The Federal Trade Commission
Commerce, Trade and Consumer Protection
Committee on Energy and Commerce
United States House of Representatives
June 11, 2003
Mr. Chairman, the Federal Trade Commission
("Commission" or "FTC") is pleased to appear before the Subcommittee
today to support the FTC's reauthorization request for Fiscal
Years 2004 to 2006.(1) Since
the last reauthorization hearing, the FTC has continued to
take innovative and aggressive actions to protect consumers
and promote competition. The Commission would like to thank
the Chairman and members of the Subcommittee for their continued
support of the agency's missions.
The FTC acts to ensure that markets operate
efficiently to benefit consumers. The FTC's twin missions
of competition and consumer protection serve a common aim:
to enhance consumer welfare. The FTC's competition mission
promotes free and open markets, bringing consumers lower prices,
innovation, and choice among products and services. The FTC's
consumer protection mission fosters the exchange of accurate,
non-deceptive information, allowing consumers to make informed
choices in making purchasing decisions. Because accurate information
in the marketplace facilitates fair and robust competition,
the FTC's twin missions complement each other and maximize
benefits for consumers.
Five principles guide the FTC's agenda
for consumers. In exercising its competition and consumer
protection authority, the FTC:
- Promotes competition and the unfettered
exchange of accurate, non-deceptive information through
strong enforcement and focused advocacy;
- Stops conduct that poses the greatest
threat to consumer welfare, such as anticompetitive agreements
among rivals and fraudulent and deceptive practices;
- Employs a systematic approach for identifying
and addressing serious misconduct, with special attention
to harmful behavior in key economic sectors;
- Uses the agency's distinctive institutional
capabilities by applying its full range of tools - prosecuting
cases, conducting studies, holding hearings and workshops,
engaging in advocacy before other government bodies, and
educating businesses and consumers - to address competition
and consumer protection issues; and
- Improves the institutions and processes
by which competition and consumer protection policies are
formulated and applied.
During the past year, the FTC has applied
its unique complement of law enforcement and policy instruments
to address critical consumer concerns. Highlights include:
- Privacy: "Do-Not-Call."
The Commission promulgated far-reaching amendments to its
Telemarketing Sales Rule ("TSR"). Among the most important
changes, the agency is poised to launch its National Do-Not-Call
registry, one of the most significant consumer protection
initiatives in recent years. The registry will be a central
database of telephone numbers of consumers who choose not
to receive telemarketing calls. Once the registry is in
place this summer, telemarketers will pay a fee to gain
access to the registry and then must scrub their telemarketing
lists against the telephone numbers in the database. This
fall, consumers who have placed their telephone numbers
on the registry will begin to receive fewer and fewer unwanted
- Health Care: Prescription Drugs.
Medical therapy increasingly relies on new pharmaceuticals
as alternatives to more invasive treatments, such as surgery.
A number of FTC activities will likely, directly or indirectly,
help consumers to afford drugs to meet their needs. The
FTC published a study examining the frequency of anticompetitive
abuses to block market entry of lower-cost generic drugs;
provided comments to the Food and Drug Administration ("FDA")
on the potential for misusing the Hatch-Waxman Act procedures
governing generic entry; and brought law enforcement actions
against branded drug companies alleging improper efforts
to delay generic entry. Among other significant matters,
the Commission reached a settlement with Bristol-Myers Squibb
("BMS") resolving charges that BMS abused the Hatch-Waxman
process to obstruct the entry of generic competition for
two anti-cancer drugs and an anti-anxiety agent.
- Financial Practices: Fraudulent
Lending. In May 2003, the court finalized a settlement
to resolve FTC charges that The Associates (now owned by
Citigroup, Inc.) had engaged in widespread deceptive and
abusive practices involving subprime home mortgage lending.
The settlement is expected to provide $215 million in redress
through cash refunds and reduced loan balances to approximately
2.2 million consumers in the U.S., Puerto Rico, and the
Virgin Islands. A related class action settlement is expected
to yield an additional $25 million, for total relief to
consumers of $240 million.
- E-Commerce: A Unified Approach
to Maintaining Efficient Markets. The development
of the Internet has created a host of consumer issues, requiring
the FTC to draw on all its consumer protection and competition
capabilities. Among other activities, the FTC has formed
an Internet Task Force to analyze state regulations that
may restrict the entry of new Internet competitors; hosted
public workshops on both spam and potential anticompetitive
barriers to e-commerce; and brought significant law enforcement
actions that continue its historical role of leading efforts
to keep e-commerce free from fraud, deception, and unfair
or anticompetitive practices.
- Energy: Gasoline. In
an administrative complaint issued in March 2003, the FTC
alleged that Unocal improperly manipulated the process through
which the California Air Resources Board set regulations
for the formulation of low-emissions gasoline. The FTC contended
that Unocal's anticompetitive conduct potentially could
cost California consumers hundreds of millions of dollars
per year in higher gasoline prices.
- Innovation: Intellectual Property
and Competition. With the growth of the knowledge-based
economy, the relationship between competition and patent
policy as spurs to innovation has become increasingly important.
The FTC, together with the Antitrust Division of the Department
of Justice, held hearings over 24 days, with more than 300
participants, to explore this topic. A report will issue
later this year.
In the next two years, the FTC will continue
to address significant law enforcement and policy issues and
to devote its resources to those areas in which it can have
a major impact on behalf of consumers. With respect to the
consumer protection mission, the focus will be on broad efforts
to fight fraud and deception, as well as on consumer privacy
and security initiatives, including efforts to address spam
and ID theft. With respect to the competition mission, the
FTC will continue merger and nonmerger policy development
and law enforcement, with particular emphasis on health care,
energy, high technology, and international issues.
This testimony addresses areas of FTC focus
with discussions of specific activities and accomplishments
on behalf of consumers. To further improve the FTC's ability
to implement its mission and serve consumers, this testimony
concludes with legislative recommendations to (1) eliminate
the FTC Act's exemption for communications common carriers,
(2) enact measures to improve the FTC's ability to combat
cross-border fraud, (3) enact measures to improve the FTC's
ability to combat spam, and (4) make technical changes to
allow the agency to accept reimbursements and certain gifts
and services that can enhance our mission performance.II.
A. Fraud and Deception
The FTC targets the most pervasive types
of fraud and deception in the marketplace, drawing substantially
on data from Consumer Sentinel, the agency's award-winning
consumer complaint database,(2)
and from Internet "surfs" that focus on specific types of
claims or solicitations that are likely to violate the law.
Since April 1, 2002, the FTC has organized 12 joint law enforcement
efforts ("sweeps") with more than 165 law enforcement partners.(3)
These sweeps resulted in more than 400 law enforcement actions
targeting Internet scams and telemarketing fraud, including
deceptive work-at-home opportunities, deceptive health claims,
advance-fee credit-related fraud, fundraising fraud, and Internet
auction fraud. The FTC filed 70 of these law enforcement cases.
Overall, since April 2002, the FTC has
filed more than 145 cases involving fraud or deception and
has enjoyed significant success in obtaining redress orders
to provide relief for defrauded consumers, with more than
65 final judgments to date ordering more than $865 million
in consumer redress.(4)
The agency continues to ensure compliance with district
court orders by bringing civil contempt proceedings when appropriate,
and by assisting in criminal prosecution of FTC defendants
who flagrantly violate court orders.
The FTC's actions against fraud and deception
directly affect consumers. For example, in November 2002,
the FTC finalized a consent order against Access Resource
Services, Inc. and Psychic Readers Network, the promoters
of "Miss Cleo" psychic services, who allegedly engaged in
deceptive advertising, billing, and collection practices.
The defendants stipulated to a court order requiring them
to stop all collection efforts on accounts against consumers
who purchased or purportedly purchased defendants' pay-per-call
or audiotext services, to pay $5 million in equitable relief,
and to forgive an estimated $500 million in outstanding consumer
In January 2003, the FTC obtained a permanent
injunction against SkyBiz.com, Inc., an alleged massive
international pyramid scheme. The final settlement includes
$20 million in consumer redress to be distributed to both
domestic and foreign victims. The settlement also bans the
principal individual defendants from multi-level marketing
for a period of years.(6)
In March 2003, the FTC announced settlements
with five individual defendants who allegedly engaged in deceptive
charitable telemarketing by misrepresenting both the charities
that donations would benefit and the percentage of donations
that the charities would receive.(7)
Between 1995 and early 1999, the defendants raised more than
$27 million. Among other terms of the settlements, defendant
Mitchell Gold is subject to a $10 million judgment. Following
an FTC criminal referral, Gold was indicted for mail and wire
fraud in connection with the fundraising business and another
fraudulent telemarketing scheme. Gold pled guilty and was
sentenced to 96 months in prison.
B. Consumer Privacy
The FTC will continue to devote significant
resources to protecting consumer privacy. Consumers are deeply
concerned about the security of their personal information,
both online and offline. Although these concerns have been
heightened by the rapid development of the Internet, they
are by no means limited to the cyberworld. Consumers can be
harmed as much by the thief who steals credit card information
from a mailbox or from a discarded billing statement in the
trash as by one who steals that information over the Internet.
Of course, the nature of Internet technology raises its own
special set of issues.
As highlighted above, the FTC has initiated a national Do-Not-Call
registry, a centralized database of telephone numbers of consumers
who have asked to be placed on the list. The Do-Not-Call registry
- part of the FTC's 2002 amendments to the TSR - will help
consumers reduce the number of unwanted telemarketing phone
2. Identity Theft.
The FTC's toll-free number 1-877-ID-THEFT is the nation's
central clearinghouse for identity theft complaints. Calls
regarding identity theft have increased from more than 36,000
calls in FY 2000 to more than 185,000 calls in FY 2002. These
complaints are available to the FTC's law enforcement partners
through an online database, and now more than 620 law enforcement
agencies can access this data. In addition, FTC investigators,
working with the Secret Service, develop preliminary investigative
reports that are referred to regional Financial Crimes Task
Forces for possible prosecution.
