SAN DIEGO – Just a few months after being scrutinized by the FTC, 1-800 Contacts has once again come under fire for orchestrating bidding agreements amongst its competitors The company is facing two class-action complaints brought by residents of Southern California.
William Duncanson and J. Thompson filed these complaints with the U.S. District Court for the Southern District of California. In their complaints, Duncanson and Thompson state: “Because of the unlawful agreements, competitors could not advertise against 1-800 Contacts, and therefore customers did not receive information concerning competitors’ products and pricing.”
Basically, these agreements allow both 1-800 Contacts and its competitors to control which ads show up when you search a given company's name on the internet. If you were to search for 1-800 Contacts, no ads from their competitors (who signed these agreements) should appear. And if you search the name of a rival, no ads for 1-800 Contacts should appear. This is basically used as a stronghold tactic, as these agreements give 1-800 Contacts the ability to sue its competitors if it suspects the slightest inkling of a violation, which they have already threatened.
As previously stated, this is not the first time 1-800 Contacts has been legally scrutinized for allegedly hindering market competition by restricting the use of its trademark. The Federal Trade Commission (FTC) filed an administrative complaint against the company for essentially the same reason as the aforementioned class-action complaints. As for the FTC complaint itself, the agency stated that the agreements manufactured by 1-800 Contacts “prevent the parties from competing against one another in certain online search advertising auctions. The driving force behind these agreements and this anticompetitive scheme is 1-800 Contacts, the largest online seller of contact lenses in the United States.” This administrative complaint, which totals 12 pages, was filed in August 2016.
In an effort to draw comparisons between the class-action complaints and the administrative complaint, we spoke to Elizabeth Lordan, who works in the Office of Public Affairs for the FTC. “It is a suit alleging unfair method of competition, in violation of federal antitrust law. 1-800 Contacts has certainly come under legal scrutiny from the FTC,” Lordan told the Northern California Record
. “The FTC alleges that 1-800 Contacts entered into anticompetitive bidding agreements with at least 14 competing online contact lens retailers that eliminate competition in auctions to place advertisements on the search results page generated by online search engines such as Google and Bing.”
It’s crucial to understand the impact that these bidding agreements have on competition, which keeps prices low and quality and choice high. The ability to differentiate between several options while buying eye care products is similar to the problem some citizens have with other aspects of the healthcare market.