SEPTEMBER 2021
The FTC issued a policy statement affirming that businesses employing health apps and connected devices that collect or use consumers’ health information must comply with the Health Breach Notification Rule, which requires that they notify consumers and others when their health data is breached. The Rule ensures that entities not covered by the Health Insurance Portability and Accountability Act (HIPAA) secure the data they collect through apps and connected devices such as wearable fitness tracking devices and face accountability when consumers’ sensitive health information is breached. Companies that fail to comply with the rule could be subject to monetary penalties of up to $43,792 per violation per day. The Commission voted 3-2 to approve the policy statement.
The FTC banned Support King LLC (known as SpyFone) and its CEO from marketing products and services that monitored surreptitiously another person’s activities on that person’s mobile device. The FTC alleged that the stalkerware app company did not take reasonable steps to ensure that purchasers used its products only for legitimate and lawful purposes, instead secretly harvesting and sharing data on people’s physical movements, phone use, and online activities. The FTC also alleged that SpyFone deceived consumers about its data security practices by falsely representing that it would take all reasonable precautions to safeguard customer information, including by using its database to store consumers’ personal information encrypted. In addition to imposing the surveillance-business ban, the FTC’s order requires SpyFone to disable immediately all access to any information collected through a monitored mobile device, cease collection of any data through any monitoring software, and notify device owners that the app had been secretly installed. An analysis of the Commission’s order is available here.
The FTC filed an administrative complaint against FleetCor and its CEO alleging that they violated Section 5 of the FTC Act by charging customers hundreds of millions of dollars in mystery fees associated with fuel cards. FleetCor falsely told its business customers that they would save money, be protected from unauthorized charges, and have no set-up, transaction, or membership fees. In reality, according to FleetCor’s own records, customers generally have not achieved the advertised per-gallon savings by using FleetCor’s cards. The FTC filed suit in federal court against FleetCor and Clarke in December 2019; however, in a ruling earlier this year, the Supreme Court determined that the FTC was not able to seek equitable monetary redress for consumers in federal courts. To ensure that the agency can recover money lost by consumers if it prevails, the FTC has filed a new administrative complaint. The Commission vote to issue the administrative complaint was 4-1.
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The FTC and the Georgia Attorney General’s Office sued the co-founders of the Stem Cell Institute of America for marketing stem cell therapy to seniors nationwide using bogus claims that it is effective in treating arthritis, joint pain, and a range of other orthopedic ailments. The agencies’ complaint also alleges that the defendants promoted the false or unsubstantiated claim that stem cell therapy is comparable or superior to surgery, steroid injections, and painkillers and that they provided chiropractors and other healthcare practitioners with the means of deceiving consumers about such treatments. Defendants allegedly targeted seniors and retirement communities for consultations for joint injections costing approximately $5,000, with many patients receiving more than one injection as part of their treatment.
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The FTC sent cease-and-desist letters to 10 companies suspected of advertising unproven treatments or cures for diabetes, ordering the companies to stop making unsubstantiated claims within 15 days or face potential legal action by the FTC. The FTC issued its demands jointly with U.S. Food and Drug Administration letters warning the companies that their diabetes products are both unapproved and misbranded, in violation of the Federal Food, Drug, and Cosmetic Act. The FTC’s letters explain that marketers who make deceptive claims about the treatment, cure, prevention, or mitigation of a disease may be subject to a civil penalty of up to $43,792 per violation. They also may be required to pay refunds to consumers who purchased the deceptively marketed products. The letters order the companies to notify the FTC by email within 15 working days of receipt of what specific actions they have taken to address the FTC’s concerns.
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The FTC voted to withdraw its approval of the Vertical Merger Guidelines, issued jointly with the Department of Justice in 2020, and the FTC’s Vertical Merger Commentary. In voting to withdraw, the FTC reaffirmed its commitment to working closely with the DOJ to review and update the agencies’ merger guidance. The statement by the FTC majority notes that the Vertical Merger Guidelines had improperly contravened the Clayton Act’s language with its approach to efficiencies, which are not recognized by the statute as a defense to an unlawful merger, and that the FTC was withdrawing its approval to prevent industry or judicial reliance on a flawed approach. The Commission vote to rescind the policy statement was 3-2.
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At an open Commission meeting, FTC staff presented findings from its inquiry into acquisitions by the largest technology platforms (Alphabet Inc., Amazon.com, Inc., Apple Inc., Facebook, Inc., and Microsoft Corp.) between Jan. 1, 2010 and Dec. 31, 2019 that did not require reporting to the FTC and the Department of Justice. Launched in February 2020, the inquiry analyzed the terms, scope, structure, and purpose of these exempted transactions under the Hart-Scott-Rodino (HSR) Act and the Commission’s reporting requirements. The inquiry focused on 616 transactions (excluding hiring events and patent acquisitions) valued at or above $1 million. The resulting study can be accessed by clicking the headline above.