Continuing a program begun in March 2002,
the FTC, the Secret Service, and the Department of Justice
("DOJ") conduct training seminars to provide hundreds of local
and state law enforcement officers with practical tools to
combat identity theft. To date, the FTC and its partners have
conducted six regional training sessions for 620 law enforcement
The FTC also engages in extensive education
of both businesses and consumers about preventing and responding
to identity theft. One of the agency's most popular publications
is "Identity Theft: When Bad Things Happen to Your Good Name."(8)
Consumer Information. In May 2002, the FTC finalized
an order settling charges that Eli Lilly & Company unintentionally
disclosed e-mail addresses of users of its Prozac.com and
Lilly.com sites as a result of failures to take reasonable
steps to protect the confidentiality and security of that
information. The settlement requires Lilly to establish a
security program to protect consumers' personal information
against reasonably anticipated threats or risks to its security,
confidentiality, or integrity.(9)
In December 2002, the FTC settled charges
against Microsoft Corporation that, among other things, the
company misrepresented the measures it used to maintain and
protect the privacy and confidentiality of consumers' personal
information collected through its Passport web services.(10)
Microsoft has agreed to implement a comprehensive information
security program for Passport and similar services. The FTC
will continue to bring actions involving claims deceptively
touting the privacy and security features of products and
services, as well as failures to maintain adequate security
for personal information.
In May 2002, the Commission finalized its
Safeguards Rule to implement the security provisions of the
Gramm-Leach-Bliley Act ("GLB").(11)
The Rule establishes standards for financial institutions
to maintain the security of customers' financial information,
and became effective in May 2003. To help businesses comply
with the Rule, the agency issued a new business education
publication, and will conduct other initiatives to inform
businesses of the Rule and provide compliance guidance.(12)
Commissioner Orson Swindle, in particular,
has focused on issues involving information security. During
the past year, he has served as head of the U.S. delegation
to the Organization for Economic Cooperation and Development
("OECD") Experts Group for Review of the 1992 OECD Guidelines
for the Security of Information Systems. The group released
revised guidelines in August 2002 that consist of nine principles
promoting a "culture of security." The FTC has promoted the
dissemination of these principles among industry and consumer
groups. The FTC's consumer security web site, <www.ftc.gov/infosecurity>,
contains practical tips for staying secure online and features
"Dewie the Turtle," a colorful cartoon mascot to promote effective
online security. In addition, the FTC has worked with the
White House Office of Cyberspace Security and the Department
of Homeland Security to develop consumer awareness aspects
of the National Strategy to Secure Cyberspace.
4. Children's Online Privacy
Protection Act ("COPPA").(13)
COPPA requires commercial web sites to give notice of their
information practices and to obtain parental consent before
collecting, using, or disclosing personal information about
children under the age of 13. Since April 2001, the FTC has
brought eight COPPA cases and obtained agreements requiring
payment of civil penalties totaling more than $350,000.(14)
The two most recent cases involved settlements with Hershey
Foods and Mrs. Fields.(15)
Both companies agreed to settle charges that their web sites
allegedly collected personal data from children without complying
with COPPA requirements.
The problems caused by unsolicited commercial e-mail
("spam")(16) go well beyond
the annoyance spam causes to the public. These problems include
the fraudulent and deceptive content of most spam messages,
the sheer volume of spam being sent across the Internet, and
the security issues raised because spam can be used to disrupt
service or as a vehicle for sending viruses.
In particular, deceptive spam is an ever-growing
problem that the FTC is addressing through law enforcement
efforts, consumer and business education, and research. An
important tool the FTC uses to target law violations, identify
trends, and conduct research for education is its spam database.
Consumers forward spam they receive to the FTC database at
firstname.lastname@example.org. The database
receives, on average, more than 110,000 e-mail messages each
day, and currently contains a total of approximately 42 million
pieces of spam.
In April 2003, the FTC released a report
analyzing false claims made in spam. To prepare the report,
the FTC staff reviewed a sample of approximately 1,000 pieces
of spam, taken from a pool of more than 11 million e-mails
in the FTC's database. Of the 1,000 pieces, 66 percent contained
facial elements of deception in the "from" line, the "subject"
line, or the text of the message.(17)
The FTC shares the database information
with other federal and state law enforcement agencies to broaden
the fight against deceptive spam. In November 2002, the FTC
and 12 law enforcement partners brought 30 enforcement actions
as part of an ongoing initiative to fight deceptive spam and
Internet scams.(18) The FTC
also announced, with ten participating agencies, a "Spam Harvest,"
a study designed to identify online actions that may put consumers
at the greatest risk for receiving spam.(19)
The FTC recently settled an action against
a company that allegedly profited from a particularly insidious
spam scam. According to the complaint, the subject line of
the e-mail said "Yahoo sweepstakes winner," and the message
congratulated the recipient for being chosen as a winner of
a prize in a recent Yahoo sweepstakes contest. Most often,
the message mentioned that the prize was a Sony Playstation
2, making it particularly attractive to adolescents. But the
message was not from Yahoo, and the recipients had not won
anything. Instead, after clicking through five web pages,
consumers were connected to a pornographic web site at a cost
of up to $3.00 a minute. The settlement enjoins the defendants
from making misleading representations of material facts in
e-mail and other marketing, including deceptive e-mail header
information. The settlement also requires the defendants to
prevent third parties that promote their videotext services,
through e-mail or other means, from making deceptive statements.(20)
In April, the FTC filed an action against
an allegedly illegal spam operation for using false return
addresses, empty "reply-to" links, and deceptive subject lines
to expose unsuspecting consumers, including children, to sexually
explicit material.(21) The
FTC alleged that the defendant used the spam in an attempt
to drive business to an adult web site, "Married But Lonely."
The FTC obtained a stipulated preliminary injunction to halt
false or misleading spam.
The FTC recently hosted a three-day public
forum to analyze the impact spam has on consumers' use of
e-mail, e-mail marketing, and the Internet industry and to
explore solutions in addition to law enforcement.(22)
A major concern expressed at the forum was the dramatic rate
at which spam is proliferating. For example, one ISP reported
that in 2002, it experienced a 150 percent increase in spam
traffic. America Online reported that it recently blocked
2.37 billion pieces of spam in a single day. Indeed, spam
appears to be the marketing vehicle of choice for many fraudulent
and deceptive marketers. In addition, and of particular concern,
panelists noted that spam is increasingly used to disseminate
malicious code such as viruses and "Trojan horses."
Solutions to the problems posed by spam
will not be quick or easy; nor is one single approach likely
to provide a cure. Instead, a balanced blend of technological
fixes, business and consumer education, legislation, and enforcement
will be required. Technology that empowers consumers in an
easy-to-use manner is essential to getting immediate results
for a number of frustrated end-users. Any solution to the
problems caused by spam should contain the following elements:
1. Enhanced enforcement tools to combat
fraud and deception;
2. Support for the development and deployment
of technological tools to fight spam;
3. Enhanced business and consumer education;
4. The study of business methods to reduce
the volume of spam.
The Commission's legislative recommendations,
outlined in Part IV, would enhance the agency's enforcement
tools for fighting spam. In addition, the FTC will continue
vigorous law enforcement and reach out to key law enforcement
partners through the creation of a Federal/State Spam Task
Force to strengthen cooperation with criminal authorities.
The Task Force can help to overcome some of the obstacles
that spam prosecutions present to law enforcement authorities.
For example, in some instances, state agencies spent considerable
front-end investigative resources to find a spammer, only
to discover at the back end that the spammer was located outside
the state's jurisdiction. State and federal agencies recognize
the need to share the information obtained in investigations,
so that the agency best placed to pursue the spammer can do
so more efficiently and quickly. The Task Force should facilitate
this process. Further, it can serve as a forum to apprise
participating agencies of the latest spamming technology,
spammer ploys, and investigational techniques.
Through the Task Force, the FTC will reach
out not only to its civil law enforcement counterparts on
the state level, but also to federal and state criminal authorities.
Although few criminal prosecutions involving spam have occurred
to date,(23) criminal prosecution
may well be appropriate for the most egregious conduct. The
FTC and its partners in criminal law enforcement agencies
continue to work to assess existing barriers to successful
criminal prosecutions. The FTC will explore whether increased
coordination and cooperation with criminal authorities would
be helpful in stopping the worst actors.
Improved technological tools will be an
essential part of any solution as well. A great deal of spam
is virtually untraceable, and an increasing amount crosses
international boundaries. Panelists estimated that from 50
percent to 90 percent of e-mail is untraceable, either because
it contains falsified routing information or because it comes
through open relays or open proxies.(24)
Because so much spam is untraceable, technological development
will be an important element in solving spam problems. To
this end, the FTC will continue to encourage industry to meet
Action by consumers and businesses who
may receive spam will be a crucial part of any solution to
the problems caused by spam. A key component of the FTC's
efforts against spam is educating consumers and businesses
about the steps they can take to decrease the amount of spam
they receive. The FTC's educational materials provide guidance
on how to decrease the chances of having an e-mail address
harvested and used for spam, and suggest several other steps
to decrease the amount of spam an address may receive. The
FTC's educational materials on spam are available on the FTC
Finally, several initiatives for reducing
the overwhelming volume of spam were discussed at the FTC's
Spam Forum. At this point, questions remain about the feasibility
and likely effectiveness of these initiatives. The FTC intends
to continue its active role as catalyst and monitor of technological
innovation and business approaches to addressing spam.
Through its Section 5 authority as well as its jurisdiction
under the GLB Act, the FTC is also combating "pretexting,"
the use of false pretenses to obtain customer financial information.
The agency has obtained stipulated court orders to halt these
practices(26) and has sent
warning letters to nearly 200 others about apparent violations
of the GLB pretexting prohibitions.
C. Deceptive Lending Practices
As highlighted above, the FTC has been
aggressive in its fight against deceptive lending practices.
