Annual Highlights 2017

Enforcement

The Federal Trade Commission (FTC) functions primarily as a law enforcement agency. We undertake both court and administrative actions to enhance competition and protect consumers.

Health Care

stethoscope siting on top of patient test resultsThe Commission promotes competition among health care providers to encourage cost containment, higher quality care, increased access, and the development of innovative new treatments. Using enforcement as its primary tool, the Commission works to stop anticompetitive mergers and conduct that might diminish competition in health care markets. One key enforcement effort is preventing mergers that would allow providers to raise rates or decrease quality for vital health care services. For instance, working with the North Dakota Attorney General, the FTC successfully litigated a federal court action to preliminarily enjoin Sanford Health’s proposed acquisition of rival physician services provider Mid Dakota Clinic. After a four-day evidentiary hearing, the court found that the combination was likely to increase Sanford’s ability to demand higher reimbursement rates from commercial health plans for its affiliated doctors in violation of the antitrust laws. The parties have appealed and the case is pending before the Eighth Circuit. In another matter, the Commission required the divestiture of seven outpatient dialysis clinics to resolve charges that DaVita, Inc.’s acquisition of Renal Ventures Management was likely to harm competition for outpatient dialysis services in seven local markets in New Jersey and Texas.

The Commission also continues to review carefully mergers between medical device manufacturers. In December, the FTC issued an administrative complaint challenging Otto Bock’s consummated acquisition of Freedom Innovations, alleging that the merger substantially reduced competition in the market for prosthetic knees equipped with microprocessors and strengthened Otto Bock’s already dominant position in the market. Earlier in the year, the Commission announced settlements in three other mergers involving medical device products, requiring divestitures to preserve competition for point-of-care medical testing devices, neurosurgical medical devices, tunneled home drainage catheter systems, and soft tissue core needle biopsy devices. The Commission also preserved competition for two types of generic pharmaceutical products to resolve charges that Baxter International Inc.’s proposed acquisition of Claris LifeSciences Limited’s injectable drug business would be anticompetitive. After major chain retail pharmacies Walgreens and Rite Aid abandoned their transaction in which Walgreens would acquire all of Rite Aid due to competition concerns, the Commission closed its investigation of a revised transaction in which Walgreens would acquire some Rite Aid stores, while Rite Aid would retain the majority of its network.

pills spilling out of a bottle on red backgroundThe Commission also maintains a robust program to stop anticompetitive conduct in health care markets. In February, the Commission filed a federal court action against Shire ViroPharma Inc., alleging that the company abused the Food and Drug Administration (FDA) regulatory process to delay generic competition to its drug Vancocin. In another case, the Commission filed a stipulated injunction in federal court in which Mallinckrodt ARD Inc., formerly Questcor Pharmaceuticals, Inc., agreed to pay $100 million to settle charges that Questcor illegally acquired the rights to develop a drug that threatened its monopoly in the U.S. market for adrenocorticotropic hormone (ACTH) drugs. ACTH is used as a treatment for infantile spasms, a rare seizure disorder afflicting infants, and other serious medical conditions. The FTC alleged that Questcor’s acquisition preserved its ACTH drug monopoly and enabled it to maintain supracompetitive prices.

eyeglasses on eye chartIn January, a Puerto Rico ophthalmologist cooperative agreed to settle FTC charges that it unlawfully orchestrated an agreement among competing ophthalmologists to refuse to deal with a health plan and its network administrator. Also in January, Endo Pharmaceuticals Inc. agreed to abandon anticompetitive pay-for-delay agreements to settle FTC charges that it violated the antitrust laws by using these agreements to block consumers’ access to lower-cost generic versions of its top-selling branded drugs, Opana ER and Lidoderm. In a related matter, the FTC refiled charges against Watson Laboratories, Inc. and its former parent, Allergan plc, for illegally blocking a lower-cost generic version of Lidoderm when it entered into a pay-for-delay agreement with Endo. The FTC also issued an administrative complaint against Impax Laboratories, Inc. for engaging in similar conduct with regard to Opana ER. Both cases are pending.

cautious female on the telephoneIn consumer protection, the Commission has taken action against a company that sought to take advantage of the national opioid epidemic. The company marketed its products, Withdrawal Ease and Recovery Ease, by making unproven claims about lessening the effects of opiate withdrawal and overcoming opiate dependency without competent and reliable science to back up those claims. The FTC also continued to focus on the deceptive marketing of health-related products, including those aimed at older consumers. For example, the FTC, along with the state of Maine, settled charges that Health Research Labs’ claims that its BioTherapex and NeuroPlus products could treat everything from arthritis to Alzheimer’s disease and dementia were false or unsubstantiated.

