Contact lens companies say hotly contested pricing law passed in Utah hurts their business

Economic Indicators Associated Press

Contact-lens manufacturers say a hotly contested Utah law banning minimum prices for their product takes direct aim at their business model, and they will lose money if it stays on the books.

Continue Reading Below

The companies are fighting back after a federal appeals court allowed the law to go into effect. Alcon Laboratories, Johnson & Johnson and Bausch & Lomb say in new court documents that the law violates interstate commerce rules because it allows discount retailers like the Utah-based 1-800 Contacts to skirt pricing minimums and sell discounted contacts across state lines.

The Utah Attorney General's office declined to comment Monday on the latest moves in the battle over the law that could have wide-ranging effects on the $4 billion industry.

1-800 Contacts has begun lowering prices in the wake of the June 12 decision that cleared the way for the law to take effect while the court battle plays out, said Dan Roberti, a spokesman for the company.

The state of Utah has said the law is a legitimate antitrust measure that will bolster competition and help customers get lower prices. But the manufacturers contend it was written specifically to give 1-800 Contacts a leg up in an increasingly bitter pricing war.

The companies say the pricing rules protect trained eye doctors from being undercut from discounters who "free-ride." Without them, eye doctors might stop telling patients about new products, which brings the company customers. Discount retailers, on the other hand, generally sell people the contacts called for in their prescription without bringing up new products.

Continue Reading Below

Utah's Legislature passed the measure backed by 1-800 Contacts amid increasingly bitter pricing battles in the industry, though lawmakers deny the legislation was written to specifically benefit 1-800 Contacts. While many contact-lens sales come from eye doctors, discounters have been making inroads in recent years. 1-800 Contacts is now one of the nation's largest lens retailers.

The Utah measure bans pricing programs started by manufacturers who threatened to yank their products from resellers whose prices dipped too low. The pricing policies have also been scrutinized by Congress, consumer advocates and other states.

The companies sued to block the measure, but a federal judge in Utah allowed the law to go into effect. The companies appealed, and the higher court blocked the law temporarily. But it lifted that injunction June 12.

The two sides are set to argue before the 10th Circuit Court of Appeals in August.