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Federal Trade Commission

Fulfilling the Original Vision:
The FTC at 90

April 2004

Federal Trade Commission
Timothy J. Muris, Chairman
Mozelle W. Thompson, Commissioner
Orson Swindle, Commissioner
Thomas B. Leary, Commissioner
Pamela Jones Harbour, Commissioner

The FTC at 90

Federal Trade Commission

Cover graphics obtained under license from Microsoft Corporation and Dynamic Graphics, Inc.

Federal Trade Commission

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Highlights of Accomplishments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Chapter 2: Consumer Protection Law Enforcement, Rulemaking, and Guidance . . . . . . . . . . . . . . .
A. Fraud and Deception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Tools to Identify Fraud and Deception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Law Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Consumer Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Law Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Rulemaking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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19
25
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Chapter 3: Special Policy Instruments for Assisting and Complementing Law Enforcement . . . . .
A. Competition Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Research and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Hearings and Workshops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Advocacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Amicus Briefs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Consumer Protection Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Research and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Hearings and Workshops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Advocacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Amicus Briefs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Consumer and Business Education and Outreach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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31
33
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Chapter 4: International Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Cooperation in Enforcement and Policy Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Multilateral Competition Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Trade/Competition Fora . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Consumer Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Five-Point Plan to Fight Cross-Border Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Cross-Border Telemarketing Fraud/Canadian Partnerships. . . . . . . . . . . . . . . . . . . . . . . . .
3. International Cooperation on Spam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. International Technical Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Reflecting on Past Achievements and Considering the Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Fulfilling the Original Vision

Chapter 1: Competition Law Enforcement and Guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A. Administrative Adjudication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1. Commission Decisions and Pending Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2. New Part 3 Complaints. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Other Pending Part 3 Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
B. Nonmerger Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1. Focus on Health Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2. Seeking to Remove Public Restraints on Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
C. Merger Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1. Administrative Adjudication of Consummated Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2. Continued Emphasis on Key Market Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. Other Merger Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
D. Transparency and Policy Guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

The FTC at 90

Federal Trade Commission

Federal Trade Commission

Introduction

the Federal Trade Commission “will be found to
be the most efficient protection to the people of
the United States that Congress has ever given
the people by way of a regulation of commerce.”
This year marks the 90th anniversary of the
legislation that gave life to the FTC and stirred
hopes that the federal government would help
consumers realize the benefits of a market
economy. This milestone is an occasion
to reflect on the agency’s past work and to
consider how it can best fulfill the vision that
inspired its creation. This report reviews the
latest chapter in the agency’s work, covering its
activities and accomplishments from April 2003
through March 2004. More than a mere list
of cases, conferences, and studies, the report
aims to explain the basis for the FTC’s choice
of initiatives and to describe the policies and
priorities that motivate the use of its resources.
Many activities are ongoing and constitute much
of the agenda that the FTC will pursue in the
coming years.

The FTC’s twin missions of competition
and consumer protection serve a common
aim: enhancing consumer welfare. The
competition mission promotes free and open
markets, bringing consumers lower prices,
innovation, and choice among products and
services. The consumer protection mission
fosters the exchange of accurate, non-deceptive
information, allowing consumers to make
informed choices in their purchasing decisions.
Thus, these missions complement each other
and maximize benefits for consumers – accurate
information in the marketplace facilitates free
and robust competition.
Progress toward becoming the type of agency
that Senator Cummins and his colleagues
expected the FTC to be requires pursuing these
overall objectives with an appreciation for and
application of the distinctive institutional tools
that Congress first gave the FTC in 1914 and
supplemented in later legislation. Five principles
guide the development of the agency’s agenda
for consumers. In exercising its competition and
consumer protection authority, the FTC should:
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Promote competition and the unfettered
exchange of accurate, non-deceptive
information through strong enforcement and
focused advocacy;
Stop conduct that most threatens consumer
welfare, such as anticompetitive horizontal
agreements and fraudulent and deceptive
practices;
Employ a systematic approach for identifying
and addressing serious misconduct, with

Fulfilling the Original Vision - 1

On September 26, 1914, President Woodrow
Wilson signed the Federal Trade Commission
Act. In its substantive mandate and unique
array of adjudication, advocacy, investigation,
and enforcement powers, the statute embodied
the vision of Congress that the new agency
would be a singularly effective means for serving
consumer interests. In the weeks before the
bill’s enactment, Senator Albert Cummins, one
of the legislation’s chief sponsors, predicted that

A. Goals

Federal Trade Commission

special attention to harmful behavior in key
economic sectors;
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Apply all elements of the agency’s
distinctive portfolio of policy instruments
– prosecuting cases, conducting studies,
performing research, holding hearings and
workshops, engaging in advocacy before
other government bodies, and educating
businesses and consumers – to address
competition and consumer protection issues;
and

opinions of the Commission and the courts
and provide guidance to businesses, the bar,
and the public.
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Improve the institutions and processes by
which competition and consumer protection
policies are formulated and applied.

B. Highlights of Accomplishments
During the past 12 months, the FTC applied
its array of law enforcement and policy tools to
address critical consumer concerns. Highlights
of the agency’s recent accomplishments include:

The FTC at 90 - 2

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Bringing More Part 3 Cases. Tackling a
broad range of perceived competitive harms,
the FTC has more competition cases in Part
3 administrative adjudication than at any
time in recent history. As of late March 2004,
the FTC had 11 cases at some stage of
adjudication. Cases currently on the docket
involve, among other issues, price fixing in
physician services, collective rate setting in
the household moving industry and the role
of the State Action defense, alleged abuse of
the standard-setting process and the NoerrPennington doctrine, and consummated
mergers involving hospitals and high-tech
markets. If fully litigated, the cases will
yield detailed antitrust analyses through the

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Launching “Do Not Call.” At a Rose
Garden ceremony on June 27, 2003, the
President announced the opening of the
FTC’s National Do Not Call Registry. Within
the first 72 hours of the Registry’s operation,
consumers had enrolled over ten million
telephone numbers. By its effective date
in October, the Registry contained over 53
million telephone numbers and now tops
58 million numbers. Although attacked in
the courts, the Do Not Call Registry has
withstood all legal challenges. A February
2004 Harris Poll® found the Registry to
be “remarkably successful,” with over 90
percent of participating consumers reporting
a reduction in telemarketing calls.
Balancing Competition and Patent Policy.
In October 2003, after extensive hearings,
the agency released a report on the proper
balance between competition and patent law
and policy. Both competition in markets and
patents for inventors can promote innovation,
but each policy requires a proper balance
with the other to achieve that goal. The
report concluded that questionable patents
are a significant competitive concern and
can harm innovation. The report made ten
recommendations for reducing the proportion
of questionable patents that are issued and
upheld.

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Clarifying the State Action Doctrine. After
a two-year study, the FTC in September
2003 released a staff report on the reach

Federal Trade Commission

State Action defense. Recent matters include
Part 3 proceedings against an intrastate
mover association and the South Carolina
Board of Dentistry.
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Assessing the Horizontal Merger
Guidelines. To promote transparency in its
decision-making processes and to assess
the effectiveness of the Horizontal Merger
Guidelines, the FTC, together with the
Antitrust Division of the Department of Justice
(DOJ), held a three-day workshop this past
February. Before the workshop, the FTC
released years of detailed merger data on
proposed mergers, on both those that had
been challenged by the agency and those
that had not. Both efforts aim to promote
a discussion among the agencies, the bar,
the business community, and academia
on existing merger policy and any need for
clarification.
Surveying Consumers on Identity Theft.
Building upon the wealth of information
obtained through databases of consumer
complaints, the FTC this year undertook
a comprehensive survey of consumers’

personal experiences with identity theft. The
survey provided new data on the prevalence
and types of identity theft in the marketplace,
which will allow the agency to assess the
effectiveness of its existing tools to identify
and combat identity theft.
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Employing A Broad-Based Approach
Against Deceptive Health Claims. Using
a multi-pronged strategy, the FTC increased
its attacks on deceptive health claims. The
Commission brought 26 enforcement actions
involving dietary supplements and other
products – representing about $1 billion in
sales – that were alleged to be deceptively
marketed for their purported ability to treat or
cure a wide variety of health conditions. The
agency also continued to work with the Food
and Drug Administration through enforcement
against deceptive dietary supplement
marketing; advocating continued truthful
advertising to consumers of prescription
drugs; and suggesting changes to food
labeling requirements to address concerns
about obesity and to permit qualified health
claims on food and dietary supplement
products. Finally, the FTC challenged the
media to help in the fight against deceptive
weight-loss advertisements by publishing a
guide showing the media how to identify and
screen out bogus weight-loss claims.

The chapters below describe these and
other accomplishments more fully. With only
approximately 1,050 staff members, the FTC
has reason to be proud of these extensive
achievements. They are a tribute to the vision of
the agency’s five Commissioners and the hard
work and dedication of the its talented staff.

Fulfilling the Original Vision - 3

and applicability of the State Action doctrine,
first articulated by the Supreme Court 60
years before. The report concluded that
the doctrine has become unmoored from
its original objectives and that overbroad
interpretation has the potential to harm
consumers by shielding major areas of
commerce from the discipline of competition.
The report makes detailed recommendations
on clarifying application of this exemption
to the antitrust laws. The agency also is
pursuing enforcement matters to clarify the

Federal Trade Commission

Chapter 1:
Competition Law Enforcement and
Guidance
The work of the FTC’s competition mission
is critical to protect and strengthen the free
and open markets that are the cornerstone of
a vibrant economy. Aggressive competition
promotes lower prices, higher quality products
and services, and greater innovation. The FTC
has adopted a strategic framework to maximize
the impact of its competition mission. Elements
of that strategy include:
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The FTC at 90 - 4

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Concentrate on segments of the economy
that most affect consumers, such as health
care and energy;
Take full advantage of the FTC’s uniquely
broad set of powers and capabilities,
including law enforcement, research and
reporting, and advocacy;
Seek appropriately comprehensive coverage
of antitrust principles, such as by clarifying
the boundaries of antitrust exemptions;
Communicate FTC policies and enforcement
standards to the public clearly to facilitate
voluntary compliance; and
Work with competition agencies throughout
the world to improve the quality and
consistency of multilateral enforcement
efforts.

The competition mission continues to be
highly productive. In the past 12 months, the
Commission approved 36 antitrust enforcement
actions, including 15 involving mergers and
21 involving anticompetitive conduct. The

Commission issued two administrative
complaints and accepted six consent
agreements in merger cases, and the parties
abandoned an additional seven proposed
mergers in light of the agency’s antitrust
concerns. Nonmerger enforcement included
seven administrative complaints and 14 consent
agreements. In addition, the Commission issued
two adjudicative opinions. As described in
Chapter 3, the agency’s competition mission also
pursued numerous non-enforcement initiatives,
including conducting hearings, workshops, and
research activities; issuing reports; submitting
comments that urged other government entities
to adopt competition-based policies; filing amicus
briefs in significant private antitrust cases; and
cooperating with and assisting competition
authorities throughout the world.

A. Administrative Adjudication
The FTC has significantly expanded the use
of the administrative process under Part 3 of its
Rules to adjudicate competition cases. In fiscal
year 2003, the Commission approved more Part
3 complaints than in any year since 1985. (See
Box 1.) Currently, nine competition cases are in
adjudication before an FTC Administrative Law
Judge (ALJ) (five cases) or the Commission
(four cases). The agency also is defending
final Commission adjudicative decisions in two
additional cases before a U.S. Court of Appeals.
Finally, during the past 12 months, the agency
obtained relief in three cases after initiating Part
3 proceedings.
Mix of Cases. The increase in Part 3
proceedings is due in part to the reduced level
of merger activity in recent years. Resources

Federal Trade Commission

Part 3 Competition Complaints Issued
by Fiscal Year (1983 – 2003)

Box 1

14
12
10
8
6
4
2
0

filing thresholds has necessitated
more focus on non-reportable (and
often consummated) mergers,
which normally are contested
through administrative proceedings, instead of
through injunctive actions in federal court.

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Systematic Approach to Identifying Cases.
The FTC’s expanded administrative docket
is also a product of the agency’s systematic
approach to identifying serious misconduct,
especially in key economic sectors. The staff
working on the FTC’s State Action, NoerrPennington, and Internet Task Forces have
worked to identify problems, and the agency’s
focus on critical industries such as health
care has led to more litigated cases. Many of
these Part 3 cases involve complicated policy
questions and cutting-edge issues.
Advantages of Part 3. Part 3 adjudicative
opinions offer benefits that extend well
beyond the relief obtained in a particular case.
Consistent with congressional intent in passing
the FTC Act, thoughtful and carefully written
opinions issued by the Commission, a body
with recognized expertise in competition law

and policy, can provide guidance to the bar,
the business community, and the public on
applicable standards and enforcement policy.
Commission opinions also can influence courts
and thereby help shape the development of
antitrust jurisprudence.

1. Commission Decisions and Pending
Appeals.
Under the FTC’s Rules of Practice, the
Commission can conduct a full de novo review
of the ALJ’s findings of fact and the legal
conclusions in matters in which it hears an
appeal. During the past year, the Commission
issued Final Decisions in two Part 3 antitrust
cases.
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Polygram Holding (The Three Tenors).
The Commission issued a Final Decision in
The Three Tenors, involving allegations that
several music distribution companies entered
into an illegal agreement not to advertise or
discount earlier albums and video recordings
of concerts featuring the Three Tenors in an

Fulfilling the Original Vision - 5

Complaints

previously diverted to merger
review can now be focused
on suspected anticompetitive
conduct. While problematic
mergers reported under the
Hart Scott Rodino Act (HSR),
when not resolved by a consent
agreement, generally are litigated
in federal court, conduct cases are
usually litigated in administrative
proceedings under Part 3.
Moreover, the 2001 change in HSR

Federal Trade Commission

effort to promote their most recent concert.
The unanimous Commission opinion,
upholding the ALJ’s finding of illegality,
provided a blueprint of how the Commission
will analyze “inherently suspect” horizontal
restraints, based on established case law
principles. The Commission found that
Respondents’ agreements not to discount
or advertise Three Tenors products were
inherently suspect, and thus “presumptively
anticompetitive” because restrictions of this
sort generally pose significant competitive
hazards. The Commission also rejected
Respondents’ claim that the moratorium
on advertising and discounting served to
prevent free-riding, stating that it instead
simply eliminated interbrand competition.
Respondents have appealed, and the case
is now pending before the U.S. Court of
Appeals for the District of Columbia Circuit.

The FTC at 90 - 6

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Schering-Plough. The Commission
issued a final decision overturning the
ALJ’s dismissal of charges that ScheringPlough agreed to pay two generic drug
manufacturers to delay a launch of generic
versions of the Schering-Plough drug KDur. The delay harmed consumers because
competition from generic equivalents of
brand-name drugs helps to lower the rapidly
rising cost of prescription drugs, saving
consumers billions of dollars each year. KDur is a potassium chloride supplement used
to treat high blood pressure. The opinion
explained that the applicable substantive
test of legality of horizontal restraints is not
determined by bright lines of demarcation,
but rather by a continuum “ranging from per

se condemnation of particularly egregious
conduct to a detailed examination of more
ambiguous behavior, responsive to the
facts of individual cases.” In this case, the
Commission conducted a more detailed
examination than was required in Three
Tenors, but rejected the ALJ’s conclusion that
it was necessary to define markets indirectly
because the Commission found direct
evidence of anticompetitive effects. Schering
has appealed the case to the U.S. Court of
Appeals for the Eleventh Circuit.

