• U.S.

ANTITRUST: Three by the FTC

3 minute read

New Year’s Special! Have your appendix removed by a skilled surgeon with hundreds of satisfied clients. Regularly $149.95, but 15% discount if you act now. All major credit cards accepted. Dr. John Doe, 111 Main St.

No one has seen such an ad—and for precisely that reason the Federal Trade Commission last week took on the powerful American Medical Association. The agency charged that the A.M.A’s code of ethics, by forbidding advertising, has stifled competition between doctors and thus violates antitrust laws. The case highlighted a sudden new interest by the five-member commission in medicine and advertising: in other late-December actions, the FTC moved to bring about wider advertising of low-priced eyeglasses and to force Warner-Lambert Co. to tell consumers that Listerine mouthwash does not prevent colds or sore throats.

Of the three moves, the most important is the one against the A.M.A. It is really an opening salvo by the FTC against no-advertising rules by lawyers, architects, veterinarians and other professionals besides doctors. The commission’s argument is that these codes of ethics prevent the consumer from learning about the type and cost of available services. That in turn lessens competition and tends to fix prices illegally, the FTC contends.

Though the A.M.A. has until Feb. 9 to answer the FTC’s charge, it wasted neither time nor words in announcing that it would fight. “We think there is enough hucksterism in this country without hucksterizing medicine,” the association said, speaking for 180,000 doctors. The A.M.A. maintains that ads would not necessarily lower fees and certainly would not tell the patient about the quality of medical care. The case will next be heard before an FTC administrative law judge, whose decision can be appealed to the full commission and, after that, to the federal courts.

The background and present status of the FTC’s other two major moves:

1) Roughly 100 million Americans wear contact lenses or prescription eyeglasses, for which they paid $1.8 billion in 1974 alone. One reason that prices are high, the FTC charged last week, is that states and professional societies impose bans on advertising by eye doctors (ophthalmologists) and trained, nonmedical eye experts (optometrists). As evidence, the FTC pointed out that 24 states also ban ads by eyeglass makers (opticians) and prices of corrective lenses there are higher than in states that permit opticians to advertise. The FTC is therefore proposing a national trade rule to end all prohibitions on advertising eyeglasses. Next step: hearings to get the reaction of consumers and eye specialists alike.

2) Ever since 1921, Warner-Lambert has advertised that Listerine would help to prevent colds and sore throats or at least ease their symptoms. Those claims are misleading, the FTC decided, citing scientific testimony that Listerine has “no efficacy” in either preventing or helping to cure sore throats and colds (some experts said that warm water would do as well). So the FTC ordered Warner-Lambert not only to stop making the claims but to include a statement in the next $10.2 million worth of Listerine ads—about one year’s budget—that “contrary to prior advertising, Listerine will not help prevent colds or sore throats or lessen their severity.”

Warner-Lambert’s response was an angry denial that its claims for the mouthwash were inaccurate and a vow to fight the case “to the Supreme Court if we have to.” The next question is whether the FTC will use newly acquired injunctive powers to force the company to cease making the disputed advertising claims for Listerine while the case is before the courts.

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