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EXECUTIVE OFFICE OF THE PRESIDENT
BEFORE 1 THE
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
9/21
Honorable James T. Broyhill
House of Representatives
Washington, D. C. 20515
Dear Jim:
The President has asked me to respond to your letter of
September 16, 1982, requesting the Administration's position
on your amendment to H.R. 6995, the Federal Trade Commission
Authorization Act of 1982.
Our understanding is that your amendment would substantially
restrict the FTC's jurisdiction over certain state-licensed
professionals, while preserving FTC authority over
anticompetitive agreements among professionals.
In
particular, the amendment prohibits the FTC from using its
authority under Sections 5 or 18 of the Federal Trade
Commission Act to prohibit unfair acts or practices engaged in
by professionals in a particular state, if this will result in
the invalidation, in whole or in part, of any law of the state
establishing training, education, or experience requirements
for the licensure of professionals, or the tasks or duties
which may be performed by professionals. This prohibition
will not apply if the Commission finds that the law in
question authorizes or prescribes commercial or business acts
or practices and adversely affects or is likely to adversely
affect competition. A Commission finding in this regard will
have to take into account the benefits to public health,
safety, and welfare of the state law in question. In
addition, the FTC will be prohibited from finding a method of
competition to be unfair under its antitrust authority where
the method of competition is prescribed by a state according
to the State Action Doctrine.
The Administration supports this compromise amendment. We
believe it strikes a reasonable balance between total
elimination of FTC jurisdiction over business practices of
professionals--even practices found to be deceptive or
anticompetitive--and current law, which contains no
restrictions on the FTC's authority regarding the professions.
2
Your compromise would be consistent with the Administration's
policies of assuring vigorous market competition while
eliminating Federal intrusion into matters best reserved to
the states.
The Administration appreciates the opportunity to comment on
your amendment.
Sincerely,
David A. Stockman
Director
CC: Hon. Thomas P. O'Neill
Hon. James J. Florio
Hon. John D. Dingell
Hon. Norman F. Lent
FTC/AMA Issue
March 31
Stockman letter to Florio; supports Jim
Miller's position; "Admin would not support
proposals to grant blanket immunity to
the professions from the Commission's
antitrust & consumer protection jurisdiction."
Shortly after, doctors met with JAB & JC to
complain about Stockman letter, especially
last phrase that said "we see no reason to
exempt any particular group" provided
the FTC's overall authority is appropriately
narrowed.
OMB then tried to work out compromise that
gave doctors some exemption, but not from
anti-competitive practices such as price-
fixing, boycotts, etc. Miller was reluctantly
persuaded but doctors refused to go along.
They felt they could run over us, and did
so in committee.
May 11
Statement of Admin Policy sent to Hill on
the bill; it supported the compromise re
FTC jurisdiction over professions.
Sept 17
OMB sent official word thru whip organization
that Admin supports Broyhill compromise.
This is essentially the same as our earlier
version, though in a separate bill. Due to the
controvery on the issue of FTC jurisdiction
over professionals, the general, non-con-
troversial parts of the FTC reauthorization
were put in a separate bill.
Versions competing now are Luken-Lee (total
exemption) and Broyhill-Lent (partial exemption).
Today we will send a letter to Michel and Broyhill
restating our support for only a partial exemption.
NOTE-- in our meeting with the doctors, they really asked
only that we not take a position (as Stockman's letter did)
between Miller (no exemption at all) and the AMA (total
exemption). You talked with Stockman and asked if we could
water his letter down. He said we were too committed, but
we'd try to get Miller to compromise. We succeeded, but the
AMA wouldn't buy it. I spoke with you, then told Spencer
we could not support a total exemption.
EXECUTIVE OFFICE OF THE PRESIDENT
UNITED
OFFICE OF management AND BUDGET
SECUTITY
/
STATES
WASHINGTON, D.C. 20503
Honorable James T. Broyhill
House of Representatives
Washington, D. C. 20515
Dear Jim:
The President has asked me to respond to your letter of
September 16, 1982, requesting the Administration's position
on your amendment to H.R. 6995, the Federal Trade Commission
Authorization Act of 1982.
Our understanding is that your amendment would substantially
restrict the FTC's jurisdiction over certain state-licensed
professionals, while preserving FTC authority over
anticompetitive agreements among professionals.
In
particular, the amendment prohibits the FTC from using its
authority under Sections 5 or 18 of the Federal Trade
Commission Act to prohibit unfair acts or practices engaged in
by professionals in a particular state, if this will result in
the invalidation, in whole or in part, of any law of the state
establishing training, education, or experience requirements
for the licensure of professionals, or the tasks or duties
which may be performed by professionals. This prohibition
will not apply if the Commission finds that the law in
question authorizes or prescribes commercial or business acts
or practices and adversely affects or is likely to adversely
affect competition. A Commission finding in this regard will
have to take into account the benefits to public health,
safety, and welfare of the state law in question. In
addition, the FTC will be prohibited from finding a method of
competition to be unfair under its antitrust authority where
the method of competition is prescribed by a state according
to the State Action Doctrine.
The Administration supports this compromise amendment. We
believe it strikes a reasonable balance between total
elimination of FTC jurisdiction over business practices of
professionals: even practices found to be deceptive or
anticompetitive-- and current law, which contains no
restrictions on the FTC's authority regarding the professions.
2
Your compromise would be consistent with the Administration's
policies of assuring vigorous market competition while
eliminating Federal intrusion into matters best reserved to
the states.
The Administration appreciates the opportunity to comment on
your amendment.
Sincerely,
David A. Stockman
Director
CC: Hon. Thomas P. O'Neill
Hon. James J. Florio
Hon. John D. Dingell
Hon. Norman F. Lent
DATE: 9/21
TO:
ACTION
FYI
Dave Stockman
Joe Wright
Don Moran
Larry Kudlow
The attached 2 items
Fred Khedouri
Annelise Anderson
wur r2d-tagged to you-
Ken Clarkson
Al Keel
Chris DeMuth
Hal Steinberg
Mike Horowitz
Don Sowle
Legislative Affairs
Ed Dale
Pete Modlin
Candy Bryant
Jim Frey
Dick Darman (for WH Staffing)
Jim Cicconi
note Director's decision/comments
we should discuss this
no action necessary
please edit and return by
project log - lead to
store in book
per our conversation - this
letter went
Hill this am.
FROM: DAVID GERSON (X3060)
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON D.C. 20503
MAY 11 1923
OFFICE OF
THE DIRECTOR
NOTE FOR: DICK DARMAN
KEN CRIBB
JIM CICCONI
FROM: Don Moran M
F.Y.I.
FRESIDENT
STATEMENT OF
OFFICE THE UNITED OFFICE & & STATE STATES
ADMINISTRATION
POLICY
ON: S. 2499 (Kasten FTC Reauthorization)
The Administration supports reauthorization of the Federal
Trade Commission at the levels provided in S. 2499.
In addition, the Administration supports the bill's provisions
defining "unfairness" within the meaning of the Federal Trade
Commission Act. The bill could be improved, however, by the
addition of Chairman Miller's proposed definition of "decep-
tion" within the meaning of the Act, and the Administration
supports amendments to add this language.
The bill contains language providing for a moratorium on
certain Federal Trade Commission enforcement and rulemaking
actions affecting certain classes of professionals and
professional organizations. We understand an amendment may
be offered to substitute a total exemption from, FTC authority
for the professions. The Administration would support a
compromise provision that would (a) broaden the scope of the
moratorium provisions to preclude FTC enforcement and rule-
making actions in all matters except price fixing, group
boycotts, and similar restraints of trade, but would (b) limit
the duration of the moratorium to two years and require a
study of the appropriate role of Commission regulation with
respect to State-licensed professions.
Memo to JAB III
May 12, 1982
THE WHITE HOUSE
Page Two
WASHINGTON
May 12, 1982
exemption clause.
TO: JAB III
By the way, I had the unpleasant
experience of having Stu Spencer
RE: FTC Exemption for Professions
call me to gloat over their having
won the committee vote. They are
flushed with victory, and wanted
As you know, the AMA rolled us in
the committee vote, 10-5 in favor of
this all the way without compromise.
you to know that they intend to fight
a blanket exemption.
Their idea is both bad law and bad
Though Jim Miller has opposed any form
policy, though, and I still hope we
of exemption, he was sufficiently shocked
can quietly get some modifications
by the committee vote that he will prob-
while avoiding hard feelings. If
ably now support our moratorium proposal
you want more info, let me know.
(which was transmitted to the Hill as
the Administration's official position,
By the way, I understand Stu still
Miller notwithstanding).
has some sort of consulting relation-
ship with the White House. If so,
The moratorium would, as you know, prevent
doesn't his lobbying on such issues
any FTC action against state-regulated
etc.) present a problem? (special access,
professions for 2 years, pending a study,
except for antitrust violations such as
price-fixing and boycotts.
The moratorium is a better position for
us because it only allows the AMA to argue
of
that they should be exempt from antitrust
action. From a political standpoint, it
is clearly less harsh to them than Dave
Stockman's earlier position. Thus, even
if we lose, we should not make too many
enemies. Legislatively, we may decide
to concede the Senate and concentrate on
the House committee to modify the total
THE WHITE HOUSE
WASHINGTON
Stu Spencer
714/999-7151(0)
is
Spencer: we 're going all
the way w/ This.
AND 10 BUDGET UNITED THE OFFICE OF THE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
Jc
May 7, 1982
MEMORANDUM FOR JIM BAKER
FROM:
Dave Stockmar HAS
SUBJECT:
FTC Reauthorization
I have given Gary Lee a copy of the attached language as a
suggested compromise to the professional exemption contro-
versy. This language would place a two-year moratorium on
FTC jurisdiction over State-licensed professions except
price fixing, boycotts, similar hard-core restraints of trade,
and supression of truthful advertising. It would require an
FTC/Justice study of the broader issues to be delivered to
Congress nine months before the moratorium was over.
This approach goes further than Jim Miller's position but not
as far as the McClure/AMA proposal for total exemption. I
think it's a good compromise.
Attachment
CC: Bob Thompson
Don Moran
J.L. Cullen
97th CONGRESS
1st SESSION H.R.
To place a moratorium on certain activities of the
Federal Trade Commission with respect to professionals
and professional associations.
IN THE HOUSE OF REPRESENTATIVES
MAY , 1982
A BILL
To place a moratorium on certain activities of the
Federal Trade Commission with respect to
professions and professional associations.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress
assembled, That:
-2-
(A) The Federal Trade Commission may not use any
funds appropriated to carry out sections 5 or 18
of the Federal Trade Commission Act (15 U.S.C. 45,
57 (a) ) for fiscal years 1983 or 1984 to investi-
gate, prescribe any rule or regulation with
respect to, or issue any order concerning any
State-licensed profession; Provided however that
nothing in this section shall limit the existing
authority of the Commission with respect to
agreements among members of any State-licensed
profession to:
(1) fix prices;
(2) restrict the terms or conditions under
which professional services may be provided,
other than restrictions on the scope of
professional practice;
(3) limit the dissemination of truthful
information concerning prices, terms, or
conditions of professional services; or
(4) engage in or coerce or induce any
person to engage in a group boycott
against a competitor.
(B) The Commission shall provide to the President
and the Congress no later than December 31, 1983
a report on the economic effects of Federal and
State regulation of State-licensed professions,
including recommendations concerning the appro-
priate scope of Federal jurisdiction over State-
licensed professions.
-3-
(C) For purposes of this Act:
(1) "State" includes the District of
Columbia.
(2) "State-licensed profession" means
any profession subject to licensure, or
certification by a State, the practice
of which requires advanced training
in a field of science or learning
customarily acquired by a course of
specialized instruction.
(3) "Scope of professional practice"
means the professional duties or tasks
that a member of a State-licensed
profession is authorized by law to
perform, including conditions of
licensure such as education, experi-
ence, or training.
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
ROUTE SLIP
J.L. Cullen
Take necessary action
TO
Approval or signature
Don Moran
Comment
Bob Thompson
Prepare reply
Jim Cicconi
Discuss with me
For your information
See remarks below
X
FROM Chris DeMuth
DATE 5-10-82
REMARKS
Attached is a slightly revised version of the.
FTC moratorium compromise language Dave
Stockman sent to Jim Baker Friday. This'
version has been given to Gary Lee, who will
find it hard to reject, since it embodies
his agreement with Dave two weeks ago. I
am also sending a copy to Senator Kasten,
who is currently planning to offer a less
expansive moratorium in mark-up tomorrow,
which I understand will be defeated if it is
the only alternative to the McClure/AMA
total-exemption language. Jim Miller
prefers the Kasten proposal, but I think he
will find the attached version acceptable.
I doubt the attached will succeed where the
current Kasten version will not--but it just
might, and if so will avert a show-down on
the Senate floor.
Attachment
OMB FORM 4
REV AUG 70
97th CONGRESS
1st SESSION H.R.
To place a moratorium on certain activities of the
Federal Trade Commission with respect to
State-licensed professions.
IN THE HOUSE OF REPRESENTATIVES
MAY , 1982
A BILL
To place a moratorium on certain activities of the
Federal Trade Commission with respect to
State-licensed professions.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress
assembled, That:
-2-
(A) The Federal Trade Commission may not use any
funds appropriated to carry out sections 5 or 18
of the Federal Trade Commission Act (15 U.S.C. 45,
57 (a) ) for fiscal years 1983 or 1984 to investi-
gate, prescribe any rule or regulation with
respect to, or issue any order concerning any
State-licensed profession; Provided however that
nothing in this section shall limit the existing
authority of the Commission with respect to
actions among members of any State-licensed
profession to:
(1) fix prices;
(2) restrict the terms or conditions under
which professional services may be provided,
other than restrictions on the scope of
professional practice;
(3) limit the dissemination of truthful
information concerning prices, terms, or
conditions of professional services; or
(4) engage in or coerce or induce any
person to engage in a group boycott
against a competitor, supplier, or
purchaser.
(B) The Federal Trade Commission shall provide
to the President and the Congress no later than
December 31, 1983 a report on the economic effects
of Federal and State regulation of State-licensed
professions, including recommendations concerning
the appropriate scope of Commission jurisdiction
over State-licensed professions.
-3-
(C) For purposes of this Act:
(1) "State" means a State, territory, or
commonwealth of the United States, or the
District of Columbia;
(2) "State-licensed profession" means
any profession subject to licensure or
certification by a State where the State
requires, as a prerequisite to practice
in the profession, a post-graduate degree
from an accredited institution of higher
learning legally authorized or recognized
to train individuals for such practice; and
(3) "Scope of professional practice"
means the professional duties or tasks
that a member of a State-licensed
profession is authorized by law to
perform, including conditions of
licensure such as education, experi-
ence, or training.
###
THE WHITE HOUSE
WASHINGTON
May 4, 1982
TO: JAB III
RE: FTC Reauthorization Bill
I checked with Don Moran (in lieu
of Stockman) re the status of this.
