International Monthly: April 2015

 
 U.S. Competition, Consumer Protection and Privacy News
 

APRIL 2015

Consumer Protection and Privacy

FTC Charges DIRECTV with Deceptively Advertising the Cost of Its Satellite Television Service

DIRECTTV quote from Chairwoman

The FTC has charged DIRECTV, the United States’ largest provider of satellite television services, with deceptively advertising a discounted 12-month programming package. According to the FTC complaint, DIRECTV, which serves 20 million subscribers in the United States, fails to disclose clearly that the package requires a two-year contract and that the cost of the package will increase by up to $45 per month in the second year. The complaint also charges that DIRECTV fails to clearly disclose early cancellation fees of up to $480 and that its offer of free premium channels for three months is in fact a negative option continuity plan. The plan requires consumers to cancel to avoid automatic charges on their credit or debit cards. The FTC is seeking a court order to permanently bar DIRECTV from engaging in the allegedly illegal conduct, as well as a monetary judgment to provide refunds to affected consumers. In addition to charging DIRECTV with deceptive conduct violating Section 5 of the FTC Act, the FTC alleges the company violated the Restore Online Shoppers’ Confidence Act, known as ROSCA, by failing to clearly and conspicuously disclose on its website all of the material terms of offers with a negative option component for recurring charges.

FTC Rules Operators of Jerk.com Deceived Consumers, Violated FTC Act

jerk graphic 2

The FTC has ruled against the operators of Jerk.com, a supposed social networking site and reputation service that billed itself as the “anti-social network,” for tricking people into paying for site memberships to dispute negative profiles of themselves on the website. In an administrative proceeding before the FTC ‘s five Commissioners, the Commission entered a summary decision finding that Jerk’s operators misled consumers by claiming that content on the website was posted by other users and by misrepresenting the benefits of a paid membership to the site. According to the FTC, Jerk encouraged users to label people — including teens and kids — a “jerk” or “not a jerk.” The more than 70 million profiles also had space for users to add information like someone’s age, address, phone numbers, school, employer, and more. Some teens’ profiles included insults about their physique or sexual orientation. Many people found out about the profiles when they searched for their name online and saw a profile pop up as a top result. Most of the profiles, however, weren’t created by real users but by the company, which mined Facebook profiles and used people’s Facebook photos. When people paid $30 for memberships in the hope of disputing the profile or getting it deleted, they found their so-called memberships were worthless, and were unable to correct information about themselves on the site. The FTC’s final order requires Jerk to delete all personal and customer information collected during the operation of the now defunct website within 30 days and prohibits them from selling or disclosing any of that information.

BMW Settles FTC Charges that Its MINI Division Illegally Conditioned Warranty Coverage on Use of Its Parts and Service

BMW of North America LLC has agreed to settle FTC charges that its MINI Division violated the Magnuson-Moss Warranty Act by telling consumers that BMW would void their warranty unless they used MINI parts and MINI dealers to perform maintenance and repair work. In an administrative complaint, the FTC alleged that BMW, through MINI, violated a provision in the Warranty Act that prohibits companies from requiring that consumers, in order to maintain their warranties, use specific brands of parts or specified service centers unless the part or service is provided to the consumer without charge. The proposed order settling the FTC’s complaint prohibits BMW from violating the Warranty Act and the FTC Act in connection with any MINI good or service. The settlement also bars BMW, in connection with the sale of any MINI good or service, from misrepresenting that, to ensure a vehicle’s safe operation or maintain its value, owners must have routine maintenance performed only by MINI dealers or MINI centers. The proposed order also requires BMW to provide affected MINI owners with information about their right to use third-party parts and service without voiding warranty coverage, unless BMW provides such parts or services for free.

FTC and Multiple Law Enforcement Partners Announce Crackdown on Deception, Fraud in Auto Sales, Financing and Leasing in United States and Canada

operation ruse control

The FTC and 32 law enforcement partners in the United States and Canada recently announced the results of Operation Ruse Control, a crackdown on deceptive practices in the auto industry. The sweep aimed to protect consumers purchasing or leasing a car. Cases in the sweep charged both civil and criminal law violations for deceptive advertising, automotive loan application fraud, odometer fraud, deceptive add-on fees, and deceptive marketing of car title loans. Operation Ruse Control involved 252 enforcement actions at the federal, state and local level in both the United States and in Ontario and British Columbia, Canada (see chart for details). The six new cases filed by the FTC as part of the sweep include more than $2.6 million in monetary judgments.

