OCTOBER/NOVEMBER 2013
FTC and DOJ Release Updated Model Waiver of Confidentiality for International Civil Matters
On September 25, the Federal Trade Commission staff and the Department of Justice’s Antitrust Division jointly released a model waiver of confidentiality for use in non-criminal competition matters that are under concurrent review by the FTC or DOJ and non-U.S. competition authorities. A waiver of confidentiality is voluntarily provided by an individual or firm and allows sharing of confidential information among the U.S. and foreign competition authorities specified in the waiver. By permitting cooperating agencies to discuss and share the individual’s or firm’s confidential information, a waiver of confidentiality enables agencies to make more informed decisions and avoid conflicting outcomes, often resulting in more consistent and expedient reviews. The agencies also published a set of Frequently Asked Questions (FAQs) to accompany the model waiver. These FAQs aim to promote greater transparency and better understanding of the FTC and DOJ’s policies and practices related to waivers and to help parties determine whether and how to provide a waiver.
Chairwoman Ramirez Addresses Trans Atlantic Consumer Dialogue at Special Meeting on Consumer Protection and Transatlantic Trade Negotiations
FTC Chairwoman Ramirez on October 29 addressed consumer advocates, government officials from the U.S. and the EU, and other stakeholders at a special event in Brussels organized by the Trans Atlantic Consumer Dialogue (TACD). TACD is a forum for U.S. and EU consumer organizations that develops and agrees on joint consumer policy recommendations to the U.S. government and European Union. This year’s TACD event addressed consumer issues in the U.S-EU Transatlantic Trade and Investment Partnership negotiations. The United States Office of the Trade Representative, which leads trade negotiations for the U.S., also participated.
In her speech on “Protecting Consumers and Competition in a New Era of Transatlantic Trade,” Chairwoman Ramirez noted that the FTC’s consumer protection and competition mandates have many links to trade, even though the FTC does not negotiate trade agreements on behalf of the United States. These links are especially important as commerce becomes more and more global. The Chairwoman suggested that transatlantic trade will continue to flourish and grow only if consumers on both sides of the Atlantic feel confident and empowered, and described some of the FTC’s work on privacy, consumer protection, ecommerce, and competition that has helped to achieve that goal.
In particular, Chairwoman Ramirez focused on the FTC’s privacy enforcement program, describing the FTC’s efforts to protect consumer privacy vigorously in the commercial sphere. She described the FTC’s track record on consumer privacy enforcement as “unrivaled” and provided statistics to bear this out: To date, the FTC has brought 134 spam and spyware cases, 108 Do Not Call cases against telemarketers, 97 FCRA lawsuits involving credit reporting problems, 47 data security cases, 44 general privacy lawsuits, and 21 actions under COPPA, the law mandating especially high standards of privacy protection when information involving children is involved.
The Chairwoman also addressed criticisms of the U.S.-EU Safe Harbor framework, which provides a mechanism for companies to transfer personal data from the EU to the U.S. She detailed the FTC’s Safe Harbor enforcement program and described the FTC’s landmark cases against Google, Facebook, and MySpace, which all alleged Safe Harbor violations. As the Chairwoman explained, the legally binding orders the FTC obtained in those three cases require the companies to institute comprehensive privacy programs to address privacy risks related to the development and management of new and existing products and services for consumers. The orders also subject the companies to ongoing privacy audits, and, in case of violation, can result in hefty fines, such as the $22.5 million fine the FTC obtained against Google. These orders against Google, Facebook, and MySpace remain in effect for twenty years and impose practices that protect over a billion users, hundreds of millions of whom reside in Europe. Chairwoman Ramirez also told the audience to expect more Safe Harbor enforcement actions in coming months.
Chairwoman Ramirez Addresses Global Antitrust Enforcement Symposium
 On September 25, Chairwoman Edith Ramirez delivered the keynote address to the 7th Annual Global Antitrust Enforcement Symposium at Georgetown Law School in Washington, DC. Her remarks focused on three challenges:
- Potential limits on cooperation, with current tools possibly unequal to the task of promoting effective cooperation in complex matters among a large number of jurisdictions.
