(credit: Library of Congress)

The Federal Trade Commission has sued online retailer 1-800 Contacts, saying the company illegally restrained competitors from buying search advertisements. It’s a dramatic move that could mold the shape of online trademark law for years to come.

In the administrative complaint (PDF) filed Monday, FTC lawyers say that 1-800 Contacts reached deals with at least 14 competing contact lens sellers, in which they agreed to limit their advertising on search engines like Google and Bing. In the FTC’s view, those agreements constituted unfair competition, because they limited truthful advertising and restrained price competition.

The 14 competitors aren’t named in the FTC’s lawsuit, but some of them are likely to be companies that Utah-based 1-800 Contacts sued in court. In 2008, 1-800 Contacts filed a lawsuit (PDF) LensFast.com, saying their keyword advertising violated trademark law; in 2010, ContactLensKing.com got sued (PDF) on similar grounds.