A lawsuit filed in U.S. court against VSP Vision last week is accusing the vision insurance company and a number of its complementary businesses of abusing its market power by restricting competition within the eyecare industry and pressuring practices to purchase products/services with inflated prices.
Give me a refresher on this company.
VSP Vision is the largest national full-service vision benefits provider, with vision insurance plans covering routine eye care, frame allowances, basic lenses, eye surgery, and certain medical issues.
Its complementary businesses include VSP Vision Care, Marchon Eyewear, Inc., Visionworks, Eyefinity, Eyeconic, VSP Optics, and VSP Ventures.
And who is suing VSP?
Per the court filing: Total Vision P.C., a San Diego, California-based company comprising 59 independent optometry practices.
To note, Total Vision P.C. owns and operates these practices while Total Vision LLC. provides centralized, nonclinical back-office support and services.
Now this lawsuit.
Filed in the U.S. District Court, Central District of California, the lawsuit states that, as the largest vision insurer in the United States, VSP has “enormous leverage over independent optometry practices,” with the company also operating a number of related businesses.
The problem, according to the suit, is that VSP has used its power to force optometry practices to:
- Purchase glasses frames and lenses from its subsidiaries at supracompetitive prices for lower-quality products
- Purchase VSP’s software, regardless of whether they need or want it
- Prevent such independent practice groups from growing
View the complete filing here.
And the complaint?
Among the complaints are:
- Unfair competition
- Attempted monopolization
The lawsuit alleges that VSP has committed anticompetitive acts such as:
- Strong-arming Total Vision to enter an anticompetitive retail agreement
- Shoring up its monopoly and market power via acquiring independent optometry practices
- Pressuring Total Vision to limit its growth, threatening financial ruin if not
- Coercing Total Vision into a renewed retail agreement that unreasonably restrains competition
See a detailed list of the alleged acts here, starting on page 17.
The lawsuit claims (starting on page 42) that VSP’s anticompetitive acts have harmed marketplace competition in five relevant product markets:
- Independent optometry practices
- Vision insurance for independent optometry practices
- Glasses frames
- Glasses lenses
- Optometry practice management software
Give me specifics.
Per the lawsuit, VSP’s network encompasses +80 million members, with VSP’s patients accounting for 65% of the nation’s vision insurance (and its share of the fully-insured vision insurance even higher, at 70%).
Total Vision alleged that VSP offered to purchase the company in February 2023 with a “bid and valuation [that] were so substantially below Total Vision’s reasonable valuation …. It made no sense for Total Vision to continue negotiating the deal.”
Then what happened?
In response to “Total Vision rebuffing its lowball offer,” the lawsuit states that VSP retaliated by informing Total Vision it would remove the company from its network in September 2023.
Per Total Vision, “VSP did not do this for any legitimate reason.”
And the impact?
The lawsuit stated that “taking Total Vision ‘off network’ would make it near-impossible to grow to compete with VSP, “as most independent optometry practices in the state rely on VSP’s insurance.”
Prior insight into this came from a 2019 incident, where VSP reportedly issued a termination notice to Total Vision that left the company “no choice but to acquiesce to VSP’s increasingly anticompetitive demands”in the form of a retail agreement that contained:
- Anticompetitive terms
- Supracompetitive prices
- Requirement to purchase tied products from VSP
Further, the lawsuit claims VSP revealed that its “goal was to ‘cap’ Total Vision’s growth.”
What’s in it for VSP (according to the lawsuit, that is)?
Aside from market domination, the lawsuit states that VSP’s decision to terminate Total Vision is “a naked attempt to try and run” the company into the ground so it fails or so “VSP can purchase it at a fire-sale price.”In essence: VSP could stand to gain more profit growth and market share in California.
Is there a bigger picture to this?
Oh yes … the lawsuits points out that VSP’s anticompetitive practices extend to and affect any competitor in the independent optometry market “with the gall to stand up to the ever-growing monopolist by growing their optometry presence.”
Meaning what for patients?
Termination from the VSP network would, per the lawsuit, “be devastating to most California-based independent optometry practices,” as patients wouldn’t be able to use their in-network benefits at non-VSP-covered practices.
Gotcha. Not so great … so what is Total Vision asking for?
The company is seeking an unspecified amount in monetary damages (treble, compensatory, and punitive) to be determined at trial as well as an injunction, which would block VSP from being able to remove Total Vision from its insurance network.
And any comment from either of the companies?
Per a statement from Total Vision on Oct. 9, 2023, "We have decided to take legal action on behalf our doctors, patients, and other stakeholders. The filed complaint contains all relevant details of the situation. We have no further comment at this time."
Editor's note: the previous section was added to reflect Total Vision's company statement regarding the lawsuit.
*Disclaimer: The information provided in this article does not and is not intended to constitute legal advice; instead, all information, content, materials available herein are for general information purposes only.