FTC International Monthly - June

FTC International Monthly: U.S. Competition, Consumer Protection and Privacy News

JUNE 2014

Consumer Protection and Privacy

FTC Releases International Consumer Complaints Report for 2013

x-b complaint report

On May 22, the FTC released a new and expanded version of its annual cross-border fraud complaint report for 2013.  

The report examines trends in cross-border complaints from the FTC’s Consumer Sentinel database, including complaints reported through econsumer.gov, a website established by International Consumer Protection and Enforcement Network (ICPEN).  Econsumer.gov is available in English, French, Korean, Japanese, Polish, Spanish, and Turkish.

For the first time, the report provides information about complaints against companies by geographic region, including Africa, Asia, the Caribbean, Europe, and Latin America.  In 2013, 62 percent of the cross-border complaints in Consumer Sentinel were by U.S. consumers against foreign companies.  Another 25 percent were by foreign consumers against companies in the U.S. or Canada.  Thirteen percent were by foreign consumers against companies in other foreign countries.  Complaints by U.S. consumers against companies located in Canada were 21 percent of the total.  Complaints by Canadian consumers against companies located in the United States were 11 percent.  In addition to helping the FTC and other law enforcement partners spot trends, consumer complaints provide information that helps agencies bring law enforcement actions against specific fraudsters.   

FTC staff released the report at a meeting of ICPEN held in Panama City last month.  At the meeting, consumer protection authorities from around the world reviewed the international complaint trends to identify issues of importance for the network and its members.

Please direct consumers in your jurisdiction to econsumer.gov’s complaint page to report complaints about online and related transactions.  Consumers may report a complaint to Consumer Sentinel here.

FTC Recommends Congress Require Data Broker Industry to Increase Transparency and Consumer Control Over Personal Information

data brokers report

An in-depth report issued by the FTC on the data broker industry finds that data brokers operate with a fundamental lack of transparency.  The FTC’s report is based on information from nine data brokers, representing a cross-section of the industry.  These companies collect personal information about consumers from a wide range of sources, including public records, loyalty cards, websites, and social media.  They provide information for a wide range of purposes, including verifying someone’s identity, marketing products, and detecting fraud.  In the report, the FTC recommends that Congress consider enacting legislation to make data broker practices more visible to consumers and to give consumers greater control over the immense amounts of personal information about them collected and shared by data brokers.

Data brokers obtain and share vast amounts of consumer information, typically behind the scenes, without consumer knowledge.  Although consumers benefit from data broker practices which, for example, help enable consumers to find and enjoy the products and services they prefer, data broker practices also raise privacy concerns.  The report finds that data brokers collect and store billions of data elements covering nearly every U.S. consumer.  Just one of the data brokers studied holds information on more than 1.4 billion consumer transactions and 700 billion data elements and another adds more than 3 billion new data points to its database each month. 

The agency encourages Congress to enact legislation requiring that data brokers that provide marketing products provide disclosures, consumer access to information, and opt-outs through a centralized Internet portal or similar mechanism.  The report makes further legislative recommendations regarding brokers that provide risk mitigation products and people search products. 

The nine data brokers in the FTC’s study are Acxiom, CoreLogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf and Recorded Future.  In December 2012, the Commission voted to issue orders requiring these data brokers to produce the information that was used in the study.

FTC Settlement Bans Pyramid Scheme Operators from Multi-Level Marketing; Defendants to Pay $7.75 Million in Consumer Redress

Defendants who operated a Kentucky-based pyramid scheme with U.S. and Canadian victims will pay consumer redress totaling at least $7.75 million under a settlement with the FTC and the states of Illinois, Kentucky and North Carolina.  Over the past four years, the defendants enrolled more than 350,000 consumers throughout the United States, Puerto Rico and Canada in their operation, Fortune High-Tech Marketing (FHTM).  The settlement order bans the defendants from multi-level marketing.  The order also bars the defendants from misrepresenting material facts about any product or service, including claims concerning how much money consumers can earn, and from selling or otherwise benefitting from customers’ personal information, failing to properly dispose of customer information, or collecting any additional money from customers.  The order imposes a judgment of more than $169 million, which will be partially suspended when the defendants have surrendered certain assets with an estimated value of at least $7.75 million.  The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

In January 2013, the FTC and the states charged the defendants with deceiving consumers by claiming they would earn significant income through selling various products and services if they signed up as FHTM representatives.  The court-appointed receiver determined that FHTM’s main business was recruiting new members and not selling products and services as it claimed, and confirmed the allegations made by the FTC and the states.  More than 98 percent of participants lost money.  At least 88 percent did not even recoup their enrollment fees.  

