THE FEDERAL TRADE COMMISSION
ANTICIPATING THE 21ST CENTURY
The Mission of the Federal Trade Commission. The FTC implements a core function of government: to ensure that free markets work -- that accurate information in the hands of consumers and competition among producers generate the best products at the lowest prices, spur efficiency and innovation, strengthen the economy, and produce benefits for consumers, workers, and investors alike.
For competition to thrive, consumers must receive accurate information about products and services. One part of the FTC's basic mission is to see that consumer information in the marketplace is not deceptive or misleading.
At the same time, for consumers to have a choice of products and services at competitive prices and quality, the marketplace must be free from anticompetitive business practices. A second part of the FTC's basic mission is to prevent anticompetitive mergers and other anticompetitive business practices without interfering with businesses' legitimate activities.
These two complementary parts of its mission make the FTC the nation's only general jurisdiction consumer protection agency. In addition to enforcement authority, the Commission has unique jurisdiction to gather, analyze, and make public certain information about the nature of competition in U.S. commerce. See Attachment 1.
Challenges Confronting the FTC. Because so many sectors of the economy are changing -- and changing rapidly -- the FTC's enforcement process must be a dynamic one. The Commission must constantly reexamine its law enforcement policies, eliminate older orders and regulations that place unwarranted burdens on business, and create new law enforcement approaches that are both more effective and less intrusive. At the same time, the FTC must maintain its efforts against the ongoing, more traditional forms of fraud, deception, and anticompetitive business practices.
Competitive Forces for Change. Globalization and new information technologies, while creating potentially enormous benefits for consumers, also are raising new consumer protection concerns, e.g., online fraud, identity theft, loss of privacy, and international telephone scams. On the horizon is an array of electronic payment systems, which may give rise to a new set of concerns. Competitive forces for change also are driving a merger wave of historic proportions. Since 1991, the number of proposed transactions reported under the Hart-Scott-Rodino ("HSR") Act has doubled -- from 1529 filings in 1991 to 3087 filings in 1996, with a potential for more than 3500 filings in 1997. Forces of innovation, deregulation, and evolving markets are producing other business practices that also require scrutiny to ensure that consumers receive the benefits of new forms of competition.
Resources Remain the Same. As the FTC's workload has grown through the 1990's, the FTC's resources have remained essentially flat. The agency has responded by increasing its productivity, leveraging its resources through partnerships, and eliminating or streamlining its rules, regulations, and procedures. See Attachments 2-5.
Increased Productivity. The agency has targeted its efforts in areas of most importance to consumers. For example, in FY 1996, the FTC and its state and federal partners brought over 200 cases against fraudulent operators in a series of law enforcement "sweeps." The FTC's cases alone stopped fraud that cost consumers $200 million in 1996 -- four times the FTC's annual budget for consumer protection matters. In FY 1996, the dollar volume of commerce in the markets protected by successful merger challenges was $24 billion -- a tenfold increase from just 1993. If the FTC's 1996 merger challenges prevented price increases of only 1 percent, these challenges saved consumers $240 million in 1996 -- more than four times the FTC's annual budget for competition matters.
Leveraging. The FTC has leveraged its resources extensively -- working with states, other federal agencies, and private and industry groups to achieve compliance through enforcement, voluntary action, and the education of businesses and consumers alike.
Eliminating Unnecessary Burdens. The FTC has continued review of its rules and guides to eliminate those that are unnecessary and streamline those that still make sense as the 21st century approaches. These actions increase efficiency for both the businesses affected and for the FTC itself. The National Association of Manufacturers recently referred to the FTC in Congressional testimony as a "model agency," based on the FTC's commitment to regulatory reform and concrete action (9/25/96).
The Key Challenge: To Keep Pace. As businesses in innovative and global markets race toward the 21st century, adopting new strategies with each step, the FTC's basic challenge is to keep pace. The following report, the second report on Anticipating the 21st Century, describes how the FTC met this challenge this past year.
OVERVIEW OF KEY FTC ACTIVITIES
REDUCING FRAUD, DECEPTION, AND
UNFAIR PRACTICES IN THE MARKETPLACE.
A. Fighting Fraud
Fighting fraud is one of the FTC's highest priorities. The reason: It bilks consumers out of billions of dollars a year. The FTC wages this battle through targeted law enforcement and comprehensive consumer and business education. To maximize the impact of these efforts, the FTC works closely with state Attorneys General, state securities regulators, and other federal law enforcement agencies such as the Department of Justice and the Postal Inspection Service.
