International Monthly: March 2019

 
 U.S. Competition, Consumer Protection and Privacy News
 

MARCH 2019

Highlights

FTC to Hold Hearings on the Agency’s Role in a Changing World

int'l hearing banner

The FTC will hold a hearing, “The FTC’s Role in a Changing World,” at FTC Headquarters in Washington, D.C. on March 25-26. The hearing will explore the FTC’s international role in light of globalization, technological change, and the increasing number of competition, consumer protection, and privacy laws and enforcement agencies around the world. Leading officials, academics, and practitioners will address the implications of international developments on the FTC’s work on behalf of American consumers. The FTC will consider: the effectiveness of its enforcement cooperation tools and approaches in light of new challenges in competition, consumer protection, and privacy matters; approaches to promoting international policy coordination and best practice development; and strategies for international enforcement and policy engagement in today’s dynamic global marketplace. The agency seeks public comment on the questions posted in the press release. The agenda is available and information on livestreaming of this event will be posted here.

Competition

FTC Launches Technology Task Force

The FTC’s Bureau of Competition announced the creation of a task force dedicated to monitoring competition in U.S. technology markets, investigating any potential anticompetitive conduct in those markets, and taking enforcement actions when warranted. In addition to examining industry practices and conducting law enforcement investigations, the Technology Task Force, which will be staffed by seventeen attorneys, will coordinate and consult with staff throughout the FTC on technology-related matters, including prospective merger reviews in the technology sector and reviews of consummated technology mergers.

FTC Settles Suit that Led to Landmark Supreme Court Ruling on Drug Company “Reverse Payments”

Actavis

The FTC reached a settlement in FTC v. Actavis, in which the FTC alleged that the brand-name drug company Solvay and three generic drug companies illegally agreed to restrict generic competition to Solvay’s branded testosterone-replacement drug AndroGel for nine years. Earlier in the litigation, the case reached the Supreme Court, which in 2013 rejected lower court rulings that treated “reverse-payment” patent settlements (agreements in which the patent holder pays the alleged infringer) as largely immune from antitrust law. Under the settlement, Solvay’s current owner AbbVie is prohibited from entering into certain patent infringement settlement agreements that restrict generic entry for individual drugs and contain common forms of reverse payments.

FTC Enters Global Settlement to Resolve Reverse-Payment Charges Against Teva

Teva

The FTC reached a global settlement resolving pending claims in Actavis and two other federal court antitrust lawsuits (FTC v. Allergan and FTC v. AbbVie) involving subsidiaries of pharmaceutical manufacturer Teva Pharmaceuticals Industries Ltd. If approved by the various courts, the stipulated order will prohibit Teva from engaging in certain reverse-payment patent settlement agreements that impede consumer access to lower-priced generic drugs.

FTC to Hold Hearings on the Agency’s Merger Retrospective Program

As part of its series of hearings on Competition and Consumer Protection in the 21st Century, the FTC announced a session focused on the agency’s merger retrospective program, which will take place on April 12 at FTC Headquarters. The FTC’s Bureau of Economics has a long tradition of conducting ex post evaluations of consummated mergers. Over the last two decades, FTC economists have publicly released 29 merger retrospective studies. The vast majority of merger retrospectives authored or co-authored by Bureau economists are ultimately published in peer-reviewed journals. The agenda, questions for public comment, and further details are available here.

dialysis

Health Care Companies to Divest Bloodline Tubing Assets as a Condition of Merger

The FTC will require healthcare companies Fresenius Medical Care AG & KGaA (Fresenius) and NxStage Medical, Inc. (NxStage) to divest all rights and assets related to NxStage’s bloodline tubing set business to B. Braun Medical, Inc. as part of a settlement resolving charges that Fresenius’s proposed $2 billion acquisition of NxStage likely would be anticompetitive. The FTC’s complaint alleges that the proposed merger would harm competition in the U.S. market for bloodline tubing sets that are compatible with hemodialysis machines used in clinics that treat chronic renal failure. Fresenius and NxStage are two of only three significant suppliers of bloodline tubing sets used in open architecture hemodialysis machines in the United States, and together control 82 percent of the market for bloodlines. The Commission alleges that, without the proposed divestiture, the merger would allow the combined firm to exercise market power unilaterally, resulting in higher prices, reduced innovation, and less choice for customers in this market, and that new entry into this market is difficult, expensive, and unlikely to alleviate the competitive harm.

