for
each 	location 	at 	which 	the mobile office would 	be 	providing
services.
Such an 	interpretation could 	severely hamper 	the 	efficient
operation 	of 	mobile 	offices. 	Mobile 	offices, 	however, 	can be 	of
great 	benefit 	to 	consumers, 	particularly 	in geographic 	areas, 	or
for 	certain populations, 	that 	traditionally have 	been 	underserved
by 	health 	care 	providers. 	Restrictions 	on mobile 	offices 	can
reduce 	access 	to 	health care 	services 	for 	such consumers. 	Such
restrictions 	also 	create 	barriers 	to 	expansion both by 	individual
practition~rs and 	by 	large 	commercial 	practices. 	These
restrictions 	reduce 	the 	total 	volume 	of 	patients 	that 	a 	practice
might 	otherwise 	be 	able 	to 	serve. 	This, 	in 	turn, 	may prevent
practitioners 	from 	taking 	advantage 	of 	economies 	of 	scale 	that
might 	arise 	from 	treating 	a 	greater number of 	patients, 	such 	as
through volume 	purchasing discounts 	and 	reduced per 	office
advertising costs. 17
The 	state 	has 	a 	legitimate 	interest 	in assuring 	that 	mobile
offices 	are 	adequately 	staffed, 	equipped 	and 	available 	to
consumers 	and 	in ensuring 	the 	accountability of 	persons
associated with 	such operations. 	However, 	such requirements
should 	not 	unreasonably 	restrain 	practitioners 	from 	providing
health 	care 	services 	through 	this 	method 	to consumers 	who
otherwist 	might 	Eay more 	for 	such 	services, 	or not 	obtain 	the
services 	at 	all. 8
Commercial 	practice 	restraints, 	such as 	those 	discussed
above, 	are 	often based on 	the 	belief 	that 	business 	relationships
between professionals 	and 	non-professionals 	are 	undesirable
because 	they permit 	lay 	interference 	with 	the 	professional
judgment 	of 	licersees; 	and on 	concerns 	that, 	while 	firms 	engaged
in 	commercial 	practice might 	offer 	lower prices, 	they 	might 	also
be 	motivated 	to 	offer 	lower quality 	services 	to maintain profits.
17 	If mobile 	offices 	were 	prohibited, 	licensees 	who 	wished
to 	provide 	service 	in multiple 	locations 	would 	be 	required 	to
open 	fixed-site 	branch offices 	at 	each 	such 	location. 	The 	cost
of 	this 	alternative might 	result 	in 	fewer 	locations, 	and 	fewer
patients, 	being 	served by providers.
18 	Indeed, 	because 	of 	the 	greater per-location cost 	of
fixed 	offices, 	for 	some 	areas 	of 	low 	population density, 	a 	mobile
office 	practice may provide more 	fully 	staffed and equipped
facilities 	to 	that 	population 	than could 	a 	fixed 	office 	practice.
8

Professionals 	who 	practice 	in 	traditional, 	non-commercial
settings 	would 	then, 	in 	this 	view, 	be 	forced 	to 	lower 	the 	quality
of 	their 	services 	in 	order 	to meet 	the prices 	of 	their 	commercial
competitors.
The 	available 	empirical 	evidence, 	however, 	contradicts 	these
contentions. 	Two 	empirical 	studies 	related 	to 	optometry,
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. 	Other evidence, 	including 	survey evidence, 	indicates
that 	state 	restrictions 	on commercial 	practice may 	actually
result 	in 	decreasing 	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. 2o
19 	Bureaus 	of 	Economics 	and Consumer 	Protection, 	Federal
Trade 	Commission, 	A Comparative Analysis 	of 	Cosmetic 	Lens 	Fitting
by Ophthalmologists, 	Optometrists, 	and 	Opticians 	(1983) 	(This
study 	showed 	that 	commercial 	optometrists 	charged 	significantly
lower 	prices 	for 	fitting 	cosmetic 	contact 	lenses 	and 	fitted 	such
lenses 	at 	least 	as 	well 	as 	other 	fitters 	of 	contact 	lenses);
Bureau 	of 	Economics, 	Federal 	Trade 	Commission, 	Effects 	of
Restrictions 	on Advertising 	and Commercial 	Practice 	in 	the
Professions: 	The 	Case 	of 	Optometry 	(1980) 	(This 	study 	showed
that 	commercial 	practice 	restrictions 	resulted 	in 	higher 	prices
for 	eyeglasses 	and eye 	examinations, 	but 	did 	not 	increase 	their
quality). 	Although 	these 	studies 	deal 	specifically with
restrictions 	on optometric 	practice, 	the 	results 	may be
applicable 	to 	analogous 	restrictions 	in other 	professions.
20 	Public 	Health Service, 	Eyeglasses 	and Contact 	Lenses:
Purchases, 	Expenditures, 	and 	Sources 	of 	Payment, 	National 	Health
Care 	Expenditures 	Study 	4 	(1979); 	Benham and 	Benham, 	Regulating
through 	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-l, 	col. 	4.
Commercial 	practice 	restrictions 	also 	affect 	consumers'
access 	to 	health care 	by 	restricting 	the 	places 	where 	licensees
may 	locate. 	Commercial 	practices 	may 	be 	more 	conveniently
located 	than 	traditional 	practices, 	and 	may 	be more 	frequently
available, 	such 	as 	on weekends 	and evenings. 	Restrictions 	on
such 	firms 	tend 	to 	reduce 	accessibility 	and 	the 	frequency 	of
purchase 	of 	health 	care. 	FTC 	Ophthalmic 	Practice 	Rules, 	54 	Fed.
Reg. 	at 	10290.
9

In 	sum, 	the 	commercial 	practice 	restrictions 	discussed 	above
may 	impose 	substantial 	costs 	on 	health care 	providers 	and 	hinder
the 	development 	of 	high-volume 	practices, 	resulting 	in 	f~wer such
firms 	in 	the 	market, 	higher 	prices 	to 	consumers, 	and 	decreased
access 	to 	health care.
B. 	Fee 	Splitting/Referral 	Fees
Licensees 	are 	prohibited 	from 	dividing 	or 	agreeing 	to 	divide
fees 	with 	any person 	for 	bringing or 	referring 	patients 	under 	the
statutes 	governing 	the 	boards 	of 	Chiropractic 	Examiners,
Dentistry, 	Dispensing Opticians, 	Optometry 	and Registration 	in
Podiatry, 	and 	the 	Division of 	Health Related 	Boards. 	Tenn. 	Code
Ann. 	55 	63-4-11~(6); 63-5-124(11); 	63-14-101(8); 	63-8-120(14);
63-3-119(6); 	63-1-120(12).21 	Prohibitions 	such 	as 	these 	can be
of 	benefit 	to 	patients 	by preventing deception or 	abuse 	of 	the
provider-patient 	relationship. 	However, 	such restrictions 	also
can 	interfere with 	legitimate business 	affiliations 	between
practitioners 	and 	other persons 	or entities, 	and with 	the 	flow 	of
useful, 	nondeceptive 	information 	about 	providers 	to 	consumers.
Restrictions 	on 	referral 	fees 	should not 	be 	broader than
necessary 	to 	protect 	the 	public 	from 	harm.
Whether 	restrictions 	on 	referral 	fees 	are 	overbroad would
depend 	upon the 	potential 	for 	harm 	in 	their 	absence. 	For
example, 	the 	primary 	justification 	for 	such 	prohibitions 	is 	that
they 	prevent 	abuse 	of 	the 	special 	trust 	that 	a 	patient 	places 	in
a 	practitioner 	to 	make 	appropriate 	referrals 	based 	on 	his 	or 	her
independent 	professional 	judgment of 	the 	patient's 	best 	interest.
A practitioner who 	stands 	to 	receive 	a 	referral 	fee 	from 	another
21 	In 	addition, 	Tenn. 	Code Ann. 	S 	63-5-124(15) 	prohibits
dentists 	from 	paying or 	accepting 	"commissions 	... 	on 	fees 	for
professional 	services, 	references, 	..• 	or 	on other 	services 	or
articles 	supplied 	to 	patients." 	Like 	the 	above 	provisions 	that
bar 	referral 	fees, 	this 	provision would be 	of 	concern 	if, 	as
discussed, 	infra, 	it was 	interpreted 	to 	prohibit 	all 	divisions 	of
fees 	or 	referral 	fees.
Tenn. 	Code Ann. 	5 	63-8-113(c)(5) 	prohibits 	optometrists'
splitting 	fees 	with any organization 	in 	return 	for 	solicitation
of 	customers 	by 	that 	firm 	or 	organization. 	This 	provision 	could
limit 	the 	ability of 	optometrists 	to 	form 	business 	associations
with 	non-optometrists 	if 	it 	were 	to 	be 	interpreted 	as 	barring,
for 	example, 	a 	commercial 	optical 	establishment 	or 	an HMO or 	PPO
with which 	a 	licensed optometrist was 	associated 	from 	advertising
that 	association. 	The 	statute 	could 	also 	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. 	Sep. 	Part 	11.0.,
infra 	(Solicitation).
10

