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FTC sues Draper-based 1-800 Contacts, alleging anti-competitive business tactics

By Ben Lockhart | Posted - Aug. 9, 2016 at 10:26 p.m.

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DRAPER — The Federal Trade Commission announced this week that it is suing 1-800 Contacts, a Draper-based company, for allegedly "maintain(ing) a web of anti-competitive agreements with rival online contact lens sellers."

The agency alleged in a statement Monday that 1-800 Contacts' business tactics, including agreements signed with rival companies about search engine results, amount to "an unfair method of competition in violation of federal law." The trial phase of the lawsuit is set to begin April 11, 2017.

The federal complaint states that 1-800 Contacts entered into "bidding agreements" with more than a dozen competitors to inappropriately affect search engine queries.

"(The agreements were) designed to keep search engines from displaying one party’s advertisements in response to a search query that includes terms specified by the other party — typically trademarked terms or variations of them," FTC spokeswoman Betsy Lordan said in a statement.

The company is accused of threatening of lawsuits if steps weren't taken to ensure that searches for "1-800 Contacts" entered in Google and Bing, among other search engines, yielded no advertised results from competitors.

"The complaint alleges that these bidding agreements unreasonably restrain price competition in internet search auctions, and restrict truthful and nonmisleading advertising to consumers. … (It also) alleges that the bidding agreements are overly broad and not necessary to safeguard any legitimate trademark interest," Lordan said.

The FTC believes the company's strategy with its rivals "harm(s) competition in the United States," as it affects the sale of both contact lenses and search engine advertizing," according to Lordan. At times, the behavior drives up contact lens prices for American consumers, she said.

1-800 Contacts released a statement Monday denying the FTC's claims of anti-competitive business tactics.

"1-800 Contacts strongly disagrees with the Federal Trade Commission’s contention that settlement agreements designed to protect its trademark hinder competition," the company statement said. "1-800 Contacts is confident in its legal position and will vigorously defend its intellectual property rights."

The company also defended its track record, maintaining it has always looked out for the interests of consumers.

"1-800 Contacts has a long history of advocating for increased competition and consumer rights, including championing the passage of the landmark Fairness to Contact Lens Consumers Act of 2003 that increased convenience and lowered prices for consumers, and opposing recent price fixing by manufacturers," the company's statement reads. "1-800 Contacts strongly believes in a competitive contact lens marketplace and will continue to be a leading advocate for providing consumers with more choice, greater convenience and lower prices."

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