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Contact Lens Makers Take Utah Law to 10th Circuit

DENVER (CN) - The nation's top manufacturers of contact lenses struggled Thursday to show the 10th Circuit that a Utah law unconstitutionally favors 1-800 Contacts.

Alcon Laboratories, Johnson & Johnson and Bausch & Lomb brought the challenge in separate federal complaints this past April, about a month after the Utah Legislature amended its laws to bar out-of-state manufacturers of contact lenses from setting minimum prices.

Critical to the manufacturers is that the law lets Utah-based 1-800 Contacts sell its products at lower prices, even to customers outside Utah, because the state considers the online retailer's transactions as made in state.

The companies appealed to the 10th Circuit after a federal judge denied them an injunction in May, but a three-judge panel seemed to side with the state as well at oral arguments Thursday.

The biggest issue for the panel seemed to be why the manufacturers needed to do business in Utah if state commerce laws conflicted with their pricing needs.

"Where's the discrimination" Judge Jerome Holmes asked. "You can just walk away. You don't have to do business in Utah."

Parker Douglas, the chief of staff for the Utah attorney general, characterized the companies as a "wolf in sheep's clothing."

"Our position is that manufacturers can walk away," he explained, citing the benefits of allowing for price competition in the state of Utah.

"That's all Utah is trying to do: allow free markets to operate," Douglas said.

"We are not going to allow price fixing," the attorney added.

David Marriott, an attorney Alcon with the Manhattan firm Cravath, Swaine & Moore, said Utah's law unconstitutionally regulates interstate commerce.

"Utah is saying ... we're going to export our legislation," he said. "Utah is seeking to apply its price rules to other states. "

Judge Robert Bacharach pointed out such legislation could serve Utah's goal of making its consumers feel "protected."

The state's Douglas leaped on that point, saying the state of Utah saw the price minimums that contact lens companies were setting as a "nationwide price-fixing scheme."

"The state of Utah has said, 'we are getting rid of a price-fixing scheme,'" Douglas said.

Marriott saw it differently.

"It says to 1-800 Contacts, you can sell to a consumer in Florida, and you can utterly disregard what the manufacturer says the price should be."

The panel, rounded out by Judge Gregory Phillips, did not indicate when they will have a decision.

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