Contact Lens Retailers Settle Antitrust Lawsuit Over Search Ads

Contact lens retailers National Vision and Arlington Contact Lens have agreed to settle a class-action lawsuit stemming from allegations centered on their search advertising campaigns, court papers reveal.

The settlements will resolve all claims "in exchange for a monetary payment plus specified cooperation," according to documents filed last week with U.S. District Court Judge Tena Campbell in the Central District of Utah. More detailed terms haven't yet been disclosed.

National Vision and Arlington Contact Lens were among several retailers sued by consumers for allegedly violating antitrust laws by agreeing to restrict the keywords they purchased to trigger search ads. National Vision and Arlington Contact Lens, along with other contact lens retailers, allegedly did so in response to legal threats by 1-800 Contacts -- which itself faces both a class-action antitrust lawsuit and prosecution by the Federal Trade Commission.

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The class-action against the sellers came several months after the FTC brought a case against 1-800 Contacts for allegedly preventing rivals from using the term 1-800 Contacts to trigger search ads. The FTC contends that 1-800 Contacts' tactics amounted to a violation of antitrust laws and an unfair business.

The FTC alleged 1-800 Contacts either sued or threatened to sue competitors for allegedly infringing trademark by purchasing the keyword "1-800Contacts" as a trigger for pay-per-click search ads. From 2004 through 2013, the company allegedly sued or threatened to sue at least 15 competitors over trademark infringement on search engines, according to the FTC. Of those rivals, only Lens.com fought the lawsuit, which ended in a ruling largely in Lens.com's favor.

The agency argues that the agreements to restrict keyword advertising harmed search engines by distorting their ad auctions and reducing the quality of the search results. The FTC also says the agreements resulted in higher prices for consumers, arguing that 1-800 Contacts charges more than other online contact lens retailers, but that consumers stop searching and "settle for whatever price is offered by 1-800 Contacts" if that company is the only advertiser in the search results.

The FTC action against 1-800 Contacts is still pending before an administrative law judge.

In the class-action, a group of consumers allege that 1-800 Contacts "devised a plan to limit competition by manipulating the market for the placement of online advertisements through online search engines."

The customers also sued retailers Vision Direct, Walgreens and Luxottica. That suit alleges that 1-800 Contacts and the other retailers "entered into and enforced a series of illegal, written, bilateral agreements to prevent the dissemination of truthful and relevant information ... regarding competing sellers of contact lenses online and the prices they offer for their products in order to and with the effect of elevating the prices that consumers pay for the purchase of contact lenses online."

1-800Contacts' general counsel Cindy Williams previously said the suits against the company "have no merit whatsoever."

She said last year that the company "strongly disagrees" with claims that the trademark settlement agreements are anticompetitive.

Federal courts haven't definitively resolved questions surrounding the use of trademarks in search advertising. Google and Yahoo have prevailed in several lawsuits alleging that they wrongly allowed a trademarked term to trigger pay-per-click ads, as have several advertisers. But judges have allowed other lawsuits over the question to proceed.

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