2. New Part 3 Complaints.
The Commission issued nine Part 3
complaints in the past 12 months:
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California Pacific Medical Group (Brown
& Toland). The complaint charged this
physicians’ organization in the San Francisco
area with fixing the prices and terms under
which its doctors would contract with payors
to provide services for preferred provider
organization enrollees. The Commission
recently accepted a consent agreement that
bars Brown and Toland from negotiating
with payors on physicians’ behalf or taking
other actions consistent with doctors’ joint
bargaining with payors.

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Kentucky Household Goods Carriers
Association, Movers Conference of
Mississippi, and Alabama Trucking
Association (Household Movers Cases).
The Commission issued three Part 3
complaints against associations of intrastate
household movers in Alabama, Mississippi,
and Kentucky. The complaints challenge
the competing movers’ collective filing of

Federal Trade Commission

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South Carolina Board of Dentistry. The
pending complaint alleged that the Board
imposed anticompetitive restrictions on
the ability of dental hygienists to provide
in-school preventive dental services,
including cleanings, sealants, and fluoride
treatments. The complaint charged that the
consequences of the Board’s anticompetitive
action fell particularly heavily on South
Carolina’s economically disadvantaged
children. In the January argument before
the Commission on a motion to dismiss, the
Board argued, among other things, that its
actions were exempt from federal antitrust
liability under the State Action doctrine.

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North Texas Specialty Physicians. The
complaint alleged that this physician group
violated the antitrust laws by negotiating
agreements among its participating
physicians on price and other terms, refusing
to deal with payors except on collectively
agreed-upon terms, and refusing to submit
payor offers to participating physicians unless
the terms complied with the group’s minimum
fee standards.

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prices it demanded from payors on behalf of
its 450 member physicians in North Carolina.

Piedmont Health Alliance. The complaint
alleged that Piedmont Health Alliance violated
the antitrust laws by collectively setting the

Aspen Technology. The Commission
challenged the merger of two of the three
leading providers of engineering process
simulation software for process industries.
The complaint charged that, because
customers for this technology include leading
petroleum and pharmaceutical companies,
the loss of competition resulting from the
merger ultimately could affect prices for a
range of products, including those used in the
production of gasoline and prescription drugs.
Evanston Northwest Healthcare. The
Commission challenged the January 2000
acquisition of Highland Park Hospital by
Evanston Northwest Healthcare (ENH), the
owner of nearby hospitals in Cook and Lake
Counties, Illinois. According to the complaint,
the hospital’s prices increased significantly
following the acquisition. In addition, the
complaint alleged that the parties combined
a group of independent physicians previously
affiliated with Highland Park Hospital into a
group of physicians employed by ENH and
that joint negotiation by these physicians with
insurers constituted illegal price fixing.

3. Other Pending Part 3 Matters.
Three other cases also are pending decision
after appeal to the Commission.
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Rambus. On March 1, 2004, Complaint
Counsel filed an appeal with the Commission
of an ALJ decision dismissing charges that
Rambus monopolized a common form of
computer memory. The complaint alleged

Fulfilling the Original Vision - 7

rates for intrastate moving services, alleging
violations of Section 5 of the FTC Act. The
Alabama and Mississippi associations settled
their respective cases, agreeing to stop filing
tariffs containing collective intrastate rates,
in accord with the relief requested in the
Commission’s complaint.

Federal Trade Commission

that, as a participant in an electronics
industry standards-setting organization
(SSO), Rambus intentionally subverted the
SSO’s purposes and processes by failing
to disclose that it had a patent and several
pending patent applications on technologies
that eventually were adopted as part of the
industry standard for the memory. Once the
standard was adopted, Rambus allegedly
was in a position to reap millions in royalty
fees each year, and potentially more than a
billion dollars over the life of the patents.
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The FTC at 90 - 8

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Unocal. On March 10, 2004, the
Commission heard oral argument in
an appeal of the ALJ’s dismissal of the
complaint charging monopolization by the
Union Oil Company of California (Unocal).
The complaint alleged that Unocal made
misrepresentations to the California Air
Resources Board (CARB) and to industry
participants concerning its research relating
to low-emissions reformulated gasoline
(RFG). Unocal’s actions allegedly led to a
regulatory standard that overlapped Unocal
patents, giving Unocal a monopoly over
the technology used to produce and supply
California “summertime” RFG and costing
consumers hundreds of millions of dollars.
Unocal has argued that such conduct is
protected from antitrust scrutiny by the NoerrPennington doctrine.
Chicago Bridge. The Commission also is
considering an appeal from an ALJ Initial
Decision requiring that this combination
of two builders of field-erected, industrial
storage tanks be unwound because it
violated Section 7 of the Clayton Act.

B. Nonmerger Enforcement
The FTC began to restore its historic
balance between merger and nonmerger
enforcement beginning in 2001 when merger
activity subsided substantially. In each of the
last three years, the agency has opened at least
twice as many new nonmerger investigations
as it did in 2000. Consistent with its strategic
focus, the agency identified priorities and
sought systematically to develop cases in key
areas. The areas of emphasis included health
care, prescription drugs, standards setting,
professional associations, and immunities from
and exceptions to the antitrust laws.
The FTC’s record in fiscal year 2003
revealed the success of its investment in these
initiatives. During that year, the agency initiated
21 nonmerger enforcement actions, including
multiple cases in each of the areas targeted as
a priority. (See Box 2.) Among these cases
are 14 consent agreements and seven Part 3
complaints. This record of enforcement exceeds
that of any fiscal year in at least the past two
decades.

1. Focus on Health Care.
Promoting competition in the health care
sector has been among the FTC’s most
prominent priorities since it brought its landmark
American Medical Association case in the 1970s.
The rapidly rising cost of health care is a matter
of concern for consumers, employers, insurers,
and the nation as a whole. Recently, the agency
has redoubled its efforts to stop anticompetitive
agreements among health care providers and
other anticompetitive practices that raise the cost
of health care.

Federal Trade Commission

Collusion Among Physicians. In the
past year, the Commission has charged many
groups of physicians with colluding to raise
consumers’ costs. The Commission obtained
consent agreements in nine matters and issued
administrative complaints against another two
groups. These cases involve significant numbers
of doctors, including:

l

An administrative complaint against an
organization with more than 1,500 San
Francisco physicians, and the subsequent
settlement with that organization.

The FTC’s enforcement actions stop, or seek
to stop, allegedly collusive conduct that harms
employers, individual patients, and health plans
by depriving them of the benefits of competition
in the purchase of physician services.

Collusion Involving Hospitals. In addition
to the cases involving physician organizations,
the Commission has pursued similar actions
against organizations that include hospital
A settlement with a Dallas/Fort Worth area
services. For example, the Commission
physicians association with 1,000 members
accepted a consent agreement with Maine
and a Part 3 complaint against a separate
Health Alliance (MHA), a group of 325 physicians
Dallas/Fort Worth physicians group of 600
and 11 hospitals, to resolve charges that MHA
members;
engaged in collusion that raised health care
prices in a five-county area in Maine. In a similar
A settlement with 900 faculty physicians and
consent agreement, South Georgia Health
600 community physicians serving St. Louis
Partners, a group consisting of 15 hospitals and
and surrounding areas; and
500 physicians, settled charges that the group
collectively fixed prices. These two
Box 2
cases represent the Commission’s
Nonmerger Enforcement Actions Initiated
first challenges to provider
by Fiscal Year (1983 – 2003)
25

20

15

10

5

0

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

organizations allegedly engaged
in collusive conduct in providing
hospital services. In December,
the Commission settled charges
that Frye Regional Medical Center
and its parent, Tenet Healthcare
Corporation, were instrumental
in facilitating price-fixing by
local physicians in four North
Carolina counties. This settlement
represents the first case in which
the Commission named a hospital

Fulfilling the Original Vision - 9

l

A settlement with two San Diego County,
California anesthesiologists groups whose
members work on approximately 70 percent
of a San Diego area hospital’s cases
requiring anesthesiology services;

Enforcement Actions

l

l

Federal Trade Commission

as a participant in an alleged provider price-fixing
conspiracy. The case against the physicians
group remains in Part 3.
South Carolina Board of Dentistry. As
mentioned above, the Commission issued an
administrative complaint challenging a board
regulation that prohibited licensed dental
hygienists from providing basic preventive dental
care services in a school setting unless the
patient first had been seen by a dentist and a
treatment plan had been established. According
to the complaint, the South Carolina state
legislature passed a law in 2000 that eliminated
a statutory requirement for a dentist to examine a
child before a hygienist was permitted to provide
preventive care in schools, and the Board
responded by issuing an emergency regulation
reinstating and expanding the restrictions.
The administrative complaint alleges that the
Board’s action artificially insulated dentists from
competition that licensed and trained hygienists
can provide, and thus deprived children –
particularly economically disadvantaged children
– of important preventive dental health care.

The FTC at 90 - 10

2. Seeking to Remove Public
Restraints on Competition.
Effective application of the antitrust laws
involves not only fashioning and applying
appropriate legal standards to govern
marketplace conduct, but determining how
widely the antitrust laws properly should
apply. The State Action and Noerr-Pennington
doctrines shield substantial areas of commerce
from competition’s beneficial discipline.
Believing that some courts had expanded the
protections afforded under State Action and

Noerr-Pennington beyond the standards that the
Supreme Court articulated, the Commission has
brought cases that may provide opportunities to
clarify the legal standards.
State Action - Clear Articulation. The
State Action doctrine confers antitrust immunity
upon certain private conduct taken pursuant
to state policy. The Supreme Court has ruled
that otherwise illegal conduct is shielded from
the antitrust laws if it is pursuant to a “clearly
articulated” state policy to supplant competition
and is “actively supervised” by the state.
Some courts have broadened the “clearly
articulated” prong to the point that a broad state
authorization of certain acts or implementation of
a regulatory scheme is deemed the equivalent
of a clear articulation of a policy to restrain
competition. The South Carolina Board of
Dentistry case raises issues regarding the scope
of clear articulation.
State Action - Active Supervision. An
FTC task force has concluded that courts
have not provided sufficient guidance on what
constitutes “active supervision” under the
State Action doctrine. Although courts have
considered a variety of factors, not all of those
factors were well-tailored to the principles
underlying the standard. Overbroad application
of the standard sweeps a variety of activities
under the doctrine’s protection to the detriment
of consumers. A series of Commission
enforcement actions aimed at associations
of household goods movers have provided
opportunities for clarification regarding the active
supervision requirement. In the Analyses to Aid
Public Comment accompanying the consent
agreements in these actions, the Commission

identified three factors, based on the original
principles established in the Supreme Court’s
jurisprudence, that are relevant to determining
whether the state “actively supervised” the
challenged conduct: (1) the development of an
adequate factual record, including notice and
opportunity to be heard; (2) a written decision
on the merits that would provide analysis,
reasoning, and supporting evidence that
the private conduct furthers the legislature’s
objectives; and (3) a specific assessment – both
qualitative and quantitative – of how the private

of newly exempt transactions pose no antitrust
concern, a small number do raise competition
issues. Consequently, the FTC has placed more
emphasis on identifying possibly anticompetitive
mergers among those not reportable under
HSR, relying on press accounts, industry
knowledge, and other sources. In addition,
while the agencies ordinarily identify possibly
problematic combinations during the initial HSR
review period, occasionally the agencies cannot
identify significant competitive problems within
that time period. In those cases, the agencies

action comports with the substantive standards
established by the state legislature, particularly
when the standards include competition or
consumer welfare.

have a responsibility to challenge mergers that
could harm competition even after the HSR
review period has run. Finally, the FTC, as part
of its ongoing “competition policy research and
development,” conducts periodic reviews of
completed mergers to assess how well it has
identified possibly anticompetitive mergers in
advance.

Noerr-Pennington - Unocal Part 3
Litigation. The agency’s challenge to Unocal’s
alleged misrepresentations to the California Air
Resources Board and to Unocal’s competitors is
on appeal before the Commission after the ALJ’s
dismissal of the complaint. The ALJ based his
decision in large part on his conclusion that the
Noerr-Pennington doctrine insulates Unocal’s
conduct from antitrust challenge and rejected
various arguments why Noerr-Pennington should
not apply to Unocal’s alleged misrepresentations.

C. Merger Enforcement
1. Administrative Adjudication of
Consummated Mergers.
Amendments to the HSR Premerger
Notification Act, effective in February 2001,
raised the thresholds governing which proposed
mergers must be reported to the antitrust
agencies in advance. While the vast majority

l

Chicago Bridge. This merger already
had been consummated when the FTC
concluded that it likely violated the Clayton
Act. Thus, the Commission challenged
the merger under Part 3 instead of seeking
an injunction in federal court. Last June,
the ALJ ruled that the merger was illegal
and ordered that the deal be undone. The
matter is now before the Commission on
appeal. In December, after learning that
Chicago Bridge had notified employees of its
intent to close a plant it acquired as part of
the acquisition, Complaint Counsel filed an
emergency motion seeking authorization for
injunctive relief to prevent Chicago Bridge
from dissipating assets that are the subject of
proposed divestiture relief. Subsequently, the

Fulfilling the Original Vision - 11

Federal Trade Commission

Federal Trade Commission

Commission approved an “interim consent
order” that requires preservation of the
acquired assets in a form that will facilitate
divestiture, should the ALJ’s order be upheld.
l

l

Aspen Technology. The Commission
issued a Part 3 complaint alleging that Aspen
Technology’s $106.1 million acquisition
of Hyprotech in 2002 was anticompetitive
and led to the elimination of a significant
competitor in the provision of process
engineering simulation software for industry.
Evanston Northwest Healthcare. The
Commission’s administrative action
challenging a hospital acquisition by
Evanston Northwest Healthcare illustrates
another facet of consummated mergers. In
challenging this merger, the Commission may
be able to examine actual price evidence
instead of relying on predictions of price
effects resulting from a merger.

2. Continued Emphasis on Key Market
Segments.

The FTC at 90 - 12

The FTC continued to devote substantial
resources in its merger enforcement program to
sectors of the economy, primarily health care and
energy, that have significant impact on the daily
lives of American consumers.
Health Care. As in the nonmerger area,
health care is a priority in merger enforcement.
The FTC devotes special attention to mergers
involving pharmaceuticals, hospitals, and other
health-related markets. Two efforts stand out:
l

pharmaceutical company mergers. Last
year, the Commission ordered Pfizer, Inc., the
largest pharmaceutical company in the world,
and Pharmacia Corporation to make certain
divestitures to resolve concerns that their $60
billion merger would harm competition in nine
separate and wide-ranging product markets,
including drugs to treat overactive bladder,
symptoms of menopause, skin conditions,
coughs, motion sickness, erectile dysfunction,
and three different veterinary conditions.
The order requires divestitures to protect

Pfizer/Pharmacia. Rising prescription
drug prices are a major concern for many
consumers, and the FTC carefully monitors

consumers’ interests in those markets, while
allowing the remainder of the transaction to
go forward.
l

Hospital Merger Retrospective. The FTC
is reviewing the effects of consummated
hospital mergers in several cities. The
administrative complaint challenging
Evanston Northwest Healthcare’s acquisition
of Highland Park Hospital, discussed above,
stems from that effort.

