AO and B&L - Price Fixing

[rbaker]

In an earlier post to the Essilor gobbling up Johnson & Johnson Vision thread
http://www.optiboard.com/forums/showthread.php?t=12955

Darryl Meister said: “And, for those who are not already aware of this, the spectacle lens industry was founded principally by two corporations (American Optical and Bausch & Lomb). Those corporations "dominated" the industry for the better part of a century before the FTC stepped in.” As a college student, I was working part time for American Optical in the years just prior to the investigation. I was on the Aero Commander flight crew with Art Clemens. We flew many an AO executive and family member to various locations to meet with people from B&L. They also met with people from Shuron-Continental, Titmus and most of the other “players” of that time.

I was just a young whipper-snapper and always had to stay with the aircraft to supervise refueling so was not really sure what was going on during these late night trips. However, these trips were made to a given company just before their new price list came out. Hmmmm . . . I guess that was what piqued the Justice Departments interest.

Could it have been that AO was telling their competition how much to charge for their product? Did they use leverage through their patent holdings and licensing to enforce their price fixing and production rates? No one knows for sure because all of this was sealed by the Justice Department in return for AO’s agreement to sign the consent decree. And AO ain’t saying. Supposedly the actual decree was consigned to the AO museum in Southbridge contingent that it never be made public. Last information is that the museum has been removed to the University of Rochester.

Do any of you old timers have any recollections concerning the Justice Departments restraint of trade charges or the consent decree? Do any of you have any personal information on the events that led up to this investigation? Does anyone know if/when the decree will be made public?

Dick

www.aerovisiontech.com

[shanbaum]

I haven't sorted out the case you refer to, but here's an excerpt from an interesting one - who would've thought there'd be a case styled United States v. Kryptok? The licensees (and "other defendants") referred to are AO and B&L - note their market share. The appeal was dismissed because it was moot, having been brought after the expiration of the patents on which the license agreements were based.


In January, 1923, after investigating the matter over a period of some 11 years, the United States filed its bill in equity to enjoin an alleged combination and conspiracy by the defendants in the manufacture and sale of fused bifocal lenses and blanks.

Defendant Kryptok Company does nothing but grant licenses under basic patents, covering inventions for bifocal lenses, the last dated May 5, 1908. The other defendants operate under such licenses; they do something less than three-fourths of the fused bifocal lens and blank business of the country.

It is unnecessary to recite the facts at length. It suffices that in 1909 practically identical licenses were issued to these defendants, under which thenceforth uniform prices and discount rates to jobbers were to be and have been maintained by them. In effect the basis of the attack is primarily certain provisions of these licenses and the agreements and mutual obligations resulting therefrom. The licenses contained certain price restrictions, which in 1909 were generally supposed to be valid; since the invalidity of similar provisions has been determined by the Supreme Court in the Sanatogen Case, 33 S.Ct. 616 (1913), they have been definitely and expressly abandoned; no claim for relief is based thereon.

The attack is concentrated on the provisions for identical price maintenance by each of the several licensees in the original sale to the jobber, thereby preventing competition, at least as to sale price, as between them, and for determination by the licensees, if they can agree thereon, otherwise by the licensor, of any change in such original sale price, and of the jobbers to whom sales could be made.

All of the licenses expired by limitation with the last of the patents on May 5, 1925.

U.S. v. Kryptok Co., 11 F.2d 874, 874 -875 (D.C.N.Y. 1925).

[harry a saake]

Having worked for B&L in those years, i don,t see the price fixing as best i can remember our prices were different from thiers and if i recall correctly, we were higher, and in fact higher then anybody, which i believe is one of the contributing factors that led to the demise of B&L labs and shortly afterwards AO.

[chip anderson]

I remember something of a later suit, something in the late 50's I think. AO was forbidden from having a retail establishment. B&L and Southeastern Optical were part of the suit. Many dispensaries were wholesale/retail opticals and had precriber "ownership". In reality the precriber was paid a fee for each of his Rx's filled. I actually worked for a firm that was involved in this after the fact, you wouldn't believe (unless you do medicaid work) the number of Rx's for +.12 cylinder (no sphere) for everything from infants to welding goggles.

As a result of this suit the so called "Common Roof Law (decision)" was handed down which stated that precriber owned dispensaries could only fill the Rx's of those precribers with whom they shared a "Common Roof".

Further AO/B&L/Southeastern et. al were forbidden from dispensing to the public on thier premises.

If anyone has a copy of this or knows where one can be obtained I would sure like to find one.

Chip

Note: Due to lack of compliance/enforcement of the Eyeglass 1 and almost Eyeglass II came into existance. Why I don't know as it is also not complied with or enforced.

[Darryl Meister]

It is certainly no secret that B&L and AO worked together. However, AO and B&L were sued several times by several different people for several different reasons. It's pretty obvious that, beginning in the 1940s, the Justice Department had it out for them -- and often sued these two companies under the pretext of the Ant-Trust Act.

I am not aware of any allegations of price fixing (and the title of your thread is more than a little misleading without at least a question mark), though these two companies were accused of "delisting" laboratories who used price undercutting as a sales tactic. Probably the biggest blow to these two companies came about as the result of a single complaint by Madison Optical of Milwaukee, who had been delisted by AO and B&L. AO and B&L were even successfully sued for owning frame patents.

Strangely enough, AO and B&L (as well as many participating eyecare professionals) were also successfully sued for offering rebates for their lenses; a common practice today.

To this day, manufacturers still meet regularly to discuss topics pertinent to the Industry (the Optical Manufacturers Association is now a part of the Vision Council of America), though they are very careful not to engage in discussions that could be considered a form of "collusion."

[Jacqui]

I know in the late 60's and early 70's when I worked for AO that strange things were happening between AO, B&L and Shuron.