International Monthly: February 2015

 
 U.S. Competition, Consumer Protection and Privacy News
 

FEBRUARY 2015

Competition

FTC Proposes to Study Merger Remedies

The FTC is seeking public comments on a proposal to study the effectiveness of its orders in merger cases requiring a divestiture or other remedy. The study would update and expand on the FTC’s 1999 divestiture study, which evaluated the divestitures the Commission ordered from 1990 to 1994, relying primarily on interviews with the buyers of the divested assets. As a result of that study, the Commission made several changes to its divestiture process, including shortening the length of the divestiture period, and requiring up-front buyers and monitors more frequently. The new study would focus on 92 merger orders issued between 2006 and 2012. It would evaluate merger orders that required divestiture, as well as those that required non-structural relief to remedy anticompetitive effects to determine whether the orders met their remedial goals. More information about the proposed study, including the list of orders, can be found in the Federal Register notice.

To Cure Anticompetitive Merger Sun Pharmaceutical Agrees to Divest Ranbaxy Lab’s Generic Tablets for Treating Bacterial Infections

To settle FTC charges that Sun Pharmaceutical Industries Ltd.’s $4 billion proposed acquisition of Ranbaxy Laboratories Ltd. likely would be anticompetitive, the parties agreed to divest Ranbaxy’s interests in certain generic antibacterial tablets to Torrent Pharmaceuticals Ltd. The tablets, generic minocycline, are used to treat a wide array of bacterial infections, including pneumonia, acne, and urinary tract infections. According to the FTC complaint, the proposed merger would likely harm future competition by reducing the number of suppliers in the U.S. markets for three dosage strengths of generic minocycline tablets. The analysis to aid public comment notes that in generic pharmaceutical product markets, price generally decreases as the number of generic competitors increases. Without the remedy, the FTC alleged that the proposed acquisition would likely cause U.S. consumers to pay significantly higher prices.

Albertsons and Safeway Agree to Divest 168 Supermarkets

Supermarket operators Albertsons and Safeway Inc. have agreed to sell 168 supermarkets to settle FTC charges that their proposed $9.2 billion merger likely would be anticompetitive. According to the FTC complaint, the acquisition would have harmed competition in 130 local markets in Arizona, California, Montana, Nevada, Oregon, Texas, Washington, and Wyoming. The complaint states that Albertsons and Safeway compete vigorously on the bases of price, quality, product variety, and services, and offer consumers the convenience of one-stop shopping for food and other grocery products. The settlement aims to ensure that consumers in the affected communities continue to benefit from competition among their local supermarkets.

Consumer Protection and Privacy

 

FTC Report on Internet of Things Urges Companies to Adopt Best Practices to Address Consumer Privacy and Security Risks

Internet of Things report cover

The FTC has released a detailed report on the Internet of Things. In the report, FTC staff recommend steps businesses can take to enhance and protect consumers’ privacy and security as Internet-connected devices proliferate. The Internet of Things is already impacting the daily lives of millions of Americans through the adoption of health and fitness monitors, home security devices, connected cars and household appliances, and other applications. These devices offer the potential for improved health-monitoring, safer highways, and more efficient home energy use, among other benefits. However, the report notes that connected devices raise numerous privacy and security concerns that could undermine consumer confidence. The report is partly based on input from leading technologists and academics, industry representatives, consumer advocates, and others who participated in the FTC’s Internet of Things workshop in November 2013, as well as public comments submitted to the Commission. In addition to the report, the FTC also released a new publication for businesses, Careful Connections: Building Security in the Internet of Things.

Prepaid Mobile Provider TracFone to Pay $40 Million to Settle FTC Charges It Deceived Consumers About ‘Unlimited’ Data Plans

TracFone, the largest prepaid mobile provider in the United States, has agreed to pay $40 million to settle FTC charges concerning its “unlimited” data plans. The FTC will refund the money to consumers. The FTC’s complaint alleges that since 2009, TracFone has advertised prepaid monthly mobile plans for about $45 per month with “unlimited” data under various brands. But despite emphasizing unlimited data in its advertisements, TracFone drastically slowed consumers’ mobile data – known as throttling – or cut off their data entirely after they reached certain undisclosed limits in a 30-day period. Consumers who had a Straight Talk, Net10, Simple Mobile, or Telcel America unlimited plan before January 2015 can visit www.ftc.gov/prepaidphones to file a claim for a refund. In addition to the $40 million in consumer refunds that it must pay under its settlement with the FTC, TracFone is prohibited from making further deceptive advertising claims about its mobile data plans, and must clearly and conspicuously disclose any limits on the speed or quantity of its data service. This is the second case brought by the FTC against a mobile provider for failing to live up to its promises of unlimited data: the Commission’s case against AT&T is currently in litigation.

