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Taking a closer look at contact lens pricing

State bills would restore your right to seek a discount on lenses

Published: April 17, 2015 03:15 PM

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Last summer, Consumers Union, the policy and advocacy arm of Consumer Reports, testified at a Senate hearing about a troubling shift in the pricing policy of major contact lens manufacturers. The lens makers were prohibiting retailers from charging less than a minimum price, which effectively blocked retailers from offering discounts to consumers.

These manufacturers claim they each decided on this move independently, but the Senate Antitrust Subcommittee was rightly skeptical. The manufacturers knew that if they were coordinating with one another or with high-price retailers to stop discounting that would get them in hot water under the antitrust laws. This area of law has become less clear-cut in recent years. But the surest way to avoid antitrust trouble is to act independently, or as the antitrust cases refer to it, “unilaterally.” That’s why the manufacturers all call their anti-discount edict a “unilateral pricing policy.”

Today the manufacturers that account for about 98 percent of all contacts sold in the U.S. are setting minimum retail prices. Who benefits from denying discounts to price-conscious consumers? High-price retailers, including eye doctors who sell contact lenses directly to their patients. And the eye doctors determine which contact lenses to prescribe for each patient. So each manufacturer wants to stay on the doctors’ “good list.”

Without this warped incentive, contact lens manufacturers would likely welcome retail discounting, because more consumers could afford to buy contacts. Manufacturers would still set the wholesale price, so each retail sale, at any price, would provide the same benefit for the manufacturer. That’s how a healthy competitive market should work.

Consumers Union fought this battle more than a decade ago. It used to be that eye doctors wouldn’t even give patients the contact lens prescription, making it exceedingly difficult to get contacts anywhere else but at the doctor’s—and at the price the doctor charged. That finally changed in 2003, when Congress passed the Fairness to Contact Lens Consumers Act, requiring eye doctors to hand over that prescription.

Today, while consumers are free to buy contacts wherever they want, they can’t get discounts on the lenses. This is an important pocketbook issue for the nearly 40 million Americans who spend more than $4 billion each year on contact lenses. Modern-day contact lenses are made to be replaced frequently, and a markup on each pair adds up quickly.

Federal regulators are reportedly taking a close look at this situation. State legislatures are considering directly prohibiting these restrictions on retail discounting. Legislation has been enacted in Utah and is in various stages of consideration in Arizona, California, Florida, Idaho, Illinois, Minnesota, Mississippi, New York, Oregon, Rhode Island, and Washington State.

Consumers Union supports these efforts, and we’re pleased they are making headway. We’re going to keep pressing for reforms to restore your ability to seek a discount on your lenses.

This feature is part of a regular series by Consumers Union, the policy and advocacy arm of Consumer Reports. The nonprofit organization advocates for product safety, financial reform, safer food, health reform, and other consumer issues in Washington, D.C., the states, and in the marketplace.

Read other installments of our Policy & Action feature.

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