provider may 	refer 	the 	patient 	for 	unnecessary 	health 	care 	to 	the
provider who 	pays 	the 	highest 	referral 	fees, 	rather 	than 	to 	the
most competent 	one. 	In markets 	for 	services 	other 	than 	health
care, 	to 	the 	extent 	that 	consumers 	are 	sufficiently 	knowledgeable
to 	assess 	the 	need 	for 	and quality of 	services, 	disclosure 	of 	the
referral 	fee 	may be 	sufficient 	to 	prevent 	abuse 	or deception 	--
although 	the 	possibility of 	a 	conflict 	of 	interest 	between 	the
referring 	practitioner's 	financial 	interest 	and 	his 	or her duty
to 	the 	consumer remains. 	In 	health care markets, 	however, 	the
patient's 	greater dependency on 	the provider may warrant
restrictions 	on 	referral 	fees 	beyond mere 	disclosure 	requirements
in cases 	of 	interprofessional 	referrals.
The 	considerations 	may be 	different, 	however, 	in 	situations
where 	referrals 	are 	not made 	directly 	between 	independent
providers. 	For example, 	harm 	to 	patients 	is 	less 	likely 	to 	occur
when referrals 	are made 	among providers 	in 	a 	more 	integrated
operation, 	such 	as 	an HMO or PPO, 	or by a 	commercial 	referral
service. 	Fees 	paid 	to 	these 	entities 	are 	unlikely 	to 	provide 	an
incentive 	for 	anyone 	to 	refer 	patients 	for 	unnecessary care,
since the 	entity receiving 	the 	fee 	-- 	the 	HMO or 	referral 	service
-- 	does 	not 	recommend 	or 	suggest 	that 	any patient 	obtain 	health
care.
Prohibitions 	on 	referral 	fees, 	and on division 	of 	fees
generally, 	however, 	may 	interfere with 	the 	operation of
alternative 	health care 	delivery 	systems 	(such as 	HMOs 	and 	PPOs)
that may 	have 	incentive 	arrangements 	with 	health care
professionals 	in which 	fees 	are 	divided 	between the 	medical 	plan
and the 	professional. 22 Such restrictions 	may 	also 	prevent
practitioners 	from 	participating 	in 	commercial 	referral 	services
that charge 	a 	fee 	for 	participation. 	Referral 	services 	can be
valuable 	in 	helping 	consumers 	locate 	appropriate 	health 	care 	and,
by 	facilitating 	the 	gathering 	of 	information, 	such 	services 	can
increase 	competition 	among 	health care 	professionals. 	In 	such
situations, 	requiring 	disclosure 	of 	the 	fact 	that 	the 	provider
will 	payor 	receive 	a 	fee 	in 	consideration 	for 	a 	referral 	may be
sufficient 	to 	prevent 	abuse 	or 	deception 	and 	to 	protect 	patients
from 	harm. 	Such 	a 	requirement 	would 	also 	provide 	patients 	with
22 	For example, 	some 	PPO programs 	require 	participating
providers 	to 	remit 	to 	the 	PPO 	a 	percentage 	of 	the 	fees 	earned
from 	treating PPO patients 	referred 	to 	them 	through 	the 	PPO.
Under 	the 	above 	statutory provisions, 	such 	a 	payment 	might 	be
construed 	as 	a 	fee 	in consideration 	for 	the 	referral 	of 	a
patient.
11

information to 	aid 	in their 	decision whether 	to 	use 	the
recommended provider. 23
Restrictions 	on 	the 	division 	of 	fees 	can 	also 	harm
competition 	and 	consumers 	by 	interfering both with 	lease
arrangements 	in which 	a 	provider's 	rent 	is 	based on 	a 	percentage
of 	gross 	revenues, 	and with 	certain 	franchise 	arrangements
whereby providers 	pay 	a 	percentage 	of 	their 	fees 	to 	a 	franchisor
in 	return 	for 	marketing 	and 	advertising 	services, 	and 	the 	use 	of
a 	trade 	name. 	Such practice 	arrangements 	may 	help 	to 	lower 	the
cost of 	health care 	services, 	without 	posing 	an 	inherent 	danger
of 	reducing 	the 	quality of 	services 	provided.
C. 	Price 	Advertising
The 	Supreme Court 	has 	emphasized 	the vital 	role 	that
advertising 	plays 	in 	promoting 	the 	efficient 	allocation of
society's 	scarce 	resources. 24 As 	part of 	the 	Commission's 	effort
to 	foster 	competition among 	licensed 	professionals, 	it 	has
examined 	the 	effects 	of 	public 	and private 	restrictions 	that
limit 	the 	ability 	of 	professionals 	to 	engage 	in 	nondeceptive
advertising. 	For example, 	the 	Commission's 	Bureau 	of 	Economics
has 	published 	a 	study 	showing 	that 	advertising does 	not 	lead 	to 	a
reduction of 	quality of 	vision care but 	does 	lead 	to 	a 	decrease
in prices. 25 Other empirical 	studies 	have 	confirmed the
relationship 	between advertising 	and 	lower 	prices 	in markets 	for
n 	See 	generally 	Comments 	of 	Bureau of 	Economics, 	Federal
Trade 	Commission before 	Department 	of 	Housing 	and 	Urban
Development, 	Proposals 	to 	Relax 	the 	Interpretation of 	Section 	8
with Regard 	to Home Mortgages 	8-14 	(Docket 	R-88-1256, 	July 	15,
1988) 	(general 	discussion 	of 	circumstances 	under which 	referral
fees 	could tend 	to 	enhance 	or harm market 	performance).
24 	See,~, 	Zauderer v. 	Office 	of 	Disciplinary Counsel,
471 	U.S. 	626, 	646 	(1985) 	("the 	free 	flow 	of 	commercial
information 	is 	valuable 	enough 	to 	justify 	imposing 	on would-be
regulators 	the 	cost 	of 	distinguishing 	the 	truthful 	from 	the
false, 	the 	helpful 	from 	the misleading, 	and 	the 	harmless 	from 	the
harmful"); 	Bates 	v. 	State 	Bar of Arizona, 	433 	U.S. 	350, 	364
(1977) 	("commercial 	speech 	serves 	to 	inform 	the 	public 	of 	the
availability, 	nature, 	and 	prices 	of 	products 	and 	services, 	and
thus 	performs 	an 	indispensable 	role 	in 	the 	allocation of
resources 	in a 	free 	enterprise 	system").
~ 	Bureau 	of 	Economics, 	Federal 	Trade 	Commission, 	Effects
of 	Restrictions 	on Advertising 	and Commercial 	Practice 	in 	the
Professions: 	The 	Case 	of 	Optometry 	(1980).
12

