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The Â鶹´«Ã½ Trade Commission today released a staff report concluding that e-commerce offers consumers greater choices and more convenience in the contact lens market. This staff report is part of a series of reports that examine possible anticompetitive barriers to e-commerce in a variety of industries. “In contact lenses and other industries, barriers to e-commerce can deprive consumers of the benefits of increased competition,” said Timothy J. Muris, Chairman of the FTC.
Agency Supports Competition in Contact Lens Industry

Sales of contact lenses in the U.S. are well over $1 billion per year. Nearly 36 million Americans – approximately 13 percent – wear contact lenses. There are numerous contact lens manufacturers and many different channels of distribution, including eye care practitioners, national and regional optical chains, mass merchants, and mail order and Internet firms.

In the past, contact lenses were designed to be replaced infrequently and consumers generally purchased lenses from their eye care providers. The advent of disposable soft contact lenses – which consumers wear for a few weeks and throw away – followed by the growth of non-practitioner lens sellers, such as Internet-based contact lens retailers, have changed the market dynamics. Although eye care providers still control the prescription process, consumers now not only purchase more lenses with greater frequency, but they also have a greater choice of lens suppliers and modes of delivery. The report states that non-traditional contact lens sellers, such as Internet providers, represent a unique alternative distribution channel and offer some consumers a combination of price and convenience that they value highly.

The Commission has a long history of activity in the eye care industry through law enforcement, advocacy before other government agencies, and rulemaking. The FTC has filed comments with state legislatures and licensing boards addressing proposals that could reduce choice or increase costs for consumers. It also promulgated the Ophthalmic Practices Rule that requires optometrists and ophthalmologists to provide patients with a copy of their eyeglass prescription after completion of an eye exam at no extra cost.

Congress recently enacted the Fairness to Contact Lens Consumers Act, which requires 1) that eye care providers give patients a copy of their contact lens prescriptions at the completion of a contact lens fitting; and 2) that contact lens sellers either obtain a copy of the prescription or verify the prescription information with the prescriber before selling contact lenses to consumers. The Commission is currently seeking comment on a proposed “Contact Lens Rule” to implement the Fairness to Contact Lens Consumers Act.

“Congress passed the Act to enhance consumer choice and competition among contact lens sellers, thereby benefitting consumers” said Todd J. Zywicki, Director of the Office of Policy Planning. “It is an excellent example of how Congress can act to overcome barriers to interstate e-commerce that may restrict competition to the detriment of consumers, while also preserving valuable consumer protections.”

Key Findings and Recommendations

After extensive analysis, the FTC staff report reached the following conclusions regarding online contact lens sales:

• Although there are significant health issues concerning the use and sale of contact lenses, requiring a professional license to sell replacement contact lenses over the Internet is likely to raise prices and/or reduce convenience to consumers without substantially increasing health protections already provided by existing prescription requirements and general consumer protection laws. Staff therefore recommends that policymakers rescind, or refrain from adopting, requirements that an Internet seller have a professional license to sell replacement contact lenses. If states find it necessary to regulate replacement lens sellers further, they should consider adopting simple registration requirements.
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• The release of contact lens prescriptions by eye care providers facilitates consumer choice among replacement contact lens suppliers, and greater consumer choice increases consumer welfare. Likewise, adherence to the prescription requirement is important to consumer health. Consumers are more likely to adhere to recommended replacement schedules if lenses are less expensive and more conveniently available, however. Â鶹´«Ã½ of prescription release and verification requirements will help ensure that both consumers’ health and economic interests are protected.
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• Private label lenses and short prescription lengths can promote consumer health and welfare but can also limit consumer choice. Enforcing statutory provisions regarding private label lenses and prescription length will help ensure that contact lens seller and prescriber practices generally promote consumer health and welfare and do not hamper consumer choice in a way that ultimately harms consumers.

The FTC’s E-Commerce Initiative

This report continues the FTC’s efforts to promote competition over the Internet. In August 2001, Chairman Muris convened the Internet Task Force to evaluate government regulations and business practices that could impede online competition. The Task Force found that many state regulations favor local suppliers over out-of-state competitors, and that others ban online competition altogether for particular goods or services.

In October 2002, R. Ted Cruz, then-Director of the Office of Policy Planning, testified before the Subcommittee on Commerce, Trade, and Consumer Protection of the House Committee on Energy and Commerce regarding possible barriers to e-commerce and focused on restrictions to internet commerce in auctions, contact lenses, and wine. That same month, the Task Force conducted a workshop to study possible anticompetitive barriers to e-commerce in ten industries, including the contact lens industry. At the workshop, FTC staff heard testimony from all sides of the issue, including online sellers, brick-and-mortar companies, state officials, academics, and consumer groups. In July 2003, the Task Force released a report on anticompetitive barriers to e-commerce in wine sales. In October 2003, Todd J. Zywicki, current Director of the Office of Policy Planning, testified before the Subcommittee on Commerce, Trade, and Consumer Protection that states could significantly enhance consumer welfare by allowing the direct shipment of wine. The Internet Task Force will release a final report on the workshop’s complete findings later this year.

Besides examining state regulatory barriers to e-commerce at the workshop, FTC staff has encouraged pro-competitive state regulation in other ways. For example, in Connecticut, FTC staff filed comments with the state’s Board of Examiners for Opticians that argued against regulations that would have made it more difficult for online vendors to sell contact lenses to consumers (these comments are included as an appendix in the current report). In Oklahoma, FTC staff filed an amicus brief opposing barriers to online sales of caskets. Similarly, FTC staff with the Department of Justice filed joint comments in a number of states and with the American Bar Association to discourage the adoption of definitions of the practice of law that could raise barriers to providing services online.

The Commission vote authorizing staff to release the report was 5-0.

NOTE: The findings expressed in the report are those of the staff of the FTC’s Office of Policy Planning, Bureau of Consumer Protection, Bureau of Competition, and Bureau of Economics and do not necessarily represent those of the Commission or any individual Commissioner.

Copies of the report are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Â鶹´«Ã½ Trade Commission, 600 Pennsylvania Ave., N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws, which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.