FTC Workshop: The Contact Lens Rule and the Evolving Contact Lens Marketplace

March 7, 2018

Segment 2

Transcript

TARA KOSLOV: All right. Good morning everyone. My name is Tara Koslov. I'm the acting 

director of the FTC's Office of Policy Planning. With me is my colleague Chris Granks. He's an 

attorney in the Bureau of Competition and we're delighted to welcome you to the competition 

panel. We're going to do the very briefest of introductions of our panelists in just a moment. But 

we refer you to the materials and the bio to save some time. 

So just to frame this panel a little bit, obviously, competition in the sale contact lenses has long 

been an issue of great interest to the FTC. Was a natural outgrowth of some similar work the 

FTC had done in eyeglasses. And so this general industry is something that the FTC has paid 

attention to for quite a while. It's also worth noting that the states have played a significant role. 

We did hear in one of the earlier panels that even before the Fairness to Contact Lens Consumers 

Act and the Contact Lens Rule, many states already had some prescription release requirements 

on the books. We also know that in the 1990s, there was a sweeping MDL action brought by the 

states that led to significant pro-competitive reforms in the sale of contact lenses. And so, we 

wanted to acknowledge the progression of work in competition. 

A primary purpose of the FCLCA and the Contact Lens Rule was to spur additional competition 

among sellers of contact lenses. The idea was to generate both price and non price benefits for 

consumers. What we're planning to explore today is, ultimately, has the Contact Lens Rule 

worked as intended to promote competition? To what extent does it adequately account for the 

complex relationships among all of the different stakeholders and participants in this 

marketplace? Including consumers, of course. And then really, we want to drill down on what 

are the competitive dynamics in today's marketplace and how well are the law and the 

regulations currently working to accommodate the dynamics in today's marketplace and to 

continue to foster competition as the marketplace evolves. 

So just to briefly go down the line, we have James Cooper, who is an associate professor at 

George Mason University Antonin Scalia Law School. We have John Graham, who is the CEO 

of 1-800-Contacts, Gary Swearingen, who is corporate counsel from Costco. David Sonnenreich, 

who joins us as the Deputy Utah Attorney General from the Attorney General's office in Utah, 

and Mitch Wessells, who is Senior Director of Contact Lenses from Luxottica. 

We realize that if we had a longer table and unlimited time, there are any number of stakeholders 

and participants that we could have who could contribute meaningfully to a discussion about 

competition in this space. So, and of course, we recognize that there will be many written 

comments coming in. We expect there will be a lively discussion on the Twitter feed during the 

panel. So I just did want to acknowledge that we've done our best to put together a representative 

panel to tease out as many of the issues as we can. Chris is going to start. I'll turn it over to him. 

CHRIS GRANKS: Great. One of the purposes of this panel is to understand where competition 

currently is in the marketplace and where it might be going. In order to get a little bit of 
perspective on that, we thought we'd step back and look at where competition has been in the 

recent past. In addition to implementing and enforcing the Contact Lens Rule, the commission 

and its staff have also done multiple research activities in recent years. We've done a staff report, 

a commission report, and James Cooper sitting next to me has also done a Bureau of Economics 

working paper on contact lenses for those folks following the Twitter feed or posting links to 

those items up on our Twitter feed. And we're going to ask James to do a bit of a summary of the 

commission and staff's previous work in this area. James is currently at George Mason 

University Law School. But he has been here in the past as an FTC staffer. James? 

JAMES COOPER: Yeah. Thanks. As we deal with the high tech here. Let's see. Is my 

PowerPoint-- will it come up? There we go. All right, so, Chris and Tara asked me to get into the 

Way back Machine and go back to 2005. This is one of the-- it's really-- let me just say, it's also 

great to be back here at the FTC. I always love coming back. And I never would have thought 

that one of my first assignments as a young attorney in the Office of Policy Planning to work on 

the report that Congress ordered, out of the Contact Lens Report, 13 years later, it would be-- I'd 

be invited back to talk about it still. That's how good it is. So, I recommend-- it's a riveting read. 

And I'm also glad to hear that there's Twitter links to my SSRN page. So that's going to be good 

too. I'll get a lot of hits there. 

All right, so, just by way of background, you know, the Contact Lens Report didn't really come 

out of-- it didn't come out of nowhere, land on the FTC's lap out of nowhere as most of you 

know. And I think it was a natural fit, as Tara alluded to in the intro. The FTC has had a long, 

long history of not just in the optometrist market. But also, just in professional services in 

general looking at aspects of competition, there, especially state barriers to regulation, in the '70s 

and '80s, in particular. The FTC, both on the competition side and the Bureau of Economics-- I 

think John Kwoka did great work in this area as well looking at the impact of commercial 

practice restrictions, looking at the impact of advertising restrictions. Not only did the FTC 

administer the Eyeglasses Rule, which did prescription release for eyeglasses. There was also the 

less successful attempt in Eyeglasses Two to eliminate commercial practice restrictions. But 

again, we have a long history in this area. 

And at the same time, let's fast forward to from the historical perspective up to 2001. Chairman 

Muris had come in and put together a task force to look at-- anti-competitive-- to look at state 

barriers-- anti-competitive barriers to on e-commerce. And one of the industries that we were 

looking at, and again, I just, I was brand new to the Office of Policy Planning, was the contact 

lens market. Because there were state restrictions being put in place that were designed to keep 

out these online upstarts who were selling contact lenses. 

And so we had looked at that and issued a report in, it was either early 2004 or late 2003, I can't 

remember. On that, the same undercurrents, the same jockeying, the competitive jockeying 

between incumbents and rivals was going on in the state houses. It was also-- it led to the 

Fairness to Contact Lens Consumer Act in Congress, right? So we had battles between the 

incumbents and the online rivals leading to state restrictions. But then we had, at the federal 

level, we had the Fairness to Contact Lens Consumer Act, which was supposed to be, which did 

prescription release. That was the primary part of it, in order to help ameliorate some of these 

competitive problems. There were still a couple of outstanding issues that were not addressed in 
the Fairness to Contact Lens Consumer Act. And as Congress so often does when there's 

something they can't resolve, well, let's do a study, right? 

And so, the FTC then was tasked to undertake a study to examine the strength of competition in 

the sale of prescription contact lenses. And again, my history there is just a way of saying the 

FTC was a natural fit for this study. Now, what do we look at? There are a couple of things we 

were going to look at. First, just what is the online, offline? What does the marketplace look 

like? So we went out and gather data. We looked at offline sellers of contact lenses. We had a 

team of RAs who posed as, call up and say, hey I'm interested in buying a six month supply of 

this lens or that lens and get a offline quote from various merchants in the northern Virginia area. 

And then, we surveyed the online prices as well. And we got submissions from people during the 

study with-- but we thought it was good for us to go out and gather our own data to see what the 

marketplace really looked like. And the table here, it's-- I apologize for the small print, but I 

could not find the ancient document where this came from. So this is a screenshot from the PDF 

of the 2005 really awesome report. 

So but what I would highlight there is the-- those two numbers right there are just the delta, the 

difference between online and offline on average for the 10 most popular lenses that we 

surveyed. And what we found is that, on average, it's $16.20. As you'll see, though, one thing 

that's kind of interesting is that the online-- we found with the online prices were cheaper on 

average. But the cheapest channel was the warehouse clubs, OK? So that was the cheapest 

channel. The independent eye care practitioners were the most expensive channel that we found. 

And when you broke down online, there were the hybrids. This was the online presence of brick 

and mortar stores. And they were substantially higher than the pure online players. And actually, 

this is a consistent finding. There's a recent paper in the American Economic Review that looks 

at millions and millions of data points and finds, actually, that to be kind of a truism across 

channels. That there isn't a lot of gap when you have an online and offline presence, you 

typically tend to keep prices fairly similar between those two channels. 

So, anyway, just for completeness, we also realized, we did we did some regression analysis-- it's

in the appendix-- the control for the different mix of lenses. And we found basically the same 

thing. That on average, there's a $15.48 difference. And we found the same intra channel 

differences. Warehouse clubs, the least expensive out of everybody. And warehouse club, the 

least expensive. And independent eye care practitioners, the most expensive. All right? 

