Contact Lens Study

AGENCY:

Federal Trade Commission.

ACTION:

Notice and request for public comment.

SUMMARY:

In the Fairness to Contact Lens Consumers Act (“the Act”), 15 U.S.C. 7601 et seq., which provides for the availability of contact lens prescriptions to patients and the verification of contact lens prescriptions by prescribers, Congress required the Federal Trade Commission (the “Commission” or “FTC”) to conduct a study (“Contact Lens Study” or the “Study”) of the strength of competition in the sale of prescription contact lenses. In connection with preparation of the Study, the Commission is requesting public comment on several relevant issues.

DATES:

Public comments must be received on or before June 24, 2004.

ADDRESSES:

Interested parties are invited to submit written comments. Comments should refer to “Contact Lens Study, Project No. V040010,” to facilitate the organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission/Office of the Secretary, Room H-159 (Annex L), 600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing confidential material must be filed in paper form, as explained in the Supplementary Information section. The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments filed in electronic form (except comments containing any confidential material) should be sent to the following e-mail box: contactlensstudy@ftc.gov.

The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. All timely and responsive public comments, whether filed in paper or electronic form, will be considered by the Commission, and will be available to the public on the FTC Web site, to the extent practicable, at www.ftc.gov. As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. More information, including routine uses permitted by the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT:

Requests for additional information should be addressed to Maureen Ohlhausen or James Cooper, Federal Trade Commission, Office of Policy Planning, 600 Pennsylvania Avenue, NW., Washington, DC 20580. Telephone: 202-326-2632 (Maureen Ohlhausen) or 202-326-3367 (James Cooper); e-mail: JC_contactlensstudy@ftc.gov or MO_contactlensstudy@ftc.gov.

SUPPLEMENTARY INFORMATION:

I. Background

On December 6, 2003, President Bush signed the Fairness to Contact Lens Consumers Act (“the Act”). Among other things, the Act requires that prescribers—such as optometrists and ophthalmologists—provide contact lens prescriptions to their patients upon the completion of a contact lens fitting. The Act also mandates that prescribers verify contact lens prescriptions to third-party contact lens sellers who are authorized by consumers to seek such verification. The Act directs the Commission to prescribe implementing rules.

The Act also directs the Commission to conduct a study to examine the strength of competition in the sale of prescription contact lenses, including an examination of several specified issues. The Commission today solicits public comments on these issues, as set forth in section II below.

II. Request for Public Comments

In the Act, Congress directed the Commission to undertake a study examining the following issues related to the strength of competition in the sale of prescription contact lenses: (1) The incidence of exclusive relationships between prescribers or sellers and contact lens manufacturers and the impact of such relationships on competition; (2) The difference between online and offline sellers of contact lenses, including price, access, and availability; (3) The incidence, if any, of contact lens prescriptions that specify brand name or custom labeled contact lenses, the reasons for the incidence, and the effect on consumers and competition; (4) The impact of the Federal Trade Commission Eyeglass Rule (16 CFR Part 456 et seq.) on competition, the nature of enforcement of the rule, and how such enforcement has impacted competition; and (5) Any other issue that has an impact on competition in the sale of prescription contact lenses.

In connection with the Contact Lens Study, the Commission particularly is interested in receiving comment on the questions that follow. These questions are designed to assist the public and should not be construed as a limitation on the issues on which public comment may be submitted. Responses to these questions should cite the numbers and subsection of the questions being answered. For all comments submitted, please submit any relevant data, statistics, or any other evidence upon which those comments are based.

With regard to the following questions: (1) Prescribers include eye care practitioners (i.e., ophthalmologists, optometrists, or other persons permitted under state law to issue prescriptions for contact lenses) that sell contact lenses, as well as optical chains and other retailers that offer eye care practitioner services and sell contact lenses; (2) sellers include bricks-and-mortar retailers, as well as mail order and Internet firms that sell contact lenses, but do not offer any eye care practitioner services.

Exclusive Relationships

1. Please comment on the incidence of exclusive manufacturer-prescriber and manufacturer-seller relationships: (a) How common is it for a contact lens manufacturer to sell only to prescribers, to the exclusion of sellers? (b) How common is it for a contact lens manufacturer to sell only to sellers, to the exclusion of prescribers? (c) If a contact lens manufacturer sells only to prescribers or sellers, what type of limitations and restrictions on re-sale typically are found in such agreements? (d) How common is it for prescribers to agree to prescribe only certain manufacturers' contact lenses? (e) Do the manufacturers that are parties to agreements in question (d) restrict the sales they make to sellers and prescribers that are not parties to the type of agreements in (d)?