FTC Halts Canadian Online ‘Yellow Pages’ Scammers

The FTC has halted two Canada-based schemes that defrauded small businesses and nonprofit entities in the United States by billing them for unwanted listings in online “yellow pages” business directories. At the FTC’s request, a federal court has halted Medical Yellow Directories, a Quebec-based scheme that allegedly defrauded medical practices, churches, and retirement homes, generating more than 1,800 complaints from consumers. The FTC seeks to stop the illegal practices permanently. According to a complaint filed by the FTC, the defendants sent consumers unsolicited invoices bearing the well-known “walking fingers” image and seeking $480.95 or a similar amount for a one-year directory listing. Consumers were directed to send checks to U.S. addresses that are really commercial mail receiving agencies that forward mail to Quebec. The invoices named someone from the targeted organization and showed the listing as it purportedly would appear in a directory, suggesting that someone previously agreed to buy a listing. Those who ignored the invoices were subjected to aggressive debt collection efforts. The complaint alleges that the defendants misrepresent that consumers have agreed to buy a business directory listing and owe them money, in violation of the FTC Act. The court entered a temporary restraining order against the defendants on March 10 and a preliminary injunction on March 24. The FTC also announced a settlement and ban from the business directory industry with the owner of OnlineYellowPagesToday.com, a Montreal-based operation that the FTC sued in June 2014 for bilking millions of dollars from businesses, churches, nonprofits and local governments. In both matters, the FTC worked closely with several U.S. agencies and received invaluable assistance from the Royal Canadian Mounted Police and Centre of Operations Linked to Telemarketing Fraud (Project COLT). Consumers in your jurisdiction can learn more about business directory scams by clicking Small Business Scams.

Competition

Phoebe Putney Health System, Inc., Hospital Authority of Albany-Dougherty County, and HCA Inc. Settle FTC Charges that Acquisition of Palmyra Park Hospital Violated U.S. Antitrust Laws

The FTC entered into a settlement with Phoebe Putney Health System, Inc., the Hospital Authority of Albany-Dougherty County, and HCA Inc. resolving charges that the Hospital Authority’s acquisition of Palmyra Park Hospital, Inc. from HCA Inc. – which created an effective hospital monopoly in the Albany, Georgia area – was anticompetitive. This consent agreement follows a significant Supreme Court decision in 2013 reaffirming that state action immunity from the antitrust laws applies only when states have articulated a clear intent to replace competition with regulation, and allowing the Commission to challenge this transaction. Due to the unavailability of structural relief, the consent does not require a divestiture. The Commission explained in statement that it was unlikely that any divestiture buyer could satisfy Georgia’s strict Certificate of Need requirements to operate an independent hospital. Under the consent agreement, Phoebe Putney and the Hospital Authority must notify the FTC in advance of acquiring any part of a hospital or a controlling interest in other healthcare providers in the Albany, Georgia area for the next 10 years. They will be prohibited from objecting to regulatory applications made by potential new hospital providers in the same area for up to five years.

FTC Requires Divestitures in Connection With Impax Laboratories Inc.’s Proposed Acquisition of CorePharma, LLC

Pharmaceutical companies Impax Laboratories Inc. and CorePharma, LLC have agreed to divest certain rights and assets to two generic drugs to settle FTC charges that Impax’s proposed $700 million acquisition of CorePharma would likely be anticompetitive. The divested assets are all of CorePharma’s rights and assets to generic pilocarpine tablets and generic ursodiol tablets. Perrigo Company plc, a global drug company headquartered in Ireland that markets generic drugs in the United States, will acquire the divested assets. This market has recently experienced supply shortages, which can diminish competition among suppliers. CorePharma is one of a limited number of firms likely to enter the generic ursodiol market in the near future. The FTC alleged that CorePharma’s entry as an independent competitor would likely have resulted in significantly lower prices for each of these drugs.

