Due to regulations by provincial governments and self-regulating professional bodies, Canadian health care professionals face significant restrictions on how they are permitted to advertise their services in the marketplace. For example, price advertising, where professionals advertise the prices they will charge for particular services, is often limited; comparison advertising, where a professional compares his or her services and skills to those of another professional, is generally prohibited.
On October 4, 2016, the Competition Bureau published a report assessing the effect of advertising restrictions on the health care marketplace. The report suggests that advertising restrictions, while well-intentioned, may result in unnecessarily high prices for consumers, and calls on regulatory bodies to begin collecting data to conduct further empirical studies on the effect of advertising restrictions.
The report acknowledges the policy justification for advertising restrictions in health care professions: to prevent a “race to the bottom” in service quality. There is significant information asymmetry in the health care market, where service providers know significantly more about treatments and procedures than their patients do. With consumers unable to adequately discern service quality in the health care market, price can be seen as the primary difference between service providers, which may prompt providers to undercut one another in prices, to a point where they could not maintain high quality services. Unregulated advertising in regulated professions is thought to increase the risk of a “race to the bottom”. Regulators seek to ensure high quality services by enforcing standards of education and practice, and therefore, advertising restrictions for health care professionals are intended to protect consumers.
The report reviews a number of academic studies on the impact of advertising restrictions. Two studies cited by the report found that, where advertising is restricted, consumers tend to stick with established, well-known products, which makes it difficult for new products to become established as effective alternatives. As a result, advertising restrictions may insulate established products from competition and innovation, which could ultimately result in higher prices for consumers. The report cites two additional studies on optometric services, which found that advertising results in lower prices for optometric services without an associated reduction in quality (i.e., that the feared “race to the bottom” does not in fact occur when advertising is not restricted).
Based on its review of the economic literature, the report suggests that there is a risk that advertising restrictions may cause consumers to pay unnecessarily high prices for health care services in Canada. The Bureau recognized that it does not have easy access to the data necessary to empirically study the actual impact of advertising restrictions in Canada. The Report calls on governments and self‑regulatory bodies to begin collecting and compiling information on marketplace outcomes in Canada’s health care markets, and to move toward greater emphasis on empirical evidence in decision-making.
The publication of the report is a part of the Bureau’s larger advocacy effort directed at governments and decision‑makers, emphasizing the need to consider the effects that regulations have on competition. In the most recent issue of Competition Advocacy, published by the Bureau on the same day as the report, the Bureau outlined four internationally-recognized principles that can help regulators to minimize any negative or unintended effects on competition:
- Regulation should only address legitimate policy concerns;
- Regulation should be based on the best available evidence;
- Regulation should be proportionate to the associated harm; and
- Regulation should be regularly reviewed to reflect market conditions.
As the Bureau has previously done in a study of the Canadian taxi industry, the report calls on regulators to reassess advertising restrictions with a greater emphasis of empirical evidence and with additional consideration for their effects on competition.