|
October 2023
Competition
The FTC and 17 state attorneys general sued Amazon.com, Inc. alleging that the online retail and technology company violates the antitrust laws by using a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power in online superstore and online marketplace services markets. The FTC and its state partners say Amazon’s actions allow it to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon. The complaint alleges that Amazon violates the law not because it is big, but because it engages in a course of exclusionary conduct that prevents current competitors from growing and new competitors from emerging. By stifling competition on price, product selection, quality, and by preventing its current or future rivals from attracting a critical mass of shoppers and sellers, Amazon ensures that no current or future rival can threaten its dominance. This course of conduct results in higher prices across the internet. The FTC and its state partners are seeking a permanent injunction in federal court that would prohibit Amazon from engaging in its unlawful conduct and restore competition.
|
The FTC and the U.S. Department of Labor signed a new agreement that will bolster the FTC’s efforts to protect workers by promoting competitive U.S. labor markets and putting an end to unfair, deceptive, and other unlawful acts and practices, as well as unfair methods of competition, that harm workers. The new memorandum of understanding between the two agencies outlines ways in which the FTC and DOL will work together on key issues such as labor market concentration, one-sided contract terms, and labor developments in the “gig economy.” The MOU builds on the FTC’s recent efforts to increase collaboration on issues facing workers, including the FTC’s recent MOU with the National Labor Relations Board as well as the FTC’s enforcement policy statement related to gig work. It also builds on the broader whole-of-government approach to fostering competition that was a centerpiece of President Biden’s July 2021 Executive Order on Promoting Competition in the American Economy. As part of this initiative, the FTC has been working with agencies throughout the federal government to ensure stronger enforcement of the antitrust laws.
|
The FTC issued a policy statement, supported by the U.S. Food and Drug Administration, warning pharmaceutical companies that make and sell brand-name drugs that they could face legal action if they improperly list patents in the FDA’s catalog of “Approved Drug Products with Therapeutic Equivalence Evaluations,” commonly known as the “Orange Book.” When a brand pharmaceutical company lists a patent in the Orange Book it may lead to a statutory stay that blocks the introduction of competing drug products, including lower-cost generic alternatives, for up to 30 months. Therefore, improperly listing patents in the Orange Book may prevent competition from less expensive generic alternatives and keep prices artificially high, according to the policy statement. The FTC will scrutinize improper Orange Book patent listings as potential unfair methods of competition in violation of Section 5 of the FTC Act.
|
FTC Participates in ICN Conference
The FTC joined 400 members and non-governmental advisors from 98 jurisdictions participating this week in the International Competition Network annual conference in Barcelona. The Spanish competition authority, the National Commission on Markets and Competition (CNMC), hosted the conference. FTC Chair Lina M. Khan, who currently serves as ICN Vice Chair for Digital, delivered a keynote address on the updates to merger guidelines in the United States and led a discussion among agency heads about artificial intelligence. FTC Office of International Affairs Director Maria Coppola was a panelist on a breakout session addressing remedies in conduct cases. FTC attorney Paul O’Brien moderated a panel showcasing member implementation of ICN work product. The plenary sessions were livestreamed on October 18-20 and are available at the link.
|
The FTC and Justice Department are hosting an additional workshop to facilitate public dialogue on the 2023 Draft Merger Guidelines that the agencies announced in July. This workshop, co-hosted with the University of Chicago Law School, Coase Sandor Institute for Law and Economics, will take place on November 3 from 9 a.m. to 4:45 p.m. CST. More information about the workshop, including an agenda, will be made available on the FTC’s website in the coming weeks. Like the agencies’ two prior workshops, held in September and earlier in October, this event is designed to promote a detailed discussion about the draft guidelines to complement the thousands of public comments submitted to the agencies.
|
Consumer Protection and Privacy
The FTC announced a new proposed rule to prohibit junk fees, which are hidden and bogus fees that can harm consumers and undercut honest businesses. The FTC has estimated that these fees can cost consumers tens of billions of dollars per year in unexpected costs. The agency launched a proceeding last year requesting public input on whether a rule would help to eliminate these unfair and deceptive charges. After receiving more than 12,000 comments on how fees affect their personal spending or business, the FTC is seeking a new round of comments on a proposed junk fee rule.
“All too often, Americans are plagued with unexpected and unnecessary fees they can’t escape. These junk fees now cost Americans tens of billions of dollars per year – money that corporations are extracting from working families just because they can,” said FTC Chair Lina M. Khan. “By hiding the total price, these junk fees make it harder for consumers to shop for the best product or service and punish businesses who are honest upfront. The FTC’s proposed rule to ban junk fees will save people money and time, and make our markets more fair and competitive.”
