Court ruling gives discount contact lens retailers go-ahead to lower prices

Economic Indicators Associated Press

Discount contact lens sellers scored a legal victory in an increasingly bitter pricing war with manufacturers as a federal appeals court cleared the way for a hotly contested law Utah law that could have wide-ranging effects on the $4 billion industry.

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The decision handed down Friday from the 10th Circuit Court of Appeals in Denver clears the way for discount contact lens retailers to drop prices while a legal battle is waged between the state of Utah and manufacturers who want to impose minimum prices on their products. It comes after three of the nation's largest contact lens manufacturers sued to halt the measure.

Supporters, including Utah-based discount seller 1-800 Contacts, say the newly enacted legislation bans price fixing for contact lenses. But opponents, including Alcon Laboratories, Johnson & Johnson and Bausch & Lomb, say it's a brazen overreach that allows discount sellers to violate interstate commerce regulations and skirt industry price standards.

Company officials said in a statement that they plan to drop prices, calling the ruling "another victory in the ongoing battle to lower prices to consumers of contact lenses."

Utah's attorney general has said the companies are wrongly driving up prices, and the law is a legitimate antitrust measure designed to enhance competition and help customers. Attorney General Sean Reyes' office didn't have a comment on the decision Friday.

The ruling 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 later this month.

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Donna Lorenson, a spokeswoman for Alcon, said the company is "extremely disappointed" and maintains the law violates interstate commerce rules.

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

Bausch & Lomb representatives didn't respond to emails seeking comment.

Utah's 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.

Lawmakers deny the legislation was written to specifically benefit 1-800 Contacts.

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.