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April 2023
Highlights
FTC staff are seeking information on the business practices of cloud computing providers, including issues related to the market power of these companies, the impact on competition, and potential security risks. In a Request for Information, FTC staff are seeking information about the competitive dynamics of cloud computing, the extent to which certain segments of the economy are reliant on cloud service providers, and the security risks associated with the industry’s business practices. FTC staff are also interested in the impact of cloud computing on specific industries including healthcare, finance, transportation, e-commerce, and defense. Comments are requested by May 22 and will be posted to Regulations.gov after they are submitted.
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The FTC testified before the House Energy and Commerce Subcommittee on Innovation, Data, and Commerce. In Commission testimony delivered by FTC Chair Lina M. Khan and Commissioners Rebecca Slaughter and Alvaro Bedoya, the agency outlined its work on important consumer protection enforcement and policy initiatives, including safeguarding consumers’ privacy, combating junk fees and unwanted charges, making it easier for consumers to cancel subscriptions, and protecting servicemembers and veterans, older Americans, and other communities from fraud and deception. The testimony also details the FTC’s efforts to use its full set of tools to protect the American people from unfair methods of competition, noting that the agency is prioritizing vigorous merger enforcement, targeting anticompetitive conduct, and conducting research on important policy issues. At a time of increasing investigation and litigation demands on the agency, the testimony also highlights the need to ensure that the FTC has the resources and tools it needs to protect the American people.
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The FTC testified before the House Judiciary Subcommittee on Responsiveness and Accountability to Oversight on the responses the agency has provided to the Subcommittee since the beginning of the 118th Congress. The FTC shares lawmakers’ view that congressional oversight is vital to a well-functioning democracy and is committed to cooperating with the Committee’s efforts to seek information, consistent with the FTC’s obligation to protect ongoing agency initiatives and law enforcement efforts, the testimony states.
Competition
The FTC and DOJ’s Antitrust Division co-hosted the second Spring Enforcers Summit on March 27. FTC Chair Lina M. Khan and Assistant Attorney General Jonathan Kanter, as well as senior staff from both agencies, gathered with international enforcers from thirty jurisdictions and representatives from twenty state attorneys general offices to discuss complex challenges in merger and unilateral conduct enforcement in digital and transitional markets. The event highlighted global, federal, and state perspectives on merger review and monopolization, including remedies, rollup strategies, and other pre-commercial activities; procurement collusion; and unfair methods of competition. Recordings of interviews with Chair Khan and AAG Kanter and panels on challenges in merger and monopolization cases are available here.
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The FTC issued an Opinion and Order finding that the merger between DNA sequencing provider, Illumina, Inc., and GRAIL, Inc., which makes a multi-cancer early detection (MCED) test, violated the antitrust laws and requiring Illumina to divest Grail. The Commission found that the acquisition would diminish innovation in the U.S. market for life-saving MCED tests while increasing prices and decreasing choice and quality of tests. The Commission’s opinion rejects the parties’ claim that this acquisition itself would have saved lives, noting that their claims regarding the benefits of the deal were vague, self-serving, and unsupported. Ultimately, the Commission held that letting competition spur innovation among MCED test providers would do more to save lives than allowing a monopolist to vertically integrate and capture the market. The decision reflects the Commission’s emphasis on better capturing the full set of ways in which mergers can harm competition by placing greater weight on assessing both nonhorizontal and forward-looking competitive harm. The Opinion reverses an Administrative Law Judge’s Initial Decision that dismissed the case. Last year, the European Commission found that the transaction was anticompetitive.
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FTC Chair Lina M. Khan, Assistant Attorney General Jonathan Kanter, and EC Executive Vice President Margrethe Vestager met in Washington, D.C., for the third principal-level meeting of the U.S.-EU Joint Technology Competition Policy Dialogue to continue work on cooperation in ensuring and promoting fair competition in the digital economy. The discussions centered on critical themes such as theories of harm in digital mergers. The agencies shared policy reflections in the area of abuse of dominance and monopolization in the digital sector, presented recent policy initiatives, and exchanged views on the evolving business strategies of big tech companies as well as on their implications for enforcement.
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Consumer Protection and Privacy
The FTC proposed a “click to cancel” provision requiring sellers to make it as easy for consumers to cancel their enrollment in recurring subscriptions and memberships as it was to sign up. That is just one of several significant updates the Commission is proposing to its rules regarding subscriptions and recurring payments. The new click to cancel provision, along with other proposals, would go a long way to rescuing consumers from seemingly never-ending struggles to cancel unwanted subscription payment plans for everything from cosmetics to newspapers to gym memberships. The notice of proposed rulemaking is part of the FTC’s ongoing review of its 1973 Negative Option Rule, which the agency uses to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs.
