International Monthly: January 2016

 U.S. Competition, Consumer Protection and Privacy News
 

JANUARY 2016

Consumer Protection and Privacy

FTC Report Provides Recommendations to Business on Growing Use of Big Data

big data graphic

The FTC has released a report that analyzes the lifecycle of big data, with a focus on how its use affects consumers in underserved communities. The report draws on information from the FTC’s 2014 workshop, “Big Data: A Tool for Inclusion or Exclusion?” and the Commission’s seminar on Alternative Scoring Products. It highlights uses of big data that benefit underserved populations, including increased educational attainment and access to credit through non-traditional methods. It also considers risks that could result from biases or inaccuracies about certain groups, such as assisting in the targeting of vulnerable consumers for fraud and creating higher prices for goods and services in lower-income communities. The report outlines some of the various laws that apply to the use of big data, especially in regard to possible issues of discrimination or exclusion, and provides a range of questions for businesses to consider when they examine whether their big data programs comply with these laws. The report also poses key policy questions to help businesses maximize the benefit of their use of big data to benefit consumers while limiting possible harms. For a blog post on why big data is a big deal, click here.

FTC Issues Enforcement Policy Statement and Business Guidance on Native Advertising

The FTC issued an enforcement policy statement explaining how established consumer protection principles apply to different advertising formats, including “native” ads that look like surrounding non-advertising content. The policy statement affirms the long-standing consumer protection principle that advertisements and promotional messages that promote the benefits and attributes of goods and services should be identifiable as advertising to consumers. It explains that an ad’s format is deceptive if it materially misleads consumers about the ad’s commercial nature, including through any implied or express representation that it comes from a party other than the sponsoring advertiser. At the same time, the FTC also released “Native Advertising: A Guide for Business” to help companies understand and comply with the policy statement in the context of native advertising.

Lumosity to Pay $2 Million to Settle FTC Deceptive Advertising Charges for Its “Brain Training” Program

The creators and marketers of the Lumosity “brain training” program have agreed to settle FTC charges alleging that they deceived consumers with unfounded claims that Lumosity games can help users perform better at work and in school, and reduce or delay cognitive impairment associated with age and other serious health conditions. The FTC alleged that the defendants claimed training with Lumosity would improve performance on everyday tasks, delay age-related cognitive decline, and reduce cognitive impairment associated with health conditions, and that scientific studies proved these benefits. The proposed court order requires the defendants to have competent and reliable scientific evidence before making future claims about any benefits for real-world performance, age-related decline, or other health conditions. The order requires the company to pay $2 million in redress, while suspending a larger $50 million judgment due to the company’s financial condition.

LifeLock to Pay $100 Million to Consumers to Settle FTC Charges it Violated 2010 Order

LifeLock will pay $100 million to settle FTC contempt of court charges that it violated the terms of a 2010 federal court order in an action brought by the FTC and 35 state attorneys general. The 2010 order requires the company to secure consumers’ personal information and prohibits the company from deceptive advertising. The FTC’s filing alleged that LifeLock violated order provisions about information security, false advertising regarding use of the same high-level safeguards used by financial institutions, false advertising that it would send alerts “as soon as” it received any indication that a consumer may be a victim of identity theft, and recordkeeping requirements. For details on the terms of the settlement, and for the Commission statement and a dissent, click here.

Oracle Agrees to Settle FTC Charges It Deceived Consumers About Java Software Updates

Oracle has agreed to settle FTC charges that it deceived consumers about the security provided by updates to its widely-used Java SE software. According to the FTC complaint, Oracle was aware of significant security issues affecting older versions of the software, but provided updates that removed only the most recent prior version, leaving consumers unknowingly vulnerable to malware and phishing attacks. In light of statements made about the security benefits of the updates, Oracle’s failure to disclose their limitations was deceptive and violated Section 5 of the FTC Act. Under the terms of a proposed consent order, Oracle will be required to give consumers the ability to easily uninstall insecure, older versions. The FTC has published a blog post for consumers with more information.

Competition

Commercial Trucking Services Company Settles FTC Charges of Invitation to Collude

Drug Testing Compliance Group, LLC (the DTC Group), which provides drug and alcohol testing and other services to commercial trucking companies and their drivers, agreed to settle FTC charges that it illegally invited one of its competitors to enter into a customer allocation agreement. According to the complaint, DTC Group President David Crossett informed the competitor that such an agreement would allow each company to sell its services to customers without fearing that its rival would later undercut it with a lower price offer. The proposed settlement prohibits DTC Group from communicating with competitors about rates or prices. The settlement also prohibits the company from soliciting, entering into, or maintaining an agreement with any competitor to divide markets, allocate customers, or fix prices; and from urging any competitor to raise, fix, or maintain prices, or to limit or reduce service.