So here is the more contentious issue we were asked to look at, the one that was not addressed in 

the Fairness to Contact Lens Consumer Act, that many had lobbied to be-- that should've been 

part of the act, as I understand the history of that. And it had to do with private label and limited 

distribution lenses. So, the private label at the time, it was Biomedics 55. And sometimes, it was 

labeled-- the Walmart, I think, had their own proprietary label. Some independent eye care 

practitioners may have had their own proprietary label. But it was the generic Biomedics 55 lens. 

So the idea there was that. There was also, at the time, Cooper Vision's Pro-Clear Compatible. 

Cooper Vision-- and we'll get into this more-- wasn't part of the MDL settlement. So they didn't 

have to, as part of the settlement, sell lenses to everybody, to all channels. So there was some 
concern that the Cooper Visions offerings-- no relation, by the way, unfortunately. The Cooper 

Vision lens and the limited distribution lenses would allow eye care prescribers to lock their 

consumers in. In the sense that, here's a lens. Yes, there's a prescription release requirement. But, 

you can take this prescription, but you can't go anywhere else. You've got to buy it from me 

because I'm the only one that sells either the private label, or you're not going to find the ProClear compatible online. You're going to have to buy it from me. 

And that was the idea. So there's certainly a theory of competitive harm, potential competitive 

harm from the lock in. But at the same time, as economists have known forever, that vertical 

restraints on trade, there's a lot of pro-competitive efficiencies that can come from different--

from limiting vertical distribution. And so, in some ways, it became-- you had theory that didn't 

point to a specific answer. So let's go out and look at the data. 

And what we found from going out is we found no price difference between the private label and 

their brand name equivalent. So, this was-- in fact, the brand name, Biomedics 55, is actually 

slightly more expensive. Those numbers are not statistically significant. So for all intents and 

purposes, it's exactly equal. Looking at the Pro-Clear compatible, the Pro-Clear lens, we didn't 

find any evidence that actually-- I mean, we didn't have a perfect benchmark. But we looked at 

some of the advanced lenses with some of the same decay and what are content values, the 

breathability parameters that Pro-Clear had, which was actually, I think, a fairly advanced lens at 

the time. 

And we actually, there was no-- when we controlled for those kind of things, we didn't find any 

difference. So our conclusion was that there is a potentially anti-competitive theory here. But at 

least our review of the data doesn't push our prior that this isn't the kind of thing that we need to 

restrict and say, you know, you can't have limited distribution lenses, or you can't have private 

labels. 

So, and then, finally, just to kind of wrap up, is we did a, when I was in the Office of Policy 

Planning, we thought it would be interesting to go back. Because one of the things that the FTC 

does in a lot of areas, which I commend it for, is retrospectives to go back and they do that a lot 

on merger policy. Let's go back and see if what we've done has actually been effective. So, we 

wanted to go back and see if the prescription release requirement actually had any impact in the 

marketplace, at least as far as we could measure with respect to prices. As Chris alluded to, this 

turned into a BE working paper. And it's, again, on my SSRN page, if anyone wants to click on it 

and take a look. 

But, these are regression results. And I know this isn't an academic seminar. But the point from 

here is what we were looking for is negative coefficients. And we really didn't find any. So what 

we looked at is the, did the price gap between online and offline change in any meaningful way 

between 2000-- fall of 2004, which is when we measured our first-- took-- or fall. I'm sorry, fall 

of 2003, when we took our first price measurements, and fall of 2007 when we took these price 

measurements. And the punch line is that we didn't find really any change in any statistically 

significant change in the gap. They're still maintained roughly about the same gap as there was in 

2003. And also looking at measures of price dispersion, which is the variance in price, did the 
price-- did the range of prices compress? We didn't really find any evidence of that either. And 

that's also another kind of indicia of price competition. 

So the take away from the 2007 follow up study is the market hadn't really changed in any 

meaningful way that we could see, at least from our sample in 2007. So that's where I'll leave 

you, leave you off. So we're up to at least 2007 now. And I'll turn it over to the rest of the panel 

to bring us up to date. 

CHRIS GRANKS: Great. Thank you for that background, James. And we'll fast forward to 

today, and try to understand a little bit more about where consumers are buying their contact 

lenses. So we're going ask our three retail panelists to each give a snapshot of their various 

businesses and business models so we can understand where consumers are getting their contact 

lenses. So if we could start off with Mitch Wessells of Luxottica. Luxottica has a number of 

brands underneath its umbrella. And then move on to Gary Swearingen of Costco. And finish up 

with John Graham of 1-800-Contacts. 

MITCH WESSELLS: Thanks Chris. I suspect I'm going first because it is the most complex 

model. We've got about 2,500 locations in the United States that sell contact lenses. As Wally 

pointed out earlier, the split of doctor type, there's only about 5% of those locations that actually 

employ a doctor. 95% of the locations have an independent eye care provider associated with the 

business next door. That breaks down as Lenscrafters, with about 950 locations. And within 

Lenscrafters, half of those locations have a sublease doctor who owns the contact lens business. 

So they work next door. They collect the revenue for all of the professional services they 

provide. And they also sell contact lenses. The retail side of the business does not sell contact 

lenses. 

In the other 450 locations, the retail side of the business sells the contact lenses. We either have 

an employed doctor or we have a sublease doctor who does not sell contact lenses. You move 

over to Pearl Vision, which has 500 locations in the US. 440 of those locations are franchise 

businesses. In a franchise world, the franchisee owns the entire business. They own the 

professional services, the contact lens business, as well as the eyeglass business. Within the 60 or 

so stores that are corporately owned, it's a mix of sublease and sublease who don't sell. 

Target Optical now has just over 500 locations. All Target Optical doctors are independent 

sublease doctors who do not sell contact lenses. We sell the lenses on the Target side. Target also 

operates TargetOptical.com where we sell contact lenses online. 

Sears Optical has just over 500 locations. And it's the same exact set up as I just described for 

Target. Only Sears Optical does not have an online presence. 

And then, we also operate Contacts Direct, which is a direct to consumer e-commerce site. And I 

failed to mention Lenscrafters also sells online. So we've got four brick and mortars. Two of 

those brick and mortars have an online component to them. And we have a standalone online 

component as well. 
Throughout an average year, Luxottica affiliated doctors perform about 2 million contact lens 

exams a year. 

GARY SWEARINGEN: Again I'm Gary Swearingen from Costco. Costco is fairly simple 

model. We are the fourth largest retailer of eye wear in the country. We have our own eyeglass 

lens manufacturing plant. Eyeglasses are about 75% of the business. Contact lenses, around 25% 

of the business. We've been selling contacts since about 1990. We sell all brands. Our 

warehouse-- our model is, we lease space to independent doctors of optometry, and all the 

warehouses that we're allowed by law. So they are independent. They run their own practices. It 

tends to be a pretty good gig for them. And pretty good for us, too. 

We sell internationally in all the countries we're in. And we're 18 months into our online sales of 

contact lenses. 

JOHN GRAHAM: I'm John Graham, the CEO of 1-800-Contacts. We have a fairly simple 

business model as well. I always explain to people in our industry that we're basically a 

pharmacy for contacts. Most pharmacies sell a lot of different goods. We sell 80,000. But they're 

all contacts. We have about 80,000 SKUs and they're all contact lenses. There are a couple of 

unique things about our business. So we're singularly focused on contacts. We focus on making 

the wearing of contacts simple, affordable, convenient, healthy. 

There are two unique things about us as a pharmacy. The first is, as was explained on the 

previous panel, because there is no generic equivalents, when someone comes to our website or 

calls us on the phone, we can simply ask one question. How many boxes would you like? And so 

we don't have much of a browse experience. We just sell what has been prescribed. 

The second is that, because of the nature of this industry, we send our customers back to our 

competitors annually for permission to buy from us, which is unique for a pharmacy. 