1. Law Enforcement "Sweeps"
During the last fiscal year, the FTC led its state and federal partners in a series of law enforcement "sweeps" that included over 200 cases. FTC cases alone stopped consumer fraud totaling $200 million in FY 1996. And for every case the FTC brought, state and federal partners brought two more. These efforts included:
Telemarketing Sales Rule Sweeps
Within the first year of enforcing the new Telemarketing Sales Rule, the FTC led four federal-state sweeps -- Operations Payback, Loan Shark, Jackpot, and Copycat -- targeting hundreds of fraudulent operators of credit repair, advance-fee loan, sweepstakes, and office supply scams.
This sweep focused on fraud aimed at high school and college students seeking financial aid, stopping scams that cost some 100,000 consumers over $15 million. The sweep was combined with a massive education campaign in which the FTC and the education community posted warnings at popular Web sites and distributed over 800,000 bookmarks, posters, and flyers.
Project Career Sweep
This federal-state effort targeted scam artists who falsely promised to obtain jobs for consumers in exchange for up-front fees of up to several hundred dollars each. Working with its federal and state partners, the FTC obtained more than $1 million in refunds for thousands of consumers.
2. Criminal Task Forces
The FTC also supported criminal enforcement efforts to combat especially pernicious fraud. Examples include:
Chattanooga Telemarketing Fraud Project
FTC staff, detailed as Special Assistant U.S. Attorneys, continued to lead a unique federal-state task force aimed at rooting out the burgeoning telemarketing fraud industry in Chattanooga, Tennessee. The overall results: 41 criminal convictions; federal prison sentences totaling over 100 years; restitution orders exceeding $18 million; and the virtual elimination of telemarketing fraud in this market.
In efforts modeled on the Chattanooga project, FTC attorneys, detailed as Special Assistant U.S. Attorneys, are pursuing criminal convictions of telemarketers in Washington, D.C. and Harrisburg, Pennsylvania.
B. Stopping Unfair and Deceptive Practices
In addition to targeting fraud, the FTC's law enforcement efforts focus on stopping deceptive or unfair practices that cause significant risk to consumer health, safety, and economic well-being.
Health and safety claims -- claims which consumers often cannot judge for themselves -- are a primary focus of the FTC's advertising program. Recent actions include:
Abbott Labs The FTC charged the largest producer of nutritional beverages with false claims (e.g., "doctors recommend") in promoting its nutritional beverage, Ensure, to healthy, active adults. The company agreed to stop the practice.
Conopco, Inc. The FTC charged a leading maker of margarines and spreads with misleading health claims in its "Get Heart Smart" campaign for Promise margarines. The company agreed to stop the practice.
Schering-Plough Healthcare, Inc. The FTC charged the leading maker of sunscreens with deceptive claims about the sun protection offered by "Coppertone Kids" sunscreens for children. The company agreed to stop the practice and to distribute consumer brochures highlighting the dangers of overexposure to the sun.
Gerber Products Company The FTC charged the leading manufacturer of baby food with a false claim that "four out of five pediatricians recommend Gerber baby food." The company agreed to stop the practice.
The FTC also brought several actions challenging deceptive and unfair practices causing significant economic loss. For example:
General Motors Corp.; American Honda Motor Co., Inc.; American Isuzu Motors, Inc.; Mazda Motor of America Inc.;and Mitsubishi Motor Sales of America, Inc. The FTC and 23 states charged five major auto manufacturers with inadequately disclosing significant fees and terms in their car leasing ads. The companies agreed to stop the practices.
Exxon Corp. The FTC charged the largest oil company in the U.S. with making misleading claims that its gasolines are superior for cleaning engines and reducing auto maintenance costs. The case is scheduled for administrative trial.
Hasbro The FTC charged the second largest U.S. toy manufacturer with deceptive toy advertising aimed at children. The company agreed to pay $280,000 in civil penalties.
Apple Computer Corp. The FTC charged the company with false claims about the upgradeability of some of its computers. The company agreed to offer upgrade kits to consumers at low cost, with rebates to consumers who had already bought the kits.
Computer Business Services, Inc. The FTC charged the company with false ads about the potential earnings from a home-based computer business. The company agreed to pay a record-setting $5 million for consumer redress.
