Utah bans contact lens price-fixing; viewpoints

ST. GEORGE – In what some consumer advocates are calling a victory, the Contact Lens Consumer Protection Act Amendments, was signed into law March 27, making Utah the first state to ban contact lens manufacturers from fixing retail prices on contact lenses through unilateral pricing policies.

The law is industry-specific, and to the thinking of some is an inappropriate way to enforce free trade since federal trade protections and remedies are available judicially through antitrust laws.

The Contact Lens Consumer Protection Act Amendments bill was brought to Utah’s Legislature under Senate Bill 169. The bill passed the Senate 21-8 on March 2, and passed the House 58-16, with one representative not voting, on March 10. Senators and representatives for Southern Utah all voted for the bill except for Reps. V. Lowry Snow and Jon Stanard, who voted against it.

The amendments provide:

A contact lens manufacturer or a contact lens distributor may not: (1) take any action, by agreement, unilaterally, or otherwise, that has the effect of fixing or otherwise controlling the price that a contact lens retailer charges or advertises for contact lenses; or (2) discriminate against a contact lens retailer based on whether the contact lens retailer: (a) sells or advertises contact lenses for a particular price; (b) operates in a particular channel of trade; (c) is a person authorized by law to prescribe contact lenses; or (d) is associated with a person authorized by law to prescribe contact lenses.

The law will go into effect in May.

Rep. V. Lowry Snow, for House District 74, objected to the bill in part because he could not see where the industry proponents of the bill had sought redress from the courts.

I don’t think that one industry should look for relief by looking for protection through the arm of legislators when there are remedies available through the courts,” Snow said.

While antitrust laws are pretty complicated, they are very sensitive to protecting free trade, he said. If an industry believes that they’re not having free trade protected, then they should start with the Federal Trade Commission and the courts – not a state legislature.

Sen. Stephen Urquhart, who voted for the new law, disagreed with Snow’s position. Among other things, courts are for dispute resolution, he said, noting that decisions made through litigation are specific to the facts of a given case and less effective across the board.

“Courts swing a very blunt hammer,” Urquhart said. “Legislative bodies can be a little more nuanced.”

There has been antitrust litigation against Johnson & Johnson, Urquhart said, countering Snow’s position that there was not a showing during legislative discussions on the Utah legislation that judicial remedies had been exhausted.

One such antitrust suit was filed in federal court in California March 1, by Costco Wholesale Corp. against Johnson & Johnson Vision Care Inc., one of the four major contact lens manufacturers, alleging, according to Law360.com, that it is creating pricing floors for Acuvue lens in order to stifle competition. Law360.com further noted:

The American Antitrust Institute urged federal regulators in October to take action against retail price floors used by the nation’s top contact lens manufacturers, saying that the business practice is illegal and pins consumers with higher prices.

Read more on Costco’s suit against Johnson & Johnson in Michael Lipkin’s Law360.com article linked here.

Utah consumers will once again have the opportunity to shop around for the best possible prices on their contact lenses,” a March 27 press release issued by PRNewswire sourced to 1800Contacts.com stated.

Johnson & Johnson, Bausch & Lomb, Alcon, and CooperVision, which together control more than 98 percent of the contact lens market, according to the  March 27 press release, began using unilateral pricing policies in 2013 to eliminate retailers’ ability to offer consumers lower prices and discounts for their contact lenses.

These unilateral pricing policies, or price-fixing schemes, are now under investigation both by the Federal Trade Commission and by several state attorneys general.  During the past two weeks, the March 27 press release stated, at least 15 consumer class action suits have also been filed against the manufacturers on the basis that unilateral pricing has caused consumers to pay substantially higher prices for their contact lenses with no corresponding benefit.

“The Utah Legislature should be applauded for passing a law that puts consumer interests before manufacturers’ profits,” 1800Contacts.com CEO Brian Bethers said, according to the March 27 press release.  “We are hopeful that the various federal and state government investigations, private lawsuits and legislative initiatives around the country will put an end to this clearly anticompetitive practice in our industry.”

Snow said that the restriction imposed by the amendments is actually not going to facilitate free trade, but expects it will do the opposite, particularly for optometrists local to Southern Utah.

“The local optometrists would be hurt, those running their small businesses,” Snow said. “They’re having to compete with 1800Contacts and large retail distributors, and I think that enforcing that law would work against them.”

Others maintain, as argued in the Costco antitrust lawsuit, that when retailers, including eye care professionals who sell contact lenses directly to their patients, are subject to minimum pricing, doctors may have an incentive to issue certain contacts prescriptions over others based on profit considerations.

Nearly 40 million Americans use contact lenses, spending more than $4.2 billion dollars every year, according to the 1800Contacts press release. Since the four major contact lens manufacturers instituted unilateral pricing policies, contact lens wearers have seen some online prices increase as much as 150 percent.

“Contact lens prescriptions are brand specific and do not allow substitution.  A doctor not only selects the contact lens brand, but also sells the product,” Bethers said. “Contact lenses are different from consumer products, like smartphones, where the consumer can choose between brands.  UPP price fixing is clearly inappropriate in the contact lens industry.”

Similar legislation to ban UPP has passed committees in New York, Florida, Idaho, and Arizona.  Such legislation also has been introduced in several other states.

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