Appeals court allows hotly contested Utah law banning contact lens price fixing to take effect

Economic Indicators Associated Press

A federal appeals court cleared the way for a hotly contested Utah law banning price fixing for contact lenses Friday, a ruling that could have wide-ranging effects on the $4 billion industry.

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The decision handed down from the 10th Circuit Court of Appeals in Denver comes after three of the nation's largest contact lens manufacturers sued to halt the measure. Alcon Laboratories, Johnson & Johnson and Bausch & Lomb contend the law is a brazen overreach written to give Utah-based retailer 1-800 Contacts and other discount sellers an illegal end run around minimum prices set by the companies.

But the Utah attorney general says the companies are wrongly driving up prices, and the law is a legitimate antitrust measure designed to enhance competition and help customers.

The decision allows the law to go into effect while a legal battle over the measure works its way through the courts. The appeals court did agree to fast-track the case and new briefs are due in the case in July.

Johnson & Johnson spokeswoman Carol Goodrich says the company is moving ahead with the appeal and the minimum prices are legal.

Utah legislature passed the measure backed by 1-800 Contacts amid increasingly bitter pricing battles in the industry. While many contact lens sales come from eye doctors, discounters have been making inroads in recent years, and now 1-800 Contacts is now one of the nation's largest lens retailers.

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The contact lens manufacturers say the law would allow any company in Utah to ignore price minimums and sell discounted lenses to customers around the country.

Though they deny the law was written to benefit the company, state officials have been vague on whether the law would allow Utah-based sellers to charge lower prices to customers outside the state.

The Utah measure bans pricing programs started by manufacturers who threatened to yank their products from resellers whose prices dipped too low.

The contact lens makers that dominate the market say the price minimums protect eye doctors from being undercut by sellers who don't offer the same expertise, but the pricing policies have also been scrutinized by Congress, consumer advocates and others.