FTC International Monthly - December

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



FTC Conditions Medtronic’s Proposed Acquisition of Covidien

To settle FTC charges that its $42.9 billion acquisition of Ireland-based medical products company Covidien plc likely would be anticompetitive, global medical technology company Medtronic, Inc. agreed to divest Covidien’s drug-coated balloon catheter business to Spectranetics Corp.  According to the FTC complaint, both Medtronic and Covidien are developing drug-coated balloon catheters to compete with C.R. Bard, Inc., which currently is the only company that supplies these products, used to treat peripheral artery disease, in the U.S. market.

Medtronic and Covidien are the only companies with products in clinical trials in the Food and Drug Administration’s approval process, which makes it unlikely that other competitors could enter the market in time to counteract the effects of the merger, the FTC alleged. According to the analysis to aid public comment, Spectranetics has the industry and regulatory experience to obtain FDA approval for the product to enter the U.S. market as a viable competitor.  FTC staff cooperated closely with antitrust agencies in Canada, China, the European Union, Japan, and Mexico.

Consumer Protection and Privacy

Sony Settles FTC Charges Over Misleading Ads For PlayStation Vita Gaming Console

Sony Computer Entertainment America (“Sony”) has agreed to settle FTC charges that it deceived consumers with false advertising claims about the “game changing” technological features of its PlayStation Vita handheld gaming console.  The settlement bars Sony from making similarly misleading advertising claims in the future, and requires it to provide redress to consumers who bought a PS Vita gaming console before June 1, 2012.  

Sony Vita graphic

Sony claimed that the pocket-sized console would revolutionize gaming mobility, enabling consumers to play their PlayStation 3 games via “remote play.”  It advertised that players could engage in “cross platform” play by starting a game on a PS3 and then continuing it on the go, right where they left off, on a PS Vita.  According to the FTC complaint, each of these claims was misleading.  The FTC’s complaint also alleged that Sony’s PS Vita ads falsely implied that consumers who owned the 3G version of the device (which cost an extra $50 plus monthly fees) could engage in live, multi-player gaming through a 3G network, but actual game play delivered less than the company promised.

“As we enter the year’s biggest shopping period, companies need to be reminded that if they make product promises to consumers -- as Sony did with the ‘game changing’ features of its PS Vita -- they must deliver on those pledges,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.  “The FTC will not hesitate to act on behalf of consumers when companies or advertisers make false product claims.”

In a related action, the FTC charged that Sony’s advertising agency, Deutsch LA, Inc., knew or should have known that certain cross platform and live, multiplayer gaming claims for the PS Vita were false.  Significantly, the FTC  also charged Deutsch LA with using deceptive social media to promote the PS Vita. According to the FTC, Deutsch LA urged its employees to create awareness and excitement about the PS Vita on Twitter, without instructing employees to disclose their connection to the advertising agency or its then-client Sony. Deutsch LA is barred from such conduct in the future.

The blog post, Sony Ads Shouldn’t Play Games, contains more information for consumers.  Another blog post, Game over: FTC challenges Sony’s claims for PlayStation Vita and tweets by Deutsch LA, provides detail on Sony’s challenged claims and the social media aspect of the case.

TRUSTe Settles FTC Charges it Deceived Consumers Through Its Privacy Seal Program

TRUSTe, Inc., a major provider of privacy certifications for online businesses, has agreed to settle FTC charges that it deceived consumers about its recertification program for the company’s privacy practices, and that it perpetuated its misrepresentation as a non-profit entity.  TRUSTe provides seals to businesses that meet specific requirements for consumer privacy programs that it administers.  The seals assure consumers that businesses’ privacy practices are in compliance with specific privacy standards like the Children’s Online Privacy Protection Act (COPPA) and the U.S.-EU Safe Harbor Framework. 

“TRUSTe promised to hold companies accountable for protecting consumer privacy, but it fell short of that pledge,” said FTC Chairwoman Edith Ramirez.  “Self-regulation plays an important role in helping to protect consumers.  But when companies fail to live up to their promises to consumers, the FTC will not hesitate to take action."

The FTC’s complaint alleges that from 2006 until January 2013, TRUSTe failed to conduct annual recertifications of companies holding TRUSTe privacy seals in over 1,000 instances, despite stating on its website that companies holding TRUSTe Certified Privacy Seals receive recertification every year.  In addition, the FTC’s complaint alleges that since TRUSTe became a for-profit corporation in 2008, the company has failed to require companies using TRUSTe seals to update references to the organization’s non-profit status. The proposed order prohibits the company from making misrepresentations about its certification process or timeline, and bars it from misrepresenting its corporate status or whether an entity participates in its program.  In addition, TRUSTe is prohibited from providing other companies or entities the means to make misrepresentations about these facts, such as through incorrect or inaccurate model language.  The company must also pay $200,000 as part of the settlement.

