FTC Provides House Testimony on Competition Issues in the Contact Lens Industry

Testifying today on behalf of the Federal Trade Commission before the U.S. House of Representatives Subcommittee on Commerce, Trade, and Consumer Protection, Office of Policy Planning Director Maureen Ohlhausen said the agency is dedicated to continuing its work to protect both consumers and competition through enforcement of the Fairness to Contact Lens Consumer Act (FCLCA) and the FTC’s Contact Lens Rule, which closely tracks the Act’s provisions.

According to the testimony, the multi-billion-dollar contact lens industry has changed significantly in recent years. In the past, lenses were designed to last for a long time and required daily removal and extensive cleaning. Consumers generally bought their lenses from eye care practitioners (ECPs) after an eye examination and lens fitting, and replaced them when their prescriptions changed or the lenses were lost or damaged. There was no method yet for producing standardized lenses.

Starting in the late 1980s, however, manufacturers began marketing and selling “disposable” and “frequent replacement” lenses that are designed to be replaced more often. Today, the soft contacts that patients get from their ECPs or other sellers – inlcuding those sold over the Internet – are exactly the same, regardless of how they are obtained. The only difference is that non-ECP sellers do not fit lenses or provide eye-care services, and ship the lenses to consumers instead of providing them in person. These changes in how lenses are marketed and sold have led to new education and enforcement responsibilities for the Commission.

Under the FCLCA, ECPs must: 1) provide patients with a copy of their contact lens prescriptions immediately upon completion of a contact lens fitting, and 2) provide or verify contact lens prescriptions to sellers of contact lenses. The Act also states that, before providing consumers with contact lenses, sellers must either get copies of the prescriptions or verify the information in the customers’ prescriptions with their prescribing ECPs. To implement the FCLCA, the FTC issued its Contact Lens Rule, and since then, the testimony states, “has undertaken substantial efforts to educate sellers and eye care practitioners about its requirements.” This includes distributing consumer education materials, as well as sending warning letters to sellers whom the FTC thinks may be violating the Rule.

While the goal is to avoid the need for law enforcement actions, the FTC will bring such actions when necessary, the testimony continues. Last month, for example, the Commission filed a complaint and settlement against Walsh Optical, Inc., and its owner Kevin Walsh for selling contact lenses to consumers without first obtaining their prescription from, or verifying them with, the prescribing ECPs. Under a consent decree with the FTC, the defendants will pay $40,000 in civil penalties and are prohibited from violating the Rule in the future.

The testimony also summarizes the Commission’s work in studying the effects of state-imposed restrictions on competition from alternative contact lens sellers, which advocates policies for the optical good industry that would benefit consumers and competition. In March 2004, after holding a workshop to evaluate possible anticompetitive barriers to e-commerce, the agency issued a report on barriers to Internet competition in contact lenses which expressed concern that state laws and regulations may limit competition in contact lens sales, raise consumer costs, and harm public health.

Finally, the testimony addresses limited contact lens distribution policies, citing an agency study released in February 2005 that examined, among other things, private labeling and limited distribution policies. Some people argue that such policies allow prescribing ECPs to lock their patients into lenses that must be bought from them at inflated prices. The Commission’s report concluded, however, that “theory and the evidence examined do not support the conclusion that these distribution practices harm competition and consumers.”

“The FCLCA and the Contact Lens Rule are intended to promote competition and consumer choice in the sale of contact lenses,” the testimony concludes. “The Commission will continue to engage in educational and law enforcement activities to encourage compliance with the law to assure that consumers obtain the benefits Congress intended the FCLCA to confer.”

The Commission vote authorizing the presentation of the testimony and its inclusion in the formal record was 4-0, with Commissioner Pamela Jones Harbour recused.

Copies of the Commission’s testimony are available on the FTC’s Web site at www.ftc.gov. The FTC’s Bureau of Competition, working with the Bureau of Economics, seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

The Division of Advertising Practices within the FTC’s Bureau of Consumer Protection enforces the FCLCA and the Contact Lens Rule. Complaints about alleged violations of the FCLCA or the Rule, as opposed to those about vertical restraints within the contact lens industry, should be forwarded to that Division of the Commission.

(FTC File No. V040010)