International Monthly: May 2015

 
 U.S. Competition, Consumer Protection and Privacy News
 

MAY 2015

Highlights

FTC Participates in International Competition Network Conference That Releases Guidance on Procedural Fairness in Investigations and Cooperation in International Merger Enforcement

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FTC Chairwoman Ramirez and staff participated in the annual meeting of the International Competition Network (ICN), hosted by the Australian Competition and Consumer Commission on April 28-May 1 in Sydney. The ICN adopted guidance on investigative process in competition cases and approved new work on international merger enforcement cooperation, legal theories in tying and bundling investigations, and interaction with government procurement agencies. The Agency Effectiveness Working Group, co-chaired by the FTC, addresses competition agency strategy, operations, and investigative procedures. It developed ICN guidance on investigative process to promote fair and informed enforcement across all institutional frameworks and all competition enforcement areas. The guidance is based on a broad consensus among ICN members regarding the importance of transparency, engagement between agencies and parties, and the protection of confidential information during investigations. “The ICN’s guidance on investigative process is an important step as agencies strive to be effective in promoting competition and protecting consumers,” said Chairwoman Ramirez. “Good investigative process leads to better agency decision making, protects the procedural rights of parties, and bolsters the legitimacy of competition enforcement.”

The ICN Merger Working Group presented a practical guide to international enforcement cooperation. It is intended to promote interagency cooperation, including for parties and third parties that seek to facilitate cooperation. The guide identifies the benefits and basic principles of enforcement cooperation such as consistent outcomes, efficient investigations, flexibility, and independent agency decision making. More information on the conference and new training tools that were presented is available here. Additional resources are available at the ICN website.

International Consumer Protection and Enforcement Network Hears Keynote from FTC Commissioner on Intersection of Privacy and Consumer Protection

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FTC Commissioner Julie Brill delivered a keynote address via video on April 15 to the International Consumer Protection and Enforcement Network (ICPEN) Conference held in Åre, Sweden. Her topic was the intersection of privacy and consumer protection. Commissioner Brill described the FTC’s privacy enforcement and policy roles having grown out of its consumer protection mission, noting that privacy violations are often linked to a variety other harms, such as deceptive financial practices and fraud. She provided background on how some U.S. laws are designed to address both privacy and consumer protection issues. Commissioner Brill also described and provided examples of how the FTC uses its authority under Section 5 of the FTC Act to prevent unfair or deceptive acts or practices in privacy and data security cases. Commissioner Brill noted that the FTC addresses practices in a technologically neutral way, focusing on mobile apps and the Internet of Things as well as the Internet of PCs and laptops. She described how behind the scenes, invisible to consumers, vast amounts of data about consumers flow from their laptops, smartphones, connected devices – and from offline sources like driving records, mortgage liens, and tax assessments – to create detailed, individual profiles. She stated that ICPEN consumer protection enforcers should be focused on how this data can be used in a manner that harms consumers. For more details, see the text of the address.

Competition

Cardinal Health Agrees To Disgorge $26.8 Million To Settle Charges It Monopolized 25 Markets for the Sale of Radiopharmaceuticals to Hospitals and Clinics

The FTC announced that Cardinal Health, Inc. has agreed to resolve charges that it illegally monopolized 25 local markets for the sale and distribution of low-energy radiopharmaceuticals and forced hospitals and clinics to pay inflated prices for these drugs. The stipulated order requires Cardinal to pay $26.8 million as disgorgement of ill-gotten gains, the second largest monetary settlement the FTC has obtained in an antitrust case. The money will be deposited into a fund for distribution to injured customers. The order also includes provisions to prevent future violations and restore competition in six markets where Cardinal remains the dominant radiopharmacy. The Commission vote authorizing staff to file the complaint and the proposed order in federal court, and to issue a Commission statement, was 3-2, with Commissioners Maureen K. Ohlhausen and Joshua D. Wright dissenting.

Federal Appeals Court Upholds FTC Order That Found McWane, Inc. Unlawfully Maintained Monopoly in Domestic Pipe Fittings

The U.S. Court of Appeals for the 11th Circuit upheld an FTC decision finding that McWane, Inc., the largest U.S. supplier of ductile iron pipe fittings used in municipal and regional water distribution systems, unlawfully maintained its monopoly in the domestic fittings market through exclusionary conduct. The court upheld the FTC’s ruling that McWane imposed an illegal exclusive dealing policy on its distributors, which effectively prevented them from buying domestic pipe fittings from new competitor Star Pipe Products Ltd. if the distributors wished to also continue buying the fittings from McWane. This conduct prevented Star from achieving the sales necessary to compete effectively and threaten McWane’s monopoly in the domestic fittings market.