FTC Issues Modified Final Order Imposing Conditions on Merger of International Industrial Gas Suppliers Praxair, Inc. and Linde AG

Following a public comment period, the FTC has approved a modified final order requiring industrial gas suppliers Praxair, Inc. and Linde AG to sell assets in nine industrial gases product markets in numerous U.S. geographic markets to four divestiture buyers. The Commission made two material modifications to the proposed order issued in October 2018. The first modification specifies the scope of the intellectual property that the newly merged Linde must divest. The second modification concerns the joint venture between Messer Group GmbH and CVC Capital Partners that is acquiring some of the divested assets. The modified final order gives the Commission the right of prior approval if Messer’s stake in the joint venture falls below 50 percent or if Messer and CVC decide to sell their combined interest in the joint venture to a third party.

Consumer Protection and Privacy

Record Civil Penalty Imposed Against Operator of China-Based Video Social Networking App to Settle FTC Allegations That it Violated Children’s Privacy Law

Musical.ly

The operators of the video social networking app Musical.ly, now known as TikTok, have agreed to pay $5.7 million to settle FTC allegations that the Shanghai-based company illegally collected personal information from children. This is the largest civil penalty ever obtained by the Commission in a children’s privacy case.

FTC Halts Tech Support Scam as Part of Major Initiative Focused on Older Adults Hit Hardest by These Scams

Chairman at elder fraud sweep presser

As part of a state, federal, and international crackdown on tech support scams, at the FTC’s request a federal judge has temporarily shut down a scheme that tricked consumers into believing their computers were infected with viruses to sell them costly computer repair services. The vast majority of the scheme’s victims were older consumers, according to the complaint. The FTC’s case (Elite IT Partners) is part of an initiative announced with the Department of Justice and other partners aimed at cracking down on elder fraud, with a tech support scam focus. FTC Chairman Simons (pictured) also highlighted new complaint data and educational materials on the subject.

The Department of Justice acknowledged “[e]xceptional assistance from foreign law enforcement partners,” noting that the sweep benefited from the work of the International Mass-Marketing Fraud Working Group. IMMFWG is a network of civil and criminal law enforcement agencies from Belgium, Canada, Europol, the Netherlands, Norway, Spain, the United Kingdom, and the United States, co-chaired by DOJ, the FTC, and U.K. law enforcement.

data spotlight

The FTC’s latest Consumer Protection Data Spotlight shows that consumers 60 and older were about five times more likely in 2018 to report losing money to a tech support scam than adults 20-59. Over the past four years, older adults filed more reports of a loss to a tech support scam than any other FTC fraud category.

Operators of Sweepstakes Scam Targeting Seniors Will Forfeit $30 Million to Settle FTC Charges

Sweepstakes scam operators that appeared to target seniors have agreed to forfeit $30 million in cash and assets and will be permanently banned from the prize promotion business under a settlement with the FTC and the State of Missouri. The case represents the largest forfeiture the FTC has ever obtained in a case against a sweepstakes scam, and the proceeds will be used to refund money to victims. The complaint charged defendants with sending tens of millions of deceptive personalized mailers to consumers around the world, telling them they had won or were likely to win a substantial cash prize. Several U.S. and foreign partners assisted in this case. To facilitate cooperation with the U.K. National Trading Standards Scams Team, the FTC relied on the U.S. SAFE WEB Act, which allows the FTC to share information with foreign counterparts to combat deceptive practices across national borders.