Unscrupulous lenders can deceive consumers about loan terms,
rates, and fees, and the resulting injury can be severe -
including the loss of a home. Over the last year, the FTC
has obtained settlements for nearly $300 million in consumer
redress for deceptive lending practices and other related
law violations. The FTC has settled cases against Associates
First Capital Corporation (now owned by Citigroup)(27)
for alleged deceptive sales of credit insurance and alleged
violations of the Equal Credit Opportunity Act(28)
and the Fair Credit Reporting Act;(29)
against First Alliance Mortgage(30)
for alleged deceptive loan terms and origination fees; and
against Mercantile Mortgage(31)
for alleged deception of consumers about loan terms and alleged
violations of the Truth in Lending Act.(32)
In addition to monetary relief, the Mercantile settlement
gives hundreds of consumers the opportunity to refinance loans
at low or no cost.(33)
D. Health Fraud and Deception
Truthful and substantiated advertising
can serve as an important source of useful information for
consumers about health care. Inaccurate information, on the
other hand, can cause serious financial as well as physical
harm. For that reason, combating deceptive health claims,
both online and off, continues to be a priority for the FTC.
1. Dietary Supplements.
Challenging misleading or unsubstantiated claims in the advertisement
of dietary supplements is a significant part of the FTC's
consumer protection agenda. During the past decade, the FTC
has filed more than 80 law enforcement actions challenging
false or unsubstantiated claims about the efficacy or safety
of a wide variety of supplements.(34)
The agency focuses its enforcement priorities on claims for
products with unproven benefits or that present significant
safety concerns to consumers, and on deceptive or unsubstantiated
claims that products treat or cure serious diseases. The FTC
has taken action against all parties responsible for the deceptive
marketing, including manufacturers, advertising agencies,
infomercial producers, distributors, retailers, and endorsers.
2. Weight Loss
Advertising. Since the 1990s, the
FTC has filed nearly 100 cases challenging false or misleading
claims for all types of weight loss products, including over-the-counter
drugs, dietary supplements, commercial weight loss centers,
weight loss devices, and exercise equipment.(35)
In September 2002, the FTC issued a "Report on Weight-Loss
Advertising: An Analysis of Current Trends,"(36)
which concludes that false or misleading claims for weight
loss products are widespread and, despite an unprecedented
level of FTC enforcement activity, appear to have increased
over the last decade.
The FTC continues to explore ways to reduce
the number of deceptive weight loss claims. On November 19,
2002, the FTC held a public workshop on the Advertising of
Weight Loss Products.(37)
Workshop participants included government officials, scientists,
public health groups, marketers of weight loss products, advertising
professionals, and representatives of the media. Participants
explored both the impact of deceptive weight loss product
ads on the public health and new approaches to fighting the
proliferation of misleading claims, including a more active
role for the media in screening out patently false weight
loss advertising. Also, in an opinion piece in Advertising
Age, Commissioner Sheila Anthony noted that the FTC cannot
solve this problem alone and challenged the industry and the
media to play their part.(38)
E. Cross-Border Consumer Protection
The Internet and electronic commerce know
no boundaries, and cross-border fraud is a growing problem
for consumers and businesses in the U.S. and abroad. During
2002, approximately 14% of the complaints collected in the
Consumer Sentinel complaint database involved a cross-border
element. The number of FTC cases involving offshore defendants,
offshore evidence, or offshore assets also has increased.
In 2002, the FTC brought approximately 22 law enforcement
actions involving cross-border fraud.
Those who defraud consumers take advantage
of the special problems faced by law enforcers in acting against
foreign companies, including difficulties in sharing information
with foreign law enforcement agencies, exercising jurisdiction,
and enforcing judgments abroad. Thus, law enforcers worldwide,
now more than ever, need to cooperate and expand their consumer
To address the growing problem of cross-border
fraud, in October 2002, Chairman Muris announced a Five-Point
Plan to Combat Cross-Border Fraud. Since then, the FTC has
been implementing this plan by:
- Developing OECD guidelines on
cross-border fraud. Commissioner Mozelle Thompson
of the FTC chairs the OECD Committee on Consumer Policy
and leads the U.S. delegation to the Committee, which is
developing guidelines for international cooperation concerning
cross-border fraud. The FTC is working with its foreign
counterparts, and soon expects to finalize these guidelines.
- Strengthening bilateral and multilateral
relationships. The FTC already has bilateral consumer
protection cooperation agreements with agencies in Australia,
Canada, and the U.K., and is working to strengthen these
relationships and develop new ones. The FTC also participates
in a network of consumer protection enforcement officials
from more than 30 countries. Finally, the FTC has joined
other agencies in various cross-border task forces, such
as the Toronto Strategic Partnership, Project Emptor with
British Columbia authorities, and MUCH -- the Mexico-U.S.-Canada
Health fraud task force. In the past year, the FTC has announced
numerous joint law enforcement actions taken with the assistance
of these task forces, including actions involving credit
card loss protection,(39)
advance fee credit cards,(40)
and bogus cancer clinics.(41)
- Continuing public-private partnerships.
The FTC continues to ask responsible industry to help fight
cross-border fraud, which hurts businesses as well as consumers.
The FTC held a workshop on this issue in February 2003 and
continues to work with the private sector to follow up on
some ideas discussed at the workshop, including better sharing
of information between the private sector and the FTC.
- Providing technical assistance.
The FTC wants to ensure that no developing country
becomes a haven for fraud. Therefore, it is conducting U.S.
AID-funded technical assistance on consumer protection issues
in various developing countries. Last year, the FTC conducted
technical assistance missions for consumer protection authorities
from 13 Eastern European countries, including Hungary and
Slovenia. This year, the FTC is planning to conduct missions
in Romania, Russia, and Peru.
- Recommending proposals for legislative
amendments. Many of the challenges the FTC faces
in combating cross-border fraud might best be addressed
through legislative changes. The FTC's proposals for legislative
changes are described in Section IV of this testimony.
F. Initiatives Designed to Reach
Specific Consumer Groups
The FTC has implemented a variety of initiatives
that assist particular consumer groups, including children,
Spanish-speaking consumers, and military personnel and their
1. Protecting Children.
The agency maintains an active program to monitor, report
on, and provide educational materials about marketing activities
affecting children. The FTC continues to monitor the marketing
of violent entertainment products to children. Since September
2000, the agency has issued a series of reports on this issue.(42)
The FTC intends to issue a fourth follow-up report on the
industries' practices. The staff also is working with retailer
trade groups to devise a consumer education message for parents,
and is preparing to hold a public workshop on these issues
later this year.
The FTC also conducted an informal survey
of online gambling sites and published a consumer alert warning
parents and their children that online gambling can pose huge
risks, including money loss, impaired credit ratings, and
addiction to gambling.(43)
Finally, the FTC monitors alcohol advertising
to ensure that ads for these products do not involve potentially
unfair or deceptive practices, including the targeting of
alcohol advertisements to minors. In response to a Congressional
request, the agency will prepare reports on two subjects related
to alcohol advertising and youth: (1) the impact on underage
consumers of the significant expansion of ads for new alcoholic
beverages, and (2) the industry's response to recommendations
for improved self-regulation contained in the FTC's 1999 report
2. Spanish-Speaking Consumers.
In FY 2002, the FTC instituted a Hispanic Outreach Program,
which resulted in hiring a Hispanic Outreach Coordinator.
This effort includes the creation of a dedicated page on the
FTC site, Protection Para el Consumidor ("Consumer
Protection"), which mirrors the English version of the consumer
protection page and provides Spanish translations of several
popular consumer education publications. The FTC also has
created an online Spanish-language consumer complaint form
and has undertaken outreach efforts to Hispanic media.
In addition, the FTC has taken action against
alleged law violations affecting Spanish-speaking consumers.
The agency settled a civil penalty action against a Houston-based
debt collection company for alleged violations of the rights
of Spanish- and English-speaking consumers under the Fair
Debt Collection Practices Act.(45)
The settlement requires, among other things, that the company
make disclosures in Spanish where applicable.
3. Military Sentinel.
In September 2002, the FTC and the Department of Defense ("DOD")
launched Military Sentinel, the first online consumer complaint
database tailored to the unique needs of the military community.
The system offers members of the military and their families
a way to file complaints and gain immediate access to the
FTC's full range of educational materials and information.(46)
It also gives DOD and law enforcement officers secure access
to the complaints entered into the database.
The FTC's competition mission, as its name
suggests, promotes competition in the marketplace to give
consumers the best products at the lowest prices. The FTC
employs a variety of tools to promote and protect competition:
in addition to enforcing the antitrust laws, the agency holds
workshops, conducts studies, writes reports, and monitors
the marketplace. The agency will continue to focus both its
law enforcement activity and other initiatives in key sectors
of the economy, such as health care, energy, and high-tech
industries. The global economy also requires the FTC's competition
mission, like its consumer protection mission, to be increasingly
concerned with international issues.
A. Health Care
The health care sector remains enormously
important to both consumers and the national economy. Health-related
products and services account for more than 15 percent of
the U.S. gross domestic product ("GDP"), and that share has
grown by about 25 percent since 1990. Without effective antitrust
enforcement, health costs would be greater and the share of
GDP would be even higher.
Drugs. As previously mentioned, the FTC
recently reached a major settlement with Bristol-Myers Squibb
("BMS") to resolve charges that BMS engaged in a series of
anticompetitive acts over the past decade to obstruct entry
of low-price generic competition for three of BMS's widely-used
pharmaceutical products: two anti-cancer drugs, Taxol and
Platinol, and the anti-anxiety agent BuSpar.(47)
Among other things, the FTC's complaint alleged that BMS abused
FDA regulations to obstruct generic competitors; misled the
FDA about the scope, validity, and enforceability of patents
to secure listing in the FDA's "Orange Book" list of approved
drugs and their related patents; breached its duty of good
faith and candor with the U.S. Patent and Trademark Office
("PTO"), while pursuing new patents claiming these drugs;
filed baseless patent infringement suits against generic drug
firms that sought FDA approval to market lower-priced drugs;
and paid a would-be generic rival $72.5 million to abandon
its legal challenge to the validity of a BMS patent and to
stay out of the market until the patent expired. Because of
BMS's alleged pattern of anticompetitive conduct and the extensive
resulting consumer harm, the Commission's proposed order necessarily
contains strong - and in some respects unprecedented - relief.(48)
The settlement with BMS represents the
latest FTC milestone in settlements regarding allegedly anticompetitive
conduct by branded or generic drug manufacturers designed
to delay generic entry. Other recent FTC successes in this
- Biovail. An October
2002 consent order settling charges that Biovail Corporation
illegally acquired a license to a patent and improperly
listed the patent in the FDA's Orange Book as claiming Biovail's
high blood pressure drug Tiazac (under current law, the
listing of the patent and the subsequent lawsuit brought
by Biovail against a potential generic entrant triggered
an automatic 30-month stay of FDA approval of the generic
- Biovail/Elan. An August
2002 settlement with Biovail and Elan Corporation, plc resolving
charges that the companies entered into an agreement that
provided substantial incentives for the two companies not
to compete in the markets for 30 milligram and 60 milligram
dosage strengths of the generic drug Adalat CC (an anti-hypertension
2. Health Care Providers.
For decades, the FTC has worked to facilitate innovative and
efficient arrangements for the delivery and financing of health
care services by challenging artificial barriers to competition
among health care providers. These efforts continue. In the
last year, the FTC settled with seven groups of physicians
for allegedly colluding to raise consumers' costs.(51)
These settlements involved significant numbers of doctors
-- more than 1,200 in a case in the Dallas-Fort Worth area
and more than three-quarters of all doctors in the Carlsbad,
New Mexico area. The Commission's orders put a stop to allegedly
collusive conduct that harms employers, individual patients,
and health plans by depriving them of the benefits of competition
in the purchase of physician services.