Court of Appeals Affirms FTC Deception Decision on POM Wonderful Advertising

On January 30, the Court of Appeals for the D.C. Circuit affirmed a January 2013 FTC decision that the marketers of POM Wonderful 100% Pomegranate Juice and POMx supplements deceptively advertised their products in 36 advertisements and promotional materials. POM claimed that the products could treat, prevent, or reduce the risk of heart disease, prostate cancer, and erectile dysfunction, and were clinically proven to have such benefits. The court also affirmed the FTC order requirement that POM have at least one randomized, well-controlled human clinical study for future disease benefit claims. The court did not find sufficient justification for a blanket requirement that POM have two such studies as a pre-condition to making any disease-related claim, but observed that, in other circumstances, such a requirement might be appropriate. Here are links to the Court’s opinion and a blog post containing a dozen “quotable quotes” from the opinion, as well as a timeline with pleadings from the administrative case before the FTC.

Two Defendants in Canada-Based Telemarketing Scheme Settle FTC Charges

Two individual defendants have agreed to settle FTC charges that they participated in an alleged multi-million dollar cross-border telemarketing fraud. The Canada-based scam targeted elderly Americans by making unauthorized withdrawals from their accounts using remotely created checks. The settlement orders with each settling defendant bar them from using remotely created checks drawn on consumers’ bank accounts, and require consumer consent before debiting accounts. The orders also prohibit the defendants from misrepresenting any goods or services. The settling defendants have agreed to turn over proceeds of the scheme from their personal and corporate accounts. According to the memorandum in support of a summary judgment motion against another defendant, the scheme took in nearly $11 million between 2010 and March 2014. A U.S. district court temporarily shut down the operation in late March 2014, pending the resolution of the FTC’s action. The Royal Canadian Mounted Police provided essential information to the FTC throughout this case.

In Comment to Federal Communications Commission, FTC Says No Legal Barriers or Policy Considerations Stop Common Carriers from Providing Call-Blocking Services to Consumers

The directors of the FTC Bureau of Consumer Protection, Bureau of Economics, and Office of Policy Planning write, in a comment to the Federal Communications Commission, that in their view no legal barriers or policy considerations prevent common carriers from offering call-blocking technology to consumers. According to the comment, “[a]n affirmative statement from the FCC that common carriers can offer call-blocking services to their consumers without violating their common carriage obligations would be in the best interest of American consumers.” Filed in response to an FCC public notice seeking input on call-blocking, the comment states that “consumers continue to be plagued with unwanted telemarketing calls, which in many cases violate the law.” Law violators are now using the Internet to place large numbers of illegal telemarketing calls, inexpensively, often from overseas, and in a manner that allows them to hide from law enforcement. To combat this problem, a technological solution is needed, and “call-blocking technology – i.e., a ‘spam filter’ for the phone – is an integral part of that technological solution.”

Company That Touted Products’ Ability to Treat Children’s Speech Disorders Settles FTC Charges It Deceived Consumers

To settle FTC charges, NourishLife, LLC and its owner, Mark Nottoli, will stop making claims that their dietary supplements are proven effective at treating childhood speech disorders, including those associated with autism. Under the settlement, the defendants also will pay $200,000 and are required to disclose any material connections with their endorsers. According to the FTC complaint, since at least 2008, the defendants have sold the supplements online and through a network of distributors for more than $70 per bottle.

Makers of Jungle Rangers Computer Game for Kids Settle FTC Charges that They Deceived Consumers with Baseless “Brain Training” Claims

To settle FTC charges, Focus Education and its officers must stop making unsubstantiated claims about their cognitive products, including their computer game, Jungle Rangers. The challenged claims included permanent improvements for children with attention deficit hyperactivity disorder (ADHD). The FTC’s administrative complaint states that the defendants marketed the products via television infomercials and the company’s websites for more than $200. The consent order and an analysis to aid public comment are available on the FTC website.

Website Operator Banned from the ‘Revenge Porn’ Business After FTC Charges He Unfairly Posted Nude Photos, Offered Fake ‘Takedown’ Service

Under a settlement, the FTC has banned the operator of an alleged “revenge porn” website from sharing nude videos or photographs of people without consent. The settlement also requires him to destroy the intimate images and personal contact information he collected while operating the site. The FTC complaint against Craig Brittain alleges that he used deception to acquire and post intimate images of women. In addition to the deception charge under the FTC Act, the complaint contains an unfairness charge under the Act because he disseminated intimate pictures and personal information for commercial gain without knowledge or consent, causing substantial injury.