He says they are very aware of the
AMA's concerns about the bill. They
do not fully agree with the position
that Jim Miller has taken on the issue,
and are right now trying to work out
a compromise that will take care of
the AMA's concerns and with Miller's.
Don says it should be worked out in
the next day or two.
However, he also said that if Miller
hangs tough OMB will try to overrule
him on the issue.
Guidance: at the moment, OMB is trying
to work out a compromise provision that
is acceptable to both the AMA and FTC.
Don promised me a one-pager when the
matter is taken care of. If I have
not heard by Friday, I'll call and
prod them.
Call Stu Spencer
if
JC
THE WHITE HOUSE
WASHINGTON
May 4, 1982
TO: JAB III
RE: FTC Reauthorization Bill
I checked with Don Moran (in lieu
of Stockman) re the status of this.
He says they are very aware of the
AMA's concerns about the bill. They
do not fully agree with the position
that Jim Miller has taken on the issue,
and are right now trying to work out
a compromise that will take care of
the AMA's concerns and with Miller's.
Don says it should be worked out in
the next day or two.
However, he also said that if Miller
hangs tough OMB will try to overrule
him on the issue.
Guidance: at the moment, OMB is trying
to work out a compromise provision that
is acceptable to both the AMA and FTC.
Don promised me a one-pager when the
matter is taken care of. If I have
not heard by Friday, I'll call and
prod them.
F
JC
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE
12222
UNITED
OFFICE OF MANAGEMENT AND BUDGET
DECUTIVE
THE
WASHINGTON, D.C. 20503
March 31, 1982
Honorable James Florio
U.S. House of Representatives
Washington, D.C. 20515
Dear Mr. Florio:
I am writing with regard to the reauthorization of the Federal
Trade Commission currently under consideration by your Commit-
tee.
The Administration generally supports the position expressed
by Chairman James C. Miller III in testimony before the Senate
Committee on Commerce, Science and Transportation on March 18
that statutory definitions of "unfair acts or practices" and
"deceptive acts or practices" would be desirable. The defini-
tions proposed by Chairman Miller would clarify the vague and
subjective standards of the current law, provide greater cer-
tainty to private parties and the Commission's own enforcement
officials, and ensure that the Federal Trade Commission Act is
focused on actual cases of consumer harm.
Provided these changes are made, the administration would not
support proposals, such as those contained in S.1984 and
H.R.3722, to grant blanket. immunity to the professions from
the Commission's antitrust and consumer protection juris-
diction. With the Commission's legal authority appropriately
clarified and circumscribed, we see no cause for exempting any
particular group or economic sector from that authority.
Sincerely,
Invid A. Stodement
David Stockman
Director
12222
U.S. Dous: of Representatives
INC.
CARVEL
Committee on Energy and Commerce
CONN.
SANTIN NEV.
MARC
MASS.
TOM
2125. Blogburn Thoust Office Uniting
THEME A. LUKEN OHIO
GARY
DATE WALGHEN PA.
WILLIAM CALIF.
Washington, D.C. 20515
ALBERT GORE JR., TENN.
BOB V1H PANS
BANLLRA A. MIFULSKI MD.
THOMAS TAUKE DnA
RONALD M. MOTTL. OHIO
DON TTER. PA.
PHIL GRAMM. TEX.
HAROLD ROGERS KY.
September 10, 1982
AL SWIFT. WASH.
CLEVE BENEDICT. n. VA.
MICKEY LELAND. TEX.
DANIEL R. COATE INC.
RICHARD SHELBY. ALA.
THOMAS : E-ILEY, JR., VA.
CARDIES COLLINS. ILL.
MIKE SYNAR OKLA.
W.J. "BILLY" TAUZIN, LA.
RON WYDEN. OREG.
RALPH M. HALL, TEX.
FRANK M. POTTER, JR.
CHIEF COUNSEL AND STAFF DIRECTOR
Dear Colleague:
The House will soon be considering H.R. 6995, the FTC Reauthoriza-
tion Bill, which we have cosponsored with Congressmen Dingell and Florio. As
ordered reported by the Energy and Commerce Committee on Wednesday, August 18,
1982, the bill reflects a bipartisar consensus on several issues respecting
the authority and procedures of the FTC. Specifically, the bill includes
provisions which define unfairness, improve and make permanent the legislative
veto, and make permanent the agricultural cooperatives limitation.
However, H.R. 6995 does not at present address the Commission's
jurisdiction over professionals. H.R. 3722, introduced by Representatives
Luken and Lee, would exempt professionals from FTC jurisdiction until further
Congressional action. After careful consideration of the Luken-Lee bill, we
have determined that it goes too far by placing professionals above the law.
Of equal importance, it is our belief that adoption of an exemption for the
professions on the Floor would virtually guarantee that no FTC reauthorization
bill would become law this year. Should this occur, critical provisions such
as legislative veto and the provision relating to agricultural cooperatives
would expire on September 3C.
Therefore, we have oeveloped an alternative approach which we intend
to offer with Messrs. Dingell and Florio as a substitute to Luken-Lee. This
substitute would protect State iaws which address educational and licensing
requirements relating to professionals which are properly within the juris-
diction of the States. It would limit the ability of the FTC to challenge
State laws in this area to those circumstances in which the FTC could prove
that the State law in question prescribed a business or commercial practice
of professionals and that the practice is anticompetitive. This imposes an
additional and appropriate burden upon the FTC when proceeding against the
professions.
Finally, the substitute incorporates the State Action Doctrine when
the FTC is operating pursuant to its antitrust authority. This doctrine pro-
hibits the FTC from overturning a State law if the State is actively enforcing
and administering the law.
We believe that our proposal strikes a reasonable balance with respect
to this issue and clearly puts professionals in a more advantageous position
than under current law.
We would greatly appreciate your support when it is offered on the
Floor. Should you have any questions, please contact Margaret Durbin or Jane
Sutter at 6-3400.
Sincerely,
Norman F. Lent
JimBrughill
Ranking Minority Member
Subcommittee on Commerce,
Committee on Energy and Commerce
Transportation, and Tourism
THE WHITE HOUSE
WASHINGTON
August 5, 1982
To Cicconis 8/10 MOT FYI
MEMORANDUM TO ED MEESE
JIM BAKER
MIKE DEAVER
THRU:
ED HARPER
KEN DUBERSTEIN Ken R
FROM:
BOB THOMPSON BT
Jim Miller would like a definitive decision one way or the other
on the ticklish issue of whether or.not we support exempting
the AMA from FTC jurisdiction.
A brief meeting with appropriate Administration officials might
be necessary.
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
July 30, 1982
OFFICE OF
CONGRESSIONAL RELATIONS
(202) 523-3620
FTC Reauthorization Briefing Paper
A. White House Action Needed for Chairman Miller's FTC
Reforms to Succeed
Despite an Administration position favoring compromise, a
stalemate has developed in Congress over a proposal by profes-
sional groups - - primarily, the American Medical Association
(AMA) - - to be totally exempted from the jurisdiction of the
Federal Trade Commission. Since the AMA proposal takes the form
of an amendment to the FTC reauthorization, the result may be
that FTC Chairman Jim Miller's legislative initiatives to narrow
the FTC's statutory discretion, strongly supported by the busi-
ness community, will be lost.
A Presidential threat to veto legislation giving wealthy
professional groups such as the AMA and their members the privi-
leged, immunized status they seek would break the logjam. In
addition - - or in the alternative - - active White House support
for the efforts by Chairman Miller and House Republicans
Rep. Lent and Rep. Broyhill to broker a compromise would end the
stalemate.
B. Background of the Stalemate
Resolution of the AMA issue is the biggest hurdle in the way
of Chairman Miller's FTC reform proposals, because House Energy &
Commerce Committee leaders have announced they will not act on
the FTC reauthorization until agreement is reached that prevents
the AMA from receiving a blanket exemption. On the Senate side,
the Commerce, Science & Transportation Committee already has
approved the AMA amendment to an FTC bill containing many of
Chairman Miller's reforms. However, because of their opposition
to the AMA amendment, Senate Committee leaders will wait until
after the House Committee acts to schedule the bill for floor
action.
C. The Congressional Compromise
Negotiations among Republican and Democratic leaders of the
House Energy & Commerce Committee have centered on compromises
resembling Chairman Miller's proposal to specify that FTC
jurisdiction only applies to the commercial or business aspects
of a professional practice. The state action doctrine would
apply to all other FTC activity in the professions area and
Chairman Miller would agree to a legislative scheme to ensure the
FTC keeps out of licensure and quality of care issues.
(See attachment A.)
D. Reasons for White House Support for Compromise
Most House & Senate Republicans want to support a
compromise. After the veto of the used car rule (on which
Chairman Miller was neutral), they want to avoid another anti-
consumer vote; but, the AMA has heavily contributed to many
campaigns, and members want to do something for the AMA, short
of the total exemption. (See attachments B & C.)
The business community strongly supports Chairman Miller's
FTC reform proposals and shares his concern over resolving the
AMA amendment, so the reforms may succeed. (See attachment
D.) Moreover, the Washington Business Group on Health,
composed of over 200 major corporations (See attachment E.)
specifically opposes the AMA amendment.
The FTC is just one step in a power grab by the AMA. The
AMA House of Delegates in June passed resolutions endorsing
model state legislation and draft federal legislation to
narrow both the states' and DOJ's antitrust jurisdiction over
the professions. (See attachment F.)
Administration opposition to the AMA amendment would be
consistent with its general support for increased competition
in the delivery of health care as a means for controlling the
cost of health care.
This year may be the one chance Administration reformists
have to make the lasting reforms to FTC law. Next Congress,
after six more months of Chairman Millers' leadership, the FTC
simply won't be perceived as a rogue agency, and the momentum
for reform may be lost.
E. Likely AMA Reaction
An impassioned response to Administration support for
Chairman Miller may be expected from Congressional allies of the
AMA, especially Sen. McClure. Sen. McClure was angered earlier
this year when OMB Director Stockman supported compromise rather
than a bill Sen. McClure had sponsored to give the professions
their FTC exemption. 10 Republicans and 6 Democrats have
cosponsored Sen. McClure's bill. However, other Senators,
including the Committee sponsor of the AMA amendment to the FTC
reauthorization bill - - Sen. Stevens - - said during Committee
markup that they hope a compromise eventually can be worked out.
In the House of Representatives, the leading advocates for
the AMA are Rep. Lee and Rep. Luken, who are sponsors of a bill
that would provide the complete exemption. 208 of their
colleagues have cosponsored the bill. For the reasons already
stated, Chairman Miller believes that the great majority of these
Congressmen will want to support a compromise.
-2-
Chairman Miller is not unmindful of the political reach and
clout of the AMA. There's no question that the AMA is determined
to fight this matter to the bitter end and that it will react
vehemently to strong White House support for Chairman Miller's
position, even more so because of its support for President
Reagan during the 1980 campaign.
However, it is Chairman Miller's strongly-held belief that a
total exemption from FTC jurisdiction in the manner proposed by
the AMA is not in the public interest. Moreover, he believes
that Administration opposition to the AMA exemption will be
strongly supported across the country. (See attachment G for
editorial comment.)
F. Action Recommended:
1. The President transmit a letter to leaders of the
House and Senate Commerce Committees (See attachment H for
list.), stating that he will veto legislation containing the
blanket, total exemption for professional groups.
2. The Office of Legislation, The White House, actively
support the efforts of Chairman Miller and House Republicans
to achieve a compromise on the professions issue.
Attachment list:
Attachment A: Chairman Miller's 6-23-82 speech on the
professions (see page 3).
Attachment B: House Republican Research Committee Issue
paper, "The Federal Trade Commission (FTC) and
the Professions"; June 23, 1982.
Attachment C: Article from Newsday quoting Rep. Lent; May
18, 1982.
Attachment D: Antitrust & Trade Regulation Report article
on FTC strategy; July 22, 1982.
Attachment E: Membership list and position of Washington
Business Group on Health.
Attachment F: AMA draft legislation.
Attachment G: Editorial comment.
Attachment H: List of Committee leaders.
-3-
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
7/30/82
OFFICE OF
CONGRESSIONAL RELATIONS
(202) 523-3620
FTC Reauthorization Briefing Paper
A. White House Action Needed for Chairman Miller's FTC
Reforms to Succeed
Despite an Administration position favoring compromise, a
stalemate has developed in Congress over a proposal by profes-
sional groups - - primarily, the American Medical Association
(AMA) - - to be totally exempted from the jurisdiction of the
Federal Trade Commission. Since the AMA proposal takes the form
of an amendment to the FTC reauthorization, the result may be
that FTC Chairman Jim Miller's legislative initiatives to narrow
the FTC's statutory discretion, strongly supported by the busi-
ness community, will be lost.
A Presidential threat to veto legislation giving wealthy
professional groups such as the AMA and their members the privi-
leged, immunized status they seek would break the logjam. In
addition - - or in the alternative - - active White House support
for the efforts by Chairman Miller and House Republicans
Rep. Lent and Rep. Broyhill to broker a compromise would end the
stalemate.
B. Background of the Stalemate
Resolution of the AMA issue is the biggest hurdle in the way
of Chairman Miller's FTC reform proposals, because House Energy &
Commerce Committee leaders have announced they will not act on
the FTC reauthorization until agreement is reached that prevents
the AMA from receiving a blanket exemption. On the Senate side,
the Commerce, Science & Transportation Committee already has
approved the AMA amendment to an FTC bill containing many of
Chairman Miller's reforms. However, because of their opposition
to the AMA amendment, Senate Committee leaders will wait until
after the House Committee acts to schedule the bill for floor
action.
C. The Congressional Compromise
Negotiations among Republican and Democratic leaders of the
House Energy & Commerce Committee have centered on compromises
resembling Chairman Miller's proposal to specify that FTC
jurisdiction only applies to the commercial or business aspects
of a professional practice. The state action doctrine would
apply to all other FTC activity in the professions area and
Chairman Miller would agree to a legislative scheme to ensure the
FTC keeps out of licensure and quality of care issues.
(See attachment A.)
D. Reasons for White House Support for Compromise
Most House & Senate Republicans want to support a
compromise. After the veto of the used car rule (on which
Chairman Miller was neutral), they want to avoid another anti-
consumer vote; but, the AMA has heavily contributed to many
campaigns, and members want to do something for the AMA, short
of the total exemption. (See attachments B & C.)
The business community strongly supports Chairman Miller's
FTC reform proposals and shares his concern over resolving the
AMA amendment, so the reforms may succeed. (See attachment
D.) Moreover, the Washington Business Group on Health,
composed of over 200 major corporations, (See attachment E.)
specifically opposes the AMA amendment.
The FTC is just one step in a power grab by the AMA. The
AMA House of Delegates in June passed resolutions endorsing
model state legislation and draft federal legislation to
narrow both the states' and DOJ's antitrust jurisdiction over
the professions. (See attachment F.)
Administration opposition to the AMA amendment would be
consistent with its general support for increased competition
in the delivery of health care as a means for controlling the
cost of health care.
