International Monthly: March 2015

 U.S. Competition, Consumer Protection and Privacy News

MARCH 2015


U.S. Supreme Court Affirms FTC Position in NC State Board of Dental Examiners

The U.S. Supreme Court affirmed the FTC’s position that a state may not give private market participants unsupervised authority to suppress competition, even if they act through a formally designated ‘state agency.’ The Court’s decision, North Carolina State Board of Dental Examiners v. Federal Trade Commission, affirmed earlier appellate and FTC rulings. In its decision and order, the FTC found that the North Carolina State Board of Dental Examiners illegally thwarted lower-priced competition in the market for teeth-whitening services by engaging in anticompetitive conduct to prevent non-dentists from providing those services to consumers in the state. In so finding, the FTC rejected the Dental Board's claim that the Board’s conduct is protected from federal antitrust scrutiny by the state action doctrine. The Supreme Court upheld the FTC’s decision by a vote of 6-3. The Court underscored that because a controlling number of the Board’s decision makers were active market participants in the occupation regulated by the Board, the Board could invoke state-action antitrust immunity only if the challenged restraint was clearly articulated by the State and the Board was sub­ject to active supervision by the State. The Court held that the active supervision requirement was not met in this instance.

FTC Challenges Proposed Merger of Sysco and US Foods

The FTC has filed an administrative complaint charging that the proposed merger of Sysco and US Foods would create a national broadline foodservice distributor with 75 percent market share and harm customers in 32 local markets. Broadline distributors offer extensive product lines, including national-brand and private-label food products. They provide frequent and flexible delivery, high levels of customer service, and other value-added services such as order tracking, menu planning, and nutritional information. As detailed in the complaint, Sysco and US Foods are the only broadline distributors with a truly national footprint. Therefore, national and local customers who rely on broadline foodservice distribution, including restaurants, hospitals, hotels, and schools, would likely face higher prices and diminished service than would be the case but for the merger. The FTC also authorized staff to seek in federal court a temporary restraining order and a preliminary injunction to prevent the parties from consummating the merger and to maintain the status quo pending the administrative proceeding.

FTC Conditions Novartis AG’s Proposed Acquisition of GlaxoSmithKline’s Oncology Drugs

To settle FTC charges that its $16 billion acquisition of GlaxoSmithKline’s portfolio of cancer-treatment drugs likely would be anticompetitive, global pharmaceutical company Novartis AG agreed to divest all assets related to its BRAF and MEK inhibitor drugs, currently in development. The assets will be divested to U.S.-based Array BioPharma. According to the complaint, the Switzerland-based Novartis and the UK-based GSK are two of a small number of companies with either a BRAF or MEK inhibitor currently on the market or in development, and two of only three companies marketing or developing a BRAF/MEK combination product to treat melanoma. If the acquisition went forward as proposed, the FTC believed that Novartis likely would have delayed or terminated development of both its inhibitors, as well as the combination product, ultimately raising prices for consumers and depriving them of potentially superior products. More information about the FTC’s consent agreement can be found in the analysis to aid public comment. In January, the FTC approved a final order conditioning Novartis’s consumer health care products joint venture with GlaxoSmithKline on the divestiture of Habitrol, Novartis’s branded nicotine replacement therapy patch, as well as its private-label patch business. Throughout the investigations, staff cooperated with counterparts in Australia, Canada, and the European Union, working closely on the analysis of the proposed transaction and potential remedies. This coordination led to compatible approaches on a global scale, and included FTC and European Commission approval of Array BioPharma as the buyer of the divested oncology assets.

Appellate Court Affirms FTC’s Case Challenging St. Luke’s Health System’s Acquisition of Saltzer Medical Group

The U.S. Court of Appeals for the Ninth Circuit has affirmed a district court decision blocking the Idaho-based St. Luke’s Health System’s acquisition of Saltzer Medical Group. The district court action was brought jointly by the FTC and the state of Idaho. The ruling by the U.S. Court of Appeals for the Ninth Circuit affirmed the district court decision, which held that the acquisition violated federal and state competition law and ordered St. Luke’s to fully divest itself of Saltzer’s physicians and assets. Chairwoman Ramirez issued the following statement in response to the ruling: “Today’s decision by the Ninth Circuit is a win for consumers and healthcare competition in the Nampa, Idaho area. If left unchallenged, St. Luke’s acquisition of Saltzer would have created a dominant provider of physician services for adults seeking primary care in Nampa, leading to higher costs for consumers and employers there. The acquisition would have delivered no benefit to consumers that could not be achieved in ways other than the anticompetitive merger.”

Consumer Protection and Privacy

FTC Signs Memorandum of Understanding with Dutch Agency on Privacy Enforcement Cooperation

The FTC has signed a memorandum of understanding (MOU) with the Dutch Data Protection Authority to enhance information sharing and enforcement cooperation on privacy-related matters. This MOU is similar to those the FTC has with data protection authorities in Ireland and the United Kingdom. The two agencies already cooperate as part of several privacy-related initiatives. The FTC increasingly seeks to secure the assistance of international privacy and data protection authorities in its efforts to protect consumer privacy. The FTC is the chief U.S. consumer privacy agency. Its comprehensive privacy program uses law enforcement, research, policy initiatives, and consumer and business education to protect consumers’ personal information. In the Netherlands, the Dutch Data Protection Authority enforces the Dutch Data Protection Act, which implements the European Union’s 1995 Data Protection Directive.

