When Advertising Eyeglass Prices Was Illegal: The 25% One Economist Found

"Eyeglasses from $25."

An ordinary line today.

In the early 1970s, in a number of US states, that one line was against the law.

Optometrists were professionals, and for a professional to advertise prices was to lower the dignity of the profession — so the argument went.

Doctors and lawyers did not advertise either, back then.

It sounded reasonable.

So nobody asked the question.

"So what happened to the price of eyeglasses?"

One economist's simple question

In 1972, an economist named Lee Benham asked it.

His method was simple.

American states have different laws.

Some banned optometrists from advertising entirely, some banned only price advertising, and some had no restriction at all.

The country contained its own natural experiment.

Benham collected, from household survey data, what people had actually paid for eyeglasses, state by state.

The result:

In states that banned advertising, the average price of eyeglasses was $6.70 higher — about 25%.

In states with a complete ban, the gap widened to $7.48.

States that banned only price advertising fell in between.

It was the opposite of the received wisdom that "advertising costs get added to the price."

Without advertising, consumers cannot compare; when they cannot compare, prices rise.

The paper appeared in the Journal of Law and Economics and became a textbook case in the study of regulation.

What was hiding behind the advertising ban

Advertising was not the only problem.

At the time, optometrists often examined a patient's eyes and then did not hand over the prescription.

Without a prescription, you cannot have glasses made anywhere else.

You buy them where you were examined.

In nearly every survey of optometrists that the Federal Trade Commission (FTC) reviewed during its rulemaking, more than half placed some restriction on giving patients their prescription.

The FTC had already issued guidance in 1962 calling it unfair to tie an eye examination to the sale of glasses, but the guidance had no force, and no one followed it.

2 June 1978

Benham's numbers and the prescription problem piled up, and the FTC wrote a rule.

The Eyeglass Rule, issued on 2 June 1978.

It had two parts.

First, after an examination, the patient gets the prescription automatically, without having to ask.

Second, state bans on eyeglass advertising were declared an unfair practice.

The American Optometric Association (AOA), representing the profession, sued at once.

The court accepted half

1980, the federal appeals court in Washington, D.C.

The court struck down the advertising part. Congress, it held, had not given the FTC the authority to declare state laws unfair.

But it upheld automatic prescription release.

The reasoning was Benham's.

Withholding prescriptions makes comparison shopping harder, removes any reason for sellers to advertise, and keeps opticians from competing.

The advertising clause was gone, but around the same time the Supreme Court recognised price advertising by pharmacists (1976) and advertising by lawyers (1977) as protected speech, and state bans on professional advertising lost their footing.

In 1992 the FTC reissued the rule without the advertising clause, and "automatic release of the prescription after an examination" remains in force today.

The weight of one sheet of paper

This story ends not with advertising but with the prescription.

Once the patient holds the prescription, the patient decides where to buy.

When people can compare, prices come down.

That is what Benham proved with his 25%.

What the numbers on your own prescription mean is covered in Six Codes Hidden on One Sheet of Paper.

Why a glasses prescription and a contact lens prescription differ continues in Same Eyes — Why Do Glasses and Contact Lens Prescriptions Differ?.

And the same fight over contact lens prescriptions would be fought once more, 25 years later. That story is next.

References

• Benham L, The Effect of Advertising on the Price of Eyeglasses, Journal of Law and Economics 15(2), 1972, pp. 337–352
• Kobayashi BH, Muris TJ, I Can See Clearly Now: Lee Benham, Eyeglasses, and the Empirical Analysis of Advertising and the Effects of Professional Regulation, George Mason Law & Economics Research Paper 16-16 — the $6.70 (25%) and $7.48 figures
• US Federal Trade Commission, Ophthalmic Practice Rules (Eyeglass Rule) — Notice of Proposed Rulemaking, 2023 — the 1962 guides, the 2 June 1978 rule, over 50% of optometrists restricting prescriptions, the 1980 appeals court decision, the 1992 reissue
• FTC, Eyeglass Rule — the current rule (16 CFR Part 456)

This article provides general information. It describes a US case; rules on prescription release and advertising differ by country. Prices are in US dollars at the time of the 1972 study.