TARA KOSLOV: So, I like to start our discussion when we talk about competition issues, 

ultimately, looking at things from the consumer perspective, right, when we're looking at 

competition issues. So, I'd be interested in exploring the factors that influence which lenses 

consumers ultimately end up with, which ones they purchase. And to what extent they're able to 

comparison shop based on price, how effectively they're able to do that kind of comparison 

shopping. And in particular, whether that ability differs for a new prescription when there's an 

initial supply versus looking at refills. And John, I believe you're going to kick that off for us. 

JOHN GRAHAM: So I think that there's a few things to unpack there. First, with your first 

question about how do they choose what to buy? I think that's simple. The optometrist tells them 

what to buy. Generally speaking, they set the brand. And then that becomes the basis of what the 

consumer buys from there. As far as shopping, I think the data that we saw earlier today shows 

that, for the most part, people are able to find price, convenience, value, however they define 

that, in whatever channel. And so there's a lot of channel movement today. 

I think there's a couple of things that you see that are unique in this industry in the way that the 

consumer interacts. James mentioned private label. Usually, that is mostly about trying to avoid 
that switching between places, more so than driving price difference. Usually, when you think of 

price difference-- private label, you think of something that's more affordable. In our industry, a 

private label is rarely more affordable. It's either the same or more expensive. An example, I was 

working on a lens this week that's a national retailer is selling that's the same brand, same 

material, same base curve, and 1.1 millimeter difference on diameter. So we can't sell it. 

Probably not a clinical reason for that. But there may be. 

The other is that, the other thing is that, in this industry, prices generally go up, not down. Most 

technologies that I consume, the price goes down over time in technology. But in our industry, 

generally technology goes up over time. I was going through our prices going back about 10 

years, our wholesale prices, and couldn't find products where prices had actually declined over 

time. And so to James's study that shows the price over time, it's really tricky to get prices lower 

and lower for consumers over time because wholesale goes up over time. 

TARA KOSLOV: Mitch, I believe you were going to have some discussion. 

MITCH WESSELLS: Yeah, so my experience is similar to what John mentioned, which is, the 

biggest influence in what the patient is wearing is what the doctor prescribes. One of the things 

that we recognize, though, is that in many situations, the doctor's only prescribing or offering one 

lens. So it's not a, try these five lenses. There's one lens that they have decided will work for you. 

And that's the one that's offered. So, many times, they end up in a lens without trying other 

lenses. 

When the consumer is given the choice of lenses, so they have several to choose from, it's almost 

always driven by comfort, then followed by visual acuity is the reason why they're choosing that 

lens. So, the cost or the value of the lens doesn't typically come into play immediately. It's more 

prevalent on someone who has worn lenses for more than a year. So they're going in and being 

refit. Or they're going online and checking for a refill. But the initial dispense cost is not 

typically one of the driving factors of why they're choosing that lens. 

We mentioned private label earlier. We take a different approach to private label in our locations. 

So we have two private labels. We have a Lenscrafters branded private label, and a Pearl Vision 

branded private label. Historically, and we had done private labels in the past using a more 

generic type of name, it probably was around keeping somebody in your location. Because they 

believe they can't get that lens somewhere else. Our new approach to private label, or branded 

label is-- as a proprietary branded label, as we call it-- is more around the experience. So we've 

chosen to go into lenses that are of a very high quality. They are all daily disposable in the 

situation for Lenscrafters. They actually have the Lenscrafters name on it and the Pearl brand has 

the Pearl name on it too. They're good, very high quality lenses. And what we're looking for is 

we want an experience for that patient and that customer. When they're opening up their lenses in 

the morning, we want them to remember Lenscrafters. We want them to associate it with a 

positive experience. We want them to come back to us. We want them to come back and see the 

doctor and associate that with the doctor and with the retail location. It's not a matter of trying to 

say, OK, you can't get this lens anywhere else. You can get these lenses anywhere else. They are 

manufactured by, in one case, Cooper Vision. It's the My Day lens. And any time they go online, 

they're going to be informed of that. 
CHRIS GRANKS: Great. Next, we're going to turn to David Sonnenreich in the Utah Attorney 

General's office to give us some perspective on Utah's experience in recent years. Utah has a 

particular state level statute that relates to the sale of contact lenses. And David's office has been 

active in this area in recent years. 

DAVID SONNENREICH: Well thank you, Chris. And thank you for the opportunity to be here. 

And of course, I have to mention that the views expressed here today are my own, and do not 

necessarily represent those of the Office the Attorney General, State of Utah, or, for that matter, 

by any means, the other attorney generals of the United States. 

That said, what I really want to emphasize is the long, strong partnership between state enforcers 

and the FTC in favor of competition in the contact lens industry. And at the risk of going over a 

few things that have been mentioned earlier, I'd like to point out that this really begins in the 

mid-1990s. By 1994, a series of lawsuits, which were eventually consolidated into In Re--

Disposable Contact Lens litigation, had been brought forth by the state attorneys general. 

Eventually, there were 32 plaintiff states, including Utah engaged in that antitrust litigation, 

which resulted in a settlement and a five year injunction that required both the American 

Optometric Association and contact lens manufacturers to not take steps that would prevent 

commercially reasonable and nondiscriminatory sale of contact lenses. While that injunction--

while that case was going forward, of course, it was actually decided in 2001. The settlement 

was entered in 2001. While that was going forward, in 1997, 17 state attorney generals petitioned 

the FTC to extend the spectacled prescription release rule to include contact lenses. As the term 

of the injunction from the antitrust case came towards an end, in the middle of that process, the 

FTC, of course, well Congress passed the FCLCA. And the FTC passed the Contact Lens Rule in 

2005. 

Likewise, at that time, as the case injunction was coming to an end, states started to pass their 

own contact lens rules to fill in potentially gaps, and to bolster some of the terms that were going 

to be lost at the end of the injunction. In Utah's case, that was the 2006 Utah Contact Lens 

Consumer Protection Act, which prevented nondiscriminatory-- or required nondiscriminatory 

distribution and certification by manufacturers, they were engaged in nondiscriminatory 

distribution. 

That was a state of law for a while. But the following year, the United States Supreme Court 

issued a decision in a case called Leegin Creative Leather Products, which had nothing do with 

contact lenses, but had everything to do with antitrust law. What that case was about was resale 

price maintenance. That is, the ability of a manufacturer to require resellers to maintain a certain 

price. Traditionally, that practice had been considered to be a per se violation of antitrust law, 

meaning that all that an enforcer had to prove was that the practice was going on to prove a 

violation of antitrust law. 

The United States Supreme Court decided in Ligand that it instead would view these resale price 

maintenance agreements as a rule of reason, potential antitrust violation. What that meant is that 

in addition to showing the existence of the agreement, now a party challenging on antitrust 

grounds those agreements would have to show that the anti-competitive impact of the agreement 
exceeded its pro-competitive benefits. This made for a much different analysis. And that opened 

the door for many industries, for resale price maintenance agreements. And by about 2013, the 

contact lens industry followed other industries and had engaged in what are called unilateral 

resale pricing policies, or UPPs. Which were simply a version of resale price maintenance. 

The problem with the UPPs from the perspective of Utah and other states was that they 

effectively could harm the FTC's contact lens rule by removing a primary method of competition 

between different chains of distribution, i.e., price. As a result, in 2015, the Utah legislature 

passed amendments to the Utah Contact Lens Consumer Protection Act that prohibited UPPs and 

other acts by manufacturers to control retail pricing or advertising, and prohibited manufacturer 

discrimination based upon whether the retailer-- A, operates or advertises contact lenses for a 

particular price; B, operates in a particular channel of trade; C, is a person authorized by law to 

prescribe contact lenses; or D, is associated with a person authorized by law to prescribe contact 

lenses. 

Prior to the effective date of the law, three of the four main contact lens manufacturers filed a 

lawsuit against the state of Utah. They sought a preliminary injunction to stop enforcement of the 

law. The trial court denied their preliminary injunction, and found that they were unlikely to 

succeed on the merits of their case. And the Tenth Circuit in 2016, in Johnson and Johnson 

Vision Care versus Reyes-- obviously Attorney General Reyes-- upheld the trial court's denial of 

the preliminary injunction, allowing the law to go into full effect. 

