NOVEMBER 2020
The FTC announced a settlement with Zoom Video Communications that prohibits the video conferencing provider from making privacy and security-related misrepresentations and requires it to implement a robust information security program to settle allegations that its practices undermined the security of hundreds of million daily meeting participants. Zoom has agreed to a prohibition on privacy and security misrepresentations, and other detailed and specific relief. In its complaint, the FTC alleged that, since at least 2016, Zoom misled users by touting that it offered “end-to-end, 256-bit encryption” to secure users’ communications, when in fact it provided a lower level of security. In fact, according to the agency, Zoom did not provide end-to-end encryption for most Zoom meetings because Zoom’s servers – including some located in China – maintained the cryptographic keys that could allow Zoom to access the content of its customers’ meetings. The FTC also alleged that Zoom also misled some users who wanted to store recorded meetings on the company’s cloud storage by falsely claiming that those meetings were encrypted although Zoom stored such recordings for up to 60 days on its servers before transferring them to its secure cloud storage. The complaint also details how the company’s ZoomOpener web server software bypassed certain security features of Apple’s Safari browser leaving Apple Mac users vulnerable to malware and phishing. Even though Zoom has discontinued most of the practices challenged in the complaint, the settlement requires Zoom to institute a comprehensive security make-over including regular assessments by a qualified third party for 20 years, monitored by the FTC, and enforceable in court. The Commission voted 3-2 to issue the proposed administrative complaint and to accept the consent agreement with the company, with Commissioners Rohit Chopra and Rebecca Kelly Slaughter voting no.
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The FTC signed an updated memorandum of understanding (MOU) with two Nigerian enforcement agencies to enhance the agencies’ communication and cooperation on cross-border fraud. The MOU with the Federal Competition and Consumer Protection Commission (FCCPC) and Economic and Financial Crimes Commission (EFCC) updates a 2013 agreement with the FCCPC’s predecessor agency and reaffirms the agencies’ intention to share information and to assist one another in consumer protection investigations. The agreement was signed by FTC Chairman Joseph Simons, FCCPC Executive Vice Chairman/Chief Executive Officer Babatunde Irukera, and EFCC Acting Executive Chairman Mohammed Umar Abba.
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At the FTC’s request, a federal court in Ohio has issued a temporary restraining order against 25 counterfeit websites that have been playing on consumers’ COVID-19 pandemic fears to trick them into paying for brand-name Clorox and Lysol cleaning products that the defendants never deliver. The FTC complaint alleges that none of the defendants’ websites are owned by, affiliated with, or authorized by the companies that make Clorox and Lysol, and that none of the consumers who paid for cleaning and disinfecting products ever received what they ordered online. The FTC also alleged that the defendants used deceptive tactics to thwart consumers’ ability to obtain refunds or chargebacks from their credit card companies. The FTC is seeking an order permanently banning the defendants from their allegedly illegal conduct, as well as the disgorgement of money they collected through the scheme to provide refunds to defrauded consumers.
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The FTC will require medical device companies Stryker Corp. and Wright Medical Group N.V. to divest all assets related to Stryker’s total ankle replacements and finger joint implant products to remedy concerns that Stryker’s proposed $4 billion acquisition of Wright would otherwise harm competition in those markets. Commission staff worked closely with counterparts at the UK Competition and Markets Authority to analyze the proposed transaction and proposed remedy.
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Pharmaceutical companies Pfizer Inc. and Mylan N.V. have agreed to divest assets and abide by other conditions to settle FTC charges that the proposed combination of Pfizer’s division, Upjohn Inc., and Mylan will harm current or future competition in ten generic drug markets. The FTC’s complaint alleges that the proposed combination would harm current U.S. competition in seven product markets by reducing the number of existing suppliers and would harm three additional markets through the delay or elimination of a likely entrant. The order requires divestitures with regard to seven markets, and prior Commission approval before Upjohn, Mylan, or their new entity, Viatris, can gain an interest in or exercise control over any third party’s rights to levothyroxine sodium tablets, sucralfate tablets, or varenicline tartrate tablets, the three additional product markets of concern. Commission staff and the staff of antitrust agencies in Australia, Canada, the European Union, and New Zealand worked cooperatively to analyze the proposed transaction and potential remedies. The Commission vote to issue the complaint and accept the proposed consent order for public comment was 3-2 with Commissioners Rohit Chopra and Rebecca Kelly Slaughter voting no.