This year may be the one chance Administration reformists
have to make the lasting reforms to FTC law. Next Congress,
after six more months of Chairman Millers' leadership, the FTC
simply won't be perceived as a rogue agency, and the momentum
for reform may be lost.
E. Likely AMA Reaction
Chairman Miller is not unmindful of the political reach and
clout of the AMA. There's no question that the AMA is determined
to fight this matter to the bitter end and that it will react
vehemently to strong White House support for Chairman Miller's
position, even more so because of its support for President
Reagan during the 1980 campaign.
However, it is Chairman Miller's strongly-held belief that a
total exemption from FTC jurisdiction in the manner proposed by
the AMA is not in the public interest. Moreover, he believes
that Administration opposition to the AMA exemption will be
strongly supported across the country. (See attachment G for
editorial comment.)
- 2 -
F. Action Recommended:
1. The President transmit a letter to leaders of the
House and Senate Commerce Committees (See attached list. ),
stating that he will veto legislation containing the
blanket, total exemption for professional groups.
2. The Office of Legislation, The White House, actively
support the efforts of Chairman Miller and House Republicans
to achieve a compromise on the professions issue.
July 30, 1982
- 3 -
See p. 3
FEDERAL TRADE COMMISSION
WASHINGTON. D. C. 20580
*
REMARKS OF JAMES C. MILLER III
CHAIRMAN
FEDERAL TRADE COMMISSION
BEFORE THE
WASHINGTON BUSINESS GROUP ON HEALTH
WASHINGTON, D.C.
JUNE 23, 1982
Thank you very much.
1 am very grateful to Bill Goldbeck for providing me the
opportunity to speak to you today. I'm here to talk to you about
a piece of special interest legislation now pending in
Congress. This legislation could affect you as consumers, could
affect you as employers, and could affect your companies' balance
sheets, for if it becomes law in its present form health care
costs may well rise faster than necessary.
The special interest legislation I'm talking about, believe
it or not, is attached to the FTC's reauthorization bill, a
measure essential to the agency's very survival.
The bill now before the Senate contains a provision that
would exempt the so-called "learned professions" from FTC
enforcement of the antitrust and consumer protection laws. The
bill would thereby create a "special class" of citizens,
including doctors, dentists, and lawyers.
Let me make clear my belief that most professionals are
honest and law-abiding people who provide valuable public
services. Most professionals would not consciously violate
antitrust or other laws concerning business practices. But this
special interest legislation would exempt not only the law
abiding, but also those who do violate the laws administered by
the Commission.
*
The views expressed are the Chairman's and do not
necessarily reflect those of the other Commissioners.
corporation - an obvious potential source of inflated costs.
Further, in the AMA case, the Commission challenged unlawful
agreements preventing physicians from forming business
partnerships with licensed non-physicians, such as clinical
psychologists. The competition that clinical psychologists and
other licensed provider groups can bring to the marketplace can
mean lower health care costs.
As you can see, the Commission has been particularly active
in challenging private restraints on the competitive, business,
and financing aspects of delivering professional health
services. These actions and other efforts by the Commission have
helped contain health care costs. But if the special interest
exemption for professionals were enacted, this protection would
come to an end.
Most of you know that I am not known as a wild-eyed
regulator. Like most economists, I conclude that when markets
are freed from anticompetitive restraints, fraud, and deception,
they tend to work more efficiently. That is why I am so troubled
by the professions' bid to be exempt from FTC scrutiny.
There are, of course, limits to the FTC's role in the health
care area. For instance, the Commission should not be second-
guessing the medical professions where true quality of care
concerns are the real issue. Moreover, important principles of
federalism must be recognized and observed. The Commission
should not be second-guessing state legislatures in the
reasonable exercise of their essential role in licensing and
accrediting professionals, and in protecting the health of their
citizens.
But when we look at the commercial aspects of professionals
-- their business and competitive practices -- I must confess
that the free market economist in me takes over from the states'
rights political scientist. There I believe the FTC does have a
role to play in assuring that private restraints do not hamper
the efficient workings of the marketplace.
I believe that the FTC has an important role in assuring
that our Nation has a competitive market for health care services
that is free from fraud and deception. Obviously, the Commission
should be careful not to overstep its statutory authority or to
venture into areas where it fails to have the relevant
expertise. But it can hardly do its job if its hands are tied.
A medical degree should be an indication of technical
competence. It should not convey immunity from FTC law
enforcement.
Thank you very much.
# # #
-3-
House Republican Research Committee
1616 LHOB, WASHINGTON, D.C. 20515
TELEPHONE NO. 202/225-0871
EDWARD R. MADIGAN
ROBERT H. MICHEL
Chairman
WILLIAM E. O'CONNER, JR.
Minority Leader
Executive Director
Ex-Officio
July 23, 1982
Task Force on Congressional and Regulatory Reform
Jerry Lewis
Bob Okun
Chairman
Director
The Federal Trade Commission (FTC) and the Professions
The problem of monopoly in America is most serious when anticompetitive
practices are sanctioned by government. State or Federal endorsements of
barriers to entry, price fixing agreements or other collusive activities can be
highly resistant to marketplace pressures. Professional services have been
affected by such activities, particularly at the state level, and the FTC has
been increasing its involvement to improve the competitive situation. The
Commission's goal regarding professionals is to promote competition and freedom
of choice as an alternative to "big-brother" regulation. Indeed, in a recent
article that is highly critical of many FTC cases, Professor Ernest Gellhorn
singled out the Commission's actions vis-a-vis professionals as making good
economic sense and providing benefit to consumers.
Many economists have concluded that the markets for professional services
are not competitive. Certainly, state and local regulation of the quality of
health and other professional services is highly desirable, as is much of
professional self-regulation. The vast majority of professionals undoubtedly
oppose harmful anticompetitive practices in their fields. However, an
extensive array of private restrictions and government regulations control
aspects of professional practice which have little to do with ethical
standards, but have a significant economic effect on the market for
professional services. These include dictating not only who may enter the
profession and what services may be offered to the public, but also how
professionals may conduct the business aspects of their practices. This is
particularly true in the health professions, which have received most of the
attention because of the large and rapidly increasing expenditures for health
care. Greater reliance on market forces and less regulation can help to stem
these rising health care costs.
There is a strong case that the FTC should not have scrutiny over
"quality of care" aspects of doctors, dentists, lawyers and other groups. The
FTC is neither a competent nor the appropriate organization to determine, for
example, the medical qualifications of physicians or other professional
standards. The case for any FTC role is limited to the economic activities of
these groups such as price fixing, group boycotts or other restrictions on the
business aspects of professional practice.
-3-
Private restrictions on professionals, as well as government regulation,
create costly inefficiencies. The FTC has built on a significant body of
economic evidence indicating that certain types of professional regulation can
impose substantial costs on consumers. Restrictions by states on advertising
the prices of prescription drugs have been estimated to cost consumers $134
million annually. Regulations restricting advertising of eyeglasses resulted in
consumers paying 25 to 40 percent more for prescription eyewear.
Much more work remains to be done in assessing the costs and benefits of
various types of restrictions on professional practice. A 1979 study by the
Commission's Bureau of Economics found that regulations limiting the way
optometrists may organize their practices increased prices by 17 percent
without increasing the quality of service. Since such restrictions are
widespread in markets such as vision care ($4 billion in annual sales) and
dentistry ($14 billion spent annually), the economic loss to consumers is
likely to amount to billions of dollars. Other studies have demonstrated that
higher prices prevent some consumers from obtaining needed services, which
further injures the public welfare.
The FTC has adopted only one rule directed at health professionals. In
that rule the FTC acted in a deregulatory manner to preempt state regulations
that restricted truthful advertising by eye doctors. The economic case against
these restrictions was overwhelming, and market statistics following the
Commission's action show substantial savings for consumers.
Overall, the FTC activities regarding the professions increase consumer
welfare by permitting market forces to operate without interference from
private collusive activity or burdensome government regulation. If the
Commission's activities duplicated efforts at the state level or trampled on
states' legitimate prerogatives, then there would be reason for concern. This
does not appear to be the case. Evidence suggests that the political power
professional associations wield at the state level often protects themselves
from competition, with little or no resistance from state authorities.
Professional groups seeking to restrict competitive behavior undoubtedly
intend that their actions serve the public. However, the economic costs to
consumers have been neglected too often, and the public benefits claimed from
restrictions on competition have not been substantiated. In its early period
of involvement in the professions, the FTC exhibited some excessive rhetoric,
which failed to acknowledge the traditional bases of professional regulation.
The FTC displayed overblown fears of evil conspiracies. The Commission's more
recent actions reflect a record of sound and careful economic analysis, though.
Such actions have improved the health and well-being of consumers through
wider availability of quality professional services, at lower cost.
Conclusion
In a recent editorial, the Wall Street Journal stated:
"In general, it's a good idea to keep the federal government out of
things. Generally, more power to the FTC has meant more punitive and
unnecessary regulation. But this time the Commission is on the side of the
markets. And it bears repeating that the purpose of (this) deregulation
(effort) is to let the market in
"
International New York City
NEWSDAY
LONG ISLAND.
E-460,000 3-370,000
MAY- 18-82
Regulation of Professionals
Backed by FTC's Chairman
By Judith Bender
Newsday Washington Bureau
Editorial, Page 50
Washington - The Federal Trade Commission
chairman, a leading proponent of stricter congressional
Reagan and was not on the commission when the rule was
curbs on regulatory authority, said yesterday that Con-
issued, declined to say whether he approved of that action.
gress would be making a big mistake politically if it
Despite Miller's vigorous efforts to the contrary, the
adopted a measure exempting professionals from his
Republican-ruled Senate Commerce Committee voted to
agency's regulation.
stop the commission from continuing its crackdown on
The chairman, James C. Miller III, said he was "very
professional boycotting of low-cost medical groups, price-
disturbed" about a measure approved by the Senate
fixing and professional opposition to advertising. Miller
Commerce Committee that would bar the commission
and others say the full Senate probably will approve the
from scrutinizing or moving against professionals-in-
measure.
cluding doctors, dentists and lawyers-who might have
In the House, however, the administration may be
violated antitrust laws or engaged in deceptive consum-
more persuasive, at least with some Republicans, and
er practices.
"passage there of a similar bill is not as certain, according
"It doesn't make sense to be establishing a privileged
to congressional sources. Indeed, there have been some
class," he said, "and it's hard for me to understand how
significant defections. A key Republican, Rep. Norman
the Senate and the House could explain [to voters]
Lent of East Rockaway, the senior GOP member on the
how they could set up separate classes. It smacks of elit-
subcommittee considering the FTC authorizing bill, said
ism." Miller said the measure was "bad law, bad econom-
yesterday that after a recent meeting with Miller and
ics and bad politics," particularly when health care
budget director David Stockman, he "was not going to
expenditures account for nearly 10 per cent of the na-
push the bill."
tion's gross national product.
Lent, listed as a cosponsor of the House bill, said: "I
Miller's remarks to a small group of reporters over
just don't think it's a good idea to cut out a certain seg-
coffee and doughnuts came just a day before the full Sen-
ment of society from FTC's jurisdiction. The House bill
ate is to take up a resolution vetoing the FTC's controver-
differs from the Senate version in that it places a morato-
sial used-car rule, which requires used-car dealers to
rium on further commission enforcement until the Con-
disclose far more information about defects than they now
gress spells out the commission's jurisdiction more
do. Miller, who was appointed last year by President
clearly.
224
(Vol. 43)
ANTITRUST & TRADE REGULATION REPORT
One source of aid will be a new coalition of 33
DISAGREEMENT OVER STRATEGY IS KEY FACTOR
groups. including such members as the American
TO FUTURE OF FTC REAUTHORIZATION MEASURE
Nurses Association. American Psychological Associ-
The Federal Trade Commission's reauthorization
ation. International Chiropractors Association. and
bill remains stalled because of an apparent impasse
American Retail Federation. They announced their
over whether to exempt professionals. such as doctors.
joint opposition to the professionals exemption at a
from the FTC's jurisdiction.
July 19 news conference attended by Florio and Sen.
Confident of having the votes. the American Medi-
Bob Packwood (R-Ore). Thomas Nichols. coalition
cal Association and other professionals' groups have SO
spokesman and counsel to the American Nurses Asso-
far eschewed any willingness to compromise, according to
ciation. said. "The health practitioners that make up
Capitol Hill observers. Their position brings them into
our coalition are not afraid to compete openly and
direct disagreement not only with an important con-
fairly."
gressman but also with interest groups concerned
Packwood. the chairman of the Senate Commerce
about other proposed amendments to the FTC Act.
Committee. hinted broadly at the press conference
Rep. James J. Florio (D-NJ). chairman of the sub-
that he would delay Senate fioor action on S. 2499.
committee with FTC oversight authority, continues to
which contains a professionals exemption. until the
insist that a compromise be made before he will act.
House Commerce Committee acts.
However. no serious compromise talks have been
The National Association of Attorneys General is
commenced. "We keep talking at a staff level. but we
also expected to fight the exemption for professionals.
have nothing in hand." said one staffer. Florio is
Most business and trade groups oppose the profes-
amenable to foregoing the authorization bill and ac-
sionals largely because it could interfere with other
cepting a continuing resolution after the FTC's cur-
gains they hope to make in the FTC authorization
rent authorization runs out in September. according to
measure. "As long as they stand where they are. it's
close observers.
got the kiss of death to it." lamented one industry
Florio's strategic preference differs from that of
lobbyist. The U.S. Chamber of Commerce has remained
FTC Chairman James C. Miller III. According to
neutral on the matter because of cross-cutting cur-
informed sources. Miller opposes the idea of going for
rents within the Chamber's membership.
a continuing resolution to fund the agency, fearful that
Meanwhile. the stage is set for a Senate Commerce
the doctors and other groups will easily be able to
Committee hearing on a Miller proposal 10 redefine
accomplish with amendments to the appropriations
the Commission's authority to challenge deceptive
bill what was impossible with the authorization bill.
acts or practices. The committee already has acted to
In any event. the agency's hopes of forestalling
restrict the FTC's authority to regulate "unfair" com-
restrictive amendments are dim. The AMA and its
mercial speech but deferred consideration of decep-
allies-veterinarians. dentists. opthamologists. archi-
tion. Most business lobbyists doubt that Congress will
tects. and engineers-boast 210 co-sponsors to a bill
restrict the Commission's deception jurisdiction but
H.R 3722 sponsored by Reps. Thomas A Luken (D-
note that the deception hearing could set the stage for
Ohio and Gary Lee (R-NY) The Luken-Lee bill would
action next year. Senate Commerce Committee staffers
prohibit the FTC from taking actions involving profes-
have warned some lobbyists that pushing too hard on
sionals. unless Congress provides it with specific
the deception issue could jeopardize the authorization
authority. Officials of professionals groups told BNA
legislation as a whole.
that they hope to circumvent Florio.
In testimony prepared for delivery on July 22 be.
