FTC Judge Upholds Charges That California Dental Association Restrained Member Advertising
A Federal Trade Commission administrative law judge has issued an order prohibiting the California Dental Association (CDA), whose 19,000 members comprise 75 percent of the dentists in the state, from interfering with any truthful, nondeceptive advertising in which its members engage and to take steps to correct the membership status of dentists who have been suspended, disciplined or denied membership by CDA for certain advertising practices. Judge Lewis F. Parker issued the order after finding that CDA, through its component societies and members, conspired to illegally restrict dentists' advertising. According to the decision, " . . . CDA has successfully withheld from the public information about prices, quality, superiority of service, guarantees, and the use of procedures to allay patient anxiety." The judge's decision upholds FTC charges against CDA announced in 1993.
CDA's offices are located in Sacramento, California. It is a constituent society of the American Dental Association and its projected revenues for 1993-1995 were nearly $20 million.
In its 1993 complaint detailing the charges, the FTC alleged that CDA had adopted rules to prohibit dentists from engaging in a variety of forms of truthful, nondeceptive advertising and that it has coerced compliance with the rules through expulsion and other means. According to the complaint, CDA's rules prohibit certain categories of price advertising (including across-the-board discounts for seniors or others, and statements such as "care at reasonable prices"), and representations about the quality of dental services (such as "special treatment for nervous patients"). The FTC also alleged that CDA, in effect, discourages free dental screenings of school children by prohibiting dentists from reporting the results of screening on forms bearing the dentists' names and addresses.
Judge Parker held an administrative trial on the FTC charges in February 1995. In the initial decision announced today, he found an "aversion to competition" on the part of some CDA principals, noting as one example the president of one of CDA's components who "generally disparaged advertising and warned members against individual advertising . . . ." According to Parker:
"The reason that CDA adopted its advertising policy may have been, in part, to protect consumers from false or deceptive advertising, but its policy also reflects, in its inception and its implementation, a hostility toward advertising by its members even if it is truthful and nondeceptive."
As to the policy itself and its implementation, Parker found that CDA and its component societies monitor member advertising, require prior approval of ads in some instances, and expel or deny membership for dentists whose advertising does not comply with CDA's code. Parker cited numerous instances of ads that resulted in disciplinary or other action, including one instance in which CDA recommended denial of an application for membership "in part, because the applicant included in advertising the phrase affordable dentistry' on the basis that it implies [the doctor] is offering lower fees than other practitioners, or that he is offering a bargain.'" Other examples of challenged advertising Parker cited in his decision include ads that claimed "[y]ou'll appreciate our warm personal attention," "state of the art dental services," and "caring dentistry." CDA or its components challenged the ads, Parker found, because "they implied that other dentists did not provide the same quality service."
The effect of these rules, according to Parker's decision, is to restrict advertising that conveys important information toconsumers. "There are important reasons for California dentists to become a member of CDA; reasons which explain why, when a member or applicant's advertising is challenged, the dentist often chooses membership over advertising, and changes his advertising to conform to CDA's rules," Parker said. He added that CDA officials who testified at the administrative trial said they did not know of any instance in which a member refused to modify or discontinue challenged advertising. CDA's rules also restrict non-members' advertising because "CDA holds members and applicants responsible for advertising published by employers or other businesses such as referral services," Parker said.
Judge Parker also found that interpretation and application of CDA's advertising rules varies between, and within, components of CDA and that "[s]uch inconsistences are inevitable because of CDA's failure to adopt a procedure which ensures that rules on members' advertising are promptly and consistently sent to all members." As a result of ensuing confusion about what is or is not acceptable in advertising, "CDA has banned not only those advertisements which violate its announced policy but also advertising which is lawful and informative," Parker said.
These practices are inherently suspect and CDA has not met its burden of proving that they are capable of creating or enhancing competition; thus, they constitute an unfair method of competition in violation of the FTC Act, Parker concluded.
The order accompanying Parker's decision requires CDA to cease and desist from restricting advertising as alleged in the complaint, remove from its Code of Ethics those provisions that include such restrictions, ban any component that continues to enforce such restrictions, and notify current and new members of the order's provisions. In addition, Parker ordered CDA to publish the order in the CDA Journal and to send notices to and reconsider the membership status of certain members who have been disciplined, expelled or denied membership by CDA for their advertising practices or those of their employers. The order also includes record keeping and reporting requirements to assist the FTC in monitoring CDA's compliance.
Judge Parker's order is subject to review by the full Commission on its own motion or appeal by CDA or FTC staff. If not appealed within 30 days, it would become the Commission's decision and the order would be effective 60 days after it is served on the respondent.
Copies of the initial decision and order, as well as the complaint and other documents associated with this case, are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580: 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it happens, call the FTC's NewsPhone at 202-326-2710. FTC news releases and other documents also are available on the Internet at the FTC's World Wide Web Site at http://www.ftc.gov
(FTC Docket No. 9259)