International Monthly: November 2015

 U.S. Competition, Consumer Protection and Privacy News



FTC Requires Mylan to Sell Rights to Seven Generic Pharmaceuticals as a Condition of Acquiring Perrigo Company

Mylan N.V. agreed to sell the rights and assets related to seven generic drugs to settle FTC charges that its proposed acquisition of Perrigo Company plc would be anticompetitive. The purchaser will be generic pharmaceutical company Alvogen Group Inc. According to the FTC’s complaint, the proposed acquisition likely would have harmed competition in U.S. markets for four generic drugs: Bromocriptine mesylate, used to treat conditions including type 2 diabetes and Parkinson’s disease; Clindamycin phosphate/benzoyl peroxide, used to treat acne; Liothyronine sodium, used to treat hypothyroidism and treat or prevent enlarged thyroid glands; and Polyethylene glycol 3350, a laxative used to treat occasional constipation. The FTC alleged that the proposed acquisition would eliminate at least one likely future entrant from a very limited pool of future entrants in each of these markets. Further details about the divestitures are available in the analysis to aid public comment.

FTC Challenges Proposed Merger of Two West Virginia Hospitals

The FTC issued an administrative complaint alleging that Cabell Huntington Hospital’s proposed acquisition of St. Mary’s Medical Center would create a dominant firm with a near monopoly over general acute care inpatient hospital services and outpatient surgical services in several counties in West Virginia and Ohio. According to the complaint, the two hospitals, located three miles apart, are each other’s closest competitor for health plans and patients, and the acquisition would substantially lessen competition between the hospitals for patients and for inclusion in health plan networks. The complaint also alleges that, at times, the parties have attempted to limit their intense head-to-head competition through collusive conduct, such as restrictive marketing agreements. The Commission also authorized staff to seek a temporary restraining order and a preliminary injunction in federal court to prevent the parties from consummating the acquisition, and to maintain the status quo pending the administrative proceeding. The FTC may not immediately pursue an action in court because the merging hospitals are still awaiting approvals from the West Virginia Health Care Authority and the Catholic Church before they can close the transaction, which may take months.

Marketer of Rug Accessory Settles FTC Charges of Invitation to Collude with Competitor

Step N Grip, LLC, a maker of rug accessories designed to keep rugs from curling, agreed to settle FTC charges that it illegally invited its closest competitor to coordinate prices in violation of Section 5 of the FTC Act. The complaint alleges that earlier this year, Step N Grip and a firm identified as “Competitor A” reduced their prices to compete with each other and gain sales. After a week of this rivalry, Step N Grip approached Competitor A, proposing that it agree to fix and raise the price of their competing rug devices. Competitor A reported the invitation to collude to the FTC. Under the proposed settlement agreement, Step N Grip is required to stop communicating with its competitors about prices. It is also barred from entering into, participating in, inviting, or soliciting an agreement with any competitor to divide markets, allocate customers, or fix prices. The order is in effect for 20 years. Further details about the case are available in the analysis to aid public comment.

Orthopedic Practices Settle Charges That Their Consummated Merger Was Anticompetitive

Keystone Orthopedic Specialists agreed to settle FTC charges that its consummated orthopedist practice group merger harmed competition and inflated prices in Berks County, Pennsylvania. According to the complaint, the merger, which took place in 2011, combined six practice groups, comprising 19 of the 25 orthopedists in Berks County, into a single practice that gave Keystone a 76 percent share of the market for orthopedic physician services in the county. Before the merger, health plans could choose among the different independent practices and could form a network with some, but not all of them. The merger eliminated this competition and, according to the FTC, enabled Keystone to raise prices with most health plans operating in Berks County.

