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Appeals court sides with Utah in blow to contact lens makers

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SALT LAKE CITY (AP) — A federal appeals court has dealt a blow to the country's largest contact-lens makers amid bitter price wars in the $4 billion industry.

The court upheld a Utah law that bans manufacturers from setting minimum prices for their contacts, a practice critics such as Costco call price-fixing. Contact-lens makers argue the policies are good for customers because they protect professional eye doctors from being undercut by discounters such as the Utah-based 1-800 Contacts.

The companies — Alcon, Johnson & Johnson and Bausch & Lomb — could not immediately be reached for comment on Wednesday. At least one, Johnson & Johnson, has already moved away from the pricing programs after previous court losses.

The contact-lens makers have argued the law was crafted to help the homegrown discounter 1-800 Contacts, but has the effect of changing lens pricing nationwide though online sales. 1-800 Contacts does most of its business with people outside of Utah, but the law allows it to ignore price minimums because online sales are considered in-state transactions no matter where the customer is.

The 10th Circuit Court of Appeals refused to block the law in an opinion handed down on Monday. The three-judge panel says the industry dominated by four big companies has anti-competitive leanings and states are allowed to pass laws that promote free-market competition.

One member of the three-judge panel disagreed. U.S. Circuit Judge Robert Bacharach wrote the manufacturers appear to have a solid argument that the law could discriminate against other retailers outside the state, and said he would have overturned the lower-court ruling that allowed the law to go into effect.

After that decision came down last year, 1-800 Contacts dropped its prices by about $15 a box on some brands that were subject to the manufacturers' minimum prices.

The contact lens makers started setting minimum prices a few years ago to protect eye doctors from being undercut by discount sellers. If a retailer sells at too steep of a discount, the manufacturers pull their products.

Though most contact sales still come through eye doctors who bring the manufacturers new customers with brand-specific prescriptions, discounters have taken a bigger slice of the market in recent years.

The pricing policies have also been scrutinized by Congress, consumer advocates and others.

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Lindsay Whitehurst

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