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h2008
The FTC in 2008:
A Force for
Consumers and Competition
Federal Trade Commission
Deborah Platt Majoras, Chairman
Pamela Jones Harbour, Commissioner
Jon Leibowitz, Commissioner
William E. Kovacic, Commissioner
J. Thomas Rosch, Commissioner
Federal Trade Commission Headquarters Building
600 Pennsylvania Avenue, N.W., Washington D.C.
The online version of this report contains hyperlinks to news releases, reports, cases, campaigns, and other information referenced in this report.
The report is available at www.ftc.gov/os/2008/03/ChairmansReport2008.pdf.
The FTC in 2008: A FORCE for consumers and competition
Contents
Letter from the Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
A Year in Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section One: Competition Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Chapter 1. Competition Law Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
A. Merger Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
B. Nonmerger Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
C. Guidance, Transparency, and Process Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Chapter 2. Competition Policy Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
A. Research and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
B. Hearings and Workshops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
C. Advocacy Letters and Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
D. Amicus Briefs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
E. Congressional Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Chapter 3. Competition – Consumer and Business Education and Outreach . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section Two: Consumer Protection Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Chapter 4. Consumer Protection Law Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
A. Fraud and Deception Law Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
B. Privacy and Data Security Law Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
C. Consumer Protection Law Enforcement Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Chapter 5. Consumer Protection Policy Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
A. Rulemakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
B. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
C. Hearings and Workshops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
D. Inter-governmental Task Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
E. Advocacy Letters, Comments, and Amicus Briefs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
F. Congressional Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Chapter 6. Consumer Protection – Consumer and Business Education and Outreach . . . . . . . . . . . . . . . . . . 55
Section Three: International Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Chapter 7. Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
A. Promoting Cooperation and Convergence Through Bilateral Relationships . . . . . . . . . . . . . . . . . . . . . 59
B. Promoting Convergence Through Multilateral Competition Fora . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Chapter 8. Consumer Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
A. The U.S. SAFE WEB Act and International Law Enforcement Cooperation . . . . . . . . . . . . . . . . . . . . 62
B. International Policy Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Chapter 9. Outreach and International Technical Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Looking Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Senior Staff of the FTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
FTC Annual Awards – September 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Principal Contributors to Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Federal Trade Commission
The FTC in 2008: A FORCE for consumers and competition
Letter from the Chairman
Consumers are the driving force behind the mission of the Federal Trade
Commission. We make decisions on how to spend taxpayer resources by
identifying and understanding the great number of consumer and economic
issues that our global economy produces and tackling those that are most
relevant to Americans. It is critical that the FTC enforces our nation’s antitrust
and consumer protection laws to ensure that consumers receive the benefits of
a robust, competitive, and fair marketplace in the form of lower prices, higherquality goods, more product choices, and greater innovation.
Over the past year, the Commission has continued
“Our job is not to substitute our judgment for that of
to scrutinize market developments and tailor an agenda
consumers
or to save them from bad choices; rather, it is to
that meets the significant challenges of a quickly evolving
ensure that they obtain the truthful information they need
global marketplace. The Commission has rooted out
to make their own choices. When markets function in this
economic “villains” by actively pursuing the latest
manner, consumers win – securing a broader selection of
generation of fraudsters working to deceive the public by
innovative products at lower prices.”
touting the newest cure-all treatment or credit scam; those
– Chairman Majoras, Opening Remarks, Carbon Offsets Workshop
that pervert the promise of the electronic age and the
(Jan. 8, 2008)
Internet by hijacking consumers’ computers and stealing
their most sensitive personal information; and those that
mock the competitive marketplace by engaging in anticompetitive conduct that
raises the specter of increased prices or decreased consumer choice.
These twelve months have been characterized by significant litigation activity
on both sides of the house in federal district and appellate courts, as well as in
the FTC’s administrative Part III process. Appellate decisions in such matters
as Chicago Bridge, QT, Inc., and Prochnow, litigated merger cases like Whole
Foods and Equitable/Dominion, and FTC Part III decisions like Rambus and
Evanston promote validation and development of sound legal standards and
provide guidance to the antitrust agencies and the consumer, legal, and business
communities. And the Commission continues to obtain temporary restraining
orders in consumer protection cases, halting mortgage foreclosure rescue scams
and deceptive telemarketing operations. Increasingly, the decisions of our courts
are highly scrutinized by our colleagues at the more than 100 sister agencies
around the world. While we work to ensure that each case we choose to litigate
has a solid evidentiary, legal, and economic basis, we, of course, do not always
prevail. While no one relishes losses, they, too, have value in setting legal and
evidentiary standards in our unique common law system.
To cast a wide net to police anticompetitive or deceptive conduct, the
Commission has leveraged its limited resources by teaming with civil and
criminal authorities here and around the world. For example, our work
with criminal enforcement authorities over the past year has led to 81 FTC
defendants and their associates being charged with crimes and 47 convictions
or guilty pleas. We also are highly engaged in working with the federal
banking agencies and state attorneys general on the current mortgage crisis
and with dozens of partners in the fight against identity theft.
Federal Trade Commission
Understanding markets and trends is no easy feat. The Commission
continued to study significant market issues to educate ourselves, the public, and
other policymakers. Our timely report on the “net neutrality” Internet access
issue was well-received, and our public workshops on behavioral marketing and
the marketing of “green” products like carbon offsets contributed to some of the
most important debates in marketing today. And backstopping all of our other
work, we continued to educate, educate, educate. An educated consumer is an
empowered one, and this year, the Commission released innovative consumer
and business education projects, including videos that teach how to spot phishing
scams, an interactive tutorial that teaches how to handle data securely, and a suite
of products (publications, radio public service announcements and classified
ads, newsletter articles, and a syndicated article for community newspapers) that
teach how to recognize and avoid both deceptive mortgage offers and mortgage
foreclosure assistance scams. Since last year’s Annual Report, the Commission
has distributed nearly 8 million print publications in English and Spanish and
logged more than 34.1 million accesses to its publications on the FTC website.
I am extremely honored to have served as FTC Chairman for more than
three-and-a-half years. As I prepare to leave the Commission, I continue to
marvel at the sheer breadth of the FTC’s work, the creativity and dedication
of our staff, and the positive impact of the agency’s actions on the lives of
Americans. I am confident that the FTC will continue its strong record of taking
their cues from, and acting on behalf of, American consumers.
Deborah Platt Majoras
Chairman
ii
The FTC in 2008: A FORCE for consumers and competition
A Year in Highlights
The Commission continued to be very busy in the past year by engaging in
numerous competition and consumer protection law enforcement investigations
and cases, preparing advocacy and policy projects and reports, building its
working relationships with foreign counterparts, and educating millions of
consumers and businesses with its outreach materials.
In its competition mission, the Commission aggressively:
Scrutinized mergers in many industries, filing actions to enjoin mergers
deemed to be anticompetitive and reaching settlements requiring
divestitures where appropriate to preserve competition while allowing
the beneficial aspects of the merger to proceed. For example, the agency
required divestitures to resolve competitive problems involving five
generic drugs in its review of Mylan’s $6.6 billion acquisition of Merck’s
generic subsidiary. The Commission ruled in the Evanston matter that
a hospital acquisition was anticompetitive and raised prices for acute
care inpatient services, and fashioned a remedy that would reintroduce
competition in that market.
The Commission filed two actions to enjoin mergers in energy markets,
including an action to preserve competition in the market for natural
gas distribution in Allegheny County, Pennsylvania, in the Equitable/
Dominion matter that led the parties to abandon the transaction and a
court of appeals to vacate the district court decision. The Commission
also brought actions in various retail markets, including the Whole Foods/
Wild Oats case, and settled cases to preserve competition in the retail
pharmacy and grocery store markets. A federal court of appeals upheld a
Commission administrative ruling in the Chicago Bridge/Pitt-Des Moines
matter that a consummated merger in four markets for industrial storage
tanks was anticompetitive.
Policed anticompetitive conduct in the health care, energy, real estate,
and high technology industries, with a particular a focus on competitor
collaboration and exclusionary conduct. For example, in the health
care industry, the agency filed a new action against Cephalon, Inc.
alleging that the manufacturer entered into illegal agreements to keep
Federal Trade Commission
generic formulations of its branded product Provigil off the market, and
concluded its case in the Warner Chilcott/Barr matter involving an alleged
agreement to keep a generic oral contraceptive drug off the market.
In the real estate industry, the agency continued to challenge real
estate board rules that the Commission alleged restrained competition
and restricted consumers from receiving services from nontraditional
brokers. For example, the Commission brought an action alleging
that RealComp prohibited information for nontraditional listings to be
transmitted to public real estate websites; the administrative law judge’s
decision concluding that the Commission failed to show that RealComp’s
conduct substantially lessened competition in the relevant market is
now on appeal. The agency also continued to litigate its claims against
exclusionary conduct in a standard-setting organization, arguing before
the court of appeals that Rambus, Inc. unlawfully monopolized markets
for four computer memory technologies that were incorporated into
industry standards for dynamic random access memory chips.
Filed two civil penalties actions for violations of the Hart-Scott-Rodino
Act’s premerger reporting requirements to ensure that parties to some
mergers do not have an unfair advantage.
