FTC International Monthly - February

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



Court Orders Lifetime Industry Ban Against “Pharma Bro” Martin Shkreli in Vyera Pharmaceuticals Matter Concerning Monopoly for Daraprim


The U.S. District Court held “Pharma Bro” Martin Shkreli liable for antitrust claims brought by the FTC and a group of seven state enforcers.  Enforcers alleged that Shkreli and another defendant hiked the price of life-saving drug Daraprim by 4000 percent and then concocted an elaborate web of restrictions to illegally block competitors from producing a cheaper option.  Finding that Shkreli’s conduct was “egregious, deliberate, repetitive, long-running, and ultimately dangerous,” the Court imposed a lifetime ban against Shkreli participating in the pharmaceutical industry and found him liable for $64.6 million to be disgorged.  It is the first time a court ordered a lifetime industry ban in an FTC competition case.  According to a statement by FTC Chair Lina Khan, “[t]his precedent-setting relief should be a warning to corporate executives everywhere that they may be held individually responsible for the anticompetitive conduct they direct or control.”

Lockheed Martin Abandons Vertical Acquisition of Aerojet Rocketdyne Holdings Following FTC Challenge

Aerojet logo

After the FTC sued to block Lockheed Martin Corporation’s $4.4 billion proposed vertical acquisition of Aerojet Rocketdyne Holdings Inc., the last independent U.S. supplier of missile propulsion systems, the parties abandoned the transaction.  Aerojet supplies advanced power, propulsion, and armament systems, which are critical components for the missiles made by Lockheed and other defense prime contractors.  The agency’s complaint alleged that if the deal had been allowed to proceed, Lockheed would use its control of Aerojet to harm rival defense contractors and further consolidate multiple markets critical to national security and defense.  In a statement Bureau of Competition Director Holly Vedova said, “Simply put, the deal would have resulted in higher prices and diminished quality and innovation for programs that are critical to national security.”

FTC and Justice Department Seek To Strengthen Enforcement Against Illegal Mergers

Merger Guidelines

The FTC and DOJ’s Antitrust Division launched a joint public inquiry aimed at strengthening enforcement against illegal mergers.  To address mounting concerns that many industries across the U.S. economy are becoming more concentrated and less competitive, the agencies are soliciting public input on ways to modernize federal merger guidelines to better detect and prevent illegal, anticompetitive deals in today’s modern markets.  Some of the specific areas of inquiry on which the agencies are seeking public input and information include: Purpose and scope of merger review; Presumptions that certain transactions are anticompetitive; Use of market definition in analyzing competitive effects; Threats to potential and nascent competition; Impact of monopsony power, including in labor markets; and Unique characteristics of digital markets.  

Consumer Protection and Privacy

In Wake of Omicron Variant, FTC Orders More Marketers To Stop Falsely Claiming Their Products Can Effectively Prevent or Treat COVID-19

COVID-19 banner

The FTC ordered more than 20 marketers nationwide to immediately stop making baseless claims that their products and supposed therapies can treat or prevent COVID-19.  In cease-and-desist demands sent to these marketers, the agency noted that violators could be hit with monetary penalties under the COVID-19 Consumer Protection Act that Congress passed last year.  The demands are the latest action in the FTC’s continued fight against fraudsters who attempt to take advantage of ongoing coronavirus concerns.  This is the eleventh set of warning letters that the FTC has issued.  The Commission has previously sent similar health-related letters to 405 companies and individuals.  Most of the demands announced today were sent to companies that use social media platforms to sell their products; in those instances the FTC also notified the platform of its demand.

Fashion Nova Will Pay $4.2 Million As Part of Settlement of FTC Allegations It Blocked Negative Reviews of Products


Online fashion retailer Fashion Nova, LLC will be prohibited from suppressing customer reviews of its products and required to pay $4.2 million to settle FTC allegations that it blocked negative reviews of its products from being posted to its website.  The FTC alleged in a complaint that the California-based retailer, which primarily sells its “fast fashion” products online, misrepresented that the product reviews on its website reflected the views of all purchasers who submitted reviews, when in fact it suppressed reviews with ratings lower than four stars out of five.  The case is the FTC’s first involving a company’s efforts to conceal negative customer reviews.