2. Please comment on whether contact lens prescribers advertise their willingness to provide prescriptions for contact lenses available from competing prescribers and sellers: (a) How prevalent is prescriber advertisement of willingness to prescribe contact lenses available through other prescribers and sellers? (b) How prevalent is consumer awareness of prescribers' willingness to prescribe contact lenses available from alternative prescribers and sellers? (c) Are consumers able to shop for prescribers that will prescribe contact lenses available from alternative prescribers and sellers? (d) What role do state regulatory or self-regulatory bodies play in controlling prescriber advertisements, especially with respect to a prescriber's willingness to prescribe contact lenses that are available from alternative prescribers and sellers? (e) Do manufacturers advertise directly to consumers that their contact lenses are available both from sellers and prescribers? (f) Do sellers advertise that lenses may be purchased from sellers that are not prescribers?

3. Are there instances where exclusive relationships have prevented market entry by a manufacturer, seller, or prescriber?

4. Please comment on the market shares of prescribers, sellers, and manufacturers: (a) What are the national and local market shares of contact lens manufacturers? (b) What are the national and local market shares of sellers? (c) What are the local market shares of contact lens sales by prescribers? (d) Are there instances where a specific prescriber (including different eye care practitioners associated with the same chain or retailer) issues a substantial share of contact lens prescriptions at a local level?

5. Please comment on the benefits, if any, associated with exclusive manufacturer-prescriber and manufacturer-seller relationships: (a) To what extent do exclusive relationships lower costs for manufacturers and/or for sellers and prescribers, and to what extent are these cost savings passed on to consumers? (b) What role do exclusive relationships play in assuring that sellers or prescribers give a manufacturer's contact lenses the desired level of promotion? (c) What role do exclusive relationships play in assuring that sellers or prescribers provide customers with the level of service that manufacturers desire to accompany their contact lenses? (d) What role do exclusive relationships play in discouraging sellers and prescribers from “free-riding” off the promotional or customer service efforts provided by other sellers or prescribers?

6. Please comment on how, if at all, current patterns of exclusive relationships may change in response to the Act.

7. Please provide any other information regarding the impact of the exclusive relationships on competition.

Online and Offline Sellers

8. Are there differences in the prices charged for similar contacts lenses by online and offline merchants?

9. Are there any cost advantages associated with selling contact lenses online versus offline?

10. Please comment whether consumers find it more convenient to purchase contact lenses online or offline: (a) Do consumers save time by purchasing their contacts online rather than at an offline store, or vice-versa? (b) What is the value consumers place on any time savings? (c) Do consumers find greater lens availability online or offline? (d) Irrespective of any time savings, do consumers find it more convenient to purchase contact lenses online rather than at an offline store, or vice-versa? (e) Do consumers who purchase contact lenses from online sellers differ from consumers who purchase from bricks-and-mortar sellers and prescribers with regard to income, education, geographic location, or any other attribute? (f) What is the cost to consumers of home delivery of contact lenses?

11. Do consumers who purchase contact lenses from offline sellers have any differing concerns with regard to the quality of the lenses they receive from those who purchase contact lenses online?

12. Please comment on the extent to which online and offline contact lens sellers compete: (a) To what extent are offline contact lens sellers' pricing decisions affected by prices offered by online sellers? (b) To what extent are online contact lens sellers' pricing decisions affected by prices offered by offline sellers? (c) To what extent do prices charged for identical contact lenses vary among online sellers, and is the variance any greater or smaller than that found between prices offered by offline sellers? (d) Are some online sellers perceived by customers as preferable to other online sellers in terms of customer service, ease of shopping, trustworthiness, or any other non-price characteristic? (e) Are some offline sellers perceived by customers as preferable to other offline sellers in terms of customer service, ease of shopping, trustworthiness, or any other non-price characteristic? (f) Do contact lens manufacturers charge different prices to online and offline sellers? (g) If there are differences in the prices manufacturers charge to online and offline sellers, to what extent do they reflect differences in the cost of serving online and offline sellers, and/or different levels of customer service and promotion provided by online and offline sellers?

