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June 2024
Consumer Protection and Privacy
The FTC is acting against software maker Adobe and two of its executives for deceiving consumers by hiding the early termination fee for its most popular subscription plan and making it difficult for consumers to cancel their subscriptions. A federal court complaint filed by the Department of Justice on notification and referral from the FTC charges that Adobe pushed consumers toward the “annual paid monthly” subscription without adequately disclosing that canceling the plan in the first year could cost hundreds of dollars. After 2012, Adobe shifted principally to a subscription model, requiring consumers to pay for access to the company’s popular software on a recurring basis. Subscriptions account for most of the company’s revenue.
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The FTC has referred to the Department of Justice a complaint against TikTok, the successor to Musical.ly, and its parent company ByteDance Ltd. Although the Commission does not typically make public the fact that it has referred a complaint, according to its statement on the TikTok referral, “[W]e have determined that doing so here is in the public interest.” The FTC’s investigation of these companies began in connection with its order compliance review of Musical.ly following a 2019 settlement with the company for violations of the Children’s Online Privacy Protection Act (“COPPA”). The investigation uncovered reason to believe the defendants are violating or are about to violate the law and that a proceeding is in the public interest.
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The FTC alleged that bill payment company Doxo and two of its co-founders used misleading search ads to impersonate consumers’ billers. The FTC complaint also alleges that they used deceptive design practices to mislead consumers about millions of dollars in junk fees they tacked on to consumers’ bills. It alleges that defendants have known from years of internal surveys and complaints from tens of thousands of consumers and hundreds of billers of the harms their business model caused consumers and have still failed to correct their unlawful actions. The FTC’s complaint notes that although Doxo immediately charges a consumer for payment, in many instances it prints a paper check that is mailed to the biller – causing delays and arriving days or sometimes weeks after the customer believes their bill is paid. As a result, many consumers have had their utilities shut off, have had car and health insurance lapse, and have been charged fees and fines even though they paid their bills on time.
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The FTC charged Razer, Inc., with misrepresenting that face masks it sold under the name of Zephyr were of N95-grade when in fact it had never submitted them for testing to the FDA or the National Institute for Occupational Safety and Health, and they were never certified as N95. The firm will pay more than $1.1 million to provide full refunds to consumers nationwide, as well as a civil penalty, under a proposed settlement with the FTC. The stipulated order settling the complaint also bars Razer from making COVID-related health misrepresentations or unsubstantiated health claims about protective health equipment and requires them to pay a civil penalty of $100,000. The complaint alleges that Razer only stopped the false advertising following negative press coverage and consumer outrage at the deceptive claims. The Department of Justice filed the case upon notification and referral from the FTC.
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The FTC finalized a settlement with digital marketing and data aggregator InMarket Media over allegations the company unlawfully collected and used consumers’ location data for advertising and marketing. The FTC alleged that InMarket collects location information about consumers from a variety of sources, including its own apps and third-party apps that incorporate its software development kit (SDK). InMarket combines this location information with other data to help target advertising based on consumers’ behavior. The FTC charged that InMarket failed to fully inform consumers about how their location data ‒ which can include sensitive information about where they live, work, and worship ‒ would be used and that it would be combined with other data about those users for targeted advertising. It also failed to ensure that third-party apps that use its SDK obtained informed consent from consumers. Under the order, the company will be prohibited from selling, sharing, or licensing any precise location data and any product or service that categorizes or targets consumers based on sensitive location data.
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Home products company Williams-Sonoma will be required to pay a record civil penalty of $3.175 million for violating a 2020 FTC order requiring the retailer to tell the truth about whether the products it sells are Made in USA. In a complaint filed by the Department of Justice upon notification and referral from the FTC, the agency charges that Williams-Sonoma listed multiple products for sale as being “Made in USA” when in fact they were made in China and other countries. The company has agreed to a settlement that requires them to pay the civil penalty, which is the largest ever in a Made in USA case.
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Competition
The FTC expanded its effort to stop pharmaceutical manufacturers’ improper or inaccurate listing of patents in the Food and Drug Administration’s (FDA) Orange Book, disputing junk patent listings for diabetes, weight loss, asthma, and COPD drugs, including Novo Nordisk Inc.’s blockbuster weight-loss drug, Ozempic. The Commission sent warning letters to 10 companies and notified the FDA that it disputes the accuracy or relevance of more than 300 Orange Book patent listings across 20 different brand name products. These patent listings are currently listed in the FDA’s publication of “Approved Drug Products with Therapeutic Equivalence Evaluations,” commonly known as the Orange Book, which lists drug products approved by the FDA as safe and effective. To promote competition, the FTC said it is disputing these patent listings as improper or inaccurate. Improper Orange Book patent listings can delay cheaper generic alternatives from entering the market, keeping brand name drug prices artificially high.
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The FTC approved a consent order resolving antitrust concerns surrounding Exxon Mobil Corporation’s (Exxon) $64.5 billion acquisition of oil producer Pioneer Natural Resources. The order prevents founder and former Pioneer CEO Scott Sheffield from gaining a seat on Exxon’s board of directors or serving in an advisory capacity at Exxon once it acquires Pioneer. According to the complaint, Sheffield has, through public statements and private communications, attempted to collude with the representatives of the Organization of Petroleum Exporting Countries (OPEC) and a related cartel of other oil-producing countries known as OPEC+ to reduce output of oil and gas. In addition to his prior statements, Sheffield’s appointment to Exxon’s board also would be anticompetitive as he currently serves on the board of The Williams Companies, Inc., which operates a host of natural gas pipelines; natural gas gathering, processing, and treating assets; and other businesses that directly overlap with Exxon’s operations. Sheffield’s appointment would facilitate a board interlock among competitors, in violation of Section 5 of the FTC Act.