Consumers in your jurisdiction can learn more about multi-level marketing by reading the FTC’s Multilevel Marketing and Business Opportunity Scams (Estafas de Oportunidades de Negocio).

Snapchat Agrees To Settle FTC Charges It Deceived Consumers

Snapchat, the developer of a popular mobile messaging app, has agreed to settle FTC charges that it deceived its users regarding the privacy and security of their information.  Snapchat marketed the app’s central feature as the ability to send photos or “snaps” that would “disappear forever" after a set time.  However, according to the FTC, users could save snaps simply and indefinitely.  The FTC case also alleged that Snapchat’s failure to secure its Find Friends feature resulted in a security breach that enabled attackers to compile a database of 4.6 million Snapchat usernames and phone numbers.  The settlement prohibits Snapchat from misrepresenting how it maintains the privacy and security of users’ information and requires the company to implement a comprehensive privacy program that will be monitored by an independent privacy professional for the next 20 years.

The settlement with Snapchat is part of the FTC’s ongoing effort to ensure that companies market their apps truthfully and keep their privacy promises to consumersThe case is part of a multi-national enforcement sweep on mobile app privacy by members of the Global Privacy Enforcement Network, a cross-border coalition of privacy enforcement authorities.  The case was also coordinated with the Asia Pacific Privacy Authorities forum’s Privacy Awareness Week.


Chairwoman Ramirez Meets with Officials of Chinese Antitrust Agencies

FTC Chairwoman Edith Ramirez, Commissioner Maureen Ohlhausen, and other FTC and Department of Justice officials, met with Chinese officials from MOFCOM, NDRC and SAIC to follow up on the U.S. and Chinese agencies’ high-level dialogue regarding antitrust developments and priorities. They also participated in the American Bar Association Section of Antitrust Law’s first conference in China.  Chairwoman Ramirez delivered a keynote speech at the conference in which she focused on three keys to an effective competition agency and the sound application of antitrust laws: fair and transparent investigative procedures; decisions based solely on competition considerations and not other economic or social goals; and a careful balance that maximizes consumer welfare when competition principles touch on other important values, such as respect for intellectual property rights. 

FTC files Amicus Brief on Reverse Payments

The FTC filed an amicus brief in a Federal Court of Appeals urging it to reverse the finding of a lower court that agreements between branded and generic drug makers that do not involve the payment of cash cannot violate the antitrust laws under the Supreme Court’s recent decision in FTC v. Actavis.   In this case, private plaintiffs alleged that branded drug firm GlaxoSmithKline (GSK) paid Teva Pharmaceuticals to forgo generic entry in exchange for GSK’s promise not to compete with authorized generic versions of the drug Lamictal.          

The brief explains that FTC v. Actavis reaffirms that traditional antitrust principles apply to agreements between a brand-name drug firm and its potential generic competitor and that settlements between potential competitors that take the form of reciprocal agreements not to compete also raise antitrust concerns. If the Third Circuit does not reverse the district court decision, the brief states, its narrow reading of Actavis “would undermine the Supreme Court’s decision in that case and encourage parties to structure potentially anticompetitive reverse-payment settlements simply by avoiding the use of cash.”

Ski Manufacturers Barred from Non-compete Agreements

Two manufacturers of ski equipment, Marker Völkl and Tecnica, settled charges alleging that they illegally agreed not to compete for one another’s ski endorsers or employees. According to the FTC’s complaints, the purpose of these anticompetitive agreements was to avoid bidding up the cost of securing endorsements from skiers, as well as the salaries of their employees. While limited non-compete agreements may be legitimate in some cases, the complaints state that the agreements between Marker Völkl and Tecnica had no efficiency benefits to justify their anticompetitive harm. The proposed orders (Tecnica Group order, Marker Volkl order) settling the charges are designed to stop the alleged anticompetitive conduct and to prevent similar conduct in the future.