And that basically is where we are today on the state side on the contact lens law. 

TARA KOSLOV: Thank you David. So, as David's remarks remind us, it is critically important 

when we're looking at competition in this area to consider the relationships between 

manufacturers and other market participants. So, I would welcome thoughts from the other 

panelists about the factors that have, in the past, influenced or that currently influence the 

competitive dynamics among manufacturers, and their interactions with other market 

participants. So, I don't know who would like to chime in first on that. 

JOHN GRAHAM: No one rose to it. Want me to go? Well I think that-- so, there are two sides of 

this industry. There's the prescribing and the selling side of it. And in the experience I've had 

within the industry, the primary thing that the manufacturers are trying to do is influence the fit, 

because that's what really drives behavior downstream. And part of that is talking about the 

clinical efficacy or comfort or clarity or whatever the product, and try to convince doctors that 

they should fit the product because of how good it is. And then secondarily, there's always a 

financial part of it too. This is a lens where you'll get higher margins, better prices, less price 

competition and things like that. 

So there's the mix of those two things to try to create a fitting environment that works for the 

manufacturer. What we see in our data is that generally speaking, most doctors, as I interact with 

doctors, I think this is the case and probably no surprise, most doctors predominantly fit a single 

manufacturer. So they'll say, I'm a J&J fitter. I'm an Alcon fitter. There may be some mixing. 

Usually it's across modalities. So maybe I'm a J&J fitter. But I like Alcon for dailies, or things 

like that. But people tend to fit into-- they have very specific fitting behavior is what we see. So 
even just in the same zip code, you'll see two doctors where one's 90% one, one's 90% the other. 

And so that's-- if you can get the fit right, then everything flows downhill from there. And so I 

think that that's the way that they try to work is to influence that. Which is, if you think about the 

pharmacy doctor metaphor, that's how, generally speaking, you want to spend your marketing 

dollars and your sales dollars. 

GARY SWEARINGEN: And I think so. I would agree with that, the competition among 

manufacturers is really for the doctors. There is very little competition among manufacturers for 

the retailers. We have to buy their lenses if we want to serve our customer. And that's the 

fundamental point. John mentioned they said they have 80,000 SKUs. If you want to serve all the 

population, that's what you have to stock. Costco obviously doesn't stock that much. So we do a 

lot of direct order. But, we have to buy the lens if we want to serve the customer. 

MITCH WESSELLS: We see a similar thing as John and Gary mentioned as well. You've got a 

competition of manufactures to namely get a fit set into a location where the doctors can 

prescribe. So there's this very early push to try to get fit sets into locations. In the world where 

the doctor owns the contact lens business, that's done more or less one on one, with the sales reps 

going in and having a conversation. It's really based upon sort of their personal relationship. In a 

lot of situations, there's a lot of education going on about the features and benefits of the lenses. 

On the more corporate side, where we sell the contact lenses, and we're putting a fit set into a 

doctor location, it's a little bit broader in that manufacturers are competing, not only with that 

prescribing doc-- or for that prescribing doctor's prescription. They're also working with the 

retailer to try to determine, OK, what's going to be the best way for me to get you to focus on my 

lenses? So there's a lot of conversation, not only with my team and the manufacturer, but also 

with the individual doctor and the manufacturers to their reps. 

One of the things that we're starting to see sort of change is the-- I call them sales reps. But a lot 

of the companies now, it's more of a business consultant relationship. So you have what would 

traditionally have been someone who is going in and competing with the other manufacturers 

around features and benefits of their lenses, you have manufacturers who are trying to build a 

deeper relationship with that practitioner by helping them with non product related services. So 

different business consulting services. How can I help you get set up onto a ship to home model? 

Or a different model that is better for your patients and customers? So you're seeing them 

compete in different ways beyond just the competition based upon features and benefits of the 

product. 

CHRIS GRANKS: And to pick up on this theme of competitive dynamics, I think John Graham 

alluded to this. The dual role of prescribers who also sell lenses. We just wanted to ask our retail 

panelists to give us their views on this role and to ask for some follow up comments from an 

economic perspective from James Cooper. This characteristic of some sellers also-- or some 

prescribers also selling, has variously been described as a dual role in some cases. Attention in 

the sale and prescription of contact lenses. And we just thought we'd ask our panelists if they 

have any thoughts as this relates to their various business models or if there any ways that we 

should think about this issue. And we'll start off with Mitch Wessells. 
MITCH WESSELLS: So as I mentioned earlier, we have about 20% of our locations, they 

happen to all be Lenscrafters locations, where the doctor is the prescriber as well as the seller of 

the contact lenses. In that model, the doctor, or the lease holding OD, they're responsible for all 

aspects of the contact lens business. So as a retailer, I'm not doing anything to talk to them about 

promotion or pricing. They make all of those decisions on their own. But any time you're in a 

model where the seller has a financial incentive for selling a specific product, there is the 

possibility that that becomes one of the things that is the determining factor. 

You move over into a model where the prescriber does not sell the contact lenses, they don't 

have a financial incentive to choose one lens over another. Their main priority is how can I help 

this patient and how can I retain this patient? So how can I make it as easy as possible for this 

patient? As opposed to as financially possible for this patient. We have-- we see situations where 

there are doctors who tend to make a decision on what they're going to prescribe based upon 

their perceived ability of that patient to pay for that product. So we're going to talk a little bit 

later on about daily disposables and how daily disposables are penetrated in the US versus how 

they're penetrated in the rest of the world. But that's one of the examples where you can have a 

situation that they're making a decision, sometimes based upon their own financial decision. But 

also sometimes based upon their perceived ability of their patient to afford the product that they 

want to prescribe. 

GARY SWEARINGEN: So we see the same thing. Our independent doctors have no incentive 

to sell a particular brand. But we still see choices made by brand. Not to backtrack, but it takes a 

really savvy consumer to actually price shop between brands. Because it has to be done before 

the eye exam. But optometrists, and to some extent, ophthalmologists, control all the information 

that's going to that patient at the time. It's a trusted relationship. Most, as with any medical 

profession, there's a high degree of integrity. But they are in a unique position to influence the 

purchase of a product. And it puts product they sell, you can't help but say, I really like this 

brand. This is the brand I carry. And that's what the patient is going to want. 

JOHN GRAHAM: Yeah, I think, again, there's prescribing and there's selling. And I think the 

numbers earlier that about a third of prescribers don't sell. And there's obviously a lot of places 

that sell that don't prescribe. But there are a lot in the middle, and that's the gray area. And I think 

the CLR, what it did is created a demarcation between the two. And so it was successful in 

pulling those two things apart and trying to create a clarity between the two so that you could 

prescribe. And then it could be sold elsewhere, especially as it's become-- it's a product in a box 

with a bar code. Right? It's not a custom product. 

Before the FCLC, you had a lot of retailers that were selling product without prescriptions. And 

they were calling pet stores. And they were doing all kinds of things, right? And then you had on 

the prescriber side, we had states where we were deleting orders and we were selling, than we 

were shipping because we just couldn't get prescriptions and couldn't get verification requests. 

And so the CLR really freed that market up to actually work. It was working to some extent. It 

was just very state by state before the CLR. And so with the FCLCA and the CLR, it created a 

uniformity across the country where it pulled those two things apart and made them more 

distinct. 
And so, to the degree that that works, I think it's working really well. The trick is just making 

sure that that point of demarcation works. And you know, we do a lot of price shopping, a lot of 

secret shopping. And for the most part, we find that most of our online competitors tend to verify 

the way that is laid out in the CLR and the FCLCA. Cause we shop doctors. We consistently find 

about 50% don't give a prescription. And so that's problematic when only 50% aren't releasing. 