3. Health Care Mergers.
The FTC has taken action regarding a number of proposed mergers
in the health care sector to ensure that consumers continue
to receive the benefits of competitive markets. In April,
the Commission reached a settlement with Pfizer Inc., the
largest pharmaceutical company in the United States, and Pharmacia
Corporation to resolve concerns that their $60 billion merger
would harm competition in nine separate and wide-ranging product
markets, including drugs to treat overactive bladder, symptoms
of menopause, skin conditions, coughs, motion sickness, erectile
dysfunction, and three different veterinary conditions.(52)
Annual sales in the nine product markets currently total more
than $3 billion. The settlement will require divestitures
to protect consumers' interests in those markets while allowing
the remainder of the transaction to go forward.
Other recent health care mergers investigated
by the FTC include:
- Cytyc/Digene. In June
2002, the Commission authorized the staff to seek a preliminary
injunction blocking Cytyc Corporation's proposed acquisition
of Digene Corporation,(53)
involving the merger of two manufacturers of complementary
cervical cancer screening tests. The complaint alleged that
the combined firm would have an incentive to use its market
power in one product to stifle increased competition in
the complementary product's market. Thus, if the merger
had been consummated, rivals would have been substantially
impeded from competing. Following the Commission's decision,
the parties abandoned the transaction.
- Baxter/Wyeth. The FTC
alleged that Baxter International's $316 million acquisition
of Wyeth Corporation raised competitive concerns in markets
for a variety of drugs. Of particular concern were the $400
million market for propofol, a general anesthetic commonly
used for the induction and maintenance of anesthesia during
surgery, and the $225 million market for new injectable
iron replacement therapies used to treat iron deficiency
in patients undergoing hemodialysis.(54)
To settle this matter, the parties agreed to divestitures
that are expected to maintain competition in those markets.
- Amgen/Immunex. The FTC
obtained an agreement settling allegations that Amgen Inc.'s
$16 billion acquisition of Immunex Corporation would reduce
competition for three important biopharmaceutical products:
(1) neutrophil regeneration factors used to treat a dangerously
low white blood cell count that often results from chemotherapy;
(2) tumor necrosis factors used to treat rheumatoid
arthritis, Crohn's disease, and psoriatic arthritis; and
(3) interleukin-1 inhibitors used in the treatment of rheumatoid
arthritis.(55) The settlement
required that the companies divest certain assets and license
certain intellectual property rights in these markets.
4. Promoting Competition
in Prescription Drugs. The FTC also has sought
to promote competition in the pharmaceutical industry through
published reports and speeches. Commissioner Leary has a special
interest in pharmaceutical competition and has addressed this
topic in speeches to solicit input from affected parties and
to promote dialogue regarding practical solutions.(56)
In July 2002, the FTC issued a report entitled
"Generic Drug Entry Prior to Patent Expiration: An FTC Study,"(57)
which evaluated whether the Hatch-Waxman Amendments to the
Federal Food, Drug, and Cosmetic Act are susceptible to strategies
to delay or deter consumer access to generic alternatives
to brand-name drug products. The report recommended changes
in the law to ensure that generic entry is not delayed unreasonably,
including through anticompetitive activity. In October 2002,
President Bush directed the FDA to implement one of the key
findings identified in the FTC study.(58)
Specifically, the FDA has proposed a new rule to curb
one of the abuses uncovered by the FTC study - pharmaceutical
firms' alleged misuse of the Hatch-Waxman patent listing provisions
- to speed consumer access to lower-cost generic drugs.(59)
5. Hearings on Health
Care and Competition Law and Policy. To keep
abreast of developments in the dynamic health care market,
the FTC, working with DOJ's Antitrust Division, commenced
a series of hearings on "Health Care and Competition Law and
Policy" on February 26, 2003.(60)
Over a seven-month period, the FTC and DOJ will spend almost
30 days of hearings in a comprehensive examination of a wide
range of health care issues, involving hospitals, physicians,
insurers, pharmaceuticals, long-term care, Medicare, and consumer
information, among others. To date, the hearings have focused
on the specific challenges and complications involved in applying
competition law and policy to health care; issues involved
in hospital merger cases and other joint arrangements, including
geographic and product market definition; horizontal hospital
networks and vertical arrangements with other health care
providers; the competitive effects of mergers of health insurance
providers; and consumer information and quality of care issues.
A public report that incorporates the results of the hearings
will be prepared after the hearings.
Antitrust law enforcement is critical in
the oil and gas industry. Fuel price increases directly and
significantly affect businesses of all sizes throughout the
U.S. economy and can strain consumer budgets.
1. Oil Merger Investigations.
In recent years, the FTC has investigated numerous oil mergers.
When necessary, the agency has insisted on divestitures to
cure potential harm to competition. In the most recent case,
Conoco/Phillips, the Commission required the merged
company to divest two refineries and related marketing assets,
terminal facilities for light petroleum and propane products,
and certain natural gas gathering assets.(61)
2. Natural Gas Merger
Investigations. The FTC also has investigated
mergers in the natural gas industry and taken necessary action
to preserve competition. Just two weeks ago, the Commission
accepted for public comment a consent order designed to preserve
competition in the market for the delivery of natural gas
to the Kansas City area.(62)
The proposed order conditionally would allow Southern Union
Company's $1.8 billion purchase of the Panhandle pipeline
from CMS Energy Corporation, while requiring Southern Union
to terminate an agreement under which one of its subsidiaries
managed the Central pipeline, which competes with Panhandle
in the market for delivery of natural gas to the Kansas City
area. Absent the settlement agreement, the transaction would
have placed the two pipelines under common ownership or common
management and control, eliminating direct competition between
them, and likely resulting in consumers' paying higher prices
for natural gas in the Kansas City area.
Monopolization Case. As highlighted above, the
Commission recently issued an administrative complaint in
an important nonmerger case involving the Union Oil Company
of California ("Unocal").(63)
The complaint alleges that Unocal violated Section 5 of the
FTC Act by subverting the California Air Resources Board's
("CARB") regulatory standard-setting procedures of the late
1980s relating to low-emissions reformulated gasoline ("RFG").
According to the complaint, Unocal misrepresented to industry
participants that some of its emissions research was non-proprietary
and in the public domain, while at the same time pursuing
a patent that would permit Unocal to charge royalties if CARB
used such emissions information. The complaint alleged that
Unocal did not disclose its pending patent claims and that
it intentionally perpetuated the false and misleading impression
that it would not enforce any proprietary interests in its
emissions research results. The complaint states that Unocal's
conduct has allowed it to acquire monopoly power for the technology
to produce and supply California "summer-time" RFG, a low-emissions
fuel mandated for sale in California from March through October,
and could cost California consumers five cents per gallon
in higher gasoline prices. This case is pending before an
Administrative Law Judge.
4. Study of Refined Petroleum
Product Prices. Building on its enforcement
experience in the petroleum industry, the FTC is studying
the causes of volatility in refined petroleum products prices.
In two public conferences, held in August 2001 and May 2002,(64)
participants discussed key factors that affect product prices,
including increased dependency on foreign crude sources, changes
in industry business practices, and new governmental regulations.
The information gathered through these public conferences
will form the basis for a report to be issued later this year.
5. Gasoline Price Monitoring.
In May 2002, the FTC announced a project to monitor
wholesale and retail prices of gasoline in an effort to identify
possible anticompetitive activities to determine if a law
enforcement investigation would be warranted. This project
tracks retail gasoline prices in approximately 360 cities
nationwide and wholesale (terminal rack) prices in 20 major
urban areas. The FTC Bureau of Economics staff receives daily
data purchased from the Oil Price Information Service ("OPIS"),
a private data collection company. The economics staff uses
an econometric (statistical) model to determine whether current
retail and wholesale prices each week are anomalous in comparison
with historical data. This model relies on current and historical
price relationships across cities, as well as other variables.
As a complement to the analysis based on
OPIS data, the FTC staff also regularly reviews reports from
the Department of Energy's Consumer Gasoline Price Hotline,
searching for prices significantly above the levels indicated
by the FTC's econometric model or other indications of potential
problems. Throughout most of the past two years, gasoline
prices in U.S. markets have been within their predicted normal
bounds. Of course, the major factor affecting U.S. gasoline
prices is the substantial fluctuation in crude oil prices.
Prices outside the normal bounds trigger further staff inquiry
to determine what factors might be causing price anomalies
in a given area. These factors could include supply disruptions
such as refinery or pipeline outages, changes in taxes or
fuel specifications, unusual changes in demand due to weather
conditions and the like, and possible anticompetitive activity.
To enhance the Gasoline Price Monitoring
Project, the FTC has recently asked each state Attorney General
to forward to the FTC's attention consumer complaints they
receive about gasoline prices. The staff will incorporate
these complaints into its ongoing analysis of gasoline prices
around the country, using the complaints to help locate price
anomalies outside of the 360 cities for which the staff already
receives daily pricing data.
