Policy Studies Competition Policy

Regulatory protectionism in the contact lens market

The attached policy study was co-authored by R Street Senior Fellow Alan Smith.

New technologies often present competitive threats to established industries. Incumbent businesses sometimes respond in turn by seeking to use the political process to limit market access to these emerging threats or to regulate alternative business models out of existence. The costs imposed by these interventions, which are borne largely by consumers, are examples of what economists call “rent-seeking.” The market for corrective contact lenses provides a case study in this form of political exploitation.

According to public choice theory, rents typically are extracted from a large number of consumers, but flow to a small percentage of market actors. As a result of this dynamic of “concentrated benefits, diffuse costs,” these rents often may go undetected until they are exposed by an event that disrupts an industry. In the retail market for contact lenses, once monopolized entirely by physicians, this moment arrived with the advent of e-commerce. From the mid-1990s onward, health-care providers saw continuing declines in lens-wear sales as the internet proved itself an attractive marketplace to buy and sell contact lenses.

Over the past two decades, the struggle for market share within the contact-lens industry has spilled into the legal, legislative and regulatory arenas. This policy study offers a brief historical overview of recent efforts to grant consumers greater freedom in the contact-lens market, as well as legislative and regulatory pushback by eye-care providers to curtail those reforms.

Image by Syda Productions

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