supplement

FTC Brings First Case Challenging Fake Paid Reviews on an Independent Retail Website, Alleges Weight Loss Supplement Claims Were Deceptive

The FTC announced its first case challenging a marketer’s use of fake paid reviews on an independent retail website. In settling the agency’s complaint, Cure Encapsulations, Inc. and its owner resolved allegations that they made false and unsubstantiated claims for their garcinia cambogia weight loss supplement and that they paid a third-party website to write and post fake reviews on Amazon.com.

imposter scams

Imposter Scams Top Complaints to FTC in 2018

In 2018, for the first time, imposter scams topped the list of consumer complaints submitted to the FTC’s nationwide Consumer Sentinel database, driven in part by a jump in reports about government imposter scams. Fraudsters operating government imposter scams falsely claim to be from the Internal Revenue Service, Social Security Administration, or another government agency to induce people to turn over money or personal information. Government imposter scams made up nearly half of the 535,417 imposter scam reports to the FTC in 2018. Consumers reported losing a total of nearly $488 million to all types of imposter scams in 2018—more than any other type of fraud—and reported a median loss of $500.

free trials

FTC Alleges that Deceptive Skin Cream Free-Trial Offer Cost Consumers Millions

The FTC announced another case in a series of recent actions targeting allegedly deceptive online “free-trial” offers that tricked consumers into enrolling in negative option plans. The Commission’s complaint against a Puerto Rico-based defendant and the companies he controlled alleges violations of the Restore Online Shoppers’ Confidence Act (ROSCA) through negative option marketing. Defendants’ deceptive scheme cost consumers tens of millions of dollars.

In Other News

Capitol

FTC Testifies on Private Sector Data Security Before Senate Homeland Security and Government Affairs Subcommittee

Testifying before a Senate Homeland Security and Government Affairs Subcommittee, the FTC described its work to promote reasonable data security and reiterated its longstanding bipartisan call for enactment of a comprehensive federal data security law. In testimony delivered by Bureau of Consumer Protection Director Andrew Smith before the Permanent Subcommittee on Investigations, the FTC described its efforts over nearly two decades to address data security through law enforcement, policy initiatives, and consumer and business education. The testimony noted that the Commission has settled or litigated more than 60 law enforcement actions against businesses that allegedly failed to take reasonable precautions to protect consumers’ data.

FTC Seeks Comment on Proposed Amendments to Safeguards and Privacy Rules

The FTC is seeking comment on proposed amendments to two rules that protect the privacy and security of customer information held by financial institutions. The agency is seeking comment on proposed changes to the Safeguards Rule and the Privacy Rule under the Gramm-Leach-Bliley Act. The Safeguards Rule, which went into effect in 2003, requires a financial institution to develop, implement, and maintain a comprehensive information security program. The Privacy Rule, which went into effect in 2000, requires a financial institution to inform customers about its information sharing practices and allow customers to opt out of having their information shared with certain third parties.

FTC Participates in National Consumer Protection Week

The FTC and its federal, state, and local partners, together with consumer groups and national advocacy organizations, participated in the 21st annual National Consumer Protection Week (NCPW) from March 3-9. NCPW is a nationally coordinated campaign to help consumers understand their rights while giving them access to free educational materials. During NCPW, the FTC joins its partners to bring consumers information and advice on scams, identity theft, and other fraudulent business practices. For details on this year’s activities, click on the headline above.

FTC Announces Revised Thresholds for Premerger Notification Filings and Interlocking Directorates and Publishes Inflation-Adjusted Civil Penalty Amounts

The FTC announced the size-of-transaction threshold for reporting proposed mergers and acquisitions under Section 7A of the Clayton Act will adjust from $84.4 million to $90 million. Also, the agency increased 2019 thresholds under Section 8 of the Act that trigger prohibitions on certain interlocking memberships on corporate boards of directors. The FTC revises the thresholds annually, based on the change in gross national product. The agency also adjusted the maximum civil penalty dollar amounts for violations of 16 provisions of law the FTC enforces, as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.