Promoted sound competition policy through myriad research and
reports, studies, hearings, workshops, advocacy filings, amicus briefs, and
testimony before Congress. For example, the agency issued reports on
Internet broadband connectivity competition policy, intellectual property
and competition, competition in the real estate brokerage industry,
competition in public and private postal services, and the Spring/Summer
2006 gasoline price increases.
The Commission also held a 3-day conference concerning energy
markets, concluded a 29-session hearing on single-firm conduct, and
held a workshop on unilateral effects analysis and litigation. Finally,
the agency filed competition advocacy letters and comments that,
among others, advocated for increased competition between lawyers
and nonlawyers where appropriate, promoted competition in the area of
pharmacy benefit management, advocated against collective bargaining
for health care providers, and furthered competition in the electricity
transmission and gasoline retail markets.
In its consumer protection mission, the Commission actively:
Pursued law enforcement actions to enjoin deceptive lending, debt
negotiation and settlement, debt collection, mortgage, and subprime
credit schemes that prey on financially strapped consumers. The agency
also held a public workshop on current and evolving debt collection
practices, issued a report on improving consumer mortgage disclosures,
The FTC in 2008: A FORCE for consumers and competition
and filed advocacy comments on payment processing and disclosures for
subprime mortgage lending.
Filed enforcement cases to protect consumers’ personal and financial data
from technology-driven threats during the complete life cycle of personal
data, including its collection, storage, use, and disposal. For example, the
agency brought and settled its first case alleging violations of the FTC’s
Disposal Rule against American United Mortgage Company, claiming
that the mortgage broker left sensitive consumer loan documents in and
around an unsecured dumpster.
The agency also engaged in policy and advocacy work related to identity
theft. It released its second national survey of the incidence and impact
of identity theft, worked with other agencies to develop and release a
report from the President’s Identity Theft Task Force that discussed the
coordinated plan of the Commission and other federal agencies to address
and combat identity theft, held workshops on consumer authentication
and behavioral marketing, and proposed principles on behavioral
marketing.
Monitored compliance with previous orders to detect repeat offenders
and deter order violations, including a $61 million judgment in a civil
contempt action against Julian Gumpel for violating a 1998 federal court
order, and a contempt ruling against Kevin Trudeau for violating a 2004
federal court order enjoining him from making misrepresentations of the
contents of his books in his infomercials.
Worked with criminal authorities through its Criminal Liaison Unit to
facilitate the prosecutions of criminal consumer fraud, and that in the
past year, led to 81 FTC defendants and their associates being charged
with crimes, and 47 such defendants and their associates being convicted
or pleading guilty, with sentences imposed totaling more than 141 years.
Continued enforcement efforts in the technology area against spyware
and adware programs that are installed on consumers’ computers without
their knowledge or consent. For example, the Commission challenged
DirectRevenue LLC and its principals for their allegedly unlawful practices
in connection with the distribution of adware, ultimately resulting in a
$1.5 million settlement.
The agency also pursued deceptive and unfair spam practices under its
CAN-SPAM Act authority, settling three cases targeting deceptive spam
and obtaining nearly $4 million in civil penalties, including a $2.9
million civil penalty against ValueClick, the highest the Commission
has obtained in this area. The agency also obtained a judgment of more
than $2.5 million against Sili Neutraceuticals, LLC and its principal for
unsolicited messages regarding dietary supplements.
Federal Trade Commission
Filed cases against defendants who made deceptive health, safety, and
weight loss claims, including those making unsubstantiated claims to
prevent, treat, or cure a wide variety of serious diseases. For example,
the agency charged the defendants in the J.W. McLain case with making
deceptive claims that their herbal tea could prevent or cure AIDS,
diabetes, cancer, arthritis, strokes, and heart disease; the consent order
imposed a $31.7 million suspended judgment on the defendants and
required them to forfeit their frozen assets and the proceeds from their
business opportunity sales.
A federal court of appeals upheld a ruling that the defendants in FTC v.
QT, Inc., who falsely marketed the “Q-Ray Ionized Bracelet” as providing
therapeutic relief from arthritis and other chronic conditions, had to
return nearly $16 million in net profits. The agency also issued a report
on the exposure of children to TV advertising, and held a forum with
the Department of Health and Human Services on childhood obesity
that discussed significant industry self-regulatory initiatives designed to
encourage healthier eating choices.
Initiated a major crackdown on violators of the agency’s Do Not Call
provisions, involving six settlements against telemarketers, including ADT
and Craftmatic, that resulted in nearly $7.7 million in civil penalties, and
another $3 million suspended civil penalty judgment against Voice-Mail
Broadcasting Corp., a large “voice blaster” that allegedly placed over 46
million unlawful recorded calls to consumers.
Held a public workshop on carbon offsets and renewable energy
certificates that explored advertising claims relating to these products.
Some of the Commission’s activities reflect the close relationship between the
agency’s two missions. For example, after a thorough antitrust review, the agency
determined not to challenge Google, Inc.’s proposed acquisition of Internet
advertising server DoubleClick, Inc., concluding that the proposed acquisition
was unlikely to substantially lessen competition in any relevant antitrust market.
At the same time, however, recognizing that the proposed acquisition raised
concerns about consumer privacy in the online advertising marketplace that were
not unique to the proposed merger, the Commission reiterated its commitment
to protecting consumers’ privacy and data security by releasing a set of proposed
behavioral marketing principles that could be used by businesses generally to
protect consumers’ online privacy.
The Commission’s Office of International Affairs (OIA) continued to
build upon its bilateral and multilateral relationships to enable the agency to
accomplish its law enforcement and advocacy missions. For example, the OIA
effectively utilized its expanded authority under the U.S. SAFE WEB Act to
cooperate with foreign law enforcement authorities and share information to
protect consumers, and pursued convergence toward sound antitrust enforcement
and policy through the International Competition Network and other venues.
The FTC in 2008: A FORCE for consumers and competition
It also successfully launched the International Fellows program through which
several foreign officials worked at the FTC, contributing to the agency’s work
while strengthening inter-agency relationships.
Finally, the Commission continues to receive accolades for its work, as well
as for its commitments to a nondiscriminatory work environment. For example,
the agency received the Hispanic Bar Association of the District of Columbia’s
2007 Employer Award for its commitment to Latino professionals, diversity in
the workplace, and its efforts to recruit and retain Latino attorneys.
Federal Trade Commission
The FTC in 2008: A FORCE for consumers and competition
Section One: Competition Mission
Each year, more people around the globe
embrace the promise inherent in open and
Enforcement Actions by Sector
competitive markets. They too have come
FY 05 Through FY 08*
to understand that competition among
independent businesses is good for consumers
– individuals and businesses – and is good
for the economy. Competitive markets
Other, 17.3%
Energy, 17.3%
yield lower prices and better quality goods
Technology, 2.5%
and services, and a vigorous marketplace
provides the incentive and opportunity for
the development of new ideas and innovative
products and services. But competitive
Services & Nonmarkets require clear rules fairly applied. The
Health Care &
Health Care
Pharmaceutical,
Commission is dedicated to that task, and
Professions,
39.5%
23.5%
uses a variety of tools to promote competition
and protect consumers from anticompetitive
mergers and business conduct. Through
* Represents Fiscal Year 2008 through February 29, 2008.
enforcement, study, advocacy, and education,
the FTC’s competition mission is to remove
private or public impediments that prevent consumers from receiving the benefits
of such competition.
This was a year for antitrust in the news, with the Supreme Court issuing
several important rulings on a variety of competition issues which generated
interest from a wide audience. In addition, the Antitrust Modernization
Commission completed its work, issuing a report that endorsed free-market
principles as the primary driver of success in the American economy, and
concluding that the state of the U.S. antitrust laws is “sound.” With this
reaffirmation of the importance of effective antitrust policies, the Commission is
committed to its role in enforcing the rules of the marketplace to encourage fair
competition wherever and whenever it can produce positive results for consumers
and for the economy.
The Commission effectively manages its limited resources by addressing
anticompetitive mergers and conduct in those industries that most directly
Federal Trade Commission
impact consumers, such as health care, energy, retail goods, technology, and real
estate. In the past year, the Commission’s merger and nonmerger enforcement
actions in these and other industries confirm that much of the Commission’s
competition work has a direct impact on consumers by promoting competition
for the products and services they regularly purchase. From groceries and generic
drugs to gasoline and garden apartments, the Commission seeks to prevent the
kinds of anticompetitive mergers and conduct in markets that affect consumers
every day.
Chapter 1. Competition Law Enforcement
A. Merger Enforcement
The Commission continues to face a demanding merger review workload
as the number of mergers requiring pre-merger notification continues to
increase, and the proposed mergers and the products and services at issue grow
in complexity. Over the past three years, the Commission has faced a 30%
increase in pre-merger filings and a comparable increase in second requests issued.
Effective and efficient merger review is critical to the agency’s ability to deal with
the pressures of keeping pace with the substantial stream of merger filings every
year.
