International Monthly: March 2017

 
 U.S. Competition, Consumer Protection and Privacy News
 

MARCH 2017

Competition

FTC Preserves Competition in Face of Acquisition of Minority Interest in Competing Pipeline Company

Energy infrastructure companies Enbridge Inc. and Spectra Energy Corp. agreed to settle FTC charges that their proposed merger would reduce natural gas pipeline competition off the coast of Louisiana. Enbridge owns and operates one pipeline, while Spectra has an indirect, minority ownership interest in another. According to the complaint, as a result of the merger Enbridge would have access to competitively sensitive information of its competitor, which it could misuse. It could also exercise voting rights to make the competing pipeline a less effective competitor or facilitate coordination in the industry. To remedy these concerns, Enbridge is required to erect firewalls to limit its access to non-public information relating to the Discovery Pipeline, and board members of Spectra-affiliated companies with certain cross-ownership interests in the Discovery Pipeline must recuse themselves from votes involving the pipeline, subject to limited exceptions. More information can be found in the analysis to aid public comment.

Inadvertence Does Not Protect Two Investors from Penalties for Second Violation of U.S. Premerger Notification Requirements

In two separate actions, the FTC charged investors with violations of U.S. premerger notification requirements. Hedge fund founder Ahmet H. Okumus agreed to pay $180,000 in civil penalties to resolve FTC allegations that he violated the Hart-Scott-Rodino Act by failing to report his purchases of voting securities in the internet services company Web.com Group Inc. Entrepreneur Mitchell P. Rales agreed to pay $720,000 in civil penalties to resolve FTC allegations that he violated the same law by failing to report his purchases of shares in two industrial companies, Colfax Corporation and Danaher Corporation. In each case, the FTC sought civil penalties in spite of claims that the violations were inadvertent given similar prior violations by each investor.

Consumer Protection and Privacy

Three Companies Settle FTC Charges that They Deceived Consumers About Participation in International Privacy Program

Three U.S. companies have agreed to settle FTC charges that they deceived consumers about their participation in the Asia-Pacific Economic Cooperation (APEC) Cross-Border Privacy Rules system. The FTC charged that Sentinel Labs, Inc., which provides endpoint protection software to enterprise customers; SpyChatter, Inc., marketer of the SpyChatter private message app; and Vir2us, Inc., which distributes cyber security software; falsely represented in their online privacy policies that they participated in the system. The system is based on nine data privacy principles, and companies that seek to participate in the system must undergo a review by an APEC-recognized accountability agent, which certifies companies that meet the standards. The FTC complaints allege that the three companies were never certified.

FTC, Maine Attorney General Shut Down Web of Deceptive Supplement Sellers

The FTC and the Maine Office of the Attorney General announced a complaint and three settlements with dietary supplement marketers for deception, false advertising, and other charges. Defendants allegedly used radio infomercials deceptively formatted as talk shows and print ads featuring fictitious endorsers to advertise two dietary supplements, CogniPrin and FlexiPrin. They claimed the products, respectively, improve memory and reduce back and joint pain. The complaint also charged that defendants did not disclose burdensome requirements for their “unconditional” money-back guarantee and sold consumers negative option buying clubs and discount medical programs with ongoing monthly fees for poorly disclosed continuity plans that many did not want. The three court orders bar the settling defendants from making unsubstantiated health claims, require them to have competent and reliable scientific evidence when making health-related claims, and prohibit them from engaging in other marketing practices that have caused serious financial injury to consumers.

In Other News

FTC Releases Annual Summary of Consumer Complaints

Sentinel report

Impostor scam complaints surpassed identity theft for the first time as the second most common category of consumer complaints received by the FTC’s Consumer Sentinel Network in 2016, according to the agency’s new Data Book. Although debt collection complaints declined slightly between 2015 and 2016, they remained the top consumer complaint category, comprising 28 percent of all complaints. The rise in impostor scam reports is due to an increase in complaints about government impostors. The most widely reported method of payment for those who reported losing money to fraud was a wire transfer. The FTC urges consumers to be wary of any caller asking for a wire transfer. In 2016, the Consumer Sentinel Network collected more than 3.1 million consumer complaints.

Acting FTC Chairman Maureen K. Ohlhausen and FCC Chairman Ajit Pai Issue Joint Statement on Protecting Americans’ Online Privacy

Acting FTC Chairman Maureen K. Ohlhausen and Federal Communications Commission Chairman Ajit Pai issued a statement on the FCC’s issuance of a temporary stay of a data security regulation. They explained that it “does not serve consumers’ interests to create two distinct frameworks—one for Internet service providers and one for all other online companies.” They also stated that, “The federal government shouldn’t favor one set of companies over another—and certainly not when it comes to a marketplace as dynamic as the Internet. So going forward, we will work together to establish a technology-neutral privacy framework for the online world. Such a uniform approach is in the best interests of consumers and has a long track record of success.” The stay will remain in place only until the FCC is able to rule on a petition for reconsideration of its privacy rules. For the full statement, click here.

FTC Study Reports Online Businesses Could Do More to Protect Their Reputations and Prevent Consumers from Phishing Schemes

The FTC’s Office of Technology Research and Investigation (OTech) has released a staff study reporting that most major online businesses are using proper email authentication technology to prevent phishing emails, but few of these businesses are taking full advantage of the latest technologies to combat phishing. Phishing is a type of online scam that targets consumers by sending them an e-mail that appears to be from a well-known source such as an internet service provider, a bank, or a mortgage company. It asks the consumer to provide personal identifying information, and then the scammer uses the information to open new accounts or invade the consumer’s existing accounts.

FTC Reports on 2016 Activities to Combat Illegal Debt Collection Practices

The FTC sent a summary of its 2016 work on debt collection practices to the Consumer Financial Protection Bureau (CFPB) for inclusion in the CFPB’s annual report to Congress on the Fair Debt Collection Practices Act (FDCPA). In 2016, the FTC filed or resolved 12 cases against 61 defendants, obtaining nearly $70 million in judgments, and banned 44 companies and individuals that engaged in serious and repeated violations of law from ever working in debt collection again. The FTC has also worked to educate consumers and businesses about their rights and responsibilities under the FDCPA and the FTC Act. In addition to reaching consumers through about 16,000 community-based organizations and national groups, the FTC distributed 15.5 million print publications, FTC website pages logged more than 43 million views, and its videos were seen more than 600,000 times at YouTube.com/FTC.

FTC Business Guidance Explains It’s Illegal to Ban Honest Reviews

The FTC has released business guidance to help companies comply with the recently-passed Consumer Review Fairness Act, which protects consumers’ ability to share in any forum their honest opinions about a business’s products, services, or conduct. Some companies had been using contract provisions – including their online terms and conditions – to threaten to sue consumers or penalize them financially for posting negative reviews or complaints. The new law makes that illegal. The FTC website features the new FTC staff guidance, Consumer Review Fairness Act: What Businesses Need to Know, and a related blog post.

FTC and NASCO Announce Preliminary Agenda for March 21 Conference Exploring Consumer Protection Issues and Charitable Solicitations

The FTC and the National Association of State Charities Officials have announced a preliminary agenda for the Give & Take: Consumers, Contributions, and Charity conference. The conference will examine issues related to ensuring that consumers are protected from fraud when they make donations, and that they have confidence when making donations. The conference is free and open to the public. It will be held at the Constitution Center, 400 7th St., SW, Washington, DC 20024. The FTC welcomes public comments related to topics addressed by the conference, which may be submitted online through May 1.