And so we're very in favor of what the FTC has proposed with the prescription verification 

release form, to make sure that happens. Because I think where it happens, it works. It works 

well. And where it doesn't work, it doesn't work as well. There needs to be a mechanism for 

enforcement. And I think if enforcement increased, we actually see more freedom in the market 

still. 

And when that doesn't happen, you see the sorts of things, like there's a scenario where what we 

find sometimes-- and first of all, I don't think there are bad people. There are good people with 

conflict, right? And we see the scenario sometimes where we'll go into an office, and there's no 

release until asked for. And then the simple act of asking for release then prompts the doctor to 

say, were you going to buy somewhere else. I'll price match it, right? So there's the ability to do 

that price discrimination at the point of sale. If someone doesn't ask for the prescription, then I 

can have a certain price. If they're going to ask for the prescription, then I can price match. And 

so I can variablilze the way that I price, potentially. 

CHRIS GRANKS: And just to follow up on that, do any of the other panelists have any 

particular views on whether the contact lens rule successfully accounts for this issue? 

JOHN GRAHAM: For the separation? 

CHRIS GRANKS: Does anybody else in the panel have any views on whether the contact lens 

rule is successfully dealing with this issue? 

MITCH WESSELLS: I agree with what John said. I do think it is successfully dealing with the 

issue. I am challenged with enforcement. So I know that the suggestion out there right now is to 

collect a signature. And it sounds pretty easy you know, to get somebody to sign a piece of 

paper. It sounds like it will only take one minute to do that. In a large organization that's looking 

to become more electronic as opposed to paper based, it actually does cause some burdens. If 

there is a way to enforce that doctors actually gave out the prescription without the consumer 

having to ask for it, and without putting a burden on the retailer, or the doctor's office, we would 

find that to be even more beneficial. 

GARY SWEARINGEN: So we certainly think that the rule has been very helpful for 

competition within the selling market. It's leveled the playing field a lot. We don't have too much 

trouble getting prescriptions at the locations. We require physical prescriptions. We still have 

trouble on occasion. But it's certainly nothing like it was in the past. 

TARA KOSLOV: So James, we'd be interested in your economic perspective on this concept of 

the dual role. 

JAMES COOPER: Rarely do I hear that. I'd be interested in your economic perspective. 
TARA KOSLOV: But you're limited. And I'll cut you off if you go over your time. 

JAMES COOPER: Yes. Yes. Please. So I don't get the rest of the hour. 

TARA KOSLOV: James and I have been friends a long time, so I can get away with that. 

JAMES COOPER: Yes. So yeah. You know, what I can talk about is, of course, I've had the 

experience back in the day in this. But in general, just from an economic perspective, I think 

about the relationship-- what makes the contact lens industry different than maybe other 

industries. Or at least if this is what we call a credence good. I mean, so you go in to get your--

there's asymmetric information between the consumer and the eye doctor. And you need the eye 

doctor is the one who, ultimately, is the gatekeeper. He has to write the prescription. As we all 

heard and we all know, you're not going to-- the ultimate-- the demand is actually created by the 

person who writes the prescription. 

The problem is if there's a big asymmetric-- there's a large asymmetry in information between 

the consumer and the eye doctor. Why? Because the doctor has gone to school and gone to 

specialized training to learn how to fit contact lenses and see what you need. So you go in, and 

the eye doctor says you need this Cooper Vision-- and I'm going to plug Cooper Vision, again, 

my name. You need this Cooper Vision lens, or you need this Bausch & Lomb lens. And because 

you don't have that specialized expertise, you typically will just say, OK, I get it. That's what I'll 

do. And then I'll fill that. And then, not only does the doctor sell the diagnosis, which is what 

lens you need, but they sell the cure, which is the lens itself. So they're often in credence good 

markets, we see the bundling of the diagnosis and the cure. 

So, that's what makes this industry unique. I mean, not unique. It makes it different than a normal 

commodity industry. Because a gatekeeper's someone who has an information advantage over 

the consumer. But what I would say that asymmetric information is endogenous, OK? So, in the 

sense, there is a symmetry. Consumer's not going to go out and get a-- go out and get an 

optometrist degree so they can evaluate or double check what their eye doctor is doing. But if 

we're talking here about price, well, if there are incentives to figure out the price difference and 

shop. 

Now, things like-- we have credence good and asymmetric markets all the time and all over the 

place. And they work. And reputation is a disciplining mechanism. And as John had said, you 

know-- I think it was John-- you said, only savvy consumers really know the price. But again, 

this is my endogeneity point is that you can become savvy for a price. So, I get prescribed a lens. 

I like, well gosh. This is like, a private label and I've got to spend a fortune on this. Well, that 

prescription's going to last me a year. During that year time, especially now with information 

everywhere, you can become informed. 

Now, this is-- we don't-- so I think we would have to be, what I would say if their reputation can 

discipline markets, even when there's this sort of credence good aspect to it, and we see it-- I 

don't, in the same way that, you know, I wouldn't want to force, say, eye doctors cannot sell 

prescription lenses anymore, in the same way that, we don't-- we don't say that mechanics can't 

sell the repair that they do, right? That's a credence good market. And the cost-- when I got my 
car last repaired, the cost of what my repair was is a lot more than the delta between oh, I had to 

pay $16 more for my year's supply of contact lenses because I bought it from my eye doctor as 

opposed to bought it online. 

So I think we have to think carefully before there would be any-- and I don't hear anyone on this 

panel, and I've only heard it occasionally that to say that the solution to this is let's get-- there's a 

conflict of interest, so eye doctors shouldn't sell lenses. I think we should be careful when we 

think about that. Because again, I think that asymmetric information, if there's one point, is 

asymmetric information is endogenous. It isn't just plopped down on consumers. Consumers can 

determine whether they want to be informed. And if the cost is too large in relation to the benefit, 

then they're not going to do it. 

And maybe that is what we may see in this market. And, but then again, we may see-- and I don't 

know how much channel switching we see. I imagine we see a lot more of it now than we did 10 

years ago. Because it's so much easier to comparison shop and there's so much more information 

out there and there are Yelp reviews, and there's all this sort of information that consumers get. 

So I would imagine if an eye doctor tried to rip off a consumer, it would be much harder for 

them to get away with it now than they would have, say, 10 years ago. Anyway, those are just, I 

think, some of the economics that you need to think about when you think about analyzing how 

this market works. 

GARY SWEARINGEN: But again, we are looking at the market for one particular brand of lens. 

And so, yes, I'm paying $16 more at my eye doctor than I would online for that one particular 

brand of lens. The cost between a different brand of lens may be much more significant than that. 

And then the person is faced with, OK, well, I'm in this lens for a year. And if it's daily, that's a 

lot of money. Or, I see the price difference, and I have to go back to my eye doctor and pay for 

another exam, and another prescription for this other brand of lens. 

JAMES COOPER: Well again, the idea the reputation is, you would-- you're right. I mean, there 

is a cost. I mean, the benefit from coming informed is avoiding a bad decision. And what just 

happened would be a bad decision. So, OK. That's happened. Now I realize my doctor's ripped 

me off. And I don't go back to that doctor. I go somewhere else and I have more information as I 

go into the marketplace. I guess the question would be-- and it's an empirical question-- whether 

that cost is large enough to force to have consumers get informed. And I imagine that under 

some circumstances, it very well can. 

I'd also imagine it would depend on whether you're a new fit or a return customer. Because it's 

true that you go in to get that prescription and you're in some ways at the mercy of the doctor. 

But I have worn contacts since I've been 13. My brand has changed, I mean, because 

technology's changed. It was only changed three times. I've worn the same brand for the last five 

years. So I go back in. I know what I'm wearing. I know what the price-- I mean, maybe I'm in a 

special circumstance, because I do regressions on contact lens prices. Like most patients don't 

have that. But, you get-- but I'm just saying that--

TARA KOSLOV: James, let me pick up on that point. So if we are looking at a situation where 

the competition is mostly happening at this level after a prescription has been given and you're 
shopping within a brand. What would it take to enhance competition at that earlier stage in the 

current regulatory environment? Could we somehow incentivize or provide information to 

consumers to encourage them to do more of that comparison shopping up front, so that when 

they go in for an exam, they have some of that information? Is that anything that any of you are

seeing in the retail space? Or is there more that-- does more consumer education? What might we 

be doing there? 