FTC Requires Cement Manufacturers Holcim and Lafarge To Divest Assets As a Condition of Merger

Holcim Ltd. and Lafarge S.A. have agreed to divest plants, terminals, and a quarry to settle FTC charges that their proposed $25 billion merger creating the world’s largest cement manufacturer would likely harm competition in the United States. According to the FTC complaint, the merger would harm competition in 12 markets for portland cement, an essential ingredient in making concrete, and in two additional markets for slag cement, a specialty cement used for making more durable concrete structures. In each of these markets, Holcim and Lafarge are either the only two significant suppliers, or two of, at most, four significant suppliers. Because cement products are heavy and relatively cheap, transportation costs limit their markets to local or regional areas. FTC staff cooperated closely with the Canadian Competition Bureau and DG-COMP of the European Commission throughout this investigation. The Commission vote to issue the complaint and accept the proposed consent orders for public comment was 4-1, with Commissioner Joshua D. Wright voting no.

Consumer Protection and Privacy

FTC Halts Illegal Spammers’ Deceptive Marketing of Bogus Weight-Loss Products

The FTC has obtained a court order temporarily halting an operation that allegedly used millions of illegal spam emails, along with false weight-loss claims and fake, unauthorized endorsements from celebrities like Oprah Winfrey, to market its unproven diet pills. The court order halts the defendants’ illegal conduct, freezes their assets, and appoints a temporary receiver over the corporate defendants. The Commission is seeking to recover money from the defendants that would be used to provide refunds to consumers who bought the defendants’ diet pills. The FTC complaint charges that the defendants behind Sale Slash violated the FTC Act and the CAN-SPAM Act. According to the complaint, the defendants used affiliate marketers to send illegal spam emails and post banner ads online that led consumers to fake news sites designed to appear as if an independent consumer reporter, rather than a paid advertiser, had reviewed and endorsed the products. Since 2012, the defendants allegedly have marketed and sold a variety of products nationwide, including supposed weight-loss supplements such as Premium Green Coffee, Pure Garcinia Cambogia, Premium White Kidney Bean Extract, Pure Forskolin Extract, and Pure Caralluma Fimbriata Extract. For consumer information about avoiding fake news websites, see Trusting Your Sources.

Retail Tracking Firm Settles FTC Charges It Misled Consumers About Opt Out Choices

Nomi Technologies, a company whose technology allows retailers to track consumers’ movements through their stores, has agreed to settle FTC charges that it misled consumers. Nomi had promised that it would provide an in-store mechanism for consumers to opt out of tracking, and that consumers would be informed when locations were using Nomi’s tracking services. The complaint alleges that Nomi collected information on about nine million mobile devices within the first nine months of 2013. The complaint is the FTC’s first case against a retail tracking company. Under the terms of the settlement, Nomi will be prohibited from misrepresenting consumers’ options for controlling whether information is collected, used, disclosed, or shared about them or their computers or other devices, as well as the extent to which consumers will be notified about information practices. The agreement will be subject to public comment through May 25, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit comments electronically. The Commission vote to issue the complaint and accept the proposed consent order was 3-2, with Commissioners Maureen K. Ohlhausen and Joshua D. Wright dissenting. The Commission held a privacy seminar on the issue of mobile device tracking in the retail environment as part of its spring privacy series last year.

FTC Obtains Settlement from Web Company for Misleading Consumers About Refunds

Network Solutions LLC has agreed to settle FTC charges that it misled consumers who bought its web hosting services by promising a full refund if they canceled within 30 days. In reality, the company withheld substantial cancellation fees from most refunds. In an administrative complaint, the FTC alleged that Network Solutions, a domain name registrar and web hosting provider, offered web hosting packages with a “30 Day Money Back Guarantee,” but did not adequately disclose that it withheld part of the refund – up to 30 percent – from customers who cancelled within 30 days of buying an annual or multi-year package and registering an included domain name. The proposed settlement order prohibits Network Solutions from failing to clearly disclose, before obtaining a customer’s billing information, the material terms of any money-back guarantee, or failing to refund the full purchase price in response to a request that complies with the terms of a guarantee. The settlement also bars the company from misrepresenting material terms of any refund or cancellation policy or money-back guarantee, or any other material fact about web hosting.

National Mortgage Servicing Company Settles FTC, CFPB Charges for $63 Million

Green Tree Servicing LLC, a national mortgage servicing company, will pay $63 million to resolve FTC and Consumer Financial Protection Bureau (CFPB) charges that it harmed homeowners with illegal loan servicing and debt collection practices. According to a joint complaint, Green Tree made illegal and abusive debt collection calls to consumers (often several times a day), threatened them unlawfully with arrest, imprisonment or other dire consequences, misrepresented the amounts people owed, and failed to honor loan modification agreements between consumers and their prior servicers, among other charges. Under the settlement, Green Tree will pay $48 million to affected consumers and a $15 million civil penalty and stop its illegal conduct.