C. Addressing Emerging Issues in the High-Tech Global Marketplace
The FTC's November 1995 Hearings on Consumer Protection in the New High-Tech Global Marketplace ("Global Hearings") focused on how new information technologies and globalization are changing the marketplace. FTC staff issued its report on the hearings in May 1996. Working with its public and private sector partners, the FTC has begun to address some of the issues raised at the hearings.
1. Internet Scams
Participants at the Global Hearings expressed concern that the Internet may be a fertile ground for fraud, and that without consumer protection rules online, consumers might stay away from this newest marketplace. The FTC is actively monitoring the Internet for illegal practices, and last year brought some 15 actions to stop online scams. These actions included:
Fortuna Alliance, L.L.C. The FTC stopped a pyramid scheme promising consumers $5,000 a month on an initial investment of $250. At least 15,000 consumers bought into the scheme, accumulating losses that topped $11 million.
Audiotex Connection, Inc. The FTC stopped a complex scam in which consumers who downloaded information from defendants' website unknowingly were disconnected from their local Internet service providers and connected to another provider at costly international telephone rates. Defendants made their money through "kickbacks" from foreign telephone companies.
Surf Day In an innovative effort to educate online entrepreneurs, the FTC, along with state and federal partners across the country, surfed the Internet for three hours and sent business education messages to over 500 suspected pyramid schemes. The messages offered guidance about the difference between multi-level marketing and illegal pyramids and provided the FTC's Web address for more information.
2. Online Privacy
Participants at the Global Hearings also expressed concern about privacy online. To explore this issue in greater depth, the Bureau of Consumer Protection held a workshop in June 1996 to learn more about the collection and use of personal information and developing technologies and industry initiatives that address privacy concerns. A staff report on the workshop was issued in December 1996; a follow-up workshop is scheduled for June 1997. In addition, the FTC will conduct a study of databases often referred to as "look-up" services.
D. Educating Consumers, Businesses, and the Public
The FTC puts a high priority on consumer and business education, the first line of defense against fraud and deception. With each major enforcement initiative, the FTC launches an education campaign, using both traditional and new media. Last fiscal year alone, the FTC distributed a record 4.1 million brochures. Almost all print materials were posted to the FTC's Web page (www.ftc.gov). The FTC also spearheaded a number of special projects:
Partnership for Consumer Education. This unique partnership now includes 80 businesses, trade associations, consumer groups, and government agencies, all working to educate the public about telemarketing fraud. Since its launch in January 1996, the partnership has disseminated 90 million fraud prevention messages.
Fraud Report. The FTC issued its first annual fraud report, "Fighting Consumer Fraud: The Challenge and the Campaign." The report describes consumer frauds mass-marketed nationally and internationally in 1996 and shows that vigorous public and private partnerships have been successful and are necessary to stem these sophisticated frauds.
Project Price-Check. The FTC piloted a multi-state study of the accuracy of electronic retail scanners, which showed a high degree of scanner accuracy for most, but not all, retailers. The study was followed by an education campaign designed to increase awareness of scanner accuracy and to promote good pricing practices.
Identity Theft. FTC staff convened two workshops to encourage consumer education and improve business response to the fast-growing problem of identity theft, the practice of taking over consumers' existing credit accounts or opening new ones in their names. Workshop participants included law enforcement agencies, consumer and privacy groups, creditors, and credit bureaus.
FCC License Scams. The FTC joined with the Federal Communications Commission to distribute over 17,000 brochures alerting potential investors to the perils of FCC license-related scams.
Prepaid Phone Cards. The FTC joined with American Express and the Better Business Bureau in a bilingual campaign (English and Spanish) to educate consumers about prepaid phone cards and potential problems in using them, such as hidden charges.
Laser Eye Surgery. In response to recent concerns about advertising that exaggerates the benefits and minimizes the risks of PK and RK laser eye surgery, the FTC and FDA staffs sent a joint advisory letter to over 37,000 ophthalmologists with guidance on truthful advertising for the treatment.
PREVENTING ANTICOMPETITIVE MERGERS
AND OTHER ANTICOMPETITIVE BUSINESS PRACTICES
IN THE MARKETPLACE.
