United States v. Bausch & Lomb Optical Co.

Background

A federal lawsuit was brought by the United States against a distributor called Soft-Lite and its manufacturer supplier, Bausch & Lomb, over the sale of pink tinted eyeglass lenses. The trial court found that Soft-Lite ran a tightly controlled distribution system: it bought lenses from Bausch & Lomb, sold them only through selected wholesalers and licensed retailers, used numbered "Protection Certificates" to trace resales, published price lists, and required retailers to sell at local prevailing prices and only to the public. Some wholesalers were affiliates of Bausch & Lomb. The District Court held that these arrangements restrained interstate trade and entered an injunction cancelling license and price agreements, forbidding enforcement and allowing some Fair Trade contracts to be renegotiated after six months.

Reasoning

The Court reviewed whether Soft-Lite’s system unlawfully fixed resale prices and limited customers. It agreed the retailer price-fixing and the integrated wholesale arrangements amounted to an illegal conspiracy to maintain prices down the distribution chain. The Court explained that a distributor cannot use agreements to control downstream resale prices or limit customers, even when parts of the system took the form of Fair Trade contracts under the Miller-Tydings Act. Because the resale-price contracts were entwined with the illegal scheme, the Court upheld cancellation of those contracts and the ban on systematic price suggestions, but it struck one vague reporting requirement as unenforceable.

Real world impact

The ruling forces Soft-Lite to end its license-based dealer controls and price-setting practices, and limits its ability to suggest or enforce resale prices for six months, with future use of Fair Trade methods subject to the law. The judgment left Bausch & Lomb and its officers free of the charges, and the Court kept jurisdiction to modify or enforce the order as needed.