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October 2024
Competition
The FTC brought action against the three largest prescription drug benefit managers (PBMs) ‒ Caremark Rx, Express Scripts (ESI), and OptumRx ‒ and their affiliated group purchasing organizations for engaging in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs, impaired patients’ access to lower list price products, and shifted the cost of high insulin list prices to vulnerable patients. PBMs are companies that serve as middle-men, managing prescription drug benefits for health plans, insurers, and employers. The FTC’s administrative complaint alleges that these PBMs have abused their economic power by rigging pharmaceutical supply chain competition in their favor, forcing patients to pay more for life-saving medication. According to the complaint, these PBMs, known as the Big Three, together administer about 80% of all prescriptions in the United States.
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Federal Judge Rules in Favor of the FTC, Blocking Merger of Tapestry ‒ Parent of Coach and Kate Spade ‒ and Capri Holdings ‒ Parent of Versace and Michael Kors
Ruling on an FTC action brought last spring, a federal judge has blocked the $8.5 billion merger of Tapestry, parent of Coach and Kate Spade, and Capri holdings, parent of Versace and Michael Kors. The district court agreed with the FTC that the merger would eliminate direct head-to-head competition between Tapestry’s and Capri’s brands. It would also give Tapestry a dominant share of the “accessible luxury” handbag market. Tapestry has announced it will appeal the district court’s decision.
WillScot announced it abandoned its proposed $3.8 billion acquisition of McGrath RentCorp in the face of a potential Commission challenge. WillScot and McGrath are two of the largest modular and portable storage rental companies nationally and in many local markets throughout the United States. According to a statement by FTC Bureau of Competition Director Henry Liu, “[s]trong competition in the markets for modular and portable storage solutions is essential to ensuring low prices and high levels of product quality and customer service for businesses and school districts nationwide.”
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The FTC approved a proposed consent order to resolve antitrust concerns related to Chevron Corporation’s acquisition of rival oil producer Hess Corporation that would prohibit Chevron from appointing Hess CEO John B. Hess to its Board of Directors. The FTC’s complaint alleges that Hess communicated publicly and privately with the past and current Secretaries General of the Organization of Petroleum Exporting Countries (OPEC) and an official from Saudi Arabia. In these communications, Hess stressed the importance of oil market stability and inventory management and encouraged these officials to take actions on these issues and speak about them at different events, the complaint alleges.
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Ryan Cohen, managing partner of RC Ventures, LLC, and Chairman and CEO of GameStop Corp., will pay a $985,320 civil penalty to settle charges that his acquisition of Wells Fargo & Company shares violated the Hart-Scott-Rodino Act. According to the complaint, Cohen, who is also the founder and former CEO of Chewy, Inc., acquired more than 562,000 Wells Fargo voting securities resulting in aggregated holdings of Wells Fargo securities that exceeded HSR filing thresholds. Cohen’s purchase triggered an obligation to file an HSR form with federal antitrust agencies and wait before completing the acquisition. Yet Cohen failed to do so, which violated the HSR Act, according to the complaint.
The FTC finalized changes to the premerger notification form and associated instructions, as well as the premerger notification rules implementing the Hart-Scott-Rodino (HSR) Act. The final rule implements changes that will improve the ability of the FTC and DOJ’s Antitrust Division to detect illegal mergers and acquisitions prior to consummation. The final rule requires additional information that is necessary to determine which deals require an in-depth antitrust investigation, including through the issuance of Second Requests. The Commission is responding to changes in corporate structure and deal-making, as well as market realities in the ways businesses compete, that have created or exposed information gaps that prevent the agencies from conducting a thorough antitrust assessment of transactions subject to mandatory premerger review. The final rule also will reduce the current burden on third parties, including small businesses, that the agencies routinely rely on to fill in existing information gaps.
The FTC, together with the Justice Department Antitrust Division, released their annual report detailing fiscal year 2023 data on the HSR Premerger Notification Program. The report notes that in fiscal year 2023, 1,805 transactions were reported under the HSR Act, nearly one quarter of which were valued at more than $1 billion, continuing a trend in recent years towards larger and more complicated transactions. The FTC and DOJ together filed 28 merger enforcement actions in fiscal year 2023. The Commission brought 16 merger enforcement challenges in fiscal year 2023, two in which it reached consent orders for public comment, 10 in which the transaction was abandoned or restructured as a result of antitrust concerns raised during the investigation, and four in which the Commission initiated administrative or federal court litigation.
