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FTC Resorts to Carjacking

January 26, 2011

The Federal Trade Commission forced a Georgia woman to sell her car as punishment for selling cosmetic contact lenses over the internet without first asking for customers’ prescriptions. In papers filed last week with a federal court in Atlanta, the US Attorney for the Northern District of Georgia, acting on the FTC’s behalf, accused Da Young Kim, the sole owner and manager of Gothic Lens LLC, of failing to obey the Commission’s rules governing the sale of contact lenses. The FTC fined Kim $50,000, but due to her limited financial resources, the Commission seized her car in lieu of payment.

According to the DOJ/FTC complaint, Kim’s Gothic Lens LLC sold “decorative” contact lenses for theatrical and other uses (such as Halloween costumes). In 2003, Congress enacted the “Fairness to Contact Lens Consumers Act,” which granted the FTC a regulatory franchise over sellers of contact lenses. Additionally, in 2005 Congress decreed that decorative (non-medical) contact lenses were “restricted medical devices” subject to the regulatory monopoly of the Food and Drug Administration. Because of these two decrees, anyone selling decorative contact lenses must, under FTC rules, obtain and verify prescriptions from a government-licensed optometrist or ophthalmologist for every consumer who wishes to purchase such “restricted medical devices.”

The FTC claimed that, “In numerous instances, in connection with the advertising and sale of [decorative] contact lenses, [Kim and Gothic Lens LLC] have sold [decorative] contact lenses to consumers without obtaining the consumers’ contact lens prescription or verifying the prescription by direct communication with the prescriber.” The FTC did not provide any details about these “numerous instances,” nor did it say how it learned of the alleged violations. (In many cases, the FTC conducts its own “undercover” operations against small businesses, having an FTC employee make a fraudulent purchase to test compliance with Commission mandates.)

Notably, the FTC did not allege a single instance of consumer harm caused by Kim or Gothic Lens LLC’s actions. Although an FTC press release about the case warned, “The improper use of contact lenses, whether they are corrective or not, can cause corneal ulcers, corneal abrasions, vision impairment, and blindness,” none of the supporting court documents suggested there was ever any improper use of contact lenses by Kim or Gothic Lens LLC’s customers. In fact, the FTC’s use of this statement in its press release appears to be an attempt to mislead the public about the facts of this case by suggesting, without cause, that the accused somehow acted with intent to injure customers.

Under a consent decree imposed by the FTC and the US Attorney’s office, Kim is subject to criminal penalties if she fails to comply with numerous FTC business and record-keeping requirements for up to the next eight years. The consent decree also threatens additional financial penalties if Kim fails to disclose all of her financial records to the Commission.

As noted above, the consent decree also requires Kim to auction off her personal automobile and transfer the sale proceeds to the FTC — as a “civil penalty owed the United States Government” and not, the DOJ emphasized, as compensation for any alleged injury to an individual.

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