1-800 Contacts Class Action Says Bidding Agreements are Illegal Trade Restraints

1-800 Contacts Inc. faces a class action lawsuit alleging the company pursued anticompetitive agreements with online competitors to eliminate and suppress competition in online search advertising auctions to preserve profits and market share.

Plaintiff Kathryn Champion, a Florida resident, says she purchased contact lenses through the defendant’s website. But when she did so, she claims that she paid “inflated prices” as 1-800 Contacts entered bidding agreements with at least 14 competing online contact lens sellers.

By restraining competition, customers like Champion are misled into purchasing products based on false advertising premises and claims, according to the class action lawsuit.

The complaint follows a similar suit filed by the Federal Trade Commission. According to the FTC, 1-800 Contacts entered bidding agreements to eliminate competition in auctions by disallowing competitors to place their ads on search engine results pages. These include search engines such as Google and Bing.

The class action lawsuit states that the bidding agreements, “restrain a broad range of truthful, nonmisleading and nonconfusing advertising.”

1-800 Contacts allegedly entered bidding agreements in roughly 2004. According to the lawsuit, 1-800 Contacts sent “cease-and desist” letters to competing online contact lens retailers whose ads appeared because of “user queries” containing any variation of the term “1-800 Contacts.”

According to the class action, the defendant accused competitors of trademark infringement and “threatened to sue its competitions that did not agree to cease participating in these search advertising auctions,” the lawsuit explains.

Several online contact lens sellers participated, albeit one, Lens.com. In the U.S. Court of Appeals for the 10^th Circuit, the court rejected the defenses argument of trademark infringement in 2013.

1-800 Contacts secured such a bidding arrangement by allegedly sending threatening letters to contact lens retailers and claimed to competitors that if the defendant suspects a violation in the bidding agreement, threats of further litigation would follow and thereby sustain compliance.

According to the complaint, “1-800 Contacts’ conduct cause significant anticompetitive effects including restraining or eliminating competition sold directly to U.S. consumers and fixing, raising or maintaining the price of contact lenses sold online at artificially high levels.”

Plaintiff and all those who have similarly suffered from the defendant’s bidding agreement have endured damages from the defendant’s “price manipulation conspiracy,” the lawsuit states. According to the complaint, through 1-800 Contacts’ “illegal trade restraints,” consumers were unable to view a normal online market with competitive contact lens prices.

Such customers were unable to be presented with competing prices and options from several sellers of contact lenses because of the bidding agreement, and 1-800 Contacts were viewed as the only option through their inflated charges and “supracompetitive prices,” Champion claims.

The FTC ruled that bidding agreements hurt competition and reduce truthfulness, honesty, and representative advertisements through the restraint of competitive online contact lens sellers.

Champion is represented by James L. Kauffman, Steven L. Bloch and Mark B. DeSanto of Bailey Glasser LLP and Randall K. Pulliam of Carney Bates & Pulliam PLLC.

The 1-800 Contacts Class Action Lawsuit is Champion, et al. v. 1-800 Contacts Inc., Case No. 0:17-cv-60696, in the U.S. District Court for the Southern District of Florida.