26
professional 	services. 26 Therefore, 	to 	the 	extent 	that 	truthful,
nondeceptive 	advertising 	is 	restricted, 	higher 	prices 	and 	a
decrease 	in consumer welfare may result. 27
We 	believe 	that 	false 	or deceptive 	advertising 	should be
prohibited. 28 	Any other 	standard 	is 	likely 	to 	suppress 	the
dissemination 	of 	potentially useful 	information 	and may
contribute 	to 	an 	increase 	in 	prices. 	State 	legislatures
increasingly have 	amended 	laws 	regulating 	professionals 	to 	bring
statutory restrictions 	on 	advertising 	into 	closer 	conformity with
the Commission's 	"false or deceptive" 	standard.
Various 	of 	the 	Tennessee 	statutes, 	as 	discussed below,
appear 	to 	place 	broad prohibitions 	or 	restrictions 	on 	the
communication 	of 	price 	information. 	As 	the 	Supreme Court 	has
See, 	~, 	Bureau 	of 	Economics 	and 	Cleveland Regional
Office, 	Federal 	Trade 	Commission, 	Improving 	Consumer Access 	to
Legal 	Services: 	The 	Case 	for 	Removing 	Restrictions 	on Truthful
Advertising 	(1984); 	Benham, 	Regulating 	through 	the 	Professions:
A Perspective 	on 	Information Control, 	18 	J. 	Law 	& Econ. 	421
(1975); 	Benham, 	The 	Effect 	of 	Advertising 	on 	the 	Price of
Eyeglasses, 	15 	J. 	Law 	& Econ. 	337 	(1972). 	See 	also 	J.R.
Schroeter, 	S.L. 	Smith and 	S.R. 	Cox, 	Advertising 	and 	Competition
in Routine 	Legal 	Service Markets, 	36 	J. 	Industrial 	Econ. 	49
(1987); 	T. 	Calvani, 	J. 	Langenfeld 	and G. 	Shuford, 	Attorney
Advertising 	and 	Competition 	at 	the 	Bar, 	41 	Vanderbilt 	L. 	Rev. 	761
(1988).
27 	The 	Tennessee 	Court 	of Appeals 	also 	recognized 	the 	value
of 	advertising when 	it 	held unconstitutional 	provisions 	of 	the
statute 	and 	rules 	regulating dispensing 	opticians 	that 	prohibited
most 	forms 	of 	advertising, 	including 	advertising of 	prices 	of
professional 	services, 	free 	professional 	services 	and 	guarantees
of 	professional 	services. 	Horner-Rausch Optical 	Co. 	v. 	Ashley,
547 	S.W.2d 577, 	579-80 	(Tenn. 	Ct. 	App. 	1977). 	Although 	the 	court
distinguished dispensing 	opticians 	from 	other professionals 	with
respect 	to 	the 	validity of 	advertising 	restrictions, 	we 	believe,
as 	discussed below, 	that 	the 	court's 	analysis 	of 	the 	effects 	on
competition 	and consumers 	of 	such prohibitions 	is 	applicable 	to
other professions 	as 	well.
28 	See 	the 	FTC 	Policy Statement on 	Deceptive 	Acts 	and
Practices, 	attached 	to 	the Commission decision 	in Cliffdale
Associates, 	Inc., 	103 	F.T.C. 	110 	(1984). 	The 	Commission 	also
regulates 	unfair 	advertising on 	a 	case-by-case 	basis. 	For 	a
discussion 	of 	what 	the Commission considers 	in evaluating whether
an advertisement 	is 	unfair, 	~ 	International 	Harvester, 	104
F.T.C.949, 	1060-62 	(1984), 	and 	the 	attached Commission 	Statement
of 	Policy on 	the 	Scope 	of 	the 	Consumer 	Unfairness 	Jurisdiction,
104 	F.T.C. 	at 	1072.
13

noted 	in 	Bates, 	the 	lack of 	such 	information 	"serves 	to 	increase
the 	[consumer's} 	difficulty of 	discovering 	the 	lowest 	cost 	seller
of 	acceptable 	ability. 	As 	a 	result 	... 	[professionals] 	are
isolated 	from 	competition 	and 	the 	incentive 	to 	price
competitively 	is 	reduced." 	The 	absence 	of 	such 	information 	also
"servers] 	to 	perpetuate 	the 	market 	position of 	established
[parties]." 	433 	U.S. 	at 	377-78.
Price 	advertising 	informs 	the 	public 	of 	the 	availability of
price alternatives, 	places 	pressure 	on 	sellers 	to 	reduce 	prices,
and 	instills 	cost 	consciousness 	in both consumers 	and 	providers.
Restraints 	on 	price 	advertising, 	therefore, 	should be 	narrowly
tailored 	to 	avoid unnecessarily 	suppressing 	this 	important 	means
of 	communication.
1. 	Discount 	Advertising
Dispensing opticians 	are 	prohibited 	from 	"[o]ffering
discounts 	or 	inducements 	to 	prospective patrons 	by means 	of
coupons 	or otherwise 	to 	performirofessional 	services 	.... "
Tenn. 	Code Ann. 	S 	63-14-104(7).2 	A different 	section of 	the
relevant 	statute, 	however, 	authorizes 	advertising of 	discount
prices 	for 	optical 	products 	by dispensing 	opticians 	under 	certain
conditions, 	discussed below. 	Tenn. 	Code Ann. 	S 63-14-103(h)(3).
Although 	the 	latter 	section permits 	some 	advertising of 	discount
prices, 	we 	are concerned 	about 	the 	effects 	of 	the 	restrictions 	it
imposes.~
29 	See 	also 	Tenn. 	Code Ann. 	S 63-1-120(18) 	(Division 	of
Health Related 	Boards) 	(offering 	of 	discounts 	prohibited). 	In
view of 	the 	possible 	constitutional 	problems 	with 	such bans 	on
advertising, 	see, 	~, 	Virginia 	Board of 	Pharmacy v. 	Virginia
Citizens 	Consumer Council, 	Inc., 	425 	U.S. 	748 	(1976) 	(ban on
offers 	of 	discounts 	and 	rebates), 	as 	well 	as 	their
anticompetitive 	effects, 	we 	assume 	that 	the 	Legislature 	does 	not
intend 	this 	result 	and would wish 	to 	eliminate or 	clarify 	~hese
provisions.
30 	In 	addition, 	statutes 	governing the 	boards 	of 	Examiners
in 	Psychology 	and Medical 	Examiners, 	Tenn. 	Code Ann. 	SS 	63-11-
215(12); 	63-6-214(16), 	prohibit 	"giving or 	receiving, 	or 	aiding
or 	abetting 	the 	giving or 	receiving, 	of 	rebates, 	either 	directly
or 	indirectly." 	The meaning of 	"rebate" 	under 	these 	provisions
is 	unclear. 	However, 	if 	the 	provisions 	are 	interpreted 	to
prohibit 	advertising of 	certain 	kinds 	of 	price 	discounts, 	see
Tenn. 	Compo 	R. 	& Regs. 	S 	0480-8-.01 	(Board of 	Dispensing
Opticians 	prohibits 	"[r]ebates 	and 	discounts 	of 	any 	kind,"
apparently equating the 	two), 	this 	would 	raise 	the 	same 	concerns
as 	other 	restrictions 	on discount 	advertising.
14

