International Monthly: October 2015

 U.S. Competition, Consumer Protection and Privacy News


Consumer Protection and Privacy

FTC and Consumer Protection Agencies from 33 Other Countries Unveil Updated Website

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The FTC and consumer protection agencies in 33 other countries that are part of the International Consumer Protection and Enforcement Network (ICPEN) unveiled an updated version of ICPEN's website at the semi-annual meeting of the network of consumer protection authorities in Manchester, United Kingdom., originally launched in 2001, helps law enforcement authorities gather and share cross border consumer complaints that can be used to investigate and take action against international scams. The new and improved website has a fresh look, is easier to use, and is reader-friendly on tablets and smart phones. It is now available in eight languages: English, French, German, Japanese, Korean, Polish, Spanish, and Turkish. The website also has an updated, user-friendly complaint form and provides information for consumers on additional steps they can take to resolve their complaints, complaint trend data, and consumer news from ICPEN members. It will eventually feature additional consumer education resources.

FTC Sues Marketers Who Used “Gag Clauses,” Monetary Threats, and Lawsuits to Stop Negative Consumer Reviews for Unproven Weight-Loss Products

The FTC is suing Florida-based weight-loss supplement marketers who allegedly made baseless claims for their products, and then threatened to enforce “gag clause” provisions against consumers to stop them from posting negative reviews and testimonials online. Although the FTC has gone to court hundreds of times to stop allegedly misleading weight loss claims, the FTC’s complaint against Roca Labs, Inc. and related defendants includes a first-ever count challenging the defendants’ use of consumer gag clauses as an unfair practice. In particular, the FTC alleges that the defendants have sued and threatened to sue consumers who shared their negative experiences online or complained to the Better Business Bureau, stating that the consumers violated the non-disparagement provisions of the “Terms and Conditions” they supposedly agreed to when they bought the products. The FTC alleges that these gag clause provisions, and the defendants’ related warnings, threats, and lawsuits, harm consumers by unfairly barring purchasers from sharing truthful, negative comments about the defendants and their products.

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The FTC’s complaint also includes a consumer privacy count. To buy the defendants’ products, consumers were required to turn over a substantial amount of personal health data. Despite Roca Labs’ promise to keep it confidential, the FTC alleges that the defendants disclosed this information in some cases to payment processors, banks, and in public court filings, violating consumers’ privacy.

FTC Sends Warning Letters about Green Certification Seals

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As part of the FTC’s efforts to hold companies accountable for their environmental marketing claims, agency staff has sent warning letters to five providers of environmental certification seals and 32 businesses using those seals. The letters alerted the businesses to the agency’s concerns that the seals could be considered deceptive and may not comply with the FTC’s environmental marketing guidelines (commonly known as the Green Guides), including its guidance on creating a seal or certificate that avoids deceiving consumers about the environmental benefits of a product. In particular, the Green Guides advise marketers that they may prevent deception by accompanying the seal with “clear and prominent qualifying language that clearly conveys that the certification or seal refers only to specific and limited benefits.” They also provide guidance on how to effectively qualify a certification based on broad-based, multi-attribute standards. The warning letters are not official determinations that companies’ marketing claims violated the law; however, they do ask the recipients to review their marketing materials and advise the FTC of the steps they are taking to bring their marketing into compliance. Together with the warning letters, the FTC released a new business blog post, Performing Seals, to help marketers understand how certification seals can comply with the Green Guides. It includes two sample certification seals (pictured above).


FTC and DOJ Sign Antitrust Memorandum of Understanding with Korea Fair Trade Commission


FTC Chairwoman Ramirez and Assistant Attorney General Baer signed an antitrust memorandum of understanding with the Korea Fair Trade Commission to promote increased cooperation and communication among the competition agencies in both countries. The U.S. antitrust agencies and the KFTC have developed an increasingly close working relationship since Korea adopted its competition law in 1981. The MOU with the KFTC is the U.S. antitrust agencies’ third antitrust cooperation arrangement in East Asia, following those reached with Japan in 1999 and the Chinese competition agencies in 2011.

FTC Files Amicus Brief Explaining that Pharmaceutical “Product Hopping” Can Violate the Antitrust Laws

The FTC filed an amicus brief in a private antitrust action in which Mylan Pharmaceuticals Inc. alleges that Warner Chilcott PLC/Mayne Pharm Group maintained a monopoly in the market for its antibiotic, Doryx, by suppressing generic competition through three successive insignificant reformulations of the drug, combined with various efforts to curtail the availability of the original formulations. Generic competition through state automatic substitution laws saves American consumers billions of dollars each year, but brand-name pharmaceutical companies have been able to avoid this competition and preserve monopoly profits by combining minor product reformulations with efforts to damage or destroy the market for the original formulation. This approach, commonly called “product hopping,” can harm consumers. The FTC’s amicus brief asserts that in examining whether such conduct is unlawful, courts should account for the unique aspects of the pharmaceutical marketplace, including the nature of competition between branded pharmaceutical products and their generic counterparts. The FTC vote approving the amicus brief filing was 3-1, with Commissioner Maureen Ohlhausen voting no.