- Procedural fairness differences. She said that the FTC intends to advocate at the International Competition Network and elsewhere for the establishment of norms in this area.
- The need to maintain a substantial consensus regarding the proper function and goals of competition policy.
The speech will be posted shortly on the FTC website.
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FTC to Study Patent Assertion Entities and Their Impact on Innovation, Competition; Seeks Public Comment on Proposed Information Requests
The FTC has begun a study of Patent Assertion Entities (PAEs), which are firms that purchase patents and then attempt to generate revenue by enforcing the patents against persons who are already practicing the patented technologies. The Commission is studying PAEs to learn how they do business and develop a better understanding of the impact on innovation and competition. The study will gather information from 25 PAEs and from 15 firms in the wireless telecommunications sector. The Commission seeks public comment on its proposed information requests. The decision to conduct the study follows a December 2012 joint workshop with the Department of Justice’s Antitrust Division on PAE activities, and agency review of public comments.
Bureau of Competition Director Addresses Global Competition Review’s Inaugural New York Conference
FTC Bureau of Competition Director Deborah L. Feinstein spoke at Global Competition Review’s inaugural New York conference on September 17 about the importance of consent orders in the FTC’s enforcement arsenal. “In my view, FTC consent orders are every bit as important in preserving competition and protecting consumers as are our successful litigation efforts. And they provide significant guidance about how the Commission analyzes mergers and non-merger conduct matters,” she said. She cited four other “enormous benefits” to resolving matters through consent orders: quicker resolution of a matter; conserving both public and respondent/third-party resources; avoiding the uncertainty of litigation; and allowing a surgical approach, eliminating the anticompetitive aspects of a transaction or conduct while not adversely affecting procompetitive aspects of an arrangement. She also spoke about myths concerning consent orders, the process and timing of settlements, the key components of merger remedies, other provisions in aid of effective divestiture, and remedies in conduct cases.
FTC Puts Conditions on Nielsen’s Proposed $1.26 billion Acquisition of Arbitron in Audience Measurement Services Merger
Media research company Nielsen Holdings N.V. has agreed to settle Federal Trade Commission charges that its proposed acquisition of Arbitron Inc. may substantially lessen competition in the emerging market for cross-platform audience measurement services. According to the FTC’s complaint, the elimination of future competition between Nielsen and Arbitron would likely cause advertisers, ad agencies, and programmers to pay more for national syndicated cross-platform audience measurement services, including TV and online. The proposed order requires Nielsen to sell and license, for at least eight years, certain assets related to Arbitron’s cross-platform audience measurement services to an FTC-approved buyer, within three months.
FTC Puts Conditions on Honeywell's Acquisition of Scan Engine Manufacturer Intermec
The Federal Trade Commission will require Honeywell International Inc. to license patents critical to the manufacture of two-dimensional (2D) bar code scanners, under a settlement resolving FTC charges that Honeywell’s acquisition of rival scan engine manufacturer Intermec Inc. would be anticompetitive. The proposed FTC consent order preserves competition in the market for 2D scan engines by requiring Honeywell to license its and Intermec’s patents for 2D scan engines to Datalogic IPTECH s.r.l for the next 12 years. Scan engines are used in products such as retail store scanners to translate an image (often a UPC barcode) into a digital format that can be interpreted and analyzed by a computer. “Although divestiture of assets is the preferred remedy in merger cases, licensing requirements can preserve competition in markets where access to needed technology is the main barrier to entry,” said Deborah Feinstein, Director of the FTC’s Bureau of Competition. “By requiring Honeywell to license its technology, the proposed order gives Datalogic access to the patents it needs to enter the U.S. market immediately and restore the competition lost due to the merger.”
