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A05245 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A5245
 
SPONSOR: Dinowitz (MS)
  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 manufactur- ers.   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 compe- tition 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 prescri- ber 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: 2015-16: A.4530- Referred to Codes/S.4106 - Referred to Consumer Protection   FISCAL IMPLICATIONS: None to the State.   EFFECTIVE DATE: This act shall take effect immediately.
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