Washington – U.S. Sen. Amy Klobuchar is seeking greater scrutiny of a decision by three of the four top U.S. contact lens makers to set price minimums for products.
“They are an essential part of many people’s daily lives, and these consumers deserve fair prices,” said Klobuchar, chairwoman of the Senate Judiciary Committee’s antitrust panel. “We need to be clear-eyed about how these policies are impacting consumers and competition.”
Klobuchar and others are concerned the moves by Alcon, Bausch & Lomb and Johnson & Johnson, which make up roughly 75 percent of the estimated $4 billion per year U.S. contact lens market, will snuff out competition and put consumers at a disadvantage.
Nearly 39 million people in the United States use contacts, according to industry estimates.
The companies began unilaterally setting minimum sale prices on some of their products over the last 15 months. Contact manufacturers simply end shipments to retailers that refuse to comply.
The new practice is a major blow to online and discount retailers, who say the arbitrary prices are a play to drive them out of the market.
With prices set by the manufacturers, contact lens wearers would buy from their local optometrists instead of turning to discount retailers, said R. Joe Zeidner, an attorney for online retailer 1-800-CONTACTS.
“Unless someone steps in to stop these … programs from dominating an already highly concentrated industry, discount shopping will become a thing of the past for contact lens wearers,” Zeidner said at a hearing on Capitol Hill last week.
Manufacturers are capitalizing on a 2007 U.S. Supreme Court decision that said setting price floors was acceptable in some situations. Before that, the practice had been illegal.
Millicent Knight, head of professional affairs at Johnson & Johnson Vision Care, argued that her company’s prices would be lower for two-thirds of people who buy their lenses.
Knight testified that Johnson & Johnson, which controls more than a third of the contact lens market, will eliminate manufacturers’ rebates to provide “instant savings” on every box purchased.
Knight also said the price floors are below the current average market prices for the majority of consumers.
In written testimony, Alcon said it resorted to price setting to rectify a problem where consumers use the expertise and advice of optometrists to find the proper lens and then turn to discount websites to buy contacts at a lower price.
“Eye-care professionals incur the cost of studying and appraising the new technology, but online and big-box retailers do not,” the company said.
Zeidner saw things differently. “It’s about getting patients to buy from the doctor and not shopping for a discount price because there’s none available,” he said.
Klobuchar said there are parallels between the contact lens debate and the complaints from retailers such as Target and Best Buy about shoppers who test out merchandise in stores and then buy on rivals’ websites.
Contact lens makers and discount retailers have clashed over the issue for nearly 20 years.
In the mid-1990s, attorneys general from 34 states, including Minnesota, pursued antitrust claims against the American Optometric Association and the major contact lens manufacturers, charging that they conspired to impede competition from online companies and big-box retailers.
The attorneys general alleged that the optometry trade association threatened to boycott lens manufacturers that directly distributed their products to online companies, pharmacies and big-box retailers.
K.L. Beebe, a Brainerd optometrist who attended the Senate hearing, said patients, not prices, are his primary concern.
“We don’t think the pricing policies of these companies are really part of our process at all,” said David Cockrell, president of the American Optometric Association.
Congress entered the contact lens seller debate in November 2003 when it passed a law that requires eye-care professionals to provide patients with a prescription for their lenses. The measure was designed to make it easier for consumers to shop around for the best deal and foster competition.
George Slover, senior policy counsel for Consumers Union, a Washington, D.C.-based watchdog group, said the price floor policy will once again tie eye-care services to the sale of contact lenses, denying consumers low-cost alternatives.
“It is anti-competitive to refuse to allow discounting,” Slover said. “That’s not good for consumers, however you look at it.”
Corey Mitchell is a correspondent in the Star Tribune Washington Bureau. Twitter: @C_C_Mitchell