FTC Settles Charges That $8.5 Billion Acquisition of Warner Chilcott by International Pharmaceutical Manufacturer Actavis Would Be Anticompetitive
To settle FTC charges that its proposed acquisition of drug-maker Warner Chilcott plc would be anticompetitive, international drug manufacturer Actavis, Inc. has agreed to sell all rights and assets to four generic pharmaceuticals. These include three oral contraceptives and an osteoporosis treatment. The FTC alleged that Actavis and Warner Chilcott are the only two significant manufacturers of generic Femcon FE, an oral contraceptive, and the proposed acquisition would eliminate their competition in the market for this drug. For pharmaceutical products, the price generally decreases as the number of generic competitors increases, so this would have a direct and substantial effect on pricing. In the other three markets, Warner Chilcott sells the branded drugs, but no company currently sells a generic version. According to the FTC’s complaint, Actavis is likely to be the first generic supplier to compete with Warner Chilcott’s branded versions of these drugs, so the proposed acquisition would likely result in higher prices for U.S. consumers, because the merged firm could delay the entry of Actavis’s generics.
FTC Puts Conditions on Mylan’s Proposed Acquisition of Agila from Strides in Pharmaceutical Merger
The FTC will require Mylan, Inc., and Agila Specialties Global Pte. Ltd and Agila Specialties Pvt. Ltd. (collectively, Agila) to divest 11 generic injectable drugs as a condition of allowing Mylan’s proposed $1.85 billion acquisition of Agila from Strides Arcolab Ltd. According to the complaint, in each of these 11 markets, Mylan and Agila are two of a limited number of current or likely future competitors. In generic pharmaceutical markets, prices generally decrease as the number of competing generic suppliers increases. These injectable generic products are vulnerable to supply disruptions and shortages due to the inherent difficulties of producing sterile liquid drugs.
FTC Seeks Public Comment on Polypore International’s Application to Sell Microporous to Seven Mile Capital Partners to Unwind Illegal 2008 Acquisition Affecting Markets for Battery Separators
The FTC is seeking public comment on an application by Polypore International, Inc. for approval to divest all stock and assets related to Microporous, which it acquired in February 2008, to Seven Mile Capital Partners (Seven Mile). The divestiture is required by a Commission final decision and order that found the acquisition anticompetitive in North American markets for battery separators, and required Polypore to sell Microporous to an FTC-approved buyer. Polypore appealed the Commission’s decision to the U.S. Court of Appeals, which affirmed the FTC’s final decision and order. Polypore then appealed the case to the U.S. Supreme Court, which declined to hear it. The FTC has extended the period for public comments on the divestiture until November 12.
FTC Sues to Stop Massive Sweepstakes Scam Victimizing Consumers in the U.S., Canada, the U.K., France, Japan, and Other Countries
A federal court has temporarily halted a massive sweepstakes scam that has operated for seven years and taken more than $11 million in the past four years from consumers throughout the United States and dozens of other countries throughout the world, including Canada, the United Kingdom, France, and Japan. The FTC asked the court to restrain the defendants temporarily while the case, which seeks to enjoin the practices and return money to victims, is pending. The court enjoined the illegal conduct, froze the operation’s assets, and appointed a receiver over the corporate defendants while the FTC moves forward with the case.
According to the FTC’s complaint, the California-based defendants mass mailed personalized letters to millions of consumers telling them that they had won a large cash prize, typically more than $2 million with bold, large-type statements such as “Over TWO MILLION DOLLARS in sweepstakes has been reserved for you.” The letters told consumers that they could collect the prize by sending in a fee of approximately $20 to $30. However, consumers got nothing of value in exchange for their payment. Among the law enforcement partners who cooperated with the FTC were the Vancouver Police Department, the London Metropolitan Police and the City of London Police’s National Fraud Intelligence Bureau, and the Australian Competition & Consumer Commission.
FTC Halts Elusive Cross-Border Business Opportunity Scheme
At FTC request, a federal court has temporarily halted a $6 million fraudulent cross-border business opportunity scheme that targeted U.S. and Canadian consumers. The complaint alleges that the fraudsters falsely promised that consumers could earn up to $3000 per month referring merchants in their area to the defendants’ non-existent money-lending service. Consumers paid from $299 to $499 to buy the business opportunity, and many were also scammed for bogus business leads of “high quality” or “pre-approved” merchant customers, often to the tune of $10,000 or more. The fraudsters attempted to elude detection by law enforcement by changing names, and office locations, using among other names, “Money Now Funding” and “Cash4Businesses.” The court temporarily froze the defendants’ assets and appointed a receiver to take control of the operation, pending litigation. The court subsequently entered preliminary injunctions against eight companies and 18 of 20 individual defendants. The FTC seeks to permanently shut down the operation and return money to consumers.