A. Preserving Competition amid a Record-Setting Merger Wave
Mergers that are anticompetitive can drive up consumer prices by millions of dollars every year, and can significantly diminish output, product quality, innovation, and consumer choice. To find anticompetitive mergers, the FTC relies primarily on the premerger notification required by the Hart-Scott-Rodino ("HSR") Act. The FTC uses sophisticated economic analysis and thorough factual investigation to distinguish between mergers that threaten free markets and those likely to promote them. This year, the ongoing merger wave put unprecedented demands on the limited resources available for these analytically complex and fact-intensive matters.
1. Making Sure that Firms Notify the FTC of Proposed Mergers or Acquisitions
If businesses do not comply with the HSR requirements to file premerger notifications, anticompetitive mergers become difficult to detect. Therefore, the FTC has taken tough action against failures to file HSR-required premerger notifications.
FY 1996 Civil Penalties: FTC collected a record $7.65 million in civil penalties from consent judgments for violations of the HSR Act.
Mahle/Metal Leve: In FY 1997, two firms -- a German and a Brazilian automotive parts manufacturer -- agreed to pay the highest civil penalty ever for an HSR violation: over $5 million. In addition, the merged firm agreed to a substantial divestiture of assets to restore competition that had been lost due to the unreported merger.
2. Keeping Pace with a Record Level of Merger Filings
FY 1996 produced the largest volume of merger filings in FTC history -- a total of 3,087 reportable transactions, easily surpassing the previous high of 2,883 filings in FY 1989. Despite this unprecedented volume, the FTC and the Antitrust Division have resolved the vast majority of these filings in less than 30 days.
3. Challenging Transactions to Protect Consumers in High-Priority Areas
The markets targeted by the FTC's enforcement actions in recent years have been high-priority areas such as health care, pharmaceuticals, energy, defense, information and technology, and consumer goods and services.
Rite Aid/Revco D.S. The FTC blocked a merger between the largest retail pharmacy chains in the U.S., which would have created a chain with nearly 5,000 stores. FTC action saved consumers millions in purchases of prescription drugs through pharmacy benefit plans.
Ciba-Geigy/Sandoz. The FTC obtained a consent order requiring licensing of certain key intellectual property assets to ensure that Ciba-Geigy's $63 billion acquisition of Sandoz would not slow the competitive race to develop and commercialize gene therapy treatments for cancer and other lethal diseases.
Time-Warner/Turner Broadcasting. The FTC obtained a consent order to prevent the merged firm from limiting program choices and restricting the entry of new distribution companies.
Industrial Goods and Services. Harm to competition in markets for industrial goods or services may have ripple effects that raise price or cause other anticompetitive harm in other sectors of the economy as well. The FTC issued consent orders to preserve competition in markets such as: refractory products, atmospheric gases, agricultural herbicides, and pistons for locomotives, diesel trucks, and stationary power generators.
B. Keeping Pace with Competitive Forces for Change
Many markets are undergoing dramatic change, resulting from deregulation, downsizing, evolution to new forms of production, distribution, or marketing, and other competitive forces. The FTC has acted to ensure that consumers will receive the benefits of this change and to ensure that businesses continue to understand antitrust analysis in the context of changing markets. In addition, following the Commission's 1995 Hearings, FTC staff in May 1996 issued a report, Competition Policy in the New High-Tech, Global Marketplace, which recommends possible policy adjustments and areas for further study in response to the changing nature of competition.
1. Markets in Transition
a. Newly deregulated industries
Cable Television. Recent deregulation of the cable television industry is creating possible a new era in which cable companies face competition from multiple directions in providing programming to consumers. Certain mergers and other conduct can restrict this new competition, however. The FTC's consent order in Time Warner/Turner Broadcasting furthered the goals expressed in the 1996 Cable Act by requiring that a merger creating the largest media company in the world be restructured to ensure that new competitive alternatives to cable, like direct satellite or other wireless transmission and transmission by telephone, have access to the inputs they need to compete.
Natural Gas. In the past year, the FTC issued consent orders in 3 cases to ensure that consumers will benefit from recent deregulatory steps to foster competition and open markets in the natural gas industry.
b. Health Care
The FTC identified a small number of hospital consolidations that appeared likely to raise health care costs. An FTC order requires divestitures to restore competition from a merger of two acute care hospitals in San Luis Obispo County, California. In Butterworth/Blodgett, a district court found that a merger of the two dominant hospitals in Grand Rapids, Michigan would substantially increase the merged hospital's market power, but the court nonetheless declined to enjoin the merger. The Commission has sought review of that decision and issued an administrative complaint to continue its challenge of the merger.