JAMES COOPER: Well again, I mean, if you're-- I think, again, that it isn't that there's a right--

there's cost to using the price system. And one of the costs is becoming informed. And if it's too 

expensive to become informed, I don't think it's necessarily and here's the-- necessarily, that we 

need, OK, well now we should spend taxpayer money to make sure consumers know what all 

their choices are. I mean, I'm all for competition, as you know. I mean, I've spent my entire life 

devoted. Is there a private sector antitrust lawyer at the FTC? And then in academia. 

But I also think that there's consumer sovereignty. And in order to if information gathering is 

expensive in a market, it's expensive in lots of markets. So I don't know what makes the contact 

lens market special in that respect. Should we start telling consumers to start shopping around for 

plumbers? Or for mechanics, right? I mean, there are all these asymmetric information problems 

that exist all over. And so that would-- I don't know-- and so the point is that I don't know if 

consumers are necessarily making mistakes. But you have to take into account the cost of 

gathering information. That is a cost. 

JOHN GRAHAM: And it is a low interest category. You know, I think there are some categories 

are much higher interest. And the reality is that most consumers just don't think much about their 

contacts. They don't want to think too much about their contacts. And we're successful when they 

don't have to. 

CHRIS GRANKS: We've touched on the issue of the internet as it relates to contact lenses a few 

times today. And I just wanted to come back to that and throw this topic open to our panelists.

The internet had been giving-- has given rise to new online ways to buy and sell contacts even 

before the Contact Lens Rule was implemented in 2004. So we just thought we'd ask our 

panelists specifically if they have thoughts about this development, and whether there are any 

particular implications or impacts for consumers, for retailers, for manufacturers, for other actors 

in the marketplace. If John Graham wants to start us off. 

JOHN GRAHAM: Yeah, we do some things on the internet. I'll start. So to put this kind of into a 

historical context, you know, before the CL:R the FCLC, 1-800-Contacts was founded really 

before there was much of an internet, which is why we're named after a phone number. Probably 

at this point, a little unfortunate. But we are named-- we sell on the phone and on the web. And if 

you look back at when 1-800-Contacts was founded, we were-- contacts were still sold in vials, 

for the most part. They tended to be like $200 for a pair of contacts. We were selling them at the 

time for $39 to $49. So it was a significant price gap that the consumer could take advantage of. 

Once we moved into boxes, at that time, I think it tended to be about $120 for a customer. And 

we were selling them for $79. So there was a gap. 
But all that happened before the FCLC, before the CLR. And so I think the advent of the FCLC 

and CLR didn't invent the internet, didn't create that opportunity. But it facilitated it. Because 

while those prices were available, it was really hard for consumers to navigate that, especially in 

certain states where people would try to get those prices, but they couldn't because they couldn't 

get a copy of their prescription and we couldn't get a copy of their prescription. And you know, 

when you're deleting half of your orders, just something has to change. And so, the CLR, I think, 

facilitated that. And so there was entry into the market at that point. And I think probably the 

most significant thing you'll see at this point is just that everyone's on the internet now. 

So the health and safety, I thought that was kind of an interesting discussion, because it was 

more interesting 10 years ago. At this point, everyone sells on the internet. So to talk about 

internet versus not internet is a very hard conversation to have, right? Manufacturers, prescribers, 

vision plans, everyone's on the internet. J&J that was on the panel, right? They just bought Sight 

Box. They're selling on the internet. They're enabling prescribers to sell on the internet. So, I 

think that there has been a proliferation of business models that you've seen where taking care 

of-- I hope that what it does is, says taking care of customers is what matters most. And taking 

care of patients. And if we can get fresh lenses on their eyes more frequently, they'll be healthier. 

And I think that that's what you've seen. 

GARY SWEARINGEN: So Costco's been online for only about 18 months. It's been pretty good 

success, about 12% of our contact lens sales are online. Generally, they are new customers, new 

contact lens-- you have to be a member. But they are new customers for the contact lens 

business. We don't have the ability to take insurance online. So that's an impediment. But what 

we find is, most people-- most of our members are shopping online out of convenience. We offer 

the same price online as we do in the stores, with free shipping. And this may shock some of 

you. But not everybody wants to come into a Costco to both order their lenses and pick them up. 

And so this is an ability for one stop shopping. It's been good for-- certainly good for our 

members. 

DAVID SONNENREICH: I would speculate that the proposed FTC amendment requiring the 

logging of the handing over the prescription will have, combined with the internet, an effect on 

the competition between brands for the reasons that Professor Cooper suggested. Namely that, a 

consumer now can say, I know exactly which contact lens I have. Otherwise, it's sort of generic. 

I know I wear Bausch & Lomb, but I don't know which one. I know exactly which one I have. I 

can go to websites. I can say, well, this is really equivalent to another one. And that other one is 

much less expensive. Now, I can ask my eye care professional, why did you prescribe A versus 

B, and have that meaningful conversation. And it's a conversation that the eye care professional 

knows may occur. Which means they have an incentive to be sensitive to those price differentials 

too. 

GARY SWEARINGEN: I would agree with that. But I think-- not jump in. But, why can't we 

have that conversation at the point of purchase? Once we get the health data that we talked about 

earlier, once-- if that health data shows that the distinction between brands, particularly for daily 

disposables, is really not meaningful, it seems to me, we should be able to have that conversation 

at the point of purchase. And move those consumers, if they choose, into a different brand right 

there. And that's the type of competition that could seriously bring competition in among the 
manufacturers. And drive down prices, not only for the retailers, but drive down prices for the 

independents as well. 

MITCH WESSELLS: So I think if you listened to everybody today on the panel, you would 

think that the only competition within contact lenses or the only way that we compete with each 

other is on price. And everybody in this room knows that's not true. You compete, not just on the 

price of the product, but you know, you compete on how convenient can you provide that 

product. You know, when are your doctors available? Nights and weekends. Do you accept 

insurance? Price is rarely the number one deciding factor for the patient or the consumer on 

where they buy their contact lenses. It's almost always convenience or even in front of that, it's, 

do they take my Manage Vision Care? So about 50% of our transactions are Manage Vision 

Care, anywhere from 30% to 50%, depending upon the brand. And that's usually the first 

deciding factor. That may be equated to price, because they want to be able to have a lower out 

of pocket. 

But the other deciding factors typically are less on price and more on the convenience. The 

portability of a prescription is critical for that model. It's not just about the price. You're giving 

the consumer the ability to choose where they want to buy that lens based upon a variety of 

factors, whether it is, they're laying in bed at 9 o'clock at night and need their contact lenses in 

two days so they can go online and buy them and have it shipped directly to their home. Or 

whether it's, I like my doctor, and I want to make sure that I go back to my doctor because I have 

a personal relationship with that doctor. Either way, portability of that contact lens prescription is 

critical for that. 

DAVID SONNENREICH: I would definitely agree with that point. Absolutely. 

TARA KOSLOV: So I do want to pick up on a couple of the health and safety points that have 

been raised. So we did hear this idea that there might be some potential for interchangeability or 

substitutability. We are going to consider that in greater detail in a later panel, which I will also 

be moderating. But we did hear from the prior health and safety panel that currently the science 

does not support that sort of interchangeability. But what we did also hear in the health and 

safety panel, I think, consistently, was the idea that, because so many of the risk factors are 

behavioral, the idea of daily disposable lenses is solving a lot of those problems. And that might 

be one of the best ways to reduce over wearing and to mitigate some of the other safety risks. 

And so I would like the panel to explicitly consider, to what extent is price competition today 

contributing to making daily lenses an affordable and more accessible choice for consumers, 

perhaps in a way that would improve overall health and safety for contact lens wearers? 

GARY SWEARINGEN: I would say that there is a little bit of price competition. But the lenses 

are simply-- they simply cost too much money. They're not an affordable alternative as of yet. 