Technology

Competition in technology sectors can be especially important in driving innovation and growth in the economy, introducing more efficient products and processes into the marketplace, increasing quality, and decreasing prices. In 2017, the Commission took action to preserve competition in the worldwide market for fibre channel switches, which are part of storage area networks that transfer data between servers and storage arrays in data centers. To resolve concerns that semiconductor manufacturer Broadcom Limited’s acquisition of Brocade Communications Systems, Inc. would reduce competition or slow innovation for fibre channel switches, the Commission’s order prevents Broadcom’s business unit from sharing the confidential information of its customer, Cisco Systems, Inc., with Brocade, Cisco’s rival. In the consumer protection area, the Commission continued to combat unwanted telemarketing calls, protect consumers’ privacy and data security, ensure truthful marketing on social media platforms, and fight tech support imposter scams.

hand holding a smartphoneThe case against satellite TV provider Dish Network for violating the Telemarketing Sales Rule resulted in a groundbreaking civil penalty. After eight years of litigation by the FTC, Department of Justice (DOJ), and the Attorneys General of California, Illinois, North Carolina, and Ohio, the Court imposed a record-setting $280 million civil penalty against Dish. Dish made more than 66 million calls that broke the law, including abandoned calls and calls to people on the Do Not Call (DNC) Registry or who had told Dish they didn’t want to get calls.

The Commission also continued its aggressive law enforcement against illegal robocalls. At the request of the FTC, the court imposed a $2.7 million penalty against Aaron Michael Jones and his companies and banned them from all telemarketing activities. Jones’ operation blasted consumers with billions of illegal robocalls, more than 100 million per year. In another case, the ringleader of an illegal robocall operation settled the FTC’s charges. The Commission estimated that in just one week in July 2012, Justin Ramsey and his company made more than 1.3 million illegal robocalls to consumers nationwide, 80 percent of which were to numbers listed on the DNC Registry.

laptop computer with mouse resting on top of itIn 2017, the FTC continued to prioritize privacy and data security, announcing nine privacy and three data security cases. For instance, the Commission and 32 State Attorneys General reached a settlement with the computer manufacturer Lenovo after challenging the company’s privacy practices. In addition, the FTC and the New Jersey Attorney General reached a $2.2 million settlement with VIZIO, Inc., one of the world’s largest manufacturers and sellers of internet-connected “smart” televisions, over charges that the software on its TVs collected viewing data on 11 million consumer TVs without consumers’ knowledge or consent.

This year, the Commission also brought its first cases to enforce the new European Union-United States (EU-U.S.) Privacy Shield framework, charging that MD7, Tru Communication, Inc., Decusoft claimed to complete the certification process for the EU-U.S. Privacy Shield, but, in fact, had not done so. The Privacy Shield provides companies on both sides of the Atlantic with a mechanism for complying with EU data protection requirements when transferring consumer data from the EU to the US. These cases join the four enforcement actions the FTC has brought related to the Asia-Pacific Economic Cooperation (APEC) Cross-Border Privacy Rules (CBPR) system.

tax formsIn another case, TaxSlayer, an online tax preparation service, settled the FTC’s allegations it violated the Gramm-Leach-Bliley Act’s Safeguards and Privacy Rules when malicious hackers were able to gain full access to nearly 9,000 TaxSlayer accounts and use that information to get taxpayers’ refunds by filing fraudulent tax returns.

This year the Commission took action to alert online influencers to their responsibilities when making endorsements. In its first ever case against social media influencers, the Commission charged the owners of the CSGO Lotto site with deceptively endorsing the online gambling service CSGO Lotto, while failing to disclose they jointly owned the company. According to the FTC, the defendants, who are widely followed in the gaming community, paid other well-known influencers thousands of dollars to promote the site on YouTube, Twitch, Twitter, and Facebook, without requiring them to disclose the payments in their social media posts. The Commission order settling the charges requires the defendants to disclose clearly and conspicuously any connection that consumers might find material and that they would not reasonably expect and monitor their endorsers to ensure that they do the same.

