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1-800 Contacts Set Up Anticompetitive Deals, FTC Commission Finds

The agreements related to bidding for search engine keywords.

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The Federal Trade Commission has held that 1-800 Contacts, largest online retailer of contact lenses in the U.S., unlawfully entered into a web of anticompetitive agreements with rival online contact lens sellers.

A commission opinion authored by Chairman Joseph J. Simons ruled that the agreements between 1-800 Contacts and 14 online sellers of contact lenses constitute unfair methods of competition. The agreements prevent online contact lens retailers from bidding for search engine result ads that would inform consumers that identical products are available at lower prices.

The opinion held that the agreements harm competition in bidding for search engine keywords, artificially reducing the prices that 1-800 Contacts pays, as well as the quality of search engine results delivered to consumers. Although the opinion directly addresses restraints to search engine advertising for contact lenses, it carries broader implications for preserving competition through online advertising, according to a press release from the FTC.

The order requires 1-800 Contacts to cease and desist from enforcing the unlawful provisions in its existing agreements and from entering into similar agreements in the future. It prohibits 1-800 Contacts from agreeing with other contact lens retailers to restrict search advertising or to limit participation in search advertising auctions.

The opinion stems from an August 2016 administrative complaint. It upholds Chief Administrative Law Judge D. Michael Chappell’s October 2017 initial decision, which similarly found that the agreements were unfair methods of competition.

The commission vote approving the opinion and final order was 3-1-1, with Commissioner Noah Joshua Phillips dissenting and Commissioner Christine S. Wilson not participating.

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