FTC Stops Automobile Shipment Broker from Misrepresenting Online Reviews

AmeriFreight, a Georgia-based automobile shipment broker, has agreed to a settlement with the FTC in the agency’s first enforcement action charging a company with misrepresenting online reviews by failing to disclose that it gave cash discounts to customers to post reviews. According to the FTC’s complaint, AmeriFreight and its owner, Marius Lehmann, violated Section 5 of the FTC Act by this failure to disclose. The settlement prohibits AmeriFreight and Lehmann from misrepresenting that their products or services are highly rated or top-ranked based on unbiased consumer reviews, or that customer reviews are unbiased. It also requires them to clearly and prominently disclose any material connection, if one exists, between them and their endorsers. AmeriFreight is an automobile shipment broker that arranges the shipment of consumers’ cars through third-party freight carriers.

FTC and Ten State Attorneys General Take Action Against Pretextual “Political Survey” Robocallers Pitching Cruise Line Vacations

The FTC and ten state attorneys general filed a lawsuit against a Florida-based cruise line company, Caribbean Cruise Line, Inc. (CCL), and seven other companies that facilitated a massive telemarketing campaign. The joint complaint alleges that that the companies illegally sold cruise vacations through billions of robocalls that purportedly came from a political opinion research company. Although political survey calls are not prohibited under U.S. law, the defendants’ robocalls were illegal because they incorporated a sales pitch. CCL and several of the other defendants have entered into settlements, while litigation continues against the remaining defendants.

FTC Staff Warns Marketers and Sellers of Dog Waste Bags That Their Biodegradable and Compostable Claims May Be Deceptive

FTC staff has sent letters warning 20 manufacturers and marketers of dog waste bags that their “biodegradable,” “compostable,” and other environmental claims may be deceptive. The letters were sent after staff examined the companies’ environmental, or “green,” claims on their websites and in other media. Based on the FTC’s Guides for the Use of Environmental Marketing Claims (the Green Guides), an unqualified “biodegradable” claim generally means to consumers that the product will completely break down into its natural components within one year after customary disposal. Most waste bags, however, end up in landfills where no plastic biodegrades in anywhere close to one year, if it biodegrades at all. According to the Green Guides, consumers generally think that unqualified “compostable claims” mean that a product will safely break down at the same rate as natural products, like leaves and grass clippings, in their home compost pile. If marketers disclose that a product will only compost in commercial or municipal facilities, consumers think that those facilities are generally available in their area. However, dog waste is generally not safe to compost at home, and very few facilities accept this waste. Therefore, compostable claims for these products are generally untrue.

In Other News

Identity Theft Tops FTC’s Consumer Complaint Categories Again in 2014: Imposter Scams on the Rise


Identity theft topped the FTC’s annual report on consumer complaints for the 15th consecutive year according to the FTC's newly-released 2014 Consumer Sentinel Network Data Book. The agency also recorded a large increase in the number of complaints about so-called “imposter” scams, which includes complaints about scammers claiming to be friends, family, a romantic interest, companies or government agencies to induce people to send money or divulge personal information. Overall, the Consumer Sentinel Network (CSN) received over 2.5 million complaints (excluding do-not-call complaints) during calendar year 2014: 60% fraud complaints; 13% identity theft complaints; and 27% other types of complaints. The CSN Data Book is produced annually using complaints (excluding do-not-call complaints) received by the CSN from numerous sources including consumers, other state and federal law enforcement agencies, national consumer protection organizations and non-governmental organizations, money transfer businesses and the Canadian Anti-Fraud Centre. The CSN’s secure online database is available to more than 2,000 civil and criminal law enforcement agencies across the country and abroad.

FTC Collaborates with Canadian Agency on Robocall Contests to Combat Illegal Automated Calls


As part of its multi-pronged effort to combat illegal robocallers, the FTC launched two new robocall contests in collaboration with the Canadian Radio-television and Telecommunications Commission (CRTC) and other partners. The contests challenge the public to develop a crowd-source honeypot and better analyze data from an existing honeypot. A honeypot is an information system that may be used by government, private and academic partners to lure and analyze robocalls. More information on the contests is available on the FTC website at Robocalls: Humanity Strikes Back , and DetectaRobo, together with information on earlier contests and tips and education on robocalls. 

FTC Posts Video and Other Materials from FTC-DOJ Health Care Competition Workshop

health care


The FTC has posted video and other materials from a recent joint FTC-DOJ workshop in the series Examining Health Care Competition. The workshop studied 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. 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.

FTC Staff Provides Annual Report on Equal Credit Opportunity Act Activities

FTC staff have provided an annual report to the Consumer Financial Protection Bureau on the FTC’s activities related to the enforcement of the Equal Credit Opportunity Act (ECOA). The FTC is responsible for ECOA enforcement and education related to most non-bank financial service providers. In the letter to the CFPB, staff details the Commission’s work on a number of policy issues related to ECOA, including issues addressed in FTC workshops and reports. In addition, the letter outlines the Commission’s business and consumer education efforts related to fair lending issues.