International Monthly: February 2017

 U.S. Competition, Consumer Protection and Privacy News


Consumer Protection and Privacy

Second Billion Dollar Settlement with Volkswagen Requires Company to Repair or Buy Back 3.0 Liter TDI Diesel Vehicles


The FTC announced a settlement that requires Volkswagen Group of America to fully compensate consumers who purchased 3.0-liter TDI diesel vehicles through a combination of repairs, additional monetary compensation, and buybacks for certain models. Under the new settlement, consumers will receive compensation worth between $1 billion and $4 billion. The new settlement follows a $10 billion judgment the FTC previously obtained to compensate the larger group of consumers who had 2.0-liter TDI Volkswagen cars. The federal court order sets out the terms of relief, which includes buybacks for older model cars and emissions repair and compensation for newer model cars. A fact sheet and chart provide more details.

Uber Agrees to Pay $20 Million to Settle FTC Charges that It Recruited Prospective Drivers with Exaggerated Earnings Claims

Uber Technologies, a ride-hailing company, has agreed to pay $20 million to resolve FTC charges that it misled prospective drivers with exaggerated earning and financing claims. The money will be used to provide refunds to affected drivers. According to the FTC complaint, Uber claimed on its website that uberX drivers’ annual median income was more than $90,000 in New York and over $74,000 in San Francisco, although median incomes were actually $61,000 and $53,000, respectively. The complaint also alleges that Uber made high hourly earnings claims, but typical Uber drivers failed to earn those amounts in various cities. The stipulated court order bars future misrepresentations. The FTC has published blog posts for consumers and businesses with additional information. Acting Chairman Maureen K. Ohlhausen dissented from the complaint and settlement and issued a statement explaining her view that the monetary settlement was not tied to an estimate of consumer harm.

VIZIO to Pay $2.2 Million to FTC, State of New Jersey to Settle Charges It Collected Viewing Histories on 11 Million Smart Televisions Without Users’ Consent

VIZIO, Inc., one of the world’s largest manufacturers and sellers of Internet-connected “smart” televisions, has agreed to pay $2.2 million to settle charges by the FTC and the Office of the New Jersey Attorney General that it installed software on its TVs to collect second-by-second viewing data on 11 million consumer TVs without consumers’ knowledge or consent. The company sold this information to third parties for targeted advertising and other purposes. The stipulated federal court order requires VIZIO to prominently disclose and obtain affirmative express consent for its data collection and sharing practices, and prohibits misrepresentations about the privacy, security, or confidentiality of consumer information it collects. It also requires the company to implement a comprehensive data privacy program and biennial assessments of that program. More information in available in blog posts for consumers and businesses.

FTC Settlement Puts a Stop to Money Mule Who Profited from India-Based Tax and Other Scams

Florida-based defendants charged with helping telemarketers in India defraud American consumers through various tax, government grant, and advance fee loan schemes will be banned from aiding any telemarketers in a settlement with the FTC. The FTC complaint charges Joel S. Treuhaft and his company, PHLG Enterprises, LLC with collecting more than $1.5 million from about 3,000 consumers. The scheme involved paying runners to collect Western Union or MoneyGram cash money transfers at retail outlets. The stipulated court order bans defendants from aiding or facilitating any telemarketing, including the use of money transfers, cash reload mechanisms, gift cards, or other payment methods as payment for goods or services sold via telemarketing.


FTC Releases Staff Study Examining Commission Merger Remedies Between 2006 and 2012

The FTC issued a new study regarding its merger remedies, The FTC’s Merger Remedies 2006-2012: A Report of the Bureaus of Competition and Economics, which expanded on its divestiture study from 1999 and found that the process by which the agency designs and implements merger remedies is generally effective, but also identified certain areas the Commission could improve. Staff examined 89 merger orders issued by the Commission between 2006 and 2012, including those requiring divestitures, as well as non-structural relief, to address anticompetitive effects. The study summarizes the findings and provides best practices reflecting the learning of this review.