FTC Releases Fiscal Year 2013 HSR Premerger Notification Report

HSR report cover

The FTC and DOJ released the FY 2013 report on the agencies’ premerger notification program.  The report notes that 1,326 transactions were reported to the antitrust agencies, a 7.2 percent decrease from the 1,429 transactions reported in the prior fiscal year. The report also summarizes the agencies’ merger enforcement activities, highlighting the 38 merger enforcement actions that preserved competition in many sectors of the U.S. economy, including pharmaceuticals, health care and health insurance, industrial and high tech goods, commercial air travel, consumer goods, waste collection, and energy.  The report also summarizes recent amendments to the premerger notification rules, including a framework for the withdrawal of a premerger notification filing under the HSR Act, which allows parties to refile without incurring an additional filing fee.

In Other News

FTC Testifies on Patent Assertion Entities and Legislation to Prohibit Deceptive Patent Demand Letters

On May 22, the FTC testified about a draft bill regarding deceptive patent demand letters before the House Subcommittee on Commerce, Manufacturing, and Trade of the Committee on Energy and Commerce.  Lois Greisman, Associate Director of the FTC’s Division of Marketing Practices delivered the testimony.  According to the testimony, “The Commission shares this Subcommittee’s goal of stopping deceptive patent demand letters while respecting the rights of patent holders to assert legitimate claims, and recognizes that achieving this goal is not easy.”  The testimony favored civil penalty authority for the Commission under proposed legislation as an adjunct to existing authority under the FTC Act.  The Commission continues to pursue a proposed study of patent assertion entity behavior which was first announced last year.  A Federal Register Notice announced on May 13 seeks additional public comments on the study, which may be submitted here.

FTC Outlines Recommendations for Online Advertising In Testimony Before Senate Homeland Security Subcommittee

On May 15, the FTC testified about emerging threats related to online advertising before the Senate Committee on Homeland Security and Governmental Affairs’ Permanent Subcommittee on Investigations.  Maneesha Mithal, Associate Director of the FTC’s Division of Privacy and Identity Protection delivered the testimony.  The agency outlined steps it is taking to address concerns related to online advertising through enforcement and consumer education and offered its recommendations.  The testimony highlighted work by the Commission on three online advertising issues: privacy, spyware and other malware, and data security.  Feel free to direct consumers in your jurisdiction to FTC consumer education materials in this area, including OnGuard Online.

FTC Seeks Protection for Students’ Personal Information in Education Technology Company ConnectEdu’s Bankruptcy Sale

The FTC has authorized staff of the FTC’s Bureau of Consumer Protection to send a letter to the court overseeing the bankruptcy proceedings involving ConnectEdu, an education technology company, raising privacy concerns.  The concerns relate to the proposed sale of the company’s assets, which include student information. The company collected data from high school and college students, along with their parents and counselors, to provide guidance on career choices.  The letter states that 20 million students registered with ConnectEdu over a period of 12 years.  The company’s privacy policy promised consumers notification and an opportunity to delete personally identifiable data prior to any sale of the company. The letter states that the terms of the bankruptcy sale of the company and its subsidiary, Academic Management Systems, Inc., do not live up to these promises.  The letter states that the sale may violate both the FTC Act and the Bankruptcy Code.  Commission staff has sent similar letters regarding the potential sale of personal information in previous bankruptcy proceedings, such as Borders bookstores and XY Magazine.

FTC and DOJ to Hold Workshop on Conditional Pricing Practices

The FTC and DOJ Antitrust Division will hold a joint public workshop on June 23, 2014, to explore the economic and legal analysis of conditional pricing practices among firms in a supply chain. The workshop will focus on conditional pricing arrangements – practices in which prices are explicitly or effectively contingent on commitments to purchase or sell a specified share or volume of a single product or a mix of multiple products – such as loyalty or bundled pricing.

A principal goal of the workshop will be to advance the economic understanding of the potential harms and benefits of conditional pricing practices and to reexamine their treatment under the antitrust laws. Written submissions on conditional pricing practices are welcome and may be submitted online through August 22.  Submitted comments will be made publicly available on the FTC and DOJ websites.