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February 2024
Competition
In a statement in response to the announcement that Amazon and iRobot have terminated their $1.4 billion merger agreement, FTC Associate Director Nathan Soderstrom said that the Commission’s probe focused on Amazon’s ability and incentive to favor its own products and disfavor rivals’, and associated effects on innovation, entry barriers, and consumer privacy. The Commission’s investigation revealed significant concerns about the transaction’s potential competitive effects.
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The FTC sued to block Novant Health, Inc.’s $320 million acquisition of two North Carolina hospitals from Community Health Systems, Inc. (“CHS”). The Commission issued an administrative complaint and authorized a lawsuit in federal court to block the proposed acquisition, alleging that Novant Health’s proposed deal to acquire Lake Norman Regional Medical Center and Davis Regional Medical Center from CHS threatens to raise prices and reduce incentives to invest in quality and innovative care that would benefit patients in North Carolina’s Eastern Lake Norman Area.
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Consumer Protection and Privacy
Newly released FTC data show that consumers reported losing more than $10 billion to fraud in 2023, marking the first time that fraud losses have reached that benchmark. This marks a 14 percent increase over reported losses in 2022. Key findings include:
- Consumers reported losing more money to investment scams – more than $4.6 billion – than any other category in 2023. That amount represents a 21 percent increase over 2022.
- The second highest reported loss amount came from imposter scams, with losses of nearly $2.7 billion reported.
- In 2023, consumers reported losing more money to bank transfers and cryptocurrency than all other methods combined.
- The FTC received fraud reports from 2.6 million consumers last year, nearly the same number as 2022.
- The most commonly reported scam category was imposter scams, which saw significant increases in reports of both business and government impersonators.
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A federal district court has granted the FTC’s motion for summary judgment against a company and its CEO charged by the FTC with deceiving consumers into signing up for bogus health care plans. In its complaint, the FTC said that Simple Health misled people into thinking they were buying comprehensive health insurance. Consumers paid as much as $500 per month but, according to the FTC, the plans did not deliver the coverage or benefits they promised. This effectively left consumers uninsured and exposed to limitless medical expenses. The Court imposed a $195 million judgment against Simple Health Plans LLC and its CEO, and banned Simple Health, five related entities and the CEO from telemarketing and from marketing, promoting, selling, or offering any healthcare products.
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Blackbaud Inc. will be required to delete personal data that it doesn’t need to retain as part of a settlement with the FTC over charges that the company’s lax security allowed a hacker to breach the company’s network and access the personal data of millions of consumers including Social Security and bank account numbers. In its complaint, the FTC says that Blackbaud, which provides data services and financial, fundraising, and administrative software services to companies, nonprofits, healthcare organizations, and others, failed to implement appropriate safeguards to secure and protect the vast amounts of personal data it maintains as part of the services it provides to its clients.
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The FTC is charging online cash advance provider FloatMe and its co-founders with making false promises of quick and free cash advances. After consumers were deceived into signing up, the company failed to deliver the promised cash advance amounts, made it difficult to cancel, and discriminated against consumers who receive public assistance. The FTC is also charging FloatMe with falsely claiming cash advance limits would be increased by an automated system. Under the terms of a settlement order, FloatMe, as well as its co-founders are required to provide $3 million to be used to refund customers, stop the company’s deceptive marketing, make it easier for consumers to cancel their subscriptions, and institute a fair lending program.
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Tractor maker Kubota North America Corporation will pay a $2 million civil penalty as a result of an FTC action against the company for falsely labeling some of its replacement parts as being “Made in USA.” The company agreed to a court order that will forbid it from making deceptive claims and require it to pay the $2 million penalty. The penalty is the largest ever in a Made in USA case. The Department of Justice filed the order on the FTC’s behalf.
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In Other News
The FTC is seeking public comment on rule changes that would prohibit the impersonation of individuals. The proposed rule changes would extend protections of the new rule on government and business impersonation. The agency is taking this action in light of surging complaints around impersonation fraud, as well as public outcry about the harms caused to consumers and to impersonated individuals. Emerging technology – including AI-generated deepfakes – threatens to greatly boost these harmful practices, and the FTC is committed to using all of its tools to detect, deter, and halt impersonation fraud. The Commission is also seeking comment on whether the revised rule should declare it unlawful for a firm, such as an AI platform that creates images, video, or text, to provide goods or services that they know or have reason to know are being used to harm consumers through impersonation.