A: a' June convention the AMA House of Delegates
fore the Senate Commerce Committee. Commissione:
passed resolutions endorsing legislative initiatives to
David A Clanton will call for the Commission to issue
exempt professionals not only from the FTC's jurisdic-
a policy statement on how it will exercise its authority
tion but also from any other federal or state antitrust
to attack deceptive acts or practices.
attack Mooel state and federal legislation has been
Clanton's position is intended to provide an alterna-
prepared. which according to the AMA's minutes.
tive to congressional definition of "deception." which
"would require courts reviewing antitrust cases
Clanton said would be "premature." Chairman James
involving the sale or delivery of health services to
C. Miller III supports a statutory definition of decep-
consider whether the activities are directed. autho-
tion. while Commissioners Michael Pertschuk and
rized. or encouraged by the federal or state govern-
Patricia P. Bailey oppose any change. All four are
ment. whether the activity is intended to maintain or
scheduled to testify.
improve the quality of health care in the public inter-
Clanton will argue that the evidence does not justify
est. and whether the activity is intended to control
statutory redefinition of deception. "In my view, the
costs in the public interest."
basic legal standards are still valid: it is primarily the
Miller. who has strongly opposed the professionals
discretionary application of those standards that may
amendment, got some belated help from several quar-
require further refinement and clarification." according
ters this week. However, Miller has not been able to
to Clanton.
obtain a solid commitment from the White House to
Preparations for the hearing included a minor tiff
veto a bill exempting professionals from FTC attack.
between the Chamber of Commerce and National
The White House has spoken disparagingly of the
Association of Manufacturers. The two groups have
professionals' amendment. but it has been heavily
identical positions on the deception issue, but the
lobbied by the professionals and now is considered
Chamber of Commerce rebuffed a suggestion that one
essentially neutral.
spokesman represent both groups at the hearing.
7-22-82
WBGH MEMBERSHIP LIST
As of 5-15-82
AMAX
CPC International
AMF
FMC
CONOCO
ARA Services
Federated Dept. Stores
Jack Eckerd Corporation
ASARCO
Campbell Soup
Jewel Companies
Firestone Tire & Rubber
Carter llawley Hale
John Hancock
AT&T
Ford Motor
Caterpillar Tractor
Johnson & Johnson
Aetna Life & Casualty
Champion International
Air Products & Chemicals
GATX Corporation
Chemical Bank
Kaiser
Allied Chemical
Chrysler
GTE Serv. Corporation
Kimberly-Clark
Aluminum Co. of America
General Electric
Citibank
Koppers
American Can
General Foods
Cities Service
Kraft
American Cyanamid
General Mills
Coca-Cola
American Express
General Motors
Kroger Company
Connecticut General Life
American Home Products
General Signal
Consolidated Edison
LTV
American Medical Int'l
General Tire & Rubber
American Natural Serv Co.
Container Corp of America
Georgia-Pacifie
Continental Bank
MCA
American Standard
Goodrich Company, B.F.
Macy, R.11.
Amsted Industries
Continental Group
Goodyear Tire & Rubber
Coopers & Lybrand
Manufactuers Hanover Trust
Armeo Inc.
Grace, W.R.
Corning Glass Works
Martin Marietta
Armstrong Cork
Gulf Oil
Massachusetts Mutual Life
Atlantic Richfield
Dana Corporation
Melville Corporation
Heinz, USA
Deere & Company
Mercer, William M. & Co
Bank of America
Hellmuth & Assoc, C.T.
Bechtel
Digital Equipment
Merck
Hewlett-Packard
Dillingham
Merrill-Lynch
Becton, Dickinson & Co
Hoffmann-LaRoche
Dresser
Metropolitan Life
Bethlehem Steel
Honeywell
Milliken & Company
Boeing
Hospital Corp of America
EDS Federal
Mobil Oil
Boise Cascade
E.I. duPont de Nemours
Monsanto
Bristol Myers
INA Corporation
Eastman Kodak
Montgomery Ward
Buck Consulting Act.
Ingersoll-Rand
Eli Lilly
Morgan Guaranty Trust
Burlington Industries
Inland Steel
Equitable Life
Motorla
Burlington Northern
Inmont Steel
Ernst & Whinney
Int'l Business Machines
Exxon
International Harvester
International Paper
Nabisco
Scars, Rocbuck & Co
Nat'l Chain Drug Stores
Shell Oil
Nat'l Medical Enterprises
Sherwin-Williams
Norton Company
SmithKline
Sperry Corporation
Occidental Life
Std. Oil of California
Olin
Std. Oil (Indiana)
Owens-Corning Fiberglas
Std. Oil Co. Ohio
Owens-Illinois
Stanley Works
Stauffer Chemical
PACCAR
Sun Company
PPG
Sundstrand Chemical
PI111 Group
Penney, JC
TRW
PepsiCo
Tenneco
Pfizer
Texas Eastern
Philip Morris
Texas Gas Transmission
Pitney Bowes
Tosco Corporation
Pittston Company
Travelers
Procter & Gamble
Provident Life
Union Camp
Prudential
Union Carbide
Union Oil of California
Quaker Oats
Union Pacific
UpJohn
Ralston Purina
U.S. Stecl
Republic Steel
Reynolds Metals
Valley National Bank
Rockwell International
Rohm & Haas
Warner Lambert
Warisau Ins Companies
SCM
Wells Fargo
St. Joe Minerals
Weyerhaeuser
St. Regis Paper
Westinghouse
Schering-Plough
Wheelabrator-Frye
Searle & Company, G.D.
Whirlpool
Wyatt Company
Xerox
Washington Business Group on Health
July 19. 1982
ISSUE DISCUSSION PAPER
FTC Reauthorization and the Exemption of the Professions
THE ISSUE
Congress is now considering the FTC reauthorization legislation. In the Senate, the reauthorization bill is
S. 2499, sponsored by Bob Kasten (R-WI). The bill contains a provision to exempt the medical profession
from FTC jurisdiction. The exemption would also apply to other professions but due to the limited
charter of the WBGH, this paper is restricted to the issues of the medical profession. In simple terms.
the issue is whether or not this exemption should be allowed.
LEGISLATIVE STATUS
In the Senate, S. 2499 passed the Senate Commerce Committee, in May, 10-5. Committee Chairman Bob
Packwood (R-OR) was opposed and will delay taking the bill to the Senate floor as long as possible.
The reauthorization must take place by September 30, or the FTC must receive a continuing resolution,
or the FTC will be effectively out of business.
In the House, the FTC received a one-vear reauthorization, that did not change its authority, from the
Subcommittee on Commerce, Transportation, and Tourism. Next, the full Energy and Commerce
Committee must pass on reauthorization. A House bill, H.R. 3722 sponsored by Thomas Luken (D-OH)
and Gary Lee (R-NY) has 206 co-sponsors and places a moritorium on FTC activity in health. The AMA
wants an amendment along the lines of H.R. 3722 to be attached to the FTC reauthorization bill when it
is heard in the Energy and Commerce Committee. Subcommittee Chairman James Florio (D-NY) opposes
the exemption or moritorium.
THE ADMINISTRATION
There is no formal position. Observers feel they are not enthusiastic about the AMA position since,
despite heavy urging to do so, they have not given an endorsement. Also, and even more important, has
been the freedom which FTC Chairman James C. Miller III (a Reagan appointee) has been given to loudly
oppose the AMA. Chairman Miller spoke at our 1982 Annual Conference on June 23 to explain why he
felt the AMA position would be directly detrimental to competition in health care delivery and to the
cost management efforts of employers. A copy of his remarks are enclosed.
THE WBGH POSITION
This issue was raised at the June 22 Policy Committee meeting at which time it was decided that the
WBGH would oppose the exemption on the basis that it was contrary to our dual objectives of cost
management and stimulating increased competition in the medical care market place. The Board
confirmed this position at its July 15 meeting after hearing staff report that 100% of the WBGH members
polled by telephone or spoken with in person on this issue agreed with the decision to oppose. The Board
requested that staff conduct a written survey of the membership to gain 8 final and more formal record
of the members' views. A reply form is enclosed.
922 Pennsylvania Avenue, S.E., Washington, D.C. 20003 (202) 547-6644
REPORT OF THE BOARD OF TRUSTEES
Report: Q
(A-82)
Subject:
Remedial Antitrust Legislation
(Resolution 9, I-81)
Presented by: Joseph F. Boyle, M. D, Chairman
Referred to:
Reference Committee B
(Malcolm O. Scamahorn, M. D, Chairman)
1
Resolution 9 (I-81), which was referred to the Board of Trustees,
2
calls upon the AMA to seek enactment of federal and state legislation
3
that would recognize that certain reasonable activities in the health
4
care field do not violate antitrust laws.
5
6
The Board concurs with the Council on Legislation, which has
7
studied this matter carefully, that the intent of this resolution
8
can be carried out by development of draft legislation amending the
9
Sherman and Clayton Acts at the federal level and amending state
10
antitrust laws. Draft legislation applicable to the sale and
11
delivery of health care services has been developed to accomplish
12
this reform.
13
14
The Board has approved two model bills recommended by the
15
Council on Legislation to amend federal and state antitrust laws.
16
These bills would require courts reviewing antitrust cases involv-
17
ing the sale or delivery of health services to consider whether the
18
activities are directed, authorized or encouraged by the federal or
19
state government, whether the activity is intended to maintain or
20 improve the quality of health care in the public interest, and
21
whether the activity is intended to control costs in the public
22 interest.
23
24
The Board recommends adoption of this report in lieu of
25
Resolution 9.
Past House Action: I-81:223
April 1982
In The General Assembly
State of
A Bill
To Amend the Antitrust Laws of
this State Relating to the Sale or
Delivery of Health Care Services
Be it enacted by the People of the State of
,
represented in the Generaly Assembly:
"
I
Revised Statutes, Title
, Chapter
,
Section
is amended to add the following language:)
Section 1. In determining whether a restraint under the antitrust
laws of this state relating to the sale or delivery of health care
services is reasonable, the criteria to be considered shall include:
(a) whether the activities involved are authorized or encouraged br the
federal or state government; and (b) whether the activities involved are
intended to maintain or improve the quality of health care or to control
costs in the public interest.
Section 2. Activities relating to the sale OI delivery of health
care services that are conducted pursuant to direction by the federal or
state government shall be exempt from the antitrust laws of this state.
- AMERICAN MEDICAL ASSOCIATION -
DEPARTMENT OF STATE LEGISLATION, DIVISION OF LEGISLATIVE ACTIVITIES
97th Congress
2nd Session
Bill No.
IN THE (SENATE) (HOUSE) OF TEE
UNITED STATES
of
introduced the following bill
which was read twice and referred
to the Committee on
A Bill
Be it enacted by the Senate and House of Representatives of
the United States in Congress assembled,
Sec. 1. This Act may be cited as the "Clayton and Sherman
Act Amendments of 1982.' -
Sec. 2. Title 15, Chapter 1 of the United States Code is
amended by adding the following new sections:
11
"Section 32. In determining whether a restraint related to
the sale or delivery of health care services in or affecting
interstate commerce is reasonable, the criteria to be
considered shall include: (1) whether the activities
involved are authorized or encouraged by the federal or a
state government; (2) whether the activities involved are
intended to maintain DI improve the quality of health care in
the public interest; and (3) whether the activities involved
are intended to control costs in the public interest." -
"Section 33. Activities related to the sale or delivery of
health tare services that are conducted pursuant to direction
by the federal or a state government shall be exempt from
federal antitrust laws."
Sec. 3. The provisions of this Act shall take effect on the
date of the enactment of this Act.
0220s
REMEDIAL FEDERAL ANTITRUST LEGISLATION
This bill modifies the federal antitrust laws as they apply to the
sale and delivery of health care services. In an antitrust case
involving the sale of delivery of health care services, the court
sould be required to consider three factors (1) whether the activities
?TE authorized or encouraged by federal or state government, (2)
/hether the activities involved are intended to maintain or improve
the quality of health care in the public interest and (3) whether the
ctivities are intended to control costs 10 the public interest. The
>111 also provides an antitrust exemption for activities related to
the sale or delivery of health care services that are conducted
pursuant to the direction of the federal or state government.
- American Medical Association -
Department of Federal Legislation, Division of Legislative Activities
THE WALL STREET JOURNAL.
FRIDAY. APRIL 2. 1982
Deregulating the Doctors
We see that the deregulation move-
trol over the professions has been
ment has run into & small case of in-
largely a story of protectionism. Time
ternal wrangling lately over the issue
and again professionals have been
of how to treat professionals like doc.
able to use the cloak of state author-
tors and dentists. One bunch of self-
ity. with its licensing requirements
proclaimed deregulators wants to end
and codes of behavior, to restrict com-
the jurisdiction that the Federal Trade
petition and keep others out of their
Commission now holds over these
lucrative trades.
groups. Another camp of deregulators
The FTC has been moving against
is fighting 10 preserve the commis-
this kind of restrictiveness. and has
sion's role. On this one, we are on the
acted 10 open up the legal, dental and
side of the Feds.
medical fields to advertising by prac-
In the name of deregulation. a bill
titioners. Returning jurisdiction to the
has been filed in Congress to strip the
states would kill the movement.
FTC of its present authority over the
trade practices of professions that are
In general. It's a good idea to keep
already regulated on the state level.
the federal government out of things:
But the Reagan administration, so ca.
generally, more power to the FTC has
ger to shrink the federal government
meant more punitive and unnecessary
in most respects, won't go along. In
regulation. But this time the commis-
fact the FTC's new deregulating
sion is or. the side of the markets. And
chairman. James C. Miller 111. has
it bears repeating that the purpose of
just testified to Congress that he
deregulation is to let the market in.
"fully, strongly and unalterably up-
no! simply to switch regulatory func.
poses" the effort. This puts Mr. Miller
tions from one jurisdictional box to
on the side of the Naderites for a
another.
change.
In fact we should keep this point in
But the reason for Mr. Miller's un-
mind during the debates to come ove:
accustoined territorial sensitivity is
all the current "new federalism" initi-
not very mysterious. If the FTC were
atives: A lot of what IS going to be
to lose power over the professions.
walking around disguised as decen-
they would be left to the exclusive con-
tralization or deregulation Just may.
trol of state authorities. In principle
when you take a closer look, turn out
this would not be a bad idea. But it
to be just the same old protectionism
happens that the history of state con-
underneath.
The Topeka Capital- Journal
Opinion
Friday, May 7. 1982
Editorials
In God we trust
How things work
There's B modest lesson to be learned In the
In 1978, the FTC successfully overruled a
Federal Trade Commission's attempts to re.
prohibition on advertisements for eyeglasses
Lain its jurisdiction over professionals. This
and contact lenses. Since then, the price of
lesson will demonstrate how things work in
contact lenses has dropped 25 percent. The
our nation's capital.
cost of cyeglasses has increased less than the
Bills to reauthorize the FTC are currently
rate of inflation.
in the House and Senate Commerce Commit-
Similarly, the FTC has challenged the ban
tees. The legislation is designed to renew the
on advertising by dentists and doctors. The
agency's functions. But. in the name of so.
aim is to encourage competition and bring
called deregulation. some elements of Con-
the cost of these services down.
gress are secking exemption for profession-
The professional groups don't want regula-
als from FTC regulations. The professionals
tion, and for good reason. They don't want to
include optometrists, dentists, doctors and
be objects of FTC watchdogs.
lawyers.
