1-800-Contacts Class Action Says Rivals Coerced into Antitrust Scheme

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A woman from California accuses 1-800-Contacts of scheming to deprive consumers of the benefits of a competitive market for online contact lens sales.

In her 1-800-Contacts antitrust class action lawsuit, plaintiff Pam Stillings says the largest online retailer of contact lenses coerced its rivals into anti-competitive agreements that violate federal law.

According to Stillings, 1-800-Contacts is the largest online retailer of contact lenses, controlling about 50 percent of that market.

When 1-800-Contacts’ success drew competitors to the market, Stillings says the company responded by threatening them with litigation.

She claims 1-800-Contacts sent cease and desist letters to at least 15 other online contact lens retailers, threatening to bring trademark infringement lawsuits against them unless they agreed to the company’s terms.

Under those terms, 1-800-Contacts and its competitors allegedly agreed to refrain from competing against each other for specified sale leads drawn from internet search engines.

1-800-Contacts would get exclusive rights to submit bids for search engine advertisements that would run in response to search engine queries of 1-800-Contacts’ own trademarks, such as “800-Contacts,” the lawsuit states.

Stillings alleges these agreements between 1-800-Contacts and 14 of its competitors constitutes unlawful bid-rigging, as part of an overall market allocation scheme. Both bid rigging and market allocation constitute per se violations of Section 1 of the Sherman Antitrust Act, according to Stillings.

One remaining competitor, Lens.com refused to enter into the agreement, Stillings says. 1-800-Contacts responded by filing what Stillings calls an “objectively baseless” trademark lawsuit against that competitor.

Stillings says the competitor won that lawsuit on summary judgment, then won again on appeal.

The company’s alleged scheme deprived consumers of the benefits of competition for their business, Stillings claims.

Consumers allegedly could not benefit from information about competitor’s lenses, financing terms, and alternative services.

By suppressing competition, Stillings claims 1-800-Contacts was able to charge higher prices for contact lenses.

The plaintiff plans to provide econometric data showing that 1-800-Contacts charged supracompetitive prices and quantifying the amounts of those overcharges.

Stillings alleges that she has bought contact lenses from 1-800-Contacts over the past four years. She says she was misled by 1-800-Contacts’ promotions to believe that the company offered the best possible price on contact lenses, when in fact it was charging a higher price than a truly competitive market would allow.

The plaintiff claims she was overcharged for her contact lenses due to the company’s anticompetitive activities. Were it not for those practices, she says, she would have been better informed about competitor’s products, services and prices.

Stillings seeks to represent a plaintiff Class consisting of all persons in the U.S. who purchased contact lenses online from 1-800-Contacts for personal use between Sept. 21, 2012 and the date on which Class notice is given.

She is asking the court to award treble damages, pre-judgment interest, injunctive and declaratory relief, as well as court costs and attorneys’ fees, all as authorized by the Sherman Act.

Stillings is represented by attorneys William A. Markham, Dorn Bishop and Jason Eliaser of the Law Offices of William Markham PC, and by Ronald Marron and Michael Houchin of the Law Offices of Ronald A. Marron PC.

The 1-800-Contacts Antitrust Class Action Lawsuit is Stillings v. 1-800-Contacts Inc., Case No. 3:16-cv-5400, in the U.S. District Court for the Northern District of California.