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With fraud on social media surging, the FTC has issued orders to eight social media and video streaming platforms seeking information on how these companies scrutinize and restrict paid commercial advertising that is deceptive or exposes consumers to fraudulent health-care products, financial scams, counterfeit and fake goods, or other fraud. The amount of money consumers have reported losing to fraud that originated on social media platforms has skyrocketed since 2017. In 2022 alone, consumers reported losing more than $1.2 billion to fraud that started on social media, more than any other contact method, according to FTC data. The Commission also is seeking information about how the social media and video streaming companies ensure that consumers are able to identify commercial advertising on their platforms as advertising. The orders, which the companies are required to comply with by law, were sent to: Meta Platforms, Inc.; Instagram, LLC; YouTube, LLC; TikTok, Inc.; Snap, Inc.; Twitter, Inc.; Pinterest, Inc.; and Twitch Interactive, Inc.
As a result of an FTC lawsuit, the operators of a telemarketing scam that called hundreds of thousands of consumers nationwide and allegedly scammed them out of more than $6 million for expensive “extended automobile warranties,” will face a lifetime ban from the extended automobile warranty industry and from all outbound telemarketing. According to the FTC, the defendants falsely claimed to be affiliated with vehicle makers and deceptively claimed to offer “bumper to bumper” protection. American Vehicle Protection Corp., CG3 Solutions, Inc., and Tony Gonzalez Consulting Group, Inc., along with their owners, have agreed to the terms of the orders.
Anthony Joseph Damiano and his funeral service companies—Funeral & Cremation Group of North America, LLC, and Legacy Cremation Services, LLC— will pay civil penalties and abide by strict requirements on how they communicate with customers to resolve a lawsuit filed on behalf of the FTC by the U.S. Department of Justice. The DOJ and FTC alleged that defendants misrepresented their location, leading consumers to believe they were a local provider, advertised deceptively low prices, illegally threatened and failed to return cremated remains to bereaved consumers, and failed to provide disclosures required by the Funeral Rule.
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The FTC pursued its first action under the Opioid Addiction Recovery Fraud Prevention Act (OARFPA), suing Dr. Dalal A. Akoury and a set of companies she controls that operate as AWAREmed Health & Wellness Resource Center, a medical clinic, for making a wide range of false or unsupported claims for addiction treatment services, cancer treatment services, and the treatment of other serious conditions. The Department of Justice filed the case on the FTC’s behalf. The proposed order settling the Commission’s complaint bars Dr. Akoury and her AWAREmed clinic from making such unsupported claims and requires her to pay a $100,000 civil penalty.
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The FTC has acted to stop Nexway, a multinational payment processing company, along with its CEO and chief strategy officer, from serving as a facilitator for tech support scammers through credit card laundering. These defendants have agreed to court orders that prohibit them from any further payment laundering and require them to closely monitor other high-risk clients for illegal activity. The complaint and orders were filed by the U.S. Department of Justice on behalf of the FTC. The FTC’s complaint against Nexway, its CEO, and its chief strategy officer charges that the defendants were at the center of several offshore tech support scams, processing tens of millions of dollars in charges and giving the scammers access to the U.S. credit card network.
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The FTC and the State of Florida have filed suit against Chargebacks911 for unfairly thwarting consumers who were trying to dispute credit card charges through the chargeback process. The chargeback process is a key protection for consumers who wish to contest unwanted, fraudulent, or incorrect credit card charges. When a consumer sees a charge they did not authorize, or for which the promised goods of services didn’t arrive, they can dispute the charge with their credit card company. The company then contacts the merchant’s credit card company for information and determines whether to reverse the charge. According to the complaint, Chargebacks911 has regularly sent screenshots on behalf of their clients to credit card companies that supposedly show that consumers had agreed to the disputed charges—often recurring monthly subscription charges. The complaint notes that, in many instances, these screenshots have not actually been from the website where consumers made the disputed purchases and that the company ignored clear warning signs the website screenshots were misleading.
