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December 2023
Competition
The FTC and Department of Justice jointly issued the 2023 Merger Guidelines, which describe factors and frameworks the agencies utilize when reviewing mergers and acquisitions. The 2023 Merger Guidelines are the culmination of a nearly two-year process of public engagement and reflect modern market realities, advances in economics and law, and the lived experiences of a diverse array of market participants. They emphasize the dynamic and complex nature of competition ranging from price competition to competition for the terms and conditions of employment, to platform competition. This approach enables the agencies to assess the commercial realities of the United States’ modern economy when making enforcement decisions and ensures that merger enforcement protects competition in all its forms. Like the prior horizontal and vertical merger guidelines they replace, the 2023 Merger Guidelines are not themselves legally binding, but provide transparency into the agencies’ decision-making process.
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Illumina, Inc. announced it would divest Grail, Inc. following a U.S. Court of Appeals for the Fifth Circuit decision that supported the FTC’s determination that the acquisition threatened competition in the market for cancer detection tests. According to a statement by Bureau of Competition Director Henry Liu, the court’s unanimous ruling recognizes how vertical deals can threaten competition and provides a clear roadmap for future cases. The FTC challenged Illumina’s acquisition of Grail in March 2021 alleging the deal would diminish innovation in the U.S. market for multi-cancer early detection (MCED) tests while increasing prices and decreasing choice and quality of tests.
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The FTC sought to block Sanofi’s proposed acquisition of an exclusive license to Maze Therapeutics Inc.’s developmental drug to treat Pompe disease. Following this challenge, the parties abandoned the transaction. The FTC charged that the license, valued at up to $755 million, would eliminate a nascent competitor to Sanofi in Pompe disease drugs, threatening to stall innovation and deprive patients of lower drug prices. With the deal’s termination, the FTC has now dismissed its case. This transaction is the 20th transaction parties have abandoned in the face of FTC review since July 2021.
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The FTC filed an amicus brief in Mylan Pharmaceuticals Inc. v. Sanofi-Aventis U.S. LLC, to address the anticompetitive harm that stems from improperly listed patents in the Food and Drug Administration’s publication of “Approved Drug Products with Therapeutic Equivalence Evaluations,” commonly known as the “Orange Book.” In its amicus brief, the FTC explains that improper Orange Book listings, such as those alleged in Mylan’s case, can cause significant harm to competition, including delaying consumer access to a lower-priced competing drug that would save patients money while also potentially offering better access and higher quality medications. In September, the FTC issued a policy statement, which warned that the agency would be scrutinizing the improper submission of patents for listing in the Orange Book.
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The FTC, Department of Justice, and Department of Health and Human Services are working together to lower health care costs, including partnering on new initiatives and engaging in greater data sharing, which include a joint Request for Information to seek input on how private-equity and other corporations’ control of health care is impacting Americans. The FTC, DOJ, and HHS will engage in data-sharing to the extent possible, with each agency naming health care competition officers to help lead these efforts.
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The FTC, along with the California Attorney General, sued to block John Muir Health’s proposed $142.5 million deal to acquire sole ownership of San Ramon Regional Medical Center, LLC from current majority owner Tenet Healthcare Corporation, saying the deal will drive up health care costs in California’s I-680 corridor, which spans Contra Costa and Alameda Counties in the San Francisco Bay Area. The deal would eliminate head-to-head competition between the merging parties and allow John Muir to demand higher rates at its two hospitals as well as San Ramon Medical for inpatient general acute care services (GAC), which are a broad range of essential medical, surgical, and diagnostic services that require an overnight hospital stay. The elimination of competition between John Muir and San Ramon Medical would also reduce incentives for these hospitals to invest in quality improvements.
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Consumer Protection and Privacy
The FTC has obtained proposed orders against the operators of a wide-ranging scheme known as “The Sales Mentor” that made millions by falsely promising consumers that they could make big money from telemarketing sales. The defendants have agreed to proposed court orders that would require them to pay a total of $1 million for consumer refunds. In a federal court complaint, the FTC charged the companies, their owners, their officers, and a former sales director with deceiving consumers to pay hundreds or even thousands of dollars for supposed telemarketing training programs that rarely, if ever, delivered on what was promised. In addition, the FTC said the companies continued to make deceptive earnings claims even after they received the FTC’s Notices of Penalty Offenses on money-making opportunities and on endorsements and testimonials warning them that such conduct is illegal.
