Legal Library: Cases and Proceedings

Announced in June 2019 as part of a crackdown on illegal robocalls against operations around the country responsible for more than one billion calls, the FTC’s complaint against six corporate and three individual defendants jointly doing business as Second Choice Horizon and CSG Solutions, alleges Raymond Gonzalez, Carlos S. Guerrero, and Joshua Hernandez ran a maze of interrelated operations that used illegal robocalls to contact financially distressed consumers with offers of bogus credit card interest rate reduction services. The FTC contends many of the consumers targeted were seniors. In July 2020, the FTC announced the defendants had settled the Commission’s complaint, and are banned from telemarketing and selling debt relief services.

Reckitt Benckiser Group plc has agreed to pay $50 million to settle Federal Trade Commission charges that it violated the antitrust laws through a deceptive scheme to thwart lower-priced generic competition to its branded drug Suboxone. According to the complaint, before the generic versions of Suboxone tablets became available, Reckitt and its former subsidiary Reckitt Benckiser Pharmaceuticals, now known as Indivior, Inc., developed a dissolvable oral film version of Suboxone and worked to shift prescriptions to this patent-protected film. Worried that doctors and patients would not want to switch to Suboxone Film, Reckitt allegedly employed a “product hopping” scheme where the company misrepresented that the film version of Suboxone was safer than Suboxone tablets because children are less likely to be accidentally exposed to the film product. Invidior has agreed to pay an additional $10 million to settle FTC charges.

The operators of a scheme that targeted new businesses across the country with bogus threats of government fines will pay $1.2 million and be banned from sending unsolicited direct mail under a settlement with the Federal Trade Commission and the State of Florida.

Polyurethane foam producers FXI Holdings, Inc. and Innocor, Inc. have agreed to divest polyurethane foam pouring plants in three regional markets to Future Foam, Inc., to settle Federal Trade Commission charges that FXI’s proposed $850 million acquisition of Innocor would violate federal antitrust law. The FTC alleges that the combination of FXI and Innocor would substantially lessen competition for low-density conventional polyurethane foam used in home furnishings in three regional markets: the Pacific Northwest (Oregon and Washington); the Midwest states of Indiana, Michigan, and Ohio; and Mississippi. To remedy the proposed transaction’s anticompetitive effects, the proposed order requires the companies to divest FXI’s foam-pouring plant in Kent, Washington and Innocor’s foam-pouring plants in Elkhart, Indiana and Tupelo, Mississippi to Future Foam no later than 10 days after the close of the acquisition. On April 20, 2020, the Commission voted 5-0 to approve the final order settling the charges.

In September 2017, a group of online marketers agreed to pay more than $2.5 million to settle FTC charges that it deceived consumers with “free” and “risk-free” trials for cooking and golfing products. According to a complaint filed in March 2017, the defendants offered “free” products, without clearly disclosing that by accepting the “free” product consumers were agreeing to be charged each month for a subscription if they did not cancel. They also allegedly misrepresented their return, refund and cancellation policies. The order setting the FTC’s complaint barred the defendants from misrepresenting the cost of any good or service, that consumers will not be charged, that consumers can get something for a processing or shipping fee with no further obligation, and that a product or service is free. In April 2020, the FTC announced it was sending refund checks totaling $488,629 to defrauded consumers.

Texas-based energy company Par Petroleum Corporation agreed to terminate its storage and throughput rights at a key gasoline terminal in Hawaii, to settle FTC charges that Par’s proposed $107 million acquisition of Koko’oha Investments, Inc.’s wholly-owned subsidiary Mid Pac Petroleum, LLC would likely be anticompetitive. According to the FTC’s complaint, the proposed merger would reduce competition and lead to higher prices for bulk supply of Hawaii-grade gasoline blendstock, ultimately increasing the price of gasoline for Hawaii consumers. As a result of the proposed acquisition, Par gained Mid Pac’s rights to Aloha’s Barbers Point terminal, which it does not need for importation because it produces its own blendstock, but which it could exercise in a manner that impairs Aloha’s use of its terminal. If Par were to hamper Aloha’s import capability, it would weaken Aloha’s ability to negotiate lower bulk supply prices from Par and Chevron, and thus reduce Aloha’s ability to compete effectively in the bulk supply market. Potential new competitors would be unable to deter or counteract the anticompetitive effects resulting from the acquisition, according to the complaint. The consent agreement requires Par to terminate the Barbers Point terminal storage and throughput rights it acquires from Mid Pac within five days after the merger is completed. Par will retain rights to load a limited number of tanker trucks at the Barbers Point terminal, and must obtain prior FTC approval to modify these rights or enter into any new agreement at the Barbers Point terminal. In January 2020, the FTC sought public comment on Par’s application to modify the agreement to store petroleum products at Barbers Point terminal.

A group of affiliate marketers who lured consumers into a business coaching and investment scheme known as My Online Business Education (MOBE) will surrender millions of dollars in assets to settle Federal Trade Commission charges.

A group of affiliate marketers who lured consumers into a business coaching and investment scheme known as My Online Business Education (MOBE) will surrender millions of dollars in assets to settle Federal Trade Commission charges.

The Federal Trade Commission has filed an administrative complaint challenging a proposed joint venture between Peabody Energy Corporation and Arch Coal. The transaction would combine their coal mining operations in the Southern Powder River Basin, located in northeastern Wyoming. The admininstrative complaint alleges that the transaction will eliminate competition between Peabody and Arch Coal, which are the two major competitors in the market for thermal coal in the Southern Powder River Basin, and the two largest coal-mining companies in the United States. This civil case seeks a temporary restraining order and preliminary injunction enjoining the defendants from consummating their joint venture. The Commission votes to issue the administrative complaint and to authorize staff to seek a temporary restraining order and preliminary injunction were both 4-1. The administrative trial is scheduled to begin on Aug. 11, 2020.

The Federal Trade Commission authorized an action to block Post Holdings, Inc.’s proposed acquisition of the private label ready-to-eat ("RTE") cereal business of TreeHouse Foods, Inc.  In an administrative complaint issued on December 19, 2019, the Commission alleges that the proposed acquisition would harm retailers and end consumers by eliminating head-to-head competition between the Respondents in the United States market for private label RTE cereal. The Commission vote to issue the administrative complaint and to authorize staff to seek a temporary restraining order and preliminary injunction was 5-0. The administrative trial is scheduled to begin on May 27, 2020. The parties announced they had abandoned the transaction on Jan. 13, 2020.

The FTC is mailing refund checks totaling more than $2.6 million to small businesses who lost money to a New York-based office supply scam operated by a business known as A-1 Janitorial.

In June 2018, the final two defendants among a group of California-based marketers were permanently barred from the deceptive marketing and billing tactics used in connection with selling skincare products offered to consumers with supposedly “risk-free” trials. The court order settled the charges against them, which the FTC announced in mid-2015. In all, 32 defendants who sold AuraVie, Dellure, LéOR Skincare, and Miracle Face Kit branded skincare products agreed to court orders with the FTC or had default orders entered against them. In November 2019, the FTC announced it was returning over $1.8 million to consumers who bought the deceptively marketed products.