1-800 Contacts Class Action Accuses Retailer of Anticompetitive Conduct

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1-800 Contacts Inc., the largest online seller of contact lenses in the United States, has been hit with a class action lawsuit alleging it enters into bilateral agreements with its competitors preventing them from competing against one another using online search advertisements.

In the 1-800 Contacts class action lawsuit, plaintiff Tyler Nance points to a complaint filed in 2016 by the Federal Trade Commission, which alleges that 1-800 Contacts secured agreements with at least 14 of its competitors since 2004 to prevent them from bidding against each other in certain search advertising auctions. The class action lawsuit refers to these agreements as “Bidding Agreements.”

“1-800 Contacts and each of the competitors knew that by entering into the Bidding agreements, market share and profits would be protected,” the 1-800 Contacts class action lawsuit alleges.

In addition, 1-800 Contacts reportedly sent cease and desist letters to at least 14 rival online sellers whose paid internet advertisements showed up in searches for the term “1-800 Contacts,” claiming that its trademark was infringed when a rival’s advertisement showed up in response to the search for “1-800 Contacts.”

Because of the threat of expensive trademark litigation, 1-800 Contacts’ competitors agreed to the online retailer’s demands and entered into the anticompetitive Bidding Agreement, the lawsuit states.

“These Bidding Agreements unreasonably restrain both price competition in search advertising auctions and the availability of truthful, non-misleading advertising,” Nance says in the 1-800 Contacts class action lawsuit.

According to the class action lawsuit, 1-800 Contacts admitted in response to the FTC complaint that it entered into these anticompetitive agreements with competitors to resolve threatened trademark litigation.

Nance says that there was no way that he, or similarly situated consumers, could have known about the allegedly anticompetitive conduct of 1-800 Contacts until the FTC filed its complaint in 2016. Therefore, he was unaware that the online retail prices he paid for contact lenses were influenced by collusive or anticompetitive practices until he learned about the FTC complaint.

Although the 1-800 Contacts website has a Terms of Service page that requires any disputes to be resolved through arbitration, Nance says this clause is not binding on him because the arbitration clause is extremely difficult to find on the website, even if a consumer is specifically looking for it. Further, there is allegedly no place for a consumer to acknowledge that they agree to the arbitration provision.

By filing the 1-800 Contacts class action lawsuit, Nance seeks to represent himself and a national Class of consumers who made retail purchases of contact lenses from 1-800 Contacts since Jan. 1, 2004. He also seeks to represent an Arkansas subclass.

The 1-800 Contacts class action lawsuit asserts violations of the Sherman Act and the Arkansas Deceptive Trade Practices Act. He is seeking damages, attorneys’ fees, pre- and post-judgment interest, equitable and injunctive relief, and any other relief deemed proper by the court.

Last year, 1-800 Contacts was hit with a similar class action lawsuit in California over its anticompetitive practices related to online advertising.

Nance is represented by Randall K. Pulliam, Joseph Henry “Hank” Bates, and Justin Craig of Carney Bates & Pulliam PLLC and Steven L. Bloch and James L. Kauffman of Bailey Glasser LLP.

The 1-800 Contacts Class Action Lawsuit is Tyler Nance v. 1-800 Contacts Inc., Case No. 4:17-cv-00178, in the U.S. District Court for the Eastern District of Arkansas.