Energy. The cost of energy affects every
consumer. The FTC carefully reviews mergers
in energy-related markets for possible adverse
effects on competition. In the past year, the
FTC considered mergers involving natural gas
transmission and petroleum refining.
l

Southern Union (Panhandle Pipeline).
In July 2003, the Commission approved a
final consent order designed to preserve
competition in the market for the delivery of
natural gas to the Kansas City area. The
order allowed Southern Union Company’s
$1.8 billion purchase of the Panhandle
pipeline from CMS Energy Corporation, after

Federal Trade Commission

l

Sunoco/Eagle Point. After investigation,
the FTC concluded that Sunoco’s proposed
acquisition of Eagle Point Oil Company from
El Paso Corporation would not threaten
consumers’ interests. Although Sunoco
owned three Philadelphia-area local
refineries, and the acquisition would add
a fourth, the FTC’s investigation identified
significant sources of both reformulated
and conventional gasoline that likely would
prevent Sunoco and other area refiners from
raising prices. In addition, according to the
Commission’s statement, Sunoco presented
credible evidence that the acquisition likely
would produce substantial merger-specific
efficiencies relating to refinery synergies and
optimization.

3. Other Merger Enforcement.
The agency continued to scrutinize and
challenge proposed mergers across the
economy when they threatened competition.
l

DSM/Roche. The Commission acted to
protect competition in the market for phytase
– an enzyme important to the nation’s food

supply – by obtaining a settlement that allows
DSM N.V. to proceed with its $1.89 billion
acquisition of Roche Holding AG’s Vitamin
and Fine Chemical Division, but requires that
DSM divest its phytase business. Phytase is
added to poultry and swine feed to promote
digestibility of phosphorous and other
nutrients that are vital to livestock production.
l

l

GenCorp/ARC. A final consent order
involving GenCorp, Inc.’s $133 million
acquisition of Atlantic Research Corporation
protects competition by requiring divestiture
of ARC’s in-space liquid propulsion business.
The remedy fully resolved the agency’s
concerns about the transaction’s impact on
competition in markets for four types of inspace propulsion thrusters, while allowing
the parties to complete the otherwise benign
transaction.
GE/AGFA. The Commission reached a
settlement to resolve antitrust concerns
arising from General Electric Company’s
$437 million acquisition of Agfa-Gevaert
N.V.’s nondestructive testing (NDT) business.
The consent agreement requires GE to
divest its ultrasonic NDT business within 20
days of its acquisition of Afga’s NDT assets.
Ultrasonic NDT equipment is used for quality
control and to inspect the tolerance of
materials in manufacturing applications.

D. Transparency and Policy Guidance
The FTC increases the effectiveness of its
law enforcement efforts by facilitating public
understanding of its enforcement policies and
standards. Transparency serves the FTC’s
objectives because a full understanding of the

Fulfilling the Original Vision - 13

Southern Union terminated an agreement
under which one of its subsidiaries managed
the Central pipeline, which competes with
Panhandle in the market for the delivery
of natural gas to the Kansas City area.
The complaint alleged that the transaction
would have placed the two pipelines under
common ownership or common management
and control, eliminating direct competition
between them, and likely resulting in
consumers paying higher prices for natural
gas in the Kansas City area.

Federal Trade Commission

kinds of transactions or conduct the FTC is likely
to challenge, and why, informs businesses,
facilitates antitrust lawyers’ counseling of
their clients, and prevents harmful mergers
or anticompetitive practices without need for
government intervention. Each successful
enforcement action not only promotes
competition in the specific market at issue, but
also communicates to the business and legal
communities that the FTC can and will move
successfully to challenge the type of merger
transaction or conduct at issue. The FTC

Pharmaceuticals and Genzyme Corporation,
the FTC focused on the transaction’s
potential impact on the pace and scope
of research into the development of a
treatment for Pompe disease using enzyme
replacement therapies (ERT). Pompe
disease is a rare and often fatal disease
affecting infants and children. There is
currently no effective treatment for this
affliction. Because Pompe disease affects
few individuals, potential treatments fall
under the Orphan Drug Act, which grants

has sought to expand public awareness and
understanding of its actions in several additional
ways.

seven years of market exclusivity to the
first treatment gaining FDA approval. In
a statement presenting his views on the
matter, closed by a 3-1 Commission vote,
Chairman Muris noted that economic theory
and research have not established a general
causal relationship between innovation and
competition, and that careful investigation of
case-specific facts was therefore necessary.
He explained that the agency’s investigation
uncovered no evidence that the merger
caused a reduction in R&D spending or
progress on either of the two Pompe disease
ERT programs, and that the merger may

Explaining Decisions Not to Take
Enforcement Action. Explaining why the FTC
decided not to take action in a particular case
can provide as much useful information to the
public as the documents released when the
agency initiates litigation or accepts a settlement.
For this reason, the Commission has issued
statements explaining why it declined to take
action.

The FTC at 90 - 14

l

Sunoco/Eagle Point. The Commission
issued a statement when it closed this
investigation, explaining that multiple sources
of gasoline supply to the Philadelphia area,
including other local refineries as well as
shipments via a major petroleum products
pipeline from Gulf Coast refineries, likely
would prevent any anticompetitive result
from Sunoco’s acquisition of an additional
Philadelphia-area refinery.

l

Genzyme/Novazyme. In this investigation
of a consummated merger of Novazyme

in fact benefit patients. Commissioner
Thompson also issued a statement in which
he argued in favor of a challenge on the
grounds that the merger was presumptively
anticompetitive under the Horizontal Merger
Guidelines and that it eliminated one of
two rivals seeking to develop Pompe
disease ERT. Commissioner Harbour did
not participate in this matter but issued a
statement expressing her general views on
the relationship between competition and
innovation.

Federal Trade Commission

Caremark. The Commission issued a
statement explaining the closing of its
investigation into Caremark Rx, Inc.’s
proposed acquisition of AdvancePCS. The
firms are two of the largest providers of
prescription benefit management (PBM)
services in the United States. PBMs
administer prescription benefits for most U.S.
consumers under contracts with health plans
or directly with employers. The Commission
concluded that competition from the
remaining national, independent, full-service

Data on Horizontal Merger Investigations
and Challenges. Together with DOJ, the FTC
released a report summarizing merger challenge
data for the two agencies from 1999 through
2003. The report indicated the number of
merger enforcement actions by post-acquisition
Herfindahl-Hirschman Index (HHI) and change
in HHI. In addition, the FTC recently released a
staff analysis of horizontal merger investigations
for fiscal years 1996 to 2003. The data show
tabulated post-acquisition HHIs and change in
HHIs associated with the FTC’s investigations

PBMs, along with significant additional
competition from several health plans and
several retail pharmacy chains offering
PBM services, and dozens of small, often
regionally oriented PBMs, should prevent
any adverse effect on consumers. The
Commission also found no reason to expect
PBM monopsony power over pharmaceutical
manufacturers.

in 151 horizontal merger investigations involving
more than 780 markets over the last eight years.
(See Box 3.) For investigations involving three
or fewer markets, the FTC staff also reported
information on whether or not “hot documents”
or “strong customer complaints” were identified
during the investigation. This information should
assist practitioners and businesses in evaluating

Horizontal Merger Investigations
Post Merger HHI and Change in HHI (Delta)

Box 3

All Markets by Fiscal Year (1996 - 2003)
Enforced/Closed
Change in HHI (Delta)
100 - 199 200 - 299 300 - 499 500 - 799

800 - 1,199

1,200 - 2,499 2,500 +

Total

0 - 1,799

0/14

17/20

18/8

17/4

3/2

0/1

0/0

0/0

55/49

1,800 - 1,999

0/4

5/4

5/3

12/1

12/2

0/0

0/0

0/0

34/14

2,000 - 2,399

1/1

1/5

7/4

22/11

31/8

1/1

0/0

0/0

63/30

2,400 - 2,999

1/1

4/1

4/3

13/4

41/11

25/3

0/0

0/0

88/23

3,000 - 3,999

0/2

2/2

3/1

6/1

15/6

49/11

28/7

0/0

103/30

4,000 - 4,999

0/0

0/2

1/1

3/0

8/1

6/0

42/2

0/0

60/6

5,000 - 6,999

0/0

2/0

3/2

3/1

6/0

7/1

63/12

20/2

104/18

7,000 +

0/0

0/0

0/0

1/0

2/0

5/0

11/1

81/2

100/3

Total

2/22

31/34

41/22

77/22

118/30

93/17

144/22

101/4

607/173

Fulfilling the Original Vision - 15

0-99

Post Merger HHI

l

Federal Trade Commission

the likelihood of an antitrust challenge to a
proposed acquisition.
Disgorgement Policy Statement. The
Commission unanimously issued a policy
statement on the use of monetary equitable
remedies, such as disgorgement and restitution,
in antitrust cases. The statement explained that,
in determining whether to seek disgorgement
or restitution, the agency would consider:
(1) whether the underlying violation is clear,
(2) whether there is a reasonable basis for
calculating the amount of the remedial payment,
and (3) the value of equitable monetary relief in
light of other likely remedies, including remedies
in private actions and criminal proceedings.
The agency stated that it remains sensitive
to potential duplicative recoveries by injured
persons or excessive multiple payments by
defendants for the same injury.

The FTC at 90 - 16

Analyses to Aid Public Comment.
Although the Commission routinely publishes
Analyses to Aid Public Comment to explain a
consent agreement, it recently has emphasized
making them more informative. Besides
assisting the public in interpreting and
commenting on a proposed settlement, these
documents can serve the more general purpose
of outlining the agency’s analytical approach and
the enforcement standards that apply to specific
conduct. In the Household Movers cases,
for example, the Commission issued lengthy
statements identifying specific elements of an
active supervision regime that it will consider
in determining whether the active supervision
prong of the State Action doctrine is met and
evaluating the facts of each case in light of those
elements.

Achieving a Synthesis of
Competition Policy and
Consumer Protection

Box 4

The Federal Trade Commission has the dual
role of advancing competition policy and promoting
consumer protection. In various articles and
speeches, Commissioner Thomas B. Leary has
emphasized that the combination of responsibilities
requires coherent principles for exercising these
functions and creates opportunities for exploring how
insights achieved in one mission might inform policy in
the other.
In a presentation in January 2004, Commissioner
Leary considered tensions that might arise between
industry self-regulation measures to combat fraud
and traditional antitrust limits on collaboration among
competitors. Commissioner Leary described how
industry groups can achieve legitimate pro-consumer
objectives while minimizing antitrust risks – for
example, by ensuring that industry ethical codes are
well-tailored to the purpose of preventing fraud, are
premised on objective criteria, and are implemented
through reasonable dispute resolution mechanisms.
As he outlined practical steps that businesses
collectively can take to reduce fraud, Commissioner
Leary underscored the need for the FTC to consider
and improve the conceptual links between its
competition and consumer protection programs.

Chapter 2:
Consumer Protection Law Enforcement, Rulemaking, and Guidance
The FTC’s consumer protection mission
protects against fraud, deception, and unfair
practices in the marketplace. During the past 12
months, the agency focused on issues of critical
importance to consumers, including identity
theft, telemarketing fraud, Internet fraud, credit
reporting, and consumer privacy. The FTC
targeted its law enforcement to combat the worst
consumer harms and focused its consumer and
business education to promote and provide
accurate information to help consumers with
their purchasing decisions.

Federal Trade Commission

the law acting alone or with other government
authorities; and to educate the agency about
emerging issues, industry about complying with
the law, and consumers about how to protect
themselves from fraud and deception.

A. Fraud and Deception
1. Tools to Identify Fraud and
Deception.
Over the past year, the FTC continued to
improve its methods for identifying fraud and
deception. The agency added thousands of
consumer complaints to its internal databases,
recruited more law enforcement partners
at home and abroad, and educated more
businesses and consumers about how to avoid
and fight fraud. The FTC continued to use
electronic tools extensively to ferret out fraud,
especially in the cyberworld. For example, the
FTC identified and targeted the emergence of
a new online technique for duping consumers
into revealing personal information, known
as “phishing.” Using sophisticated technical
investigation, close coordination with criminal
law enforcement, and a variety of legal tools,

Top 10 Consumer
Fraud Complaints
Calendar Year 2003
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Box 5

Identity Theft - 42%
Internet Auctions - 15%
Shop-at-Home/Catalog Sales - 9%
Internet Services & Computer Complaints - 6%
Prizes, Sweepstakes & Lotteries - 5%
Foreign Money Offers - 4%
Advance Fee Loans & Credit Protection - 4%
Telephone Services - 3%
Business Opportunities & Work-at-Home Plans - 2%
Magazine Buyers Clubs - 1%

the FTC has begun to track down and stop the
perpetrators of such schemes.
Consumer Response Center. The CRC
continues to be a vital resource for both
consumers and law enforcers at the FTC. The
Center responds to complaints and inquiries
submitted by consumers using the FTC’s toll-free
number (1-877-FTC-HELP), filing complaints
online, and sending letters. In fiscal year 2003,
the CRC added 944,000 complaints and inquiries
to the FTC’s database. The total number of
entries now exceeds 3.2 million.
Consumer Sentinel. Consumer Sentinel
is the FTC’s primary fraud database. Created
in 1997, Consumer Sentinel now contains
over 1.5 million fraud complaints and is
available online to over 990 enforcement
agencies across the United States, Canada,
and Australia – an increase of more than 400
organizations since last year. Consumers also
can access public sections of this Web site and
find a wealth of statistics about fraud through
www.consumer.gov. (See Box 5 for a list by
category of the top complaints.)

Fulfilling the Original Vision - 17

The FTC uses various policy tools to
set priorities for its consumer protection
mission. The agency’s complaint databases
provide valuable information about consumer
experiences in the marketplace; Internet surfs
help single out the most serious online fraud
and deception; and workshops, hearings, and
conferences advance FTC knowledge and the
public policy debate. As the FTC tracks trends
using state-of-the-art technology, its fundamental
mission remains the same: to identify the most
egregious fraud and deception; to enforce

Federal Trade Commission

Providing Tools for Law Box 6
Enforcement and Consumers
to Combat Identity Theft

The FTC at 90 - 18

Pamela Jones Harbour was sworn in as a
Commissioner on August 4, 2003. In December
2003, Commissioner Harbour spoke at the Inside ID
Conference, addressing the dangers of identity theft
and detailing the FTC’s ongoing ID Theft program.
Emphasizing the Commission’s continued commitment
to provide consumers and law enforcement with
the tools necessary to combat this rapidly-growing
area of fraud, Commissioner Harbour noted, “The
Commission, through its education and enforcement
capabilities, is committed to reducing identity theft as
much as possible. The Commission will continue its
efforts to assist criminal law enforcement with their
investigations, maintain a robust identity theft program
to assist victims, and work with the private sector
on ways to both prevent ID theft from happening
and facilitate the process for regaining victims’ good
names.”