The Commission also sent more than 90 educational letters to influencers and brands to remind them of the FTC’s Endorsement Guides and persuade them to comply with the Guide’s established truth-in-advertising principles. The Guides provide that if there is a “material connection” between an endorser and an advertiser – in other words, a connection that might affect the weight or credibility that consumers give the endorsement – that connection should be clearly and conspicuously disclosed, unless it is already clear from the context of the communication. Finally, the Commission updated The FTC’s Endorsement Guides: What People are Asking, a staff publication that answers questions about the use of endorsements, on topics like tags in pictures, disclosures in Snapchat and Instagram, the use of hashtags, and disclosure tools built into some platforms.

Imposter scams were the top complaint that consumers reported to the FTC this year and the Commission continues to crack down aggressively on these frauds. With its federal, state, and international partners, the Commission spearheaded Operation Tech Trap, a nationwide initiative to stop tech support scams that trick consumers into believing their computers are infected with viruses and malware and then charge them hundreds of dollars for unnecessary repairs. Tech Trap involved 16 new actions, including complaints, settlements, indictments, and guilty pleas against deceptive tech support operations.

Consumer Products and Services, and Manufactured Goods

female holding up a contact lens in front of her eyeThe Commission works to prevent anticompetitive conduct that could lead to higher prices or fewer choices for purchases consumers make every day. For instance, the administrative law judge upheld the FTC’s complaint against 1-800 Contacts, ruling that the nation’s largest retailer of contact lenses unlawfully orchestrated a web of anticompetitive agreements with rivals that suppressed competition in online search advertising auctions, restricting advertising to consumers and resulting in some consumers paying higher retail prices for contact lenses. The parties have appealed the ALJ’s decision to the Commission. The FTC also took action against a state licensing board controlled by real estate appraisers, charging that the board is unreasonably restraining price competition for appraisal services in Louisiana in violation of federal antitrust law. Additionally, the Commission required divestitures to preserve competition between the two largest providers of third-party paid referral services for senior living facilities.

To preserve competition among daily fantasy sports providers, the Commission filed suit to block the merger of DraftKings, Inc. and FanDuel Limited because it would substantially reduce competition and lead to higher prices and lower quality for paid daily fantasy sports contests. The parties abandoned their merger plans one month after the Commission authorized legal action. The Commission also required divestitures in connection with Mars, Incorporated’s acquisition of VCA Inc. to preserve competition for specialty and emergency veterinary services in 10 different localities in the United States.

The Commission also is concerned about anticompetitive conduct that likely would lead to higher prices or fewer choices for consumers who rely on professional services, and it challenges the rules and practices of trade associations that unreasonably limit competition among their members without a legitimate business reason. For instance, the Commission charged that the code of ethics of the American Guild of Organists unlawfully restricted its members from competing for opportunities to perform and thereby deprived consumers of the benefits of competition among the 15,000 organists and choral directors who are members.

The Commission also works to maintain competitive markets for manufactured goods. This year, the Commission took action to preserve competition for industrial wood coatings, pesticides, and switchboxes used to control the flow of liquids or gases through pipes in industrial applications. The Commission also required the divestiture of two production facilities in the merger of fertilizer and chemical companies Agrium Inc. and Potash Corporation of Saskatchewan. Finally, in December, the FTC took action to block the proposed merger of Tronox Limited and Cristal, alleging that the transaction was likely to harm competition in the North American market for chloride process titanium dioxide, a pigment used in paints, plastics, paper, and other products.

mattressOn the consumer protection front, the Commission brought its first-ever case against a company making “organic” product claims. The FTC alleged that Moonlight Slumber misrepresented that its mattresses were “organic,” when, in fact, the substantial majority of the mattresses was non-organic. The FTC also alleged that the company claimed one of its mattresses contained a “Natural Latex Core,” which, in truth, was synthetic. The defendants also falsely claimed that testing proved there were no volatile organic compounds (VOCs) from its products, even though they didn’t have such evidence. In another case, the FTC settled deceptive advertising charges against Cowboy AG, LLC for violating federal law when it misrepresented the cost of buying or leasing cars, qualifications or restrictions for financing or leasing cars, and the availability of cars. The FTC also alleged that the dealership did not disclose required credit or lease terms and that favorable terms were prominently stated in Spanish in their ads, but the material limitations to those terms were only in fine print in English at the bottom of the ad.

