So far, most FTC law enforcement involving the contact lens rule (Rule) focused on sellers of cosmetic or decorative lenses. Indeed, decorative contact lens safety concerns were newsworthy in 2010, when Lady Gaga appeared in her Bad Romance video with “big cartoon eyes.” But the agency just announced a case against a bigger player in the industry, vision path, which markets Hubble contact lenses. The case also provides an important reminder about reviews.
Before we talk about the case, let’s get some background on what the rule requires. In recent years, the FTC has considered changing the rule, and in 2020 the agency, after much deliberation, announced such changes. Today’s case primarily involves violations of the old version of the Rule. But the core elements of the rule haven’t changed — it requires prescribers to give consumers free copies of prescriptions after a contact lens fitting so consumers can have more buying options. The rule also requires contact sellers to verify prescriptions in cases where the consumer does not have an actual copy of their prescription, and it details – with some precision – how this verification process should take place.
And that’s where our business begins. Hubble is a contact lens seller, and the FTC alleges that during the contact lens prescription verification process, the company made a number of missteps that required the payment of $3.5 million in combined penalties and reparations. Violations of the rules set out in the complaint cover a good deal of ground and are essential reading for anyone involved in the sale of contact lenses. In short, the FTC alleges a failure to properly verify prescriptions, record-keeping violations, and a few additional rule violations.
There are, however, two aspects of the case worth discussing that have no bearing on contact lenses. First, there are allegations of deceptive review practices, and that is the second FTC case in January raising allegations about the exams. In several instances, the company allegedly attempted to encourage critics in a manner contrary to FTC law. In one such case, the FTC alleges that to counter negative reviews, the company ran campaigns offering free lenses in exchange for reviews with the Better Business Bureau and HighYa. These sites discourage incentivized reviews or require information about the incentivized. Hubble reportedly failed to inform consumers of the need to disclose the incentives, and unsurprisingly the reviews were published without disclosure. In another instance, Hubble again offered free lenses for reviews and asked consumers to post a screenshot of their published review. And the complaint describes a case in which an employee posted a positive review without disclosure and a company executive responded positively to that review. the order requires disclosure of material relationships, monitoring of endorsers, and notification of websites where reviews have been posted.
As we noted last week, the FTC recently issued guidance on reviews of traders and platforms, and we promise a deeper dive into those docs soon. But here are some pointers to keep in mind that relate to this case. If you ask for reviews and offer any inducement, be sure to tell consumers that their review should indicate the nature of the inducement. If you offer an inducement for a review, do not condition it, explicitly or implicitly, on the review being positive. And you might not necessarily want employees to write reviews, but make sure employees know that if they post reviews about your products or services, they must disclose the fact of their employment. Any social media policy you have should address the issue of employee reviews.
The second issue to report will be a common theme in 2022. How do they get money here? Violations of the rule allow for the imposition of civil penalties. But in addition to the penalties, the order requires the payment of $2 million in reparations from consumers. How is it possible after AMG? It’s actually quite simple – the agency is using a different authority, not FTC Section 13(b). Article 19 is again in play. And Article 19, in addition to allowing penalties for certain violations of the rules, may allow reparations and other forms of monetary redress in such cases. This is why alleging violations of the rules is particularly important for the agency in the post-AMG world.
The case was dismissed unanimously, with a concurring statement by curator Rebecca Kelly Slaughter. She discusses the important role new entrants like Hubble can play in the marketplace and the interplay between competition law and consumer protection law. But ultimately, she points out that “market concentration doesn’t give startups a free pass to break the law.”
So for people in the contact lens industry, this is an important case, and it highlights the need to make sure you comply with the new contact lens rule. And eyewear friends, we have not forgotten you. This regulation was has been going on for a whilebut the Existing glasses ruler is certainly still in force. And for everyone else, we’ve said it before, and it bears repeating – after the Supreme Court decision AMG decision, it will be increasingly important for the FTC to allege rule violations in order to get certain forms of monetary relief.
And with that – we return to Lady Gaga.