The site included photos of more than 1,000 individuals, according to the complaint. Women whose photographs and information were posted on the site contacted Brittain to have the information removed, citing potential harm to their careers and reputations. Women also cited unwelcome contact from strangers who had discovered their information on the site. The complaint notes that in many cases Brittain did not respond to the women’s requests to remove the information. In fact, the complaint alleges the site advertised content removal services that could delete consumers’ images and content for a payment of $200 to $500. Despite the site presenting these as third-party services, the complaint alleges that they were owned and operated by Brittain himself.

In Other News

FTC to Co-host Upcoming Workshop on Health Care Competition

health care competition workshop

The FTC and the U.S. Department of Justice will jointly host the second workshop in the Examining Health Care Competition series on February 24-25. The workshop will study recent developments related to health care provider organization and payment models, with an emphasis on how they may affect competition in the provision of health care services. Topics will include: early observations regarding accountable care organizations and health insurance exchanges; alternatives to traditional fee-for-service payment models; trends in provider consolidation; and trends in provider network and benefit design strategies. The workshop also will examine contracting practices and regulatory activity that may enhance or undermine these strategies. The workshop will be webcast live via a link that will be posted on the FTC’s website. Public comments will be accepted through April 30. Suggested comment topics, and instructions on how to submit comments online and by mail, can be found in the Federal Register notice.

 

Annual Update of Thresholds for Notification and Interlocking Directorates

The FTC has revised the thresholds that determine whether companies are required to notify a transaction under Section 7A of the Clayton Act. The FTC also revised the thresholds that trigger prohibitions on certain interlocking directorates under Section 8 of the Clayton Act. Companies proposing a merger or acquisition are required to notify the FTC and DOJ if the size of the parties involved and the value of a transaction exceeds certain filing thresholds, absent an applicable exemption. For 2015, the size-of-transaction threshold for reporting proposed mergers and acquisitions subject to antitrust enforcement will increase from $75.9 million to $76.3 million. The new 2015 thresholds for the Act’s prohibition on interlocking directorates are $31,084,000 for Section 8(a)(l ) and $3,108,400 for Section 8(a)(2)(A). The FTC revises these thresholds annually, based on the change in gross national product. A listing of current thresholds can be found on the FTC’s website. It will be updated once the revised thresholds are published in the Federal Register.

FTC Posts 2014 Privacy and Data Security Update

The FTC has posted its 2014 Privacy and Data Security Update. The report provides background on the FTC’s mission and authority under the FTC Act, the Truth in Lending Act, the CAN-SPAM Act, the Children’s Online Privacy Protection Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and the Telemarketing and Consumer Fraud and Abuse Prevention Act. It describes how the FTC protects consumer privacy and ensures data security. It also summarizes and links to further information on FTC enforcement matters concerning privacy, data security, credit reporting and financial privacy, the U.S.-EU Safe Harbor Framework, children’s privacy, and Do Not Call. It also summarizes comments provided to other agencies on privacy issues. The report, which will be updated annually, overlaps a previously issued report covering approximately January 2013-March 2014.

FTC Issues Follow-Up Study on Credit Report Accuracy

The FTC has issued a follow-up study of a 2012 study on credit report accuracy. The new study focuses on 121 consumers who had at least one unresolved dispute from the earlier study and participated in a follow-up survey. Most consumers who previously reported an unresolved error on one of their three major credit reports believe some disputed information on their report remains inaccurate. The congressionally mandated study is the sixth and final study on national credit report accuracy by the FTC. It recommends that CRAs review and improve the process they use to notify consumers about the results of dispute investigations. It also recommends that CRAs continue to explore efforts to educate consumers regarding their rights to review their credit reports and dispute inaccurate information.

FTC ‘Fotonovela’ Warns Spanish-Speaking Community About Debt Collection Scams

fotonovella on debt collection

To help Spanish-speaking consumers know their rights when dealing with debt collectors, the FTC has created a Spanish-language graphic novel, Cobradores de Deuda, which describes the rules debt collectors must follow, and what consumers should do if they do not. It is part of the FTC’s fotonovela series, a campaign to promote consumer education and protection in the Latino community. Previous issues focused on government imposters and income scams. Consumers can order all three free publications at ftc.gov/bulkorder, or read and download them at ftc.gov/fotonovela.