AOA-supported Federal Trade Commission complaint filed Aug. 2016 against the online contact lens retailer.

Judge calls 1-800 Contacts’ online advertising practices harmful to the public

Anti-competitive and anti-consumer-that's what an administrative law judge called 1-800 Contacts' internet advertising practices after upholding a Federal Trade Commission (FTC) complaint against the nation's largest online retailer of contact lenses.

“The AOA will continue to stand up for our patients and advocate 24/7/365 against any abusive or unlawful practice we see connected to online contact lens retail.”

Announced Oct. 30 by the FTC, the "initial decision" by Chief Judge Michael Chappell called 1-800 Contacts' online advertising practices harmful to contact lens wearers. The AOA has long rallied against abusive and illegal practices of contact lens sellers. This is a victory for consumers, the AOA says.

"The judge's decision makes it clear that full accountability, under the law, is coming for any company that withholds information from the public and engages in anti-competitive tactics that reduce competition or cause higher prices," says Christopher J. Quinn, O.D., AOA president. "The AOA will continue to stand up for our patients and advocate 24/7/365 against any abusive or unlawful practice we see connected to online contact lens retailing."

1-800 Contacts' practices called harmful to consumers, competition


Judge Chappell issued his decision and order Oct. 20, but it was made public Monday.

"The Challenged Agreements restricted advertisements for the sale of contact lenses on the internet by prohibiting competitors from presenting paid advertisements on the search engine results page in response to searches for 1-800 Contacts' trademarks," Judge Chappell wrote in his decision. He concluded, the "evidence in this case demonstrates that the advertising restraints imposed by the Challenged Agreements cause harm to consumers and competition in the market for the sale of contact lenses online.

"This is sufficient to establish the Complaint Counsel's prima facie case that the agreements are anticompetitive," he continued. "The evidence fails to prove that the Challenged Agreements have countervailing procompetitive benefits that outweigh or justify the demonstrated anticompetitive effects of the Challenged Agreements. Accordingly, the Challenged Agreements violate Section 5 of the FTC Act."

What's next? The initial decision, announced Oct. 30, will be reviewed by the full commission and then become final after 30 days once it is served upon the concerned parties, provided one of the parties doesn't appeal the decision.

What it means for 1-800 Contacts


If the judge's order becomes final, 1-800 Contacts would be prohibited from making agreements with a "marketer or seller of any contact lens product to restrict, prohibit, regulate or otherwise limit that seller's participation in search advertising auctions." The order would also restrict the retailer from configuring search engines that bar any seller's use of a keyword or negative keyword for search.

Further, 1-800 Contacts could not make agreements-and uphold current deals-with other online sellers that "restrict, prohibit, regulate or otherwise limit that seller's use of truthful, nondeceptive and nontrademark-infringing advertising or promotion." 

The FTC's lawsuit against 1-800 Contacts was originally filed in August 2016. The lawsuit-which made national news-faulted 1-800 Contacts with how it manipulated prominent search engine advertising by signing agreements with 14 other online contact lens retailers stating that the companies would not competitively advertise against one another in search engines, such as Bing or Google.

Typically, competing companies bid in an advertising auction for space atop search engine results. When a search is performed for a keyword or phrase, the search engine's algorithm evaluates bids and awards the advertising placement to the most relevant and useful content.

However, the FTC alleged that 1-800 Contacts' "bidding agreements" with other retailers barred both parties from bidding over each other's trademarked terms, and additionally, required the use of negative keywords designed to keep search engines from displaying another party's advertisements when a specific trademarked term or variation was searched. That means even if a consumer searched for "1-800 Contacts cheaper competitors," search results would return advertisements only for 1-800 Contacts, the FTC said in its lawsuit.

"As early as 2003, 1-800 Contacts recognized that it was losing sales to lower-priced online competitors," the FTC complaint read. "However, 1-800 Contacts did not want to lower its prices to compete with these rivals, and devised a plan to avoid doing so. To this day, 1-800 Contacts' prices for contact lenses remain consistently higher than the prices of its online rivals."

"These actions had the purpose, capacity, tendency and likely effect of restraining competition unreasonably and injuring consumers," the FTC says, in a number of ways, including:

  • Unreasonably restraining price competition in certain search advertising auctions;
  • Distorting prices in, and undermining the efficiency of, certain search advertising auctions;
  • Depriving consumers of truthful and non-misleading information about the prices, products and services offered by online sellers of contact lenses;
  • Depriving consumers of the benefits of vigorous price and service competition among online sellers of contact lenses; and,
  • Causing at least some consumers to pay higher prices for contact lenses than they would pay absent the agreements, acts and practices of 1-800 Contacts.

In a statement released on the same day the FTC filed its complaint, the AOA commended the FTC for taking action and filing suit against 1-800 Contacts, noting: "This suit reveals anti-competitive sales tactics that 1-800 Contacts purportedly employs to suppress competition-tactics that harm patients by restraining competition in online advertising and restrict truthful internet advertising, resulting in some consumers paying higher retail prices for contact lenses."

AOA sounds alarm over deceptive, illegal online tactics


Within days of the FTC lawsuit, the Coalition for Patient Vision Care Safety, of which AOA is a member, met with FTC Commissioner Maureen Ohlhausen to discuss the importance of safeguarding patients' eye health and educating about the risks associated with improper contact lens practices. Other coalition members include Alcon, Bausch + Lomb, CooperVision and Johnson & Johnson Vision.

The AOA continues to aggressively fight for crackdowns on online contact lens sellers' deceptive and unlawful tactics that can ultimately restrict patient choice and put patient health at risk, including:

  • Every day in October, the AOA issued a letter to a contact lens seller previously flagged for suspicious business practices or apparent disregard of federal law. This '31 in 31' campaign confronts vendors and informs them of the regulatory requirements related to the sale of contact lenses in the United States. Learn more.
  • The AOA makes it easy for doctors and patients to report suspected illegal sales of contact lens with its StopIllegalCLs@aoa.org.

October 31, 2017

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