In Other News

FTC Issues 2014 Annual Highlights

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FTC Chairwoman Edith Ramirez issued the agency’s Annual Highlights, which provide an overview of the FTC’s major initiatives and achievements for calendar year 2014. These accomplishments include important law enforcement work in key sectors of the economy—health care, technology, and a variety of consumer services; research and policy initiatives to better understand the dynamics of evolving markets and the increasingly digital and mobile world; international engagement to promote sound competition enforcement and protect consumers in the global marketplace; and creative and practical education strategies for consumers and businesses. More detailed information about the FTC’s international program is at https://www.ftc.gov/about-ftc/bureaus-offices/office-international-affairs.

FTC Announces June Workshop on “Sharing” Economy Issues Facing Platforms, Participants, and Regulators

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On June 9, the FTC will host a workshop to examine competition, consumer protection, and economic issues raised by the proliferation of online and mobile peer-to peer business platforms in certain sectors of the economy, often referred to as the “sharing economy.” The FTC’s sharing economy workshop will explore how regulatory frameworks can accommodate new sharing economy business models while maintaining appropriate consumer protections and a competitive marketplace. The workshop will take place in Washington, D.C., at the FTC’s Constitution Center. The workshop is free and open to the public. FTC staff seeks public comment on a number of questions, both in advance of and following the workshop.

Two More Companies Settle FTC Charges over Membership in International Safe Harbor Framework

Two U.S. businesses have agreed to settle FTC charges they falsely claimed they were abiding by an international privacy framework known as the U.S.-EU Safe Harbor. The Safe Harbor enables U.S. companies to transfer consumer data from the European Union to the United States in compliance with EU law. FTC complaints against TES Franchising, LLC, and American International Mailing, Inc. allege that the companies’ websites indicated they were currently certified under the U.S.-EU Safe Harbor Framework and U.S.-Swiss Safe Harbor Framework, when in fact their certifications had lapsed years earlier. The complaint against TES contains additional deception allegations about its dispute resolution procedures and its being a licensee of the TRUSTe Privacy program. The settlements with TES and American International and more details on the Safe Harbor, including the seven privacy principles that must be met for certification, are available on the FTC website. Under the proposed settlement agreements, which are subject to public comment, the companies are prohibited from misrepresenting the extent to which they participate in any privacy or data security program sponsored by the government or any other self-regulatory or standard-setting organization. The settlement with TES further prohibits the company from misrepresenting its participation in or the terms of any alternative dispute resolution process or service. Consumers who want to know whether a U.S. company is a participant in the U.S-EU or U.S.-Swiss Safe Harbor program may visit http://export.gov/safeharbor to see if the company holds a current self-certification, as described in this blog post, which also contains other helpful information.

FTC Staff Comments Advocate That Missouri Consider Changing Physician Supervision Requirements for Advanced Practice Registered Nurses

FTC staff submitted comments regarding the competitive impact of a legislative proposal to modify the collaborative practice arrangements that are imposed on Advanced Practice Registered Nurses (APRNs) in the state of Missouri, limiting the services they can provide. The FTC staff encouraged the legislature of the state of Missouri to “scrutinize claimed health and safety justifications for its current supervision and collaboration requirements, review carefully whether any claims of potential patient harm are adequately substantiated and well founded, and evaluate whether the collaboration requirements are warranted.” According to the comments, the proposed legislation would amend Missouri’s Nurse Practice Act to remove some, and impose other, restrictions that would affect whether APRNs would be able to practice independently of physicians. For example, while the bill would permit offsite review of charts, it may impose additional recordkeeping responsibilities for APRNs, as well as additional consultation and chart review responsibilities for collaborating physicians. It also retains the state’s current mandatory collaboration structure, but according to the staff comment, such restrictions on APRNs “do not appear to be justified by health and safety concerns.”

FTC Staff Expresses Concern That New York’s Certificate of Public Advantage Regulations Can Harm Competition

FTC staff sent a letter to the New York State Department of Health, expressing concern that New York State’s Certificate of Public Advantage regulations, which purport to provide antitrust immunity to certain approved health care collaboratives, are unnecessary. According to the letter, antitrust law already permits health care collaborations that benefit consumers. Therefore, the main effect of the COPA regulations is to immunize conduct that would not generate efficiencies and therefore would not pass muster under the antitrust laws, the letter states.