International Monthly: December 2016

 
 U.S. Competition, Consumer Protection and Privacy News
 

DECEMBER 2016

Highlights

FTC Issues “Sharing Economy” Report, Highlighting Competition Benefits and Consumer Protection Challenges

Sharing Economy

The FTC issued a staff report that provides an in-depth assessment of evolving business models that rely on internet and app-based “sharing economy” platforms. The report, The “Sharing” Economy: Issues Facing Platforms, Participants, and Regulators, summarizes a June 2015 FTC public workshop and highlights a number of competitive benefits and potential consumer protection challenges triggered by the proliferation of online services, including those posed by disruptive business models in markets such as for-hire-transportation and short-term lodging. The report also summarizes concerns expressed by state and local regulators and stakeholders that sharing economy platforms enable new entrants to evade regulations designed to protect consumers and promote public safety. In exploring the tension between the potential competitive benefits that sharing economy business models may provide and the potential consumer harms that they may pose, the report draws on the FTC’s expertise as both a competition and a consumer protection agency. Read more about it on the FTC’s blog..

Consumer Protection and Privacy

FTC Issues Enforcement Policy Statement Regarding Marketing Claims for Over-the-Counter Homeopathic Drugs

homeopathic

The FTC announced a new “Enforcement Policy Statement on Marketing Claims for Over-the-Counter (OTC) Homeopathic Drugs.” The policy statement was informed by an FTC workshop held last year to examine how such drugs are marketed to consumers. The FTC also released its staff report on the workshop, which summarizes the panel presentations and related public comments in addition to describing consumer research commissioned by the FTC. The policy statement explains that the FTC will hold efficacy and safety claims for OTC homeopathic drugs to the same standard as other products making similar claims. That is, companies must have competent and reliable scientific evidence for health-related claims, including claims that a product can treat specific conditions. The statement describes the type of scientific evidence that the Commission requires of companies making such claims for their products. The FTC has published blog posts for consumers and businesses.

FTC Charges Prepaid Card Company Deceptively Marketed Reloadable Debit Card

The FTC has charged that in numerous instances prepaid card company NetSpend Corporation deceived consumers, many of whom do not have bank accounts, about access to funds deposited on defendants’ debit cards. According to the FTC’s complaint, NetSpend tells consumers that its reloadable prepaid debit cards offer an alternative way to store and immediately access their funds. But once people have loaded funds onto the cards, many of them find they cannot access their money, either because NetSpend denies or delays activation of the card, or because it blocks consumers from using it, the FTC alleges. The FTC seeks to return consumers’ funds and ensure that NetSpend provides them with promised access to their funds in the future. The Commission vote authorizing the staff to file the complaint was 2-1. Commissioner Maureen Ohlhausen voted no.

Competition

FTC Requires Parent Company of Bausch + Lomb to Divest Paragon

Canadian pharmaceutical conglomerate Valeant Pharmaceuticals International, Inc., parent of Bausch + Lomb, agreed to divest Paragon Holdings I, Inc. to settle charges that its May 2015 acquisition of Paragon was anticompetitive. This transaction did not require notification under the Hart-Scott-Rodino Act. The FTC challenged the transaction under its general authority. Prior to the acquisition, both Valeant and Paragon produced polymer discs used to make rigid gas permeable, or “GP,” contact lenses. According to the complaint, with a combined share of more than 70 percent of U.S. sales, the acquisition eliminated competition between Valeant and Paragon for the sale of FDA-approved buttons used for three types of GP lenses. Allegedly, this allowed Valeant to exercise market power unilaterally in each button market by increasing prices, reducing volume discounts, decreasing innovation, and reducing product distribution options. Valeant will sell Paragon in its entirety to a newly created entity, Paragon Companies LLC, headed by the former president of Paragon. Further details of the consent agreement are set forth in the analysis to aid public comment. Read more about the FTC’s approach to remedies in the FTC’s blog.