The goal of the Monitoring Project is to
alert the FTC to unusual changes in gasoline prices so that
further inquiry can be undertaken expeditiously. When price
increases do not appear to have market-driven causes, the
FTC staff will consult with the Energy Information Agency
of the Department of Energy. The FTC staff also will contact
the offices of the appropriate state Attorneys General to
discuss the anomaly and the appropriate course for any further
inquiry, including the possible opening of a law enforcement
C. High Technology
With its history of keeping pace with marketplace
developments, the FTC is well-positioned to take a leading
role in assessing the impact of technology on domestic and
world markets. In addition to bringing enforcement actions
in high tech areas, the FTC is studying the impact of the
Internet and intellectual property on competition law and
1. Standard-Setting Cases.
As technology advances, efforts will increase to establish
industry standards for the development and manufacture of
new products. Standard setting is often procompetitive, but
anticompetitive abuses can take place during the standard-setting
process. When the standard-setting process appears to have
been subverted, the FTC will take action. In addition to Unocal,
discussed previously, the agency is currently conducting an
administrative adjudication regarding Rambus, Inc. A June
2002 complaint alleges that Rambus, a participant in an electronics
standard-setting organization, failed to disclose - in violation
of the organization's rules - that it had a patent and several
pending patent applications on technologies that eventually
were adopted as part of the industry standard.(65)
The standard at issue involved a common form of computer memory
used in a wide variety of popular consumer electronic products,
such as personal computers, fax machines, video games, and
personal digital assistants. The Commission's complaint alleges
that, once the standard was adopted, Rambus was in a position
to reap millions in royalty fees each year, and potentially
more than a billion dollars over the life of the patents.(66)
Because standard-setting abuses can harm robust and efficiency-enhancing
competition in high tech markets, the FTC will continue to
pursue investigations in this area.(67)
2. Intellectual Property
Hearings. In 2002, the FTC and DOJ commenced
a series of ground-breaking hearings on "Competition and Intellectual
Property Law and Policy in the Knowledge-Based Economy."(68)
These hearings, which took place throughout 2002 and were
held in Washington and Silicon Valley, heard testimony from
academics, industry leaders, technologists and others about
the increasing need to manage the issues at the intersection
of competition and intellectual property law and policy. The
FTC anticipates releasing a report on its findings later this
3. Internet Task Force.
In 2001, the FTC's Internet Task Force began to evaluate potentially
anticompetitive regulations and business practices that could
impede e-commerce. The Task Force has discovered that some
state regulations may have the effect of protecting existing
bricks-and-mortar businesses from new Internet competitors.
The Task Force also is considering whether private companies
may be hindering e-commerce through the use of potentially
anticompetitive tactics. In October 2002, the Task Force held
a public workshop to: (1) enhance the FTC's understanding
of these issues; (2) educate policymakers about the potential
anticompetitive effects of state regulations; and (3) educate
private entities about the types of business practices that
may be viewed as problematic.(69)
D. International Competition
Because competition increasingly takes
place in a worldwide market, cooperation with competition
agencies in the world's major economies is a key component
of the FTC's enforcement program. Given differences in laws,
cultures, and priorities, it is unlikely that there will be
complete convergence of antitrust policy in the foreseeable
future. Areas of agreement far exceed those of divergence,
however, and instances in which differences will result in
conflicting results are likely to remain rare. The agency
has increased its cooperation with agencies around the world,
both on individual cases and on policy issues, and is committed
to addressing and minimizing policy divergences.
1. ICN and ICPAC.
In the fall of 2001, the FTC, DOJ, and 12 other antitrust
agencies from around the world launched the International
Competition Network ("ICN"), an outgrowth of a recommendation
of the International Competition Policy Advisory Committee
("ICPAC"). ICPAC suggested that competition officials from
developed and developing countries convene a forum in which
to work together on competition issues raised by economic
globalization and the proliferation of antitrust regimes.
The ICN provides a venue for antitrust officials worldwide
to work toward consensus on proposals for procedural and substantive
convergence on best practices in antitrust enforcement and
policy. Sixty-seven jurisdictions already have joined the
ICN, and the FTC staff is working on initial projects relating
to mergers and competition advocacy.
The FTC continues to participate in the work of the OECD on,
among other things, merger process convergence, implementation
of the OECD recommendation on hard-core cartels (e.g.,
price-fixing agreements), and regulatory reform.
E. Other Enforcement
1. General Merger Enforcement.
The FTC reviews and challenges mergers in any economic sectors
that have significant potential to harm competition and consumers.
For example, last summer the Commission settled allegations
that Bayer AG's $6.2 billion purchase of Aventis S.A.'s crop
science business raised antitrust concerns in the markets
for a number of crop science products, including markets for
(1) new generation chemical insecticide products and
active ingredients; (2) post-emergent grass herbicides for
spring wheat; and (3) cool weather cotton defoliants. These
new generation products are at the forefront of pesticide,
insecticide, and herbicide products, and maintaining competition
in these markets is significant because they appear to offer
greater effectiveness, with less environmental impact than
current generation products. In settling this matter, the
Commission required Bayer to divest businesses and assets
used in the manufacture of these products to parties capable
of maintaining competitive conditions in these markets.(70)
Also, in October 2002, the Commission authorized
the staff to seek a preliminary injunction in federal court
blocking the proposed acquisition of the Claussen Pickle Company
by the owner of the Vlasic Pickle Company.(71)
If allowed to proceed, the combined firm would have had a
monopoly share of the refrigerated pickle market in the United
States. Following the FTC's decision, the parties abandoned
the proposed acquisition.
2. Mergers Not Reportable
Under HSR. The FTC will continue to
devote resources to monitoring merger activities that are
not subject to premerger reporting requirements under HSR,
but that could be anticompetitive. In 2000, Congress raised
the HSR size-of-transaction filing threshold to eliminate
the reporting requirement for smaller mergers, but of course
it did not eliminate the substantive prohibition under Section
7 of the Clayton Act(72) against
smaller mergers that may substantially lessen competition.
Consequently, the FTC must identify - through means such as
the trade press and other news articles, consumer and competitor
complaints, hearings, and economic studies - and remedy those
unreported, usually consummated mergers that could harm consumers.
One notable example is the case against
In this case, the company ultimately agreed to settle FTC
allegations that MSC's 1999 acquisitions of Universal Analytics,
Inc. and Computerized Structural Analysis & Research Corporation
violated federal antitrust laws by eliminating competition
in, and monopolizing the market for, advanced versions of
Nastran, an engineering simulation software program used throughout
the aerospace and automotive industries. Under the terms of
the settlement agreement, MSC must divest at least one clone
copy of its current advanced Nastran software, including the
source code. The divestiture will be through royalty-free,
perpetual, non-exclusive licenses to one or two acquirers
who must be approved by the FTC.
3. Enforcement of FTC Merger
Orders. The FTC also will litigate, when necessary,
to ensure compliance with Commission orders protecting competition.
In March, a federal judge fined Boston Scientific Corporation
("BSC") for violating a licensing requirement in a merger
settlement involving medical technology used to diagnose and
treat heart disease.(74) To
preserve competition in the market for intravascular ultrasound
catheters following its acquisition of two competitors, BSC
had agreed to license its catheter technology to Hewlett-Packard
Company. Finding that BSC "acted in bad faith" and took an
"obstreperous approach" to its obligation, the court assessed
a civil penalty of more than $7 million. This represents the
largest civil penalty ever imposed for violation of an FTC
IV. Legislative Recommendations
To improve the agency's ability to implement
its mission and to serve consumers, the FTC makes the following
recommendations for legislative changes. The FTC staff will
be happy to work with Subcommittee staff on these recommendations.
A. Elimination of the FTC Act's
Exemption for Communications Common Carriers The
FTC Act exempts common carriers subject to the Communications
Act from its prohibitions on unfair or deceptive acts or practices
and unfair methods of competition. This exemption dates from
a period when telecommunications services were provided by
government-authorized, highly regulated monopolies. The exemption
is now outdated. In the current world, firms are expected
to compete in providing telecommunications services. Congress
and the Federal Communications Commission ("FCC") have replaced
much of the economic regulatory apparatus formerly applicable
to the industry with competition. Moreover, technological
advances have blurred traditional boundaries between telecommunications,
entertainment, and high technology. Telecommunications firms
have expanded into numerous non-common-carrier activities.
For these reasons, FTC jurisdiction over telecommunications
firms' activities has become increasingly important.
The FTC Act exemption has proven to be
a barrier to effective consumer protection, both in common
carriage and in other telecommunications businesses. The exemption
also has prevented the FTC from applying its legal, economic,
and industry expertise regarding competition to mergers and
other possible anticompetitive practices, not only involving
common carriage but also in other high-tech fields involving
telecommunications. The FTC believes that Congress should
eliminate the special exemption to reflect the fact that competition
and deregulation have replaced comprehensive economic regulation.
The common carrier exemption sometimes
has stymied FTC efforts to halt fraudulent or deceptive practices
by telecommunications firms. While common carriage has been
outside the FTC's authority, the agency believes that the
FTC Act applies to non-common-carrier activities of telecommunications
firms, even if the firms also provide common carrier services.
Continuing disputes over the breadth of the FTC Act's common
carrier exemption hamper the FTC's oversight of the non-common-carrier
activities. These disputes have arisen even when the FCC may
not have jurisdiction over the non-common-carrier activity.
These disputes may increase the costs of pursuing an enforcement
action or may cause the agency to narrow an enforcement action
- for example, by excluding some participants in a scheme
- to avoid protracted jurisdictional battles and undue delay
in providing consumer redress. It may have additional serious
consequences to new areas of industry convergence, e.g.,
high technology and entertainment, where the FTC's inability
to protect consumers can undermine consumer confidence.
The FTC has the necessary expertise to
address these issues. The FTC has broad consumer protection
and competition experience covering nearly all fields of commerce.
The FTC has extensive expertise with advertising, marketing,
billing, and collection, areas in which significant problems
have emerged in the telecommunications industry. In addition,
the FTC has powerful procedural and remedial tools that could
be used effectively to address developing problems in the
telecommunications industry if the FTC were authorized to
The common carrier exemption also significantly
restricts the FTC's ability to engage in effective antitrust
enforcement in broad sectors of the economy. The mix of common
carrier and non-common-carrier activities within particular
telecommunications companies frequently precludes FTC antitrust
enforcement for much of the telecommunications industry. Further,
because of the expansion of telecommunications firms into
other high-tech industries and the growing convergence of
telecommunications and other technologies, the common carrier
exemption increasingly limits FTC involvement in a number
of industries outside telecommunications.