First, 	it 	provides 	that 	advertised discounts 	are 	not 	to 	be
nlimited 	to 	any particular group or classification but 	shall 	be
advertised 	as 	being 	available 	to 	all 	persons." 	This 	restriction,
in 	precluding the 	advertising 	of 	discounts 	directed 	at 	specific
groups 	such as 	students 	or 	senior 	citizens, 	appears 	overbroaa 	and
unnecessary 	to 	prevent 	consumers 	from 	being misled. 	Such a
restriction does 	not 	appear 	to 	benefit 	the 	consumer. 	Senior
citizens 	in 	particular may benefit 	substantially 	from 	advertising
of 	available 	discounts. 	Truthful, 	nondeceptive 	advertising of
discounts 	directed 	at 	particular 	groups 	is 	in 	the 	consumer's
interest; 	it 	encourages 	price 	competition, 	gives 	such 	consumers 	a
greater choice of 	providers, 	and may contribute 	to 	price
reductions.
Second, 	this 	section prohibits 	a 	practitioner 	from 	offering
a 	discount 	for 	less 	than 	a 	seven-day period. 	It 	is 	not 	clear why
this 	requirement 	is 	necessary 	to 	prote~t consumers, 	provided 	the
length of 	the 	offer 	is 	specified. 	A truthful 	adver~isement
offering a 	discount 	that 	states 	that 	the 	discount 	is 	available
only, 	for 	example, 	the weekend 	before 	school 	begins 	does 	not
appear 	to 	be 	inherently deceptive, 	and may benefit 	consumers 	and
increase 	price 	competition among 	opticians.
Although optometrists 	apparently may advertise 	price
discounts, 	they may 	not 	discount 	optometric 	services 	"contingent
upon 	the 	purchase 	of 	ophthalmic 	materials." 	Tenn. 	Code Ann. 	S
63-8-113(b)(7). 	This 	would, 	for 	example, 	prohibit 	an optometrist
from 	truthfully offering 	an 	eye 	examination 	at 	a 	discount, 	or
presumably 	at 	no 	cost, 	providing 	that 	the 	consumer 	purchases 	one
or more 	pairs 	of 	glasses. 	The 	ability 	to make 	such 	an offer
provides 	an 	incentive 	for 	a 	practitioner 	to 	lower 	the 	cost 	of 	a
service 	in order 	to 	sell 	more 	ophthalmic 	goods. 	Moreover, 	it 	is
not 	clear 	that 	such offers 	inherently are 	deceptive. 	While 	such
an 	offer 	could be 	deceptive 	-- 	for 	example, 	if 	the 	seller 	raised
the 	"regular" 	price 	of 	the 	article 	to 	be 	purchased 	at 	full 	price,
or 	the 	consumer was 	misled 	as 	to 	the 	terms 	or 	conditions 	of 	the
offer 	-- 	the 	above 	provision 	is 	broader than 	necessary 	to 	prevent
such 	deception. 	On 	balance, 	we 	believe 	this 	restriction may
unnecessarily 	limit 	competition among 	optometrists, 	and 	deprive
consumers 	of 	a 	valuable choice 	that 	has 	the 	potential 	to 	lower
the 	cost 	to 	them of 	ophthalmic 	goods 	and 	services.
2. 	Free Goods 	or Services
Dispensing opticians 	are 	prohibited 	from 	advertising 	that
they 	offer 	"premiums" 	or 	"gifts" 	on 	the 	basis 	that 	such offers
either 	are 	fraudulent 	or 	are 	of 	a 	character to 	deceive 	or
mislead. 	Tenn. 	Code Ann. 	S 63-14-103(g). 	In 	addition,
optometrists 	are 	prohibited 	from 	offering a 	"prize, 	premium 	or
15

gift," 	except 	as 	authorized 	by 	the 	Board of 	Optometry. 31 	Tenn.
Code Ann. 	S 63-8-113(b)(6).
We 	believe 	bans 	on 	such offErs 	are 	overly 	restrictive 	and
unnecessary 	to 	protect 	the 	public. 	Such 	bans 	may 	deprive
consumers 	of 	an 	important 	form 	of 	price 	competition. 	In
particular, 	the 	ability 	to 	communicate 	such offers 	to 	consumers
can 	provide a 	valuable 	promotional 	tool 	to 	new practitioners 	who
are 	trying 	to 	enter 	the 	market, 	whereas 	the 	absence 	of 	this 	kind
of 	competitive 	information 	serves 	to 	perpetuate 	the 	market
position of 	established 	practitioners. 	Also, 	there 	is 	no 	reason
to 	believe 	that 	all 	offers 	of 	free 	goods 	or 	services 	inherently
are deceptive, 	and 	those 	that do 	deceive 	can be dealt 	with 	under
a 	"false or deceptive" 	standard. 32
3. 	Affirmative 	Disclosures
The 	statute 	governing price 	advertising by dispensing
opticians 	imposes 	a 	number of 	disclosure 	requirements, 	at 	least
some 	of 	which may be 	unnecessary 	to 	prevent 	deception 	and 	could
raise 	significantly 	the 	cost 	of 	advertising ophthalmic 	products.
Advertisements 	for 	ophthalmic 	lenses, 	eyeglasses, 	spectacles 	or
contact 	lenses 	must 	contain 	"a 	further 	readily 	legible 	statement
identifying the 	lens 	as 	single vision, 	bifocal 	or 	trifocal 	and 	as
clear or 	tinted," 	as 	well 	as 	"the 	type 	of 	material, 	the 	name 	of
the 	manufacturer, 	the 	manufacturer's 	identifying 	name 	or 	number
of 	lens, 	and 	the 	country 	of manufacture." 	Tenn. 	Code Ann. 	S 63-
14-103(h)(1). 	Advertisements 	for 	ophthalmic 	frames 	also must
identify 	the 	type 	of 	material, 	name 	of 	manufacturer, 	identifying
name 	or 	number 	of 	frame, 	and 	country of 	manufacture. 	Tenn. 	Code
Ann. 	S 6~-14-103(h)(2). 	In all 	advertisements, 	the 	expiration
date, 	if 	any, 	of 	the 	advertised 	price 	and 	a 	statement 	that 	the
price 	"Does 	Not 	Include 	Professional 	Services 	of 	an 	Examining
Optometrist 	of 	Physician" 	must 	appear. 	Tenn. 	Code Ann. 	SS 	63-14-
31 	We 	have 	found 	no 	board 	rule 	that 	specifically permits
such 	advertising; 	accordingly, 	it 	appears 	that 	this 	provision
could be 	interpreted 	as 	banning 	the 	advertising of 	gifts,
premiums 	or 	free 	services. 	See 	also 	Tenn. 	Code Ann. 	S 63-1-
120(17) 	(Div. 	of 	Health Related 	Boards) 	(prohibits 	"[a]dvertising
any 	free 	professional 	services 	or 	free 	examinations"). 	In view
of 	the 	possible 	constitutional 	problems 	with 	such bans 	on
advertising, 	see, 	~, 	Virginia 	Board of 	Pharmacy 	(ban on
advertising of 	premiums); 	Horner-Rausch Optical 	Co. 	(ban on
advertising of 	free 	services), 	as 	well 	as 	their 	anticompetitive
effects, 	we 	assume 	that 	the 	Legislature 	does 	not 	intend 	this
result 	and would wish 	to 	eliminate 	or clarify this 	provision.
32 	The 	FTC 	has 	issued 	a 	guide 	concerning the 	use 	of 	the
word 	nfree" 	and 	similar 	representations. 	See 	16 	C.F.R. 	S 	251
(1990).
16