And so while well-to-do people might be able to afford the benefits from dailies, other people are 

not. The information we heard this morning from Wally, vision care plans might pay $115 to 

$150 a year. And we also saw prices of dailies, $500, $600, $700 a year for dailies. Even our 

own private labels, $472 a year. That's a lot of money. So. 
JOHN GRAHAM: Yeah, I think that's right. We-- certainly our perspective is that it's the most 

healthy lens that we've seen. And I think it goes way back. Jonathan, the founder of the 

company, he had a-- he was a little OCD when it came to health. That's why we've always stayed 

out of the cosmetic lens business for the most part, other than the ones that, certainly like the 

ones for Halloween and things like that. Because that is such a risk. And dailies are much less so. 

In fact, if you go back even before I joined the company-- I've been with the company since 

2009-- and before I joined the company, we actually owned a manufacturing plant and facility 

and brand. And ostensibly, the reason that 1-800-Contacts got into that early on was that they 

really had a belief that if you could get dailies down to around $1 a day that it might be an 

affordable option for people. And so we-- there was a contact that we tried to develop at that 

point. But it was really hard to get that going, because we are just a pharmacy. And if you can't 

get someone to fit what it is you sell, you don't sell it. And so, we were in a situation where we 

couldn't get the lens fit, even if we could get it developed. And so we ended up selling that 

business for a loss. 

But I think right now, there's really not a strong incentive for dailies to become affordable 

because it is dictated at the fit. And neither prescribers or manufacturers really have a reason to 

drive affordability of dailies at that point. It's mostly a way to drive revenue and profit. And you 

don't have to read very many practice management articles to see that that's what the point is. 

You should be driving dailies, because it drives the profitability of your practice. And so the trick 

is just, how do you do that in that environment? Is there a way to let consumers have more 

choice? Because I think consumers want it. And I think that the reception that you've seen from 

consumers to Hubble entering the market is a good indication that consumers would like to see 

an affordable daily lens. It's not without its challenge, right? You're selling over 700 lenses 

where before you were selling 24, 48 lenses. So it's a lot of lenses you've got to manufacture to 

get the price down there. But I think that should be our ambition. 

MITCH WESSELLS: I agree. I think John hit on it. There is a legitimate reason why daily 

disposables cost more than a two week or a monthly lens. For my manufacturing friends in the 

audience, that doesn't mean I'm going to stop asking for price concessions on daily disposable 

lenses. But I do realize that it is 700 lenses versus 24 lenses. So there is a reason. We operate--

we operate optical shops around the world. And there are many places in the world where daily 

disposables are significantly higher penetrated than they are in the United States. So depending 

upon where you look at it in the US, you're 30% to 40% penetration. If you look in Italy or China 

or Hong Kong, where we happen to have operations as well, they're just above 70% penetration 

on daily disposable lenses. 

When I look at the price differential in those countries, though, the price differential between 

dailies and monthlies is fairly similar to what the price differential is in the United States. When I 

look at what my cost is in those countries, it's fairly similar. When I look at what my margin is in 

those countries, it's fairly similar. So we're not doing anything in those countries to drive a higher 

penetration by accepting a lower margin and trying to compete on price. The difference in those 

three countries is the consumer makes the choice of the modality and the brand. So, they get a 

refraction, tells them what their power is. Their doctor doesn't write the prescription with the 

brand on it. That consumer then goes to the retail side of the location and they're typically 
working with a fitter, an optician level fitter, who is helping them decide, all right. What brand 

and modality is right for you? 

So the consumer is making the choice. They're paying about the same differential as they would 

in the United States. And you're seeing a 70% penetration in daily disposables. 

TARA KOSLOV: Did anyone have any reactions to any of the other panelists on that point? OK. 

So I do want to tie this back to the overall theme of the workshop, which is tethered to the 

Contact Lens Rule and looking at that rule. So I would like us to focus specifically on the 

changes that we've seen since the rule was implemented, going back to where James started, 

looking at where the market was before the rule was implemented. And I know we've touched on 

this a little bit in a couple of the answers. But I'd love to have an interactive discussion among all 

of you about the bottom line question. Has the Contact Lens Rule been successful in promoting 

competition in this space? And both on price and non price dimensions of competition. And to 

the extent that we've seen differences in the competitive effects in the different distribution 

channels, how that has played out. 

JOHN GRAHAM: To start, so first of all, I think that unquestioningly, the CLR has reduced the 

friction between channels, right? The data before was very compelling, that shows how much of 

the market has shifted from where the prox prescribed into other channels, whether it's in 

Walmarts or Costcos, or onto the internet or wherever. There's so much more across between 

channels. But as you say, and as David said, a lot of the competition also hasn't just been about 

price. 

So while customers, consumers can certainly find better prices and have a lot of ability to find 

lower prices, they can also find just better service models, different service models, more 

convenient service models. You know, I think in, we, in our app, it's two taps on your app and 

you've got contacts on the way. So it's just very simple to reorder contacts. Or it's just so easy to 

get them delivered to your door. And I think that's why you see every player of consequence at 

this point has a ship to own program, has a website, is doing the same things, right? Spawned 

competition in those areas as well. So I think that that creates a good opportunity for consumers 

as well. 

And I think that spreads out into other areas. You know, more people buying glasses online. 

More is happening just overall. And this proliferation at this point of different business models 

and different ways to service the customer and the patient is just accelerating. So I think that the 

FTC can consider this a successful rule. 

GARY SWEARINGEN: Yeah I certainly agree with that. I think the other impact it has is it 

tends to empower the consumer. They understand they have choices. I have this prescription. 

And now I can make a choice of where to shop. And then maybe next time, they will look at it 

and say, well, maybe I should talk to my doctor about the brand as well. 

DAVID SONNENREICH: I'd say the CLR has provided a solid base for competition in the 

industry. I think the proposed amendments improve that base. And I think that the other part of 
the base are these other things that the states do and that antitrust enforcers, public and private, 

do. It's all a package. But the base of the package is the CLR. 

MITCH WESSELLS: I agree with what the three panelists have already said. There's really 

nothing else for me to add. 

TARA KOSLOV: So, one of you alluded to this a little bit. But let's more explicitly consider 

looking at whether any changes to existing laws or regulations or policies or business practices, 

for that matter, would improve competition. And that does not necessarily need to be limited to 

the changes that have been proposed that are on the table. I sort of open this up to a blue sky, 

what could we do to improve competition? I do also want to just remind everyone that if you do 

want to submit a comment or a question on one of the question cards, we have some people 

going around. And I tried to leave a little bit of time so we might be able to address some of 

those. And we're also monitoring the Twitter feed, so if questions come up there, we can get 

those as well. 

DAVID SONNENREICH: Well I think I'd start by just saying that there's strong support among 

the state's attorneys generals for the proposed amendment of the Contact Lens Rule. Over 20 

have come out publicly in favor of the proposed amendments. None, as far as I'm aware of, 

publicly opposed the amendments. I think that going forward, states will continue to be active 

partners with the FTC in ensuring meaningful competition and consumer choice in the contact 

lens market. I think you'll see this in two ways. One is that while states tend to favor as much 

federal uniformity as possible in those areas, states will continue to examine the possibility of 

specific laws to fill in and to prevent problems and abuses like Utah's anti UPP statute that we 

passed in 2015. 

And I also think states remain ready to litigate, to avoid abuses, potentially under either antitrust 

laws or consumer protection laws, UDAP, Unfair Deceptive Act Practices laws, to ensure that 

the laws that are on the books are actually effective. 

JOHN GRAHAM: So I guess within statute, there's obviously things outside of statute as you 

look across the globe. I think within statute, there's at least three things I think-- I think the FTC 

is already working on all three of these. The prescription release, I think that recommendation 

we're obviously very in favor of because of the fact that it splits the two. Do I wish that we didn't 

have to paperwork? Absolutely I do. Just 14 years of 50% not releasing has made us feel like 

something has to happen to change that-- to affect that logjam. 