In August, the FTC, with the Department of Justice, issued the 1996 Statements of Antitrust Enforcement Policy in Health Care. The new Statements revised and broadened the guidance provided in earlier policy statements. The New York Times praised the new guidelines, noting that they should "result in greater competition and better health care" (8/29/96).
In Fresenius/National Medical Care, the FTC acted to ensure that patients with kidney disease could continue to have available at competitive prices and quality a chemical that is used in hemodialysis treatment.
In Wesley-Jessen/Pilkington Barnes Hind, the FTC acted to prevent a near monopoly -- and, thus, likely price increases -- in the market for opaque contact lenses.
FTC Chairman Robert Pitofsky chaired the Defense Science Advisory Board task force that recommended guidelines for the evaluation of defense mergers and acquisitions. FTC staff uses those guidelines and maintains a productive working relationship with DOD staff in reviewing such transactions.
In Boeing/Rockwell, the Commission's order will prevent Boeing's $3.025 billion acquisition of Rockwell's Aerospace and Defense business from reducing competition and innovation in the markets for high altitude endurance unmanned air vehicles and space launch vehicles, including DOD's Evolved Expendable Launch Vehicle Program.
In Lockheed Martin/Loral, the Commission's order prevented Lockheed Martin's $9.1 billion acquisition of Loral Corp. from reducing competition in the markets for the research, development, manufacture, and sale of air traffic control systems, commercial low earth orbit (LEO) satellites, commercial geosynchronous earth orbit (GEO) satellites, military tactical fighter aircraft, and unmanned aerial vehicles.
In other actions, FTC enforcement prevented mergers from reducing price and other forms of competition in connection with the following procurements: a satellite communications system to be used on U.S. Navy submarines; Aegis destroyers for the U.S. Navy; and a critical component of an Air Force anti-missile program.
d. Networks and Network Industries
Networks play an increasingly vital role in the development of new products and new markets. The FTC has analyzed the competitive impact of such networks and provided guidance to firms entering network arrangements.
The FTC is a member of the interagency Consumer Electronic Payments Task Force that is studying emerging electronic money and payments technology and the issues such networks raise for consumers, businesses, and government.
The FTC has acted to preserve competition in a number of markets that use networks, including consumer money wire transfers, information systems, and prescription drugs. ADP/Autoinfo, the FTC's challenge to a merger to monopoly between two networks that facilitate transactions between auto part recyclers, is currently in administrative litigation.
2. Innovation and R&D Competition
The FTC acted to preserve firms' incentives and abilities to compete in R&D, especially in light of the increased importance of innovation in the new global, high-tech environment.
In Ciba-Geigy/Sandoz, the FTC acted to prevent the two leading firms in the race to develop the hoped-for next generation of cancer treatments -- gene therapy -- from monopolizing the key assets necessary to compete in that race. According to Business Week, the FTC's order requiring the licensing of key gene-therapy patent rights to a third company "shows a new savvy among trustbusters about high-tech competition" (1/20/97).
In Baxter /Immuno, the FTC required divestitures to ensure that a merger creating the largest manufacturer of blood plasma products in the world would not lessen the incentives for and the ability to continue R&D competition, as well as other forms of competition, in two markets for those products.
3. Updating and Rethinking Competition Policies
The FTC is addressing competition in the new high-tech, global marketplace and evaluating whether competition policies require any adjustments in light of the changing nature of competition. The FTC Staff Report on the competition aspects of the Global Hearings identified areas for further analysis and study. So far, two projects are underway to provide such analysis.
a. Merger Efficiencies. Testimony at the hearings confirmed that businesses often view mergers as an effective way to cut costs and become more competitive, especially in an increasingly global marketplace. The FTC Staff Report agreed with hearings participants who urged that the antitrust agencies, in assessing a merger's likely competitive effects, consider the contribution that merger-generated efficiencies could make to maintaining or increasing post-merger competition. FTC and Department of Justice lawyers and economists have formed a task force to investigate possible guidelines to formalize and improve such an efficiencies analysis, which is similar to the efficiencies analysis that agency merger staff already typically use.
b. Joint Ventures. Participants at the hearings reported that global and innovation-based competition is driving firms toward ever more complex collaborative agreements that sometimes raise new competition issues. At the same time, participants noted confusion in the case law and other antitrust guidance about collaborations among competitors. The Commission has authorized a Joint Venture Project to attempt to clarify and improve guidance to the business community on joint ventures, strategic alliances, and other forms of collaboration among competitors.
