Many manufacturers practice resale price maintenance. Consider contact lenses. Forty million Americans wear them, and they spend about $4 billion annually on those lenses. Approximately 90 percent of lens manufacturing is controlled by four companies: Alcon, Bausch & Lomb, Cooper Vision, and Johnson & Johnson. To protect optometrists’ lens sales from being undercut by discounters like Costco and 1-800-CONTACTS, those manufacturers allegedly have worked jointly to impose price floors on the retail sale of lenses. In response, the state of Utah (home to 1-800-CONTACTS) passed a law in 2015 forbidding any practice that “has the effect of fixing or otherwise controlling the price that a contact lens retailer charges or advertises.” The Utah statute has survived court challenges. Johnson & Johnson and Alcon say they have discontinued minimum pricing policies. Nationwide, several settlements have been reached in litigation against lens manufacturers. 

Questions 

1. Is the Leegin decision good or bad for consumers? Explain. 

2. Krist Oil, a family-owned gasoline company with more than 70 locations, was required by Wisconsin law to mark up its retail gasoline prices in that state by a minimum of 9.18 percent above cost. Krist wanted to lower its prices. Some 26 states have minimum markup laws of one form or another. 

a. Why would some states forbid most retail sales below cost and/or require minimum markups beyond cost? 

b. Are those laws good public policy in your view? Explain. See C.J. Szafir and Patrick Gleason, “Cross Country: These Prices Are a Steal and in Some States, That’s Illegal,” The Wall Street Journal, January 27, 2018 [www.wsj.com]; and Bryan Polcyn, “‘How Do You Survive?’ Small Station Owners Say Costco’s Gas Prices Are Too Low,” ­Fox6Milwaukee, February 28, 2018 [https://fox6now.com].