Antitrust Law Daily Wrap Up, ANTITRUST NEWS: AAI urges federal enforcement action on contact lens unilateral pricing policies, (Oct 27, 2014)

By Greg Hammond, J.D.

The American Antitrust Institute (AAI) has sent a letter to the FTC and the U.S. Department of Justice Antitrust Division, urging the two agencies to reverse the recent spread of “unilateral pricing policies” (UPPs) that have taken hold in the contact lens market. According to AAI, UPPs effectively prevent contact resellers from discounting contact lenses below a minimum retail price fixed by the manufacturers.

There are four dominating manufacturers of contacts that have adopted the minimum pricing practice—Alcon, Bausch & Lomb, CooperVision, and Johnson & Johnson. The companies account for more than 97 percent of contact lens sales.

“The winners and losers from UPPs in contact lenses are not difficult to identify,” the AAI wrote. Both eye care providers and contact lens manufacturers benefit from the restrained retail competition. Specifically, eye care providers sell contact lenses, and therefore have an incentive to prescribe more expensive and high-margin brands over lower-priced alternatives. To the AAI, eye care providers may be the moving force behind UPPs. Conversely, consumers will bear the burden of paying higher profit margins for contact lenses. In addition, efficient retailers—such as Costco and online retailers like 1-800 CONTACTS—are no longer able to compete on price for many contact lens products due to the pricing practice.

The AAI therefore urges the FTC and Antitrust Division to take action to investigate and reverse the spread of UPPs in the contact lens market. Specifically, the organization noted that UPPs are nothing but resale price maintenance (RPM), which was per se illegal due to the Colgate doctrine. However, the Supreme Court’s Leegin decision now subjects RPM to the rule of reason. Consequently, the AAI suggests that there is no longer any reason to construe Colgate broadly to shelter UPPs from ordinary agreement principles.

“Americans spend more than $4 billion on contact lenses annually and, at least until recently, have saved significant sums of money when they buy supplies from discount retailers,” AAI stated. “More generally, by advancing a consumer-friendly structured rule of reason and narrowing the anachronistic Colgate doctrine, the antitrust agencies would root out anticompetitive RPM throughout the economy, potentially saving consumers billions of dollars every year.”

Companies: Alcon; Bausch & Lomb; CooperVision; Johnson & Johnson

News: Antitrust