B. Legislation to Improve the FTC's
Ability to Combat Cross-Border Fraud
As stated earlier, consumer fraud is now
more global than ever before. To better protect consumers,
the FTC requests that Congress enact legislation that would
better address the changing nature of the consumer marketplace
and improve the agency's ability to cooperate and share information
in cases and investigations relating to cross-border fraud.
The agency's recommendations focus primarily on improving
its ability to combat fraud involving foreign parties, evidence,
or assets. At the same time, some of the recommendations may
also benefit the pursuit of purely domestic investigations
and cases. Indeed, it is often not immediately evident whether
a matter has a cross-border component.
These proposals also would help the FTC
fight deceptive spam. As the agency has learned from investigations
and discussions at the recent FTC spam forum, spammers easily
can hide their identity, forge the electronic path of their
e-mail messages, or send their messages from anywhere in the
world to anyone in the world. Also, a large percentage of
spam comes from outside our borders. For these reasons, the
spam forum participants emphasized that successful efforts
to combat deceptive spam will require international enforcement
cooperation. These legislative proposals can improve the FTC's
ability to cooperate with international partners on this issue.
The FTC staff has discussed these legislative
proposals with other affected agencies, and these agencies
generally support the goals of the proposals. The FTC staff
is continuing to work with these agencies on the details of
a few of the proposals.
The FTC's cross-border proposal includes
four main components. First, the FTC is seeking to strengthen,
in a number of ways, its ability to cooperate with foreign
counterparts, who are often investigating the same targets.
Under current law, for example, the FTC is prohibited from
sharing with foreign counterparts certain information that
the FTC has obtained in its investigations. Legislation is
necessary to allow the agency to share such information and
provide other investigative assistance in appropriate cases.(75)
Second, the FTC is seeking enhancements
to its information-gathering capabilities to enable it to
obtain more easily information from federal financial regulators
about those who may be defrauding consumers. The FTC is also
seeking enhancement of its ability to obtain information from
third parties without the request triggering advance notice
to investigative targets and thus prompting the targets to
move their assets overseas.
Third, the FTC is seeking improvements
to its ability to obtain consumer redress in cross-border
litigation, by clarifying the agency's authority to take action
in cross-border cases and expanding its ability to use foreign
counsel to pursue offshore assets.
Finally, the FTC is seeking to strengthen
international cooperative relationships by obtaining authority
to facilitate staff exchanges and to provide financial support
for certain joint projects.
C. Legislation to Enhance the FTC's
Effectiveness To Fight Fraudulent Spam
As discussed earlier, a recent study by
the Commission found that 66 percent of spam contained obvious
indicia of falsity. Moreover, a significant portion of spam
is likely to be routed through foreign servers. For these
reasons, it would be useful to have additional legislative
authority, addressing both procedural and substantive issues,
that would enhance the agency's effectiveness in fighting
fraud and deception. The procedural legislative proposals
would improve the FTC's ability to investigate possible spam
targets, and the substantive legislative proposals would improve
the agency's ability to sue these targets successfully.
1. Procedural Proposals.
The FTC's law enforcement experience shows that the path from
a fraudulent spammer to a consumer's in-box frequently crosses
at least one international border and often several. Thus,
fraudulent spam exemplifies the growing problem of cross-border
fraud. Two of the provisions in the proposed cross-border
fraud legislation discussed above also would be particularly
helpful to enable the FTC to investigate deceptive spammers
more effectively and work better with international law enforcement
First, we request that the FTC Act be amended
to allow FTC attorneys to seek a court order requiring a recipient
of a Civil Investigative Demand ("CID") to maintain the confidentiality
of the CID for a limited period of time. Several third parties
have told us that they will provide notice to the target before
they will share information with us, sometimes because they
believe notice may be required and sometimes even if such
notice clearly is not required by law.
Second, we are requesting that the FTC
Act be amended to provide that FTC attorneys may apply for
a court order temporarily delaying notice to an investigative
target of a CID issued to a third party in specified circumstances,
when the Right to Financial Privacy Act ("RFPA") or the Electronic
Communications Privacy Act ("ECPA") would require such notice.
The FTC's experience is that when fraud
targets are given notice of FTC investigations they often
destroy documents or secrete assets. Currently RFPA and ECPA
provide a mechanism for delaying notice, but the FTC's ability
to investigate would be improved by tailoring the bases for
a court-ordered delay more specifically to the types of difficulties
the FTC encounters, such as transfers of assets offshore.
In addition, it is unclear whether FTC attorneys can file
such applications, or whether the Commission must seek the
assistance of the Department of Justice. Explicit authority
for the FTC, by its own attorneys, to file such applications
would streamline the agency's investigations of purveyors
of fraud on the Internet, ensuring that the agency can rapidly
pursue investigative leads.
Other legislative proposals would enhance
the FTC's ability to track deceptive spammers. First, we request
that the ECPA be clarified to allow the FTC to obtain complaints
received by an ISP regarding a subscriber. Frequently, spam
recipients complain first to their ISPs, and access to the
information in those complaints would help the agency to determine
the nature and scope of the spammer's potential law violations,
as well as lead the agency to potential witnesses.
Second, we request that the scope of the
ECPA be clarified so that a hacker or a spammer who has hijacked
a bona fide customer's email account is deemed a mere unauthorized
user of the account, not a "customer" entitled to the protections
afforded by the statute. Because of the lack of a statutory
definition for the term "customer," the current statutory
language may cover hackers or spammers. Such a reading of
the ECPA would permit the FTC to obtain only limited information
about a hacker or spammer targeted in an investigation. Clarification
to eliminate such a reading would be very helpful.
Third, we request that the ECPA be amended
to include the term "discovery subpoena" in the language of
18 U.S.C. § 2703. This change is particularly important
because a district court has ruled that the FTC staff cannot
obtain information under the ECPA from ISPs during the discovery
phase of a case, which limits the agency's ability to investigate
2. Substantive Proposals.
Substantive legislative changes also could aid in the FTC's
law enforcement efforts against spam. Although Section 5 of
the FTC Act provides a firm footing for spam prosecutions,
additional law enforcement tools could make more explicit
the boundaries of legal and illegal conduct, and they could
enhance the sanctions that the agency can impose on violators.
The Telemarketing and Consumer Fraud and Abuse Prevention
Act ("TCFAPA"), 15 U.S.C. §§ 6101-6108, provides a model
for addressing unsolicited commercial e-mail. Amendments to
the TCFAPA would authorize the FTC to adopt rules addressing
deceptive and abusive(77)
practices with respect to the sending of unsolicited commercial
e-mail. Approaching spam through this statutory model would
provide the market with direction, but would do so within
a framework that could change as the problems evolve. It also
would provide several more specific, important benefits.
First, amendment of the statute would give
the FTC general discretionary authority via rulemaking to
address deceptive practices relating to spam. The
rule would set out bright lines between acceptable and unacceptable
practices for the business community. The list of deceptive
practices could include: the use of false header or routing
information; the use of false representations in the "subject"
line; the use of false claims that an unsolicited commercial
e-mail message was solicited; and the use of false representations
that an opt-out request will be honored. As with telemarketing,
a rule also could prohibit assisting and facilitating any
of the above, i.e., providing substantial assistance
to another party engaged in any rule violation knowing or
consciously avoiding knowing that such party is engaged in
Second, amendment of the statute would
give discretionary authority via rulemaking to address abusive
practices relating to spam. Specific abusive practices might
include: sending any recipient an unsolicited commercial e-mail
message after such recipient has requested not to receive
such commercial e-mail messages; failing to provide a reasonable
means to "opt out" of receiving future e-mail messages; and
sending unsolicited commercial e-mail to an address obtained
through harvesting or a dictionary attack.
Third, amendment of the TCFAPA would ensure
that the Rule embodies the same standard of liability that
is embodied in Section 5 of the FTC Act, without a general
requirement to show intent or scienter. Imposition of intent
or scienter requirements would unnecessarily complicate enforcement,
and also would actually constrict the scope of the FTC's existing
authority under Section 5 to attack spam.
Fourth, the amended statute would provide
that the Rule would be enforceable, like all FTC Rules, through
FTC actions in federal district court, and it further would
provide that violators would be subject to preliminary and
permanent injunctions and could be ordered to pay redress
to consumers. In addition, in an action brought by DOJ on
behalf of the FTC, violators would be liable to pay civil
penalties of up to $11,000 per violation (the amount of civil
penalties is governed by statutory factors, such as ability
to pay, previous history of such conduct, egregiousness of
the conduct, etc.).
Like the existing statute, the amended
TCFAPA would authorize states to enforce the FTC Rule in federal
court to obtain injunctions and redress for their citizens,
but not civil penalties.
The TCFAPA authorizes a private right of
action for any person adversely affected by a violation of
the FTC's Telemarketing Sales Rule if the amount in controversy
exceeds $50,000 in actual damages for each person adversely
affected by such action. The FTC, however, will need to assess
whether the inclusion of an analogous provision in an amended
TCFAPA that addresses spam would be appropriate, effective,
Finally, the rulemaking authority granted
through this amendment could be adapted to new changes in
technology without hindering technological innovation.
An amended TCFAPA should seek to assure
consistency between state and federal laws. The scope of the
Internet and of e-mail communication is global, transcending
national boundaries. Congress should seek to minimize artificial
barriers that would break up this market.
In addition to the TCFAPA amendments, the
possible criminalization of false header and routing information
should be explored. There is some debate over whether the
wire fraud statute covers fraud in the sending of e-mail communications.