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Consumer Protection and Privacy
 The FTC hosted a Conference and High-Level Meeting of the International Consumer Protection and Enforcement Network (ICPEN) in Washington, D.C. The FTC assumed the presidency of ICPEN in July. The FTC welcomed more than 250 representatives of consumer protection authorities and organizations from the United States and around the world who attended in-person and virtually. Participants represented consumer protection enforcement authorities from more than 60 countries, several international governmental organizations (including the European Commission, COMESA, UNCTAD, and OECD), and representatives of nine State Attorneys General. They discussed important issues that consumers are facing in today’s expanding digital age, including challenges related to online gaming and artificial intelligence, and they exchanged best practices for international enforcement cooperation. At the meeting, ICPEN also unveiled a revamped version of its econsumer.gov website, including an updated complaint form, a more mobile friendly format for consumers to report international scams, and updated guidance on additional steps that consumers can take to resolve their complaints.
Following negotiations throughout the year, the consumer protection agencies of Costa Rica, the Dominican Republic, and Panama joined the Multilateral Memorandum of Understanding, an existing nonbinding instrument that the FTC reached in 2023 with the consumer protection authorities of Chile, Colombia, Mexico, and Peru. The MMOU promotes cooperation among the agencies to protect consumers from cross-border fraud, deception, and other illegal practices. The MMOU provides a framework and mechanism for information sharing, investigative assistance, and other types of cooperation on consumer protection enforcement.
The FTC is acting against multiple companies that have relied on artificial intelligence as a way to supercharge deceptive or unfair conduct that harms consumers, as part of its new law enforcement sweep called Operation AI Comply. The cases include actions against a company promoting an AI tool that enabled its customers to create fake reviews, a company claiming to sell “AI Lawyer” services, and multiple companies claiming that they could use AI to help consumers make money through online storefronts. Claims around artificial intelligence have become more prevalent in the marketplace, including frequent promises about the ways it could potentially enhance people’s lives through automation and problem solving. For details on the individual actions, click on the headline above.
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The FTC will require Marriott International, Inc. and its subsidiary Starwood Hotels & Resorts Worldwide LLC to implement a robust information security program to settle charges that the companies’ failure to implement reasonable data security led to three large data breaches from 2014 to 2020 impacting more than 344 million customers worldwide. In a proposed settlement order with the FTC, Marriott and Starwood also agreed to provide all its U.S. customers with a way to request deletion of personal information associated with their email address or loyalty rewards account number. In addition, the proposed settlement requires Marriott to review loyalty rewards accounts upon customer request and restore stolen loyalty points.
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The FTC is acting against rideshare operator Lyft for making deceptive earnings claims about how much money drivers could expect to make per hour and how much they could earn in special incentives. Lyft has agreed to a proposed settlement that would require its claims about drivers’ pay to be based on typical earnings. In addition, Lyft has agreed to back up with evidence any claims it makes about drivers’ pay, clearly notify drivers about the terms of its “earnings guarantee” offers, and pay a $2.1 million civil penalty. The U.S. Department of Justice filed the lawsuit and proposed settlement upon notification and referral from the FTC. According to the complaint, ads for Lyft advertised that drivers around the country could make specific hourly amounts. Lyft failed to disclose that these amounts did not represent the income an average driver could expect to earn, but instead were based on the earnings of the top one-fifth of drivers. In addition, the complaint notes that the hourly earnings claims Lyft made in its ads included tips paid by passengers, even though many drivers would assume any tips they received would be in addition to an hourly pay figure.
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The FTC is taking action against Care.com (Care), alleging that the child and older adult care gig platform has systematically deceived caregivers who were looking for jobs and failed to give families seeking care a simple way to cancel their paid memberships. In a federal court complaint, the FTC alleges that Care’s marketing messages about both the number of jobs available on their site and the amount workers could expect to be paid were deceptive. Care has agreed to a settlement that will require it to turn over $8.5 million to be used to refund consumers harmed by their practices, as well as requiring the company to be able to back up the earnings claims it makes and be honest about the number of jobs available on their site.