Investor to Pay $656,000 for Second Violation of Premerger Notification Law

Investor Len Blavatnik agreed to pay $656,000 in civil penalties to resolve FTC allegations that he violated federal premerger reporting laws by failing to report the acquisition of voting shares in a technology start up, TangoMe. The acquisition was made in August 2014 via Blavatnik’s company, Access Industries. According to the complaint, Blavatnik eventually made a filing for the acquisition, which brought his stake in the company up to $228 million, asserting that his failure to report the transaction in a timely fashion was inadvertent. Blavatnik had previously violated the HSR Act in 2010, when he bought voting shares of LyondellBasell Industries N.V., a public multinational chemical company. Blavatnik also made a later filing in that case and represented to the FTC that he would discuss reportability with HSR counsel prior to any future acquisitions. However, Blavatnik did not consult with HSR counsel prior to the acquisition of TangoMe voting securities.

FTC Staff Provides Comments to the FDA on Naming Proposal for Biologic Products

FTC staff submitted a comment to the U.S. Food and Drug Administration (FDA) expressing concern that the FDA’s draft guidance on “Nonproprietary Naming of Biological Products: Guidance for Industry” may hinder competition. In its draft guidance, the FDA proposes adding a new, random suffix to the nonproprietary name of each biological product to improve pharmacovigilance and minimize possible inadvertent substitution of biological products that the FDA has not determined to be interchangeable. Building on the FTC’s extensive experience in evaluating healthcare competition and studying competitive issues affecting biologics, the staff comment suggests that the FDA’s naming convention, which departs from the FDA tradition, may cause physicians to believe mistakenly that the products have clinically meaningful differences, potentially resulting in reduced price competition in biologic drug markets. The comment also notes ways in which the naming proposal may create unnecessary costs, and conflict with efforts toward global naming harmonization. The comment recommends that the agency consider proposed alternatives with less impact on competition that could achieve FDA’s purpose.

Consumer Protection and Privacy

FTC and Seven International Partners Launch New Initiative to Boost Cooperation in Protecting Consumer Privacy

GPEN Alert pic

The FTC and enforcement agencies from seven other countries launched a new information-sharing system – GPEN Alert – that will enable them to better coordinate international efforts to protect consumer privacy. GPEN Alert will enable participants to share information confidentially about investigations. The participants, who are members of the Global Privacy Enforcement Network (GPEN), signed a Memorandum of Understanding at the 37th International Conference of Data Protection and Privacy Commissioners in Amsterdam.

The GPEN Alert technology is based on the FTC’s Consumer Sentinel Network, a system that enables member U.S. law enforcement agencies to access complaints that consumers provide to the FTC and other data contributors. The initial participants, along with the FTC, are: Office of the Australian Information Commissioner; Canada’s Office of the Privacy Commissioner; Ireland’s Office of the Data Protection Commissioner; the Netherlands’ Data Protection Authority (“College Bescherming Persoonsgegevens”); New Zealand’s Office of the Privacy Commissioner; Norway’s Data Protection Authority (“Datatilsynet”); and the United Kingdom’s Information Commissioner’s Office.

FTC and Law Enforcement Partners Announce Operation Collection Protection, Targeting Abusive Debt Collection

Operation Collection Protection

The FTC and other law enforcement authorities around the United States announced a coordinated enforcement initiative targeting deceptive and abusive debt collection practices. The announcement highlighted 30 new law enforcement actions by federal, state, and local law enforcement authorities against abusive debt collectors. The new cases bring to 115 the total number of actions taken so far this year by the more than 70 law enforcement partners in Operation Collection Protection. So far in 2015, the FTC has secured final judgments in seven cases, placing 33 defendants under strict federal court orders, securing over $88 million in judgments, and banning 24 defendants from working in debt collection. Among the cases brought by the FTC as part of Operation Collection Protection are BAM Financial, Delaware Solutions, and K.I.P. LLC. The defendants in each of these cases engaged in intimidation (including false threats of arrest, litigation and wage garnishment), harassment, and other unlawful tactics. In some of these cases, the consumers did not owe the debts (so-called phantom debts) or did not owe them to the defendants. In others, the defendants unlawfully disclosed consumers’ debts to third parties in an attempt to embarrass the consumers into paying them.

