FTC International Monthly - December

The FTC is seeking to block Microsoft Corp. from acquiring leading video game developer Activision Blizzard, Inc., alleging that the $69 billion deal would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business. Activision is one of only a very small number of top video game developers in the world that create and publish high-quality video games for multiple devices. It produces some of the most iconic and popular video game titles, including Call of Duty and World of Warcraft, and has millions of monthly active users around the world, according to the FTC’s complaint. Activision currently has a strategy of offering its games on many devices regardless of producer. But that could change if the deal is allowed to proceed. The FTC asserts that Microsoft would have both the means and incentive to harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content or withholding content from competitors entirely.

The FTC joined the Department of Justice in filing an amicus brief with the U.S. Court of Appeals for the Seventh Circuit in the cases of Deslandes v. McDonald’s USA, LLC and Turner v. McDonald’s USA, LLC. The brief argues that the antitrust laws protect competition for workers. It also asks the appeals court to hold that a lower court applied the wrong test in a decision that dismissed workers’ allegations that restrictions in McDonald’s franchise agreements banning store owners from hiring workers away from other McDonald’s stores violated U.S. antitrust law. The brief argues that horizontal no-hire restrictions are per se illegal unless the employer can show that the provision is “ancillary” to the franchise agreement itself, which in this case depends on whether the hiring restriction is “reasonably necessary” to a pro-competitive benefit of the franchise agreements.

FTC Amicus Brief Challenges Abuse of FDA “Orange Book” Listing Procedures To Block Drug Competition

The FTC filed an amicus brief with the U.S. District Court for the District of Delaware in the case of Jazz Pharmaceuticals v. Avadel CNS Pharmaceuticals. The brief highlights the significant harm to consumers when a branded drug company improperly lists a patent on a distribution system in the Food and Drug Administration’s “Orange Book” of approved drugs. The FTC’s amicus brief explains how the Orange Book listing process can be abused and emphasizes the harm to competition and consumers that can result from that abuse, including blocking of the introduction of lower-cost generic medications or other follow-on competition. The FTC’s amicus brief further argues that distribution patents should not be listed in the FDA Orange Book because they do not meet the statutory requirement that a listed patent claim either the drug itself or a method of using the drug.

The FTC is taking action against Precision Patient Outcomes, Inc. and the company’s CEO for marketing an over-the-counter dietary supplement as an effective treatment to mitigate the effects of COVID-19. In its complaint, the FTC seeks to permanently stop the company and its CEO from using deceptive treatment or prevention claims with no supporting scientific evidence to sell their dietary supplement, which contains nothing more than vitamins, zinc, and a flavonoid. The FTC alleges that these practices violate the FTC Act and the COVID-19 Consumer Protection Act. The latter allows the Commission to seek civil penalties in cases of COVID-related consumer fraud.

The Department of Justice, on behalf of the FTC, and the Wisconsin Attorney General, filed suit against Consumer Law Protection and related companies, along with their owners and operators, for scamming consumers—mostly older adults—out of more than $90 million in a massive timeshare exit scam. The defendants used direct mail and in person “seminars” to pitch a dizzying array of deceptive claims to pressure consumers into paying for their services. According to the complaint, defendants 1) falsely used logos of legitimate timeshare companies and trade groups; 2) falsely told consumers that they could not exit a timeshare on their own without paying defendants an exorbitant fee; 3) threatened consumers to buy their service on the day of the sales pitch or never be able to exit their timeshare; 4) falsely told consumers’ their heirs would be saddled with ever-increasing maintenance fees after the consumers die, despite state procedures allowing heirs to disclaim any timeshare inheritance; 5) failed to honor refund guarantees; and 6) pressured consumers to sign contracts with non-negotiable and unenforceable terms.

The FTC and state attorneys general announced lawsuits against Google LLC and iHeartMedia, Inc. for airing nearly 29,000 deceptive endorsements by radio personalities promoting their supposed use of and experience with Google’s Pixel 4 phone in 2019 and 2020. According to the FTC, Google hired iHeartMedia and 11 other radio networks in ten major markets to have on-air personalities record and broadcast scripted endorsements. However, the on-air personalities were not provided with Pixel 4s before recording and airing the majority of the ads and therefore did not own or regularly use the phones. The proposed FTC orders and the state judgments settling the allegations bar Google and iHeartMedia from similar misrepresentations, and the state judgments also require them to pay $9.4 million in penalties.

The FTC is taking action against DK Automation and its owners for using unfounded claims of big returns to entice consumers into moneymaking schemes involving Amazon business packages, business coaching, and cryptocurrency. Few consumers ever made money from these schemes. The defendants charged consumers as much as $100,000. A proposed court order would require the defendants to turn over $2.6 million to be used to refund consumers harmed by their deception, as well as requiring them to stop their deceptive earnings pitches and follow the law. The FTC’s complaint notes that the defendants continued to use deceptive earnings claims even after they received Notices of Penalty Offenses from the agency regarding money-making opportunities and endorsements.

The FTC obtained a Federal District Court Order against Superior Products International II, Inc. and its CEO to permanently halt its deceptive energy-efficiency claims about coating products sold for houses and other buildings. The court issued a permanent injunction prohibiting Superior Products and the individual defendant from misrepresenting the coatings’ insulating or energy-saving capabilities and imposed a monetary judgment of $14 thousand. The order further prohibits the defendants from failing to comply with the FTC’s R-Value Rule, which covers the labeling and advertising of home insulation.

FTC Proposes Updating Eyeglass Rule To Require Prescribers To Get Signed Confirmation When Providing a Prescription to Their Patients

The FTC has proposed updating the Eyeglass Rule to further facilitate consumer choice and promote competition in the eyeglass market by ensuring that ophthalmologists and optometrists provide patients with a copy of their prescription immediately after the completion of a refractive eye exam, get a signed statement from the patient confirming that they have received their prescription, and keep a record of that confirmation for at least three years.

The FTC released the National Do Not Call Registry Data Book for Fiscal Year 2022. The Registry lets consumers add their phone number and choose not to receive most legal telemarketing calls. In the last fiscal year, over 2.5 million people signed up with the DNC Registry, bringing the total to more than 246 million phone numbers. According to the Data Book, imposter calls again topped the list of complaints, with almost 287,000 received during the fiscal year ending on September 30 including both live calls and robocalls. In such calls, imposters falsely pose as government representatives, such as the Social Security Administration or the IRS, legitimate business entities, or as people affiliated with them.

FTC Issues Agency Financial Report for Fiscal Year 2022

The FTC issued its Fiscal Year 2022 Agency Financial Report. The report highlights the FTC’s accomplishments in protecting consumers and promoting competition and reaffirms the agency’s commitment to responsible stewardship of resources and sound financial operations. The report includes annual audited financial statements, as well as the Office of the Inspector General’s assessment of the FTC’s key management accomplishments and opportunities for performance improvements. The FTC’s FY 2022 independent financial statement audit marks the agency’s 26th consecutive unmodified opinion, the highest audit opinion available. The report is being submitted to Congress and the Director of the Office of Management and Budget.