Endo Pharmaceuticals Inc. Abandons Pay-for-Delay Agreements; FTC Refiles Suits Against Generic Defendants

The FTC has refiled a complaint and proposed order in federal court to resolve charges that Endo Pharmaceuticals Inc. and Endo International plc violated the antitrust laws by using pay-for-delay settlements to block consumers’ access to lower-cost generic versions of its two top-selling branded drugs, Lidoderm and Opana ER, in order to preserve its monopoly profits. The proposed order prohibits Endo from entering into the type of anticompetitive patent settlements that the FTC charged Endo used to eliminate the risk of generic competition, including its use of no-authorized generic commitments, in which a brand company agrees not to compete with an authorized generic version of a drug for a period of time.

In a related matter, the FTC refiled charges against Watson Laboratories, Inc., and its former parent, Allergan plc, for illegally blocking a lower-cost generic version of Lidoderm when it entered into a pay-for-delay agreement with Endo. The FTC’s complaint against Watson Laboratories and Allergan alleges, among other things, that Watson, which was the first to file for FDA approval to market a generic Lidoderm patch, and its parent company agreed with Endo to eliminate the risk of generic competition for Lidoderm in exchange for a share of Endo’s extended monopoly profits in violation of the FTC Act. In the new complaint, the FTC is seeking an order permanently barring the defendants from engaging in similar anticompetitive behavior and disgorgement of the defendants’ ill-gotten gains.

Puerto Rico Ophthalmologist Group Settles Boycott Charges

Cooperativa de Médico Oftalmólogos de Puerto Rico (OFTACOOP), a Puerto Rico ophthalmologist cooperative, has agreed to settle FTC charges that it unlawfully orchestrated a refusal to deal agreement among competing ophthalmologists. Under the agreement, parties refused to deal with a health insurance plan and its network administrator. OFTACOOP’s alleged concerted refusal to deal forced the insurer to abandon its plan to create a lower-cost network of ophthalmologists. The insurer was also forced to maintain its reimbursement rates to ophthalmologists. The proposed consent order prohibits OFTACOOP from entering into or facilitating refusal to deal agreements with ophthalmologists.

Mallinckrodt Will Pay $100 Million to Settle Charges that It Illegally Maintained Its Monopoly of Specialty Drug Used to Treat Infants

Mallinckrodt ARD Inc., formerly known as Questcor Pharmaceuticals, Inc., agreed to pay $100 million to settle FTC charges that it violated the antitrust laws when Questcor acquired the rights to a drug that threatened its monopoly in the U.S. market for adrenocorticotropic hormone (ACTH) drugs. The FTC complaint alleges that, while benefitting from an existing monopoly over the only U.S. ACTH drug, Acthar, Questcor illegally acquired the U.S. rights to develop a competing drug, Synacthen Depot. The acquisition prevented any other company from using the Synacthen assets to develop a synthetic ACTH drug, preserving Questcor’s monopoly and allowing it to maintain extremely high prices for Acthar. The proposed stipulated court order requires that Questcor grant a license to develop Synacthen Depot to treat infantile spasms and nephrotic syndrome to a licensee approved by the Commission.

FTC Charges Pharmaceutical Firm Abused Government Processes Through Sham Petitioning to Delay Generic Entry

The FTC has charged ViroPharma Inc. with violating the antitrust laws by abusing government processes to delay generic competition to its branded prescription drug, Vancocin HCl Capsules. The complaint alleges that because of ViroPharma’s actions, consumers and other purchasers paid hundreds of millions of dollars more for their medication. After ViroPharma acquired the rights to Vancocin Capsules in 2004, it raised the price of the drug significantly and continued to do so through 2011. The FTC alleges that to maintain its monopoly, ViroPharma waged a campaign of serial, repetitive, and unsupported filings with regulators and the courts to delay regulatory approval of a generic version of the drug that would compete with it. Viropharma intended its serial filings to delay the approval of generics, and thus competition and lower prices. The FTC seeks a court order permanently prohibiting ViroPharma from submitting repetitive and baseless filings as well as any other necessary equitable relief, including restitution and disgorgement.