Stopping Activities Related to Fraud

graduation cap sitting on top of a pile of moneyStudent loan debt affects more than 42 million Americans and, with outstanding balances of more than $1.4 trillion, student loans are the second largest segment of U.S. debt, after mortgages. The FTC, 11 states, and the District of Columbia brought Game of Loans, the first coordinated federal/state law enforcement initiative targeting deceptive student loan debt relief scams. This nationwide crackdown encompassed 36 actions by the FTC and state attorneys general against scammers alleged to have used deception and false promises of relief to take more than $95 million in illegal upfront fees from American consumers over a number of years.

The Commission pursued law enforcement in a variety of fraud cases, including phony federal grants, deceptive come-ons for invention promotion services and business coaching, and collection of phony phantom debts. Following a trial, a federal court has found the operators of the IWorks scheme liable for more than $280 million. IWorks’ online marketing campaigns falsely claimed that federal grants for personal needs were generally available to consumers and that people who used its moneymaking product were likely to earn substantial income. The company unlawfully enrolled people in membership programs without disclosing, or without disclosing clearly, that it would charge their accounts on a recurring basis until they canceled. The court’s final order bans the last remaining defendants from selling grant and moneymaking products, and imposes a $280,000 judgment against them. Previously, other defendants in this matter – nine individuals and dozens of corporations – settled with the FTC.

man typing on computerThe FTC charged World Patent Marketing, operators of an invention-promotion scam, with deceiving consumers and suppressing complaints by threatening criminal prosecution against dissatisfied customers. People paid thousands of dollars to patent and market their inventions based on bogus “success stories” and testimonials promoted by the defendants. But after they strung people along for months or even years, they did not deliver what they promised. Instead, many customers ended up in debt or lost their life savings with nothing to show for it. At the FTC’s request, a federal court temporarily halted the scheme and froze its assets pending litigation.

In the Thrive Learning case, the Commission alleged that a deceptive telemarketing operation, took millions of dollars from thousands of consumers who were trying to start home-based Internet businesses. According to the FTC, the defendants falsely promised that their clients were likely to earn substantial income, that their training programs were personalized and open only to qualified participants, and that they needed consumers’ financial information to determine if they qualified. After consumers bought the business coaching services, typically for thousands of dollars, they were targeted with more sales calls to buy more purported business services. Many people were left with no functioning business, little or no earnings, and heavily in debt. The defendants are now banned from selling business coaching services and work-at-home opportunities.

The Alliance Law Group settled the FTC’s charges that the defendants coerced people into paying bogus phantom debts by posing as lawyers, threatening people with prison time, or claiming police would come to their house to arrest them. The settlement bans the defendants from the debt collection business. Litigation continues against one remaining defendant.

Energy

car at gas station with gas pump attachedPromoting competitive energy markets is another Commission priority. This year, the Commission required divestitures to resolve charges that the proposed merger of energy infrastructure companies Enbridge, Inc. and Spectra Energy Corporation likely would reduce natural gas pipeline competition in three offshore natural gas producing areas in the Gulf of Mexico, leading to higher prices for natural gas pipeline transportation from those areas. The Commission also challenged three mergers involving retail fuel stations and convenience stores, requiring divestitures of 84 locations in 11 states in connection with Alimentation Couche-Tard Inc.’s acquisitions of rivals CST Brands, Inc., Jet-Pep, Inc., and Holiday Companies.

Getting Money Back For Consumers

money transfer signWhenever possible, the Commission works to get ill-gotten gains back to bilked consumers. In 2017, the FTC directly refunded nearly $320 million to people, and supported refund programs administered by FTC defendants that delivered more than $6 billion in refunds to consumers. In a global settlement with the FTC and the DOJ, Western Union agreed to return $586 million to consumers to settle charges that the company didn’t adequately protect them from fraud, and didn’t properly discipline problem agents. According to the FTC, Western Union was long aware of the problem, having received more than 550,000 complaints about money transfers made for fraudulent lottery and prizes, family emergency calls, advance-fee loans, online dating, and more. The company’s internal reports flagged fraud by some of its own agents and warnings from law enforcement. Even when faced with clear evidence that many of its agents were committing fraud, Western Union kept taking billions in fraud-related transfers. The DOJ is handling the redress program to return the money to the consumers affected by the fraud. Western Union also must create a strong anti-fraud program.