The FTC expanded its efforts over the last year to stop illegal calls originating overseas from entering the United States, working in coordination with the FCC. To stop the calls, the FTC announced in April 2023 that it had implemented Project Point of No Entry (PoNE). The project targets “point of entry” or “gateway” Voice over Internet Protocol (VoIP) service providers. It warns they must work to keep illegal robocalls out of the country. The project’s work has continued over the past year and continues to demonstrate its effectiveness. It has targeted more than two dozen service providers that were involved in millions of illegal robocall campaigns. Through Project PoNE, the FTC is disrupting foreign-based scammers and imposters responsible for blasting U.S. consumers with annoying and unwanted calls. As part of the project, the Commission: 1) identifies point of entry VoIP service providers that are routing or transmitting illegal call traffic from overseas, 2) demands they stop doing so and warns their conduct may violate the Telemarketing Sales Rule, and then 3) monitors them to pursue providers that do not comply, including by opening law enforcement investigations and filing lawsuits when appropriate.
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The FTC is sending warning letters to 39 funeral homes across the country after investigators discovered several violations of the Funeral Rule. The violations included funeral homes failing to provide accurate pricing information or failing to give out price information entirely. The violations were discovered by staff who conducted the agency’s first undercover phone sweep. The Funeral Rule gives consumers important rights when making funeral arrangements, including requiring funeral homes to provide certain information. The Rule requires that funeral homes give consumers who ask by telephone accurate information about prices or offerings from their price lists. They must also answer any other questions about their offerings and prices with any readily available information that reasonably answers the questions. They may not require the consumer to provide their name, address, or phone number, or come to the funeral home in person. Throughout 2023, investigators and other FTC staff placed undercover calls to more than 250 funeral homes from across the country to try to obtain price information. Staff determined that 39 funeral homes violated the Funeral Rule.
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The FTC and Justice Department announced that both agencies are updating language in their standard preservation letters and requests for information, voluntary access letters, and compulsory legal process, including grand jury subpoenas, that require preservation of materials during government investigations and litigation. The changes address the increased use of new tools and messaging platforms in the modern workplace. In recent years there has been an increase in use of tools and platforms, such as Slack, Microsoft Teams, and Signal, that allow, or even automatically enable, immediate and irretrievable destruction of communications and documents. Documents created through use of these technologies have long been covered by FTC and DOJ document requests. However, companies have not always properly retained these types of documents during government investigations and litigation. These updates intend to clarify that the obligations to preserve information incudes these platforms and technologies.
The FTC issued a comment in response to the National Institute of Standards and Technology’s (NIST) request for information on its Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights under the Bayh-Dole Act. Under the Act, the federal government has the right to “march in” on patents on inventions created using taxpayer funds – to require the patent holder to license the federally funded patent to other applicants. In the comment, the FTC expressed support for an expansive and flexible approach to march-in rights, including providing that agencies can march in on the basis of high prices. Contrary to industry claims that high drug prices are necessary to fund research and development (R&D), drug prices often depend more on whether the drug faces competition than the drug’s R&D costs. At the same time, pharmaceutical firms enjoy hundreds of billions of dollars of taxpayer investment in R&D. March-in rights are an essential check to ensure that taxpayer-funded inventions are affordable and accessible to the public. The FTC’s comment also addressed the challenge of dense “patent thickets” that result from pharmaceutical companies using increasingly large patent portfolios to protect a single treatment. This may weaken the utility of march-in rights to provide affordable public access to drugs because some pharmaceuticals may be protected by patent thickets that include privately funded blocking patents in addition to government-funded patents subject to march-in rights.
The FTC’s Office of Technology held a virtual summit to discuss key developments in the rapidly evolving field of artificial intelligence. The summit featured a series of conversations on AI across the layers of the technology stack – from chips and cloud infrastructure to data and models to consumer applications. A video recording of the Summit is available here.
The FTC held an informal hearing on the proposed Trade Regulation Rule on the Use of Consumer Reviews and Testimonials to take oral and documentary submissions from hearing participants. For a video recording of the hearing, click on the headline above.
A new FTC blog post explains evolving privacy enhancing technologies (PETs) and how they fit within the landscape of digital privacy. The post reminds companies that they must live up to their privacy promises to consumers, including promises concerning PETs. According to the blog, “Privacy practices exist on a spectrum of data access. On one end of the spectrum, a company has access to all of an individual’s private information and relies on internal policies and procedures to ensure this information is not misused or breached. On the other end of the spectrum, there are technologies which allow a company to offer products and services without ever having access to a user’s data. PETs are approaches that allow companies to move towards the latter end of the spectrum – some reach the end-goal of a company truly not having access to the data of any individual, and others reside in the middle, where they limit access but still have some reliance on a company’s policies and practices.” For details on two examples of PETs, and where they fit on the spectrum, click on the headline above.
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