FTC Cracks Down On U.S.-Canada Bogus Prescription Discount Card Scam Targeting Seniors
The FTC has moved to shut down a cross-border scam targeting seniors across the United States by offering them phony prescription drug discounts and pretending to be affiliated with Medicare, Social Security, or medical insurance providers. Many consumer victims were allegedly led to believe they could lose their benefits if they failed to purchase the cards, which in reality were available for free and generally do not provide any discounts to consumers who already have private or public health insurance. The FTC complaint alleges that the callers convinced their victims to turn over their bank account numbers and used that information to debit money from victims’ accounts. TheFTC worked with law enforcement partners in Canada on this case including the Canadian Anti-Fraud Centre, the Royal Canadian Mounted Police, and the Centre of Operations Linked to Telemarketing Fraud (Project COLT), a U.S. Canadian partnership thatcombats cross-border telemarketing-related fraud.
FTC Brings First Case Alleging Text Messages Were Used In Illegal Debt Collection Scheme
A California-based debt collector will pay $1 million dollars to settle Federal Trade Commission charges for deceptive debt collection and other violations. This is the first FTC action against a debt collector who used text messaging to attempt to collect debts in an unlawful manner. The FTC alleged that the defendants used English- and Spanish-language text messages and phone calls in which they unlawfully failed to disclose that they were debt collectors and falsely represented that they were attorneys who could sue consumers for not paying their debts or to garnish their wages. The defendants were charged with violating both the Fair Debt Collection Practices Act and the FTC Act. In addition to the $1 million civil penalty, the settlement requires the defendants to stop sending text messages that do not include disclosures required by law, and to obtain a consumer’s express consent before contacting them by text message. The defendants also are barred from falsely claiming to be law firms, and from falsely threatening to sue or take any action – such as seizure of property or garnishment – that they do not actually intend to take.
Internet Innovator Vinton G. Cerf to Keynote FTC's Internet of Things Workshop on Nov. 19
Vinton G. Cerf, co-creator of the Internet’s key networking technology, TCP/IP, will give the keynote address at the Federal Trade Commission’s Internet of Things workshop on Nov. 19 in Washington, D.C. The workshop will explore consumer privacy and security issues posed by the growing connectivity of everyday devices, often referred to as “The Internet of Things.” A tentative agenda for the workshop is now available. It includes speeches and panel discussions about the opportunities and challenges for consumers related to the growing number of Internet-connected devices that touch their lives, from household goods to automobiles. The workshop will be held at the FTC Conference Center, 601 New Jersey Avenue NW in Washington, and is free and open to the public.
FTC Native Advertising Workshop on Dec. 4 Will Explore the Blending Digital Ads With News Entertainment and Other Digital Content
The Federal Trade Commission will host a workshop on December 4 in Washington, DC to examine “native advertising” or “sponsored content,” which involves advertisements that more closely resemble the content in which they are embedded than the banner advertisements they replace. Publishing and advertising industry representatives, consumer advocates, academics, and government regulators will have an opportunity to explore changes in how paid messages are presented to consumers and the impact of those changes on consumers’ recognition and understanding of advertising messages. The FTC invites the public to submit original research, recommendations for topics of discussion, and requests to participate as panelists. The Commission also invites the submission of examples and mock-ups that can be used for illustration and discussion at the workshop. More information is available at the FTC’s website.
Show Me the Money
The FTC recently refunded approximately $8 million to consumers in cases involving a cramming scheme, a credit card operation that charged up-front fees for a “guaranteed” line of credit, a “free gas for life” scam, and a phony debt relief services scam.
FTC Seeks Public Comment
The FTC seeks public comment on a parental verification method and a safe harbor program submitted under the Children’s Online Privacy Protection Rule. The FTC has extended these comment periods to November 4. The FTC also seeks public comment on proposed changes to its Wool Products Labeling Rules as part of its systematic review of all current FTC rules and guides. Comments on the rule must be received by November 25.
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