Volkswagen logoIn addition, this year, a federal court finalized the FTC’s settlement with Volkswagen by ensuring that all consumers who purchased a TDI diesel engine vehicle will be fully compensated for their losses. The FTC charged that the company falsely claimed its 3.0-liter diesel cars had low levels of harmful emissions. Consumers who bought 3.0-liter vehicles will receive up to $1.2 billion in compensation for Volkswagen’s allegedly misleading “clean diesel” claims. This settlement affects more than 77,000 cars made by VW, Audi, or Porsche, which were not covered by an earlier settlement for similar false advertising for VW and Audi 2.0-liter diesel cars that resulted in a more than $10 billion redress fund for those car owners. In all, consumers who bought affected “clean diesel” vehicles will receive up to $11.5 billion, and the court may hold Volkswagen in contempt if it makes deceptive environmental claims in the future. The Commission will monitor VW’s compliance with the settlement’s provisions, which include special protections for those serving in the armed forces and those consumers in rural areas who may be far from the nearest dealer.

International Law Enforcement

The FTC cooperates on investigations and enforcement actions with competition, consumer protection, and privacy agencies in other countries to halt deceptive and anticompetitive business practices that affect U.S. consumers.

gavel on deskWith regard to the competition mission, the FTC cooperated with international counterparts on 38 merger and anticompetitive conduct cases of mutual concern with 21 jurisdictions. The vast majority of these cases involved cooperation with two or more foreign agencies. For example, in Abbott/St. Jude, we cooperated with antitrust agencies in Brazil, Canada, China, the European Union, Israel, Korea, and South Africa to ensure consistent analyses, outcomes, and divestiture remedies.

We also share enforcement techniques and experience to ensure close collaboration on cross-border cases. For example, we recently engaged with the European Commission (EC) on issues of common interest and with staff from the Canadian Competition Bureau (CCB) and Mexico’s COFECE on merger-related enforcement techniques.

female on headset facing a computer screenIn the consumer protection area, the FTC cooperated on enforcement-related mutual assistance with foreign agencies or multilateral organizations in 51 matters, including by using its powers under the U.S. SAFE WEB Act. One highlight was the collaboration between the FTC and its foreign counterparts as part of Operation Tech Trap, a crackdown on tech support scams that tricked consumers into paying millions of dollars to rid their computers of non-existent viruses. The coordinated effort included actions against foreign-based defendants, two criminal enforcement actions by Indian law enforcement authorities, and consumer education initiatives by the Australian Competition & Consumer Commission and the CCB. Alongside this effort, the agency conducted training and roundtables in the United States and India to help build the capacity of Indian law enforcement to investigate, arrest, and prosecute the promoters of impostor scams stemming from Indian call centers and to coordinate with other foreign enforcers and stakeholders.

The FTC entered into a memorandum of understanding (MOU) to facilitate information sharing and enforcement cooperation with the Royal Canadian Mounted Police on cross-border fraud. The MOU recognizes the long-standing partnership between the two agencies, which have worked together on joint cases, shared consumer complaints, and provided assistance with foreign asset recovery. The FTC continued to cooperate with other longstanding Canadian law enforcement partners on cross-border telemarketing and other scams that target American consumers.

In addition, the FTC, together with consumer protection agencies of 60 other countries that are part of the International Consumer Protection and Enforcement Network (ICPEN), unveiled an updated version of ICPEN.org to help members identify and respond to consumer challenges that cross international borders. The updated website provides new tools for members to share intelligence securely on emerging fraudulent, deceptive, and unfair commercial practices. The FTC also expanded econsumer.gov, an ICPEN project that allows law enforcement authorities to share complaints and intelligence, increasing members’ access to more cross-border consumer complaints and expanded training.

Finally, through its International Fellows Program, the FTC brought 15 foreign officials from competition, consumer protection, and privacy agencies in Canada, El Salvador, Honduras, India, Israel, Pakistan, South Africa, South Korea, the Ukraine, and the United Kingdom, as well as from the EC and the European Data Protection Supervisor, to work alongside FTC staff.