The FTC sued Facebook in federal court alleging that the company is illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct. Following a lengthy investigation in cooperation with 48 State attorneys general, the complaint alleges that Facebook engaged in a systematic strategy—including its 2012 acquisition of up-and-coming rival Instagram, its 2014 acquisition of the mobile messaging app WhatsApp, and the imposition of anticompetitive conditions on software developers—to eliminate threats to its monopoly. This course of conduct harms competition, leaves consumers with few choices for personal social networking, and deprives advertisers of the benefits of competition. The FTC is seeking a permanent injunction that could, among other things: require divestitures of assets, including Instagram and WhatsApp; prohibit Facebook from imposing anticompetitive conditions on software developers; and require Facebook to seek prior notice and approval for future mergers and acquisitions. Facebook must now either answer the FTC’s complaint or move to dismiss it. The Commission vote to authorize staff to file for a permanent injunction and other equitable relief was 3-2. Commissioners Noah Phillips and Christine Wilson voted no.
The FTC filed a complaint to block internet listing services provider CoStar Group Inc.’s proposed $587.5 million acquisition of competitor RentPath Holdings, Inc. CoStar operates a network of websites, including Apartments.com, ApartmentFinder.com, and ForRent.com, which are two-sided platforms that match prospective renters with available apartments. RentPath operates similar websites, including Rent.com and ApartmentGuide.com. The complaint alleges that the acquisition would significantly increase concentration in the already highly concentrated markets for internet listing services advertising for large apartment complexes in 49 metropolitan areas across the United States. The Commission vote to issue the administrative complaint and to authorize staff to seek a preliminary injunction was 4-1 with Commissioner Christine Wilson voting no.
FTC Challenges Two Hospital Acquisitions
The FTC filed a complaint to block Hackensack Meridian Health’s proposed acquisition of Englewood Healthcare. According to the complaint, the merged healthcare system would control three of the six general acute care hospitals in Bergen County, New Jersey, a suburb of New York City. The proposed acquisition would allegedly eliminate close competition between the parties and leave insurers with few alternatives for inpatient general acute care services. According to the FTC, this would enable the combined firm to demand higher rates from insurers for their services, which, in turn, may lead to higher insurance costs for plan members. In addition, the elimination of competition would reduce incentives to improve quality.
The FTC also filed an administrative complaint to block the proposed $350 million acquisition by Memphis-based Methodist Le Bonheur Healthcare of two Memphis-area hospitals, known as Saint Francis, owned by Dallas-based healthcare system Tenet Healthcare Corporation. According to the complaint, the transaction would eliminate competition, increase prices, and reduce quality of care in the Memphis area for a broad range of inpatient general acute care services sold to commercial insurers and their insured members.
Consumer Protection and Privacy
The FTC has issued orders to nine social media and video streaming companies (Amazon.com, Inc., ByteDance Ltd., which operates the short video service TikTok, Discord Inc., Facebook, Inc., Reddit, Inc., Snap Inc., Twitter, Inc., WhatsApp Inc., and YouTube LLC) requiring them to provide data on how they collect, use, and present personal information, particularly for advertising and user engagement. The Commission issued the orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct wide-ranging studies into industry practices. The FTC is seeking information on: how social media and video streaming services collect, use, track, estimate, or derive personal and demographic information; how they determine which ads and other content are shown to consumers; whether they apply algorithms or data analytics to personal information; how they measure, promote, and research user engagement; and how their practices affect children and teens. The Commission voted 4-1 to issue the 6(b) orders, with Commissioner Noah Phillips voting no.
The FTC, along with 19 federal, state, and local law enforcement partners announced a nationwide crackdown on scams that target consumers with fake promises of income and financial independence that have no basis in reality. The impact of these scams has intensified as scammers take advantage of the COVID-19 pandemic and financial crisis. Called “Operation Income Illusion,” the crackdown encompasses more than 50 law enforcement actions against the operators of work-from-home and employment scams, pyramid schemes, investment scams, bogus coaching courses, and other schemes that can end up costing consumers thousands of dollars. The income scams that the FTC has pursued through its law enforcement actions in this sweep collectively defrauded consumers of over a billion dollars.
As part of its commitment to protecting consumers in the fast-moving realm of financial technology (FinTech), the FTC sued Beam Financial Inc. and its founder and CEO, operators of a mobile banking app. The FTC alleged that defendants falsely promised users high interest rates on their accounts and “24/7” access to their funds, within three to five business days, with “NO LOCKUP.” Instead, some users waited weeks or even months to receive their money despite repeated complaints to Beam, while others said they never received their money, according to the complaint filed by the FTC in federal court. This action underscores the FTC’s view that long-standing “truth-in-advertising” principles apply to FinTech firms.
Coronavirus Pandemic: FTC Sends More Warning Letters on Unsubstantiated COVID-19 Health Claims, Educates Consumers on Vaccine Scams
The FTC sent letters warning 20 more marketers nationwide to stop making unsubstantiated claims that their products and therapies can prevent or treat COVID-19, bringing the agency’s total to more than 330 letters. In addition to warning marketers about claims for products and “treatments” such as intravenous Vitamin C infusions, ozone therapy, and supplements, the new letters challenge claims for more obscure products and therapies such as copper water bottles, bead bracelets, and water filtration systems. There is no scientific evidence that these products or services can prevent or treat the disease. The agency also provided consumers tips on how to recognize and avoid vaccine-related scams, and cautioned consumers not to pay money for a promise of vaccine access or share their personal information.
In Other News
The FTC issued its Fiscal Year 2020 Agency Financial Report, which describes the agency’s strong performance during the past year as well as its sound financial operations. The report details how the FTC performed in reaching its consumer protection and competition enforcement, policy, and outreach goals, and includes information on the FTC’s engagement with foreign consumer, privacy, and competition agencies as well as international organizations and networks. It also contains short highlights of key accomplishments such as the agency’s response to COVID-19, the renewal of the U.S. SAFE WEB Act, and the FTC’s co-hosting of the International Competition Network’s virtual annual conference. The report includes the agency’s annual audited financial statements, which received the highest audit opinion available.
FTC staff has sent 28 letters to eyeglass prescribers warning them of potential violations of the agency’s Ophthalmic Practice Rules, known as the Eyeglass Rule, and, in some cases the Contact Lens Rules, as well. These rules require prescribers to provide patients with no-cost copies of their prescriptions following an exam even if they do not request it.
At the ABA Antitrust Law Section’s Fall Forum, Chairman Joseph Simons delivered remarks addressing the acquisition by firms with significant market power of firms that pose emerging competitive threats. His presentation also included an update on the FTC’s recent antitrust enforcement actions.
According to a new FTC staff report, the 226 final Hatch-Waxman patent settlements entered by pharmaceutical companies and filed with the agencies in FY 2017 was close to the record high of FY 2016. Despite the high number of settlements, those that include the types of reverse payments that are likely to be anticompetitive remain very low.
The FTC submitted papers prepared with the Department of Justice to the recent meetings of the OECD Competition Committee and Global Forum on Competition. The papers are: The Role of Competition Policy in Promoting Economic Recovery< (Competition Committee), Using Market Studies to Tackle Emerging Competition Issues (Global Forum on Competition), and Economic Analysis in Merger Investigations (Global Forum on Competition).