Chairman Pitofsky Says FTC's Fiscal 95 Record Shows Tough Enforcement of Core Laws...

The Bureau of CompetitionThe Bureau of Consumer Protection

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"In the last year, the Federal Trade Commission has crafted new techniques for dealing with several of the more intractable consumer and competition abuses in the marketplace. At the same time, the Commission has refined its enforcement and regulatory program to eliminate obsolete and unnecessarily burdensome FTC review and allow the agency to anticipate and encourage marketplace developments that can help consumers," FTC Chairman Robert Pitofsky said today in reporting on fiscal year 1995 agency actions.

Case numbers for the year show that the FTC took an aggressive approach to enforcing core consumer protection and pro-competition laws. The arm of the Federal Trade Commission charged with maintaining marketplace competition to keep prices low and quality and selection high was a tough cop on the beat in fiscal year 1995, having brought 47 law-enforcement actions, a 70 percent increase over 1994. In addition, the FTC's consumer protection arm carried out more than 300 enforcement actions, a 29 percent increase over fiscal 1994, and obtained orders requiring defendants to provide redress to consumers in 60 cases.

On the other hand, as a result of the FTC's updating and streamlining efforts, the agency has repealed or is repealing 25 percent of its guides and regulations, and has announced several policy changes regarding its merger review activities and the duration of Commission orders that will streamline FTC review of business transactions.

Of the 48 antitrust cases initiated by the FTC's Bureau of Competition and the agency's regional offices in fiscal 1995, 35 involved challenges of allegedly anticompetitive mergers that could have raised prices in a wide variety of industries, including medical devices, drugs and vaccines, national defense, hospitals, computer software, consumer money wire transfers, retail pharmacies and supermarkets. This is the largest number of mergers challenged since at least 1980. Another eight mergers or acquisitions were abandoned before the Commission could act, after the FTC staff raised concerns that the transactions might reduce competition and therefore raise prices or reduce quality and selection for consumers, the agency said. And the number of mergers and acquisitions reported to the FTC competition staff for review also continued its recent trend of dramatic climbing -- this year saw almost a 20 percent increase over fiscal 1994 in reported transactions, and that was a 25 percent jump over 1993.

FTC orders in merger cases are designed to restore competition to the pre-merger level, often by requiring divestitures or licensing agreements. In a policy change designed to reduce the burden of being under order, the FTC said it will no longer routinely require parties to a merger it has challenged to obtain prior approval for future transactions in the same market. Under a second policy statement issued by the FTC last year, the Commission reaffirmed the value of pursuing litigation against allegedly anticompetitive mergers in an administrative setting, after a federal district court judge has refused to bar the companies from merging pending the outcome of the administrative trial. The Commission said it would determine whether to pursue such litigation on a case-by-case basis, and will consider the public interest as a part of that decision-making process.

The 13 non-merger antitrust cases brought by the FTC's Bureau of Competition also involved a wide variety of industries. The agency challenged allegedly anticompetitive conduct -- including boycotts, marketing allocation agreements or price fixing -- by, among others, manufacturers of baby furniture, medical professionals, athletic shoe makers, video rental stores, automobile dealers, and cable TV providers. One of those cases involved the alleged agreement by an association of automobile dealers to cancel their advertising in a major daily newspaper in retaliation for an article the paper ran telling consumers how to analyze new car factory invoices so that they could be better negotiators. Pitofsky said the FTC acted to protect consumers from losing twice in the face of such activity, once when advertising containing important information is pulled, and again when investigative consumer journalism is chilled. Another alleged agreement involved the allocation of customers by competing cable TV providers in Georgia, depriving consumers of competition based on price and other factors.

Bureau of Competition staff also responded to eight requests from industry for advice about whether specific health care arrangements might violate antitrust laws. These letters can help businesses in the changing health care industry avoid enforcement actions.

On the consumer protection side, as a part of its effort to develop new strategies for dealing with age-old problems, the FTC worked with state and local law-enforcement officials from across the nation to launch a major enforcement sweep -- titled "Project Telesweep" -- against the perpetrators of business opportunity fraud. Nearly 100 cases against defendants based all over the nation were filed by the FTC, the Department of Justice and state officials in the same time period as a part of this project. Project Telesweep is so named because many of the pre-packaged businesses at issue were marketed to investors over the telephone. Participants in Project Telesweep also issued an extensive consumer bulletin on how to avoid fraudulent business opportunities offered over the phone.

The FTC also developed new tools for dealing with telemarketing fraud, which continues to be a $40 billion a year problem for consumers. As a result of the FTC's new Telemarketing Sales Rule, which goes into effect on Dec. 31, 1995, con artists will find this method of operation much more expensive. The rule makes illegal virtually everything the FTC has found that fraudulent telemarketers do to separate consumers from their money, and also gives the 50 state Attorneys General the ability to go into federal district court and get an injunctive order that applies nationwide against fraudulent telemarketers.

Overall, the FTC's anti-fraud program resulted in orders requiring defendants to pay more than $35 million in consumer redress in fiscal 1995. (Due to the financial status of some of the defendants as well as other factors, it is unclear how much of the total will be collected and returned to consumers.) The Bureau also obtained 29 orders totaling more than $3.6 million in civil penalties against companies for alleged violations of FTC rules that, among other things, require important pre-purchase information to be disclosed to consumers. For example, the FTC brought cases against companies that allegedly violated rules governing the purchase of funeral goods and services, mail order sales, and 900-number services, and prohibiting harassment or abuse of consumers while attempting to collect payment on debts.

The FTC has continued to focus resources on issues and industries most pressing to consumers, especially those that affect their health. For example, the FTC brought actions to weed out false or unsubstantiated advertising claims for frozen desserts, nutritional supplements, and diet products in fiscal 1995. The FTC also brought cases in the medical services area against two marketers of seminars using hypnosis to help consumers stop smoking or lose weight, three schemes using allegedly fraudulent telemarketing tactics to sell durable medical equipment such as scooters to consumers, and firms offering treatments forvaricose and spider veins, impotence and infertility. Other cases involved advertising relating to purported environmental benefits, or performance claims for sophisticated and often quite expensive consumer products, such as educational tools and computer software. The FTC also challenged the billing practices of well-known dating service franchises, and the advertising of credit and lease terms by a Washington metropolitan area car dealer. Finally, the FTC announced a settlement with a major advertising agency, reiterating the Commission's policy of holding advertising agencies liable in addition to their clients when the agencies knew or should have known the claims they helped disseminate were deceptive.

In a report to the President announced in August, the Commission detailed efforts to review all of its trade regulation rules and guidelines. In addition to repealing outdated or unnecessary items, the Commission is reviewing several others to consolidate where possible and update where necessary. In an effort to expand industry and consumer participation in the process, the Commission has continued to employ the public workshop-conference technique to discuss the comments it receives during public comment periods on rules or guides under development or review. The next such conference, regarding the FTC's Environmental Marketing Guidelines, is scheduled for Dec. 7 and 8 in Washington.

The Federal Trade Commission is headed by five Presidentially-nominated, Senate-confirmed Commissioners, one of whom the President designates as Chairman. The current Chairman is Robert Pitofsky. Commissioners are appointed to fill staggered, seven-year terms.

Copies of news releases announcing individual FTC cases and rulemaking or guidance activities, as well as other information about the FTC, are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov

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