Antitrust Law Daily Wrap Up, ANTITRUST NEWS: 1-800 Contacts restrained price competition in search ad auctions, FTC alleges, (Aug 8, 2016)

By Greg Hammond, J.D.

1-800 Contacts, Inc. has engineered a bid allocation scheme with competing online sellers of contact lenses that have unreasonably restrained both price competition in search advertising auctions and the availability of truthful, non-misleading advertising, according to an administrative complaint filed by the FTC (In the Matter of 1-800 Contacts, Inc., FTC Dkt. No. 9372).

1-800 Contacts is the largest online seller of contact lenses in the United States. The FTC’s complaint challenges a number of bilateral agreements between 1-800 Contacts and at least 14 competing online sellers of contact lenses that allegedly prevented the parties from competing against one another in certain online search advertising auctions.

In particular, the FTC alleges that online search engine companies like Google and Bing sell advertising space on their search engines results pages through computerized auctions. Beginning in 2004, 1-800 Contacts entered into bidding agreements with competing online contact lenses sellers that provided the parties would not bid against each other in certain search advertising auctions.

The Commission claims that the bidding agreements have unreasonably restrained price competition in search advertising auctions and the availability of truthful, non-misleading advertising. In addition, the bidding agreements constitute an unfair method of competition in violation of the FTC Act. As a result of this anticompetitive conduct, the FTC claims that 1-800 Contacts has distorted prices in certain search advertising auctions; prevented search engine companies from displaying to users on the results page the array of ads that are most responsive to a user’s search; impaired the quality of the service provided to consumers by search engine companies, including the results page; deprived consumers of the benefits of vigorous price and service competition among online sellers of contact lenses; increased consumers’ search costs; and caused some consumers to pay higher prices for contact lenses than they would pay absent the agreements.

An administrative trial has been scheduled for April 11, 2017, on the charges set forth by the FTC’s administrative complaint.

Companies: 1-800 Contacts, Inc.

News: Advertising Antitrust FederalTradeCommissionNews