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.