FTC Chairwoman Ramirez Testifies Before Congress on Legislation That Would Alter the Agency’s Role in Adjudicating Merger Cases

FTC Chairwoman Edith Ramirez testified before Congress regarding the Commission’s concerns about proposed federal legislation that would eliminate the Commission’s role in adjudicating some merger cases. The testimony before the Subcommittee on Antitrust, Competition Policy and Consumer Rights described the proposed legislation – known as the Standard Merger and Acquisition Reviews Through Equal Rules Act, or SMARTER Act – as an unnecessary step that would remove a key tool the Commission has used successfully for many decades to promote competition and advance consumer welfare. The testimony concludes that the proposed legislation could undermine the beneficial role the Commission plays in merger enforcement, and cites several reasons why the legislation is unnecessary, including the lack of evidence of a difference in outcomes between merger cases handled by the FTC and those handled by the Department of Justice.

FTC Requires Divestitures in Orthopedic Device Companies Merger

Wright Medical Group, Inc. and Tornier N.V. have agreed to sell Tornier’s U.S. rights and assets related to its total ankle replacements and total silastic toe joint replacements to resolve FTC charges that the proposed $3.3 billion merger would illegally reduce competition for these devices. According to the complaint, Wright, a global orthopedic device company headquartered in the United States, and Tornier, which is based in the Netherlands, are close competitors and significant suppliers of these orthopedic devices in the United States. By eliminating direct and substantial head-to-head competition, the proposed merger likely would allow the combined firm to exercise market power unilaterally, resulting in less innovation and higher prices for consumers. Under the proposed settlement, Wright and Tornier will divest the rights and assets to these devices to Integra Lifesciences Corporation, a global medical device company.

Merging Pharmaceutical Companies Must Sell Generic Drugs for Treating Certain Types of Ulcers and Thyroid Conditions

Pharmaceutical companies Endo International plc and Par Pharmaceuticals, Inc. agreed to divest all of Endo’s rights and assets to generic glycopyrrolate tablets and generic methimazole tablets to settle FTC charges that Endo’s proposed $8 billion acquisition of Par likely would be anticompetitive. Without the divestitures, the complaint alleges that the acquisition would combine the two most significant suppliers in the market for generic glycopyrrolate tablets, which are used with other drugs to treat certain types of ulcers, and two of only four active suppliers in the market for generic methimazole tablets, which are used to treat the body’s production of excess thyroid hormone. The result would likely be higher prices for consumers. Generic drug marketer Rising Pharmaceuticals will acquire the divested assets.

Advice of Counsel does not Shield Leucadia National Corporation from Civil Penalties for Second Violation of Premerger Notification Law

Holding company Leucadia National Corporation agreed to pay $240,000 in civil penalties to resolve FTC allegations that it violated federal premerger reporting laws by failing to report a conversion of its ownership interest in the financial services company Knight Capital Group, Inc. According to the complaint, Leucadia did not report the transaction because it thought that it qualified for an exemption applicable to institutional investors. Even though Leucadia relied on the advice of counsel, the FTC determined to seek civil penalties because Leucadia had previously violated the HSR Act in 2007, which led to a corrective filing in 2008. Although the FTC did not pursue a civil penalty against Leucadia for the 2007 violation, its Premerger Notification Office informed Leucadia at that time that it was accountable for instituting a program to comply with the HSR Act.

National Association of Animal Breeders Agrees to Eliminate Advertising Rules That Limit Competition

The National Association of Animal Breeders agreed to remove provisions in its Code of Ethics that the FTC charged limit competition among its members. The proposed consent order settling the FTC’s allegations requires the association to end restrictions that prohibited truthful comparative advertising and price advertising by its members. It will be required to publish and distribute an announcement regarding the consent agreement and the resulting changes to the Code of Ethics, and implement an antitrust compliance program.

In Other News

FTC Chairwoman Releases Statement Regarding the European Court of Justice Safe Harbor Framework Decision

FTC Chairwoman Edith Ramirez released a statement regarding the recent decision of the European Court of Justice declaring that the European Commission’s U.S. Safe Harbor Decision - which authorized the U.S.-EU Safe Harbor Framework - is invalid. The Safe Harbor Framework was established in 2000 to provide a method for U.S. companies to transfer personal data outside the European Union in a manner consistent with EU law. The Chairwoman’s statement emphasized the FTC’s commitment to protecting consumers' personal information and privacy and noted that FTC enforcement actions have helped safeguard the privacy of many European consumers.

FTC Office of International Affairs Releases FY 2014 Technical Assistance Report

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The FTC Office of International Affairs (OIA) released its FY 2014 Technical Assistance Report. Through the OIA’s Technical Assistance Program, FTC’s attorneys and economists work directly with enforcement authorities and related institutions in developing countries to strengthen their capacity to effectively enforce competition and consumer protection laws. In fiscal year 2014, the FTC conducted and participated in 52 technical assistance programs involving 70 jurisdictions and hosted 9 international colleagues pursuant to statutory authority that allows them to be appointed as temporary FTC employees so that they can gain experience by joining FTC teams on competition or consumer protection matters.

Bureau Director Discusses Preliminary Injunction Decision in Abandoned Sysco-US Foods Merger

Following a June 23 ruling by the U.S. District Court for the District of Columbia granting the FTC request for a preliminary injunction, Sysco and US Foods abandoned their proposed merger, and the Commission dismissed its administrative complaint. Debbie Feinstein, Director of the FTC’s Bureau of Competition, discussed the court’s decision in a recent speech and blog posting, available for downloading on the FTC’s blog, Competition Matters.