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The FTC will require security camera firm Verkada to develop and implement a comprehensive information security program to settle allegations the company failed to use appropriate information security practices, which allowed a hacker to access customers’ security cameras. Under a proposed order, which must be approved by a federal judge before it can go into effect, Verkada will also be required to pay a $2.95 million monetary penalty to settle allegations the company inundated prospective customers with commercial emails in violation of the CAN-SPAM Act, the largest penalty obtained by the FTC for a CAN-SPAM violation. A complaint filed by the Department of Justice (DOJ) upon notification and referral from the FTC, alleged that Verkada failed to use appropriate information security practices to protect consumers’ personal information, which allowed a hacker to access internet-connected security cameras and view patients in psychiatric hospitals and women’s health clinics.
In Other News
The FTC announced a final “click-to-cancel” rule that will require sellers to make it as easy for consumers to cancel their enrollment as it was to sign up. The Commission’s updated rule will apply to almost all negative option programs in any media. The rule also will prohibit sellers from misrepresenting any material facts while using negative option marketing; require sellers to provide important information before obtaining consumers’ billing information and charging them; and require sellers to get consumers’ informed consent to the negative option features before charging them. The final rule is part of the FTC’s ongoing review of its 1973 Negative Option Rule, which the agency is modernizing to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs in an increasingly digital economy where it is easier than ever for businesses to sign up consumers for their products and services.
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The FTC and DOJ Antitrust Division participated in a G7 Competition Authorities and Policymakers Summit to discuss ways to ensure competition in artificial intelligence (AI)-related technologies, products, and applications. At the conclusion of the summit, FTC Chair Khan and other representatives of the G7 competition authorities and government policymakers issued a communiqué highlighting potential competition concerns in AI-related markets and identifying guiding principles to ensure fair competition across AI markets. The communiqué underscores the important role that competition authorities and policymakers have in addressing competitive threats. For the text of the communique, click here.
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FTC Commissioner Alvaro Bedoya, Assistant Attorney General Jonathan Kanter, and Japan Fair Trade Commission Commissioner Reiko Aoki met in Washington, D.C., to mark the 25th anniversary of the signing of an agreement between the United States and Japan concerning cooperation on anticompetitive activities. Commissioner Bedoya noted that cooperation with the JFTC on competition issues extends back to 1976, making it the U.S. antitrust agencies’ longest-running bilateral consultations with any foreign competition agency.
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As the nation weathered major hurricanes, the FTC, along with the Department of Justice and the Consumer Financial Protection Bureau, warned consumers about those looking to take advantage of natural disasters by engaging in potential fraud or price gouging. Scammers quickly exploit weather emergencies and take advantage of people trying to recover or donate to disaster victims. Consumers who may have encountered a scam can report it to the FTC at ReportFraud.ftc.gov.
Possible types of natural disaster scams include:
- Fraudulent charities soliciting donations for disaster victims that often imitate the names of charities linked to the disaster.
- Scammers impersonating government officials, offering disaster relief in exchange for personal information or money.
- Scammers promoting non-existent businesses or investment opportunities related to disaster recovery, such as rebuilding or flood-proofing.
- Price gouging for essential goods and services needed by disaster victims.
To avoid scams and frauds while you’re recovering from a hurricane or another natural disaster, remember only scammers will insist you pay for services by wire transfer, gift card, payment app, cryptocurrency or in cash. Avoid anyone who promises they can help you qualify for relief from the Federal Emergency Management Agency (FEMA) ― for a fee. That’s a scam. FEMA will never require you to pay a fee to get disaster relief. Never sign your insurance check over to someone else. Be sure to research contractors and get estimates from more than one before signing a contract for work. Get a written contract for repairs and read it carefully before signing it.
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The FTC submitted a comment supporting a U.S. Department of Agriculture (USDA) proposed rule to protect against unfair practices by dominant meat processors that can harm farmers, growers, ranchers, and consumers. The USDA’s proposed rule seeks to clarify the scope of what constitutes unfair practices under the Packers and Stockyards Act (PSA), which assures fair competition and fair trade practices to protect farmers, ranchers, growers, and consumers. The FTC applauds USDA’s push to revitalize the PSA by dispelling confusion about its requirements, the comment states. The comment notes that imposing a difficult-to-meet competitive injury requirement is counter to the plain text of the PSA. The proposed rule correctly recognizes that, based on the PSA’s plain text and its relationship to the FTC Act, competitive injury is not required for a PSA violation.