There are 181 House co-sponsors of the bill
Though the professionals may argue that
to exempt professionals. It just so happens
state agencies can move in to fill FTC func.
that 96 percent. or 155. of the co-sponsors
tions. the sad fact is that state authorities
have received B total of $800,000 in campaign
have been reluctant to do SO. According to the
contributions from the American Medical As.
Wall Street Journal, "Time and again profes-
sociation. the American Dental Association
sionals have been able to use the cloak of
and the American Optometric Association.
state authority. with Its licensing require-
Three Kansas congressmen who are CO-
ments and codes of behavior. to restrict com-
sponsors of this legislation have received con-
petition and keep others out of their lucrative
tributions from these organizations. Rep.
trades."
Jim Jeffries has received $6,250: Rep. Pat
The FTC efforts to open up these profes.
Roberts, $15,700; and Rep. Robert Whittaker.
sions and invite competition may be secing
$16,350.
their last days If congressmen approve an
Aside from the persuasive influence the
exemption for professionals. The strong sup-
professional organizations seem able to ex.
port for the exemption and the FTC's appar-
ert, the law to exempt professionals from
ently futile attempts to retain Its authority
oversight Is bad legislation, opposed even by
demonstrate once again that the power of the
the Reagan administration.
purse reigns In Washington.
International
New York City
NEWSDAY
LONG ISLAND. Y.
E-460.000 -310,000
MAY-18-82
Don't Tie the FTC's Hands Again
When Long Island doctors boycotted pa-
This is being done in the name of deregu-
tients whose bills were being paid by the
lation. The states already control the profes-
workers' compensation system, New York
sions, the argument goes, 80 why should
State took them to court - and lost.
Washington get into the act?
The doctors said they had a right to re-
While it's true that the states license doc-
fuse to treat patients as a protest against
tors, dentists, lawyers and the like, & state's
fixed state medical payments that they
ability to deal with anticompetitive practices
claimed were too small. A grand jury
is limited; witness the outcome of the New
thought their boycott violated state antitrust
York case. And where states actually man-
laws, but a judge ruled that those laws didn't
date practices that are anticompetitive,
apply to the professions.
professionals could be protected by standard
This case obviously involved important
antitrust-law limitations, leaving the FTC
social questions bearing on the cost of health
free to attack the state rules under federal
care. Despite a recent decline in the national
consumer protection laws.
rate of inflation, medical costs are still rising
When federal policymakers are searching
at a double-digit pace.
for new ways to make health care and health
When it comes to social regulation, New
insurance more competitive, why is Congress
York is 8 progressive state; many others
trying to junk a perfectly good tool Washing-
are far more protective of the people
ton already has? Perhaps because of the medi-
they're supposed to regulate. So the federal
cal professions' generosity: In the past two
government, which has developed a body of
years, it has given $800,000 in campaign con-
laws dealing with anticompetitive practices
tributions to House co-sponsors of this bill.
in the professions, shouldn't pull back from
We're pleased that Rep. Norman Lent (R-
enforcing them. Yet a Senate committee
East Rockaway), who may have the swing
has approved a bill that would prevent the
vote on the House subcommittee considering
Federal Trade Commission from enforcing
the ban, plans to oppose it. We hope other
antitrust laws against professionals. That
subcommittee members, and eventually the
ban would include doctors, dentists, optom-
whole Congress, see the wisdom of treating
etrists and others; the bill is vague on how
anticompetitive practices in the professions
far it would extend.
like' those in other businesses.
:
MAY 1 3 82
Philadelphia Dally News
PHILA, PA
PM-262,391
Deregulation
Deregulation sounded different when it was a campaign
promise. In practice, it's turning out to be little better than a
license to return 10 some time-honored ways to cheat people.
The Senate Commerce Committee this week voted over-
whelmingly to bar the Federal Trade Commission from tak-
ing antitrust action against professional groups. That means
that businesses are (at least for the time being) still re-
quired not to do things like fix prices or advertise deceptive-
ly. Doctors and lawyers, however, would be able to cheat as
much as they like as long as they do it in groups.
For example, it would be perfectly all right for a medical
association to set fixed fees for doctors to charge or bar phy-
sicians from giving prescriptions to their patients so they
can shop for the best price. In fact, even outright fraud
would not be something that the FTC would be allowed 10
challenge.
Congress seems here to be creating a special kind of aris-
tocratic privilege by exempting an entire class of people
from the law.
There is a reason for all this, although it's not the one
the "deregulators" are giving. The market for doctors and
lawyers these days isn't as bullish as it has been. What better
way to keep income levels high than 10 keep everything
within the club? Competition would be so untidy, after all,
and a bad doctor who charges high feesmight lose patients.
Being a "professional" is not a guarantee against greed
or dishonesty. The public would have to take what it could
get.
The American Medical Association, naturally, believes
that FTC regulation lowers the quality of medical care. Ap-
parently the AMA believes that doctors don't do good work if
they're not allowed to fix prices and defraud patients.
The AMA. as usual, is looking out for its own pocketbook.
It stopped blathering about "socialized medicine" when
Medicare proved to be a spectacular windfall for many of its
members. AMA principle is a matter of cash flow.
The "professionals" aren't alone in their distaste for the
FTC. The agency has been under sustained attack for the
past four years by business and professional groups who'd
like to go back to the good old days of no holds barred in
dealing with the public.
But the fact is that we're all the public - even "profes-
sionals." It's in everyone's best interest to enforce the laws.
against cheating us. Even the administration, despite its
own interest in deregulation, opposes exempting a whole
class of people from the law.
It's bad deregulation, bad law and bad news for the pub-
lic. Congresspeople who vote for it when it hits the floor
might just as well pick everybody's pockets.
F1. Worth, TX
Star Telegram
(Evening) 3 1997
(Cir. D. 148,543)
Editorials
4/13/82
Deregulation we don'tneed
There are times when regula-
The TMA lobbied 50 ffectively
tion is necessary to maintain free
that the Sunset Commission
enterprise. That sounds contra-
made no recommendation to the
dictory, but it isn't There is a bill
Legislature on the medical board.
in Congress to remove Federal
The Sunset Commission usually
Trade Commission jurisdiction
recommends to the Legislature
over professions that already are
after review of each agency
regulated at the state level. The
whether the agency should be
bill, however, is opposed not only
continued or abolished and spe-
by the FTC's chairman, & champi-
cific changes in the agency. It
on of deregulation, but by the
made recommendations on all
Reagan administration, the avid
but three of the 28 agencies it
pusher of deregulation.
reviewed before the last legisla-
It is well that there is such high
tive session. The other two on
powered opposition, and from
which it made no recommenda-
staunch deregulators, too. Re-
tions also dealt the medical pro-
moving federal regulation over
fession.
the professions, such 2S doctors,
The TMA lobbied successfully
dentists, 18 wyers, etc. and leaving
to defeat proposed changes in the
the regulation up to the states
Medical Practice Act that would
would most likely result in less
have permitted nurses to per-
competition rather than more.
form some medical duties under
The state boards that regulate
certain circumstances, such as to
professions are frequently heavi-
prescribe medications. The medi-
ly influenced by the professions
cal prof ession also was successful
they regulate.
in eliminating from the act a curb
on the state board's power to in-
The hassle the Texas Sunset
terfere with physician advertis-
Commission and the Legislature
ing.
went through last year over the
The FTC has been opening up
reconstitution of the Texas State
the professions - legal, medical,
Board of Medical Examiners is
etc. - to advertising in order to
evidence of the hold that the
promote competition in those
medical profession has over that
fields.
board. The Texas Medical Associ-
State regulating agencies in
ation fought proposed changes in
which the professions exercise
the board so vigorously that the
strong influence if not control
Legislature did not approve re-
have a tendency to stifle competi-
newal of the board in its regular
tion rather than foster it. It is well
session and had to deal with re-
that the FTC keeps a band in the
newal in a special session later in
regulation of the professions -
the year.
for the good of the consumer.
STAR . LEDGER
NEWARK. NJ
P!' -417,000 S-575.000
The wrong Rx
A strong special interest group made up of doc-
tors, dentists and other high-income professionals has
Raunched a well-financed drive in Congress to remove
the jurisdiction the Federal Trade Commission (FTC)
holds over these groups.
On the surface, this would appear to be consistent
with the deregulation movement instituted under for-
mer President Carter and given continued support by
President Reagan with bis commitment to get the
government off the people's backs.
In this instance, however. the Reagan Adminis-
Tration is opposed to ending the FTC authority over
the trade practices of these professions. The agency's
chairman, James C. Miller 3d, testified against a con-
gressional bill that would strip the FTC powers in
these professional sectors.
Mr. Miller's "unalterable" opposition to the pro-
Dosed deregulatory legislation was based on an under-
standable concern of a less vigilant regulatory control
will these powers were left to the exclusive jurisdiction
of state authorities.
Historically, the experience with state regulato-
Ty agencies is that they have been less rigorous than
their federal counterpart, the FTC, on licensing re-
quirements. codes of behavior and other measures
-that serve to restrict competition in these lucrative
fields.
The FTC has moved in the other direction in an
effort to remove anti-consumer restrictions. The
agency has acted to open up the legal, medical and
dental professions to the competition of a free mar-
ketplace. If this authority were given exclusively to
state agencies, the competitive element would be
aborted, killed off.
Deregulation is designed to open markets. That
principle would be circumvented in this case by trans-
ferring jurisdiction from one government level to
another - one more amenable to the professions in-
volved.
International New York City
COURANT
HARTFORD. COMM.
M-200.000
000
MAY- 15-82
Doctoring Federal Deregulation
The Senate Commerce Committee recently
The Supreme Court recently upheld the
approved a bill that, in the name of deregula-
FTC's order allowing ads and non-traditional
tion, would actually encourage protectionism
business arrangements, affecting doctors, op-
and limit competition.
tometrists and dentists, among others.
The bill would eliminate state-regulated
The agency has also prevented doctors
professionals - such as doctors - from the
from refusing to treat Medicaid and emer-
Federal Trade Commission's jurisdiction. It
gency room patients and from refusing to
would also wipe out the F ICS purview over
work in hospitals with other doctors em-
"unfair" advertising, and cut the agency's
ployed by health maintenance organizations.
budget from $68 million to $54.6 million by
Opposition to this bill comes from across
1985.
the political terrain, including FTC chairman
If passed, this measure would undermine
James C. Miller. But some of the most influ-
FTC's fight to eliminate restrictions, often
ential groups in politics want the FTC out of
codified into state law, that prevent profes-
the picture, including the American Medical
sionals from engaging in basic competitive
Association, the American Dental Associ-
practices, such as advertising.
ation, and the American Optometric
Too many state boards designed to over-
Association.
see professionals are controlled by the profes-
Each is a major campaign contributor.
sionals themselves. Even if they weren't,
Senators should have an excellent oppor-
nationwide standards make sense in this area
tunity to demonstrate their independence and
SO states don't have to compete for doctors,
support of consumer interests by voting
for example, by relaxing their standards.
against this proposal.
International
New York City
POST-NERALM
FIRMINGHAM. SLA,
12-75.000
MAR- :7-82
Latesi example
The relationship between large
Shelby has not had a serious polit-
campaign contributions and an indi-
ical challenge since he won the Dem-
vidual congressman's support of leg-
ocratic runofi in 1978 - the first
islation favored by the contributors
time be sought the Seventh District
has long been plain to anybody who
seat - and there are no indications
cared to look. And as campaign costs
that he will have strong opposition
have escalated, the relationship has
this year. Some of the contributions
become even clearer.
- made in 1979, 1980 and 1981 -
The latest example, as have many
went to pay off his 1978 debts. But he
previous ones, involves political
doesn't really need the funds.
action committees (PACs) repre-
That fact, however, seldom enters
senting various medical groups and a
into the contributors' decisions. If
bill to exempt professionals from
anything, they prefer to contribute to
investigation or prosecution by the
incumbent congressmen they know
Federal Trade Commission. The 155
will be around for awhile and in posi-
co-sponsors of The legislation have
tions to help their causes. Shelby hap-
received a lotal of $831,960 from
pens to be a member of a House sub-
PACs of the American Dental Asso-
committee on health.
ciation, the American Medical Asso-
There is nothing illegal under cur-
ciation and the American Optometric
rent law about the contributions. But
Association, according to Ralph
the strong correlation between where
Nader's Congress Watch organization.
money goes and the legislative
The second highest recipient was
actions of recipients doesn't do much
Rep. Richard Shelby of Alabama, who
for public confidence in Congress'
received $18,500.
dedication to the public interest.
Waco, TX
Tribune-Herald
3/25/82
EDITORIALS
Physicians' ads:
a good medicine
It won't set a precedent, but the Supreme
Court's 4-4 vote on the issue of advertising by doc-
tors and dentists advances the cause of consumer-
ism and allows physicians and dentists more free-
dom to conduct their practices as they see fit.
The court's decision upheld a Federal Trade
Commission order which instructed the American
Medical Association to lift some of its restrictions
on medical advertising. The order says physicians
must be allowed to advertise, compete for busi-
ness and enter into non-traditional financial ar-
rangements. Dentists are bound to the advertising
portion of the order.
The abstention of Justice Harry A. Blackmun
caused the tie, and it means the AMA could chal-
lenge the FTC again. But for now, the FTC order
stands. Consumers and doctors both could benefit.
One advantage for doctors comes to mind im-
mediately. Those who are beginning their prac-
tices will be able to use advertising to make them-
selves known. Advertising also could effectively
point out physicians and dentists who are over-
priced. The Supreme Court says the AMA would
still have control over deceptive advertisers, and
active prosecution of these people could correct a
problem the AMA anticipates.
From a consumer standpoint, too, the advan-
tages are obvious. The biggest one is helping to
control the rising cost of medical care.
The AMA's standards of conduct for its mem-
bers are necessarily high. But its close-to-the-vest
approach to the medical profession sometimes
separates doctors from the public they serve and,
in some cases, has shielded less competent mem-
bers of its ranks from public scrutiny. Advertising
could promote more honesty, which can only
benefit doctors with nothing to hide and consum-
ers seeking their money's worth.
Lewiston, ID
Tribune
(Clr. D. 24,691)
(Clr. S. 24,892)
MAY 1 4 1982
Another Senate blow to the
I
f there was ever any doubt that the U.S.
Senate, as currently constituted, is an
enemy of the consumer, then consider the
consumers
way the Senate Commerce Committee
rushed this past week to lick the boots of
practically everyone who is eager to take
commercial advantage of the public.
