The Supreme Court ruled yesterday that a state can bar members of a profession from practicing under a corporate or trade name and can require appointees to the public agency regulating the profession to belong to a specified private organization.
At the Federal Trade Commission, a source said privately that at least in some states, the decision could work to inhibit robust price competition.
The justices acted in a case from Texas, where all optometrists must be licensed and are limited to the highly standardized tasks of measuring vision and fitting corrective lenses.
The case arose from a schism between "professional" optometrists, who usually practice solo, and "commercial" practitioners in high-volume chains that advertise heavily and claim to offer sharply lower prices.
One chain, Texas State Optical, operates more than 100 offices. Some TSO offices are owned by a member of the Texas Optometry Board, Dr. N. Jay Rogers.
Under a 1969 law similar to those in 19 other states, Texas struck a blow at the commercial faction by prohibiting an optometry office from using any name but that of an optometrist who practices in it at least half of the hours it's open, or half of the hours he devotes to his profession, whichever is less.
Rogers, charging that the law ran afoul of the protection of commercial speech provided by the First Amendment to the Constitution, challenged it in U.S. District Court. A panel of three judges ruled for him -- and against the Texas Optometric Association, the organization of professional practitioners affiliated with the American Optometric Association.
In doing so, the panel relied on 1976 and 1977 rulings extending constitutional protection to statements about products and services and their prices.
The Supreme Court reversed the panel's ruling. The reliance placed on the 1976 and 1977 rulings was "misplaced" because a trade name used in connection with optometric practice is "a significantly different form of commercial speech," Justice Lewis F. Powell Jr. wrote for a 7-to-2 majority. A trade name is a form of speech "that has no intrinsic meaning," he said.
Moreover, Powell said, "the possibilities for deception are numerous." As an example, he cited the use of a trade name to reflect the reputation of an optometrist who has left.
In passing the law, the Texas Legislature had concerns about deception that "were not speculative or hypothetical, but were based on expericence," Powell said. At the same time, he emphasized that an optometrist remains free to "advertise the type of service he offers, the prices he charges, and whether he practices as a partner, associate, or employe with other optometrists."
In a dissenting opinion, Justice Harry A. Blackmun, joined by Justice Thurgood Marshall, protested that the majority had ignored a fact of "profound importance": in Texas "'commercial' optometry is legal." This means that "without reasonable justification," Texas is able to absolutely prohibit "the dissemination of truthful information about wholly legal commercial conduct," Blackmun wrote.
Blackmun also charged that the majority underestimated "the harmful impact of the broad sweep" of the trade-name ban. To a consumer for whom eyeglasses are a basic necessity, and possibly of more interest than the day's most urgent political debate, a trade name can be most valuable, he said.
Yet, the law bars Rogers from telling the public that the TSO "even exists," or that he is associated with any office it controls in which he doesn't spend half-time, Blackmun said.
"Because a trade name has no intrinsic meaning, it cannot by itself be deceptive," Blackmun said. "A trade name will deceive only if it is used in a misleading context."
The court was unanimous in holding that Texas was empowered to require that four of the six members of the optometry board had to be members of the Texas Optometric Association. It also rejected the claim of the Texas Senior Citizens Association that the general public has a right to be represented on the board.
By contrast, several states, including California, Massachusetts and Wisconsin, have been putting consumer representatives on some of their professional regulatory boards.