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The FTC filed an amended complaint against Facebook in the agency’s ongoing federal antitrust case. The complaint alleges that after repeated failed attempts to develop innovative mobile features for its network, Facebook instead resorted to an illegal buy-or-bury scheme to maintain its dominance. The complaint provides that Facebook engaged in a systematic strategy to eliminate threats to its monopoly by unlawfully acquiring innovative competitors and maintaining and enforcing anticompetitive conditions on developers to access its platform. The complaint includes additional data and evidence in support of the FTC’s contention that Facebook is a monopolist that abused its excessive market power to eliminate threats to its dominance. The Commission vote to authorize staff to file the amended complaint was 3-2.
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The FTC is looking at the merger filing process to identify ways to streamline and maximize efficiency, including reviewing informal interpretations in response to questions from firms about whether specific types of transactions are covered. According to Holly Vedova, Acting Director of the Bureau of Competition, the Bureau is concerned that some of these informal interpretations may not reflect modern market realities or the policy position of the Commission. In a recent blog post, Vedova highlights one such example, concluding effective September 27 the Bureau of Competition will begin to recommend enforcement action for companies that fail to file when retirement of debt is part of the consideration for the deal. The details of this change are available at this link.
Richard Fairbank, CEO of Capital One Financial Corp., will pay a $637,950 civil penalty to settle charges that his acquisition of Capital One Financial stock violated the Hart-Scott-Rodino (HSR) Act. According to the FTC’s complaint, Fairbank had been warned in 1999 and 2004 about failures to comply with the HSR Act’s filing requirements relating to his compensation packages and had pledged to implement a system to ensure that required HSR notifications would be filed. Despite this, the complaint alleges that in 2018 Fairbank again violated the notice and waiting period requirements of the HSR Act by failing to file before acquiring an additional 100,000 Capital One Financial voting securities, which was in excess of the HSR filing threshold, as adjusted.
Following the FTC’s December complaint to block Hackensack Meridian Health’s proposed acquisition of Englewood Healthcare, the U.S. District Court for the District of New Jersey granted a preliminary injunction, which temporarily prevents the consummation of the proposed merger. Lindsay Kryzak, Director of the FTC’s Office of Public Affairs, issued a statement on the district court’s decision. The administrative trial is scheduled to begin on October 12.
At the joint recommendation of its Bureau of Consumer Protection and Bureau of Competition, the FTC voted to approve and make public a series of resolutions that will enable agency staff to efficiently and expeditiously investigate conduct in core FTC priority areas over the next ten years. The Bureaus recommended that the Commission authorize eight new compulsory process resolutions in these essential areas: (1) Acts or Practices Affecting United States Armed Forces Service Members and Veterans; (2) Acts or Practices Affecting Children; (3) Bias in Algorithms and Biometrics; (4) Deceptive and Manipulative Conduct on the Internet; (5) Repair Restrictions; (6) Abuse of Intellectual Property; (7) Common Directors and Officers and Common Ownership; and (8) Monopolization Offenses. The Bureaus are now authorized to take steps to ensure that any compulsory process orders are enforceable. The Commission approved the resolutions by a vote of 3-2. For more details on compulsory process and compulsory process resolutions, as well as the specific resolutions just approved, click on the headline above.
At an open Commission meeting, the FTC approved a series of changes to the FTC’s Rules of Practice designed to make it easier for members of the public to petition the agency for new rules or changes to existing rules that the FTC administers. The Commission vote to approve the changes to the Rules of Practice and other related rules and to publish the changes in the Federal Register was 4-1.
The FTC approved final revisions that would bring several rules that implement parts of the Fair Credit Reporting Act (FCRA) in line with the Dodd-Frank Act of 2010. In separate notices, which will be published in the Federal Register shortly, the FTC approved largely technical changes that would clarify that five FCRA rules enforced by the FTC apply only to motor vehicle dealers. The Dodd-Frank Act transferred rulemaking authority related to parts of the FCRA to the Consumer Financial Protection Bureau, narrowing the FTC’s FCRA rulemaking authority. The final revisions do not make substantive changes to the rules. The FTC sought comment on the proposed rule changes last year. For details on the specific rules, click the headline above.
FTC staff have submitted a comment urging the Board of Governors of the Federal Reserve System (the Fed) to clarify and strengthen the implementation of debit card fee and routing reforms to the Electronic Fund Transfer Act (EFTA) made under the Dodd-Frank Act of 2010. The FTC enforces EFTA and implementing rules with respect to card networks. The FTC’s comment supports the Fed’s efforts to enhance the options available to merchants for routing electronic debit transactions to promote competition among debit card networks. According to a 2019 study, Americans use debit cards almost twice as often as credit cards. The Commission vote authorizing the staff comment to the Fed was 3-2.
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