13. Please provide any other information regarding the difference between online and offline sellers of contact lenses.

Prescriptions That Specify Brand Name or Custom Labeling

14. Please comment on the incidence of brand name and custom label contact lens prescriptions: (a) What is the incidence of contact lens prescriptions that specify a brand name? (b) What is the incidence of contact lens prescriptions for custom labeled contact lenses? (c) Is the incidence of the prescribing practices in (a) and/or (b) increasing or decreasing? (d) Please comment on how, if at all, current patterns of prescriptions requiring brand name or custom-labeled contact lenses may change in response to the Act.

15. What are the benefits of contact lens prescriptions that specify a brand name or custom labeled contact lenses? What are the costs of contact lens prescriptions that specify a brand name or custom labeled contact lenses?

16. What role do state laws or regulations play in determining what a prescriber must include on a prescription, including whether a prescription must contain a brand name?

17. What is the incidence of brand name or custom labeled contact lenses being available only through the prescriber?

18. How prevalent is consumer awareness that a prescriber may prescribe custom labeled or brand name lenses that are available only from the prescriber?

19. Please comment on whether contact lens prescribers advertise their ability to prescribe custom labeled lenses or their willingness to prescribe contact lenses available from a variety of sellers: (a) How prevalent are prescriber advertisements that they prescribe custom labeled lenses or advertisements that they prescribe contact lenses available from a variety of sellers? (b) Are consumers able to shop for prescribers based on whether they prescribe custom labeled contact lenses or contact lenses available from a variety of sellers? (c) What role do state regulatory or self-regulatory bodies play in controlling prescriber advertisements with respect to their ability to prescribe custom labeled lenses or their willingness to prescribe contact lenses available from a variety of sellers?

20. Please provide any other information regarding the impact on competition of prescriptions that specify brand name or custom labeled contact lenses.

Impact of the FTC Eyeglass Rule on Competition

21. Describe the state of competition in the market for the retail sale of prescription eyeglasses at the time that the Commission issued the Eyeglass Rule in 1978, including, but not limited to, a description of the products included in the market, the market's geographic scope (e.g., national, regional, local), the market shares of firms, and any barriers to entry.

22. Referring to the factors listed in question 21, describe how competition in the market for the retail sales of prescription eyeglasses has changed since the Commission issued the Eyeglass Rule in 1978.

23. To what extent are the differences in competition in the market for the retail sale of prescription eyeglasses since 1978 attributable to the following factors: (a) Changes in federal law, including the issuance and enforcement of the Eyeglass Rule; (b) changes in state law; (c) changes in industry standards or trade association rules or policies; (d) changes in technology; or (e) other changes in the marketplace?

24. To the extent that the changes in competition in the market for the retail sale of prescription eyeglasses since 1978 are attributable to the issuance and enforcement of the Eyeglass Rule, identify the specific Rule provisions that have affected competition, how those provisions have affected competition, and the extent of the effect on competition.

25. Has the issuance and enforcement of the Eyeglass Rule affected prices in the market for the retail sale of prescription eyeglasses? If so, how and to what extent?

26. Has the issuance and enforcement of the Eyeglass Rule caused or prompted states to change their laws or policies regarding prescription eyeglasses? If so, what changes were made and what effect did they have?

27. Has the issuance and enforcement of the Eyeglass Rule caused or prompted private entities (e.g., trade associations) to change their rules or policies relating to prescription eyeglasses? If so, what changes were made and what effect did they have?

28. Please provide any other information regarding the impact on competition of the Eyeglass Rule.

Other Issues Related to Competition in the Sale of Prescription Contact Lenses

29. Do state licensing requirements affect out-of-state sellers' abilities to compete with in-state sellers or prescribers for the sale of prescription contact lenses?

30. What role do state licensing requirements applicable to sellers of contact lenses play in protecting consumers?

31. Please provide any other information regarding issues that affect competition in the sale of prescription contact lenses.

All persons are hereby given notice of the opportunity to submit written data, views, facts, and arguments addressing the issues raised by this Notice. Written comments must be submitted on or before June 24, 2004. Comments should refer to “Contact Lens Study, Project No. V040010,” to facilitate the organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission/Office of the Secretary, Room H-159 (Annex L), 600 Pennsylvania Avenue, NW., Washington, DC 20580. If the comment contains any material for which confidential treatment is requested, it must be filed in paper (rather than electronic) form, and the first page of the document must be clearly labeled “Confidential.” The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments filed in electronic form should be sent to the following e-mail box: contactlensstudy@ftc.gov.

The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. All timely and responsive public comments, whether filed in paper or electronic form, will be considered by the Commission, and will be available to the public on the FTC Web site, to the extent practicable, at www.ftc.gov . As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. More information, including routine uses permitted by the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.