HSR Transactions, Second Requests, and Merger Enforcement Actions
Fiscal Year
HSR Transactions
Second Requests
Issued
Merger Enforcement Actions
#
#
#
HSR premerger
violation
2005
1,610
25
14
1
2006
1,755
28
16
0
2007
2,108
31
22
1
2008*
767
8
5
1
* Represents Fiscal Year 2008 through February 29, 2008.
1. Health Care Merger Enforcement
The rapidly rising cost of health care is a matter of concern for consumers,
employers, insurers, and the nation as a whole. Spending on health-related
products and services surpassed $2.1 trillion in 2006, and now accounts for more
than 16% of Gross Domestic Product. The cost of prescription drugs alone was
more than $216 billion in 2006. The Commission will continue to challenge
mergers in the health care industry that threaten to further escalate costs or
dampen incentives to innovate. This year, the Commission challenged several
mergers in the health care industry, maintaining competition in markets for
generic drugs, poultry vaccines, treatments for vertebral compression fractures,
kidney dialysis services, and retail pharmacies.
The FTC in 2008: A FORCE for consumers and competition
Generic Drugs. Generic formulations of widely used branded medicines
bring down the costs of treatment for many conditions as patients substitute
lower-cost generic drugs that use the same active ingredients and have the same
therapeutic effectiveness as the brand-name drug.
Consumer acceptance of generic drugs has helped
contain rising health care costs, and the Commission is
committed to promoting competition between generic
drug makers and branded pharmaceuticals and among
generic drug manufacturers.
“Without question, the overall challenge in U.S. health
care markets is the cost: How can we contain steadily rising
costs, while maintaining the life-saving innovation and
quality that admirably characterizes the U.S. market?”
– Chairman Majoras, Keynote Address before the ABA Section of
Antitrust Law Fall Forum (Nov. 15, 2007)
Actavis Group/Abrika. In April 2007, the
Commission prevented a merger-to-monopoly in the sale of generic
isradipine capsules by challenging the proposed $235 million purchase
of Abrika Pharmaceuticals, Inc. by the Actavis Group, an international
generic pharmaceuticals company. To maintain competition in the
market for this important generic drug, used to lower blood pressure
and to treat hypertension, ischemia,
and depression, the consent order
requires the divestiture of all rights and
assets necessary to produce, market,
and sell generic isradipine to Cobalt
Laboratories, Inc.
Mylan/Merck. To resolve competitive
concerns in the U.S. market for
five generic drugs, the Commission
challenged Mylan Laboratories’
proposed acquisition of the generic
arm of Merck Pharmaceuticals, a
transaction valued at approximately $6.6 billion. Under a September
2007 consent order with the Commission, Mylan and Merck must divest
all assets relating to flecainide acetate tablets, acebutolol hydrochloride
capsules, guanfacine hydrochloride tablets, nicardipine hydrochloride
capsules, and sotalol hydrochloride. The generic drugs at issue are used
for the treatment of many conditions, including hypertension and
heart arrhythmia. The order requires the divestiture of all assets related
to the relevant products to Amneal Pharmaceuticals, a generic drug
manufacturer.
Hospitals, Clinics and Surgical Treatment Options. Competition among
health care providers and treatment options also helps to contain health care
costs. This includes competition between facilities, such as hospitals or clinics,
that provide a similar array of services to patients living nearby. Similarly, when
a patient is faced with a difficult health condition, the availability of multiple
technically advanced treatment options can improve outcomes and reduce
recovery times. These benefits can occur when medical facilities compete
to improve treatment techniques, and the Commission seeks to maintain
competition when reviewing mergers in this field.
Federal Trade Commission
Hospitals. In August 2007, the Commission ruled that Evanston
Northwestern Healthcare Corp.’s 2000 acquisition of Highland Park
Hospital was anticompetitive and resulted in higher prices for acute
care inpatient hospital services in parts of Chicago’s northern suburbs.
The Commission found that this consummated merger enabled the
hospitals to raise prices through an exercise of market power. The
Commission cited economic evidence that post-merger price increases
were substantial and not explained by ordinary competitive forces.
The Commission concluded that in this “highly unusual case,” the
divestiture remedy imposed by the administrative law judge would be
too costly and potentially risky, and instead imposed a conduct remedy.
The Commission’s order requires Evanston to set up two separate and
independent contract negotiation teams to bargain with managed
care organizations to revive competition between Evanston’s two
hospitals and the Highland Park hospital.
Kidney Dialysis Clinics. In September 2007, the Commission settled
charges stemming from American Renal Associates’ (ARA) proposed
acquisition of five clinics from Fresenius AG, which would have made
ARA the only operator of dialysis clinics in the Warwick/Cranston
area of Rhode Island. In addition to the sale of the five clinics, the
purchase agreement called for the closure by the seller of an additional
three Fresenius clinics in Rhode Island and Massachusetts. The parties
terminated their purchase agreement after FTC staff raised antitrust
concerns, but the Commission challenged the closure of the three clinics
as a naked agreement to pay a competitor to exit the market, and also
alleged a Section 7 violation in the Warwick/Cranston market for dialysis
services. The Commission’s order bars the parties from entering into
any agreement to close dialysis clinics, and requires ARA to notify the
Commission if it intends to acquire any dialysis centers in the Warwick/
Cranston area for a period of 10 years.
Innovative Medical Treatment Options. In October 2007, the
Commission challenged Kyphon Inc.’s $220 million proposed
acquisition of the spinal assets of Disc-O-Tech Medical Technologies,
Ltd. and Discotech Orthopedic Technologies (collectively Disc-OTech) as anticompetitive in the market for minimally invasive vertebral
Rich Cunningham
Bureau of Competition
Mergers I
Since coming to the FTC
from law school in 2004, Rich
has contributed significantly
to resolving competitive
problems presented by the
mergers in Boston Scientific/
Guidant, Thermo/Fisher
Scientific, Hologic/Fischer,
Chevron/USA Petroleum,
and Kyphon/Disc-o-Tech,
and helped challenge the
defendants’ economic
testimony in Whole Foods/
Wild Oats.
Notably, Rich took
primary staff responsibility
during his first year in
DaVita/Gambro, a merger
of two national networks of
dialysis centers. In 2007,
Rich received the FTC’s
Stephen Nye Award, given
to junior attorneys who have
demonstrated outstanding
performance.
10
The FTC in 2008: A FORCE for consumers and competition
compression fracture treatment products in the U.S. Disc-O-Tech’s
Confidence products promised real benefits to patients in treating these
painful fractures in a minimally invasive way, and threatened Kyphon’s
near-monopoly on treatment options. The Commission’s consent
order required that Kyphon divest all assets, intellectual property, and
development rights related to the Confidence brand to an FTC-approved
buyer.
Animal Health Products. In November 2007, the Commission charged
that Schering-Plough’s proposed $14.4 billion acquisition of Organon Biosciences
N.V. threatened to substantially reduce competition in the U.S. market for three
popular vaccines used to treat poultry, a staple in American food markets. The
November 2007 order settling the charges required the sale of assets necessary
to develop, manufacture, and market these vaccines to Wyeth. In addition,
Schering-Plough was required to sign a supply and transition services agreement
with Wyeth, under which Schering will provide the vaccines for a period of two
years, allowing time for the necessary FDA approvals.
2. Energy Industry Merger Enforcement
Energy industry mergers also took top billing this year in the competition
workload. The Commission carefully reviews mergers in this vital industry that
provides the engine for economic growth to ensure that consumers receive the
benefits of competition among energy companies. To that end, the Commission
filed two preliminary injunction actions in federal court to block energy market
mergers in the past year.
Western Refining/Giant Industries. In May 2007, the Commission
issued an administrative complaint and initiated federal court action to
block Western Refining, Inc.’s $1.4 billion proposed acquisition of rival
energy company Giant Industries, Inc. to preserve competition in the
supply of bulk light petroleum products, including motor gasoline, diesel
fuels, and jet fuels, in northern New Mexico. After a week-long trial, the
federal district court denied the Commission’s motion for a preliminary
injunction, rejecting arguments that Giant had unique opportunities
to increase supply and lower fuel prices in northern New Mexico. In
October, the Commission dismissed its administrative complaint,
concluding that further prosecution would not be
in the public interest.
“Competition between Dominion and Equitable results
Equitable/Dominion. In March 2007, the
Commission filed an administrative complaint,
and in April 2007, a federal court injunction
action, to block Equitable Resources’ proposed
acquisition of The Peoples Natural Gas Company,
a subsidiary of Dominion Resources. The
Commission challenged the merger-to-monopoly
in natural gas distribution as detrimental
in substantial discounts from regulated rates for commercial
and industrial customers that are served by more than one
local distribution company, while ‘captive’ consumers who do
not enjoy such competition are charged regulated rates. . . .
[Our economists showed] that there were competitive effects
even though prices were regulated and evaluated efficiency
claims made by the parties in the distribution of natural gas.”
