BILL NUMBER:S4106

TITLE OF BILL:

An act to amend the general business law, in relation to unilateral
pricing policies or agreements for contact lenses

PURPOSE:

The purpose of this bill is to protect consumers of contact lenses
from restrictions on retail competition imposed by contact lens
manufacturers.

SUMMARY OF PROVISIONS:

Section one of the bill adds a new § 349-f to the general business law
and prohibits manufacturers or distributors of contact lenses from
establishing unilateral pricing policies or agreements with respect to
contact lenses. This section also contains language authorizing the
Attorney General to enforce these provisions.

Section two of the bill is the effective date.

JUSTIFICATION:

All four contact lens manufacturers in the United States recently
              

launched a Unilateral Pricing Policy (UPP), which sets minimum resale
prices that all retailers must comply with in order to sell contact
lens. As a result, non-prescribing retailers may be forced to raise
prices to the new "minimum" price or be cut off from supply. Since the
establishment of the UPP, many consumers have found that their
preferred method of purchasing contact lenses now has higher prices.
This may be the result of the UPP's effect on the elimination of price
competition among retailers.

For most regular manufacturers of consumer products, employing a UPP
for certain items may provide benefits in the form of brand protection
and by highlighting consumer products in the marketplace.  For
example, companies such as Apple use this practice for new release
products, such as the iPhone 6. In the 2007 U.S. Supreme Court case
Leegin Creative Leather Products, Inc. v. PSKS, Inc. the court held
UPP practices as legal under a "Rule of Reason" standard.  The "Rule
of Reason" standard requires a court to look at the economic effects
of the policy on competition between rival manufacturers. In the case
of certain consumer products, such as the iPhone, competition among
rivals may actually be enhanced because the consumer has the option to
buy a different product, either from the same manufacturer or from a
competitor.

However, the contact lens industry operates differently from most
other consumer product industries, which in turn makes such Unilateral
Pricing Policies anticompetitive and harmful to the consumer. Under
federal law, contact lenses cannot be purchased without a
prescription. Lenses are prescribed by brand, and most often, the
brand is chosen by the prescriber with little, or no, input from the
consumer. Once prescribed a brand, the patient is effectively barred,
by federal law, from switching to an alternative brand for the life of


the prescription. If the patient wants a different product, he or she
typically would need to pay for another exam.

In this unique healthcare setting, where the patient has little, if
any, input in choosing the product, where the healthcare provider acts
as the retailer, and where the prescription is brand-specific with no
choice for substitution, Unilateral Pricing Policies, such as the ones
recently launched by all four U.S. contact lens manufacturers, are
harmful to competition and to the consumer-patient in the contact lens
marketplace. This legislation would prohibit the four U.S. contact
lens manufacturers from instituting a UPP for contact lenses and would
restore competition and consumer choice to the market.

LEGISLATIVE HISTORY:

This is a new bill.

FISCAL IMPLICATIONS:

None to the State.

EFFECTIVE DATE:

This act shall take effect immediately.