103(h)(3), 	(4). 	Such extensive 	disclosure 	requirements 	may 	not
be 	necessary 	to 	prevent 	deception 	and 	are 	likely 	to 	reduce 	the
amount 	of 	price 	advertising by 	increasing 	its 	cost.
First, 	some 	of 	these 	disclosures, 	because 	they would 	require
significant 	time 	in 	a 	radio 	or 	television 	ad, 	and 	significant
space 	in 	a 	printed 	ad, 	could 	greatly 	increase 	the 	cost 	of 	the 	ad.
Second, 	lengthy disclosures 	may 	detract 	from 	the 	impact 	of 	the
ads, 	particularly 	radio 	and 	television 	ads, 	by cluttering 	them
with 	information 	that 	distorts 	the 	primary message 	of 	the 	ads.
Third, 	disclosure 	obligations 	may 	also 	require 	practitioners 	to
forego 	some portion of 	the 	advertising message 	they would
otherwise 	have 	delivered, 	thereby 	resulting 	in 	less 	useful
information being made 	available 	to 	consumers. 	Consequently,
disclosures 	should be mandated only where 	they 	are 	designed 	to
prevent 	deception.
We 	recognize 	that, 	in general, 	the more 	information 	that 	is
available 	to consumers, 	the 	better prepared they will 	be 	to 	make
well-reasoned 	purchases. 	However, 	requiring 	overly extensive
disclosures 	can 	increase 	advertising costs, 	thereby discouraging
some 	opticians 	from 	advertising 	and denying consumers 	useful
information 	respecting 	available 	opticians' 	services. 	We 	suggest
that 	the 	state, 	in determining whether 	to 	require 	a 	disclosure,
consider the 	possibility that 	disclosures 	can become burdensome.
Perhaps 	a 	requirement 	that 	such 	information be made 	available 	to
consumers 	on 	request 	would 	suffice 	to 	balance 	the 	need 	to make
information 	available with 	the 	need 	not 	to 	unnecessarily burden
opticians 	seeking 	to 	advertise 	to 	the 	public.
D. 	Solicitation
Statutes 	governing 	the 	practices 	of 	chiropractors, 	dentists,
podiatrists 	and 	optometrists 	prohibit 	or 	restrain 	solicitation by
means 	of 	an 	agent. 	Tenn. 	Code Ann. 	SS 	63-4-114(5); 	63-5-124(10);
63-3-119(5); 	63-8-120(8); 	63-8-113(c)(5).33 	In 	addition, 	the
33 	Tenn. 	Code Ann. 	S 63-8-120(8) 	prohibits 	solicitation by
optometrists 	in 	person or 	by agent 	by any means 	other 	than 	those
authorized 	in Tenn. 	Code Ann. 	Ch. 	63-8. 	Section 	63-8-113(c)(5)
prohibits 	optometrists 	from 	splitting or 	sharing 	fees 	with 	any
organization 	in 	return 	for 	solicitation of 	customers.
Optometrists 	are 	also 	limited 	in 	their use 	of 	agents 	by
Tenn. 	Code Ann. 	S 63-8-113(c)(4), 	under which optometrists 	may
not 	"[a]ppoint 	agents 	or other 	persons 	to 	take 	orders" 	for
services 	or materials; 	and 	by Tenn. 	Code Ann. 	S 63-8-113(b)(4),
under 	which optometrists 	may 	not 	"[c]anvass 	or 	solicit 	.•• 	in
person or by 	agent, 	except 	as 	authorized by 	the 	board." 	We 	have
found 	no 	such authorization 	in 	t~e rules 	and 	regulations 	of 	the
Board 	of 	Optometry, 	suggesting 	that 	such canvassing 	and
17

statute 	governing 	the 	Board of 	Optometry prohibits 	optometrists
from 	engaging 	in 	in-person 	solicitation 	(other 	than 	by means 	of
advertising 	authorized by 	that 	statute), 	Tenn. 	Code Ann. 	S 63-8-
120(8), 	including door-to-door 	solicitation. 34
Restrictions 	on 	solicitation, 	in-person or by 	agent, 	may
deprive 	consumers 	of 	truthful, 	non-deceptive 	information 	that
will 	help them 	select 	a 	provider. 	Such 	contacts 	can convey
information 	about 	the 	availability and 	terms 	of 	a 	provider's
services; 	in 	this 	respect, 	they 	serve much 	the 	same 	function 	as
print 	or broadcast 	advertising. 	See 	Ohralik v. 	Ohio 	State 	Bar
Ass'n, 	436 	u.S. 	447, 	457 	(1978). 	Prohibitions 	on 	solicitation by
agents 	may 	inhibit 	the 	operation 	of 	some 	PPOs, 	HMOs, 	and 	other
alternative 	health care 	delivery 	systems, 	and may 	deter
professionals 	from 	affiliating with 	referral 	services 	or
franchisors, 	all 	of 	whom may 	solicit 	on 	behalf 	of 	professionals
affiliated with 	them. 	As 	discussed 	above,3s 	such 	organizations
and arrangements 	can be 	procompetitive 	and 	can help 	to 	contain
health care costs.
These 	statutes 	could 	also 	be 	interpreted 	to 	prohibit
professionals 	from 	hiring 	third 	parties 	such 	as 	advertising
agencies, 	public 	relations 	firms 	or 	telephone 	marketing 	firms 	to
assist 	in marketing 	a 	professional's 	services 	and products. 	By
communicating 	useful 	information, 	agents 	may 	help consumers 	in
their 	selection 	of 	a 	provider. 	Restrictions 	on 	the 	free 	flow 	of
information 	can make 	it 	more 	difficult 	for 	buyers 	to 	learn 	about
differences 	in 	price 	and 	quality, 	thereby 	insulating 	competitors
solicitation may 	be 	prohibited.
See 	also 	Tenn. 	Code Ann. 	S5 	63-14-104 	(a 	dispensing 	optician
may 	not 	"act 	as 	the 	agent 	or 	representative 	of 	any 	physician 	or
optometrist on 	any 	account" 	(emphasis 	added»; 	63-1-120(11)
(Division of 	Health Related 	Boards) 	(solicitation by 	"agents,"
"cappers" 	or 	"steerers" 	prohibited).
34 	Tenn. 	Code Ann. 	S5 	63-8-113(b)(4) 	(optometrists 	may 	not
"[c]anvass" 	in 	person or by 	agent, 	except 	as 	authorized 	by 	the
board); 	63-8-113(b)(3) 	(optometrists 	may 	not 	"peddle, 	sell 	or
render 	optometric 	services 	from 	door 	to 	door"); 	63-8-120(15)
(optometrists 	may 	not 	"peddle or 	sell 	ophthalmic 	materials 	as 	to
render 	or attempt 	to 	render 	optometric 	services 	from 	house 	to
house 	or door 	to 	door," 	except where 	a 	patient 	is 	confined by
virtue 	of 	illness 	or 	infirmity). 	It 	appears 	that 	explicit
prohibitions 	on 	door-to-door 	solicitation are 	contained only 	in
the 	optometry 	statute. 	It 	is 	unclear 	what 	purpose 	is 	served 	by
treating optometrists 	differently 	from 	other 	health professionals
in 	this 	regard.
35 See 	Part 	II.B., 	supra 	(Fee 	Splitting/Referral 	Fees).
18