– BE Director Michael R. Baye, interview in The Antitrust Source
(Feb. 2008)
11
Federal Trade Commission
to nonresidential customers in certain areas of Allegheny County,
Pennsylvania, which includes Pittsburgh. In May 2007, the federal
district court in Pittsburgh denied the FTC’s motion for a preliminary
injunction and dismissed the complaint, ruling that because the
Pennsylvania Public Utility Commission has the power to approve the
merger, the Commission is barred from taking action under the state
action doctrine. In June 2007, the U.S. Court of Appeals for the Third
Circuit granted the Commission’s motion for an injunction pending
appeal. The parties abandoned the transaction in January 2008, and in
February 2008, the Commission dismissed the administrative complaint
and moved to vacate the district court’s decision. The Third Circuit
granted the Commission’s motion to vacate in February 2008.
3. Merger Enforcement in Retail Markets
Every year, the Commission reviews mergers that threaten competition in a
wide variety of everyday retail markets, from groceries to funeral home services.
The Commission’s merger investigations in such cases can be very time- and
resource-intensive since they often require the examination of market conditions
in dozens, or sometimes hundreds, of local markets. Likewise, effective relief in
these markets may require many separate divestitures to preserve competition.
For instance, last year’s consent order in SCI/Alderwoods required the divestiture
of funeral homes in 29 markets, and of cemeteries in 12 markets, across the
U.S., all of which were overseen by Commission staff this year to assure effective
relief. Again this year, the Commission challenged several mergers that raised
competitive concerns in local retail markets, one involving retail pharmacies and
two between grocery store chains.
12
Whole Foods/Wild Oats. In June 2007, the Commission issued
an administrative complaint, and sought a federal court temporary
restraining order (TRO) and preliminary injunction, against Whole
Foods Market, Inc.’s proposed acquisition of its
chief rival, Wild Oats Markets, Inc. According to
the complaint, the approximately $670 million
deal raised competition problems in 21 local
markets where Whole Foods and Wild Oats
both operated stores and were each other’s closest
competitors among premium natural and organic
supermarkets. The district court granted the TRO,
but subsequently denied the preliminary injunction
after an abbreviated hearing, concluding that the
merger’s likely effect would not be substantially to
reduce competition in violation of Section 7 of the Clayton Act. The
Commission has appealed the district court’s ruling on grounds that
the lower court failed to apply the proper legal standard that governs
preliminary injunction applications by the Commission in Section 7
cases.
The FTC in 2008: A FORCE for consumers and competition
Rite Aid/Brooks and Eckerd. In June 2007, the Commission charged
that Rite Aid Corporation’s $3.5 billion acquisition of competitors
Brooks and Eckerd Pharmacies from the Canadian drug store operator
Jean Coutu Group, Inc. was anticompetitive and required the sale of
retail pharmacies located in 23 cities along the East Coast. According
to the Commission’s complaint, the merger would have substantially
reduced competition in the sale of pharmacy services to customers in
those areas, where customers view stores operated by the two companies
as their two best options. The consent order requires Rite Aid to divest
pharmacies in those cities to buyers pre-approved by the Commission.
The investigation, which included cooperation from the state attorneys
general of Maryland, New Jersey, New York, Pennsylvania, Vermont,
Virginia, and Maine, was handled by the agency’s Northeast Regional
Office.
A&P/Pathmark. In November 2007, the
Commission intervened in the proposed $1.3
billion acquisition of Pathmark Stores, Inc. by
The Great Atlantic & Pacific Tea Company, Inc.
(A&P), alleging the transaction would have reduced
competition among grocery stores in the highly
concentrated markets of Staten Island and Shirley,
Long Island, New York. A&P operates stores under
the A&P, A&P Super Foodmart, Food Basics, Food
Emporium, Super Fresh, and Waldbaum’s banners.
The Commission’s consent order requires A&P to divest five supermarkets
in Staten Island to King Kullen Grocery Company, and one supermarket
in Shirley to Stop & Shop Supermarket Company.
4. Other Merger Enforcement
The Commission also scrutinizes mergers, and files enforcement actions
to block those found likely to be anticompetitive, in other industries where
necessary to protect consumers.
Chicago Bridge/Pitt-Des Moines. In January 2008, the U.S. Court
of Appeals for the Fifth Circuit upheld a Commission order requiring
Chicago Bridge & Iron Co., N.V. and its U.S. subsidiary (CB&I) to
divest assets acquired from Pitt-Des Moines, Inc. used in the business of
designing, engineering, and building field-erected cryogenic storage tanks.
In its 2005 order, the Commission had ruled that CB&I’s acquisition
of these assets in 2001, during a pending FTC investigation, would
likely result in a substantial lessening of competition or tend to create
a monopoly in four markets for industrial storage tanks in the U.S., in
violation of Section 7 of the Clayton Act and Section 5 of the FTC Act.
The court endorsed the Commission’s findings, based on an extensive
review of many years of bidding data, that the merged firms controlled
over 70% of the market, and that new entry was unlikely given the high
13
Federal Trade Commission
entry barriers based on the incumbents’ reputation and control of skilled
crews.
Jarden/K2. The Commission charged that the acquisition of K2, Inc.,
a sporting goods manufacturer, by Jarden Corporation would likely
harm competition. The proposed $1.2 billion transaction would have
joined two of the nation’s leading producers of monofilament fishing
line, the most common type of line used in the U.S. The August 2007
order settling the charges requires Jarden to sell all assets related to the
manufacture and sale of four varieties of monofilament fishing line to
sporting goods company W.C. Bradley/Zebco.
Owens Corning/Compagnie de Saint Gobain. In October 2007, the
Commission remedied competitive problems raised by Owens Corning’s
proposed acquisition of glass fiber reinforcements and composite fabric
assets from Compagnie de Saint Gobain. The investigation involved
cooperation among staff of the FTC, the European Commission,
and Mexico’s Federal Competition Commission. After staff from the
competition agencies raised antitrust concerns, the parties modified their
agreement to exclude Saint Gobain’s glass fiber reinforcement assets in
the U.S. and certain assets in Europe. The Commission’s consent order
addressed additional competitive problems in the highly concentrated
North American market for continuous filament mat, which is used in
the production of non-electrical laminate, marine parts and accessories,
and other products. The order requires Owens Corning to divest
sufficient U.S. continuous filament mat facilities, assets, and intellectual
property to enable the buyer effectively to produce and sell the products
in competition with the new Owens Corning/Saint Gobain joint venture.
B. Nonmerger Enforcement
Over the past year, the Commission also has had an active nonmerger
agenda, investigating and challenging anticompetitive conduct in the health care,
energy, real estate, and technology sectors. In addition to aggressively filing new
enforcement actions, the FTC continues to litigate several important cases in the
federal courts of appeals. The Commission remains at the forefront of developing
antitrust standards for competitor collaboration and single-firm conduct in these
important and dynamic industries.
1. Health Care Nonmerger Enforcement
The Commission continues to use its enforcement powers to challenge
anticompetitive agreements between branded and generic drug manufacturers,
settling one case involving the marketing of a generic oral contraceptive drug,
and filing a new action in the market for drugs to treat sleep disorders. The
Commission also challenged a price-fixing agreement among competing
physicians, and brought to a successful close a long-running action against a
state dental board’s efforts to restrict hygienists’ provision of preventive care to
schoolchildren.
14
The FTC in 2008: A FORCE for consumers and competition
Cephalon, Inc. In February 2008, the
“Today’s suit against Cephalon seeks to undo a course of
Commission charged that Cephalon engaged
anticompetitive
conduct that is harming American consumers
in illegal conduct to prevent competition for its
by depriving them of access to lower-cost generic alternatives
branded drug, Provigil, by paying four firms to
to an important branded drug.”
refrain from selling generic versions of the drug
until 2012. Provigil is used to treat excessive
– BC Director Jeffrey Schmidt, “FTC Sues Cephalon Inc. for
Unlawfully Blocking Sale of Lower-Cost Generic Versions of
sleepiness in patients with sleep apnea, narcolepsy,
Branded Drug Until 2012” (press release, Feb. 13, 2008)
and shift-work sleep disorder. The four companies
had applied to the FDA for approval to market a
generic formulation, and challenged the validity of the only remaining
patent on Provigil, a formulation patent related to the size of the
particles used in the drug. Cephalon entered into agreements with these
companies, paying more than $200 million in exchange for agreements
not to sell generic Provigil until 2012. No other generic company could
enter the market until all of these four “first filers” either relinquished
their marketing exclusivity or 180 days after one of them entered the
market. By these agreements, Cephalon effectively prevented any
generic from entering the market until at least 2012. The Commission’s
complaint before the Washington, D.C. federal district court alleges that
Cephalon’s conduct in signing patent-litigation settlement agreements
that included payments designed to prevent generic competition
constituted an abuse of monopoly power that is unlawful under Section 5
of the FTC Act.
Commissioner Leibowitz: Promoting Affordable Prescription Drug Products
Commissioner Jon Leibowitz continues to play an active role to ensure that consumers have
access to affordable drug products. In particular, he has focused on eliminating exclusion patent
settlements in which branded pharmaceutical companies pay potential generic competitors to stay off
the market as part of a patent settlement. These settlements can delay generic entry for many years
and cost consumers – who lose the benefits of lower prices – tens of billions of dollars. Over the last
20 years, generic pharmaceutical products have been one of the few constraints on health care costs.