FTC Sends Full Refunds to Consumers Who Bought Deceptively Marketed Fish Oil Supplement

Fish oil

The FTC is sending refunds totaling $396,431 to more than 1,800 consumers nationwide who bought Hepaxa and Hepaxa PD, two fish oil supplements that were marketed as treatments for adults and children with non-alcoholic fatty liver disease (NAFLD).  The FTC alleged that until mid-2020 defendants deceptively advertised Hepaxa and Hepaxa PD as clinically proven to reduce liver fat in adults and children with NAFLD.  The orders settling the Commission’s charges banned the companies from making unproven health claims about Hepaxa or similar products and required them to pay money to provide refunds.

FTC Sues Burger Franchise Company That Targets Veterans and Others With False Promises and Misleading Documents

The FTC has filed suit against fast-food chain Burgerim, accusing the chain and its owner of enticing more than 1,500 consumers to purchase franchises using false promises while withholding information required by the FTC’s Franchise Rule.  In a complaint filed on the FTC’s behalf by the Department of Justice, the FTC alleges that Burgerim and its owner recruited potential franchisees by pitching the opportunity as “a business in a box” that required little to no business experience, downplaying the complexity of owning and operating a restaurant.  According to the complaint, many consumers paid Burgerim between $50,000 and $70,000 in franchise fees, and the company targeted veterans with discount programs to lure them into the business.  The complaint also alleges that although Burgerim pocketed tens of millions of dollars in such fees, the majority of the people who paid them were never able to open restaurants.  In targeting consumers with these pitches, the FTC alleges, Burgerim offered assurances that if a franchisee was unable to open a restaurant, the company would refund the franchise fee.  The company’s promised refunds often proved to be an illusion.  According to the complaint, some franchisees were unable to obtain refunds from Burgerim even after months of making requests, leaving franchisees with losses or debt of tens of thousands of dollars.

FTC Charges Sellers for Deceptively Marketing “Extended Auto Warranty” Programs

The FTC is taking action in federal court against a group of defendants it alleges have called hundreds of thousands of consumers nationwide to pitch them expensive “extended automobile warranties” using deceptive telemarketing tactics.  According to a complaint filed in federal district court, American Vehicle Protection Corp. and related defendants bilked consumers out of more than $6 million over the last four years, pretending to represent their dealer or car manufacturer, and providing coverage much more limited than represented.  In addition to misrepresenting that they either are, or are associated with, the consumers’ vehicle manufacturer or dealer, the defendants’ telemarketers have made false promises that they can provide “bumper to bumper” or “full vehicle” coverage for prices ranging between $2,800 and $3,400.  The FTC complaint also alleges that the defendants falsely claimed that consumers can get a full refund of their down payment or full payment within 30 days of buying the warranty if they are not satisfied with it.

In Other News


FTC Outlines Aggressive Approach to Policing Against Pandemic Predators in Testimony Before Senate Commerce Subcommittee

Testifying on behalf of the Commission before a Senate subcommittee, FTC Bureau of Consumer Protection Director Samuel Levine said the Commission has encountered disturbing trends and noted a surge in consumer complaints stemming from a broad range of deceptive COVID-related schemes.  From January 2020 through January 2022, the FTC received more than 292,000 reports associated with COVID-19 frauds, reflecting $674 million in losses.  The FTC is fighting back by taking law enforcement action to halt and deter deceptive COVID-related claims.  The agency is deploying new tools thanks to the agency’s expanded authority under the COVID-19 Consumer Protection Act of 2020.  The FTC has pursued cases against more than a dozen COVID-19 predators, with more investigations in the pipeline.  The FTC also issued cease-and-desist demands to more than 425 companies making false or unsubstantiated COVID-19 claims, giving them 48 hours to stop their scheme or face federal charges.  In response to these demands, the vast majority of recipients take down their claims. The agency also notified state and local authorities of scammers’ possible criminal misconduct and alerted online companies about the fraudulent actors using their platforms to break the law.

