US Second Circuit Reverses FTC Decision On Online Advertising Restrictions

In a significant case on the competition/IP interface, which we first discussed on this blog a couple of years ago, the US Court of Appeals for the Second Circuit has recently vacated a 2018 FTC decision which found that settlement agreements regulating the use of trademarks in online search advertising violated US antitrust law. In a robust (and arguably new-Madisonian) ruling, the Second Circuit emphasised the pro-competitive benefits of trademark enforcement and held that whilst trademark settlements are not immune from antitrust scrutiny, it is typically "difficult to show that an unfavourable trademark agreement creates antitrust concerns".

The case is 1-800 Contacts v FTC. To recap on the background, 1-800 Contacts is the leading online retailer of contact lenses in the US. Between 2004 and 2013 it settled various trademark infringement claims against rival online retailers, who were alleged to have used 1-800's trademarks in online advertising auctions run