If exclusion settlements continue, however, consumers will lose the benefits of generic entry. Twice
in 2007, Commissioner Leibowitz testified on behalf of the Commission in favor of legislation that
would clearly prohibit these anticompetitive settlements: in January, before the Senate Judiciary Committee and, in
May, before the Subcommittee on Commerce, Trade, and Consumer Protection of the House Committee on Energy and
Commerce.
Warner Chilcott/Barr Laboratories. In 2007, the Commission settled
with Barr Laboratories concluding its federal court action challenging an
agreement between Warner Chilcott and Barr in which, the Commission
alleged, Barr agreed not to sell a lower-priced generic substitute of Warner
Chilcott’s branded Ovcon 35, an oral contraceptive drug, for several years
for $20 million. In September 2006, faced with a preliminary injunction
action by the Commission, Warner Chilcott waived the exclusionary
15
Federal Trade Commission
provision in its agreement and Barr immediately announced that it would
begin marketing generic Ovcon in the U.S. Warner Chilcott settled with
the Commission in October 2006, agreeing to certain terms designed to
protect generic entry into the market. In November 2007, Barr agreed
to refrain from entering into similar supply agreements with branded
companies.
Connecticut Chiropractic Association. In March 2008, the
Commission challenged an allegedly illegal group boycott by two
chiropractic associations and their counsel aimed at a cost-saving
Connecticut health plan. According to the FTC, the Connecticut
Chiropractic Association, the Connecticut Chiropractic Council and
CCA’s legal counsel conspired through a campaign of meetings and
other communications to organize their members to refuse to deal
with American Specialty Health, which offered a chiropractic benefits
administration program in the state. In settling the matter, the
Commission accepted a proposed consent order that prohibits the parties
from seeking agreement among competing chiropractors to negotiate
with payors on behalf of any chiropractor, or to refuse to deal with any
payor.
Colegio de Optometras. In July 2007, the Commission charged a
group of optometrists in Puerto Rico with violating the FTC Act by
orchestrating agreements among members of the Colegio de Optometras
to refuse, or threaten to refuse, to accept vision and health care contracts
except on collectively agreed-upon terms. Two leaders of the group were
also charged with facilitating the agreement by urging members not
to participate in the vision network. The Commission’s consent order
settling these charges bars the group and the two leaders from engaging
in such conduct, while allowing them to undertake certain kinds of
joint contracting arrangements by which physician participants control
costs and improve quality by managing the provision of services. FTC
staff worked with the Office of Monopolistic Affairs of Puerto Rico’s
Department of Justice on this case.
South Carolina State Board of Dentistry. This past year, the
Commission settled a 2003 complaint charging the South Carolina
State Board of Dentistry with unlawfully restraining competition by
enacting a rule that required a dentist to examine every child before a
dental hygienist could provide preventive dental care – such as cleanings
– in schools. The Board, which is a state regulatory agency composed
primarily of practicing dentists, claimed that its actions were immune
from antitrust challenge under the state action doctrine, but that
argument was rejected in a 2004 Commission opinion holding that
the Board’s conduct was directly contrary to state law. In 2006, the
U.S. Court of Appeals for the Fourth Circuit dismissed the Board’s
interlocutory petition for review for lack of jurisdiction, and the Supreme
Court denied certiorari in January 2007. The FTC’s June 2007 consent
Lawrence
DeMille-Wagman
Office of the
General Counsel
Larry is an attorney who
has represented the FTC in
federal courts of appeals
for over 20 years. In 2004,
in Mainstream Marketing
v. FTC, Larry successfully
defended the FTC’s Do Not
Call rule, which now blocks
unwanted telemarketing
calls from over 150 million
telephones. In TransUnion
v. FTC, Larry won a ruling
upholding an FTC order
preventing credit bureaus
from selling credit reports
to marketers who used
the information to target
unsolicited ads to consumers.
In FTC v. Check Investors,
he argued in support of a
court order applying the
FDCPA to halt abusive debt
collection practices by a
company specializing in
collecting dishonored checks.
Larry received the FTC’s Louis
D. Brandeis litigation award
in 2001.
16
The FTC in 2008: A FORCE for consumers and competition
order requires the Board to publicly support the current state public
health program that allows hygienists to provide preventive dental care to
schoolchildren, especially those from low-income families.
2. Real Estate Nonmerger Enforcement
The Commission continues to challenge realtor board rules that restrain
competition and hinder consumer choice in markets throughout the country.
This work is the product of a 2006 enforcement sweep of the real estate brokerage
industry, which resulted in seven separate actions against realtor boards. Six of
these were resolved by consent order requiring each realtor board to discontinue
enforcing the polices that, the Commission alleged, kept nontraditional brokers
from competing, and in one investigation led to an administrative complaint
against a realtor group. The Commission also settled an action raising similar
concerns with a Milwaukee-based realtor group in the past year.
RealComp. In October 2006, the Commission
“American homeowners and future homeowners owe
issued an administrative complaint charging
a great debt of gratitude to the FTC . . . for [its] ongoing
Realcomp with violating Section 5 of the FTC
dedication to reverse the protectionist efforts of real
Act by prohibiting information on Exclusive
estate organizations such as Realcomp to interfere in the
Agency listings and other forms of nontraditional
marketplace in order to force American homeowners to pay
more than necessary for real estate services.”
listings from being transmitted from the multiple
listing service (MLS) it maintains to public real
– American Homeowners Grassroots Alliance, January 2008
estate websites. The complaint further alleged
that the conduct was collusive and exclusionary,
because the brokers enacting the rules were essentially agreeing among
themselves how to compete with one another, and were withholding the
valuable benefits of the MLS from nontraditional real estate brokers. In
December 2007, an administrative law judge dismissed the complaint,
ruling that Commission staff had not met its burden of demonstrating
that the group’s policies unreasonably restrained or substantially lessen
competition under a standard rule of reason analysis. The ALJ found
that “despite Realcomp’s market power and the implementation of
the Website Policy, discount brokerage services continue to be widely
available.” Commission staff is appealing the ALJ’s decision, and the
Commission will hear arguments in the case in April 2008.
Multiple Listing Service, Inc. The FTC settled charges that Multiple
Listing Service, Inc. (MLS, Inc.), a group of real estate professionals
based in Milwaukee, Wisconsin, adopted rules that withheld valuable
benefits of the multiple listing service it controls from consumers who
chose to enter into nontraditional listing contracts with real estate
brokers. The rules blocked less-than-full-service listings from being
transmitted by MLS, Inc. to popular Internet websites, but provided this
important benefit for traditional forms of listings. Under the terms of
the December 2007 consent order, MLS, Inc. is barred from adopting
or enforcing any rule that treats one type of real estate listing agreement
more advantageously than any other, and from interfering with the ability
17
Federal Trade Commission
of its members to enter into any kind of lawful listing agreement with
home sellers.
3. Technology Nonmerger Enforcement
Competition in the high technology sector, such as in the computer
hardware and software industries, is critical to consumers and the economy. The
Commission is vigilant against conduct that seeks to distort competition in these
dynamic markets.
18
Rambus. The Commission continues to litigate its claims that Rambus,
Inc. unlawfully monopolized markets for four computer memory
technologies that were incorporated into industry standards for dynamic
random access memory (DRAM) chips. DRAMs are widely used in
personal computers, servers, printers, and cameras. In its July 2006
opinion, the Commission found that, through a course of deceptive
conduct, Rambus was able to distort a critical standard-setting process
and engage in an anticompetitive “hold up” of the computer memory
industry. The Commission found that Rambus illegally acquired
monopoly power through exclusionary acts, and issued an order limiting
the royalty rates Rambus may collect under its licensing agreements
including with those firms that may have already incorporated its DRAM
technology. Rambus appealed the Commission’s order to the U.S.
Court of Appeals for the District of Columbia Circuit, which heard oral
arguments in February 2008.
N-Data. In January 2008, the Commission charged that Negotiated
Data Solutions LLC (N-Data) violated Section 5 of the FTC Act by
engaging in unfair methods of competition. N-Data acquired patent
rights originally held by National Semiconductor Corp. that were
included in an IEEE industry standard for autonegotiation technology,
the technology that allows Ethernet devices made by different
manufacturers to work together. Ethernet is a computer networking
standard that is used in nearly every computer sold in the U.S. N-Data
reneged on National Semiconductor’s commitment to charge a one-time
royalty of $1,000 to manufacturers or sellers of products using the IEEE
standard, and demanded higher royalties from users. In a consent order
resolving the charges, the Commission ordered N-Data to stop enforcing
the patents at issue unless N-Data has first offered a license under the
original terms. Chairman Majoras dissented from the Commission’s
decision on the grounds that, unlike the conduct of patent-holders in
other standard-setting cases brought by the Commission, there were
no allegations here of deception or improper or exclusionary conduct
to induce the standard-setting body to include N-Data’s technology in
the standard that was adopted. Commissioner Kovacic also dissented,
arguing that the conduct at issue did not constitute an unfair method of
competition or an unfair act or practice under Section 5 of the FTC Act.