FTC Publishes Blog Post on Advancing Racial Equity by Addressing Consumer Issues Affecting Black Communities

The FTC has published a blog post on advancing racial equity by addressing consumer issues affecting Black communities.  Reports to the FTC, analysis of data from FTC enforcement actions, and research have shown that people living in majority Black communities are disproportionately harmed by fraud and other consumer problems.   “Racial discrimination has led to structural barriers to accessing credit, housing, and income-generating opportunities, especially in Black communities.  The FTC has brought enforcement actions and provided consumer education to address various issues that adversely affect communities of color, such as discriminatory auto financing, predatory lending, inaccuracies related to tenant screening and credit reporting, deceptive student debt relief operations, shady debt collection practices, and phony money-making opportunities.”

Online reviews

FTC Publishes Business Education and Blog Posts on Online Reviews

The FTC has published  two business guides and two related blog posts on online reviews.  These materials include: Featuring Online Customer Reviews: A Guide for Platforms; Soliciting and Paying for Online Reviews: A Guide for Marketers;  I’ll Pay You To Give This Blog Post Five Stars; and Abracadabra: Bad Reviews Be Gone.  The agency has also added a new webpage on endorsements, influencers, and reviews to its Business Center.  The webpage helps those who use endorsements in their marketing see if they meet the standards of the FTC Act and the FTC's Guides Concerning Use of Endorsements and Testimonials in Advertising (Endorsement Guides).  It also helps businesses that work with influencers see if they are taking necessary steps to clearly disclose material connections.

FTC Finds Huge Surge in Consumer Reports About Losing Money to Scams Initiated Through Social Media

In 2021. consumers reported losing about $770 million to fraud initiated on social media—about one fourth of all reported fraud losses for the year and an 18-fold increase from 2017, according to the FTC’s latest Consumer Protection Data SpotlightOf those who reported losing money to fraud in 2021, more than 95,000 indicated that they were first contacted on social media—more than twice the 2020 number.  Investment scams topped the list of total reported dollar losses, followed by romance scams.  The largest number of reports came from people who lost money to online shopping scams.  Most of the reports about online shopping scams involved someone who ordered a product they saw marketed on social media that never arrived.  Consumers who listed the social media platform where the undelivered products were marketed most often named Facebook or Instagram.

Romance scams (cropped)

FTC Data Show Romance Scams Hit Record High; $547 Million Reported Lost in 2021

New data from the FTC show that more consumers than ever report falling prey to romance scammers. Consumers reported losing $547 million in 2021 alone.  A newly released data spotlight shows that in 2021 reported losses to romance scammers were up nearly 80 percent compared to 2020, and the total reported lost over the past five years has now reached $1.3 billion.  Romance scammers draw people in using pictures stolen from around the internet, building false personas that seem just real enough to be true, but always having a reason never to meet in person.  Eventually, the supposed suitor will ask for money from the unwitting victim.  The impact can be major, with a median loss of $2,400 reported to the FTC.

FTC Launches Studies of Drug Pricing and Rulemaking on Deceptive Earnings Claims for Business Ventures

At an open virtual Commission meeting, the Commission voted to issue Orders to large pharmacy benefits managers to study the competitive impact of contractual provisions, reimbursement adjustments, and other practices that affect drug prices, including practices that may disadvantage independent or specialty pharmacies.  The Commission also voted to issue an Advance Notice of Proposed Rulemaking to address deceptive earnings claims for business ventures, gig or other work opportunities, or educational, coaching, or training offerings.

FTC Announces Update of Size of Transaction Thresholds for Premerger Notification Filings and Interlocking Directorates

For 2022, the size-of-transaction threshold for reporting proposed mergers and acquisitions under Section 7A of the Clayton Act will increase from $92 million to $101 million.  Also, the 2022 thresholds under Section 8 of the Act that trigger prohibitions on certain interlocking memberships on corporate boards of directors are $41,034,000 for Section 8(a)(l ) and $4,103,400 for Section 8(a)(2)(A).  Every year, as mandated by the Hart Scott Rodino Act, the FTC adjusts the merger reporting thresholds according to the annual change in the gross national product.