Advisory Opinion to Roberts and Sunshine (07-06-94)

July 6, 1994

Steven L. Roberts, DDS
President
Albert A. Sunshine, DDS
Chairman, Ethics Committee
Suffolk County Dental Society
850 Veterans Memorial Highway
Hauppauge, New York 11788

Dear Dr. Roberts and Dr. Sunshine:

This is in response to your letter dated March 25, 1994, seeking advice on the legality of certain "exclusive dental plans" offered by several local groups of dentists. You have asked whether these plans violate the antitrust laws, and whether the Suffolk County Dental Society could, without violating the antitrust laws, discipline for unethical behavior the dentists who promote or participate in such plans. Based on the information available to us, the short answer to both questions is “no."

You enclosed for our review copies of advertisements published by two groups. One ad offers a "dental club," membership in which entitles a person to "receive concerned quality dentistry under cost containment." The other ads promote a dental plan in which payment of a membership fee entitles a person to semi-annual checkups without further payment and to discounts on other services.

For the purpose of this discussion, I shall assume that the representations made in the advertisements are true in all material respects.1 I am not sure precisely what aspects of the advertisements raise questions in the minds of your members. However, from your reference to "exclusive dental plans," I infer that there is some concern about the fact that participants in the advertised programs presumably can receive dental care under the program only from the sponsoring dental practices.

Based on the information in your letter, I see no indication that the advertised plans are anticompetitive.2 As a general matter, we would view plans of this sort as a form of legitimate price competition. Unless access to these programs is necessary for other dentists to compete effectively, which seems unlikely, the sponsoring dental practices are under no obligation to permit other dentists to participate in their plans. On the contrary, programs such as these are of benefit to the public, among other reasons, because they tend to prompt other dentists to respond by offering competing products that consumers may find more attractive.

It follows, therefore, that any attempt by the Suffolk County Dental Society to declare these types of plans unethical simply because they are not open to participation by other dentists would likely raise serious questions under the antitrust laws. The Commission ruled in its case against the American Medical Association 3 that ethical rules prohibiting truthful advertising and certain types of price competition violate the Federal Trade Commission Act. This principle is well established in antitrust law, and would appear to govern the situation discussed in your letter.

I hope this information answers your questions. If there is additional information you think we should be aware of in our review of this matter, please contact Judith Moreland, a senior attorney in my office. Her address is Room S-3122, Federal Trade Commission, Washington, D.C. 20580.

Sincerely,

Mark J. Horoschak
Assistant Director

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1 False or deceptive advertising is subject both to federal and state law and may also be subject to private professional society discipline. See generally, American Medical Ass'n, 94 F.T.C. 701 (1979), aff’d an modified, 638 F.2d 443 (2d Cir. 1980), aff’d by an equally divided Court, 455 U.S. 676 (1982).

2 There is no suggestion that any of these plans is controlled by so large a percentage in dentists practicing in the area that it has market power, that is, the power to raise prices of dental services or to exclude entry by dentists.

3 American Medical Association, supra; see also American Dental Association, 94 F.T.C. 403 (1979) (consent order).