In Other News

President Trump Appoints Commissioner Ohlhausen Acting FTC Chairman; FTC Announces Management Changes in Bureaus of Consumer Protection and Competition

President Donald J. Trump has designated Maureen K. Ohlhausen as Acting Chairman of the FTC. “I am deeply honored that President Trump has asked me to serve as Acting Chairman of the FTC and to preserve America’s true engine of prosperity: a free, honest, and competitive marketplace,” Acting Chairman Ohlhausen said. Acting Chairman Ohlhausen was sworn in as a Commissioner of the FTC on April 4, 2012, to a term that expires in September 2018. Acting Chairman Ohlhausen announced that Jessica Rich, Director of the Bureau of Consumer Protection, is leaving the agency on February 17 and that she has appointed Thomas Pahl, a partner at the Washington, D.C. law firm of Arnall Golden Gregory LLP, to be the Acting Director of the Bureau of Consumer Protection. Pahl had served the FTC previously in a number of positions since 1990. Acting Chairman Ohlhausen also announced that she has appointed Abbott (Tad) Lipsky, a partner at the law firm of Latham & Watkins LLP, to be the Acting Director of the Bureau of Competition. Prior to his time at Latham, he was chief antitrust lawyer for The Coca-Cola Company and deputy assistant attorney general under William F. Baxter. Lipsky will replace Deborah Feinstein, who was appointed by former FTC Chairwoman Edith Ramirez in June 2013.

FTC Returns Nearly $20 Million in Additional Refunds to T-Mobile Customers

The FTC is mailing refund checks totaling nearly $20 million to more than 617,000 T-Mobile customers who had third-party charges added to their mobile bills. These refunds are the result of a 2014 settlement, in which T-Mobile agreed to fully refund unwanted third-party charges to its customers who applied for a refund. T-Mobile also agreed to remit to the FTC any remaining funds up to $90 million that were not distributed under the settlement. For more about the FTC’s refund program, click here.

FTC Releases New Report on Cross-Device Tracking

cross-device tracking

The FTC has released a report, Cross-Device Tracking, that describes the technology used to track consumers across multiple Internet-connected devices. The report makes recommendations to industry about how to apply traditional principles like transparency, choice, and security to this relatively new practice. The report draws upon comments and discussions from a November 2015 Cross-Device Tracking Workshop. It describes how cross-device tracking facilitates seamless experiences, can help to prevent fraud and more effectively target ads, and can increase competition in advertising. However, it also acknowledges that cross-device tracking often takes place without consumers’ knowledge or control, and can cache sensitive data.

FTC Testifies Before Senate Judiciary Committee on Its Efforts to Combat Fraud Affecting Older Americans

The FTC testified before Congress on current trends in fraud affecting older Americans, and how the FTC uses law enforcement and other tools to combat this fraud. Testifying on behalf of the Commission before the Senate Special Committee on Aging, Lois Greisman, Associate Director of the FTC’s Division of Marketing Practices, described scams that are more likely to affect older Americans, including fraudulent prize promotions and charity scams. The testimony highlights the FTC’s extensive international work, which was pivotal in recent enforcement actions to dismantle a global network of mass mailing fraud schemes that allegedly defrauded millions of elderly and vulnerable consumers out of hundreds of millions of dollars. For more details, click here.

FTC Announces Annual Update of Size of Transaction Thresholds for Premerger Notification Filings and Interlocking Directorates

The FTC has announced that for 2017, the size-of-transaction threshold for reporting proposed mergers and acquisitions under Section 7A of the Clayton Act will increase from $78.2 million to $80.8 million. The new 2017 thresholds under Section 8 of the Act that trigger prohibitions on certain interlocking memberships on corporate boards of directors are $32,914,000 for Section 8(a)(l) and $3,291,400 for Section 8(a)(2)(A). The FTC revises the thresholds annually, based on the change in gross national product. A full listing of current thresholds can be found on the FTC’s website, which will be updated once the revised thresholds are published in the Federal Register.