In Other News

FTC Establishes New Consumer Protection Technology Office

The FTC announced the formation of the Office of Technology Research and Investigation (OTRI), a successor to the agency’s Mobile Technology Unit (MTU). The OTRI, which is housed in the Bureau of Consumer Protection, will provide the agency with expert research, investigative techniques and further insights on technology issues involving all facets of the FTC’s consumer protection mission, including privacy, data security, connected cars, smart homes, algorithmic transparency, emerging payment methods, big data, and the Internet of Things. It is the agency’s latest effort to ensure that its core consumer protection mission keeps pace with the rapidly evolving digital economy.

FTC To Host Workshop on Cross-Device Tracking

The FTC will host a workshop on November 16 to examine privacy issues raised by “cross-device tracking.” As consumers use an increasingly diverse array of devices, from smart phones to tablets to wearable devices, each with its own web browser, companies that want to reach them with relevant advertising are finding traditional methods like cookies less effective. The workshop will address a number of questions about the potential benefits to consumers of effective cross-device tracking, as well as examine the potential privacy and security risks. FTC staff seeks public comment on several questions in advance of the workshop. Comments may be submitted online. The workshop will be held in the FTC’s Constitution Center offices located at 400 7th Street, SW, Washington, DC. It is free and open to the public.

Global Privacy Enforcement Network Releases Annual Report Highlighting Increased Membership and Enhanced Enforcement Cooperation

The Global Privacy Enforcement Network’s (GPEN) first annual report highlights its increased membership and enhanced enforcement cooperation. Membership stands at 53 privacy enforcement authorities in 39 jurisdictions around the world. The FTC is a founding member of GPEN, which was established in 2010. In 2014, GPEN undertook a sweep of mobile apps as a cooperative privacy enforcement project. Following the sweep, 23 authorities signed a joint letter to seven major app marketplaces, stating their belief that marketplace operators should require each app that can access or collect personal information to provide users with timely access to the app’s privacy policy by including a link to its privacy policy in the app’s marketplace listing. Other GPEN initiatives over the past year include an online gateway to an expanded searchable international privacy law library, a workshop on enforcement related publicity, and significant steps toward the launch of a secure Internet-based platform that will allow GPEN members to alert other members about their investigations and find out whether other members are investigating the same company or practice.

FTC Testifies Before Congress on Proposed Data Security Legislation

Bureau of Consumer Protection Director Jessica Rich told Congress last month that the FTC supports the goals of proposed federal data security legislation, such as establishing broadly applicable data security requirements for companies and requiring them to notify consumers, in certain circumstances, of the breach of their data. The testimony suggests a need to expand the bill’s definition of personal information to include consumers’ geolocation and health data, as well as a need to address the entire data ecosystem, including Internet-connected devices.

FTC Invites Applications from Counterpart Agencies Around the World for Its International Fellows Program

The FTC is inviting applications for its International Fellows Program. Fellows are detailed to the FTC for 3-6 months during which they work on a range of competition, consumer protection, or privacy issues. Fellows participate in investigations and enforcement actions with FTC attorneys, investigators, and economists. They gain first-hand experience with how the FTC carries out its enforcement and policy work. Background information is available on the FTC web site, along with a brochure, and information on how to apply.

Former Bureau of Competition Director Bill Baer and Former Bureau of Consumer Protection Director David Vladeck Named Recipients of 2015 Kirkpatrick Award

Concluding the celebration of the FTC’s 100th anniversary, FTC Chairwoman Edith Ramirez named former Bureau of Competition Director William J. Baer and former Bureau of Consumer Protection Director David C. Vladeck the 2015 recipients of the Miles W. Kirkpatrick Award for Lifetime FTC Achievement. Baer was Bureau Director from 1995 to 1999 and served in a variety of roles at the Commission from 1975 to 1980. Vladeck was Bureau Director from 2009 through 2012. Details of their contributions to the agency are available here.

FTC Videos Offer Advice on What To Do If Your Email Is Hacked or Malware Attacks Your Computer

The FTC has created two new videos, in Spanish and English, to advise consumers how to respond if their email has been hacked or their computer has been hijacked by malware. Consumers in your jurisdiction can learn what to do by watching Hacked Email: What to Do and Hijacked Computer: What to Do.