Sprint Will Pay $2.95 Million Penalty to Settle FTC Charges It Violated Fair Credit Reporting Act

Mobile service provider Sprint will pay $2.95 million in civil penalties to settle FTC charges that the company violated the Fair Credit Reporting Act and its Risk-Based Pricing Rule by failing to give proper notice and information to consumers whom it placed in a program for customers with lower credit scores. The FTC’s complaint alleges that Sprint charged consumers in the program an extra monthly fee of $7.99 in addition to the charges for cell phone and data services without giving them required information about why they were placed in a more costly program. In many cases, Sprint omitted required information that would help consumers understand the information in their credit reports, and that may have alerted them to possible errors that caused them to receive less favorable terms of credit. (A previous FTC study showed credit reports often contain significant errors.) The proposed settlement requires Sprint to pay a $2.95 million penalty for violations of the Risk-Based Pricing Rule. It also requires the company to abide by the Rule’s requirements in the future.

FTC Concludes ECM BioFilms Made False, Misleading, and Unsubstantiated Claims About the Biodegradability of Plastic Products Treated with Its Additive

The FTC, acting as an adjudicative body, issued an Opinion and Final Order against ECM BioFilms in an appeal of an administrative enforcement action. The Commission found that the company acted deceptively by making false and unsubstantiated environmental claims about its product, a chemical additive that supposedly would make treated plastics biodegrade in a landfill within nine months to five years or within a reasonably short period of time. The Commission held: “The seriousness of ECM’s deceptive conduct is evidenced by both the duration and pervasiveness of the biodegradation claims that permeated the company’s marketing efforts and was enhanced by ECM’s customers’ inability to ‘readily judge for themselves the truth or falsity’ of ECM’s claims.” The Commission’s Final Order bars ECM from representing that a plastic product or package is degradable, or that any product or service affects a plastic product’s degradability, unless the representation is true, not misleading, and substantiated by competent and reliable scientific evidence. It also requires ECM to have competent and reliable evidence to substantiate claims for any environmental benefit. The Commission vote approving the Opinion and Final Order was 4-0, with Commissioner Maureen Ohlhausen dissenting in part and issuing a separate statement.

In Other News

FTC Testifies Before Congressional Committees on Fraud and Tech Support Scams Affecting Older Americans, Highlighting International Cooperation Against Cross-Border Scams

The FTC testified before two Congressional committees about its efforts to protect older Americans from fraud. The agency’s testimony summarized the FTC’s efforts over the past two years to combat scams that disproportionately affect people over 60, including online and health care related scams. In its testimony before the House Energy and Commerce Committee’s Subcommittee on Commerce, Manufacturing and Trade, the agency described its efforts to address scams involving health care related goods or services such as medical alert devices or discounts for medical or pharmaceutical services.

In its testimony before the Senate Special Committee on Aging, the agency focused on tech support scams that use various methods to deceive consumers into believing that there is a problem with their computers. They then charge consumers hundreds of dollars to “fix” non-existent problems, leading consumers to believe that the tech support worked when, in fact, their computers never had a problem. In the testimony, the FTC noted that many tech support scams originate from call centers located in India. In 2012, the FTC launched an international crackdown that halted six tech support scams based mainly in India. The FTC coordinated this crackdown with the assistance of authorities in Australia, Canada, Ireland, New Zealand, and the United Kingdom. Last year, the agency brought new enforcement actions against operations that bilked more than $100 million from thousands of consumers.

The testimony also explained how the FTC has developed relationships with public and private sector partners in India to help fight tech support scams at their source and encourage and assist Indian law enforcement in taking action against Indian telemarketing fraudsters.