The proposed rule will save consumers more than 50 million hours per year of wasted time spent searching for the total price in live-ticketing and short-term lodging alone, according to FTC estimates. This time savings is equivalent to more than $10 billion over the next decade.
The FTC has joined the Federal Communications Commission in signing a renewed memorandum of understanding between public authorities who are members of the Unsolicited Communications Enforcement Network (UCENet). The MOU aims to promote cross-border collaboration to combat unsolicited communications, including email and text spam, scams, and illegal telemarketing. Given the success of the collaboration under the original document, UCENet members agreed to renew and make evergreen the MOU, a non-binding instrument which the FTC and its partners signed in 2016. The 2016 MOU was aimed at facilitating information sharing, capacity building, and enforcement assistance among the partners. For the past seven years, it also has facilitated communication about emerging threats and complaint trends related to spam, scams, and illegal telemarketing.
|
FTC Chair Lina M. Khan signed a cooperation agreement with the consumer protection authorities of four Latin American countries – Chile, Colombia, Mexico and Peru – to combat fraud both inside and outside the United States. The Multilateral Memorandum of Understanding promotes cooperation across Latin America, including information sharing to further investigations and policy development, as well as other types of assistance on cross-border enforcement matters. From 2019 to 2022, fraud reports against companies in these Latin American countries more than doubled, from 6,103 to 12,869. At the same time, total losses reported by consumers skyrocketed – from $39.4 million in 2019 to $237.9 million in 2022.
|
FTC Participates in ICPEN Conference in Warsaw
FTC staff participated in the International Consumer Protection and Enforcement Network conference in Warsaw, hosted by the Polish ICPEN Presidency, the Office of Competition and Consumer Protection (UOKiK). The conference was attended by more than 80 delegates. Members discussed important consumer protection topics, including artificial intelligence, sustainability claims, and online marketing. The FTC presented on recent complaint trends from econsumer.gov, a website created in 2001 by members of ICPEN to gather and share consumer complaints about international scams. In addition, econsumer.gov provides consumers information on complaint trends and consumer tips to avoid scams. Former FTC Chairman William Kovacic gave a keynote address on the importance of agency effectiveness. The FTC’s ICPEN presidency in 2024-2025 will follow the presidency of Poland’s UOKiK.
|
Two groups of student loan debt relief scammers will be permanently banned from the debt relief industry and are required to turn over their assets as part of a settlement with the FTC. In the FTC’s May 2023 complaints against SL Finance LLC and its owners, and BCO Consulting Services Inc. and SLA Consulting Services Inc. and their owners, the agency said that the defendants pretended to be affiliated with the U.S. Department of Education, charged illegal junk fees, and lured students with repayment programs and loan forgiveness that did not exist. The SL Finance defendants also falsely claimed that their program was part of the CARES Act or a similar COVID-19 relief program, according to the complaint. The agency charged that these operations bilked students out of millions of dollars. Under the proposed orders, in addition to the debt relief industry bans, defendants will also be banned from making any misrepresentations about financial products or services and from using false statements to collect consumers’ financial information. Both orders also impose monetary judgments of $5.8 million, largely suspended based on the defendants’ inability to pay.
The FTC and the Consumer Financial Protection Bureau (CFPB) obtained a settlement that will require credit reporting agency Trans Union LLC and a subsidiary to pay a total of $15 million to settle charges they failed to ensure the accuracy of tenant screening reports by including inaccurate and incomplete eviction records about consumers, hampering their ability to obtain housing. In a complaint filed in federal court, the FTC and CFPB say that TransUnion Rental Screening Solutions, Inc. and its parent company, Trans Union LLC, violated the Fair Credit Reporting Act by failing to ensure the accuracy of the information included in their tenant background screening reports.
|
The FTC announced a settlement with bankrupt crypto company Voyager that will permanently ban it from handling consumers’ assets and is filing suit against its former CEO for falsely claiming that customers’ accounts were insured by the Federal Deposit Insurance Corporation (FDIC) and were “safe,” even as the company was approaching an eventual bankruptcy. In the federal court complaint, the FTC charges that from at least 2018 until it declared bankruptcy in July 2022, Voyager used promises that consumers’ deposits would be “safe” to entice them to hand over their funds. When the company failed, consumers lost access to significant assets they had saved, including ongoing salary deposits, college tuition funds, and down payments for homes, according to the complaint, which notes that consumers were locked out of their cash accounts for more than a month and lost more than $1 billion in crypto assets.