The FTC in 2008: A FORCE for consumers and competition
4. Energy Nonmerger Enforcement
On the nonmerger front, the Commission also guards against anticompetitive
conduct in the energy industry and brings enforcement actions when necessary.
American Petroleum Company, Inc. In July
“Petitioning the government to repeal a law you don’t like
2007, the Commission charged that a motor
is
perfectly
legal and, in fact, is a basic constitutional right.
oil lubricant importer illegally conspired with
But
where
firms
take direct action in the marketplace as a
its competitors to restrict the importation and
means of pressuring the government, they cross the line from
sale of these products in Puerto Rico, which
permissible to illegal conduct. That’s what happened here, and
resulted in higher prices paid by consumers.
that’s why we brought this case.”
According to the FTC’s complaint, during 2005
and 2006, American Petroleum joined with
– BC Director Jeffrey Schmidt, “FTC Charges Puerto Rico Lubricant
Importer with Illegal Agreement: Consent Order Bars Company from
numerous others in the Puerto Rico lubricants
Conspiring to Limit Imports and Sales” (press release, June 14, 2007)
industry to lobby for the delay, modification, or
repeal of Puerto Rico Law 278, which imposes
an environmental recovery fee of 50 cents per
quart. With the effective date of the law approaching, the importers
adopted a strategy of refusing to import lubricants as a means of forcing a
change. The consent order settling the charges bars American Petroleum
from conspiring with its competitors to restrict output, refuse to deal, or
boycott any lubricant buyer or potential buyer.
C. Guidance, Transparency, and Process Issues
During the last year, the Commission and its staff sought to provide factspecific guidance in a detailed closing statement accompanying an investigation
and in two advisory letters. These instances presented opportunities to
clarify standards of review and competitive analysis. In addition, with DOJ
authorization, the Commission filed two separate civil penalties actions
for violations of the Hart-Scott-Rodino (HSR) Act’s premerger reporting
requirements. HSR rules and regulations form the foundation of the
Commission’s merger review process, and the Commission is dedicated to
investigating potential violations of the HSR rules and bringing civil penalties
actions when appropriate so as not to give parties to some mergers an unfair
advantage.
Google/DoubleClick. In December 2007, the
Commission announced that it would not seek to block
Google, Inc.’s proposed acquisition of Internet advertising
server DoubleClick, Inc. Among the reasons the
Commission provided in its extensive statement outlining
its decision were: the evidence showed that Google and
DoubleClick were not direct competitors in any relevant
antitrust market, that current competition among firms
in the third party ad serving market was vigorous and was
likely to increase, and that it was unlikely that Google
could effectively foreclose competition in the related ad
intermediation market following the acquisition. To address
19
Federal Trade Commission
consumer privacy concerns that were raised during the investigation
but are not limited to the activities of the merging companies, the
Commission proposed self-regulatory privacy principles for online
behavioral advertising and requested comments from interested parties.
20
MedSouth Follow-Up Advisory Letter. In 2002, Commission staff
issued an advisory opinion concerning a proposed joint venture involving
a clinically integrated network of physicians, to be known as MedSouth,
Inc. This past year, staff conducted its own “check up” of the operation
of the Denver-based group. After receiving information and data from
MedSouth, staff confirmed in a follow-up letter dated June 18, 2007, that
it had no present intention to challenge the group’s operation, noting that
concerns about the market power of the group had diminished over time
as the number of physicians participating in the venture had dropped.
Greater Rochester Independent Practice Association, Inc. Advisory
Letter. Commission staff advised a multi-specialty physician practice
group of primary care and specialist physicians practicing in the
Rochester, New York area, that it had no present intention to challenge
the organization’s operation as a non-exclusive physician network joint
venture. The physician group requested an advisory opinion on its plan
to integrate and coordinate patient services among the 575 physician
members. FTC staff found that, although the group could contract
jointly, the non-exclusive nature of the joint venture allowed members
to negotiate separately with health plans and other customers choosing
not to purchase network services, and that there were other physician
networks operating in the area. The group’s proposal to institute “best
practices” and monitor treatment and outcomes offers opportunities
for significant benefits for patients, and joint contracting may be
reasonably necessary to achieve efficiencies and reduce costs through the
coordination of care among network providers.
Premerger Filing Violations. During the last year, the Commission
filed, with DOJ authorization, two civil penalty actions against businesses
and individuals for violating the premerger reporting requirements of the
Hart-Scott-Rodino Act. In May 2007, James D. Dondero paid $250,000
to settle charges that a hedge fund he managed did not file premerger
documents for the acquisition of shares in Neighborcare, Inc., which
were in excess of the $50 million HSR filing threshold. Separately, in
December 2007, the FTC obtained $1.1 million in civil penalties from
ValueAct Capital Partners, an investment firm, to settle charges that it
had failed to make the required HSR filings related to certain 2005 stock
acquisitions. ValueAct failed to file HSR documents on similar purchases
in 2003, but had made corrective filings once notified of the need to
file, and the FTC did not take action at that time. When the firm made
additional stock purchases in 2005 and again failed to make appropriate
and timely HSR filings, the FTC sought civil penalties for violations of
the HSR Act.
The FTC in 2008: A FORCE for consumers and competition
Chapter 2. Competition Policy Tools
In addition to – and to support – its enforcement work, the FTC promotes
competition through a wide variety of activities, such as research and reports,
workshops, advocacy filings, amicus briefs, and testimony before Congress.
This work helps inform the Commission and others about emerging legal and
economic issues affecting competition enforcement. Through this “competition
R&D,” the agency invests in its resources to maintain its expertise and shares
important information with other policymakers, the antitrust bar, businesses,
and the general public thereby continuing to provide leadership on competition
policy.
A. Research and Reports
The Commission continues its efforts to address antitrust issues of national
importance through conducting research and issuing reports. In the past year,
Commission staff worked on a wide range of subjects, from evolving legal
standards for single-firm conduct and intellectual property issues relating to
competition policy, to industry studies in energy, real estate, broadband, and
postal services.
1. Energy
Electric Energy. In April 2007, the Electric Energy Market Competition
Task Force – comprised of representatives of the FTC, the Federal Energy
Regulatory Commission, and the Departments of Justice, Energy, and
Agriculture – transmitted a report to Congress concerning competition in
the wholesale and retail markets for electric energy. The Task Force report
– submitted in response to a directive contained in the Energy Policy
Act of 2005 – addressed a number of key issues involving competition in
wholesale electric power markets including whether competition in such
markets has resulted in sufficient generation supply and transmission
to provide wholesale customers with the kind of choice that generally
is associated with competitive markets. The report also discussed
competition in retail electric power markets, including the experience
of a number of states that have implemented retail competition, as well
as a number of complex issues that states may wish to consider as they
evaluate their retail electric competition policies.
2006 Gasoline Price Increases. In August
2007, the FTC and DOJ sent to President Bush
a “Report on Spring/Summer 2006 Nationwide
Gasoline Price Increases,” explaining that the
gasoline price increases in 2006 were not the
result of violations of the antitrust laws, but
stemmed from the following market factors:
(1) seasonal effects of the summer driving season;
(2) crude oil price increases; (3) ethanol price
21
Federal Trade Commission
Internet Access
Task Force
The Commission’s Internet
Access Task Force was
established by Chairman
Majoras in August 2006
to examine broadband
Internet connectivity issues,
including the regulation of
broadband providers on data
prioritization, exclusive deals,
and vertical integration. In
addition to its 2007 Broadband
Report and 2006 Wi-Fi Report,
the Task Force currently is
exploring the competition and
consumer protection issues
raised by the emergence of
Voice over Internet Protocol,
or VoIP, as a replacement for
wireline telephone service.
increases; (4) capacity reductions due to refiners’ transition from the fuel
additive methyl tertiary-butyl ether to ethanol; (5) refinery outages due to
external events such as hurricanes; and (6) increased consumer demand
for gasoline beyond the seasonal effects of the summer driving season.
Ethanol Production. In November 2007, the Commission issued
its third annual report on the state of ethanol production in the U.S.
The report noted that, as of September 2007, 13 firms had entered
into the production of ethanol during the preceding year, bringing the
total number of U.S. producers to 103. As new firms have entered,
the market, which is unconcentrated by any measure of capacity or
production, has become even more unconcentrated. The FTC concluded
that current levels of market concentration would not support a
presumption that a single firm, or a small group of firms, could wield
sufficient market power to set or coordinate price or output levels.
2. Technology
Broadband Report. In June 2007, the FTC released a staff report,
“Broadband Connectivity Competition Policy,” that urged caution
in enacting so-called “network neutrality” regulations. The report,
the work of the Commission’s Internet Access Task Force, provides
important background information on the technical functioning of the
Internet, identifies guiding principles for policymakers, and cautions
against imposing new regulations in the evolving, dynamic broadband
Internet industry in the absence of significant market failure or
demonstrated consumer harm. This report follows a 2006 Task Force
report, “Municipal Provision of Wireless Internet,” which identified the
potential benefits and risks to competition and consumers associated with
municipal provision of Internet service, thus providing a framework for
policymakers considering whether and how municipalities should provide
such service.