The FTC staff is discussing this issue with criminal authorities
to determine whether a specific statute that criminalized
this conduct would
clear up any statutory confusion or encourage
spam prosecutions. At this time, the FTC has no recommendations
on whether changes in the criminal code are necessary or appropriate.(78)
Admittedly, we recognize that these legal steps will not solve
the growing spam problem. Nor is it clear what impact these
steps will have on some of the other problems associated with
spam (e.g., volume and security). These issues may
need to be addressed separately. Nevertheless, the FTC believes
that the proposed legislation would provide more effective
investigative and enforcement tools and would enhance the
FTC's continuing law enforcement efforts.
D. Technical Changes
Finally, the FTC requests two new grants
of authority: (1) the ability to accept reimbursement for
expenses incurred by the FTC in assisting foreign or domestic
law enforcement authorities, and (2) the ability to accept
volunteer services, in-kind benefits, or other gifts or donations.
Both new authorities would be useful as the FTC tries to stretch
its resources to meet its statutory responsibilities.
The authority to accept reimbursement for
expenses incurred would be especially useful in connection
with the FTC's close coordination with domestic and foreign
law enforcement authorities to address possible law violations.
Partnering with these law enforcement authorities has resulted
in enhanced law enforcement efforts and greater sharing of
significant information. In some of these situations, the
FTC's foreign or domestic partner is interested in reimbursing
the FTC for the services it has provided or in sharing some
of the costs of investigating or prosecuting the matter. Without
specific statutory reimbursement authority, however, the FTC
cannot accept and keep such reimbursements because of constraints
under appropriations law.
In addition, the FTC requests authority
to accept donations and gifts, such as volunteer services
and in-kind benefits. Congress has conferred this authority
by statute on various agencies, including the Office of Government
Ethics, the FCC, and the Consumer Product Safety Commission.
Without this authority, the FTC cannot accept services or
keep items because of appropriations law constraints. This
broad restriction on acceptance of gifts sometimes limits
the FTC's ability to fulfill its mission in the most cost-effective
manner. For example, the FTC cannot accept volunteer services
from individuals wishing to provide such services to the agency.
In addition, agency officials must sometimes refuse donated
items that could otherwise be useful in carrying out the agency's
mission, such as books and similar mission-related items.
Mr. Chairman, the FTC appreciates the strong
support for its agenda demonstrated by you and the Subcommittee.
I would be happy to answer any questions that you and other
Senators may have about the FTC's reauthorization request.
1. This written statement
represents the views of the Federal Trade Commission. My oral
presentation and responses to questions are my own and do
not necessarily reflect the views of the Commission or any
2. In 2003, Consumer
Sentinel was named one of the top 25 E-Government programs
by the Industry Advisory Council and the Federal Chief Information
3. The FTC works with
various federal and state law enforcement agencies, as well
as Canadian, Mexican, and other international authorities.
See, e.g., FTC Press Release, State, Federal
Law Enforcers Launch Sting on Business Opportunity, Work-at-Home
Scams (June 20, 2002), available at <http://www.ftc.gov/opa.2002/06/bizopswe.htm>.
See also FTC Press Release, FTC, States Give
"No Credit" to Finance Related Scams in Latest Joint Law Enforcement
Sweep (Sept. 5, 2002), available at <http://www.ftc.gov/opa/2002/09/opnocredit.htm>.
4. This figure represents
the amount of redress that has been ordered by the courts
in more than 65 orders from April 2002 to May 2003. The figure
does not represent the actual amount of money that has been
or will be collected pursuant to those orders.
5. FTC v. Access
Resource Services, Inc., Civ. Action No. 02-60226-CIV
Gold/Simonton (S.D. Fla. Nov. 4, 2002).
6. FTC v. SkyBiz.com,
Inc., Civ. Action No. 01-CV-396-EA (M) (N.D. Okla. Jan.
7. FTC v. Mitchell
Gold, Civ. Action No. SAcv 98-968 DOC (Rzx) (C.D. Cal.
Mar. 7, 2003).
8. Since the FTC first
published the booklet in February 2002, the FTC has distributed
more than 1.2 million paper copies and logged more than
1 million "hits" accessing the booklet on the FTC web site.
The publication is available at <http://www.ftc.gov/bcp/edu/pubs/consumer/idtheft/idt04.shtm>.
9. Eli Lilly &
Co., Dkt. No. C-4047 (May 10, 2002).
10. Microsoft Corp.,
Dkt. No. C-4069 (Dec. 24, 2002).
11. Standards for Safeguarding
Customer Information; Final Rule, 67 Fed. Reg. 36,484 (May
23, 2002) (to be codified at 16 C.F.R. Part 314).
12. FTC Facts for Businesses,
Financial Institutions and Customer Data: Complying with
the Safeguards Rule, available at <http://www.ftc.gov/bcp/edu/pubs/business/idtheft/bus54.shtm>.
13. 15 U.S.C. §§ 6501-6506.
14. United States
v. Hershey Foods Corp., Civ. Action No. 4:03-cv-00350-JEJ
(M.D. Pa. Feb. 26, 2003); United States v. Mrs. Fields
Famous Brands, Civ. Action No. 2:03cv00205 (D. Utah
Feb. 25, 2003); United States v. The Ohio Art Co.,
Civ. Action No. 3:02CV7203 (N.D. Ohio Apr. 30, 2002); United
States v. American Pop Corn Co., Civ. Action No. C02-4008DEO
(N.D. Iowa Feb. 28, 2002); United States v. Lisa Frank,
Inc., Civ. Action No. 01-1516-A (E.D. Va. Oct. 3, 2001);
United States v. Looksmart, Ltd., Civ. Action No.
01-606-A (E.D. Va. Apr. 23, 2001); United States v. Bigmailbox.com,
Inc., Civ. Action No. 01-605-A (E.D. Va. Apr. 23, 2001);
United States v. Monarch Servs., Inc., Civ. Action
No. AMD 01 CV 1165 (D. Md. Apr. 20, 2001).
15. United States
v. Hershey Foods Corp., Civ. Action No. 4:03-cv-00350-JEJ
(M.D. Pa. Feb. 26, 2003); United States v. Mrs. Fields
Famous Brands, Civ. Action No. 2:03cv00205 (D. Utah Feb.
16. Unsolicited commercial
e-mail ("UCE" or "spam") is any commercial e-mail message
that is sent - typically in bulk - to consumers without the
consumers' prior request or consent.
17. FTC Staff Report,
False Claims in Spam (Apr. 2003), available at <http://www.ftc.gov/reports/spam/030429spamreport.pdf>.
The remaining spam messages were not necessarily truthful,
but they did not contain any obvious indicia of falsity.
18. FTC Press Release,
Federal, State, and Local Law Enforcers Tackle Deceptive
Spam and Internet Scams (Nov. 13, 2002), available
19. See FTC
Consumer Alert, E-mail Address Harvesting: How Spammers
Reap What You Sow (Nov. 13, 2002), available at
20. FTC v. BTV
Indus., Civ. Action No. CV-S-02-0437-LRH-PAL (D. Nev.
Jan. 6, 2003).
21. FTC v. Brian
D. Westby, Civ. Action No. 03-C-2540 (N.D. Ill. filed
Apr. 15, 2003).
22. Draft transcripts
of the forum are available at <http://www.ftc.gov/bcp/workshops/spam/index.html>.
23. See, e.g.,
United States v. Barrero, Crim. No. 03-30102-01 DRH (S.D.
Ill. 2003) (guilty plea entered May 12, 2003). Like the related
case, FTC v. Stuffingforcash.com Corp., Civ. Action
No. 02 C 5022 (N.D. Ill. Jan. 30, 2003), the allegations in
this criminal prosecution were based on fraud in the seller's
underlying business transaction.
24. An open relay is
an e-mail server that is configured to accept and transfer
e-mail on behalf of any user anywhere, including unrelated
third parties, which allows spammers to route their e-mail
through servers of other organizations, disguising the origin
of the e-mail. An open proxy is a mis-configured proxy server
through which an unauthorized user can connect to the Internet.
Spammers use open proxies to send spam from the computer network's
ISP or to find an open relay.
Brightmail recently estimated that 90%
of the e-mail that it analyzed was untraceable. Two panelists
at the forum estimated that 40% to 50% of the e-mail it analyzed
came through open relays or open proxies, making it virtually
impossible to trace. Even when spam cannot be traced technologically,
however, enforcement is possible. In some cases, the FTC has
followed the money trail to pursue sellers who use spam. The
process is resource intensive, frequently requiring a series
of ten or more CIDs to identify and locate the seller in the
real world. Frequently the seller and the spammer are different
entities. In numerous instances, FTC staff cannot initially
identify or locate the spammer and can only identify and locate
the seller. In many of those cases, in the course of prosecuting
the seller, staff has, through discovery, sought information
about the spammer who actually sent the messages. This, too,
involves resource-intensive discovery efforts. While the FTC
actions have focused more on deception in the content of the
spam message, recent actions have begun to attack
deception in the sending of spam. As discussed above,
the FTC has brought law enforcement actions targeting false
subject lines and false "from" lines.
25. See <http://www.ftc.gov/spam>.
26. FTC v. Information
Search, Inc., Civ. Action No. AMD 01 1121 (D. Md. Mar.
15, 2002); FTC v. Guzzetta, Civ. Action No. CV-01-2335
(E.D.N.Y. Feb. 25, 2002); FTC v. Garrett, Civ. Action
No. H 01-1255 (S.D. Tex. Mar. 25, 2003).
27. FTC v. Associates
First Capital Corp., Civ. Action No. 1:01-CV-00606 JTC
(N.D. Ga. Feb. 26, 2002).
28. 15 U.S.C. §§ 1691-1691f,
29. Id. §§ 1681-1681(u),
30. FTC v. First
Alliance Mortgage Co., Civ. Action No. SACV 00-964 DOC
(MLGx) (C.D. Calif. Nov. 26, 2002).
31. U.S. v. Mercantile
Mortgage Co., Civ. Action No. 02C 5079 (N.D. Ill. Aug.
32. 15 U.S.C. §§ 1601-1667f,
33. The FTC continues
its litigation against Chicago-area mortgage broker Mark Diamond
and against D.C.-area mortgage lender Capital City Mortgage
Corporation. FTC v. Mark Diamond, Civ. Action No.
02C-5078 (N.D.Ill. filed Nov. 1, 2002); FTC v. Capital
City Mortgage Corp., Civ. Action No. 1: 98-CV-00237 (D.D.C.
