Up until now, most of the FTC’s law enforcement involving the Contact Lens Rule (Rule) has focused on sellers of cosmetic or decorative lenses. Indeed, safety concerns about decorative lenses were newsworthy in 2010, when Lady Gaga appeared in her Bad Romance video with “cartoonishly large eyes.” But the agency just announced a case against a more prominent 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. For the past few years, the FTC considered changes to the Rule, and in 2020, the agency, after much deliberation, announced such changes. Today’s case mostly involves violations of the old version of the Rule. But the core elements of the Rule didn’t change – it requires prescribers to give free copies of prescriptions to consumers after a contact lens fitting so consumers can have more purchasing options. The Rule also requires sellers of contacts to verify prescriptions in instances where the consumer does not have an actual copy of their prescription, and it details – with some specificity – how that verification process must occur.
And that is where our case begins. Hubble is a contact lens seller, and the FTC alleges that in the process of verifying contact lens prescriptions, the company made a number of missteps that required the payment of $3.5 million in combined penalties and redress. The Rule violations set forth in the complaint cover a good deal of ground and are essential reading for anyone involved with the sale of contact lenses. In short, the FTC alleges a failure to properly verify prescriptions, recordkeeping 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 about deceptive review practices, and this is the second FTC case in the month of January raising allegations about reviews. In multiple instances, the company allegedly tried to encourage reviews in a manner that ran afoul of the FTC Act. In one such instance, the FTC alleges that in order to counter negative reviews, the company ran campaigns offering free lenses in exchange for reviews with the Better Business Bureau and HighYa. These sites either discourage incentivized reviews or require disclosures about the incentive. Hubble allegedly failed to inform consumers of the need to disclose the incentives, and not surprisingly, reviews were posted without disclosures. In another instance, Hubble again offered free lenses for reviews and required consumers to post a screenshot of their published review. And the complaint describes one instance in which an employee published a positive review with no disclosure and a company executive responded positively to that review. The order requires disclosures of material connections, monitoring of endorsers and notice to the websites where reviews were posted.
As we noted last week, the FTC recently issued guidance about reviews for marketers and platforms, and we promise a deeper dive into those documents soon. But here are a few pointers to keep in mind that relate to this case. If you are asking for reviews and providing any sort of incentive, make sure to tell consumers that their review must indicate the nature of the incentive. If you offer an incentive for a review, don’t 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 do post reviews about your products or services, they must disclose the fact of their employment. Any social media policy that you have should address the issue of employee reviews.
The second issue to flag is going to be a common theme in 2022. How are they getting money here? Violations of the Rule allow the imposition of civil penalties. But in addition to penalties, the order requires the payment of $2 million in consumer redress. How is this possible after AMG? It’s actually pretty simple – the agency is using different authority, not Section 13(b) of the FTC Act. Section 19 is again at play. And Section 19, in addition to allowing penalties for certain rule violations, can allow redress and some other forms of monetary relief in such cases. This is why alleging rule violations is particularly important for the agency in the post-AMG world.
The case was voted out unanimously, with a concurring statement by Commissioner Rebecca Kelly Slaughter. She discusses the important role that new entrants like Hubble can play in the market and the interplay between competition and consumer protection law. But ultimately, she emphasizes that “market concentration does not give startups a free pass to break the law.”
So for folks in the contact lens industry, this is an important case, and it drives home the need to make sure you are complying with the new Contact Lens Rule. And eyeglass folks, we haven’t forgotten you. That rulemaking has been going on for quite some time, but the existing Eyeglass Rule is still certainly in effect. And for everyone else, we have said it before, and it bears repeating – after the Supreme Court’s AMG decision, it will be increasingly important for the FTC to allege rule violations in order to obtain some forms of monetary relief.
And with that – we return to Lady Gaga.