Identity Theft Tools. The FTC employs
two major tools in the fight against identity theft.
First, the agency operates a toll-free number
(1-877-ID-THEFT) and an online complaint
form (at www.consumer.gov/idtheft) as portals
to its complaint database. Complaints and
inquiries to the FTC have increased from more
than 185,000 in fiscal year 2002 to more than
321,000 in fiscal year 2003. Second, the FTC
maintains an ID theft database, which is the
central clearinghouse for ID theft complaints and
for the collection of consumer complaint data.
The database now holds more than 500,000
complaints. Building on its experience with
Consumer Sentinel, the FTC began making
the data available to law enforcement partners
through an online database, and now more than
890 law enforcement agencies access the data.
Working with the Secret Service and the U.S.
Postal Inspection Service, FTC investigators

develop preliminary investigative reports that
are referred to regional Financial Crimes Task
Forces for possible prosecution.
Spam Database. “Spam,” the popular name
for unsolicited commercial e-mail, continues to
be a problem for consumers and businesses
alike. Since 1998, the FTC has maintained an
electronic mailbox to which Internet customers
are encouraged to forward spam (uce@ftc.gov).
This database currently receives an average
of 250,000 new pieces of spam daily. The
total number of spam received has grown from
700,000 in the first year to more than 94 million
by mid-March 2004.
Identity Theft Survey. Concentrating on
one of the most frequently reported consumer
frauds, the FTC released the findings from this
nationwide survey on identity theft, showing that
27.3 million Americans have been victims of
identity theft in the last five years, including 9.9
million persons in the last year alone. (See Box
7.) According to the survey, identity theft losses
to businesses and financial institutions totaled
nearly $48 billion, and consumer victims reported
$5 billion in out-of-pocket expenses for the year
preceding the survey. One promising finding,
however, was that the most serious form of ID
theft, the opening of new accounts, is rising at
a much lower rate than the misuse of existing
accounts, which is easier to detect and repair.
Cross-Border Fraud Web Site. Among
its newest tools to identify fraud is the FTC’s
“econsumer.gov” Web site, redesigned and
launched in September 2002. Consumer
complaints filed through econsumer.gov are
now accessible to 18 member countries, with

Federal Trade Commission

Ireland as the newest addition. Through this
site, the FTC also has established a six-month
pilot program to link consumers with alternative
dispute resolution providers to help resolve
cross-border consumer disputes, especially ecommerce disputes.

In addition, the FTC is awaiting court
approval of its settlement with Fairbanks Capital
Corp., which would require the corporate
defendants to provide $40 million in consumer
redress for violations of the FTC Act related to
the servicing of subprime loans. (See Box 8.)

2. Law Enforcement.
Drawing on all the above sources of
information, the FTC targets the most pervasive
types of fraud for law enforcement actions.
During the past 12 months, the FTC and over
100 law enforcement partners brought more
than 160 separate actions, including 20 filed
by the FTC itself, through “sweeps” targeting
work-at-home schemes, Internet scams, online
auction fraud, and fundraising fraud. The FTC
also has focused on the use of the Internet to
disseminate fraudulent schemes, and brought 58
cases involving the Internet. In the past year, the
FTC obtained 110 judgments ordering more than
$425 million in consumer redress.

Incidence of Identity Theft
April 2002 – March 20031
12

Victims, In millions

8

5.2
(2.4%)

6
3.2
(1.5%2)
1.5
(0.7%)

2
0

1Source:

New Accounts & Other
Frauds

Other Existing Accounts

Existing Credit Card Only

Total Victimization

Identity Theft Survey Report conducted by Synovate for the FTC (March-April 2003).
on the U.S. population age 18 and over (215.47 million) as of July 1, 2002
(Source: Population Division, U.S. Census Bureau; Table NA-EST2002-ASRO-01).

2Based

Deceptive Lending Practices
and Other Credit Schemes. For
most consumers, access to credit
is essential to full participation
in the nation’s economy,
including home ownership. Some
unscrupulous lenders, however,
deceive consumers about loan
terms, rates, or fees. The

Fulfilling the Original Vision - 19

(4.6%)

10

4

Criminal Liaison Unit. Coordination with
criminal law enforcement agencies has long
been a part of the FTC’s consumer protection
efforts, through both formal and informal
cooperation. In 2003, the FTC created the
Criminal Liaison Unit (CLU), a dedicated staff
of attorneys and investigators, whose function
is to act as the point of contact for criminal law
enforcement agencies whose work would be
enhanced through cooperation or consultation
with the FTC on consumer fraud issues.
Specifically, the CLU identifies appropriate and
interested law enforcement agencies and case
agents for specific types of consumer fraud
cases, educates criminal law enforcement
authorities about the FTC and its mission, offers
them training in areas of FTC expertise, and
coordinates training of FTC staff by
Box 7
criminal law enforcement to help
the FTC prepare cases for referral
and ensure the smooth progress of
9.9
parallel prosecutions.

Federal Trade Commission
Box 8

Significant Redress Orders - $425 Million Total
April 2003 - March 2004

Cyberspace.com
$17.7m, 4%

First Capital
Consumers Group
$8.5m, 2%

Rexall Sundown
$7.4m, 2%

Other Matters
$32.6m, 7%

Mitchell Gold
$23.8m, 5%
Capital Choice
Consumer Credit
$36.7m, 8%
Fairbanks Capital
Corp., $40.4m*, 9%
The
Associates/Citigroup
$215m, 45%

Hudson Berkley
$83.8m, 18%

According to the complaint, filed
jointly by the Commission and
the U.S. Department of Housing
and Urban Development, the
defendants, among other things, failed to
post consumers’ mortgage payments in a
timely manner and charged consumers illegal
late fees and other unauthorized fees.

*$40.0m is pending court approval.

results can be severe, including the loss of
the consumer’s home. Bogus organizations
target consumers with bad credit or significant
consumer debt, promising to help them manage
their debt or obtain credit otherwise unavailable
to them. Consumers may pay hundreds of
dollars for these services, only to receive nothing
in return, or worse, to see their credit damaged
even further.

l

The FTC at 90 - 20

Deceptive Subprime Lending. The FTC
has paid special attention to the subprime
lending market in recent years, last year
obtaining one of the largest judgments for
consumer redress in agency history. This year,
the FTC has continued its vigilant monitoring of
the subprime lending market, which is directed
at borrowers whose credit ratings and history do
not qualify them for prime loans.
l

Fairbanks Capital. In November 2003, the
Commission announced settlements with
Fairbanks Capital Holding Corp., its whollyowned subsidiary Fairbanks Capital Corp.,

and their founder and former
CEO, Thomas D. Basmajian. In
separate settlements, the corporate
defendants will pay $40 million in
redress to consumers (subject to
final court approval), and defendant
Basmajian will pay $400,000 in
redress. The agency charged
Fairbanks with engaging in a
variety of unfair, deceptive, and
illegal practices in the servicing
of subprime mortgage loans.

l

Mark Diamond. In November 2003,
Illinois-based mortgage broker Mark
Diamond and his company, OSI Financial
Services, Inc., settled charges by the
Commission and the Illinois Attorney
General that they misrepresented key loan
terms to homeowners in the subprime
market. Pursuant to the settlement, the
defendants paid $270,000 in consumer
redress, which was distributed to all qualified
claimants at the end of January 2004. The
settlement also enjoins the defendants from
misrepresenting loan terms, requires them to
tape record future loan closings, and imposes
other restrictions on their business practices.
Stewart Finance. In September 2003,
the Commission charged subprime lender

Federal Trade Commission

Car Club memberships, to obtain costly
refinance loans, and to participate in a direct
deposit program, which imposed additional
fees. In October, the Commission obtained
a preliminary injunction halting the allegedly
abusive practices. This case also charted
previously untested waters in a related
bankruptcy reorganization case, where the
FTC objected to the sale of Stewart Finance’s
branch offices free of the district court’s
injunction. As a result, the new (unrelated)
purchasers agreed to honor the restrictions
contained in the district court’s preliminary
injunction.
Advance Fee Credit Scams. Other
deceptive schemes involve collecting fees
with the promise of a credit card, which the
consumer never receives. In November 2003,
the Commission charged Platinum Universal,
LLC, its principals, and its successor, Pulsar
Data, Inc., with violating the FTC Act and the
Telemarketing Sales Rule in connection with
the offer of credit cards to consumers for an
advance fee. The complaint alleged that the
Florida-based defendants falsely represented

to English- and Spanish-speaking consumers
that they would obtain a credit card after paying
the defendants a fee, when, in fact, consumers
did not receive a credit card. The defendants
stipulated to a preliminary injunction entered by
the court.
Deceptive Credit Counseling Services.
Still other schemes that the FTC has fought
involve deceptive credit counseling services.
In November 2003, the Commission filed
a complaint in federal court charging that
AmeriDebt, a national organization that promotes
itself as a non-profit credit counseling agency, is
engaged in deceptive practices. According to the
complaint, the defendants falsely represented
that they charge no up-front fee, operate as a
non-profit, and teach consumers how to handle
their finances. Additionally, the complaint
charged that AmeriDebt failed to provide privacy
notices as required by the Gramm-Leach-Bliley
Act.
Law Enforcement Sweeps. Sweeps
continue to be an essential part of the FTC’s
law enforcement strategy. They provide a
unique vehicle for partnering with other law
enforcement agencies to make a greater impact
on a particular type of fraud. By bringing
multiple cases simultaneously against numerous
scammers, law enforcement can provide
greater relief to consumers. This year, the
FTC announced four sweeps, each targeting a
different kind of scam.
l

Operation “Pushing the Envelope.”
Targeting sellers of work-at-home schemes
that take money out of consumers’ pockets
with their deceptive pitches, the FTC

Fulfilling the Original Vision - 21

Stewart Finance Company, its owner
John Ben Stewart, Jr., and nine related
companies with violating federal lending
laws. According to the complaint, Stewart
Finance provided small personal loans to
consumers in the subprime market, typically
in amounts less than $1,000 to be repaid
in less than one year. The Commission
alleged that Stewart Finance engaged in
deception and other illegal practices to
induce unwitting consumers to purchase
add-on products, such as insurance and

Federal Trade Commission

announced in December 2003 a joint federal
and state law enforcement sweep to crack
down on purveyors of allegedly fraudulent
envelope-stuffing business opportunities.
l

l

Southwest Netforce. The Southwest
Netforce, announced in May 2003, included
more than 40 law enforcement actions
by more than 20 federal, state, and local
law enforcement agencies. Using training
provided by the FTC in Internet investigation
techniques, these agencies targeted a variety
of allegedly deceptive spam messages and
fraudulent Internet scams.
Operation “Phoney Philanthropy.”
Also in May 2003, the FTC announced
a law enforcement and public education
campaign with regulators of state charities
to stop fraudulent fundraising. Fraudulent
solicitors prey on the good will of donors,
misrepresenting who they are and what
they do with the money they raise. The
Commission filed five actions targeting
companies and individuals that allegedly
used deception to exploit well-intentioned
individuals and businesses. In addition, 34

sell nonexistent goods in online auctions,
making it appear that innocent third parties
were guilty of fraud. The FTC, along with 33
state and local law enforcers, announced 53
law enforcement actions, including criminal
prosecutions against individuals and entities
engaged in allegedly fraudulent activity in
online auctions.
Health, Safety, and Weight Loss Claims.
Truthful and substantiated health benefit claims
in advertising can be an important source of
information for consumers. For that reason,
combating deceptive health claims continues
to be a major focus of the FTC’s enforcement
program. In the past year, the agency sued
marketers of dietary supplements, devices, and
services, all of which purportedly improve the
health or appearance of consumers. Highlights
include:
l

states joined in the sweep by announcing law
enforcement actions, consumer education, or
new legislation.

The FTC at 90 - 22

l

Operation “Bidder Beware.” This sweep
targeted online auction fraud, consistently
one of the top complaints the FTC receives.
Cases challenged such scams as phony
online escrow services designed to lull
consumers into a false sense of security in
high-dollar transactions, and schemes in
which defendants used stolen identities to

Mark Nutritionals. In October 2003, Mark
Nutritionals, Inc., and two of its officers
agreed to settle federal charges that they
used false and unsubstantiated claims to sell
their weight-loss product. The Commission
sued the marketers of “Body Solutions
Evening Weight Loss Formula” in December
2002. Separate settlements require Edward
D’Alessandro, Jr. and Harry Siskind to pay
$140,000 and $1 million, respectively, and
prohibit all of the defendants from making
false or misleading representations about the
product or any other weight-loss product.

l

Ab Devices. In October 2003, the
Commission charged the marketers of the
Ab Force electronic muscle stimulation belt
with making the same type of false claims

Federal Trade Commission

cell or cordless phones, or by video display
units. The settlement agreements require the
firms to have adequate scientific evidence to
substantiate claims about the performance,
efficacy, or benefit of any good or service
they offer. The combined settlements
garnered almost $500,000 in redress for
consumers.
l

defendants had falsely claimed that the
belt caused loss of weight, inches, and fat;
caused well-defined abdominal muscles;
and was an effective alternative to regular
exercise.
l

l

BodyFlex. The Commission sued the
marketers of the BodyFlex+ System for
falsely advertising that BodyFlex causes
fast inch and fat loss. The November 2003
complaint alleged that the defendants falsely
claimed that BodyFlex causes users to lose
from four to 14 inches across six body areas
in the first seven days without reducing
calories; that BodyFlex causes users to burn
enough body fat to achieve the claimed inch
loss in seven days; and that a “clinical study”
proves that BodyFlex causes significant fat
and inch loss in the first seven days.
Cell Phone Radiation Protection. During
the past year, the Commission brought cases
against firms marketing cell phone radiation
protection devices, alleging that the firms
falsely claimed that their products could
reduce exposure to, or prevent penetration
by, electromagnetic radiation emitted by

l

Ephedra Weight Loss Products. The
Commission announced in July 2003 three
enforcement actions against direct marketers
of weight-loss products containing ephedra.
The two settlements and one complaint filed
in federal court targeted allegedly deceptive
claims about efficacy, safety, and lack of
side effects for weight loss supplements
containing ephedra. The actions challenged
claims that the ephedra supplements cause
rapid, substantial, and permanent weightloss without diet or exercise, and that “clinical
studies” or “medical research” prove these
claims. The agency also challenged claims
that the ephedra weight-loss products are
“100% safe,” “perfectly safe,” or have “no
side effects.” An FDA rule banning the sale
of weight loss and body building products that
contain ephedra became effective in March
2004.
Coral Calcium. Coral calcium was the diet
supplement craze of 2003. In June 2003, the
Commission charged the marketers of the
Coral Calcium Supreme dietary supplement
with making false and unsubstantiated claims
about the product’s health benefits. The
action is part of a series of initiatives that
the FTC and the FDA are taking against

Fulfilling the Original Vision - 23

in the marketing and sale of their product
as those the FTC targeted in “Project
Absurd” in 2002. The Commission alleged
in a Part 3 administrative complaint that the
respondents, through their advertisements
and promotional materials, referenced the
claims in infomercials previously targeted
in Project Absurd, and thereby implied that
their product would produce the same results
expressly promised in those infomercials.
The Commission alleged that the effect on
consumers was the same, and thus that

Federal Trade Commission

the purveyors of products with allegedly
unsubstantiated health and medical claims.
l

The FTC at 90 - 24

l

Seasilver. In June 2003, the Commission
and the FDA announced coordinated actions
against two companies – both charged with
promoting the dietary supplement “Seasilver”
– with unsubstantiated medical claims. The
Commission alleged that the defendants
promoted Seasilver through false claims that
it was clinically proven to treat or cure 650
diseases, including cancer and AIDS. Under
March 2004 settlements, the defendants
will pay a total of $4.5 million in consumer
redress, and are banned from making false
or unsubstantiated claims for any dietary
supplement, food, drug, or device. In its
settlement with the FDA, Seasilver agreed to
destroy misbranded Seasilver product worth
$5.3 million and to discontinue manufacturing
and distributing misbranded products in the
future.
Q-Ray Bracelet. In June 2003, the
Commission charged the marketers of
the Q-Ray Ionized Bracelet, a purported
pain-relief product, with making false and
unsubstantiated claims in an infomercial.
The complaint alleged that the defendants
deceptively claimed that the bracelet is a fastacting effective treatment for various types of
pain, as proven by tests, even though a study
conducted at the Mayo Clinic showed that the
Q-Ray Bracelet is no more effective than a
placebo at relieving muscular and joint pain.
Through a stipulated preliminary injunction,
the court required the defendants to take
the infomercial off the air and froze several
million dollars of defendants’ assets.

l

Gero Vita. In May 2003, the Commission
charged Glenn Braswell and others with
making false and misleading advertising
claims for five dietary supplements promoted
to cure respiratory disease, diabetes,
Alzheimers, obesity, and erectile dysfunction.
Braswell, who already is under a 1983 federal
court order for violations of the FTC Act, is
one of the largest and most visible direct mail
dietary supplement marketers in the U.S.,
with sales since 1998 totaling at least $800
million.