3. Intellectual Property
22
Second Report on Intellectual Property and Competition. In
April 2007, the FTC and DOJ issued a joint report, “Antitrust
Enforcement and Intellectual Property Rights: Promoting Innovation and
Competition,” addressing issues arising when antitrust law is applied to
conduct involving intellectual property rights. This is the second report,
of two, to come out of a series of 24 hearings spanning 10 months,
during which the agencies received comments and heard testimony from
over 300 business, government, and academic commentators offering
diverse perspectives. The report emphasizes that the agencies use a
flexible rule of reason approach for the vast majority of conduct involving
intellectual property rights, in order to promote the common goals of
encouraging innovation and competition. In 2003, the FTC issued
the first report on these hearings, “To Promote Innovation: The Proper
The FTC in 2008: A FORCE for consumers and competition
Balance of Competition and Patent Law and Policy.” That report urged
that the role of competition in promoting innovation be considered when
formulating patent policy.
4. Other
Real Estate Report. In May 2007, the FTC
and DOJ issued a joint report on the nature
of competition in the real estate brokerage
industry, including structural characteristics of
the industry, the recent growth of nontraditional
brokerage models, the impact of the Internet on
consumers of brokerage services, and obstacles
to a more competitive environment. The
report compiled information gathered during
a joint FTC/DOJ workshop in October 2005.
In conjunction with the report, the FTC issued a new consumer alert,
“Buying a Home: It’s a Big Deal,” with tips for using the services of a real
estate professional when purchasing a home.
Postal Service Study. In January 2008, the
Commission issued a report, required by the
Postal Accountability and Enhancement Act,
that examined federal and state laws that
apply differently to the U.S. Postal Service
(USPS) and to its private competitors offering
comparable products. The report concluded
that legal constraints increase the USPS’s costs,
and implicit subsidies partially mask those costs
from consumers. Taken together, consumers
buy more competitive mail products from the USPS and more resources
are used to produce these products than would occur in a market without
these distortions. The report also laid out some options for Congress and
the Postal Regulatory Commission to consider to minimize or eliminate
these market distortions.
Authorized Generics Study. The Commission is conducting a study
on authorized generic drugs. The study is intended to help understand
the circumstances under which innovator companies launch generics; to
provide data and analysis regarding the effects of authorized generics on
short-term price competition, particularly during the Hatch-Waxman
Act’s exclusivity period, and on long-term prospects for generic entry; and
to add to the research on the effect of generic drug entry on prescription
drug prices. In 2007, the Commission issued orders to branded and
generic manufacturers and marketers of pharmaceuticals, requiring
responses to information requests. Staff will prepare a report based on the
information that is received.
Greg Luib
Office of
Policy Planning
As Assistant Director of
the Office of Policy Planning,
Greg has been significantly
involved in the Commission’s
policy work in the last year
across a number of topics.
He served as a principal
drafter of the joint FTC/DOJ
report on “Competition in
the Real Estate Brokerage
Industry.”
As a member of the
FTC’s Internet Access Task
Force, Greg oversaw the
drafting of the staff report
on “Broadband Connectivity
Competition Policy,” which
addressed the complex and
controversial subject of
network neutrality regulation.
Greg was awarded the
Commission’s 2007 Paul Rand
Dixon award for his efforts in
the area of competition policy
development and advocacy.
23
Federal Trade Commission
B. Hearings and Workshops
The Commission also organizes public hearings and workshops to gain a
deeper understanding of the complex economic and legal issues surrounding
various antitrust issues and to help it develop effective policy research and
development tools. These events generally bring together experts from various
legal, business, academic, and government backgrounds to exchange ideas,
challenge positions, and reflect on new issues to study.
1. Hearings
Single-Firm Conduct Hearings. Between June 2006 and May 2007, the
FTC and DOJ Antitrust Division held a series of joint public hearings
to study the antitrust implications of single-firm conduct. The hearings
included 29 sessions with approximately 120 panelists that discussed
when specific types of single-firm conduct may be anticompetitive and
violate Section 2 of the Sherman Act, and when such conduct is procompetitive and lawful. The hearings focused on the identification and
analytical meaning of monopoly power; circumstances that determine
exclusionary conduct; unilateral refusals to deal with rivals; predatory
pricing and bidding; loyalty and bundled discounts; exclusive dealing;
tying; misleading and deceptive conduct; remedies; historical and
strategic business perspectives; the use of empirical data; and international
perspectives. Agency staff is preparing a report that draws conclusions
based on the hearings and relevant scholarship.
2. Workshops
energy markets
in the 21st century:
Competition Policy in Perspective
24
Energy Conference. In April 2007, the FTC hosted a three-day public
conference, Energy Markets in the 21st Century: Competition Policy in
Perspective, that examined: (1) the relationship between market forces
and government policy in energy markets; (2) the dependence of the
U.S. transportation sector on petroleum; (3) the effects of electric power
industry restructuring on competition and consumers; (4) technological
developments in the industry; (5) the security of U.S. energy supplies;
and (6) the government’s role in maintaining competition and protecting
energy consumers. Based on presentations at the conference, as well as
additional research and analysis, the Commission expects to issue a report
that will address a number of key energy issues, including the security of
energy supplies and proposals for addressing climate change concerns.
Grocery Store Antitrust. In May 2007, the FTC’s Bureau of Economics
held a one-day conference on the antitrust analysis of the grocery
industry including both historical perspectives and current methods of
analysis. The presentations included recent academic work related to
competition in this industry, a historical review of the Commission’s
actions in this industry, current economic analysis of grocery and retail
competition, and recent work on new methods for analyzing grocery and
retail competition.
The FTC in 2008: A FORCE for consumers and competition
Unilateral Effects. In February 2008, the FTC convened a public
workshop, “Unilateral Effects Analysis and Litigation,” that brought
together recognized legal and economic experts to discuss how unilateral
effects theories are applied to mergers of firms selling competing but
differentiated products as well as judicial perspectives on such theories.
Among economists, unilateral effects is a widely accepted theory of
competitive harm. Yet both the FTC and DOJ have experienced some
difficulties litigating differentiated product cases under a unilateral
effects theory. Panelists discussed, from the trial attorney’s point of view,
effective strategies for litigating mergers under unilateral effects theory
and the relative importance of presenting business documents, customer
testimony, industry experts, and other non-economic market evidence
when bringing a unilateral effects case. Other panelists examined the
importance of econometric and non-econometric evidence when relied
upon by experts, and how reliance on such evidence may bolster or
undermine the credibility of the expert. The workshop included a moot
court-style presentation, moderated by two federal judges, that examined
different litigation strategies.
C. Advocacy Letters and Comments
“The challenge for the FTC, looking ahead, is to ensure
that private and public restrictions do not conspire to
inhibit the introduction of innovative solutions. Some of
these solutions may work, and some may fail; but our job
as competition enforcers is to ensure that anticompetitive
restrictions do not doom them to failure.”
Providing policymakers with a framework to
analyze competition issues is an important component
of the Commission’s mission to promote competition
for the benefit of consumers. Government-imposed
impediments can be among the most durable and effective
– Chairman Majoras, Keynote Address before the ABA Section of
restraints on competition. Thus, in response to requests,
Antitrust Law Fall Forum (Nov. 15, 2007)
the FTC advises state and federal entities on the potential
competitive impact of pending governmental actions
focusing on the same critical economic sectors that receive emphasis in FTC law
enforcement: health care, energy, real estate, and others that have a major impact
on consumers’ wallets.
Unauthorized Practice of Law. During the last year, FTC staff filed
comments before a number of state entities arguing against proposals
to prevent non-lawyers from performing certain tasks. In April 2007,
FTC and DOJ filed joint comments with the New York State Assembly
Committee on the Judiciary opposing a proposal to expand the scope
of activities that must be performed by a lawyer during a real estate
transaction. In addition, in comments filed with the Connecticut
Superior Court and the Supreme Court of Hawaii (jointly with DOJ) in
the past year, FTC staff communicated its long-standing position that
non-lawyers should be permitted to compete with lawyers in areas where
no specialized legal knowledge and training is demonstrably necessary
to protect the interests of consumers because such lawyer/non-lawyer
competition provides consumers with a broader range of service options
and lower prices.
25
Federal Trade Commission
Supreme Court
Decision
The Supreme Court’s 2007
seminal decision on rule of
reason treatment for minimum
resale price maintenance in
Leegin Creative Leather
Products, Inc. v. PSKS,
Inc., for which DOJ and FTC
submitted a joint amicus
brief, cited FTC studies in
overturning the century-old
standard from Dr. Miles.
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26
Pharmacy Benefit Managers. In April 2007, FTC staff provided
comments on legislation in New Jersey that would regulate the
contractual relationship between pharmacy benefit managers and
both health benefit plans and pharmacies. The comments argued that
the proposed law would limit the abilities of these parties to enter
into efficient, mutually beneficial contracts and might increase costs
of pharmaceutical care for employers, unions, and consumers. For
example, according to FTC staff, the bill might adversely impact the
efficient use of mail-order pharmacies, or impede price competition
among pharmaceutical companies or pharmacies.
