This is an archived article that was published on in 2015, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

A 2007 U.S. Supreme Court decision has legalized a price-fixing arrangement that threatens to sink a Utah company, which enjoys $500 million in annual sales and employs 1,100 Beehive State workers.

Utah, home to 1-800 Contacts, has become ground zero in efforts to combat the effects of Leegin Creative Leather Products Inc. v. PSKS Inc., in which the justices reversed a nearly century-old edict against price fixing by ruling that certain limits can be imposed as long as they don't impede trade.

Consequently, some manufacturers have refused to supply their products to retailers that sell below a set price. This practice is employed in many high-end products, particularly in the ever-changing electronics industry.

Within the past year, it also has been adopted by four manufacturers of contact lenses who together control about 99 percent of the global market. That move has drastically reduced the advantage of the 1-800 Contacts business model, which was born from a Brigham Young University student's graduate thesis in the early 1990s.

As an online retailer, 1-800 Contacts buys lenses in bulk, which allows the company to get a discount. It then ships contacts to customers, often at a cheaper price than they would pay an ophthalmologist or optometrist. The firm has captured about 11 percent of the retail contacts market and is the world's largest lens retailer.

But 1-800 Contacts doesn't create new customers for the manufacturers, whose traditional practice is to push their brands to ophthalmologists and optometrists, who then sell them to patients.

The online contact-lens industry, as well as other retailers such as Costco, Sam's Club and Wal-Mart, got a boost several years ago when Utah and California passed laws that said consumers owned their eye prescriptions and could take them to any vendor. Other states followed suit, and it became a federal law in 2003.

Now, Utah is again taking on the manufacturers.

Senate Bill 169, sponsored by Sen. Deidre Henderson, R-Spanish Fork, would bar contact-lens makers from controlling the prices retailers can charge. A violation would be a class A misdemeanor, and the Utah attorney general could file a civil action against such manufacturers.

So far, the ayes have it. The bill cleared the Senate Business and Labor Committee on Tuesday in a 4-1 vote, and it now goes to the full Senate.

Henderson argued that a medical product requiring a prescription is not like buying a certain kind of computer. If customers don't like the price of one computer, they can shop for a different brand.

Jay Magure, vice president of government relations for 1-800 Contacts, said that since the price-fixing took effect less than a year ago, the average price of contact lenses has increased.

Two witnesses from Johnson & Johnson, the largest contact-lens manufacturer, disputed that claim and argued that an established minimum price would lead to lower prices for consumers. They said the current average retail price is higher than the minimum they have set, so competition would pull down those prices.

In a letter to senators, the manufacturers also said that without certain constraints, the contact-lens industry could attract retailers lax on quality, harming consumers.

But under questioning by committee Chairman Curt Bramble, R-Provo, an industry lobbyist could not provide an example of that ever occurring.

Dave Davis, president of the Utah Retail Merchants Association, said his organization supports Henderson's bill. He said allowing manufacturers to set minimum prices runs counter to free-market principles.