The committee voted 11 to 3 to bar the
Federal Trade Commission from taking any
anti-trust actions against medical associa-
tions and others that fix prices. The commit-
tee also voted to curb the FTC's powers to
regulate unfair advertising.
In other words, let the buyer beware.
Never give the suckers an even break.
What is wrong with regulating unfair
advertising, with requiring the nation's
businesses to tell people the truth about the
products they would sell them? What's
wrong with giving people fair warning?
And price fixing in any realm - especial-
ly one as essential as medicine - is not only
detrimental to the consumer but to that free
enterprise system which is so frequently
advocated by members of the medical com-
munity. With price fixing, the cost of medi-
cine bears no relationship to the value of the
service rendered. It is related solely to what
the price-fixing doctors think the traffic will
bear.
The FTC stands ready to check such
abuses.
And the U.S. Senate - bought and paid for
by many of those the FTC would keep under
control - is apparently ready to check the
FTC. It's the Senate's way of saying thank
you for all those contributions.
But there is no price fixing on the purch-
ase of senators. Some of them will sell out,
more reasonably than others. - B.H.
MAR2162
SUNDAY TIMES
CUMBERLAND, MD
S-33,441
Professional Organizations
Eying Congressional Move
An effort is under way in Congress to enact law
which would exempt professionals from Federal
Trade Commission investigation or prosecution. The
move appears to reflect professional groups' dismay
at FTC actions in recent years. These notably in-
clude an agency decision that the American Medical
Association's curbs on advertising by doctors are
unlawful.
The professional organizations naturally have a
keen interest in securing passage of the legislation
introduced in the House by Reps. Thomas Luken of
Ohio and Gary Lee of New York. This would serve
their interest. One cannot take exception to their
lobbying for passage.
Questions are raised, however, by the
disclosures of Congress Watch about heavy can-
tributions to members of Congress who have since
backed the proposal. According to this watchdog
organization. these campaign gifts totaled more
than $800,000 It is said that nearly $300,000 went to
members of congressional committees which will
consider the legislation. It would seem that another
chapter should be written in the electoral reforms
story
WASHINGTON POST
June 2, 1982
page A-18
Doctors, Lawyers and the FTC
T
HE FTC has been taking it on the chin. In a
whether practiced by automobile manufacturers or
single month, Congress has vetoed a proposed
the local medical establishment.
regulation on disclosures about used cars and the
And the magnitude of that economic activity is
Senate Commerce Committee has come up with a
not to be eneezed at. General Motors, for example,
series of controversial amendments that may kill
spends more on health care for its employees than it
the commission's whole authorization bill. One of
does on purchases from its largest supplier, U.S.
these amendments would exempt state-licensed
Steel. Some states supervise. this activity well,
professionals from FTC regulation directed against
within their own borders; some hardly pay attention
anti-competitive activities such as price-fixing and
at all. If the FTC is pushed out of the picture, there
boycotts. Thus, doctors and lawyers, for example,
will be no comprehensive, national regulation of this
would continue to be regulated-or not regulated-
commerce unless the Justice Department's jurisdic-
by the states.
tion is expanded and its budget substantially in-
This is a terrible idea. For years, professional as-
creased. That's an impractical solution that is not
sociations were thought to be exempt from the anti-
even supported by the department.
trust laws. The change came in 1975 when the Su-
James Miller, who was appointed by President
preme Court held that minimum-fee schedules en-
Reagan to be chairman of the FTC, opposes the
forced by the bar amount to illegal price-fixing. Two
Commerce Committee's exemption for the profes-
years later, the court said that prohibitions against
sions. He believes that the commission has done
advertising could not be enforced by professional
useful work in this area that has promoted compèti-
associations. And only last March the Supreme
tion, brought down some prices and served to bene-
Court upheld an FTC order allowing doctors and
fit the consumer. Commission cases have challenged
dentists to advertise and preventing the American
price-fixing agreements among doctors and opposed
Medical Association from penalizing physicians who
concerted efforts by physicians to force increases in
work for health maintenance organizations or other
Medicaid fees and to kill cost-containment pro-
prepaid plans instead of on a fee-for-service basis.
grams organized by insurers and unions. The agency
States may very well be the proper authorities for
has stopped illegal kickbacks by physicians to medi-
determining professional qualifications. State regu-,
cal laboratories and opposed organized boycotts de-
lators assess competence and educational standards,
signed to coerce local hospitals. FTC actions on eye-
and they license professionals. But the economic ac-
glass advertising and generic drugs have saved con-
tivity of professionals is commerce in the true sense
sumers millions of dollars.
of the word. Price-fixing, deceptive advertising and
This is just the kind of protection American con-
anti-competitive agreements hurt consumers
sumers rightly expect the FTC to provide.
(Buitorial
rage)
May 7, 1982
Laws for Sale
Abscam-style bribery that buys legislation out-
by dental hygienists; pressure to sell "brand-name"
right may be the exception in Congress. But the evt-
prescription drugs, and deceptive advertising by
dence grows that perfectly legal campaign contribu-
weight-loss clinics.
tions are having the same effect. Special interests
Now the professional trade groups are striking
are buying laws they like. It's hard to find a clearer
back. Several senators are sponsoring bills to block
example than the present effort of professionals to
commission action against state-licensed profes-
gain exemption from scrutiny by the Federal Trade
sionals, from architects to veterinarians. A similar
Commission.
House bill, with 160 co-sponsors, is only slightly less
House and Senate committees are now drafting
inclusive. These bills are rationalized as a matter of
legislation to restrict the commission's authority in
states' rights: if states set standards for profes-
different ways. That is not all bad. For example, the
sional skills, it is said, they should also set the stand-
commission's chairman, James Miller, wants Con-
ards of professional conduct.
gress to na:TOW the F.T.C.'s power to regulate "un-
But that is not the view of even conservatives at
fair" advertising. The limit be proposes is probably
the White House or the commission. They under-
too stringent, but the idea itself is defensible. That is
stand the difference between deciding whether a
not the case, however, with the attack on the
dentist knows how to fix teeth and whether he or she
F.T.C.'s jurisdiction over physicians, dentists, op-
should be permitted to do so in a department store.
tometrists and other professionals.
They also understand that state legislators are no
This jurisdiction has been well used. Four years
torious patsies for professional lobbies. AS a practi-
ago the commission ruled that state laws and trade
cal matter, only the F.T.C. has the independence
association agreements that restrict advertising for
and expertise to police the economic conduct of pro-
eyeglasses were illegal under Federal law. Such ad-
fessionals.
vertising has since become common and has made it
possible for consumers to save millions of dollars
Why, then, the enthusiasm in Congress for curb-
through easy comparison shopping.
ing the F.T.C.? To Congress Watch, a group that
In 1973, as part of a broader investigation of the
monitors campaign contributions, the answer seems
American Medical Association, the commission
obvious. Over the last three years, 155 of the House
ended similar restrictions on advertising by physi-
co-sponsors received campaign contributions of
clans. It also forced the A.M.A. to drop its opposition
$599,000 from the A.M.A., $191,000 from the dental
to doctors who work for salaries instead of fees in
association and $41.000 from optometrists.
hospitals and prohibited physicians' groups from
Finished bills from the Senate and House com-
boycotting cost-cutting health maintenance organi-
merce committees are due soon. Then the country
zations. Other prime targets for investigation in-
will learn which counts more among their mem-
clude restrictions on services that may be provided
bers: conscience or cash.
LOS ANGELES TIMES
June 14, 1982
Part II P. 8.
Bad Medicine
Not content with the bad press that it received
The House Commerce Committee will consider
for selling out to used-car dealers last month, Con-
this exemption later this month. The committee
gress is now turning to doctors with its legislative
has 42 members, 39 of whom received a total of
largesse. It is considering exempting them, at their
$198,660 in medical association contributions,
well. financed request, from antitrust enforcement
Congress Watch said.
efforts of the Federal Trade Commission. Such an
The doctors argue that their restrictive adver-
exemption not only would be harmful to efforts to
tising codes have been dropped. The commission
hold the line on health costs, but it also runs coun-
counters that practices that block competition
ter to the nation that the marketplace should be
have not in fact stopped. pointing to a case earlier
the ultimate price regulator. If passed, this legisla-
this year in Fort Lauderdale, Fla., in which the
tion would foster even more cynicism about who
local medical association was trying to get doctors
controls Congress.
not to advertise their professional experience or
.For some years, the trade commission has been
their willingness to accept credit cards or Medicare
studying the effect that various professional asso-
payments. A commission official says that, despite
ciations' bans on advertising have had on the price
what the doctors say, the agency still has a full
of health care. In 1978, it ruled that such bans on
docket of restraint-of-trade cases involving the
advertising of eyeglasses and contact lenses were
health-care field.
unlawful. The commission says that consumers
The doctors cannot mask their lobbying as
saved more than $100 million in 19S0 because of
regulatory reform. That would be seen through by
the resulting price competition.
the Federal Trade Commission chairman, James C.
In 1979, the commission issued a similar ruling
Miller, a Reagan appointee who was formerly the
forbidding the American Medical Assn. from inter-
executive director of the presidential task force on
fering with advertising by its members. The doc-
regulatory relief. Miller thinks that the profession-
tors appealed and lost when the U.S. Supreme
als' self-imposed restrictions, such as restraints
Court had a tie vote on the case, leaving the rule
on who can practice where or advertise what
intact.
services, interfere with the free play of market
Even before the court verdict, though, the doc-
forces.
tors. had turned to Congress. Reps. Thomas A.
And he does not think that federal enforcement
Luken (D-Ohio) and Gary A. Lee (R-N.Y.) are
adds a layer of needless burecucratic regulation
sponsoring legislation that would exempt doctors,
over state rules already in place, as the doctors
dentists, optometrists and others in the so-called
say. The states and the federal government regu-
"learned professions" from this antitrust enforce-
late different aspects of medicine. Miller says, with
ment According to Congress Watch. a consumer-
the former looking more at qualifications while the
advocacy group, 155 of the co-sponsors of this
federal government handles business practices.
legislation in the House-that is, virtually all of
In short and from all perspectives, the exemp-
them-received a total of $831,960 in campaign
tion of professionals from antitrust enforcement is
contributions from the doctors', dentists' and
bad medicine for consumers. It is one prescription
optometrists' associations.
that Congress should tear up immediately.
International
International
New York City
New York City
(
FRESS SCIMITAR
FOST-HERAL!
MEMPHIS. TONN.
PIRVINOHAM. ALA.
E-125,000
M-75.000
MAY- 14.82
MAY-
Gutting the FTC
Do we want a privileged class of
unwelcome attention. The purported
professionals in this country that
reason was that they are already
could engage in price-fixing and other
"state-licensed."
anti-competitive acts and be immune
That reasoning is specious. Most
from scrutiny by the Federal Trade
state professional boards are domin-
Commission?
ated by the persons they are supposed
Obviously not. But that is what we
to regulate. and most put the finan-
could get if a bill pushed by doctors.
cial interest of the professions above
dentists. lawyers. engineers, archi-
the public's interest in heightened
tects, accountants and other profes-
competition.
sionals is passed by Congress.
FTC Commissioner Michael Perts.
In recent years the FTC has been
chuk angrily but perhaps accurately
probing price-fixing. boyeotts,
called the committee vote "2 tribute
restrictions on acvertising. fraud and
to the naked political power UT
deception and other practices by pro-
American Medical Association and
fessional bodies that artificially raise
the American Bar Association.
prices.
While they were at it. committee
Naturally the professionals resent
members ordered the FTC 10 stop
SUCH moves and have been fighting
looking into unfair advertising This
Political action committees for
provision was backed by friends of
deciors. dentists and optometrists
the tobacco industry. raising feats
alone contributed almost $300.000
that the FTC could no longer require
during the last three years 10 mem-
health warnings in cigarette advertis-
bens of the House and Senate commit-
ing.
tees with jurisdiction over the FTC.
The bill is expected 10 pass the full
It seems 10 have been inoney well
Senate and face is fight in the House
spent. The other day the Senate Com-
There we will learn which will pre-
merce Committee voted 10 to 5:10
vail: campaign contributions or the
exempt professionals from the FTC's
common good.
DAILY NEWS
PHIDADELPHIA.
E-265,000
MAY- 13-82
Deregulation
Deregulation sounded different when it was a campaign
promise. In practice, it's turning out to be little better than a
license to return to some time-honored ways to cheat people.
The Senate Commerce Committee this week voted over-
whelmingly to bar the Federal Trade Commission from tak-
ing antitrust action against professional groups. That means
that businesses are (at least for the time being) still re-
quired not to do things like fix prices or advertise deceptive-
ly. Doctors and lawyers, however, would be able to cheat as
much as they like as long as they do it in groups.
For example, it would be perfectly all right for a medical
association 10 set fixed fees for doctors to charge or bar phy-
sicians from giving prescriptions to their patients SO they
can shop for the best price. In fact. even outright fraud
would not be something that the FTC would be allowed to
challenge.
Congress seems here to be creating a special kind of aris-
tocratic privilege by exempting an entire class of people
from the law.
There is a réason for all this, although it's not the one
the "deregnlators" sie giving. The market for doctors and
lawyers these days isn't as bullish as it has been. What better
way to keep income levels high than to keep everything
within the club? Competition would be SO untidy, after all,
and a bad doctor who charges high fees might lose patients.
Being a "professional" is not a guarantee against greed
or dishonesty. The public would have to take what it could
get.
The American Medical Association, naturally, believes
that FTC regulation lowers the quality of medical WATE. Ap-
parently the AMA believes that inctors don't du good work if
they 're not allowed to fix prices and defraud patients.
The AMA, as usual, is looking out for its own pocksibook.
It stopped blathering about "socialized medicine" when
Medicare proved to be a spectocular windfall for maLy of its
members. AMAprinciple is a metter of cash Now.
The "professionals" aren't alone in their distaste for the
FTC. The agency has been under sustained attack for the
past four years by business and professional groups who'd
like to 80 back to the good old days of no holds barred in
dealing with the public.
But the fact is that we're all the public - even "profes-
sionals." It's in everyone's best interest to enforce the laws
against cheating us Even the administration, despite its
own interest in deregulation, opposes exempting a whole
class of people from the law.
It's had deregulation, had law and bad news for the pub-
lic. Compresspoople who Vite for it when it 1,515 the floor
might jast as well pickever, dy speckets.
