Several lawsuits have been filed against contact lens manufacturers, including Johnson & Johnson and Alcon Laboratories, Inc., based on the companies’ unilateral pricing policies (UPPs). Unilateral pricing policies are a form of retail price maintenance whereby a manufacturer announces a minimum resale price and refuses to sell to a reseller that sells below that minimum price. The complaints allege that these UPPs are forcing customers to pay artificially high prices for contact lenses in violation of antitrust laws.
In a lawsuit brought by Costco Wholesale Corp., Costco indicated that it first refused to increase prices for contact lenses, but eventually complied when Johnson and Johnson threatened to stop selling contacts to Costco. According to the same suit, one online retailer was forced to double its prices in order to comply with the policy. Further, Joe Zeidner, General Counsel for 1-800 CONTACTS gave the following example before the Senate regarding the choices available to a consumer wearing Acuvue Moist daily disposable lenses:
Prices for a box of 30 lenses ranged from $18.50 at an online seller to an average price charged by eye care providers of just over $31 per box. The next slide shows what these same choices will be for that consumer after RPM. The minimum price will be – $33 per box – whether she buys online, from a big box retailer, or from her eye care provider.
In October of 2014, the American Antitrust Institute (AAI) also brought these policies to light by requesting that the United States Department of Justice (DOJ) and the Federal Trade Commission (FTC) conduct an investigation into the use of UPPs in the contact lens industry. AAI President Albert Foer and Senior Counsel Sandeep Vaheesan said UPPs threaten to constrain market competition and keep retail prices artificially high. Alcon, Bausch & Lomb, CooperVision and Johnson & Johnson — which combined account for 97 percent of contact lens sales revenue in the U.S. — have each adopted UPP policies within the past year.
Historically, resale price maintenance constituted a per se violation of federal antitrust law. However, in 2007, a decision issued by the United States Supreme Court, Leegin Creative Leather Products Inc. v. PSKS, Inc., moved retail price maintenance to a rule-of-reason analysis as opposed to a per se violation. Under the rule-of-reason analysis, the court will evaluate the policies to determine if they increase competition in the contact lens industry, or restrict it.
Since the shift to the rule-of-reason analysis, retail price maintenance cases have been scarce. These cases will test the Leegin decision and help determine whether retail price maintenance claims remain viable under that decision. If you need more information on this litigation, contact Leslie Pescia, a lawyer in our firm’s Consumer Fraud Section, at 800-898-2034 or by email at Leslie.Pescia@beasleyallen.com.
Sources: Law360; Testimony of Joe Zeidner available at: www.judiciary.senate.gov/imo/media/doc/07-30-14ZeidnerTestimony.pdf