Jan. 29, 1998). The Diamond case represents the FTC's
first litigated case against a mortgage broker. In Capital
City, the FTC alleges that Capital City deceived consumers
into taking out high-rate, high-fee loans and then foreclosed
on consumers' homes when they could not afford to pay.
34. See, e.g.,
FTC v. Dr. Clark Research Ass'n, Civ. Action No. 1-03-00054-TRA
(N.D. Ohio Jan. 8, 2003); FTC v. Vital Dynamics,
Civ. Action No. 02-CV-9816 (C.D. Calif. Jan 17, 2003) (consent
decree); FTC v. Rexall Sundown, Inc., Civ. Action
No. 00-CV-7016 (S.D. Fla. Mar. 11, 2003) (proposed consent
decree subject to court approval).
35. See, e.g.,
Enforma Natural Prods., Inc., Civ. Action No. 2:00cv04376JSL
(CWx) (C.D. Cal. Dec. 9, 2002) (consent decree); Weider
Nutrition Int'l, Dkt. No. C-3983, 2001 WL 1717579 (Nov.
15, 2000); FTC v. SlimAmerica, Inc., 77 F. Supp.
2d 1263 (S.D. Fla.1999); Jenny Craig, Inc., 125 F.T.C.
333 (1998) (consent order); Weight Watchers Int'l, Inc.,
124 F.T.C. 610 (1997) (consent order); NordicTrack, Inc.,
121 F.T.C. 907 (1996) (consent order).
36. FTC Staff Report,
Weight Loss Advertising: An Analysis of Current Trends (Sept.
2002), available at <http://www.ftc.gov/bcp/reports/weightloss.pdf>.
37. See Public
Workshop: Advertising of Weight Loss Products, 67 Fed. Reg.
59,289 (Sept. 20, 2002).
38. Commissioner Sheila
Anthony, Let's clean up the diet-ad mess, Advertising
Age, Feb. 3, 2003, at 18.
39. FTC v. STF
Group, Civ. Action No. 03-C-0977 (N.D. Ill. filed Feb.
40. FTC v. Pacific
First Benefit, LLC, Civ. Action No. 02-C-8678 (N.D. Ill.
filed Dec. 2, 2003).
41. FTC v. CSCT,
Inc., Civ. Action No. 03-C-00880 (N.D. Ill. filed Feb.
42. FTC, Marketing
Violent Entertainment to Children: A Review of Self-Regulation
and Industry Practices in the Motion Picture, Music Recording
& Electronic Game Industries (Sept. 2000), available
FTC, Marketing Violent Entertainment to Children: A Six-Month
Follow-Up Review of Industry Practices in the Motion Picture,
Music Recording & Electronic Game Industries (Apr. 2001),
available at <http://www.ftc.gov/reports/violence/violence010423.pdf>;
FTC, Marketing Violent Entertainment to
Children: A One-Year Follow-Up Review of Industry Practices
in the Motion Picture, Music Recording & Electronic Game
Industries (Dec. 2001), available at <http://www.ftc.gov/os/2001/12/violencereport1.pdf>;
FTC, Marketing Violent Entertainment to
Children: A Twenty-One Month Follow-Up Review of Industry
Practices in the Motion Picture, Music Recording & Electronic
Game Industries (June 2002), available at <http://www.ftc.gov/reports/violence/mvecrpt0206.pdf>.
43. FTC Consumer Alert,
Online Gambling and Kids: A Bad Bet (June 26, 2002),
available at <http://www.ftc.gov/bcp/conline/pubs/alerts/olgamble.htm>.
44. Conference Report
on the Omnibus Appropriations Bill for FY 2003, H. Rep. No.
108-10 (Feb. 13, 2003)
45. United States
v. United Recovery Systems, Inc., Civ. Action No. H-02-1410
(sl) (S.D. Tex. Apr. 22, 2002).
46. FTC Facts for Consumers,
Military Sentinel: Fact Sheet, available at
Squibb Co., Dkt. No. C-4076 (Apr. 14, 2003).
48. The proposed order
includes a provision prohibiting BMS from triggering a 30-month
stay for any BMS product based on any patent BMS lists in
the Orange Book after the filing of an application to market
a generic drug.
49. Biovail Corp.,
Dkt. No. C-4060 (Oct. 2, 2002).
50. Biovail Corp.
and Elan Corp., Dkt. No. C-4057 (Aug. 15, 2002).
51. Grossmont Anesthesia
Servs. Med. Group, Inc., File No. 021-0006 (May 30, 2003)
(agreement accepted for public comment); Anesthesia Serv.
Med. Group, Inc., File No. 021-0006 (May 30, 2003) (agreement
accepted for public comment); Carlsbad Physicians, File
No. 031-0002 (May 2, 2003) (agreement accepted for public
comment); System Health Providers, Dkt. No. C-4064
(Oct. 24, 2002); R.T. Welter & Assoc., Inc. (Professionals
in Women's Care), Dkt. No. C-4063 (Oct. 8, 2002); Physician
Integrated Servs. of Denver, Inc., Dkt. No. C-4054 (July
16, 2002); Aurora Associated Primary Care Physicians,
L.L.C., Dkt. No. C-4055 (July 16, 2002).
52. Pfizer Inc.,
Dkt. No. C-4075 (Apr. 14, 2003) (proposed consent agreement
accepted for public comment).
53. FTC Press Release,
FTC Seeks to Block Cytyc Corp.'s Acquisition of Digene
Corp. (June 24, 2002), available at <http://www.ftc.gov/opa/2002/06/cytyc_digene.htm>.
54. Baxter International
Inc. and Wyeth, Dkt. No. C-4068 (Feb. 3, 2003).
55. Amgen Inc.
and Immunex Corp., Dkt. No. C-4056 (Sept. 3, 2002).
56. See Thomas
B. Leary, Antitrust Issues in Settlement of Pharmaceutical
Patent Disputes (Nov. 3, 2000), available at
Thomas B. Leary, Antitrust Issues in the Settlement of
Pharmaceutical Patent Disputes, Part II (May 17, 2001),
available at <http://www.ftc.gov/speeches/leary/learypharmaceuticalsettlement.htm
57. Generic Drug Entry
Prior to Patent Expiration: An FTC Study (July 2002), available
58. President Takes
Action to Lower Prescription Drug Prices by Improving Access
to Generic Drugs (Oct. 21, 2002), available at <http://www.whitehouse.gov/news/releases/2002/10/20021021-2.html>.
59. Applications for
FDA Approval to Market a New Drug: Patent Listing Requirements
and Application of 30-Month Stays on Approval of Abbreviated
New Drug Applications Certifying That a Patent Claiming a
Drug Is Invalid or Will Not Be Infringed; Proposed Rule, 67
Fed. Reg. 65448 (Oct. 24, 2002).
60. The FTC web site
for the hearings is http://www.ftc.gov/ogc/healthcarehearings/index.htm.
To date, the FTC has released a detailed agenda for the hearings'
sessions in February through June. All of the documents relating
to the hearings appear on the web site.
61. Conoco Inc.
and Phillips Petroleum Company, Dkt. No. C-4058 (Feb.
7, 2003) (consent order).
62. Southern Union
Co., File No. 031-0068 (May 29, 2003) (agreement accepted
for public comment).
63. Union Oil Co.
of California, Dkt. No. 9305 (complaint issued Mar. 4,
64. FTC Press Release,
FTC to Hold Public Conference/Opportunity for Comment
on U.S. Gasoline Industry in Early August (July 12, 2001),
available at <http://www.ftc.gov/opa/2001/07/gasconf.htm>;
FTC Press Release, FTC Chairman Opens Public Conference
Citing New Model To Identify and Track Gasoline Price Spikes,
Upcoming Reports (May 8, 2002), available at
65. Rambus, Inc.,
Dkt. No. 9302 (complaint issued June 18, 2002).
67. In 1996, the FTC
settled a similar complaint against Dell Computer, alleging
that Dell had failed to disclose an existing patent on a personal
computer component that was adopted as the standard for a
video electronics game. Dell Computer Co., 121 F.T.C.
68. FTC Press Release,
Muris Announces Plans for Intellectual Property Hearings
(Nov. 15, 2001), available at <http://www.ftc.gov/opa/2001/11/iprelease.htm>.
69. FTC Press Release,
FTC to Host Public Workshop to Explore Possible Anticompetitive
Efforts to Restrict Competition on the Internet (July
17, 2002), available at <http://www.ftc.gov/opa/2002/07/ecom.htm>.
70. Bayer AG and
Aventis S.A., Dkt. No. C-4049 (July 24, 2002) (consent
71. FTC v. Hicks,
Muse, Tate & Furst Equity Fund V, LP, Civ. Action
No. 1:02-cv-02070-RWR (D.D.C. filed Oct. 23, 2002). A notice
of voluntary dismissal was filed on October 31, 2002.
72. 15 U.S.C. § 18.
Corp., Dkt. No. 9299 (Oct. 29, 2002).
74. United States
v. Boston Scientific Corp., Civ. Action No. 00-12247-PBS,
Memorandum and Order (D. Mass. Mar. 28, 2003).
75. The Securities
Exchange Commission, the Commodity Futures Trading Commission,
and the federal financial regulators already have the authority
to share information and cooperate with their foreign counterparts.
See 15 U.S.C. § 78x(c); 15 U.S.C. § 78u(a)(2); 7
U.S.C. § 12(e); 7 U.S.C. § 16(f); 12 U.S.C. § 3109(a)-(b);
and 12 U.S.C. § 1818(v)(2). The FTC's proposal is modeled
after these statutes.
76. See FTC v.
Netscape Comm. Corp., 196 F.R.D. 559 (N.D. Cal. 2000).
77. The FTC has determined,
in the Statement of Basis and Purpose for the Amended TSR,
that the undefined term "abusive" used in the legislation
authorizing that Rule will be interpreted to encompass "unfairness."
68 Fed. Reg. 4580, 4614 (2003).
78. Any legislation
that criminalizes certain types of spam activities should
not negatively impact the FTC's existing Section 5 authority
or change the present standards of proof, scienter, or evidence
for cases of civil fraud, deception, or unfairness.