The FTC will hold a virtual workshop on February 25 to examine the use of design features on digital platforms aimed at keeping kids, including teens, online longer and coming back more frequently. Researchers, technologists, child development and legal experts, consumer advocates, and industry professionals will discuss design features that keep kids engaged on digital platforms, including websites, applications, and interactive online services. They also will discuss the potential impacts of those features on the well-being of younger users and how platforms might factor levels of youth engagement and kids’ well-being into designing their products. The topics to be discussed will include:
- Whether and how certain design features result in more engagement or time spent on digital platforms, and what relevant scientific research exists;
- The physical and psychological impacts, both positive and negative, of the design features on youth well-being; and
- What measures or design considerations related to youth well-being might be effective, feasible, and consistent with the current legal landscape.
The virtual event will be open to the public and registration is not required. A link to view the webcast will be posted to the FTC’s website at FTC.gov the morning of the event.
A new FTC staff report that examines the data collection and use practices of major social media and video streaming services shows they engaged in vast surveillance of consumers to monetize their personal information while failing to adequately protect users online, especially children and teens. The report is based on responses to FTC Rule 6(b) orders issued in December 2020 to nine companies including some of the largest social media and video streaming services: Amazon.com, Inc., which owns the gaming platform Twitch; Facebook, Inc. (now Meta Platforms, Inc.); YouTube LLC; Twitter, Inc. (now X Corp.); Snap Inc.; ByteDance Ltd., which owns the video-sharing platform TikTok; Discord Inc.; Reddit, Inc.; and WhatsApp Inc. The orders asked for information about how the companies collect, track and use personal and demographic information, how they determine which ads and other content are shown to consumers, whether and how they apply algorithms or data analytics to personal and demographic information, and how their practices impact children and teens.
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The staff of the FTC has issued a report that details findings from a review of income disclosure statements from 70 different multi-level marketers. Staff reviewed income disclosure statements in February 2023 that were publicly available on the websites of a wide array of MLMs, from large household names to smaller, less well-known companies. These statements are sometimes provided to consumers who are considering joining MLMs, and often purport to show information about income that recruits could expect to receive. According to the report, FTC staff found a number of issues with the statements they reviewed, including that most omit key information when calculating the earnings they present. Specifically, the report notes that most of the reviewed statements do not include participants with low or no earnings in their display of earnings amounts, and do not account for the expenses faced by participants, which can outstrip the income they make. The report notes that these omissions are often not plainly disclosed in the income statements. The report also notes that most statements emphasize the high earnings of a small group of participants.
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The FTC has issued its latest report to Congress on protecting older adults, which highlights key trends based on fraud reports by older adults, and the FTC’s multipronged efforts to combat the problem through law enforcement actions, rulemaking, and outreach and education programs. The report, Protecting Older Consumers, 2023-2024, A Report of the Federal Trade Commission, also outlines a number of actions taken by the FTC-led Scams Against Older Adults Advisory Group, which was created as a result of 2022’s Stop Senior Scams Act. The group, which includes representatives from numerous federal and state government agencies, developed guidance designed to help interrupt scams that target seniors and prepared a report highlighting what research says are the challenges to effective consumer education messaging to prevent scams.
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New data from the FTC shows a massive increase in the amount of money consumers report losing to scammers involving Bitcoin ATM machines. Since 2020, the amount consumers reported losing has increased nearly tenfold to over $110 million in 2023. Bitcoin ATMs are machines that look like a traditional ATM and are often found at convenience stores, gas stations and other high-traffic areas. Instead of distributing cash, they accept cash in exchange for cryptocurrency. Their use by scammers, who urge consumers to deposit cash into them to “protect” their savings, is on the rise. In a newly released data spotlight, the FTC says that fraud losses to Bitcoin ATMs have topped $65 million in just the first six months of 2024. During this timeframe, consumers over the age of 60 were more than three times as likely as younger adults to report losing money to Bitcoin ATM scams. Across all ages, the median loss reported in the first half of this year was a staggering $10,000. The majority of scam losses involving Bitcoin ATMs come as a result of government impersonation, business impersonation, and tech support scams. The lies told by scammers vary, but they all create some urgent justification for consumers to take cash out of their bank accounts and put it into a Bitcoin ATM.
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