C. Protecting Consumers and Businesses from Other Anticompetitive Practices
A wide variety of business practices also may harm consumers by raising prices or reducing output, quality, innovation, or consumer choice. Such practices include collusive activity among competitors (e.g., price fixing and improper "facilitating practices") and certain restraints in the chain of product distribution ("vertical restraints"), such as exclusive dealing or tying arrangements. The following are examples of the FTC's recent activity in this area.
Toys "R" Us. The FTC issued an administrative complaint alleging that Toys "R" Us, the nation's largest toy retailer, used its market power to keep toy prices higher and reduce toy outlet choices for consumers. The complaint alleged that Toys "R" Us extracted agreements from toy manufacturers to stop selling certain toys to warehouse clubs, or to put the toys into more expensive combination packages, so consumers could not obtain lower-priced toys from the clubs or compare prices easily. The case is in administrative litigation.
California Dental Association ("CDA"). The Commission held that CDA unlawfully restrained truthful and nondeceptive advertising by dentists about the price, quality (e.g., "gentle dentistry"), and availability of their dental services. The Commission found that CDA's rules harmed competition by suppressing information (such as the availability of price discounts for senior citizens) that consumers value in selecting a dentist. The case is on appeal to the U.S. Court of Appeals for the Ninth Circuit.
American Cyanamid. The FTC secured a consent order settling charges that American Cyanamid violated antitrust laws by fixing the resale prices of agricultural chemical products through an unusual rebate program that induced dealers to sell at or above specified minimum resale prices. The company sold more than $1 billion of these chemicals in 1995.
COORDINATION AND COOPERATION IN
CONSUMER PROTECTION AND COMPETITION MATTERS.
The FTC cooperates with other agencies at the local, state, federal and international levels to maximize consumer benefit while making efficient use of limited resources.
A. Federal-State Relations
Federal-State Coordination in Merger Enforcement: State Attorneys General and the FTC coordinate efforts in many merger investigations, reducing the burden to businesses. In addition, the states' participation has resulted in a more efficient allocation of resources. The states also contribute in-depth knowledge of local market conditions and important contacts.
Federal-State Coordination in Non-Merger Enforcement: State Attorneys General and FTC staff cooperated on a variety of matters involving boycotts and resale price maintenance. For example, 50 states, the District of Columbia, and Puerto Rico cooperated with the FTC in the successful challenge of American Cyanamid's resale price maintenance practices.
Federal-State Coordination in Targeting Fraud: As noted earlier, the FTC worked with the states and other federal agencies to bring a series of law enforcement "sweeps" that included over 200 cases targeting telemarketing scams and other frauds.
B. Global Cooperation
1. Cross Border Fraud
In the report on the Global Hearings, FTC staff noted the growth in international trade and the movement "toward a single global marketplace." Staff also noted the increasing problem of cross-border fraud.
One area of particular concern is the growing amount of telemarketing fraud across the U.S.-Canada border. British Columbia and Quebec now rank among the top 10 sources of telemarketing fraud; the victims are both U.S. and Canadian citizens. To tackle this problem, and build on the good working relations already in place with Canadian law enforcement officials, the FTC took the following actions last year:
Cross-Border Task Forces: The FTC and Industry Canada established a Task Force to explore cooperative strategies for tackling cross-border fraud. The FTC is also working with Canada, as well as Mexico and federal and state agencies, to combat health fraud along the Canadian and Mexican borders.
Cross-Border Law Enforcement: Working closely with Canadian officials, the FTC halted two Canadian telemarketing scams -- Ideal Credit Referral Services and Incentives International -- preying on U.S. consumers. To enhance cooperative law enforcement efforts, a coalition of Canadian enforcement agencies, Better Business Bureaus, and other organizations ("Project Phonebusters") recently began contributing to the FTC's consumer complaint database.
During the Global Hearings, participants encouraged the FTC to review its regulations to ensure that they do not impose unnecessary burdens on companies engaged in global trade. The FTC has pursued this recommendation, harmonizing a number of its rules with international standards to the extent permitted by law:
Care Labeling Rule: The FTC approved the use of care-labeling icons to harmonize labeling requirements with those of Canada and Mexico. This change eliminates the need for care-labeling instructions in three languages, paves the way for smaller labels, and allows manufacturers to maintain one inventory for all three countries.