The FTC has sent notices of penalty offenses to approximately 670 companies involved in the marketing of OTC drugs, homeopathic products, dietary supplements, or functional foods, placing them on notice they could incur significant civil penalties if they fail to adequately substantiate their product claims in ways that run counter to the litigated decisions of prior FTC administrative cases. While the FTC has long history of providing guidance on advertising substantiation, through both litigated cases and policy statements, many sellers continue to make unsubstantiated claims about their products and false claims about the proof they have. Notices of penalty offenses allow the agency to seek civil penalties -- up to $50,120 per violation -- against a company that engages in conduct that it knows has been found unlawful in a previous FTC administrative order, other than a consent order.
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U.S. consumers are bombarded by millions of unwanted, illegal robocalls each month, both to their landlines and cell phones. Data show that a significant proportion, if not the majority, of illegal robocalls originate from overseas. To stop these illegal overseas calls, the FTC has implemented Project Point of No Entry (PoNE), targeting “point of entry” or “gateway” Voice over Internet Protocol (VoIP) service providers and warning they must work to keep illegal robocalls out of the country. Through Project PoNE, the FTC is: 1) identifying point of entry VoIP service providers that are routing or transmitting illegal call traffic, 2) demanding they stop doing so and warning their conduct may violate the Telemarketing Sales Rule (TSR), and then 3) monitoring them to pursue recalcitrant providers, including by opening law enforcement investigations and filing lawsuits when appropriate. The FTC can seek civil penalties and court injunctions to stop TSR violations. It can also seek money to refund to consumers who were defrauded via illegal telemarketing calls. The FTC coordinates directly with the agency’s federal and state partners, which support the program and pursue their own actions to fight illegal telemarketing robocalls.
In Other News
The FTC will hold an informal hearing on its proposed rule prohibiting government and business impersonation at 1 p.m. EDT on May 4. The informal hearing will be held virtually and livestreamed on ftc.gov.
The FTC will host a public workshop on May 18 in Washington, DC to examine proposed changes to its Ophthalmic Practice Rules, also known as the Eyeglass Rule. The workshop, A Clear Look at the Eyeglass Rule, is free and open to the public, and pre-registration is not required. In December 2022, the FTC announced a proposal to update the Eyeglass Rule, which is designed to facilitate consumer choice and promote competition in the eyeglass market by requiring ophthalmologists and optometrists to provide patients with a copy of their prescription immediately after the completion of an eye exam. Under the rule, prescribers cannot require that patients buy eyeglasses, pay an additional fee, or sign a waiver or release as a condition of providing them with a copy of their prescription. The proposed rule changes would require prescribers to 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. For other changes, click on the headline above.
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The FTC has launched an inquiry into the small business credit reporting industry, ordering five firms in that industry to provide the Commission with detailed information about their products and processes: Dun & Bradstreet, Experian Information Solutions, Equifax, Ansonia Credit Data, and Creditsafe USA. Unlike credit reports for individual consumers, which are governed by the Fair Credit Reporting Act, there is no federal law that specifically outlines processes and protections available to small businesses when it comes to credit reporting. This can make business credit reporting hard to understand, and it can be particularly difficult for small businesses to navigate how to correct errors or omissions in their credit reports in a timely fashion. These reports can significantly affect small businesses, potentially impacting the terms on which they can obtain the goods, services, and equipment they need to stay in business. Because many of these credit reporting companies start developing a company’s credit report at the time it incorporates, tapping public records and other available financial data, business owners may not even be aware a report about them exists. Sometimes small businesses only discover they have a credit report when they are denied credit by a supplier.
The FTC’s Office of Technology published a blog post highlighting recent enforcement actions against GoodRx and BetterHelp, two digital healthcare platforms, for allegedly sharing user health data with third parties for advertising. This was done through third-party tracking pixels, which enable platforms to amass, analyze, and infer information about user activity. The blog aims to highlight key practices and trends in online ad tracking – and questions of interest across competitive dynamics, consumer harms, and business practices across data processing, use, monetization, retention, and management.
The FTC filed a brief as amicus curiae in the U.S. District Court for the District of Delaware in a case related to Sage Chemical Inc. and its marketing partner TruPharma, LLC’s efforts to sell a lower-cost alternative to Apokyn, an injectable drug used to treat patients with symptoms of advanced Parkinson’s Disease. As detailed in the brief, plaintiffs Sage and TruPharma alleged that multiple defendants, including Supernus Pharmaceuticals Inc., have engaged in several unlawful strategies to delay or block entry of a generic version of the branded apomorphine drug, Apokyn. The brief describes four important antitrust issues raised by Supernus’s motion to dismiss the case in its entirety and reiterates that “in the pharmaceutical industry, the exclusion of lower-cost generic drug competition typically causes significant harm to consumers and to competition.”
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