Electronic Payment Process Abuses.
Advances in payment technology bring important
efficiencies for industry and consumers, but
they also pose new challenges for consumer
protection. The Automated Clearinghouse
Network (ACH) is a nationwide funds transfer
system for clearing electronic payments among
banks. The ACH payment mechanism replaces
paper transactions with electronic payments.
The volume of ACH payment transactions
has grown substantially in recent years, in
part because ACH offers a fast, inexpensive,
and relatively safe payment mechanism for
merchants and consumers. At the same time,
the FTC is concerned that a number of ACH
processors have failed to abide by the strict
rules that govern this industry, and have agreed
to process payments on behalf of fraudulent
outbound telemarketers in violation of the ACH
rules.
The Commission has filed two actions
against ACH processors that allegedly assist
these fraudulent transactions by providing a
gateway into the electronic banking system. In
both FTC v. Electronic Financial Group and

Federal Trade Commission

Project Scofflaw. Created in 1996,
Project Scofflaw targets individuals who flout
Commission orders and continue to prey upon
consumers. Last August, the FTC issued its
second report highlighting efforts to detect
and prosecute violators of FTC-obtained court
orders. Last year, courts ordered defendants to
serve nearly 26 years of detention and pay $54
million in restitution and other consumer redress.

B. Consumer Privacy
Consumer privacy has grown in importance
in the FTC’s consumer protection agenda. In
fact, the agency has dramatically increased
the resources dedicated to this issue – from
approximately $4.5 million in fiscal year 2001
to $19.3 million in fiscal year 2003. FTC
initiatives to reduce the serious consequences
that can result from the misuse of personal
information fall into three major categories:
vigorous enforcement of existing laws, additional
rulemaking, and ongoing consumer and
business education.

Box 9

Harris Poll Highlights Success
of National Do Not Call Registry

The effectiveness of the Do Not Call Registry was
reinforced by a Harris Interactive® survey, released
February 13, 2004, showing that more than half of all
U.S. adults (57%) say that they have signed up for the
registry.
Of those registered, 92% report receiving fewer
telemarketing calls, and 25% say they have received
no telemarketing calls since signing up.
Humphrey Taylor, Chairman of The Harris Poll®,
Harris Interactive stated, “In my experience these
results are remarkable. It is rare to find so many
people benefit so quickly from a relatively inexpensive
government program.”

1. Law Enforcement.
The FTC continued its aggressive
enforcement of existing laws to protect consumer
privacy during the past year. Law enforcement
actions ranged from cases involving deceptions
aimed at eliciting personal information from
consumers, to cases attacking deceptive spam.
Highlights include:
Internet and Spam. In a continuing series
of law enforcement initiatives targeting Internet
fraud, the FTC, Department of Justice, Secret
Service, Federal Bureau of Investigation, and
Postal Inspection Service have filed more than
285 criminal and civil law enforcement actions
targeting Internet scams and deceptive spam.
In November 2003, the FTC announced federal
court orders against ten individuals and five
corporations. These matters represent an array
of allegedly deceptive schemes and illegal
scams, including Internet auction fraud, bogus
business opportunities, deceptive money-making
scams, and phony credit offers.

Fulfilling the Original Vision - 25

FTC v. First American Payment Processing, the
Commission obtained temporary restraining
orders against the defendants who, the agency
alleged, knowingly processed electronic
payments for telemarketers who deceptively sell
advance-fee credit cards or who engage in other
deceptive or abusive telemarketing practices.
These processors allegedly harmed tens of
thousands of consumers by processing charges
on behalf of telemarketers engaged in abusive or
deceptive practices, which ACH processing rules
were designed specifically to prevent.

Federal Trade Commission

Protecting Privacy in an Box 10
Automated and Globalized
Marketplace
The International Association of Privacy
Professionals (IAPP) presented the 2004 Privacy
Leadership Award to Commissioner Orson
Swindle. The IAPP cited the Commissioner’s deep
understanding of the complexity of privacy and
security in an increasingly automated and globalized
marketplace as well his positive influence on the
shaping of public policy issues. From issues of online
privacy and information security, to international
privacy concerns and the fight against spam, the
IAPP noted that Commissioner Swindle has provided
thoughtful leadership in seeking effective solutions that
balance the interests of a changing marketplace with
the concerns of consumers.
In accepting the award, Commissioner Swindle
stated, “The path to more effective privacy protection
is a journey, not a destination. We need to be vigilant
in enforcing the privacy laws we have on the books.
At the same time, we in government, industry, and
civil society must continue working together to keep
the dialogue going with sharp focus on improving
protection of individual privacy and reaping the
benefits of the free flow of information.”

The FTC at 90 - 26

30 Minute Mortgage. Entered in December
2003, a Commission settlement bars 30 Minute
Mortgage, Inc., an Internet operation that
advertised “3.95% 30 Year Mortgages” as a
way to obtain sensitive financial information
from consumers, from violating federal lending
and privacy laws and from using or benefitting
from personal information that was deceptively
collected from consumers. The order further
requires each of the operation’s principals to
post $1 million bonds before sending unsolicited
commercial e-mail in the future.
“Pre-Registration” Scams for the National
Do Not Call Registry. A December 2003 U.S.
district court order permanently bars Ken Chase
from claiming that, for a fee, he can register or
pre-register consumers for the FTC’s National

Do Not Call Registry or any other do not call
list through his two Web sites. The order also
requires the defendant to verify all refunds
provided to the more than 250 consumers who
signed up for his service.
Phishing. In July 2003, an identity thief
who allegedly used hijacked corporate logos
and deceptive spam to con consumers out of
credit card numbers and other financial data
settled Commission charges that his scam
violated federal laws. The complaint alleged
that the scam, called “phishing,” involved an
individual posing as America Online and sending
e-mail messages claiming that there had been
a problem with the billing of consumers’ AOL
accounts. The e-mail warned consumers that
they risked losing their accounts and Internet
access if they did not update their billing
information. The message directed consumers
to click on a hyperlink, and when they did so,
they landed on a site that contained AOL’s logo,
type style, colors, and real links to AOL web
pages. While the site appeared to be AOL’s
billing center, it was not. The complaint alleged
that the defendant used AOL’s identity to spam
consumers and to steal consumers’ identities as
well.
Guess.com. The FTC announced in June
2003 that in its third case targeting companies
that misrepresent the security of consumers’
personal information, designer clothing and
accessory marketer Guess?, Inc., agreed to
settle Commission charges that it exposed
consumers’ personal information, including credit
card numbers, to commonly known attacks by
hackers, contrary to the company’s claims. The
settlement requires that Guess? implement a

Federal Trade Commission

2. Rulemaking.
Congress has directed the FTC to issue rules
to implement statutes critical to protecting the
privacy of consumers. In late 2003, Congress
imposed new responsibilities on the FTC to
address spam, consumer credit, and identity
theft.
Telemarketing Sales Rule. The major
rulemaking effort for 2003 was the creation of the
National Do Not Call Registry. The Commission
also adopted other significant changes to the
TSR that give consumers added protection
against deceptive telemarketing and unwanted
intrusions. Among other things, the amendments
require that telemarketers transmit information
to consumers’ caller ID systems to ensure
accountability in telemarketing. The amended
rule also now restricts the use of preacquired
account information, making it illegal to traffic in
consumer account numbers, and requires the
seller or telemarketer to obtain a consumer’s
express and informed consent prior to a
purchase. In instances involving preacquired
account information, the amendments heighten
the requirements for showing consent also.
CAN-SPAM Act. The Controlling the Assault
of Non-Solicited Pornography and Marketing
Act of 2003 (CAN-SPAM Act), signed into law
in December 2003, addresses a wide range of
practices relating to spam. The CAN-SPAM
Act prohibits falsifying either the content or
the source of e-mail; prohibits abusive means
of obtaining e-mail addresses to send a high
volume of unwanted messages; requires that

commercial e-mail be so identified; requires
senders of commercial e-mail to allow recipients
to “opt out” of future e-mail messages; and
requires a warning label for e-mail with sexually
oriented material. The Act also directs the
FTC to report to Congress on the feasibility
of a Do Not E-Mail Registry and creates new
enforcement approaches and penalties.
FACT Act. The Fair and Accurate Credit
Transactions Act of 2003 (FACT Act), also
signed into law in December 2003, makes
sweeping changes and additions to the Fair
Credit Reporting Act. The primary features
of the FACT Act include making the existing
preemption provisions permanent and adding
several provisions to combat identity theft and
enhance accuracy and consumer access to
credit information. The FACT Act requires the
FTC, among other things, to engage in several
rulemakings. These rulemakings are underway
and will proceed during 2004.

Chapter 3:
Special Policy Instruments for
Assisting and Complementing Law
Enforcement
A. Competition Policy
Over the past year, the FTC continued to
make full use of its array of policy instruments to
complement its enforcement authority. Through
the use of hearings, workshops, research
projects, reports, studies, advocacy filings,
and amicus briefs – all in coordination with its
enforcement initiatives – the agency can provide

Fulfilling the Original Vision - 27

comprehensive information security program for
Guess.com and its other Web sites.

Federal Trade Commission

intellectual leadership on competition issues and
make extraordinary contributions on behalf of
consumers.

1. Research and Reports.
Over the past decade, the FTC has revived
its long tradition of performing research and
issuing reports on a range of topics relevant to
competition and the marketplace. The agency’s
investments in these activities inform the
development of competition policy, both at the
FTC and elsewhere. The FTC has concluded
some key initiatives during the past 12 months.

concluding that many courts have applied the
doctrine too broadly and recommending several
approaches the agency should take. The staff
report concluded that courts have interpreted the
“clear articulation” requirement too broadly, often
focusing on the “foreseeability” test to find a
general grant of authority to a local government
entity to act in a specific area, while overlooking
the substance of the state’s policy choice. The
report recommended a return to the principle
that the authorizing statute must also evince an
intent to displace competition with respect to the

particular conduct at issue. The report noted
that more guidance is needed on the “active
State Action Report. Last fall, the FTC
supervision” prong of the doctrine and advocates
Task Force on State Action issued a report
use of the three-part test adopted
Box 11
The FTC’s Integrated Approach to Competition Policy
by the FTC in the Indiana Movers
The FTC uses a variety of tools to achieve its policy goals,
case. Finally, the report urged
such as removing impediments to competition in the pharmaceutical industry.
that courts consider “spillover”
effects on citizens of other states
TOOL: Amicus Curiae Briefs
TOOL: Research and Reporting
• Amicus brief in In re Buspirone
in determining whether the State
• Section 6(b) study, Generic Drug Entry Prior
antitrust litigation, involving
to Patent Expiration, focused on
allegedly fraudulent
Action doctrine protects the alleged
anticompetitive drug firm conduct and
representations to the FDA
recommended changes to the Hatchconcerning a patent; court agreed
Waxman Amendments.
conduct, and that courts should
with FTC analysis rejecting NoerrPennington defense.
impose an active supervision
requirement on municipalities that
GOAL: Remove impediments to
participate in the marketplace in
competition from generic versions
of prescription medicines.

TOOL: Competition
Advocacy
• Comments to FDA
supporting amending
regulations as
suggested by FTC
study.

The FTC at 90 - 28

TOOL: Congressional Testimony
• Testimony on Competition in the
Pharmaceutical Industry.
• Testimony supporting "Greater Access
to Affordable Pharmaceuticals Act"
provisions concerning generic drug
competition; final legislation adopted two
main FTC recommendations.

TOOL: Law Enforcement

• Schering-Plough - litigation involving
alleged anticompetitive agreements.
• Pfizer/Pharmacia - merger consent
order protecting competition in nine
pharmaceutical product markets.
• Bristol-Myers Squibb (BMS) - consent
order resolving charges of abuse of
regulatory process and illegal
agreements.
• Biovail (Tiazac) - consent order
involving alleged illegal patent
acquisition and other anticompetitive
conduct.
• Biovail/Elan - consent order involving
alleged illegal agreement between
two generic firms.

competition with private firms.
Internet Wine Sales Report.
Last July, the FTC released a staff
report, Possible Anticompetitive
Barriers to E-Commerce: Wine,
which concluded that e-commerce
offers consumers lower prices and
more choices in the wine market,
and that states could expand
e-commerce by permitting direct
shipping of wine to consumers.

Federal Trade Commission

Contact Lenses Report. In March 2004,
the FTC released a staff report, Possible
Anticompetitive Barriers to E-Commerce:
Contact Lenses, which concluded that ecommerce offers consumers greater choices and
more convenience in the contact lens market
and recommended that policymakers rescind,
or refrain from adopting, requirements that
unnecessarily burden e-commerce, such as state
professional licensing for online lens sellers.
The report found that non-traditional contact lens
sellers, such as Internet providers, represent a
unique alternative distribution channel and offer
some consumers a combination of price and
convenience that they value highly. It also stated
that adherence by eye care practitioners and
contact lens sellers to the Fairness to Contact
Lens Consumers Act’s requirements should
enhance consumer choice.
Generic Drug Report - Follow-Up
Activities. This past year saw the
implementation of specific recommendations
made in the FTC’s July 2002 report on generic
drugs, entitled Generic Drug Entry Prior to Patent
Expiration: An FTC Study. The FDA approved
a final rule in June 2003 that eliminates multiple

30-month stays on FDA approval of generic
drugs, which the FTC study had identified as
harmful to consumers, and also limits the patents
that can be listed in the FDA Orange Book,
consistent with another FTC recommendation.
Moreover, the Medicare Act passed in 2003
implements key FTC recommendations to
facilitate entry of generic drugs and requires
that the FTC be notified of certain agreements
between branded and generic drug firms. The
FTC published a notice outlining procedures for
filing such agreements, and clarifying the kinds
of agreements requiring notification.
Retrospectives and Other Economic
Studies. The FTC also studies current or
emerging topics to develop policy positions and
inform its enforcement activities. For example,
the FTC staff has been conducting retrospective
studies of mergers involving hospitals and the
oil industry. In Experimental Gasoline Markets,
the authors investigated the competitive effects
of zone pricing on consumers, retail stations,
and refiners. In another paper, The Economic
Effects of the Marathon - Ashland Joint Venture:
The Importance of Industry Supply Shocks
and Vertical Market Structure, FTC economists
analyzed whether there were anticompetitive
price effects from a merger cleared by the
FTC. The learning derived from these studies
facilitates better case selection and provides
important economic support that helps the
agency succeed in its enforcement initiatives.
Gasoline Price Monitoring and
Investigation Initiative. In 2002, the FTC
initiated a project to monitor gasoline prices to
identify unusual movements in prices and then
examine whether any such movements might

Fulfilling the Original Vision - 29

The empirical study found that state bans on
direct shipping prevent consumers from saving
as much as 21 percent on some wines and
from conveniently purchasing many popular
wines from suppliers around the country. The
report also concluded that states can limit sales
to minors through less restrictive means than
an outright ban on direct shipping, such as by
requiring that a supplier verify the recipient’s age
and obtain an adult’s signature before delivering
the wine.