from direct 	competition and 	reducing 	the 	incentive 	to 	compete 	on
the merits. 	Fnr.ther, 	use 	of 	agents 	to 	undertake 	such 	contacts
can permit 	the 	provider 	to 	concentrate 	on 	the 	delivery of
professional 	services.
Certainly, 	restrictions 	on 	practices 	such 	as 	false 	or
deceptive 	solicitation, 	or 	solicitation of 	persons 	who 	have
informed 	the 	practitioner 	that 	they 	do 	not 	wish 	to 	be 	contacted,
may appropriately be 	prohibited. 	We 	also 	recognize 	that 	in
certain circumstances 	solicitation could 	result 	in 	undue
influence 	or 	overreaching, 	and 	a 	state 	justifiably may 	act 	to
prevent 	such 	undue 	influence. 	If 	there 	is 	some 	reason, 	such 	as 	a
past 	pattern 	of 	abuse, 	to 	indicate 	that 	solicitation, 	either 	in-
person 	or by 	agent, 	is 	resulting 	in 	deception, 	overreaching or
undue 	influence, 	specific 	regulations 	can be 	tailored 	to 	prevent
specific 	abuses, 	as 	opposed 	to 	imposing an 	outright 	ban on 	such
solicitation. 	The 	Commission considered 	concerns 	about
overreaching 	and 	undue 	influence 	when 	it 	decided American Medical
Association. 36 After weighing 	the 	possible 	harms 	and 	benefits 	to
consumers, 	the 	Commission ordered 	the AHA 	to 	cease 	and 	desist
from 	restricting 	solicitation, 	but 	permitted the AHA 	to 	proscribe
uninvited, 	in-person 	solicitation of 	persons 	who, 	because 	of
their particular circumstances, 	may be vulnerable 	to 	undue
influence. 	This 	standard, 	which 	protects 	consumers 	from 	harm
while 	allowing them 	to 	receive 	information 	about 	available 	goods
and services, 	should be 	considered 	as 	an 	alternative 	to 	the 	above
prohibitions 	on 	solicitation.
Finally, 	we 	are 	concerned 	that 	bans 	on 	door-to-door
solicitation may 	in 	some 	instances 	impede 	the 	flow 	of 	truthful
commercial 	information 	from 	practitioners 	to 	potential 	clients.
Such 	restrictions 	on 	the 	dissemination of 	information may make 	it
more 	difficult 	for 	buyers 	to 	learn 	about 	the 	availability 	of
goods 	and 	services 	and 	differences 	in 	price 	and 	quality, 	thereby
insulating 	competitors 	from 	direct 	competition and 	reducing 	the
incentive 	to 	compete 	on 	the 	merits. 	Although 	the 	state 	may 	have
a 	legitimate 	interest 	in 	preventing 	overreaching by canvassers 	in
general, 	an 	absolute 	ban on 	house-to-house canvassing may 	not 	be
necessary 	to prevent 	this.
E. 	Specialization Claims
Dentists 	are 	prohibited 	from 	holding 	themselves 	out 	to 	the
public 	as 	specialists 	in 	(or 	as 	being 	"specially qualified 	in,"
or 	"as 	giving 	special 	attention 	to" 	or 	"limiting 	... 	practice
toW) 	any 	branch of 	dentistry other 	than 	the 	seven 	specialties
designated 	by 	the 	statute, 	and 	then only 	if 	they 	have 	been
36 	94 	F.T.C. 	701 	(1979), 	aff'd, 	608 	F.2d 	443 	(2d Cir.
1981), 	aff'd memo 	by 	an equally 	divided 	court, 	488 	u.S. 	476
(1982).
19

certified by the 	board 	in 	the 	specialty 	in which 	they wish 	to
advertise 	as 	a 	specialist. 37 Tenn. 	Code Ann. 	SS 	63-5-112; 	63-5-
124(a)(14). 	The 	legislature 	has 	a 	legitimate 	interest 	in
preventing deceptive 	or misleading 	advertising 	of 	expertise 	that
is 	very 	difficult 	for 	the 	general 	public 	to 	evaluate. 	However,
we 	suggest 	that 	in 	enacting 	laws 	to 	prevent 	such 	deception 	the
state 	consider whether 	those 	provisions 	unnecessarily 	prevent 	the
dissemination 	of 	truthful 	and 	accurate 	information 	about
professional 	qualifications.
F. 	Superiority Claims
Optometrists 	may 	not 	"advertise or 	infer through 	advertising
that 	[they have] 	superior professional 	skills 	or 	competence"
(with 	the exception 	that 	they may 	list 	board 	certification).
Tenn. 	Code Ann. 	S 	63-8-113(d)(1)(B). 	In 	addition, 	dispensing
opticians 	are 	prohibited 	from 	using 	"comparative 	statements 	or
claims 	concerning 	the[ir] 	professional 	excellence 	or 	abilities
n 	Tenn. 	Code Ann. 	S 	63-14-104(5). 	Superiority claims,
including comparative 	claims, 	are 	not 	inherently deceptive; 	it 	is
sufficient 	to 	prohibit 	only those 	superiority claims 	that 	are
false 	or deceptive.
Bans 	on 	superiority claims 	can 	lessen competition, 	first,
because 	they deprive 	consumers 	of 	information 	they may 	need 	to
make 	an 	informed choice 	among practitioners. 	For 	example, 	such 	a
ban would 	prevent 	providers 	who 	truly possess 	superior
qualifications, 	skills, 	methods 	or materials 	from 	making a
legitimate 	claim. 	Similarly, 	it would prohibit 	a 	legitimate
claim 	that 	new 	or 	innovative 	services 	or materials 	performed 	or
used by a 	provider 	are 	professionally superior 	to 	those 	that 	are
ordinarily performed or 	used, 	whether 	or 	not 	the 	statement 	is
true. 	Indeed, 	virtually 	all 	statements 	about 	an 	optometrist's 	or
optician's 	qualifications, 	experience, 	or 	performance 	can be
considered to 	be 	implicit 	claims 	of 	superiority; 	bans 	on 	such
claims 	would make 	it very 	difficult 	for 	optometrists 	or 	opticians
to 	provide 	consumers 	with 	truthful 	information 	about 	the
differences 	between 	their 	services 	and 	those 	of 	their
competitors.
Truthful 	comparative 	advertising 	can be 	a 	highly effective
means 	of 	informing 	and 	attracting customers 	and 	fostering
competition. 	However, 	if 	sellers 	cannot 	truthfully compare 	the
attributes 	of 	their 	services 	to 	those 	of 	their competitors, 	the
incentive 	to 	improve 	or offer 	different 	products, 	services, 	or
prices 	is 	likely 	to 	be 	reduced. 	Removing 	the 	bans 	on
37 	We 	take 	no 	position on 	the 	appropriateness 	of 	the 	state
establishing 	areas 	of 	specialization 	generally, 	or 	on 	the
appropriateness 	of 	the 	specific 	dental 	specialties 	the 	Board 	has
recognized.
20