International
New York City
TIMES-UNION
ALBANY. NY
M-80,000 S-135,000
JUN- 13-82
Regulating the
professions
A move is under way to sharply limit the
Nor are the professions, in many cases, any
Federal Trade Commission's authority over the
better at regulating and remedying the problems
trade practices of professions that are already
associated with incompetence or malpractice. In
regulated at the state level. This is being done in
a series published in this newspaper last year. we
the name of deregulation.
showed how the state system for monitoring the
Removing some of the regulations that bind the
conduct of physicians embodied all the worst
nation's industries and professions has in several
elements of bureaucracy and self-policing. The
Instances proven to be a boon for both business
series disclosed both that few incompetent
and the public. But the move for deregulation can
physicians were ever disciplined by the state
go too far. Indeed, many of the rules governing
body and that the entire system for doing so was
the behavior of the nation's economic actors are
so shrouded in secrecy that the patients had no
unquestionably needed. That is certainly the case,
real way of knowing whether serious charges had
we believe, when it comes to regulating the trade
been brought against a physician. The series also
practices of the professions.
found even doctors who had committed extraor-
:
If the FTC were to be shorn of its power to
dinay breaches of professional misconduct or who
monitor the behavior of these groups, as has been
had actually harmed patients through incompe-
proposed; only the states would be left to sce to it
tent or malicious treatment were permitted to
that their trade practices were conducted in the
continue their practice unimpeded for years.
public interest. Ordinarily, that would be 3 good
But in many cases where the states new fail,
thing.
the FTC might not. In recent years, the FTC has
But experience shows that when it comes to the
been waging a strong war against those rules and
professions the states do much less regulating
regulations of the professions that are protection-
than they do protecting. The states all to often
ist in nature. It has moved against restictions in
serve those they are supposed to regulate by
competition, and has attempted to open up the
either limiting the number of persons that could
legal, dental and medical fields to advertising by
enter a particular field, limiting advertising in
the professionals. The FTC has likewise ex.
order to protect the established practices and
pressed concern with the proposed fee schedules
keep prices up. and helping to divide up
adopted by the American Medical Association
"territory" for the members of the profession.
and with the boycotts by physicians of hospitals
The states, in short, are inclined to act as
and health care programs.
benefactor and protector of the professions, and
Depriving this federal regulatory body of the
leave the regulatory functions up to the
power to oversee and investigate the practices of
professions themselves.
the professions will mean protectionism 10 in
The inadequacy of such self-policing has been
even greater degree than we now have. The
deomonstrated time and time again. One study by
public cannot afford it.
the FTC of optometrists and opticians, for
example, found that self-regulatory practices
limited the area in which professionals could
practice. It also found that because of restrictive
rules, regulations and statutes, the price of
ophthalmic goods and services had markedly
increased.
International New York City
TRIBUNE
CHICAGO. ILL.
D-259.000
S-1,115,000
JUN-1-82
Doctors, lawyers and the ETC_
Over the opposition of Chairman Robert
and price fixing are problems that are national in
Packwood and four other members, the Senate
scope. That is why the federal fair trade practice
Commerce Committee has voted to exempt medi-
and anti-trust statutes were passed in the first
cal, legal and other professional groups from
place. The exemption from anti-trust laws that
federal fair trade and anti-trust laws.
doctors, lawyers and other professionals long
Unfortunately the full Senate is all too likely to
claimed has been rejected by a number of courts.
pass the measure intact. It would bar the Federal
This trend has been especially pronounced since
Trade Commission from prosecuting individuals
the government assumed responsibility for medi-
and organizations for fraudulent and deceptive
cal bills under Medicare and Medicaid, which has
advertising, price fixing and conspiracies to boy-
helped to push medical costs through the celling.
cott. Some experts predict that enactment of the
In fairness, these professions have no more
measure could lead to removal of the health
reason to be exempt from anti-trust laws than
warning on cigarette packages because the FTC
from income tax or civil rights laws
would lose its jurisdiction over such health
It's easy and no doubt partly accurate to Name
matters.
the
committee
generous
Instead, it would be left to state governments to
contributions made in 1080 by professional campaign asso
regulate these matters, however and If ever they
ciations of doctors or lawyers Coming so close to
might choose.
the House's veto of an FTC rule tightening the
This action was not taken as part of the Reagen
regulations on used car dealers-again after gen
administration's drive to reform the federal regu-
erous campaign contributions from the used are
latory burden. Mr. Reagan's handpicked FTC
industry-it suggests that Congress can too easily
chairman, James Miller, hired away from the
be bought In fairness to Congress, though the
conservative American Enterprise Institute, vig-
House was right on the used car vote
crously opposes the Senate move. "It is very
Nor can one always assume that a
bad," he said after the committee's 10 to 5 vote,
congressman's position is determined by contribu
"to establish a privileged class and make it
tions; more often it's probably the reverse And
exempt from enforcement that everyone else is
sometimes contributions are in vain Sen
subject to."
Packwood, for example. was 3 beneficiary of this
The argument that state agencies can better
largess but stood up for what was right anyway.
perform this regulatory role is nonsense. For one
If cash or misguidance prove sufficient to get
thing, state agencies tend to be weak, under-
this nesty little measure all the way through
financed and nominated by the powerful profes-
Congress, Mr. Reagan will have good reason to
sional groups they're supposed to regulate.
use his veto. His polley on this issue is right. and
What's more important, fraudulent advertising
the FTC deserves his support
Let the F.T.C. Be a Check on the Doctors
est. Its actual aim Is to maintain and
W
E are all aware of the benefi.
tents would fall to the point where
On the whole, the F.T.C.'s прега-
cial effects of professional
Increase the profits to Its members.
licensing boards and medical
they would be forced to close and per-
tions have dealt with the menopolizing
here peen -
haps go Into teaching or consulting.
activities of the professional associa.
associations that protect consumers
of this in recent years. One was
This is not, however, 8 very compel-
tions. These activities have been more
from quackery and charlatans. But
brought to light In a 1979 F.T.C. Inves-
we are not so aware that these same
ling argument for total deregulation
ligation of morticlans, who were re-
widespread than might be expected,
associations are actually being used to
In present day circumstances. Before
and have contributed to higher costs
quiring consumers to buy coffins as a
establish cartels for their members.
market forces expelled the untalent-
condition for cremation, thus raising
of medical, dental. mortician and
ed, they might well have done consid-
other services for more than 100 occu-
And such cartels are convenient vehi-
prices to unjustifiable levels by their
erable harm, both financially and by
9 dies for setting higher fees on many
self-licensing activities. The victim is
pations. The objections to F.T.C. prac-
kinds of health and other professional
raising the mortality rate.
the consumer, required to pay for
tices have come from the professional
services.
By requiring practitioners to be
more than be needs.
associations themselves, not from'
licensed, SO as to eliminate those that
economists concerned with the quality
Congress will have to address this
But the most questionable self-regu-
contradiction In a pending authoriza-
are incompetent, even the first mis-
ation centers on direct control of pro-
and price of professional services.
3 tion bill that would drastically curtail
takes that lose patients could theoreti-
fessional fees. The setting of a sched.
If the morticians and dentists pres-
the Federal Trade Commission's BU-
cally be prevented. Public regulation
ule of fees for service so as to dia-
sure Congress to limit these antitrust
thority as policeman of these profes.
through licensing can correct the seri-
criminate between higher charges for
activities, we will all pay more for the
sional associations. Currently, the
ous problems created by lack of
high-income consumers and lower
same fillings, eyeglasses and appen-
.T.C. is able to bring actions against
knowledge in the market. But do not
dectomies.
charges for others is the key to the use
icensing boards and medical associa-
be too quick to embrace total regula-
of monopoly power by any profes-
Lions that violate the Sherman Anti-
tion. In practice, the licensing board
signal association.
trust Act, prohibiting conspiracies in
can apply the wrong test or biased re-
To maintain such a schedule It is
restraint of trade.
view procedures that produce even
necessary to prevent fee advertising
worse overall results.
80 that the wealthy do not perceive
P1, Not surprisingly, medical and other
While the system works to keep the
that they are being overcharged. Also,
NEW YORK TIMES
lobbles that favor clipping the
quacks out, It also can be used to keep
11 Is Important to prevent the develop-
June 6, 1982
F.T.C.'s wings argue that the agency
legitimate competitors from offering
ment of services not on a fee basis,
has been harassing morticians, on
cheaper and more abundant health
such as prepaid medical or dental
tometrists and even doctors And den-
g page F-3
care, and It is obviously in the self-in-
care, since It is impossible to deter.
tists by over-regulating their licensing
terest of just such A professional RS-
mine from such arrangements
procedures and activities.
sociation, though never spoken, to use
whether fees are being cut In violation
zwOn the other hand, more public-
the limitation on entry in order to keep
of the schedule.
winded economists favor continuation
fees at monopoly pricing levels.
Fee setting is a long way from state
of the F.T.C.'s strong regulatory BU-
The problem Is that licensing (1) m
board licensing to solve quackery
thority, and they Include those usually
move quackery can also be used as R
problems. Can we have one without
noted for objecting to excess regula-
convenient excuse to raise the m
the other? The Federal Trade Com-
Non. Their position Is that while the
quired level of service quality 100
mission has operated in recent years
interticians and surgeons control entry
high. More years of training, more
to allow self-regulation, but to prevent
into their professions to protect con-
equipment and longer apprentice
complracy to set monopoly profes-
Numers against quackery, there have
ships could be required by the licens-
sional fee levels. Agency cases have
also been many Instances of misuse of
Ing professional association. These
dealt with fee fixing by the Michigan
their licensing power to restrict entry
would be costly steps, and would thus
State Medical Society, and boycotts
and thus make profits greater for cur-
be the basis for mising fees, greatly
against health Insurance cost contain-
rent members. In this case, the econo-
benefiting those already in practice.
ment programs by the Indiana Feder-
mist is correct in opposing A reduction
Ation of Dentists.
to the F.T.C.'s power.
UCH A conflict of Interest often
Another example was the F.T.C.'s
Consider the case In principle for to-
occurs when a licensing board
rule requiring eye doctors to give
rally free entry into these professions,
confronts someone trying to in-
copies of eyeglass prescriptions to all
Which in practice almost no one sup-
troduce no-frills service, versus the
patients. Before this rule, many op-
ports. Any practitioner could use the
regular full-line service. Full-line has
tometrists required that patients had
title of mortician, lawyer or dentist
less potential for harmful effects on
to buy the glasses from them after the
Mist as anyone can now use the title of
quality but also carries higher prices
examination. Now, the patient, with
aconomist. Those who are poorly
and profits. Such A tendency to charge
prescription In hand, can shop around
trained or prone to mistakes would
too much for full-line can only be
for the cheapest source of glasses. The
1~Paul W. MacAvoy, Frederick WII-
lose patronage as their performance
checked by a shift 10 no-frills service
banned practices may have had some
Hom Beineche Professor of Ecorom-
became known. Others would Improve
by large numbers of consumers. And
tiplifting effect on service quality, but
ICF of Yale University, is one of four
their skills by practice and their mar-
the licensing board, by banning no-
they seem mostly to have been for the
aconomists who regularly write for
ket shares would Increase. Eventual-
frills service in the name of enhancing
purpose of putting more money In on
the Sunday Business section.
lyrthe Incomes of quacks or Incompe-
health care, Is not being entirely hon-
tometrists' pocketa.
Sun-Times, Chicago, Ill.
Mondoy. Mcv 24. 1982
Poge 31
Editoriais
An neependent newspaper. decicated := championing individual
freecom. :0 exposing abuse of the DUDIIC trust and :0 fostering
E nearthy environment. a sounc economy and a just society.
Are professionals above the law?
Doctors. dentists. optometrists and other
tion in Congress to exempt themselves from
professionais are misusing the concept of
FTC oversight.
deregulation to try to keep the Federal Trade
This was too much even for FTC Chairman
Commission from keeping them honest.
James C. Miller III. a Reagan appointee who
The FTC does not. of course. tell doctors
generally wants his agency to enforce market
how to practice medicine or dentists how
competition less energetically. The bill. he
much to charge their clients. But it has
said. "sets aside the privileged class in this
attempted to stop them from fixing prices and
country
from laws and enforcement e:-
restraining competition through boycotts. ad-
forts that govern everyone-eise's behavior."
vertising bans and deceptive trade methods.
Still. the bill has passed the Senate Com-
For example. it ruled in 1978 that it was
merce Committee by a big margin Another
illegal for optometrists' groups to prohibit
version is very much alive in the House.
advertising of eyeglasses and contact lenses.
where it has 161 co-sponsors
As a result. the price of contact lenses has
That should surprise no one who considers
dropped and the cost of eyeglasses has risen
that trade groups of physicians. dentists and
at only half the inflation rate.
optometrists have contributed $863.810 to CO-
It also has sued to prevent doctors and
sponsors of their bill. according IC a public
dentists from boycotting insurance programs
interest group called Congress Watch.
and health maintenance organizations de-
Theoretically. those professions still would
signed to contain medical COSTS. It stopped the
be regulated by the states if federal oversight
only five doctors in a small Texas town from
ceased. But most state regulatory agencies.
boycotting the emergency room of the local
including Illinois'. are firmly controlled by the
hospital in an effort to keep the hospital from
professions they regulate. And many anti-
hiring IIS own staff physician.
competitive practices (the ban on advertising
But professionais think they. alone among
by doctors. for example) are national in scope.
business people. should be immune from Yed-
If this bill passes. it will remove an impor-
eral laws requiring them to play fair with
tant control on the skyrocketing COSI of
their customers. so they' introduced legisla-
health care. The nation cannot afford that.
International New York City
NEWS
BUF:
E-260.000
SAT--PA,000
JUN- 15-82
Special-Interest Law
The Senate Commerce Committee
tices should come under the same
has passed a piece of special-interest
Federal Trade Commission regula-
legislation that would exempt medi-
tions as other public enterprises.
cal, legal and other professional
To its credit, the Reagan adminis-
groups from federal anti-trust laws.
tration is opposing this legislation.
This would mean that members of
President Reagan has been in the
such groups could not be prosecuted
forefront of moves to "get government
under federal law for deceptive adver-
off our backs" and has succeeded in
tising, price-fixing or other violations
relaxing many needless federal re-
of the fair trade and anti-trust laws.
straints on productive business and
The legislation is lavored by
industry. But Mr. Reagan's FTC
professional associations, which claim
chairman. James Miller, rightly criti-
that these matters would be better left
cizes the proposed professional
to state authorities, but there is no
exemption. "It is very bad," he said,
good reason why these groups should
"10 establish a privileged class and
be given special preference over other
make it exempt from enforcement
sectors of society. Under the relaxa-
that everyone eise is subject to."
tion of federal regulations in recent
Unfortunately, the legislation an-
years, doctors, lawyers and other
pears likely to be approved by the full
professional persons are allowed 10
Senate. President Reagan would be
advertise. Surely, 'however, their
justified in vetoing it if the House also
advertising and other business prac-
accepts this special-interest measure.
CHRISTIAN SCIENCE MONITOR
June 28, 1982 P. 23
Doctors, lawyers, and antitrust
By Earl W. Kintner
The Supreme Court recently affirmed by a tie vote an
FTC decision barring the American Medical Association
The Federal Trade Commission, already hit with
and its state affiliates from restricting truthful advertising
Congress's veto of its defects-disclosure proposal for used
by member physicians. If the bill approved by the Senate
cars, is engaged in yet another legislative battle on Capitol
Commerce Committee were enacted by the full Congress.