Federal Trade Commission

result from anticompetitive activity.
FTC economists developed a
statistical model for the purpose of
identifying such movements. This
model uses standard statistical
techniques and price data, updated
daily, from the Oil Price Information
Service (OPIS) for approximately
360 cities at retail and 20 key
urban areas at the wholesale
level. (See Box 12.) The staff
incorporates into their analysis
customer complaint data received
from the states and the Department
of Energy and also examines
movements in the level of gasoline
prices and the spread between the price of
crude oil and the price of gasoline. If the staff
detects unusual price movements, they research
the possible causes, including, if appropriate,
consulting with the staff of various federal and
state agencies. The FTC staff also contacts the
appropriate State Attorney General’s Office to
discuss the pricing anomaly and to discuss the
appropriate course for further inquiry, including
the possible opening of a law enforcement
investigation.

The FTC at 90 - 30

2. Hearings and Workshops.
Hearings and workshops represent one
of the FTC’s most effective policy “research
and development” tools. By bringing together
experts from the business, legal, government,
and academic communities, and devoting
in-depth analysis to a carefully developed
agenda, FTC hearings and workshops can
lead to significant advances in state-of-the-art

Box 12

Gasoline Price Monitoring

Retail and Wholesale Monitoring
Retail Monitoring

knowledge of competition policy issues. In the
past year, the FTC completed two lengthy sets
of hearings relating to intellectual property and
health care, and also initiated a public dialogue
on the application of the Horizontal Merger
Guidelines.
Hearings on Health Care and Competition
Policy. To explore developments in the dynamic
health care market, the FTC, working with DOJ,
commenced a series of hearings on Health Care
and Competition Law and Policy on February 26,
2003. Over a seven-month period, the agencies
held 27 days of hearings in a comprehensive
examination of a wide range of health care
issues involving hospitals, physicians, insurers,
pharmaceuticals, long-term care, Medicare,
and consumer information, among others. The
hearings focused on the specific challenges and
complications involved in applying competition
law and policy to health care; issues involved
in hospital merger cases and other joint
arrangements, including geographic and product
market definition; horizontal hospital networks

Federal Trade Commission

Horizontal Merger Guidelines Workshop.
In February 2004, the FTC and DOJ held a
three-day workshop to discuss the Horizontal
Merger Guidelines. The workshop had two
objectives: (1) to increase understanding of
current merger policy, consistent with other
efforts to promote transparency for consumers
and the business community, and (2) to obtain
feedback on the Guidelines – their strengths
and weaknesses and areas for possible
clarification – from those who have used them
most extensively and have studied them most
carefully. The workshop followed closely the
release of data on merger investigations from the
last eight years.

3. Advocacy.
The FTC complements its efforts to remove
private restrictions on competition by working to
eliminate public impediments to a competitive
marketplace by persuading other government
policy makers to apply competition principles
as they make decisions affecting consumer
welfare. As part of its coordinated strategy, the
agency focuses on the same areas that receive
its emphasis in law enforcement: energy, health
care, and other sectors of the economy that have
the greatest impact on consumers’ pocketbooks.
Energy - Motor Fuel. The FTC staff
submitted comments to the North Carolina
Attorney General stating that amendments

Box 13
FTC REPORT:
To Promote Innovation:
The Proper Balance of Competition
and Patent Law and Policy

Competition and patents stand out among the
federal policies that influence innovation. Both can
foster innovation, but errors or systematic biases
in one policy’s rules can harm the other policy’s
effectiveness in promoting innovation. A failure to
strike the proper balance between them can harm
innovation.
The FTC and DOJ held 24 days of hearings on
this topic, with more than 300 expert panelists and
100 written submissions generating over 5,000 pages
of transcripts. Many hearings participants reported
that, although competition and patents often work well
together, too many questionable patents are harming
innovation and competition.
The Commission’s October 2003 report makes
ten recommendations to reduce the proportion of
questionable patents. Among other steps, the report
recommends new procedures for challenging patent
validity, careful application of patent law to prevent or
invalidate obvious patents, and thoughtful integration
of economic insights into patent law and policy.

to the state’s Motor Fuel Marketing Act could
have significant potential to harm consumers
by causing higher gasoline prices at the pump.
Under current North Carolina law, it is illegal to
sell gasoline below cost as a regular business
practice with the intent to injure competition.
Proposed amendments to the statute would have
eliminated the “intent” and “business practice”
requirements and would have redefined “cost”
in a way that would not always reflect discounts
to retailers. Because the proposal could make
dealers liable for procompetitive price-cutting,
the staff was concerned that it would deter
aggressive competition, to the detriment of
consumers. The FTC staff filed comments on
similar proposals pending in Alabama, New York,
and Kansas, and an existing law in Wisconsin.

Fulfilling the Original Vision - 31

and vertical arrangements with other health care
providers; the competitive effects of mergers
of health insurance providers; and consumer
information and quality of care issues. The
agency expects to issue a report on these issues
later this year.

Federal Trade Commission

Energy - Electricity and Natural Gas.
The FTC continued to provide its expertise
and assistance in connection with the ongoing
process of opening electricity markets to
competition. Agency staff submitted comments
to the Federal Energy Regulatory Commission
on Market-Based Rates and Authorizations,
and on Remedying Undue Discrimination
through Open Access Transmission Service and
Standard Electricity Market Design. In addition,
the staff submitted comments to the Illinois
Commerce Commission on Asset Transfers

The FTC at 90 - 32

Among Affiliated Companies, to the California
Public Utilities Commission on Exit Fees and
Distributed Generation, and to the Georgia
Public Service Commission on Standards for
Determining Whether Natural Gas Prices Are
Constrained by Market Forces.
Health Care. Although the FTC typically
uses its law enforcement authority to challenge
potentially anticompetitive hospital mergers, the
agency employed another of its tools to comment
on the potential anticompetitive effects of the
proposed acquisition of Slidell Memorial Hospital
by Tenet Healthcare. Under Louisiana law, both
the voters and the state Attorney General must
approve the sale of a nonprofit hospital, such as
Slidell, and the Attorney General requested the
FTC’s views on the transaction. In response, the
FTC staff explained that the potential merger of
the Slidell area’s only two full-service hospitals
raised concerns about increased prices. The
analysis focused on the possible effects of the
acquisition on health care plans, which ultimately
must reimburse hospitals in whole or in part for
services provided to covered patients. Seventy-

seven percent of area voters disapproved of the
merger.
Professional Services. The FTC staff
provided comments to the Indiana State Bar
Association and the Rhode Island House of
Representatives opposing proposals that
would unduly limit the ability of non-lawyers to
compete in the market for real estate closings.
In a comment to the Tennessee legislature
on proposed regulations for the practice of
optometry, the FTC staff noted that consumers
could end up paying more for eyeglasses
because the operation of commercial optometry
practices, especially chain optical stores, could
be more difficult.
Financial Services. The agency recently
submitted a letter urging the Commodity
Futures Trading Commission to support more
competition in the market for futures trading by
allowing a new entrant to establish a competing
U.S.-registered commodity futures exchange.
The letter cited two recent studies that found
that securities-based options listed on multiple
exchanges, rather than a single exchange, have
significantly lowered bid-ask spreads, a result
consistent with the effects of multiple exchanges
in equity markets. The letter also criticized
public restraints, such as regulatory barriers,
that impede competition, limit new entrants, stifle
innovation, and raise prices. After receiving
the FTC’s letter, the CFTC voted unanimously
to approve the new entrant’s application, with
one CFTC Commissioner issuing a statement
acknowledging the FTC’s analysis.
Computer Reservation Services. FTC
comments to the Department of Transportation

Federal Trade Commission

The government’s brief argued that
whatever access may be required under
the Telecommunications Act of 1996, the
antitrust laws can be used to require access
only if the refusal to deal can be shown to
be exclusionary or predatory, as is generally
required to establish a monopolization
violation under Section 2. The Court
essentially agreed with the arguments filed by
the government and held that the complaint
had failed to state an antitrust claim.

4. Amicus Briefs.
The Commission has been active over the
past year in providing amicus briefs to help
courts resolve important competition policy
issues. Recent briefs have addressed the legal
standard under Section 2 of the Sherman Act,
the State Action doctrine, the exclusion of nonattorneys from real estate closings, and the
jurisdiction of U.S. courts over anticompetitive
conduct by foreign entities.
l

Verizon v. Trinko. In its first antitrust
decision in several years, the U.S. Supreme
Court issued an opinion in Trinko in January,
consistent with the joint amicus brief filed
by the Commission and DOJ. The Court
reversed the Second Circuit, which had
permitted the case to go forward under
Section 2 of the Sherman Act based
on “essential facilities” and “monopoly
leveraging” theories, despite the failure of
the plaintiff to allege exclusionary conduct
under general monopolization principles.
The case involved a new entrant provider
of local telephone service attempting to
acquire access to the network operated
by the incumbent local exchange carrier.

l

l

Brentwood Academy v. Tennessee
Secondary School Athletic Association.
In this case involving application of the State
Action doctrine, the Commission argued
that a district court erred in holding that the
doctrine protected a private association of
secondary schools that had been deemed a
state actor for constitutional purposes. The
brief explained that, in the antitrust context,
“state action” narrowly refers only to actions
undertaken in conformity with a policy clearly
articulated by the sovereign state itself.
On Review of UPL Advisory Opinion.
The Commission and DOJ submitted a joint
amicus brief urging the Georgia Supreme
Court to reject a State bar committee ruling
that only licensed attorneys may conduct
real estate closings. The brief argued that
allowing non-lawyers to conduct closings
likely would lower prices and increase
consumer choice and that no evidence
indicated that such lay closings would harm
consumers. The Georgia court rejected the
federal agencies’ position.

Fulfilling the Original Vision - 33

urged that the Department use caution in
applying monopoly leveraging and essential
facilities theories in a proposed rulemaking on
airline computer reservation systems and that
conduct not be condemned on these grounds
without a showing that it is exclusionary. DOT’s
final rule eliminated most of the proposed rules
governing airline computer reservations systems
and included a sunset provision to terminate the
other rules later this year.

Federal Trade Commission
l

l

Empagran v. Hoffmann-LaRoche. The
Commission and DOJ jointly addressed
the proper application of the Foreign Trade
Antitrust Improvements Act in this amicus
brief to the U.S. Supreme Court. The
agencies asserted that the jurisdiction of
a U.S. court is improper when a foreign
plaintiff’s claimed injury from an alleged
antitrust conspiracy does not arise from the
effects of that conspiracy on U.S. commerce.
Dee-K Enterprises v. Heveafil Sdn.Bhd.
The Commission and DOJ filed an amicus
brief in the U.S. Supreme Court, arguing
that the lower court should have determined
whether an alleged price-fixing conspiracy
with both foreign and domestic elements
involved commerce within the reach of the
Sherman Act, instead of whether it involved
“primarily foreign or primarily domestic ...
participants, acts, targets, and effects.”

B. Consumer Protection Policy
In similar fashion, the FTC applied its
various policy tools to complement its consumer
protection enforcement. Working with other law
enforcement agencies, industry, the media, and
the public, the FTC heightened media awareness
of false advertising, provided important data and
analysis on a variety of consumer protection
issues, and developed even greater expertise in
technological and legal issues related to spam.

The FTC at 90 - 34

1. Research and Reports.
In addition to using electronic databases
and Web sites to track consumer fraud, the
FTC conducts numerous studies of marketplace

Box 14
Red Flag:
Bogus Weight Loss Claims

A claim is too good to be true if it says the
product will...

ä Cause weight loss of two pounds or more a week
for a month or more without dieting or exercise

ä Cause substantial weight loss no matter what or
how much the consumer eats

ä Cause permanent weight loss (even when the
consumer stops using the product)

ä Block the absorption of fat or calories to enable
consumers to lose substantial weight

ä Safely enable consumers to lose more than three
pounds per week for more than four weeks

ä Cause substantial weight loss for all users
ä Cause substantial weight loss by wearing it on the
body or rubbing it into the skin

issues affecting consumers and publishes its
findings in reports.
Weight-Loss Advertising. In December
2003, the FTC announced its “Red Flag”
education campaign to assist media outlets
in voluntarily screening weight-loss product
ads containing claims that are too good to be
true. (See Box 14.) The announcement is the
culmination of a workshop held in November
2002 and meetings with trade associations and
individual media outlets over the last year. To
support the voluntary initiative, the FTC released
a media reference guide entitled “Red Flag:
Bogus Weight Loss Claims.”
Purchase of Inappropriate Material by
Children. Last October, the FTC released its
2003 nationwide undercover survey of stores
and theaters. The survey was conducted to
collect data on the extent to which retailers
prevent children from purchasing entertainment
products that have been rated or labeled by

Federal Trade Commission

by minors, a comprehensive alcohol policy also
should address underage access to alcohol.
False Claims in Spam. In April 2003, the
FTC issued a report on a survey of false claims
in spam. Sample spam analyzed in the study
came from multiple sources, including the FTC’s
own spam database. In a random sample
of 1,000 pieces of spam, 84.5 percent were
deceptive on their face and contained apparently
false “from” lines, “subject” lines, or message
text, or advertised an illegitimate product or
service. The remaining, 15.5 percent, although
not necessarily truthful, were not deceptive
on their face. (See Box 15.) This is the first
systematic review of the likely truth or falsity
of claims appearing in spam. The incidence
of likely false claims in the text of spam varied
considerably among types of offers. The highest
category for signs of falsity in the sample, 90
percent, was for investment and business
opportunities.

Alcohol Industry Self-Regulation. In
September 2003, the FTC issued a Report on
Alcohol Marketing and Advertising. The report
examined whether advertising for flavored malt
beverages (FMBs) – beverages that combine
characteristics of beer and distilled spirits – was
targeted to underage consumers, as well as
whether the alcohol industry had implemented
self-regulatory recommendations made in the
FTC’s 1999 Alcohol Report to Congress. The
FTC investigated nine major alcohol advertisers,
analyzing their advertisements,
Box 15
marketing plans, and consumer
False Claims In Spam Study
research. The report indicated
a significant improvement in
standards for the placement of
No Clear Falsity
No Obvious
34%
Deception
alcohol ads and in the adoption
15.5%
of external advertising review
Promoting
Illegitimate
mechanisms. The report also
Products or
Services
found no evidence of targeting
18.5%
underage consumers in the
FMB market. The FTC’s report
Clear Falsity
66%
concluded that while advertising
self-regulation is designed to
Only 15.5% of the spam were not clearly false or did not sell an illegitimate product or service, such as
reduce the number of ads seen
prescription drugs without a prescription, gambling, or pornography.

Fulfilling the Original Vision - 35

the entertainment industry self-regulatory
associations or entertainment producers as
inappropriate for children. The survey showed
that 69 percent of the teenage shoppers were
able to buy M-rated games; 83 percent were
able to buy explicit-labeled recordings; and 36
percent were successful in purchasing tickets for
admission to an R-rated film at movie theaters.
For the first time, the FTC also surveyed DVD
retailers, where 81 percent of the teen shoppers
were successful in purchasing R-rated movies
on DVD.

Federal Trade Commission

2. Hearings and Workshops.
As new developments arise in the
marketplace, the FTC holds hearings and
workshops to study emerging issues and to learn
from the experiences of consumers, businesses,
academics, other government agency
representatives, and a host of other experts in
various fields.

