Sights on Online Search Advertising: FTC Finds Practices by 1-800 Contacts to Unlawfully Harm Competition and Restrict the Availability of Truthful Advertising to Consumers

Last month in  In the Matter of 1-800 Contacts, Inc., the Federal Trade Commission (“FTC”) provided insight into the circumstances under which retail price competition may take place in the 21st century internet economy.  In the Opinion authored by Chairman Joseph J. Simons (“Commission’s Opinion”) the Commission decided that 1-800 Contacts, the country’s largest online retailer of contact lenses, unlawfully entered into anticompetitive agreements with 14 rival online sellers (“Agreements”).  The Agreements, which, in most cases were trademark litigation settlements, required the parties, when bidding as part of search engine advertising auctions, to take measures ensuring their advertisements do not appear in response to searches for the other party’s trademark terms.  According to the Commission’s Opinion, approved 3-1-1, the “decision will affect not only the price that consumers pay for…

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