Hill. This time the fight is in the Senate, where a bill re-
the FTC would not be able to enforce that order or others
stricting the commission's authority to prosecute or even
like it.
investigate alleged or suspected abuses among a wide
The Senate bill would not, however, alter the other fed-
range of professional groups is gaining momentum.
eral antitrust laws. The Department of Justice could still
As recently passed by the Senate Commerce Committee,
bring criminal and clvil actions; and private parties could
the bill would exempt many state-licensed professions -
institute treble damage actions challenging alleged viola-
such as doctors, dentists, lawyers, and engineers - from
tions by professionals of the Sherman Act and other federal
FTC jurisdiction altogether.
antitrust laws.
Clearly, the rollback of the commission's traditional au-
State attorneys general could also bring suit against
thority in this area constitutes piecemeal and arbitrary
professionals to redress antitrust injuries suffered by citi-
antitrust legislation Congress should either exempt
zens of their respective states. Thus, if the Senate bill were
professionals from all the antitrust laws on the books, not
enacted, it would create a jurisdictional paradox -
merely the FTC Act, or stand pat.
antitrust challenges involving the professions could be
The FTC has become an easy target these days. Ever
brought by the Justice Department, state attorneys general
since the agency started its investigation into television ad-
or private parties. but not the FTC.
vertising aimed at children and was branded the "national
This legal anomaly should be avoided.
nanny," the commission has been under steady legislative
Professional services are an increasingly important
siege. As a result, Congress has already curbed some of the
part of the economy. Restrictions on competition among
expansive powers it gave to the commission in the 1970s.
professionals that increase consumer costs without produc-
But, while the FTC may require a more carefully
ing countervailing benefits should be scrutinized closely.
crafted statutory harness, exempting professionals from
There does not appear to be any sound justification for
the antitrust laws is too important an issue to be part of a
exempting professionals from the antitrust laws which ap-
bill disciplining the FTC for excessive social engineering.
ply to virtually all other business enterprises. If a special
Specifically, the bill as approved by the Senate Com-
exemption is to be written for the profession, Congress
merce Committee would prohibit the FTC from taking any
should uniformly change all of the antitrust statutes. A leg-
action against, or even investigating, classic collusive ac-
islative determination of this magnitude should not merely
tivities such as price fixing and group boycotts, restric-
be an appendage to a bill reauthorizing the FTC for three
five professional codes, or other practices that can keep
more years.
prices artificially high in the professions.
For example, in the health care ared. the FTC could not
investigate alleged conspiracies to obstruct cost-contain-
Earl W. Kintner, former general counsel and chairman
ment programs. The ЫП would also exempt state-licensed
of the Federal Trade Commission, is 8 senior partner in the
professionals from challenges under the FTC Act to false
law firm of Arent, Fox, Kintner, Plotkin and Kahn and the
advertising and fraudulent marketing practices.
author of 16 books on antitrust and trade regulation law.
New York City
WASHINGTON TIMES
WASHINGTON. D.C.
DAILY
JUN-25-82
CATHERINE ENGLAND
groups - particularly doctors and
A different
lawyers.
Why should consumers care whether
doctors and lawyers advertise? First
deregulation
of all, advertising may provide useful
information: office hours, telephone
numbers, office location, availability
for house calls, fees for basic services,
etc. Even more important, however,
I
n urging the Senate Commerce
Committee to approve an amend-
advertising introduces competition.
ment to the Federal Trade Commis-
When consumers can compare office
sion reauthorization bill, Sen. Ted
hours or the prices for teeth cleaning,
Stevens used all the right buzzwords.
they are better able to determine the
Accusing the FTC of "extending fed-
best service for their money and, hence,
eral bureaucracy more and more into
force others to be more competitive.
our daily lives," the Alaska Republican
A 1975 study comparing eyeglass
encouraged the committee to prohibit
prices in states that allowed advertising
the FTC from taking antitrust action
with states that did not concludes that
against state-licensed professional
advertising restrictions increased eye-
groups. Supporters of the Stevens
glass prices by as much as 34 percent.
amendment spoke of professionals'
More recently, since the FTC preempted
need for relief from FTC regulation
state standards of conduct and allowed
and the right of states to handle these
eye doctors and opticians to advertise
questions. The amendment passed,
their prices, the cost of soft contact
despite the objections of committee
lenses has dropped from an average of
Chairman Bob Packwood, R-Ore. A
$256 in 1978 to $146 in 1981, after
closer TOOK at the "deregulation"
adjusting for inflation.
amendment, however, reveals it to be
deregulation of a different color.
Rather than chafing under restric-
Sen. Stevens argued (persuasively
tion imposed at the state level. many
within the committee) that since pro-
professional groups welcome them.
fessional groups already are subject
They restrict entry and, better yet, pre-
to state regulation, they should not be
vent some young upstart trying to estab-
similarly regulated by the federal gov-
lish a practice from undercutting prices
ernment. But the case is not as clear-
or offering longer office hours.
cut as the senator and his allies - the
The FTC, therefore, could provide
American Medical Association, Amer-
what is almost nonexistent on state
ican Dental Association, and others
boards and commissions - a voice for
would have us believe.
consumers. The FTC has never ques-
Most state boards or commissions
tioned licensing procedures or any other
are charged with regulating various
practices directed at determining who
professions to protect public health and
is fit to practice. The commission
safety by making sure those who wish
readily admits its lack of expertise in
10 pursue a given occupation are prop-
this area. and believes those functions
erly qualified.
should be left where they now are.
Who is in a better position to deter-
mine the qualifications of a given indi-
One must ask, why, professional
vidual than those already licensed and
groups should be exempted from laws
practicing that profession? Therefore,
pertaining to everyone else. The answer
the very individuals. who are being
is: they shouldn't. As James C. Miller
licensed or regulated generally have a
III, the FTC's deregulation-minded
strong influence, if not outright con-
chairman, has put it, "A graduate degree
trol of, the state boards doing the
is a guarantee of special training. It
regulating.
should not be a guarantee of immunity
The variety of actions falling under
from FTC law enforcement."
"standards of conduct" regulations,
While one might find many reasons
often determined by non-profit profes-
to criticize the FTC, the history of its
sional associations, may be very broad,
actions with respect to "professional
indeed. The best known examples of
groups" shows an uninterrupted
such regulations are those prohibiting
attempt to remove unnecessary protec-
advertising by various professional
tionist restrictions and allow the market
to work. Consumers of professional
Catherine England is an economist
services have much to gain from these
at the Heritage Foundation.
actions.
International
New York City
ARKANSAS GAZETTE
LITTLE AP
E-136, 000 S-155,000
JUN- 3-82
Professional Free Enterprise
Congress has prohibited the Federal Trade
concerned with price-fixing and other anticom-
Commission from requiring used car dealers to
petitive practices. The opposite is often the case.
disclose naws to buyers, and now it is moving to
State licensing agencies are usually created at
knock away the public's umbrella of protection
the behest of a trade or professional group,
from the anticompetitive practices of the profes-
which frequently proceeds to limit entry into the
sions. Even the Reagan administration is grow-
trade or profession under the new licensing law."
ing faint-hearted with this step in deregulation,
The FTC has never proposed to interfere with
with good reason. Consumers everywhere should
the licensing or qualifications of persons in pro-
be nervous, too.
fessional fields.
The Senate Commerce Committee has
The FTC's record on professional regulation
amended the reauthorization bill of the FTC so
is in the best spirit of American free enterprise.
that any profession licensed by a state govern-
In 1978, it invalidated trade association agree-
ment would be exempt from the jurisdiction of
the FTC. A similar amendment in the House of
ments and state laws that prohibited the adver-
Representatives has more than 160 sponsors,
tising of eyeglass prices, and between 1978 and
who, coincidentally, have received more than
1981 the average price of soft contact lenses, ad-
$800,000 in campaign contributions from medi-
justing for inflation, declined from $256 to $146.
cal political action committees that are leading
What specifically troubles the AMA and other
the effort to get the professions exempted from
professional groups is the FTC order, upheld by
FTC regulation.
the United States Supreme Court in March, that
If the legislation is successful, the FTC could
prohibits medical associations' restrictions on
not enforce laws against kickbacks, price-fixing,
physician advertising in which truthful informa-
boycotts against professionals and other prac-
tion about physicians' prices and services is dis-
tices that hamper competition and that drive up
seminated. The order also prohibits associations'
consumer prices. Every other class of business
ban on cost-saving contracts between doctors
would remain under the jurisdiction of the FTC.
and lay institutions such as hospitals and health
James Miller, the chairman of the FTC, who
maintenance organizations. The FTC also has
was appointed by President Reagan, has advo-
banned similar restrictions on dental advertising.
cated greatly narrowing the agency's authority,
Also affected by the bill are FTC orders
but be has drawn the line at the professional
against medical association bans on doctors
exemption. That tells you something about how
practicing for a salary rather than on a fee-for-
bad it is. "Admission to a profession should be a
service basis, against a physician boycott of hos-
guarantee of competence, not a guarantee of im-
pital emergency rooms because the hospitals
munity from the laws the rest of us must obey,"
contract with recruited physcians, and against
Mr. Miller said.
medical organizations issuing fee guides that can
Groups such as the American Medical Associ-
be used to fix prices for doctor services.
ation attempt to justify the exemption on the
Most of the FTC investigations have a direct
ground that state governments and the profes-
bearing on the skyrocketing cost of medical care,
sional organizations already regulate the profes-
such as price-fixing agreements where doctors
sions and that the public is protected from
agree not to work below "usual rates," kickbacks
abuses. They say the FTC's lawyers and the
involving physicians and a major Medicaid labo-
other bureaucrats with no medical competence
ratory, and physician boycotts of cost-contain-
shouldn't be meddling with specialized health
ment programs developed by insurance compa-
professions because the integrity of the profes-
nies, businesses and unions.
sions can be eroded.
A little free enterprise is not bad for the pro-
-
But state regulation and the interests of the
fessions, too.
FTC don't overlap. On the contrary, state licens-
Consumers may want to watch how their rep-
ing of professions and trades is almost never
resentatives vote on this important legislation.
International
New York City
ADVANCE
STATEN BELAN,
E-75,00 S-75,000
JUN 16 1982
Congress must not cripple the FTC
Having denied the Federal Trade Commission
€ A crackdown on efforts by the medical pro-
(TTC) authority to protect consumers from shady
fession to force increases in Medicaid fees and to
used-car dealers the Congress now is setting its
kill cost-containment programs organized by
sights ON stripping the agency of its limited but
insurers;
important power to regulate certain professions.
Should Congress prevail, it's consumers who'd
c Enforcement of regulations designed to give
once again be the big losers.
consumers access to lower-cost "Uneric drugs.
The FTC has been involved in professional
regulation since a 1975 U.S. Supreme Court deci-
It so happens that professional groups, through
sion found that minimum fee schedules enforced
their well-financed political action committee
by legal groups amounted to illegal price-fixing
are among the major contributors to members of
Since some states could not or would not monito:
Congress. Those groups undoubtedly are counting
such activities, and because much professional
on their "friends" in the Senate and House to tree
activity involves interstate commerce, the FTC
them of the "burdensome" requirements imposed
was the ideal agency to fill the regulatory
by the FTC.
vacuum.
While it may be true that money speaks loudest
Among the pro-consumer actions for which the
in Washington members of Congress should not
FTC deserves credit are these:
lose sight of the fact that they must stand for re-
election this fall. Yet another anti-consumer vote
e
Allowing professionals to advertise fees and
by the Congress undoubtedly would result in re-
services;
taliation at the pells.
PITTSBURGH PRESS
FITTSBURGH, F...
FW-354,712 S-742.352
Gutting
The
FTC
Do VE want in this country a
The purported reason was that
privileged class of professionals
they are already "state-licensed."
who could engage in price-fixing
That reasoning is specious.
and other anti-competitive acts and
Most state professional boards
vet be immune from scruting by the
are dominated by the persons they
Federal Trade Commission?
are supposed to regulate, and mest
Obvicusly not
put the financial interest of the
B: that is what FE could get if 2
professions above the public's inter-
bill being pushed by physicians, den-
est in beightened competition
tists, lawyers, engineers, architects,
accountants and other professional
FTC Commissioner Michael Pen-
groups is passed by Congress.
schuk angrily called the committee
vote "a tribute to the naked political
In recent years the FTC has been
power" of the American Medical
probing price-fixing. boycotts, fraud
Association and the American Bar
and deception, restrictions on adver-
Association
Lising and other practices by pro-
While they Forc 2: it. committe:
fessional bodies that artificially
mimbers also approved E proposs)
raine prices.
is forwid the FTC to lock into unfair
Naturally, the professionals TE
advertising
HE CHRISTIAN SCIENCE MONITOF
"First the blade, then the ear.
then the full grain in the ear:
The Monitor's view
Thursday, May 13, 19
Don'texempt the privileged class'
Even Federal Trade Commission Chair-
House have yet to act on the proposal. Such an
an James Miller m - a conservative who
egregious blanket exemption for one entire
IS led the fight for 2 smaller, less activist
class of persons in US society - while others,
ITC - expressed dismay at how far a Senate
such as corporate business executives and
immittee went this week in reducing the
wage earners, are not similarly exempted -
(ency's clout. The Senate Commerce Com-
should be quickly rejected. The issue, after
illee exempted professionals - doctors.
all, is not to so overregulate professionals as
wyers. accountants. dentists. etc. - from
to inhibit their performance. Rather. the FTC
rutiny by the FTC. And that, argues Mr.
would seem to have an obligation to investi-
iller. is bad economics and bad politics be
gate and thwart clearly unreasonable trade
nuse "it sets aside the privileged class in this
abuses by professionals - abuses that not
buntry
from laws and enforcement ef-
only injure the general public but also work
rts that govern everyone else's behavior.
against honest persons operating in the same
Mr. Miller is right: What the committee
professions.
tion would mean is-that the FTC would be
One final point of note: the Commerce
used from investigating or charging
Committee also voted to take away the FTC's
(essionals who may be engaged in. among
authority to ban advertisements that are only
things, deceptive trade methods, price-
"unfair" but not necessarily deceptive. It is
ing. or creating trade codes that deliber-
interesting that the cigarette industry lobbied
restrict competition. And the
particularly intensively for that particular
ofessionals who would be so excluded are
exclusion. Some FTC lawyers believe that
rsons who not only have tremendous politi-
such an exemption could take away the agen-
influence and ready access to large
cy's authority over cigarette warning labels.
hounts of campaign funds but who deal al-,
The "untair" advertising exclusion, like the
ast daily. with R significant percentage of
exclusion on regulating professionals, is dubl-
US population.
ous legislation that should be forthrightly
Fortunately. both the full Senate and
scrapped by Congress us a whole.
List of Key Leaders
House of Representatives
Senate
The Honorable John D. Dingell
The Honorable Bob Packwood
Chairman
Chairman
Committee on Energy & Commerce
Committee on Commerce, Science
and Transportation
The Honorable James T. Broyhill
Ranking Republican
The Honorable Howard W. Cannon
Committee on Energy & Commerce
Ranking Democrat
Committee on Commerce, Science
and Transportation