|
As a result of an FTC lawsuit, the owner of a series of companies that charged consumers millions of dollars in undisclosed and recurring subscription fees for skin creams has agreed to a lifetime ban on negative option marketing and will turn over his funds and assets to the FTC. The FTC sued the individual defendant and eight companies he owned in 2019, charging that he marketed a number of skin creams online, selling them for a nominal “shipping and handling” fee, usually $4.99. Consumers who bought the products were not aware that they would later be charged the full price for the products and a recurring monthly charge. In its complaint, the FTC alleged that the defendant and his companies charged consumers tens of millions of dollars in fees they didn’t consent to, noting that the supposed disclosure of these fees was hidden behind a small link on the sales websites, and that consumers’ attempts to cancel were often unsuccessful, even when they returned the products unopened. The FTC also alleged that the defendant created hundreds of shell companies to facilitate payment processing for the scam.
|
A federal judge has ruled in favor of the FTC in a case the FTC has been litigating since 2019 against a telemarketing company and its owners, finding they made millions of illegal, unsolicited calls to consumers on the Do Not Call Registry. The court found that corporate defendants Day Pacer, LLC and Edutrek, L.L.C. purchased consumers’ contact information primarily from websites claiming to help people find jobs, and instead illegally called those consumers to market unsolicited vocational or post-secondary education services. The court also found that the defendants assisted and facilitated other telemarketing companies by paying them to make approximately 40 million calls to consumers on the Do Not Call Registry. Additionally, the court found that three individual defendants directly participated in or had authority to control the corporations’ deceptive acts or practices, and were therefore also liable. In granting summary judgment, the court found that the FTC was entitled to both injunctive relief and civil penalties. The court has scheduled a hearing to determine the amount of the civil penalty award and the scope of injunctive relief.
|
The FTC is taking action to stop Lurn, an online business coaching seller, from making unfounded claims that consumers can make significant income by starting an array of online businesses. The company, its CEO, and two spokespeople have agreed to court orders that will require them to stop their unlawful practices, and require Lurn and its CEO to turn over $2.5 million to the FTC to be used to refund money to consumers they harmed.
|
In Other News
The FTC is warning five tax preparation companies that they could face civil penalties if they use or disclose confidential data collected from consumers for the purpose of preparing their taxes for other unrelated purposes, such as advertising, without first obtaining consumers’ consent. The FTC is using its penalty offense authority to remind tax preparation companies of the law and deter them from breaking it. By sending a Notice of Penalty Offenses, the agency is warning recipients they could incur civil penalties of up to $50,120 per violation if they misuse personal data in ways that run counter to the original purpose for which this information was collected.
New data from the FTC shows that scams originating on social media have accounted for $2.7 billion in reported losses since 2021, more than any other contact method. In a new data spotlight, the FTC also takes a deep dive into social media scam trends in the first half of 2023. Reports during the first half of the year show that the most frequently reported scams on social media are related to online shopping, with 44 percent of reports pointing to fraud related to buying or selling products online. Most of these reports come from people who never received the items they ordered after responding to an ad on Facebook or Instagram. While online shopping scams are the most commonly reported scam on social media, the spotlight notes that scams using social media to promote bogus investment schemes account for larger overall losses, accounting for 53 percent of all the money reported lost to scams on social media in the first half of the year. Cryptocurrency played a significant role in the investment scams consumers reported; more than half of the reports showed that consumers paid the scammers using cryptocurrency. After investment scams, the spotlight noted that romance scams accounted for the second-most reported scam losses on social media.
|
A new FTC staff paper recommends that businesses, social media influencers and others who market or promote products online to children should avoid blurring advertising by clearly separating advertising and entertainment, educational, and other content to help limit potential harms to children. The paper further warns that for younger children in particular, disclosures are unlikely to be effective. In the document, FTC staff detailed some of the main takeaways from an October 2022 workshop, Protecting Kids from Stealth Advertising in Digital Media, that examined how blurred advertising online and in digital spaces makes it difficult for children to distinguish between advertising and other content. Participants at the workshop and public comments discussed research showing that many young consumers do not have the skills or cognitive defenses to identify or sufficiently evaluate blurred advertising, potentially leading to deception, as well as physical, psychological, financial, privacy, and other harms.
|
The FTC is seeking research for its annual PrivacyCon event, which will take place virtually on March 6 on such privacy and data security topics as artificial intelligence and health-related privacy. The annual event brings together a diverse group of stakeholders to discuss the latest research and trends related to consumer privacy and data security. As part of this event, the FTC is seeking empirical research and demonstrations, including rigorous economic analyses. PrivacyCon 2024 is particularly focused on such topics as: automated systems/artificial intelligence; health-related surveillance; children’s and teens’ privacy; deepfakes and voice clones; worker surveillance; and advertising ecosystem and surveillance advertising.
|
|