TARA KOSLOV: I should note, we did have one question that came up that disputed the 50% 

figure that you're raising. And we are going to address that more explicitly in one of the 

afternoon panels. But since you mentioned it again, we did receive one question that said that 

one particular state is showing close to 100% release and that the national data is different. So, 

maybe you could provide more details on where that data is coming from. 

JOHN GRAHAM: Yeah, so, I've seen third party data. And I just know my own shopping, 

because we do a lot of shopping, that it tends to be at 50%. So we-- I think the third party 

research I saw was from SSI, if I remember right. We certainly did our own. Whatever data is 
out there, I haven't seen-- I have never experienced anything remotely close to 100%. So, that 

would be interesting to look at that data and see where that's from. 

The second is, we certainly admire the support. The FTC has recently come out in support of 

telemedicine. I think that's an opportunity. I think that the doctor-- the patient doctor relationship 

is important. But I also think that that can be done in lots of different ways with different 

prescribers and different methodologies. And I think anything that expands access is a good 

thing if it's done in a smart way. And so I think that giving prescribers discretion on how they see 

patients, I think, is a great thing. 

And then I think the third thing that I would say is, I admire what the FTC didn't do. And 

specifically, in the latest comments, basically came out and talked about how the health and 

safety risks are, that they've been unsubstantiated again. And you know, I think David talked 

about how in the earlier litigation things, those things were set aside. And I think there was a 10 

year hiatus. And now after the 10 year hiatus, now they're going back up again. But, it seems like 

health and safety, we're talking about a box with a bar code, right? It's like asking-- it's like a 

doctor coming up and saying, you should really buy your Tylenol at Walmart, not Walgreens, 

because the channel where you buy a box with a bar code just seems like a strange thing. So that 

those are three things. But thanks for having us on the panel. I appreciate being here. 

GARY SWEARINGEN: I guess my thoughts are more blue sky. I would like to see more 

competition amongst manufacturers. I think we need to drive down prices. We're able to sell 

premium daily silicone hydra gel for $472, and that's double the price it should be. If retailers 

had the ability to say, I will buy 10 million of your contacts at this price, and I will be able to sell 

them, I think that has the ability to drastically modify competition. But we can't do that if we're 

constrained by the brand name on the prescription. And I think that can only be solved at the 

federal level. I don't think it can be solved at the state level. 

DAVID SONNENREICH: I would agree with that last point. 

MITCH WESSELLS: And in general, we at Luxottica agree with the CLR the way it is right 

now. I mentioned earlier, my issue is more with the enforcement of it. I have seen data on both 

sides that is saying that doctors are not releasing the prescription as frequently as they should. 

Not sure that taking a signature and holding onto something for three years is going to change 

that. Unless there is some type of enforcement mechanism behind it. So if you get a complaint, is 

somebody really going to go and follow up on that? If that's the intention of it and it requires a 

signature to do that, then I understand it. I'm concerned that that last part won't happen and 

taking the signature won't dramatically change the release of the prescription. 

So, that worries me a little bit. But in general, we like the rule the way it is. If you start getting 

outside of the rule and agreement on that and sort of more into the blue sky areas, if you start 

talking about things like removing the brand from the prescription. It's not impossible to do, but 

it's a huge change within the industry. And it would change the relationship between the doctor 

and the patient. You would need to have a mechanism on the retail side of the floor to work with 

that consumer so you would probably need something like an optician level fitter, somebody 
who is qualified to fit people in contact lenses and to look at it back and forth. So that one's a big, 

big, big change. 

If you start talking about other things like a warehouse-- a data warehouse of prescriptions where 

everybody's prescription goes into the warehouse, and every seller has to ping that warehouse in 

order to get the prescription. That one has a lot of other unintended consequences down the line 

as well. So I think when we, as we debate this or continue to talk about this going forward, we 

just need to make sure that when everything that we vet out and look at is both protective of the 

consumer, not just from a, does it allow them to competitively price shop? But also protective of 

the patient from a safety and health standpoint. 

TARA KOSLOV: James? 

JAMES COOPER: Yeah, I mean I don't have the detailed industry knowledge that the rest of the 

panelists do. I just maybe from a 30,000 foot level, I mean, I'd echo-- I think I heard what John 

said with respect to the FTC's long and illustrious history of going after state restraints on 

competition. So if they're novel business models in this area, and I've heard some of them that 

you know, the FTC should continue to, along with it fits in very well with your telehealth 

initiatives, to allow to look at state restraints on competition, that may provide innovative models 

in this area. I mean, it's kind of history repeating itself. You know, now, if we can have 

prescriptions done online through in a safe way, and I guess that's a question. But you know, if 

that can be done, we shouldn't-- we shouldn't-- the FTC should use both its advocacy and its--

after North Carolina Dental, to the extent possible, you know, it's antitrust powers to look at 

some of these. I mean that would be one thing. 

And there's another again from more of a theoretical or 30,000 foot level, is I would just be 

careful in general. We think about regulation or in this industry going forward, is the difference 

between vertical and horizontal restraints. You know, because I think that in this some-- and as 

David mentioned, you know, he talked about Legion, and I talked about it too. And vertical-- the 

economics profession has long known that vertical restraints on distribution are typically 

efficiency enhancing, that they are at least-- they can be anti-competitive competitive in some 

cases. 

But they should probably be handled under a cost benefit analysis, which is the rule of reason, 

which is why 99% of economists signed on to various amicus briefs before the Supreme Court to 

say, Legion-- to overturn the per se prohibition on resale price maintenance. I would just be 

careful to say that there's something special about the contact lens industry. And we need to let in 

the contact lens industry make vertical price restraints or vertical distribution per se illegal. 

Because that's what it is. A regulation that prevents that is just basically says, well, all the other 

industries ruled reasons. OK, efficiencies and distribution work there. But they don't work. So I'd 

be careful thinking about that. 

That said, there's a horizontal collusion, if it's doctors getting together to force manufacturers to 

do something. That's horizontal. That can be-- and that's per se legal, and it should be. So, I think 

we should be careful if we see vertical practices that are the product of horizontal collusion at 

one level or another. That rightly should be condemned as per se. But just unilateral vertical 
restraints, I think we should be careful before we would outlaw them on a per se basis. Because 

we don't treat any other industry like that. 

DAVID SONNENREICH: I would just say that one way of interpreting our statute was, in fact, a 

rule of reason analysis by legislature in a very narrow industry. And that it is industry specific. 

And I think it was a result of specific findings and concern after analysis in that industry. 

TARA KOSLOV: So in closing, just a little lightning round for all of you. Since we have so 

much expertise up here on this panel. So, give me a prediction on something that's going to 

happen in the future that will impact competition like, five years from now, what are we going to 

look back and say was a game changer that really affected competition in this market? Anybody 

want to throw anything out? 

MITCH WESSELLS: I think telemedicine is probably the one that's out there, the ability to do 

remote refraction, ability for someone to get their refractive error determined on their phone or at 

home as opposed to having to go to a doctor. That's probably the biggest one. That if that takes 

off, it changes the industry pretty dramatically. 

TARA KOSLOV: Any others? 

GARY SWEARINGEN: I think the progression of the safety and the benefits of daily lenses are 

going to have dramatic change. 

JOHN GRAHAM: I shouldn't have gone last. I certainly think telemedicine will, right? 

Extending physicians outward so that you can keep physicians more busy. And seeing more 

patients, I think, is a huge one. And I do think that a lot of these regulations were put in place 

with much older technology than we have right now. And if anything, things are just becoming 

more and more and more customer centric, right? As the lenses get better for consumers, the 

challenges get more consumer centric. The consumer wins in the end. And I think that they are 

going to. 

TARA KOSLOV: Great. Well please join me in thanking our panelists for a really enlightened 

discussion. So we'll return the five minutes that you lost from your last break to give you five 

extra minutes for lunch. So we're going to break now for lunch. We're going to reconvene at 

1:45. And there is a large cafeteria on the corner on this floor where you can get some lunch. 

Thank you everybody.