FTC Testifies on Proposed Legislation Addressing Privacy and Security in Connected Automobiles

The FTC testified before Congress regarding proposed legislation to address privacy and security concerns around the growth of so-called “connected cars.” The agency’s testimony before the Subcommittee on Commerce, Manufacturing and Trade of the House Energy and Commerce Committee identified a number of concerns, noting that the proposed legislation “could substantially weaken the security and privacy protections that consumers have today.” In particular, the testimony stated that a proposed safe harbor for auto manufacturers who submit privacy policies to the Department of Transportation was possibly too broad, allowing manufacturers a safe harbor from FTC enforcement actions even for privacy policies that significantly limit consumer protections, and even if they do not follow the terms of the privacy policies they submit. More details on the FTC’s feedback on the proposed legislation are available here.

FTC Dismisses Complaint against Steris and Synergy

The FTC voted unanimously to dismiss its administrative complaint challenging Steris Corporation’s proposed $1.9 billion acquisition of Synergy Health plc. The FTC had filed a lawsuit in federal court seeking an injunction to prevent the acquisition from going forward pending the outcome of administrative litigation, but the court denied the motion and the Commission did not appeal that decision. According to the FTC Statement, the district court’s denial of preliminary relief would have rendered it difficult to craft meaningful relief if the FTC were to find the merger unlawful at the conclusion of the administrative proceeding.

FTC Announces Final Agenda, Panelists for Nov. 16 Cross-Device Tracking Workshop

cross-device tracking graphic

The FTC has announced the final agenda for its upcoming workshop on the practice of tracking consumers across Internet-connected devices for advertising and marketing purposes, and potential wide-ranging effects on consumer privacy. The half-day event will take place on Nov. 16 in Washington, D.C. at the FTC’s Constitution Center offices.

FTC Seeks Public Comments on Proposed Study of the E-Cigarette Industry

The FTC announced that it is seeking clearance from the Office of Management and Budget to collect information from marketers of electronic cigarettes, more commonly known as e-cigarettes, as part of a study on the industry’s sales, marketing activities, and expenditures. The agency has published a Federal Register notice that seeks public comment on the proposed collection of information including the proposed topics. Information about comment deadlines and submissions is here.

FTC Approves Changes to Energy Labeling Rule and Proposes Others

energy guide graphic

The FTC has amended the Energy Labeling Rule, which requires manufacturers to attach yellow Energy Guide labels to certain appliances such as clothes washers, dishwashers, refrigerators, air conditioners, furnaces and televisions. The amendments require expanded coverage of the Lighting Facts label, enhanced durability of appliance labels, and improved plumbing disclosure requirements. The Energy Guide labels required under the Rule for most products provide consumers with an estimated annual operating cost, an energy consumption rating, and a range for comparing the highest and lowest energy consumption for all similar models. The Commission also seeks comments on proposed Rule amendments on new refrigerator comparability range information; labels for portable air conditioners, dual-mode refrigerators, and rooftop heating and cooling equipment; and revised labels for ceiling fans, central air conditioners, and water heaters.

FTC Releases Three Staff Advocacies Regarding State Legislation

FTC staff submitted written comments on the competitive impact of legislative proposals to modify the supervision requirements imposed on Advanced Practice Registered Nurses (APRNs) in South Carolina. The staff comment refers to an FTC staff policy paper, issued in March 2014, which analyzes the competitive implications of various types of APRN regulations.

FTC and DOJ submitted a joint statement to the Virginia Certificate of Public Need (COPN) Work Group suggesting that Virginia consider whether its COPN program best serves the needs of its citizens. The statement explains that the agencies historically have urged states to consider repeal or reform of their Certificate of Need laws because they can prevent the efficient functioning of health care markets, and thus can harm consumers. Commissioner Brill issued a concurring statement.

FTC staff also submitted a comment to Pennsylvania State Representative Robert W. Godshall in response to his request for the FTC’s views on legislative proposals that would further regulate the pre-need sale of cemetery and funeral merchandise and services in Pennsylvania.