Antitrust Out of Focus: The FTC's Myopic Pursuit of 1-800 Contacts' Trademark Settlements

The Antitrust Source (April 2019)

8 Pages Posted: 5 Jan 2019 Last revised: 25 Apr 2019

See all articles by Geoffrey A. Manne

Geoffrey A. Manne

International Center for Law & Economics (ICLE)

Hal J. Singer

Econ One

Joshua D. Wright

George Mason University - Antonin Scalia Law School, Faculty

Date Written: December 20, 2018

Abstract

On November 14, 2018, the Federal Trade Commission (“Commission”) issued an opinion condemning as an antitrust violation trademark settlement agreements between 1-800 Contacts (“1-800”) and fourteen online sellers of contact lenses. The settlement agreements arise from trademark infringement claims brought by 1-800 against these online rivals. FTC Chairman Joseph Simons authored the Commission’s opinion, joined by the two Democratic Commissioners, Rohit Chopra and Rebecca Slaughter. In finding that the settlement agreements violated Section 1 of the Sherman Act, Chairman Simons and the majority commit two critical errors—one legal, the other economic—that render the Commission’s opinion, in our view, highly vulnerable to reversal upon its inevitable appeal. With respect to the legal infirmity, the Commission incorrectly concludes the challenged agreements are “inherently suspect,” and applies a truncated rule of reason analysis to assess whether the agreements harmed competition. As explained in Commissioner Noah Phillips’ dissent, a truncated analysis is not supported in this case either by judicial experience or economic learning, and was thus inappropriately applied. The second error is application of an economic analysis to claim the agreements have caused anticompetitive effects that falls woefully short of evidence of consumer injury. We predict reversal by an appellate court.

Keywords: antitrust, federal trade commission, inherently suspect, horizontal restraints, consumer welfare, rule of reason

JEL Classification: L4, L5, K21

Suggested Citation

Manne, Geoffrey and Singer, Hal J. and Wright, Joshua D., Antitrust Out of Focus: The FTC's Myopic Pursuit of 1-800 Contacts' Trademark Settlements (December 20, 2018). The Antitrust Source (April 2019). Available at SSRN: https://ssrn.com/abstract=3304769 or http://dx.doi.org/10.2139/ssrn.3304769

Geoffrey Manne

International Center for Law & Economics (ICLE) ( email )

2117 NE Oregon St.
Suite 501
Portland, OR 97232
United States
503-770-0076 (Phone)

HOME PAGE: http://www.laweconcenter.org

Hal J. Singer

Econ One ( email )

805 15th Street
Suite 501
Washington, DC 20005
United States
202.312.3065 (Phone)

HOME PAGE: http://https://www.econone.com/staff-member/hal-singer/

Joshua D. Wright (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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