1-800 Contacts Takes Fight Over Search Ads To Appellate Court

Contact lens retailer 1-800 Contacts is blasting a “short-sighted” Federal Trade Commission decision that the company's efforts to police the use of its trademark in search advertising violated antitrust law.

“The Commission’s process for assigning antitrust liability was deeply flawed at every step and threatens to transform ordinary and competition-enhancing business practices into presumptive antitrust violations,” the company writes in papers filed with the 2nd Circuit Court of Appeals. “The Commission’s short-sighted antitrust decision will undermine trademark policy and, in the long run, competition itself.”

The company is asking the 2nd Circuit to reverse a decision issued last year by the FTC, which ruled 4-1 that 1-800 Contacts violated antitrust law by entering into agreements with rivals that prevented them from using the trademarked term “1-800 Contacts” to trigger search ads.

The finding stemmed from business practices dating to 2004, when 1-800 Contacts first threatened to sue a competitor for allegedly infringing trademark on search engines. From 2004 through 2013, the company sued or threatened to sue 15 competitors over trademark infringement on search engines.  

Fourteen of those companies settled the lawsuits by entering into agreements to restrict the use of the company's trademarks in search ads. Only Lens.com fought the lawsuit, which ended in a ruling largely in Lens.com's favor.

1-800 Contacts argued to the FTC that the agreements helped protect the company's trademark, but the FTC said the agreements restricted truthful ads that may not have confused consumers.

Chairman Joe Simons said in a written opinion that the agreements may have deprived consumers of the ability to compare brands.

“When information is withheld from consumers, it frustrates their ability to compare the prices and offerings of competitors,” Simons wrote. “This is as true today, when consumers search for goods online, as it was when people shopped open-air markets for vegetables every evening.”

1-800 Contacts now argues that its trademark settlements with rivals were valid, and that it shouldn't be subject to an antitrust prosecution for either bringing or settling trademark claims.

“Settling a trademark lawsuit to block a potentially infringing advertisement cannot be a plausible antitrust violation,” the company argues. “If allowed to stand, this rule will deter efficient settlements and undermine trademark policy and brand investments.”

The retailer also says the agreements with rivals didn't prevent consumers from learning about other sellers.

“If a consumer wanted to learn about her options for purchasing contact lenses, all she had to do is type 'contact lenses,' 'contact lens retailers,' 'discount contacts,' the name of a contact lens product, or any one of thousands of non-trademarked words into a search engine,” the company writes.

The FTC is expected to respond to the retailer's arguments in September.

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