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MAY 2022
Consumer Protection and Privacy
The FTC has taken action against Saint James School of Medicine, a for-profit medical school in the Caribbean, and its Illinois-based operators, alleging they deceptively marketed the school’s medical license exam test pass rate and residency matches to lure prospective students. The FTC secured $1.2 Million in refunds and debt cancellation for students and ordered Saint James to come into compliance with two key FTC rules that preserve rights for injured consumers and protect consumers in credit contracts.
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To settle claims in a Federal District Court action brought by the FTC, Warrior Trading, which operates a day trading investment scheme, agreed to refund $3 million to consumers. The settlement also prohibits the company from making baseless claims about the potential for consumers to earn money using their trading strategies. The FTC alleged that Warrior Trading and its CEO used misleading and unrealistic claims of big investment gains to convince consumers to pay hundreds or thousands of dollars for a trading system that ultimately failed to pay off for most customers.
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At the request of the FTC, a federal court has temporarily halted a bogus credit repair scheme known as The Credit Game. In a complaint filed against The Credit Game and its owners, the FTC alleged that the company illegally charged consumers hundreds and even thousands of dollars for credit repair services of little to no value and told consumers to “invest” their COVID-19 governmental benefits in the company’s unlawful services. In some cases, the company’s “services” included filing false identity theft reports with the FTC and encouraging consumers to take actions that were unlawful. The FTC asked the court to immediately halt the company’s illegal operations, appoint a receiver, and freeze the defendants’ assets. The court issued a temporary restraining order doing so on May 3.
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The FTC has moved to stop internet service provider Frontier Communications from charging consumers for high-speed internet speeds it fails to deliver. Under a proposed order with the FTC and two California law enforcement agencies, Frontier will be prohibited from tricking consumers about its slow internet service and required to support its speed claims. Frontier must also provide current customers with free and easy cancellations when it fails to deliver the promised speeds.
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On behalf of the FTC, the Department of Justice is suing Funeral & Cremation Group of North America, LLC, Legacy Cremation Services, LLC, d/b/a Heritage Cremation Provider, and their owner for misrepresenting their location and prices, illegally threatening and failing to return cremated remains to consumers, and failing to provide disclosures required by the Funeral Rule. Regarding being local providers, the FTC alleges defendants in fact attempt to arrange for services by third-party funeral providers unaffiliated with defendants. In some instances, the defendants were unable to locate a funeral provider in the location sought by the consumer, and instead secured services in other locations (at times up to two hours away) without first consulting with the consumer. The FTC is asking the court to stop violations of the FTC Act and the Funeral Rule and impose civil penalties on the defendants. The Funeral Rule carries a potential civil penalty of up to $46,517 for each violation.
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The FTC took action against Voice over Internet Protocol (VoIP) service provider VoIP Terminator, Inc., a related company, and the firms’ owner for assisting and facilitating the transmission of millions of illegal prerecorded telemarketing robocalls, including those they knew or should have known were scams, to consumers nationwide. Many of the calls originated overseas, and related to the COVID-19 pandemic, with the defendants allegedly failing to act as a gatekeeper to stop them from entering the country. Acting on the Commission’s behalf, the Department of Justice filed the complaint in federal district court, along with an order permanently stopping the defendants from such illegal conduct. The order also includes a suspended civil penalty of more than $3 million.
Competition
FTC Chair Lina M. Khan led the FTC’s delegation at the International Competition Network’s 21st annual conference, hosted by the German Bundeskartellamt in Berlin on May 4-6. Over 80 jurisdictions participated in the conference. Chair Khan delivered a keynote address on merger enforcement. She highlighted the broad reassessment being undertaken by the U.S. antitrust agencies on the effectiveness of competition tools and the agencies’ approach to law enforcement.
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The FTC required Prince International Corp. and Ferro Corp. to divest three facilities used to make porcelain enamel frit, glass enamel, and forehearth colorants, as a condition of Prince’s parent company, American Securities Partners VII, L.P., acquiring competitor Ferro Corp. for $2.1 billion. The consent agreement preserves competition in the North American market for porcelain enamel frit, and in the world markets for forehearth colorants and glass enamel. It also requires both the newly merged company and the divestiture buyer to obtain FTC approval for 10 years for certain future transactions involving these product markets.
As a condition of Hikma Pharmaceuticals PLC’s $375 million acquisition of Custopharm, Inc., the FTC required Custopharm’s parent company to transfer Custopharm’s assets related to the corticosteroid drug, triamcinolone acetonide, or TCA, to its subsidiary, Long Grove Pharmaceuticals, LLC. The consent agreement preserves competition in the market for generic TCA by removing any incentive for Hikma to terminate or delay the marketing of the TCA product in its own development pipeline. Historically, the entry of additional generic pharmaceutical competitors has led to lower prices for patients. Further, the consent agreement requires Long Grove to maintain the competitive viability of the retained TCA assets and requires Hikma to seek Commission approval for future acquisitions related to TCA.
A Texas federal jury found the former owner of a physical therapist staffing company guilty of obstructing an FTC investigation into the company’s alleged anticompetitive conduct. The FTC had referred the case to the Department of Justice, which subsequently prosecuted it, alleging both criminal wage fixing and obstruction of the FTC’s case. The Eastern District of Texas jury found the company’s former owner Neeraj Jindal guilty of obstruction of justice for obstructing the FTC investigation.
In Other News
FTC Chair Lina M. Khan announced the appointment of two senior agency leaders: General Counsel Anisha Dasgupta and Office of Policy Planning Director Elizabeth Wilkins. Dasgupta comes to the FTC from the Office of the New York State Attorney General, where she has served since 2014 as Deputy Solicitor General. Prior to that, Dasgupta was an appellate attorney with the Civil Division of the United States Department of Justice. In 2009 Dasgupta completed a six-month detail as a counsel at the Office of the White House Counsel. Dasgupta graduated from Yale Law School. She earned a Ph.D. from Cambridge University. Before joining the FTC, Wilkins served as Senior Advisor to the White House Chief of Staff. Prior to that, she worked in several senior leadership roles at the Office of the Attorney General for the District of Columbia, including Senior Counsel for Policy and Chief of Staff. Before law school, Wilkins was a policy advisor in the White House Domestic Policy Council. She graduated from Yale Law School.
The FTC is seeking comments on updates to the Telemarketing Sales Rule that would protect small businesses against business-to-business telemarketing schemes, address tech-support scams that target seniors, and extend click-to-cancel requirements to telemarketing. A notice of proposed rulemaking proposes amending the recordkeeping requirements of the Telemarketing Sales Rule and prohibiting deception in business-to-business telemarketing calls. Specifically, the notice seeks public comment on business-to-business schemes, as the Commission’s experience has shown that small businesses continue to be harmed by deceptive telemarketing. In addition, the notice seeks comment on recordkeeping requirements, specifically whether the FTC should amend the rule’s recordkeeping provisions to require telemarketers to retain information in seven new categories, including keeping recordings of robocalls. An advance notice of proposed rulemaking seeks information on a range of issues, including tech-support scams, click-to-cancel requirements, and robocalls and other telemarketing to small businesses.
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