International Monthly: June 2019

 U.S. Competition, Consumer Protection and Privacy News

JUNE 2019


Qualcomm’s Licensing Practices Violate Antitrust Laws


The U.S. District Court for the Northern District of California ruled in favor of the FTC in its lawsuit charging Qualcomm Inc. with using anticompetitive tactics to maintain its monopoly in modem chips, a key component of cell phones and other connected devices. Following a four-week trial, the court held that Qualcomm’s practices violated Sections 1 and 2 of the Sherman Act, and constituted an unfair method of competition under the FTC Act.

The court’s decision that Qualcomm’s practices violate the antitrust laws is an important win for competition in a key segment of the economy. FTC staff will remain vigilant in pursuing unilateral conduct by technology firms that harms the competitive process.

Bruce Hoffman, Director, Bureau of Competition

The practices include Qualcomm’s “no license, no chips” policy under which it supplies its baseband processors only on the condition that cell phone manufacturers agree to Qualcomm’s license terms. The court concluded that “Qualcomm’s conduct ‘unfairly tends to destroy competition itself’” and issued broad injunctive relief. Qualcomm has appealed the decision to the Ninth Circuit Court of Appeals.

FTC Staff Report on Branded Drug Firms’ Patent Settlements with Generic Competitors Shows Decrease in Reverse Payments

Reverse payment agreements using side deals and no-Authorized Generic commitments declined to their lowest level in 15 years, according to a fiscal year 2016 report issued by the FTC Bureau of Competition. Since 2004, brand name and generic drug manufacturers have filed reverse payment agreements with the FTC and DOJ. The Bureau of Competition reviews the filings and issues an annual report on the number of final patent settlements as well as the incidence of certain potentially anticompetitive terms. Based on more than three years of data, it appears that pharmaceutical companies have adjusted to the legal landscape by continuing to develop products and settle litigations while largely avoiding reverse payments.

Canon and Toshiba Pay $5 Million for Violating Pre-Merger Notification Waiting Period

cropped canon toshiba

Canon Inc. and Toshiba Corporation agreed to settle FTC charges that the companies failed to observe the required waiting period when Canon acquired Toshiba Medical Systems Corporation from Toshiba for $6.1 billion in 2016. The complaint alleged that Canon and Toshiba devised a scheme that “had no purpose” other than to avoid the Hart-Scott-Rodino Act's waiting period requirements. The companies will pay $2.5 million each to settle the charges.

Consumer Protection and Privacy

nicotine social media ad

Agencies Send Warning Letters to Companies Selling Flavored E-liquids About Social Media Endorsements Without Nicotine Warnings

The FTC and the U.S. Food and Drug Administration (FDA) sent warning letters to four firms that manufacture and market flavored e-liquid products. The letters cite postings by influencers on social media sites such as Facebook, Instagram, and Twitter that endorse the target companies’ products without the required warnings that the products contain nicotine.

These letters are a reminder that companies who use social media influencers to promote their products must comply with all applicable advertising requirements . . . . [A]ds must disclose material health or safety risks—in this case, the fact that nicotine is highly addictive.

—Andrew Smith, Director, Bureau of Consumer Protection

The FTC noted that, given the significant risk of addiction, influencers’ failure to disclose the presence of and risks associated with nicotine in social media postings could violate the FTC Act’s prohibition on unfair or deceptive practices, which includes failures to disclose material health or safety risks. The FTC also reminded the companies that social media influencers should clearly and conspicuously disclose their relationships to the brands when promoting or endorsing products through social media.

FTC Acts Against Firms that Bar Consumers from Posting Negative Online Reviews

The FTC issued administrative complaints and proposed orders against two companies – one that rented vacation properties and one that managed rental homes – that violated the Consumer Review Fairness Act (CRFA). The CRFA prohibits businesses from using standardized contract terms that bar consumers from writing or posting negative reviews online, or that impose financial penalties for doing so. According to the FTC, one of the companies mandated in its contract that any vacationer who posted a review giving the company’s rental property less than a “5 star or absolute best rating” immediately owed the company at least $25,000 – and it followed through by filing lawsuits against renters. The other company prohibited applicants for rental housing from disparaging the company regardless whether it approved the consumer for rental housing. In settling the Commission’s complaints, the two companies agreed not to use these or similar provisions and to notify affected consumers of their right to post honest reviews. Last month, three companies agreed to settle the FTC’s first CRFA complaints.

FTC Adds Latvian Payment Processor and Its CEO to “Free Trial” Litigation

The FTC charged a Latvian financial institution and payment processor and its CEO with credit card laundering in its ongoing litigation against a multinational deceptive “free trial” scam. The amended complaint alleges that the new defendants approved and maintained merchant accounts in the name of shell companies with straw owners, and manipulated chargeback levels to evade fraud detection systems.

In Other News


FTC Releases Agenda for PrivacyCon 2019

The FTC released the final agenda for the fourth annual PrivacyCon, which will take place on June 27 and focus on the latest research and trends related to consumer privacy and data security. FTC Chairman Joe Simons will provide opening remarks, followed by four sessions of presentations and discussions on research submitted for the event. For details on the sessions, as well as where to attend in person or watch online, click on the headline above.

FTC Events Calendar Lists Upcoming Workshops and Roundtables

Check the FTC events calendar for information on upcoming FTC workshops and roundtables, including the July 16 event, “Nixing the Fix: A Workshop on Repair Restrictions.”