The FTC at 90 - 36

Marketing Violent Entertainment to
Children. Besides the report described above,
the FTC hosted a public workshop last October
to examine issues about the marketing of
violent entertainment to children. The workshop
provided a forum for discussing the state of
self-regulation in the entertainment industry and,
in particular, children’s access to products that
have been rated as potentially inappropriate
for them or have been labeled with a parental
advisory.
Spam Forum. Building upon its research,
education, and law enforcement efforts, the FTC
held a three-day public forum from April 30 to
May 2, 2003, on spam. At the forum, the FTC
gathered representatives from many sides of the
issue to explore and encourage progress toward
potential solutions to the detrimental effects of
spam. The consensus was that, while a solution
to the spam problem is critically important, it
cannot be found overnight. Instead, solutions
must be pursued from many directions –
technology, the law, and consumer action – and
depend on the continued cooperative efforts
between government and the private sector.
The information gathered during this event will
be an important resource as the FTC meets the
mandates of the CAN-SPAM Act.

Information Flows Workshop. In
June 2003, the agency held a workshop on
“information flows” to examine the benefits
and costs to consumers and businesses of the
collection and use of consumer information. The
goal is to balance the protection of consumer
privacy interests with the promotion of the free
flow of information that benefits the economy.
The workshop featured participants with a
range of perspectives, including executives
from a variety of businesses that use consumer
information extensively, academic researchers,
consumer privacy advocates, and government
officials. Panelists presented their original
research and debated the appropriate
methodology for evaluating information practices
from consumer and business perspectives,
including the appropriate use of cost-benefit
analysis.
Green Lights and Red Flags: FTC Rules
of the Road for Advertisers. In September
2003, the FTC, Kentucky Attorney General’s
Office, and Better Business Bureau of Louisville,
Southern Indiana, and Western Kentucky
presented a one-day back-to-basics workshop
about complying with truth-in-advertising
standards. The FTC has joined with other state
and local officials to present similar workshops
in Chicago, New York City, and Santa Clara,
California, and expects to continue this education
campaign through 2004.

3. Advocacy.
Advocacy continued to be an important way
to advance the FTC’s consumer protection
mission during 2003. The agency lends
its expertise to other government agencies

Federal Trade Commission

Consultation with the
FDA. Complementing the
FTC’s own efforts to ensure
that consumers have access
to truthful information, the
FTC staff responded to a
number of requests from the
Food and Drug Administration
for comment on the FDA’s
current and proposed
approaches to regulatory
issues:
l

Direct to Consumer
Drug Advertisements.
The FTC staff provided
comments to the FDA
advocating the continued
consumer advertising
of prescription drugs,
and suggesting changes
to make the current

Box 16

The FTC’s Integrated Approach to Consumer Protection Policy
The FTC uses a variety of tools to achieve its policy goals,
such as ensuring access to truthful information about weight loss products and services.

TOOL: Reports and Workshops
TOOL: Promoting Industry Self-Regulation
• Outreach to encourage the media to reject ads with
obviously false weight loss claims.
• Guidelines to encourage voluntary self-regulation
among marketers of weight loss products.
• Outreach to encourage industry associations to
institute and enforce truthful advertising standards for
member companies.

GOAL: Ensure consumer access
to truthful information
about weight loss.

TOOL: Congressional Testimony

TOOL: Advocacy

TOOL: Consumer and Business Education

TOOL: Law Enforcement

• Testimony on Ephedra-Containing
Dietary Supplements (July 2003).
• Testimony on Dietary Supplement
Enforcement (October 2002).

• Red Flag, a reference guide for the media on screening
weight loss ads, released December 2003.
• Voluntary Guidelines for businesses that market weight
loss products and services.
• Project Waistline, a public information campaign with
brochures, bookmarks, and “news you can use” features
on effective strategies for healthy weight loss, buying
exercise equipment, and health club memberships.
Information in English and Spanish.
• “Teaser” Web site. NordicaLite, a sham weight loss
product, is advertised on the Web to educate
consumers about false advertising claims.

regulatory scheme less burdensome for
industry and more effective for consumers.
l

• Weight Loss Advertising: An Analysis of Current
Trends Report. Issued in September 2002, the report
examined 300 weight loss advertisements and
concluded that use of false and misleading claims was
widespread and on the rise.
• Deception in Weight Loss Advertising Workshop and
Report. Public workshop held November 2002 to
evaluate scientific validity of common weight loss
advertising claims and explore new approaches
against weight loss fraud. Workshop report and media
guidance brochure released December 2003.

Qualified Health Claims. The agency
also commented on the FDA’s proposed
regulations for “qualified health claims” for
food and dietary supplements. Overall, the
FTC staff supported allowing marketers to
communicate truthful, non-misleading health
claims for foods and dietary supplements
when appropriately qualified to include the
level of scientific support.

l

• Comments to FDA that calorie information
be more prominent, accurate, and available
to consumers. Recommendations largely
adopted in Calories Count: Report of FDA
Working Group on Obesity.

• Over 110 cases filed since 1990.
• Over $65 million in redress, disgorgement, and
civil penalties.
• Recent cases:
� Advanced Patch Technologies - consent order
involving allegedly false and unsubstantiated
weight loss claims for “Peel Away the Pounds”
patch; over $1 million in consumer redress.
� Fountain of Youth Group - consent order
involving allegedly false and unsubstantiated
weight loss and health claims for dietary
supplements including “Skinny Pill.”

Food Labeling and Obesity. Finally, the
agency commented on food labeling and
obesity, making specific recommendations
regarding labeling requirements, including
reviewing certain serving sizes, and removing
the prohibition on calorie comparisons on
food labels. The FTC staff noted that these
changes would help consumers identify
healthier, lower calorie food and encourage
companies to develop and market more of
these foods. As described in the briefing
papers on food advertising and on obesity,
the FTC continues to coordinate with FDA

Fulfilling the Original Vision - 37

and intervenes in court
proceedings when important
issues affecting consumers
are at stake.

Federal Trade Commission

on implementation of policies to permit
qualified health claims for foods and dietary
supplements through formal written comment
and through participation on FDA’s Qualified
Health Claims Task Force

v. IRC Services, the Commission objected to
excessive attorney fees, which divert needed
compensation from injured consumers.

4. Amicus Briefs.

Consumer and business education serves
as the first line of defense against fraud and
deception. With each major consumer protection
enforcement initiative, the FTC launches a
comprehensive education campaign. During
the past 12 months, the FTC issued or revised
over 100 consumer and business education
publications, and FTC consumer tips have
appeared in every national newspaper, on every
national television network (broadcast and
cable), and in every newspaper in the top 100
media markets. Distribution also continued to
rise. During fiscal year 2003, the FTC distributed
more than 5.2 million printed publications
and logged more than 22 million accesses to
publications on its Web sites.

The FTC at 90 - 38

The Commission also files amicus briefs in
appropriate cases to champion the interests of
consumers. Last year, the Commission argued
to the Ninth Circuit in Rausch v. The Hartford
Financial Services Group that an insurance
company takes “adverse action,” as that term
is defined in the Fair Credit Reporting Act,
when the insurance company sets a price for
insurance, based on information in a consumer
report that is higher than the price it would
have charged if the information had been more
favorable. The brief argued that the district court
misinterpreted both the wording of the Act and its
legislative history when it held that an insurance
company does not take “adverse action” with
respect to a new customer when it offers that
customer insurance on less favorable terms
than it offers to others. In February 2003, the
Commission filed a similar brief in the U.S. Court
of Appeals for the Ninth Circuit in Willes v. State
Farm.
As part of its efforts to monitor classaction settlements to ensure that the interests
of consumers are adequately represented,
the agency has filed amicus briefs opposing
particularly objectionable class-action
settlements. In Schneider v. Citicorp Mortgage,
Inc., the Commission objected to the use of
low-value, or no-value, “coupon” compensation.
Similarly, in In re First Databank and Carter

5. Consumer and Business Education
and Outreach.

Hispanic Outreach. The FTC expanded
its outreach to Hispanic consumers in the last
year. The agency distributed more than 300,000
printed and 300,000 electronic publications to
Spanish-speaking consumers, and received
more than 5,400 Spanish-language complaints
by phone and online – more than double
what the agency received last year. The FTC
also managed an aggressive media outreach
campaign that led to staff interviews in major
national dailies, major market dailies, magazines,
national radio and television, and local TV and
radio stations.
www.consumer.gov. The FTC continues
to manage www.consumer.gov and to recruit

Federal Trade Commission

Identity Theft Training. Expanding on a
program initiated last year with six regional
training sessions, the FTC, the U.S. Secret
Service, and DOJ conducted a series of training
seminars for local and state law enforcement
officers throughout the country, from Orlando,
Florida and New York City to Seattle and
Kansas City, Missouri. In the past two years,
the agencies conducted 11 training sessions for
more than 1,300 law enforcement officers and
plan additional training sessions for the year
ahead.
Financial Literacy. Title V of the FACT Act
establishes a Financial Literacy and Education
Commission (FLEC) to be chaired by the
Secretary of the Treasury and composed of
the FTC and 19 other federal agencies. The
purpose of the FLEC is to develop a national
strategy to promote financial literacy and
education among all American consumers and
to establish avenues, such as a Web site and
toll-free hotline, to serve as clearinghouses
that provide a coordinated point of entry for
information about federal financial literacy. At the
inaugural FLEC meeting, Chairman Muris spoke
about the importance of financial education.
FTC staff also are actively participating in the
FLEC’s working groups.
National Consumer Protection Week. This
year’s National Consumer Protection Week
(NCPW), held this past February, focused on
financial literacy. Consumers conduct financial

transactions that require an educated decision
virtually every day. Without the right information,
many of these transactions can be confusing
and overwhelming. NCPW 2004, sponsored
by government agencies and consumer
advocacy organizations, including the FTC,
aimed to help consumers learn more about
their options in the marketplace and how to
manage their finances better. The NCPW Web
site, www.consumer.gov/ncpw, contains helpful
information for consumers in several languages,
on a variety of financial topics, including credit
and money management, saving and investing,
insurance, retirement planning, and home
ownership.
Awards. Two FTC outreach projects were
honored for excellence. The Southwest Region’s
“Consumer College” – a series of free one-hour
consumer classes for students of El Centro
Community College in Dallas – was named
one of three grand prize winners in the College
Planning & Management magazine’s first
Community College Innovation Awards Program.
The FTC’s Alaska Native Art campaign was
honored with an ACE award from the National
Association of Consumer Agency Administrators,
the second award for the campaign.
Consumer Alerts. The FTC continues to
publish consumer alerts on a broad range of
topical subjects. Some recent alerts are:
l

Federal and Postal Job Scams Advertising
Campaign. Ads have been running in
the classified sections of newspapers,
employment guides, and Web sites to alert
vulnerable consumers to federal and postal
job scams and how to avoid them. This

Fulfilling the Original Vision - 39

new members to participate in the site, which
offers one-stop access to federal consumer
information. The number of members has grown
to more than 180 agencies.

Federal Trade Commission

“information” remedy is funded by $1.6 million
recovered in the Career Information Services
case. Since the ads began in October
2003, the number of related requests to the
CRC have spiked, and the campaign site
at www.ftc.gov/jobscams is logging almost
20,000 visits per month.
l

l

Post-Disaster Home Repair Rip-offs. After
a natural disaster, the demand for qualified
contractors usually exceeds the supply.
Because many legitimate companies are
booked for months, frustrated consumers
may not take the necessary precautions
when hiring contractors. This alert, “After
a Disaster: Repairing Your Home,” warns
consumers of potential home repair rip-off
artists who may overcharge, perform shoddy
work, or skip town without finishing the job.
Online File Sharing. The FTC’s alert
“File Sharing: A Fair Share? Maybe Not”
warns consumers about a number of risks
associated with file sharing. The alert also
lists suggestions to assist consumers to
secure the personal information stored on
their computers when using file sharing
software.

The FTC at 90 - 40

l

l

Spam. The FTC expanded its series of
consumer alerts on spam e-mail. “Who’s
Spamming Who? Could it Be You?” warns
consumers that spammers are taking over
home computers to send bulk e-mails by the
millions. The alert gives tips on information
security that can reduce the odds of an
abuse.
Phishing. “Is Someone ‘Phishing’ for
Your Information?” alerts consumers about

“phishing” – a high-tech scam that uses
spam to deceive consumers into disclosing
their credit card numbers, bank account
information, Social Security numbers,
passwords, and other sensitive personal
information.

Chapter 4:
International Activities
The FTC is involved in international activities
that are increasingly critical to the achievement
of the agency’s missions. The Commission
has built a strong network of cooperative
relationships with its counterparts abroad and
plays a lead role in key multilateral fora. The
FTC actively assists new democracies in
developing competition and consumer protection
agencies in new market-based economies.
The growth of communication media and
electronic commerce presents new challenges
to law enforcement – fraud and deception now
know no borders. The Commission works
more and more with other nations to protect
American consumers who can be harmed by
both anticompetitive conduct and frauds that are
perpetrated outside the U.S.

A. Competition
1. Cooperation in Enforcement and
Policy Development.
Cooperation with competition agencies of
other jurisdictions is a key component of an
effective enforcement program. The FTC has
broadened and deepened its cooperation with
agencies around the world on individual cases

Federal Trade Commission

l

l

Pfizer/Pharmacia. The resolution of the
competition concerns raised by Pfizer’s $60
billion acquisition of Pharmacia involved
close coordination between the FTC and
the European Commission on two of the
nine affected markets in which the FTC
obtained remedial measures. The FTC also
coordinated various antitrust aspects of the
transaction with competition authorities in
Australia, Canada, Mexico, and South Africa.
DSM/Roche. DSM’s proposed $2 billion
acquisition of Roche Vitamins and Fine
Chemicals Division presented potential
anticompetitive effects in the market for a
critical enzyme in certain cattle feed. The
remedy ultimately coordinated by the FTC
and the EC required the unwinding of a
joint venture, as well as assurances that the
remaining venture partner would be capable
of maintaining competition.

l

GE/Agfa. The successful resolution of this
merger investigation involved cooperation
with the competition authorities of Ireland,
Germany, and the EC. The cooperation
demonstrated the value of the contacts that
have developed among the agencies that
enable them to respond quickly to multijurisdictional mergers. The parties reached
settlements with the FTC and the EC that
were announced within two weeks of each

other and within the time frame sought by the
parties.
The FTC and its counterpart agencies seek
to streamline cooperation in merger cases and
remain committed to addressing and minimizing
policy divergences in all areas. These efforts
are exemplified by the “best practices” that the
EC and the U.S. agencies issued in 2002 that
institutionalize and make more transparent the
means by which the agencies review mergers
subject to review in both jurisdictions. During
the past year, the U.S. agencies provided input
into EC proceedings regarding merger policy and
intellectual property regulations, the Japan Fair
Trade Commission’s proposed reform of rules
relating to the treatment of “essential facilities,”
and proposed amendments to the Canadian
Competition Act. Similarly, the U.S. agencies
have benefitted from input from their foreign
counterparts on policy reviews in the United
States.

