Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Davis Vision alleged to monopolize manufacture of prescription eyeglass lenses, (Jul 30, 2014)

By Linda O’Brien, J.D., LL.M.

Vision benefits provider Davis Vision, Inc. has engaged in a conspiracy to fix the prices of prescription eyeglass lenses by maintaining contracts with Illinois optometrists and opticians that require them to exclusively use the provider’s ophthalmic lens manufacturing laboratories for all of its members’ prescription eyeglass lens orders, according to a complaint filed in the federal district court of Springfield, Illinois (Acuity Optical Laboratories, LLC v. Davis Vision, Inc., July 29, 2014).

Davis Vision provides benefits to more than 55 million members nationwide, including 85,000 City of Chicago employees. Acuity Optical Laboratories manufactures ophthalmic products, including digitally manufactured freeform ophthalmic lenses.

Acuity’s complaint alleges that Davis maintains monopoly power by operating a provider network whereby providers are required to execute a provider agreement in order to be able to bill Davis for vision related services, such as eye exams. All of the agreements contain a provision requiring all providers to send any eyeglass manufacturing orders for a Davis member to an ophthalmic lens laboratory owned by Davis. Providers are forced to either accept the mandatory policy as part of their provider agreement or be denied access to Davis’ benefits network. Since Davis members are the majority of vision service customers, optometrists and opticians must agree to the mandatory policy or forfeit the business of Davis members.

The provider agreements allegedly operate as exclusionary contracts that prevent providers from ordering ophthalmic lenses from any manufacturing facility other than ophthalmic lens laboratories affiliated with Davis. These agreements foreclose third party ophthalmic lens manufacturers from the opportunity to compete for Davis members’ business; therefore, Davis and its affiliated ophthalmic lens laboratories are free to fix prices at a supra market rate without fear of losing consumers’ business, the complaint charges.

According to the complaint, Davis and its affiliated ophthalmic lens laboratories are separate and distinct legal entities and would normally be in competition with each other. Davis would normally negotiate for the lowest possible price for reimbursement of claims for lens purchases made by members and Davis affiliated ophthalmic lens laboratories would likewise negotiate for the highest possible reimbursement price for the sales of lenses to members. However, the mandatory policy removes any potential third party lens manufacturers from bidding for any Davis members business and Davis and its affiliated laboratories can set prices for ophthalmic lenses without risk of losing market share.

Davis’ mandatory policy constitutes a forced boycott of all third party manufacturers and functions as a conspiracy by contract to restrain trade, the lawsuit claimed. Acuity allegedly has experienced significant financial damages as a result of the conspiracy. Its sales people have been regularly denied business because providers do not want to add another laboratory to their daily use due to their Davis agreements.

The complaint states that since Davis affiliated laboratories did not fact market pressure to outperform potential competitors, there has been a reduction in product and service quality – longer wait times for obtaining eyeglasses, inferior product selection, and inferior product warranty. There is no valid business justification for the exclusionary provider agreements, since Davis does not achieve economy of scale efficiencies and its affiliated laboratories do not offer the full spectrum of digital freeform lens designs, according to the action. Davis members do not receive beneficial results since they are actually forced to pay supra market prices for ophthalmic lenses manufactured by Davis affiliated laboratories.

The plaintiff asserts claims for restraint of trade, monopolization, tying agreements, agreed boycott, tortious interference with a prospective business advantage, and violations of Sections 1 and 2 of the Sherman Act, Illinois Antitrust Act, and Illinois Insurance Code. The action seeks declaratory and injunctive relief, compensatory and treble damages, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 3:14-cv-03231-SEM-TSH.

Attorneys: Nicholas T. Williams, Chief Staff Counsel, HW Holdings, LLC of Illinois for Acuity Optical Laboratories, LLC.

Companies: Acuity Optical Laboratories, LLC; Davis Vision, Inc.

News: Antitrust IllinoisNews