CRI Genetics, LLC will pay a $700,000 civil penalty and will be barred from a wide range of deceptive practices to settle charges from the FTC and the California Attorney General that the company deceived users about the accuracy of its DNA reports. In a joint complaint filed in federal district, the agencies say that in marketing its DNA-based ancestry and information reports, CRI deceived consumers about the accuracy of its test reports compared with those of other DNA testing companies, falsely claimed to have patented an algorithm for its genetic matching process, and used fake reviews and testimonials on its websites. CRI also used “dark patterns” in its online billing process to trick consumers into paying for products they did not want and did not agree to buy, according to the complaint.
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The FTC will require prison communications provider Global Tel*Link Corp. and two of its subsidiaries to notify consumers of any future data breaches as part of a proposed settlement over charges they failed to secure sensitive data of hundreds of thousands of users stored in a cloud environment and failed to alert all those affected by the incident. In a complaint, the FTC says that Global Tel*Link and two of its subsidiaries failed to implement adequate security safeguards to protect personal information they collect from users of its services, which enabled bad actors to gain access to unencrypted personal information stored in the cloud and used for testing new search software.
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In Other News
The FTC will open an online submission portal from January 2 to 12 for a Voice Cloning Challenge to address the present and emerging harms of artificial intelligence- or “AI”-enabled voice cloning technologies. Voice cloning technology poses significant risk – families and small businesses can be targeted with fraudulent extortion scams; and creative professionals, such as voice artists, could potentially have their voices appropriated in ways that could jeopardize an artist’s reputation and ability to earn income. The FTC is prepared to use law enforcement actions under the FTC Act, the Telemarketing Sales Rule, and other authorities to hold bad actors accountable. The agency also is considering adoption of a recently proposed Impersonation Rule that would give it additional tools to deter and halt deceptive voice cloning practices. To further advance this work, the FTC is launching the Voice Cloning Challenge to encourage the development of multidisciplinary solutions – from products to policies to procedures – aimed at protecting consumers from AI-enabled voice cloning harms including fraud and the broader misuse of biometric data and creative content. The Commission is asking the public to submit ideas to detect, evaluate, and monitor cloned voices.
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The FTC will hold a virtual informal hearing on January 16 on proposed amendments to the Negative Option Rule. On March 23, the FTC announced a rulemaking proposing several significant updates to its rule regarding subscriptions and recurring payments, including a “click to cancel” provision requiring sellers to make it as easy for consumers to cancel their enrollment as it was to sign up. The new click to cancel provision, along with other proposals, is aimed at rescuing consumers from seemingly never-ending struggles to cancel unwanted subscription payment plans for everything from cosmetics to newspapers to gym memberships. The hearing will be open to the public and viewable on the FTC’s website.
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The FTC has finalized a new rule to fight two common types of illegal tactics consumers face when buying a car: bait-and-switch tactics and hidden junk fees. The new rule is expected to save consumers nationwide more than $3.4 billion and an estimated 72 million hours each year shopping for vehicles. The Combating Auto Retail Scams (CARS) Rule also includes clear protections for members of the military and their families, who are targeted not only with bait-and-switch tactics and junk fees, but also deceptive information about whether dealers are affiliated with the military and other specific issues that affect servicemembers.
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According to a consumer alert from the FTC, scammers are using multiple schemes to get unsuspecting consumers to scan bogus QR codes so they can steal information. These schemes include covering up QR codes on parking meters with a QR code of their own and sending QR codes by text message or email along with a pretext to induce the recipient to scan it. Pretexts include: claiming a package could not be delivered and the consumer must contact them to reschedule; an account problem requires verification of information; and suspicious account activity requires a password to be changed. The FTC advises:
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If you see a QR code in an unexpected place, inspect the URL before you open it. If it looks like a URL you recognize, make sure it’s not spoofed – look for misspellings or a switched letter.
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Don’t scan a QR code in an email or text message you weren’t expecting – especially if it urges you to act immediately. If you think the message is legitimate, use a phone number or website you know is real to contact the company.
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Protect your phone and accounts. Update your phone's OS to protect against hackers and protect your online accounts with strong passwords and multi-factor authentication.
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The FTC issued its Fiscal Year 2023 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. This report, required by the Office of Management and Budget, 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 2023 independent financial statement audit marks the agency’s 27th consecutive unmodified opinion, the highest audit opinion available.
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