39
nondeceptive 	superiority claims 	or comparisons 	may 	increase 	the
effectiveness 	of 	professional 	advertising, 	provide 	consumers 	with
useful 	information, 	and 	increase 	competition among 	the 	providers
of 	health care 	services.
G. 	Guarantees
Optometrists 	are 	prohibited 	from 	advertising 	guarantees 	of
optometric 	services 	or 	using 	"words 	of 	similar 	import." 	Tenn.
Code Ann. 	S 	63-8-113(d)(1)(C). 	In our 	judgment, 	a 	ban on 	the
offering of 	guarantees 	is 	broader 	than 	necessary 	to 	prevent
deception. 38 	We 	recognize 	that 	it may be 	deceptive 	to 	guarantee
to 	"cure" 	certain optical 	conditions. 	However, 	a 	truthful
communication of 	a 	"satisfaction guarantee". could be 	beneficial
to 	consumers, 	particularly when a 	consumer 	is 	trying a 	new
product. 	For example, 	a 	purchaser of 	contact 	lenses 	who 	wishes
to wear 	them 	for 	a 	time 	to 	determine 	their comfort may be
deprived of 	the 	opportunity to 	choose 	a 	practitioner who 	is
~illing to 	offer 	a 	guarantee 	of 	consumer 	satisfaction or money-
back.
H. 	Vague, 	Ambiguous 	or 	Subjective 	Standards
Several 	statutes 	contain vague, 	ambiguous 	or subjective
standards 	that 	could be 	interpreted 	in 	an 	anticompetitive manner.
The 	statutes 	relating 	to 	optometrists, 	chiropractors 	and 	the
Division of 	Health 	Related 	Boards 	prohibit 	providers 	from 	making
"flamboyant" 	or 	"extravagant" 	claims 	or 	statements 	concerning
their 	abilities. 	Tenn. 	Code Ann. 	S 	63-8-120(a)(5); 	63-4-114(19);
63-1-120(5).39 	Provisions 	relating 	to 	the 	boards 	of 	Chiropractic
Examiners, 	Dentistry, 	Medical 	Examiners, 	Optometry 	and
Registration 	in 	Podiatry, 	and 	the 	Division of 	Health Related
Boards, 	prohibit 	"unprofessional," 	"dishonorable," 	and
"unethical" 	conduct. 	Tenn. 	Code Ann. 	SS 	63-4-114(4); 	63-5-
124(1); 	63-6-214(1); 	63-8-120(2); 	63-3-119(4); 	63-1-120(2). 	The
statute 	governing 	the 	practice 	of 	veterinarians 	defines
"unprofessional 	or 	unethical 	conduct" 	as 	including 	"objectionable
advertising"; 	it 	also 	prohibits 	"conduct 	reflecting 	unfavorably
38 	See Horner-Rausch Optical 	Co., 	which 	struck down 	a 	ban
on advertising 	of 	guarantees 	of 	services 	by 	dispensing 	opticians.
These 	provisions 	also 	prohibit 	"improbable" 	statements,
a 	restriction evidently aimed 	at 	preventing deception. 	However,
to 	the 	extent 	that 	an 	improbable 	statement 	or 	claim might,
nonetheless, 	be 	truthful 	and 	nondeceptive, 	this 	restriction may
be 	overbroad.
21

upon 	the 	profession of 	veterinarrc medicine." 	Tenn. 	Code Ann. 	SS
63-12-103(12): 	63-12-124(a)(13). 0
Restrictions 	such 	as 	these 	often 	have 	been 	interpreted 	to
prohibit 	"undignified" 	advertising; 	and 	all 	advertising was 	once
considered by many as 	"conduct 	reflecting unfavorably" 	upon 	the
professions. 	However, 	advertising may 	be viewed 	by some 	as
"unprofessional" 	or 	"undignified" 	and yet 	be 	useful 	to
advertisers 	to 	attract 	and 	hold consumers' 	attention. 	Thus, 	it
can help 	to 	communicate messages 	more 	effectively 	to 	consumers.
Such advertising 	is 	not 	inherently deceptive, 	and 	prohibiting 	it
may well 	decrease 	the 	effectiveness 	of 	advertising, 	resulting 	in
higher costs 	and 	less 	frequent 	advertising.
I. 	Routine 	Services
Optometrists 	are 	prohibited 	from 	advertising 	"routine
optometric 	services 	such 	as 	eye 	examinations 	except 	in 	accordance
with 	regulations 	promulgated by 	the 	[B]oard 	[of 	Optometry]."
Tenn. 	Code Ann. 	S 63-8-113(d)(1)(E). 	The 	broad 	language 	of 	this
provision could be 	interpreted to 	give 	the 	board discretion 	to
restrict 	nondeceptive 	advertising of 	routine 	services, 	including
the 	prices 	of 	such 	services. 	For example, 	the 	board's 	rules
provide 	that 	"[n]o 	range 	of 	fees 	may be 	advertised 	for 	routine
optometric 	services; 	the 	exact 	fee 	must 	be 	specified 	for 	each
routine 	service." 	Tenn. 	Compo 	R. 	& Regs. 	S 1045-3-.04(1). 	This
rule 	would 	appear 	to 	preclude 	not 	only advertisements 	that
stipulate maximum prices 	for 	services, 	but 	also 	those 	that 	use
terms 	such 	as 	"low cost" 	or 	"as 	low as" 	to 	attract 	consumer
attention and communicate 	a 	message 	effectively. 	The 	advertising
of 	such 	price 	information can 	benefit 	consumers. 	Moreover, 	there
is 	no 	reason 	to 	believe 	that 	such advertising 	is 	inherently
deceptive, 	and 	any 	such 	advertisements 	that 	are 	deceptive 	can be
prohibited 	under 	a 	"false or deceptive" 	standard. 41
40 	The 	statute 	governing 	the 	Board of Medical 	Examiners
provides 	that 	the 	board 	shall 	adopt 	rules 	and 	regulations 	to
regulate 	advertising, 	and 	that 	"[i]f 	advertising 	is 	permj~ted,
all 	methods 	must 	be 	allowed 	••.. " 	Tenn. 	Code Ann. 	S 63-6-215.
We 	applaud 	the 	statute's 	inclusion of 	all 	media 	-- 	the 	statute
relating 	to 	podiatry, 	Tenn. 	Code Ann. 	S 63-3-119(b), 	includes 	a
similar provision. 	However, 	we 	are 	concerned 	that 	the 	above
language 	could 	be 	interpreted 	as 	granting 	the 	board 	discretion 	to
determine whether 	physicians 	will 	be 	permitted to 	advertise 	at
all.
41 	The 	above 	statutory provision might 	even 	be 	interpreted
as 	granting 	the 	board discretion 	to 	prevent 	advertising of
routine 	services, 	or 	the 	prices 	of 	such 	services, 	altogether. 	In
view of 	the 	possible 	constitutional 	problems 	with 	prohibitions 	on
such 	advertising, 	~ 	Bates 	(ban on 	advertising 	of 	prices 	of
22