FTC Alleges Debt Brokers Illegally Exposed Personal Information of Tens of Thousands of Consumers on the Internet

At the FTC’s request, a federal court has ordered two debt sellers that posted sensitive, unredacted personal information of more than 70,000 consumers on a public website to take down the information.   The information included consumers’ bank account and credit card numbers, birth dates, contact information, employers’ names, and information about debts the consumers allegedly owed.  The FTC brought one case against Cornerstone and Company, LLC and its owner, Brandon Lambert (injunction available here), and one against Bayview Solutions and its owner, Aron Tomko (injunction available here).  The FTC complaints alleged that defendants violated consumers’ privacy  and the FTC Act by unfairly exposing their personal information without their knowledge or consent.  Under the orders, defendants must also notify consumers and explain how they can protect themselves against identity theft and other fraud.  The agency is asking the court to stop defendants from repeating these actions in the future and to require them to provide redress to injured consumers.

FTC Halts Advance Fee Recovery Scheme Targeting Victims of Timeshare Resale and Investment Scams

The FTC has charged a Florida telemarketing firm, Consumer Collection Advocates, Corp. and Michael Robert Ettus, with operating an advance fee recovery scheme.   The FTC seeks to permanently stop the operation, which in the past year took close to $1.3 million from consumers, many of them elderly people who had lost money to timeshare resale and precious metal investment frauds.   The defendants have agreed to stop operating the scheme for the duration of the litigation.  According to the FTC’s complaint, the defendants falsely promised consumers that for an up-front fee, typically 20 percent of the amount they lost, defendants would recover substantial amounts of money for them.  The FTC’s complaint alleges that consumers were asked to submit a contract and power of attorney with an up-front payment ranging from hundreds to as much as $10,000.  The FTC has charged defendants with violating the FTC Act and the FTC’s Telemarketing Sales Rule (TSR), which prohibits seeking or accepting an advance fee for recovery of money paid for previous telemarketing transactions.  As part of the stipulated order, the court also froze the defendants’ assets.

FTC Obtains Court Orders Temporarily Shutting Down Massive Tech Support Scams

The FTC has announced that at the agency’s and State of Florida’s request, a federal court has temporarily shut down two massive telemarketing operations that conned tens of thousands of consumers out of more than $120 million by deceptively marketing computer software and tech support services.  In the first case, defendants include PC Cleaner Inc., Netcom3 Global Inc. and, in the second case, defendants include Boost Software Inc. According to the FTC’s complaints, since at least 2012, defendants have used software designed to trick consumers into thinking there are problems with their computers, then subjected those consumers to high-pressure deceptive sales pitches for tech support products and services to fix their non-existent computer problems.  These cases mark the third in a series of actions by the FTC against the operators of computer repair scams, including an enforcement sweep of cases in 2011 and an action brought by the FTC earlier this year. 

In Other News

FTC Issues FY 2014 National Do Not Call Registry Data Book

DNC graphic

The FTC has issued the National Do Not Call Registry Data Book for Fiscal Year 2014.  The FTC’s National Do Not Call Registry lets consumers choose not to receive telemarketing calls.  The Do Not Call Registry currently contains more than 217 million active registrations.  Now in its sixth year of publication, the Data Book contains a wealth of information about the Registry for FY 2014 (from October 1, 2013 to September 30, 2014), including the number of active registrations and consumer complaints since the Registry began in 2003; the year’s registration and complaint figures by month, type, and location; and the number of entities accessing the Registry.  Information for consumers about the Do Not Call Registry is available here.  Information on company-specific do not call requests, and telemarketer Caller ID requirements is available here.  Information about robocalls and what to do about them is available here.

FTC Issues Agency Financial Report for Fiscal Year 2014

Agency financial report graphic

The FTC has released its Fiscal Year 2014 Agency Financial Report (AFR).  The report provides an overview of fiscal and key performance results that show how the agency has managed its resources. It includes highlights from FTC programs, accomplishments of its consumer protection and competition missions, and plans for addressing future challenges.  This is the first year the FTC has chosen to produce an AFR and an Annual Performance Report (APR) in lieu of a combined Performance and Accountability Report.  Next February, the FY 2014 APR and related documents will be published at the FTC’s website (http://www.ftc.gov/about-ftc/performance).

FTC Will Keep Retail Food Store Advertising and Marketing Practices Rule

The FTC has completed its review of the Retail Food Store Advertising and Marketing Practices Rule (known as the Unavailability Rule), and announced that it will keep the Rule it in its current form.  First issued in 1971, the Rule prohibits retail food stores from advertising prices for food, grocery products, or other merchandise unless they have the advertised products in stock and readily available at or below the advertised prices.  In 1989, the FTC amended the Rule, providing an exception where “the advertisement clearly and adequately discloses that supplies of the advertised product are limited or . . . available only at some outlets.” Retail food stores do not violate the Rule if they (a) order advertised products early enough and in sufficient quantities to meet “reasonably anticipated demand,” (b) issue rainchecks for the advertised products, (c) offer comparable products at comparable prices, or (d) offer other compensation at least equal to the advertised value. 

Annual FTC Report Finds U.S. Ethanol Market Remains Unconcentrated

As required by law, the FTC has submitted an annual report to Congress and the Administrator of the Environmental Protection Agency on ethanol market concentration.  The report finds that the market for fuel ethanol in the United States is unconcentrated, and the industry is less concentrated today than it was ten years ago.  As of September 2014, 148 firms currently produce ethanol or likely will begin production within the next 12 to 18 months, down slightly from 156 firms at the time of the FTC’s 2013 Report on Ethanol Market Concentration. The largest ethanol producer's share of domestic capacity is 10.9 percent, unchanged from its percent share in 2013.