FTC Requires Kidney Dialysis Chain, U.S. Renal Care, to Divest Assets as a Condition of Acquiring Competitor, DSI Renal

The FTC will require the national kidney-dialysis chain, U.S. Renal Care, Inc., to divest its ownership interest in three outpatient dialysis clinics in Laredo, Texas, as part of a settlement resolving charges that its $640 million acquisition of competitor DSI Renal would be anticompetitive. According to the complaint, without the divestiture the acquisition would have led to a significant increase in market concentration and anticompetitive effects in Laredo, Texas, by reducing the number of providers from three to two, resulting in reduced incentives to improve service or quality for dialysis patients, and increased ability for the merged company to unilaterally increase prices.

ArcLight Energy Partners Fund to Divest Assets as a Condition of Acquiring Gulf Oil Ltd. Partnership

The FTC will require energy investor ArcLight Energy Partners Fund VI, L.P., to divest its ownership interest in four light petroleum product terminals in Pennsylvania, as part of a settlement resolving charges that ArcLight’s acquisition of Gulf Oil Limited Partnership likely would be anticompetitive. According to the FTC complaint, the acquisition as originally proposed would have increased concentration in three Pennsylvania terminal markets that are already highly concentrated. Further, the Commission alleged that potential competitors would be unable to counteract the acquisition’s anticompetitive effects because they would be unlikely to overcome the high sunk costs and other barriers to entry associated with building a new terminal.

FTC Challenges Proposed Hospital Merger

The FTC issued an administrative complaint alleging that the proposed merger of Advocate Health Care Network and NorthShore University HealthSystem will create the largest hospital system in the North Shore area of Chicago, substantially lessening competition and causing significant harm to consumers. The combined entity would operate a majority of the hospitals in the area and control more than 50 percent of the general acute care inpatient hospital services. The result likely would be rising health care costs and diminished incentives to upgrade services and improve quality, according to the complaint.

In Other News

FTC Blog Lists Top 10 Antitrust Developments of 2015

You can read Bureau of Competition Director Debbie Feinstein’s list of the top ten FTC-related antitrust developments of 2015 here.

FTC Issues Biennial Report to Congress on the National Do Not Call Registry

DNC

The FTC has issued its biennial report to Congress on the use of the Do Not Call Registry by both consumers and businesses over the past two years. As of September 30, 2015, the National Do Not Call Registry had more than 222 million active registrations, an increase of more than 4.9 million registrations from the previous fiscal year. In FY 2015, more than 23,000 businesses and other entities accessed the Registry. A similar number of entities utilized the Registry in FY 2014. The report addresses: 1) the impact of the five-year re-registration requirement which was eliminated in 2007; 2) how the FTC is responding to new technologies that have increased the number of illegal telemarketing calls made to numbers on the Registry; 3) issues regarding number portability and abandoned telephone numbers; and 4) the impact of the established business relationship exception on consumers and businesses.

FTC Seeks Comment on Proposed Changes to Its Jewelry Guides

The FTC is seeking public comment on proposed changes to its Jewelry Guides. The Guides provide advice to businesses on how to avoid making deceptive claims about precious metal, pewter, diamond, gemstone, and pearl products, and when to provide certain types of disclosures. Based on prior comments, the Commission has proposed revisions. For details, click here.

FTC Announces Agenda and Panelists for Auto Distribution System Workshop

Auto distribution workshop

The FTC has announced the full agenda for its upcoming workshop, “Automobile Distribution: Current Issues and Future Trends.” The all-day event, which will take place on January 19 in Washington, D.C., will explore critical issues in the regulation of auto distribution, with the aim of better understanding how state regulations impact the market. Panelists will include academics, along with representatives from a cross-section of the industry, and representatives from non-traditional firms such as Tesla, Elio, and Uber. Further details, including registration, and information regarding the public comment process are available on the workshop website. The workshop will be webcast live on the FTC’s website.

FTC Issues Annual Report on Ethanol Market Concentration

The FTC has issued its 2015 Report on Ethanol Market Concentration, an annual report required by the Energy Policy Act of 2005 “to determine whether there is sufficient competition among industry participants to avoid price-setting and other anticompetitive behavior.” As in prior years, the 2015 report concludes that it is “extremely unlikely that a single ethanol producer or marketer or a group of such firms could exercise market power to set prices or coordinate on price or output levels.”

Agencies Submit Joint Statement Regarding South Carolina Certificate-of-Need Laws for Health Care Facilities

In response to a request by South Carolina Governor Nikki Haley, the FTC and the Department of Justice’s Antitrust Division have submitted a statement regarding the competitive implications of certificate-of-need (CON) laws and South Carolina House Bill 3250, a legislative proposal that ultimately would repeal South Carolina’s CON laws. CON laws, including South Carolina’s, typically require certain health care providers to obtain state approval before expanding, establishing new facilities or services, or making certain large capital expenditures. The statement explains that the agencies historically have urged states to consider repeal or reform of their CON laws because they can prevent the efficient functioning of health care markets, and thus can harm consumers. For further details, click here.