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Altus Group Limited announced it is terminating its efforts to acquire Situs Group LLC’s commercial real estate valuation and advisory services business, REVS. According to a statement by FTC Deputy Director of the Bureau of Competition, Kyle Mach, the acquisition threatened to limit competition among independent valuation management services providers, which is critical to ensure the integrity of information people rely on to make investment decisions. By abandoning this deal, the two firms will continue to compete to drive innovation and improve accessibility for emerging technologies.
In Other News
FTC Chair Lina M. Khan appeared last month before the House Appropriations Subcommittee on Financial Services and General Government to discuss the agency's FY 2025 budget request and ongoing work to promote open, competitive markets and protect American consumers and businesses from fraud. In her testimony, Chair Khan detailed how the agency is using its current funding and noted the value it provides to the American people. In FY 2023, every $1 of the FTC’s costs returned an estimated $14 in benefits to American consumers through its consumer protection and competition law enforcement efforts. For FY 2025, the Commission has requested $535 million. This increase would help fund mandatory FY 2024 and anticipated FY 2025 pay increases and other inflationary non-pay expenses, as well as critical IT investments needed for the Commission to continue its enforcement work in an era of big data.
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The FTC released its Fiscal Year 2023 Annual Report. The report lays out the Commission’s work to vigorously enforce the nation’s antitrust and consumer protection laws in a constantly evolving modern economy. As artificial intelligence and algorithmic decision-making tools proliferated, the FTC’s enforcement and policy efforts have been forward-looking ‒ enabling the agency to stay on the cutting edge as these technologies develop. The FTC made programmatic strides to protect Americans’‒ and especially children’s ‒ privacy and hold companies that defraud the public accountable. The FTC also continued to deploy its full toolkit to block anticompetitive mergers, halt anticompetitive practices to monopolize markets, and prevent businesses from using unfair tactics to gain an advantage.
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FTC law enforcement actions resulted in more than $324 million in refunds to consumers in 2023, the agency said in its annual report on refunds. The FTC Annual Report on Refunds to Consumers provides a breakdown of the total amount refunded by the FTC nationally, as well as the amount mailed to each state. The report also includes a list of cases in which the agency sent first distribution payments in 2023. The FTC also has interactive dashboards online with more detailed information about consumer refunds at ftc.gov/exploredata.
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New FTC data reveals that government impersonation scammers are targeting consumers for payments in cash, with the amount of cash reported lost to these scams nearly doubling from 2022 to 2023. The FTC data shows that consumers reported losing $76 million when paying cash to government impersonation scammers in 2023, up from $40 million in 2022, an increase of 90 percent. Reported losses to government impersonation scammers across all forms of payment reached $618 million in 2023, up from $497 million in 2022 and $428 million in 2021. The FTC recently put into effect a new rule that gives the agency stronger tools to combat and deter scammers who impersonate government agencies and businesses, enabling the FTC to file federal court cases seeking to get money back to injured consumers and civil penalties against rule violators.
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New data from the FTC shows that Best Buy/Geek Squad, Amazon, and PayPal are the companies people report scammers impersonate most often. A newly released data spotlight shows that consumers in 2023 submitted about 52,000 reports about scammers impersonating Best Buy or its Geek Squad tech support brand, followed by about 34,000 reports about scammers impersonating Amazon. PayPal was the third-most impersonated company with about 10,000 reports from consumers. When it comes to the amount lost, though, consumers reported losing far more money to scammers impersonating Microsoft and Publishers Clearing House than any other companies. Consumers reported losing a total of $60 million to Microsoft impersonation scams and $49 million to Publishers Clearing House impersonation scams.
The FTC and DOJ Antitrust Division jointly launched a public inquiry to identify serial acquisitions and roll-up strategies throughout the economy that have led to consolidation that has harmed competition, consumers, workers, and innovation. In a joint Request for Information, the agencies are seeking information from the public on serial acquisitions and roll-up strategies, which are corporate consolidation strategies that occur when a company becomes larger ‒ and potentially dominant ‒ by buying several smaller firms in the same or related business sectors or industries. Information is requested by July 22.
The RFI builds on the agencies’ efforts to ensure federal antitrust enforcement tools keep pace with changes in how firms do business. The agencies have proposed amending the premerger notification forms to require firms to disclose more information about each party’s prior acquisition history. In addition, the FTC and DOJ’s 2023 Merger Guidelines recognize that serial acquisitions have the potential to violate the antitrust laws. The FTC’s Section 5 policy statement also makes clear that serial mergers, acquisitions, or joint ventures can be anticompetitive.
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The FTC and the Department of Justice jointly submitted a public comment to the Federal Energy Regulatory Commission (FERC), the federal agency that regulates aspects of U.S. energy markets, urging it to consider the competitive risks of common ownership when assessing acquisitions involving less than a controlling interest in competing firms. The FTC and DOJ’s comment states that partial acquisitions, including common ownership where individual investors hold non-controlling interests in firms that have a competitive relationship that could be affected by those joint holdings, can lessen competition by giving the partial owner the ability to influence the competitive conduct of the target firm, reducing incentives for firms to compete even absent direct control or influence, or facilitating anticompetitive information exchange by giving them or their common owners access to non-public, competitively sensitive information. Under its current policy, FERC assumes that certain transactions are in the public interest and grants blanket authorizations approving the transactions
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The FTC held an online compliance webinar to provide an overview of the FTC’s final rule banning noncompetes, which included information on how to comply with the rule after its effective date. For a video recording and transcript of the webinar, click here. For more information on the rule, click here. In May, the FTC hosted a webinar about the noncompete rule for competition agencies and will host additional webinars about labor and competition and consumer protection issues in the future.
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