Appliance Labeling: Efforts to harmonize appliance labeling requirements in North America continue. To reduce manufacturer burdens, the FTC announced that Canadian and Mexican energy use information may adjoin the FTC's EnergyGuide label.
3. Fostering International Enforcement Cooperation and Promoting the Development of Free Market Competition Policies
International Cases. The FTC cooperates with foreign antitrust agencies to enforce the antitrust laws in cases where the actors and effects may be subject to scrutiny in foreign countries as well as in the United States. Examples include transnational mergers such as Ciba-Geigy/Sandoz, Mahle/Metal Leve, Fresenius/National Medical Care, and Lockheed Martin/Loral.
Organization for Economic Cooperation and Development. At the OECD, both the FTC and DOJ initiated work in the Committee for Competition Law and Policy (CLP) on an agreement concerning cooperation in dealing with hard-core cartels. The proposed agreement would call upon member countries to adopt and maintain adequate laws for prohibiting and deterring hard-core cartels and enabling cooperation in enforcement among foreign competition authorities.
World Trade Organization. As a result of the WTO Ministerial in Singapore in December, l996, a WTO working party was established to study issues relating to the interaction between trade and competition policy in order to identify any areas that may merit further consideration in the WTO framework.
Technical Assistance. The FTC, with financial support from the Agency for International Development, provides technical assistance to new antitrust and consumer protection authorities in Central and Eastern Europe, the former Soviet Union, and Latin America.
UNBURDENING LEGITIMATE BUSINESS ACTIVITIES.
A. Regulatory Reform. In the last 18 months, the FTC stepped up the pace of its regulatory reform efforts, repealing more than 36 percent of its industry guides and trade regulation rules. With internal reforms, the rulemakings were completed in record time. Since the program began in 1992, the FTC has reviewed more than half its rules and guides, repealing 12 rules and 15 industry guides and streamlining another 19 rules and guides.
B. Self Regulation. The FTC has encouraged self-regulation and private initiatives, letting the marketplace address consumer protection concerns where appropriate and avoiding unnecessary government regulation. Recent initiatives include:
Funeral Rule Offenders Program (FROP). Since the FTC established this industry-monitored compliance program last year, industry compliance with the Funeral Rule has increased dramatically. Compliance sweeps of over 200 funeral homes have found 90 percent compliance rates, up from 36 to 80 percent rates in previous years. Under FROP, violators make a voluntary payment to either the U.S. Treasury or an appropriate state fund and participate in a compliance program run by the National Funeral Directors Association.
Media Screening in the Cable TV Industry. Following its commitment at the Global Hearings to make advertising clearance standards a priority, the Cabletelevision Advertising Bureau last year issued voluntary clearance standards for the Cable TV industry.
C. Improving the Premerger Notification Process. The FTC continued its efforts to minimize burdens and to assist merging parties in understanding the premerger notification filing requirements.
Eliminating Unneeded Filings. In FY 1996 the Commission adopted five new rules to reduce filing requirements under the HSR Act. The new rules exempt five categories of transactions that, experience has shown, are unlikely to pose competitive problems. This action reduced the number of filings by an estimated 7-10 percent.
Facilitating Public Understanding. FTC staff provided extensive assistance to persons seeking information regarding filing requirements under the HSR Act. In FY 1996, premerger staff responded to approximately 40,000 phone inquiries. About half of these calls concerned whether a proposed transaction was covered under the reporting requirements, while the other half concerned administrative matters and other details involved in filing the notice of proposed transactions.
D. Reforming Administrative Litigation. The FTC has acted to update its procedural rules for administrative litigation to reduce the cost, complexity, and length of FTC trials and to ensure timely resolution of litigated cases.
Amended Rules of Practice. The FTC has amended its Rules of Practice to create new and shorter deadlines, including a requirement that, with limited exception, the Administrative Law Judge must file an initial decision within one year after the Commission issues the administrative complaint. In some circumstances, "fast track" procedures are available, which require a final Commission decision within 13 months after issuance of the complaint. The amended rules also streamline the discovery phase and promote an expedited trial. To aid the public in monitoring the results of these rule amendments, the FTC now issues a quarterly status report on the progress of all cases before an Administrative Law Judge at the FTC.
Final Commission Decisions. The Commission issued its two most recent adjudicative decisions less than five months after oral argument. This comports with the guidelines that the Commission has established for itself.