There are numerous issues relating to the purchase and operation of medical aesthetic lasers on the resale market. This blog will serve as a general purpose letter to address the issues and provide a legal framework to resolve such issues. It is impractical and legally impossible to address specific issues relative to specific situations since the resolution of many medical aesthetic laser issues involves varying state and federal law as well as differing policies among laser vendors, laser manufacturers, purchasers, financing sources and state law. Each situation is unique and requires review and consideration of the principals discussed herein. The length is such that I will post this in three separate blogs.
Some background information is also necessary to provide additional insight into this opinion letter. I have been directly involved in the aesthetic laser industry for almost 20 years. My experience includes serving as general counsel to two laser manufacturers and as a consultant to a third. I have also served as CEO of a large dermatology and plastic surgery network and we directly or indirectly purchased literally thousands of aesthetic lasers and medical light based equipment. I have been an attorney for over 25 years and have multiple graduate and doctorate degrees in science as well.
The areas of focus of this letter are based in three issues:
1. Laser manufacturer requirement of certification of resale lasers;
2. Laser manufacturers’ arguably discriminatory pricing for parts;
3. Laser manufacturers’ refusal to service lasers and light based medical equipment sold on the resale market.
4. Restrictions on who may repair/service a medical aesthetic laser.
The certification requirement centers on an industry policy that mandates that a purchaser of “used” medical aesthetic laser must have the device certified in order for it to be repaired or serviced at a later date. Frequently, such certification comes at a very expensive price. Although this is a valid and legitimate business interest of the laser companies, the implementation of the legitimate polices is legally unsupportable in most instances.
The reason that many of such policies are not legally supportable is that such policies are arguably in restraint of trade and subject to review of the Sherman Anti-Trust Act. It is arguably restraint of trade to charge disproportionately high fees relative to the acquisition price of an aesthetic medical laser. Laser manufacturers charge varying fees for “certification” when in fact, the certification process is largely the same for most devices. The certification process entails inspection of the device in order to determine whether it has been altered, modified or otherwise changed from its original configuration. This certification process may also necessarily include inspection of computerized or automated sub systems of the device, such as a computerized scanner.
The prices charged for this service are frequently outrageous given the time and expense involved in the process. As I stated above, this is a legitimate business interest and concern for the laser manufacturer. However, they are charging exorbitant and inconsistent fees for this service. Since the certification is necessary in order for the new owner to service or maintain the device, then buyer is at a competitive disadvantage in such transactions. This situation requires that laser manufacturers avoid appearance of tactics that rise to the level of restraint of trade. It has also been my experience that laser manufactures will waive or reduce the certification fee arbitrarily and also in violation of the laws intended to protect such situations.
The Sherman Anti-Trust Act of 1890 is designed to prevent monopolistic trade practices and anti-competitive business behavior. The certification requirement is a legitimate business interest. However, the fees charged in many/most instances are violative of the spirit and intention of the Act. Many laser manufacturers have even restricted or prohibited its suppliers and vendors from supplying the parts and services to owners of resold medical aesthetic lasers. However, this right must be asserted by the supplier or vendor, but it does merit mentioning.
In fact, one prominent laser manufacturer suffered a decrease in its stock price in 2008 because analysts were concerned about restraint of trade issues.
Additionally, the certification raises issues under the Uniform Commercial Code (UCC). Many of the certification policies will violate the intent and spirit of the Uniform Commercial Code, especially Article 2 of the Code governing Sales. A more thorough discussion of this issue is not practical under the UCC because all 50 states have adopted the UCC in some form, but there are differences from state to state. However, it is important to note that in many of the certification issues that I have encountered (many), the UCC in its adopted form in various states, has been violated.