FTC Pre-Merger Office Revises Informal Guidance on Documents Discussing Only Foreign Markets

The FTC’s Premerger Notification Office (PNO) has revised its informal guidance to require parties submitting pre-merger notification forms to include any documents that are responsive to Items 4(c) or 4(d), even when those documents discuss only foreign markets. The PNO’s longstanding position had been to exclude documents otherwise responsive to Item 4(c) or Item 4(d) if they discussed only foreign markets. However, in light of the increasingly interconnected global marketplace, the PNO has determined that the rationale for excluding documents based on geography no longer holds, and their exclusion could impair the ability of the agencies to make the correct assessment of competitive impact prior to issuing a second request. Informal guidance and the tipsheet on the FTC website will be updated accordingly.

U.S. Agencies Submit Comment to FERC on Market Power Analysis of Electricity Markets

The FTC and the Antitrust Division of the Department of Justice submitted a comment to the U.S. Federal Energy Regulatory Commission (FERC) in response to an inquiry by FERC on its approach to assessing market power with respect to mergers in wholesale electricity markets, which it evaluates under the Federal Power Act. Electricity markets have evolved substantially in the 20 years since FERC adopted its approach to mergers, with the development of new markets, new technologies, and the exponential growth of data. The agencies encouraged FERC not to rely solely on structural indicators of market power, such as market share or concentration, but to consider a broad range of evidence. The comment states that certain features of electricity markets render them susceptible to the exercise of market power, even by firms with relatively small shares, and that electricity markets can involve annual sales of billions of dollars, so that even a small percentage increase in the price due to an exercise of market power can substantially harm electricity consumers.

In Other News

FTC Seeks to Study Class Action Settlements

To study the effectiveness of various class action settlement notice programs, the FTC issued orders to claims administrators to provide information on procedures used to notify class members about settlements and the response rates for various methods of notification. The orders are part of the Commission’s Class Action Fairness Project, which strives to ensure that class action settlements in consumer protection and competition matters provide appropriate benefits to consumers. Under the project, the FTC monitors class actions and files amicus briefs or intervenes in appropriate cases; coordinates with state, federal, and private groups on important class action issues; and monitors the progress of legislation and class action rule changes. Also included in the project are two proposed studies: the Notice Study, which examines consumer perception and understanding of class action notices and the options they provide to consumers, and the Deciding Factors Study, which analyzes factors that influence consumers’ decisions to participate, opt out of, or object to a class action settlement.

FTC and National Association of State Charities Officials to Host Conference Exploring Consumer Protection Issues and Charitable Solicitations

give & take (charity)

The FTC and the National Association of State Charities Officials will host a conference on March 21 in Washington, DC, to examine how consumers evaluate and respond to various charitable solicitation practices and the role for consumer protection in ensuring consumers have confidence their giving expectations are fulfilled. The event, Give & Take: Consumers, Contributions, and Charity, will engage regulators, researchers, practitioners, charity watchdogs, donor advocates, and members of the nonprofit sector in conversations about consumer protection concerns in the sector, including available data on donor expectations and perceptions, deceptive fundraising practices, the regulatory and enforcement environment, and new charitable giving options. To enhance the discussion, submissions from the public, including original research, consumer surveys, and academic papers are invited.

Chief Technologist Reflects on the FTC’s Disclosure Evaluation Workshop; FTC Releases Staff Summary

disclosures

FTC Chief Technologist Lorrie Cranor has written a blog post reflecting on the FTC’s September public workshop, Putting Disclosures to the Test, Cranor noted the workshop’s focus on methods of testing and evaluating the effectiveness of disclosures to communicate information consumers need to make informed decisions. Presenters discussed disclosure evaluation studies on privacy notices, medical study consent forms, native advertising disclosures, drug fact labels, front-of-package nutrition labels, qualifying claims in advertisements, and other disclosures. More information is available on the workshop website and in the staff summary.

FTC Offers Advice on How to Avoid and Respond to Ransomware Attacks

ransomware

The FTC is offering tips to consumers and businesses on how to protect devices and respond to ransomware, following a September workshop described in this blog post. Ransomware is malcious software that denies access to computer files until the victim pays a ransom. The FTC offers How to defend against ransomware to help consumers. Businesses can find guidance in Ransomware – A closer look and the accompanying video, Defend against Ransomware.