J. 	Signs
The 	statute 	governing 	the 	practice 	of 	optometrists 	prohibits
any person 	not 	licensed 	as 	an 	optometrist 	to 	"[d]isplay a 	sign 	or
symbol 	which 	leads 	the 	public 	to 	believe 	that 	such 	person 	is 	an
optometrist." 	Tenn. 	Code Ann. 	S 63-8-113(a)(7). 	To 	the 	extent
this 	provision 	is 	targeted 	at 	deceptive 	advertising of 	the
qualifications 	of 	non-optometrists, 	it 	appears 	overbroad; 	such
deception 	can be dealt 	with 	under a 	"false or deceptive"
standard. 	Moreover, 	this 	restriction may 	have 	harmful 	effects 	on
competition. 	The provision 	is 	sufficiently vague 	that 	it may 	be
interpreted so 	as 	to 	prevent 	the 	communication of 	useful,
nondeceptive 	information. 	For example, 	a 	sign or 	symbol 	that
mentions 	the 	availablility of 	eyeglasses 	for 	sale, 	and 	that 	is
displayed 	by 	a 	commercial 	optician or 	a 	retail 	merchant 	who 	sells
ready-to-wear 	(non-prescription) 	eyegJ~sses, may 	be 	construed 	as
a 	sign or 	symbol 	that 	"leads 	the 	public 	to 	believe 	~hat such
person 	is 	an 	optometrist." 	Such 	advertising 	is 	not 	inherently
deceptive, 	and 	should be 	barred only 	if 	it 	is 	false 	or
deceptive. 42
K. 	Restrictions 	on 	Provision of 	Services 	and 	Products 	by
Non-Traditional 	Providers
Statutes 	governing 	the 	Board of 	Dentistry require 	that
dental 	hygienists 	must 	practice only 	in 	the 	office 	and 	under 	the
"direct 	supervision" 	of 	a 	dentist. 	Tenn. 	Code Ann. 	S 63-5-115.
This 	provision may 	restrict 	dentists' 	ability 	to 	best 	use 	dental
auxiliary 	personnel 	to 	provide 	services 	to 	patients. 	While 	we
take 	no 	position on 	the 	degree 	of 	supervision 	that 	is 	appropriate
for 	specific 	procedures 	performed by 	dental 	auxiliaries, 	we
understand 	that 	most 	states 	require 	that 	hygienists 	practice
under 	a 	dentist's 	general 	supervision, 	including 	hygienists
practicing 	in 	non-traditional 	settings, 	such 	as 	nursing 	homes,
schools, 	public 	health department 	clinics, 	HMOs, 	hospitals, 	and
other 	institutions 	where 	dental 	services 	are provided. 43 General
supervision 	typically means 	that 	the 	dentist must 	in 	some manner
delegate 	and 	be 	responsible 	for 	the 	task, 	but 	need 	not 	be 	present
routine 	services 	held 	unconstitutional), 	as 	well 	as 	their
anticompetitive 	effects, 	we 	assume 	that 	the 	Legislature 	does 	not
intend 	this 	result 	and would wish 	to 	clarify this 	provision.
42 	It 	should 	also 	be 	noted 	that, 	in 	such 	situations,
consumers 	can 	easily determine 	the 	identity 	and 	qualifications 	of
the 	advertiser 	by 	inquiring.
43 	See 	also Tenn. 	Code Ann. 	S 63-19-106(a), 	which 	appears
to 	require 	physician 	assistants 	to 	practice 	under a 	form 	of
general 	supervision by 	physicians.
23

during 	the 	hygienist's 	performance 	of 	the 	service. 	A direct
supervision 	requirement may 	increase 	the 	cost 	of 	dental 	care 	to
consumers. 44 If 	costs 	increase, 	consumers 	may purchase 	fewer
dental 	services 	and 	overall 	dental 	health may 	decrease 	as 	a
result.~ 	.
The 	potential 	benefits 	to consumers 	under 	a 	general
supervision 	standard 	could 	be 	substantial. 	Under 	it, 	dentists
who 	need 	not 	be 	present 	during 	the 	performance 	of 	authorized
hygienist 	services 	could 	spend 	that 	time 	engaged 	in 	the 	more
complex 	services 	for 	which 	they were 	primarily trained, 	such 	as
diagnosis 	and 	treatment 	of 	other 	patients. 	At 	the 	same 	time, 	the
cost 	of 	providing 	preventive 	dental 	care, 	spch 	as 	prophylaxis,
could be 	reduced 	significantly because 	of 	the 	reduced 	amount 	of
dentist 	time 	required 	to 	provide 	those 	services. 	Lower costs
could, 	in 	turn, 	lead 	to 	increased output 	of 	dental 	services,
better consumer access 	to 	those 	services, 	and 	improved dental
health.
In offering 	these 	comments 	we 	are 	not 	attempting 	to 	suggest
particular 	standards 	that 	the 	State of 	Tennessee 	should 	adopt 	to
govern 	the 	relations 	between 	dentists 	and 	dental 	hygienists. 	We
also do 	not 	offer 	suggestions 	regarding 	the 	appropriateness 	of
allowing 	specific 	types 	of 	products 	or 	services 	to 	be 	provided by
any 	given 	type 	of 	individual 	or entity. 	Delineating the
appropriate 	standards 	may 	involve 	quality of 	care 	considerations
and choices 	that 	turn on medical 	safety questions, 	and we 	lack
the 	expertise 	to 	offer 	guidance 	on 	such determinations. 	We 	urge,
however, 	that 	none 	of 	the 	provisions 	governing 	these 	areas 	be
more 	reFtrictive 	than 	is 	necessary 	to 	protect 	the 	public. 46
44 	See 	J. 	Liang 	and 	J. 	Ogur, 	Restrictions 	on 	Dental
Auxiliaries 	2 	(1987) 	(FTC 	Bureau 	of 	Economics 	Staff 	Report).
45 	See General 	Accounting Office, 	Increased Use 	of 	Expanded
Function 	Dental 	huxiliaries 	W~uld Benefit Consumers, 	Dentists,
and 	Taxpayers., 	HRD-80-51, 	March 	1980, 	at 	14-15.
~ 	We 	also 	note 	that 	under 	the 	statutes 	governing
dispensing 	opticians 	and optometrists, 	Tenn. 	Code Ann. 	55 	63-14-
102(3); 	63-8-114(4), 	wholesale 	suppliers 	of 	optical 	products 	are
barred 	from 	distributing 	directly or 	advertising 	the 	prices 	of
such products 	to 	the 	public, 	while 	retail 	merchants 	are
prohibited 	from 	assisting 	their customers 	in 	fitting 	or 	selecting
ready-to-wear eyeglasses. 	The 	latter provision could be
interpreted to 	prevent 	retail 	merchants 	from 	providing even 	such
assistance 	to 	customers 	as 	helping them choose 	a 	particular 	style
or color 	of 	eyewear, 	or 	from 	physically 	assisting an 	elderly or
handicapped customer 	to 	try on a 	pair of 	eyeglasses.
24

III. 	Conclusion
We 	are 	pleased 	to 	have 	this 	opportunity 	to 	present 	our views
on 	the 	statutes 	that 	you 	have 	submitted 	for 	our 	review. 	Our
analysis 	suggests 	that 	certain provisions 	governing 	health 	care
professionals 	regulated 	by 	nine 	of 	the 	state 	boards 	could 	have
anticompetitive 	effects 	that 	may 	reduce 	output 	and 	increase
prices 	to consumers. 	If 	you 	have 	questions 	concerning 	provisions
not 	discussed 	in 	this 	letter, 	we 	encourage you 	to 	contact 	us 	for
further 	review.
Arquit
We 	do 	not 	offer 	suggestions 	regarding 	the 	appropriateness 	of
allowing 	any 	specific 	type 	of 	product 	or 	service 	to 	be 	provided
by optical 	wholesalers, 	retail 	merchants 	or 	any 	other person or
entity. 	Such 	a 	determination may 	involve 	questions 	of 	quality 	of
care 	and medical 	safety upon which we 	lack 	the 	expertise 	to 	offer
guidance. 	However, 	we 	would point out 	that 	such competition can
create 	new 	consumer options 	and competitive 	pressures 	on
practitioners 	already 	in 	the 	market, 	which could 	improve 	consumer.
welfare 	by 	lowering costs 	and 	improving 	quality. 	In view of
these 	potential 	benefits, 	restrictions 	on 	such 	forms 	of
competition 	should be 	examined 	to 	determine 	whether 	they 	are
necessary, 	and 	whether 	they provide 	public 	benefits 	that 	outweigh
the 	potential 	costs 	to 	competit~on and consumers.
25