U.S. SAFE WEB Act Reauthorized
The U.S. SAFE WEB Act, first enacted in 2006 and reauthorized in 2012, was reauthorized by Congress and signed into law for an additional seven-year period in October. The Act provides the FTC with mission-essential tools to combat cross-border fraud and other misconduct that harms American consumers ranging from sweepstakes and lotteries frauds to privacy violations and data breach incidents to misleading health claims. Since the SAFE WEB Act’s passage, the FTC has relied on the Act’s authority to respond to 165 information-sharing requests from 42 enforcement agencies in 18 foreign countries. The FTC also has helped its foreign enforcement partners, both civil and criminal, to obtain U.S.-based evidence by issuing more than 138 civil investigative demands (investigative subpoenas) in 65 investigations on behalf of 18 foreign agencies from ten countries. The Act also authorizes the FTC to host Fellows from counterpart agencies around the world for staff exchange placements in FTC Bureaus and Offices. To date, the FTC has hosted 131 foreign colleagues from 41 jurisdictions.
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The FTC has launched a new website, ReportFraud.ftc.gov, where consumers can easily report fraud and all other consumer issues directly to the FTC. At ReportFraud.ftc.gov, consumers will find a streamlined and user-friendly way to submit reports to the FTC about scams, frauds, and bad business practices. One new feature of the site is that consumers who file a report will receive next steps from the FTC with advice on what to do based on their particular report. The FTC has more information available for consumers, including a new video explaining how the site works. The site is also in Spanish at ReporteFraude.ftc.gov.
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Colombia’s Consumer Protection Agency Joins econsumer.gov.
The Superintendency for Industry and Commerce (SIC), became the newest member of the International Consumer Protection and Enforcement Network’s cross-border complaint initiative, econsumer.gov. The SIC represents the 41st country with a participating agency. Econsumer.gov has a web portal available to consumers in eight languages. Contact Hui Ling Goh at hgoh@ftc.gov for more information on how your agency can participate.
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According to the FTC’s recently-released National Do Not Call Registry Data Book for Fiscal Year 2020, the number of consumer complaints about unwanted telemarketing calls decreased, from 5.4 million in FY 2019 to less than four million in FY 2020. Of those complaints, 71 percent were about robocalls, roughly the same percentage as last year, and 24 percent were about live telemarketing. Imposter scams were the most frequent topic of robocall complaints, with more than 423,000 complaints received.
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The FTC’s annual report to Congress on protecting older adults provides a detailed look at the scams that most often affect adults over 60, as well as the FTC’s research, law enforcement, and education efforts aimed at protecting older consumers. In 2019, as in prior years, adults aged 60 and older were less likely than younger adults to report losing money to fraud, but reported much higher individual dollar losses. The most frequent type of fraud reported by older adults was online shopping scams, which mirrored a significant increase in that type of scam reported in the early months of the pandemic across all age groups. Older adults reported losing the most money to romance scams, with $84 million in reported losses, followed by government imposter scams at $61 million, and prizes, sweepstakes, and lottery scams at $51 million.
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The FTC is conducting a series of public Question and Answer sessions as part of its ongoing initiative to amend the rules governing premerger notification. The first session addressed a proposed change that would require filers to disclose additional information about their associates and to aggregate acquisitions in the same issuer across those entities. The second addressed a new proposed rule that would exempt the acquisition of 10 percent or less of an issuer’s voting securities unless the acquiring person already has a competitively significant relationship with the issuer. On November 16, from 2:00 pm to 3:00 pm, staff will answer questions related to a rulemaking initiative designed to examine changes in corporate structure and investment activity since the late 1970s and whether those changes warrant modification of the premerger notification rules or interpretations. A link to view the session will be posted to ftc.gov on the morning of the event.
The Bureau of Competition has published a blog post by Daniel Francis and Jennifer Milici on the meaning of “all documents” specifications in FTC Second Requests, Civil Investigative Demands, and subpoenas for documents. “All documents” includes emails, memoranda, voicemails, SMS/text messages, instant messages, hard copy notes, and collaborative documents (among other forms of communication).
Online Viewing and Materials Available for Recent FTC Events
The FTC’s public workshop on data portability held September 22 is now available to view online. The workshop examined the potential benefits and challenges to consumers and competition raised by data portability.
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The FTC's Bureau of Economics and the Tobin Center for Economic Policy at Yale University hosted the 13th Annual FTC Microeconomics Conference on November 5 and 6. This event (virtually) brought together scholars working in areas related to the FTC’s antitrust, consumer protection, and public policy missions. The agenda and event materials are also available online.
The FTC hosted an online public workshop on November 10 to explore a number of issues related to the FTC’s Franchise Rule and the comments received in response to the FTC’s request for comment about the Rule last year. Workshop topics included financial performance representations, the use of disclaimers, and the format of the disclosure document required by the Rule.
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