2. Multilateral Competition
Cooperation.
The FTC participates actively in various
multilateral competition fora that further
international cooperation and convergence.
ICN. The International Competition
Network, which has 86 member competition
agencies from 76 jurisdictions, provides a
venue for antitrust officials worldwide to achieve
consensus on proposals for procedural and
substantive convergence on best practices
in antitrust enforcement and policy. (See
Box 17.) In June 2003, the ICN hosted its
second annual conference, highlighting its
work on multi-jurisdictional merger review,

Fulfilling the Original Vision - 41

and on policy issues. The FTC’s relationships
with counterparts in the European Union,
Canada, and other jurisdictions remain vital as
the staffs continue to work together closely on
investigations of mutual interest, including the
following matters during the past year:

Federal Trade Commission

International Competition Network
Member Jurisdictions
Albania
Andean Community
Argentina
Armenia
Australia
Austria
Azerbaijan
Barbados
Belgium
Brazil
Bulgaria
Canada
Chile
Colombia
Costa Rica
Croatia
Cyprus
Czech Republic
Denmark

EFTA
Estonia
European Union
Finland
France
Germany
Greece
Hungary
Iceland
India
Indonesia
Ireland
Israel
Italy
Jamaica
Japan
Kazakhstan
Kenya
Korea

Kyrgyzstan
Latvia
Lithuania
Macedonia
Malta
Mexico
Morocco
Netherlands
New Zealand
Norway
Pakistan
Panama
Peru
Philippines
Poland
Portugal
Romania
Russia
Senegal

The FTC at 90 - 42

competition advocacy, and capacity building.
Based on recommendations of the Merger
Working Group’s Subgroup on Notification
and Procedures, which the FTC chairs, the
ICN adopted seven Recommended Practices
on Merger Notification Procedures, which
complement the eight Guiding Principles for
Merger Notification and Review adopted the
previous year. In preparation for the ICN’s
April 2004 annual conference, the Mergers
Working Group has prepared new recommended
practices on conduct of merger investigations,
procedural fairness, confidentiality, and
interagency coordination, and is preparing a
manual on recommended techniques for merger
investigations.
The ICN’s Competition Advocacy Working
Group developed an online information and
resource center, prepared a compilation of
advocacy provisions, conducted sectoral
studies of advocacy, and assembled a “tool
kit” of competition advocacy mechanisms. Its

Box 17

Slovak Republic
Slovenia
South Africa
Spain
Sri Lanka
Sweden
Switzerland
Taiwan
Tajikistan
Thailand
Tunisia
Turkey
Ukraine
United Kingdom
United States
Uzbekistan
Venezuela
Yugoslavia
Zambia

work is continuing in the Capacity
Building and Competition Policy
Implementation Working Group.
The Capacity Building Group
also prepared a report on the
challenges developing countries
face in implementing competition
policies, and one of its subgroups,
which the FTC co-chairs, is
conducting a study on the types
of technical assistance that work
best in particular circumstances,

examining ways to build broader
support for competition policy and
examining the relationship between
technical assistance funding
agencies and their counterpart competition
agencies. The Working Group on Antitrust
Enforcement in Regulated Sectors, created in
2003, has subgroups compiling reports on the
viability of antitrust law in regulated sectors,
antitrust enforcement initiatives in regulated
industries, and the manner in which antitrust
authorities and regulators exercise authority in
areas of overlap.
OECD. The OECD Competition Committee
is an important forum for competition officials
from developed countries to share experiences
and promote best practices. During the past
year, the FTC has participated actively in the
OECD’s continuing work on, inter alia, merger
process convergence, regulatory reform, and
examining the issues at the intersection of trade
and competition policy. The FTC was a leader in
the OECD’s first joint roundtable on competition
and consumer protection, which explored
the synergies between the two disciplines

Federal Trade Commission

in promoting consumer welfare. The OECD
also hosted a Global Forum on Competition
involving OECD members and representatives of
approximately 30 non-members.

3. Trade/Competition Fora.
Trade agreements increasingly involve
competition issues. The FTC co-chairs the U.S.
delegation to the World Trade Organization
Working Group on the Interaction between
Trade and Competition Policy, which examined
issues relating to the role of competition policy
in the WTO. The FTC staff participated in the
WTO Ministerial Conference in Cancun. The
FTC has been working with other U.S. agencies
and the other nations of the hemisphere to
develop competition provisions for a Free
Trade Agreement of the Americas. The FTC
also participated in the U.S. delegation that
negotiated the competition chapter of proposed
Free Trade Agreement with Australia.

1. Five-Point Plan to Fight CrossBorder Fraud.
This past year, the FTC continued to move
forward to implement the Five-Point Plan to Fight
Cross-Border Fraud, first unveiled in 2002. The
plan includes: (1) OECD guidelines on crossborder enforcement cooperation, (2) legislative
proposals, (3) a workshop to explore publicprivate partnerships, (4) bilateral and multilateral
cooperation arrangements, and (5) international
technical assistance.
l

B. Consumer Protection

OECD Guidelines. In June 2003, the
OECD’s Committee on Consumer Policy
announced its “Guidelines for Protecting
Consumers From Fraudulent and Deceptive
Commercial Practices Across Borders,”
Box 18

Cross-Border Complaints
By Calendar Year (1995 – 2003)
50,000

45,066

45,000
40,000
35,000

30,798

30,000
25,000
20,000

16,318

15,000

12,213
8,660

10,000
4,567

5,000
0

84
1995

6,236

1,237
1996

1997

1998

1999

2000

2001

2002

2003

Fulfilling the Original Vision - 43

Because the past few years
have seen a dramatic rise in the
number of consumer complaints
and investigations that blur
jurisdictional lines, the FTC has
focused its international consumer
protection efforts on crossborder fraud. Fraudsters use
ever-evolving electronic media
to scam consumers while hiding
behind jurisdictional borders. As
a result, the FTC has stepped
up its commitment to fight these
frauds, regardless of where they

may originate. As part of this effort, the FTC
has increased its visibility and participation in
international organizations such as the OECD’s
Committee on Consumer Policy and the
International Consumer Protection Enforcement
Network. (See Box 18.)

Federal Trade Commission

Fostering International
Cooperation in Consumer
Protection

Commissioner Mozelle W. Thompson is actively
involved in the FTC’s efforts to foster greater
international cooperation on consumer protection
issues. He continues to head the U.S. delegation
to the International Consumer Protection and
Enforcement Network (ICPEN); and in April 2003, he
spearheaded a joint meeting between ICPEN and
OECD’s Committee on Consumer Policy. Since March
2002, he has chaired the OECD’s Committee on
Consumer Policy.
In June 2003, as a result of Commissioner
Thompson’s leadership, the OECD issued its
“Guidelines for Protecting Consumers From Fraudulent
and Deceptive Commercial Practices Across Borders.”
In announcing the Guidelines, Commissioner
Thompson remarked, “Cross-border fraud, perpetrated
through telemarketing, Web sites, and spam, harms
consumers and consumer confidence in the global
marketplace. The OECD Guidelines ... reflect an
international commitment by consumer protection law
enforcement agencies to work together to combat
these schemes.”

which reflect a commitment among member
countries to work together to combat crossborder fraud. The Guidelines contain
broad principles regarding law enforcement
coordination, as well as specific information
on how countries can work together in
joint investigations. They also detail the
authority of consumer protection agencies
internationally, invite private-sector
cooperation in anti-fraud efforts, and set
the stage for future discussions regarding
consumer redress.

The FTC at 90 - 44

l

fraud involving foreign parties, evidence, or
assets. When enacted, the legislation would
enable the FTC to share key information with
foreign partners, which may enable them to
pursue the fraudsters in their country who are
targeting U.S. consumers. In particular, the
legislation would help the FTC fight deceptive
spam by allowing the agency to investigate
more fully messages originating from outside
the United States.

Box 19

Legislative Proposals. The FTC has
submitted proposals for legislative
changes that would improve the FTC’s
ability to combat cross-border fraud. The
recommendations focus primarily on
improving the agency’s ability to combat

l

l

Public/Private Workshop. In February
2003, the FTC held a workshop on public/
private partnerships to fight cross-border
fraud. The workshop delved into ways in
which members of certain key industries
(e.g., private mailbox operators, shipping
companies, electronic payment processors,
and Internet service providers) can help
combat international consumer scams.
Bilateral and Multilateral Cooperation
Arrangements. The FTC has entered
into several enforcement cooperation
memoranda of understanding (MOUs) with
key partners, such as Canada, Australia, the
United Kingdom, and Ireland. These MOUs
have helped streamline cooperation and
coordinate joint actions against cross-border
fraud involving these countries. In addition,
the agency participates in several multilateral
organizations, which allow networking and
foster cooperation with foreign enforcement
agencies from all over the world. Such
groups include the International Consumer
Protection and Enforcement Network, APEC’s
Electronic Commerce Steering Group, the
Mexico-U.S.-Canada Health Fraud Task

Federal Trade Commission

l

International Technical Assistance. The
FTC’s international technical assistance,
detailed below, is also an important part of
the fight against cross-border fraud.

2. Cross-Border Telemarketing Fraud/
Canadian Partnerships.
The FTC’s international efforts have paid
special attention to the U.S.’s neighbor to
the north, Canada. The agency has forged
partnerships with Canadian officials to
coordinate law enforcement efforts in three
places: the Ontario Strategic Partnership,
coordinated by the FTC’s Midwest Region to
focus on Toronto-based telemarketing; “Project
Emptor,” coordinated by the Royal Canadian
Mounted Police, the FTC’s Northwest Region,
British Columbia officials, and others, to target
Vancouver telemarketing boiler rooms; and
a new partnership focusing on the Canadian
province of Alberta. Cases have targeted
such areas as advance-fee credit cards and
cross-border lottery schemes that target senior
citizens.

3. International Cooperation on Spam.
The FTC is using its growing network of
international contacts to build global partnerships
against spam. This past February, the FTC
staff gave a presentation on the agency’s spamrelated initiatives at the OECD Spam Workshop
in Brussels. As a result, many foreign agencies
with spam enforcement responsibilities (such
as telecommunications and data protection

authorities) have expressed their interest in
mutual cooperation on this issue.

C. International Technical Assistance
For over a decade, the FTC has assisted
transition economies that have made the
commitment to market and commercial law
reforms. With funding principally from US
AID, and in partnership with DOJ, the FTC
has provided technical assistance to over 40
nations in the development of their competition
laws. In this past year, the FTC provided
technical assistance on competition matters in
Russia, Southeast Europe, Eurasia, the Andean
Community, Egypt, Indonesia, Mexico, and
South Africa. The FTC maintains a resident
advisor program in Indonesia and, with DOJ,
continues its resident advisor program in South
Africa. The FTC’s short-term programs have
emphasized the development of investigative
skills. These programs rely on a combination
of resident advisors, regional workshops, and
targeted short-term missions. The agency
schedules these technical assistance activities to
enable career FTC staff to share their expertise
with their counterparts in the newer competition
agencies of the world. In the past year, the
FTC received funding to begin new programs
of assistance to the ASEAN community of ten
nations in Southeast Asia.
To broaden international cooperation
on consumer protection and ensure that no
country becomes a haven for fraud, the FTC is
conducting US AID-funded training missions in
Eastern Europe, Eurasia, and South America.
Last year, FTC staff conducted consumer
protection training missions in Hungary,

Fulfilling the Original Vision - 45

Force, and the Informal Panamerican
Dialogue.

Federal Trade Commission

Slovenia, Romania, Ukraine, and Peru, covering
such issues as basic consumer protections,
consumer credit, advertising principles,
advertisement interpretation, and advertising
substantiation. A central feature is to assist
with the detection and prevention of fraud in ecommerce and through the Internet. Although
these nations are developing economically,
some are home to the most sophisticated
scam artists targeting U.S. consumers today.
For instance, a significant amount of Internet
auction fraud originates in Romania. The
FTC’s recent mission to Bucharest focused on
training Romanian authorities on how to conduct
Internet-related investigations and strengthening
relationships with that country’s cybercrime
authorities.

The FTC at 90 - 46

Reflecting on Past Achievements
and Considering the Future
The past 12 months have provided occasion
to recognize important people and events
in the FTC’s history. In summer 2003, Marc
Winerman, a senior attorney in the Office of the
General Counsel and an expert on the agency’s
history, published a seminal article on the early
history of the FTC, entitled The Origins of the
FTC: Concentration, Cooperation, Control,
and Competition. In September, the Bureau of
Economics held a symposium in honor of the
100th anniversary of the Bureau of Corporations,
the precursor to the FTC, which Congress later
incorporated into the FTC upon its creation in
1914. The agency has continued many of the
functions of the old Bureau of Corporations, such
as collecting market information, conducting

industry and policy research, and preparing
reports at the request of the Congress and the
President. Finally, in December, the agency
made the third presentation of the Miles W.
Kirkpatrick Award for distinguished service,
this time to Jodie Bernstein, former Director of
the Bureau of Consumer Protection. Assisting
Chairman Muris in making the presentation was
former Chairman Robert Pitofsky, who served
with Jodie Bernstein during separate tours at the
agency.
During the coming 12 months, the FTC
will have more reason to celebrate its past
and consider its future. September 26, 2004
commemorates the 90th anniversary of the
Federal Trade Commission Act, and March 16,
2005 marks the 90th anniversary of the day
when the Chief Justice of the Supreme Court of
the District of Columbia, the Honorable J. Harry
Covington, administered the oath of office to the
FTC’s first five Commissioners, permitting the
agency to begin operation. Next September,
the FTC will host several events to observe this
milestone. The 90-year mark will provide an
opportunity for the FTC not only to reflect on past
achievements but also to plan future initiatives to
serve American consumers and fulfill the vision
that inspired its formation.

Federal Trade Commission

Principal Contributors to Report
Judith Bailey, Chair
James M. Giffin, Competition
Karen Leonard, Consumer Protection
Dawne E. Holz, Graphics and Design
Contributing FTC staff also include Asheesh Agarwal, Jeanine Balbach,

Fulfilling the Original Vision - 47

James Cooper, Jeanne M. Crouse, John F. Daly, Rachel Miller Dawson, John Delacourt,
Susan S. DeSanti, Nikki Ellington, Maame Gyamfi, James C. Hamill, Jr.,
D. Bruce Hoffman, Brian Huseman, Maryanne Kane, Rona Kelner, William E. Kovacic,
Erin Malick, Maureen Ohlhausen, Lydia B. Parnes, C. Lee Peeler, Bilal Sayyed,
Randolph W. Tritell, Marianne Watts, Beth Arvan Wiggins, Marc L. Winerman,
Pablo Zylberglait, and Todd J. Zywicki.

Federal Trade Commission

The FTC at 90 - 48

Federal Trade Commission Annual Awards
0ctober 2003
Chairman’s Award

David Torok

Louis D. Brandeis Award

Rhett Krulla

Eleanor F. Greasley Award

Betty Moss
Catherine Norris

Stephen Nye Award

Renard Francois
April Tabor

Richard C. Foster Award

Sylvia Brooks
Diane Reinertson

James M. Mead Award

Erin Malick
Frances Williams
Douglas McGuckin
Dolores Wood

Mary Gardiner Jones Award

Doris Pressley

Outstanding Scholarship Award

Marc Winerman

Paul Rand Dixon Award

Michele Arington
Jesse Leary
Gregory Ashe
Judith Moreland
Ramona Elliott
Steven Wernikoff
John Jacobs

A. Leon Higginbotham, Jr. Award

Dean Forbes

Award for Excellence in Supervision

Joan Fina
Peggy Twohig
David Pender
Michael Vita
Robert Schroeder

Otis B. Johnson Award

Robin Overholt
Colleen Tressler
Enid Williams

Excellence in Economics Award

Christopher Taylor

Outstanding Team Effort Award

TSR Do Not Call Team
601 New Jersey Avenue Relocation Team
Competition and Intellectual Property in the KnowledgeBased Economy Hearing and Report Team