Limited Service Clinics. In October 2007, the Commission filed
comments with the Massachusetts Department of Public Health,
commending the flexibility of proposed regulations for new limited
service clinics (LSCs), sometimes referred to as retail clinics, as
a means to expand access to basic health care services for certain
patients. At the same time, staff expressed concern that a proposed
requirement that all LSC advertising – and no other clinic advertising
– be pre-screened and pre-approved could deprive consumers of
useful information about available care and act as a barrier to entry
for new competitors.
Service Provider Collective Bargaining. In January and February
2008, FTC staff provided comments on initiatives to permit
collective bargaining by health care service providers in Puerto
Rico and Ohio, respectively. In Puerto Rico, proposed legislation
sought to permit collective bargaining on fees and other matters by
health care service providers. In Ohio, an executive order sought to
require collective bargaining, via a single representative, for certain
home health care workers. In each case, FTC staff argued that
such collective bargaining could raise prices for, and thereby reduce
access to, health care services, without ensuring better quality care
as a countervailing benefit for consumers. For those reasons, the
Commission has enforced the antitrust laws when certain private
groups of health care providers have colluded to fix prices, and the
Commission consistently has opposed legislative proposals to exempt
from antitrust scrutiny various categories of health care providers.
Certificates of Need. In February 2008, the Commission
submitted written testimony to a committee in the Alaska House of
Representatives on legislation that would modify or repeal certain
aspects of Alaska’s certificate of need (CON) law, which applies to
health care facilities in that state. The Commission observed that,
although CON laws were intended to help contain health care
spending, the best available research does not support the conclusion
that CON laws actually reduce such expenditures. Rather, CON laws
The FTC in 2008: A FORCE for consumers and competition
tend to create barriers to entry for health care service providers who
may contribute to qualitative competition and provide consumers
with important choices in the market. Moreover, CON laws may
be subject to abuse by incumbent providers, who can seek to exploit
a state’s CON process to forestall the entry of competitors in their
markets.
Energy.
Electricity Transmission. In May 2007, the FTC filed comments
in response to the Federal Energy Regulatory Commission’s (FERC)
Notice of Proposed Rulemaking that would create standards to
prevent electricity transmission providers from cross-subsidizing or
discriminating in favor of their energy affiliates. The Commission
encouraged FERC to consider expanding the rules to cover
discrimination not only in favor of marketing affiliates but also in
favor of non-marketing affiliates, in both the natural gas and electric
power sectors. In September 2007, the Commission provided
comments to FERC regarding regulatory reforms designed to
promote more vigorous competition in organized wholesale electric
power markets. The FTC comments suggested ways to strengthen
competition and prevent the exercise of market power by electricity
generators, including taking greater account of the competitive
benefits of demand response and ensuring the independence of
market monitors in the organized wholesale markets.
Gasoline Industry. In May 2007, FTC staff submitted comments
advocating against proposed Connecticut legislation requiring
gasoline retailers to base their price on historic gasoline costs and
banning zone pricing. The comments noted that limiting retailers’
ability to react to wholesale price increases is likely to harm consumers
by reducing the market’s ability to ameliorate supply shortages and
by causing retailers to hold smaller inventories of gasoline than they
otherwise would. Further, staff explained how zone pricing can allow
refiners and lessee-dealers more efficiently to share risk. In June 2007,
FTC staff filed comments on a proposal to repeal Washington, D.C.’s
current ban on jobber (i.e., wholesaler) operation of retail service
stations, explaining that such divorcement provisions are associated
with higher retail gasoline prices. Staff supported the proposal, but
also noted that a total repeal of D.C.’s divorcement provision, which
also applies to refiners, producers, and manufacturers, likely would
benefit consumers more than the proposed partial repeal.
Real Estate. In May 2007, the FTC and DOJ filed a joint comment
with Michigan Governor Jennifer M. Granholm opposing proposed
legislation that would set minimum service requirements for all real estate
professionals in the state regardless of whether consumers actually wanted
all of the services. The agencies raised concerns about unnecessary and
27
Federal Trade Commission
confusing requirements for brokers, and limits on advertising that would
not provide benefits to consumers and could hamper brokers offering
nontraditional service models.
D. Amicus Briefs
During the past year, the FTC filed two amicus briefs to assist federal courts
of appeals in resolving important competition-related issues.
In re DDAVP Direct Purchaser Antitrust Litigation. In May 2007, the
Commission and DOJ filed a joint amicus brief in support of a group of
plaintiffs who were direct purchasers of the brand-name drug DDAVP.
The plaintiffs alleged that the patent for the active ingredient in DDAVP
had been obtained by fraud on the Patent and Trademark Office, and
that, by maintaining and enforcing that patent, two drug companies
who owned the patent, and a third company that was the exclusive
licensee, had violated Section 2 of the Sherman Act. The brief urged the
Second Circuit to reverse the district court’s decision, which held that the
plaintiffs lacked standing to bring monopolization claims against the drug
companies.
In re Ciprofloxacin Hydrochloride Antitrust Litigation. The
Commission filed in January 2008 an amicus brief urging the Federal
Circuit to overturn a district court decision that immunized from the
antitrust laws agreements entered into by the holder of a pharmaceutical
patent and generic competitors. Pursuant to these agreements, the patent
holder paid the competitors nearly $400 million in exclusion payments.
In exchange, the competitors agreed to delay entering the market with
their generic drug until the patent on the brand-name version had
expired. In its brief, the Commission argued that, outside the patent
context, an agreement to pay a potential competitor not to compete
constitutes a well established violation of the antitrust laws, and the
presence of a patent, without more, does not immunize that agreement
from antitrust scrutiny.
E. Congressional Testimony
The FTC’s Commissioners and senior staff testified before Congress in the
past year on several important competition-related topics, including patent
settlements between generic and branded drug manufacturers, gasoline pricing,
and a proposed antitrust exemption for independent pharmacies.
28
Health Care. During the last year, Commissioners and other senior FTC
staff provided congressional testimony on health care-related subjects.
In May 2007, Commissioner Leibowitz presented testimony discussing
recent court decisions that have made it more difficult to bring antitrust
cases to stop anticompetitive exclusion payment settlements between
The FTC in 2008: A FORCE for consumers and competition
branded drug manufacturers and their generic competitors, and the
Commission’s support for effective legislation to prevent this practice.
In October 2007, David P. Wales, Deputy Director of the Bureau of
Competition, presented the Commission’s views on H.R. 971, the
proposed “Community Pharmacy Fairness Act of 2007,” that would
create an antitrust exemption for pharmacies to bargain jointly for higher
fees and more favorable contract terms from health plans. As with
previous attempts to create a special exemption for health care providers,
the Commission opposed the bill, which threatens to raise prices to
consumers, particularly seniors, for much-needed medicines.
Energy. In May 2007, Commissioner William E. Kovacic testified on
behalf of the Commission before the House Energy and Commerce
Subcommittee on Oversight and Investigations concerning the FTC’s
varied initiatives to protect competitive markets in the production,
distribution, and sale of gasoline and other petroleum products. The
testimony emphasized the FTC’s vigorous monitoring and enforcement
activities in the petroleum industry and the agency’s numerous research
efforts – in the form of conferences, studies, and reports – that inform
and complement its work.
Also in May 2007, Michael A. Salinger, then-Director of the
Commission’s Bureau of Economics, presented FTC testimony on
petroleum industry concentration before the Joint Economic Committee
of Congress. The testimony described the Commission’s efforts to protect
competitive markets in the production, distribution, and sale of gasoline
through the agency’s comprehensive merger program and its monitoring
of wholesale and retail gasoline prices. The testimony pointed to recent
energy enforcement actions, noting that the Commission has brought
more merger cases – and has obtained merger relief in many instances
– at lower market concentration levels in the petroleum industry than in
any other industry.
Chapter 3. Competition – Consumer and Business
Education and Outreach
In conjunction with its law enforcement and advocacy work, the
Commission also strives to bolster confidence in the marketplace through public
education and outreach efforts directed at both consumers and businesses. As
part of this effort, the agency has developed a multi-dimensional outreach
program to inform consumers – individuals and businesses alike – about the
benefits of competitive markets and the importance of antitrust enforcement
in promoting competitive prices, higher quality goods and services, and more
choices. To promote transparency and provide answers about the Commission’s
mission, the agency continues to develop resources to help explain the benefits of
the antitrust laws, including a broad collection of brochures, articles, reports, fact
29
Federal Trade Commission
sheets, and other products to reach the general public, attorneys, and the business
community. The FTC also works with other public and private organizations to
widely disseminate its important message.
30
Competition Counts. The Commission continues to expand efforts to
educate the public about the benefits of competition, distributing its
consumer brochure, Competition Counts: How Consumers Win When
Businesses Compete, at events promoting the work of the agency and with
students and foreign visitors. The brochure also is available in Spanish.
Promoting Competition, Protecting Consumers: A Guide to the
Antitrust Laws. This spring, the Bureau of Competition will introduce
new resources for individuals and businesses who have questions about
the antitrust laws. Promoting Competition, Protecting Consumers: A
Guide to the Antitrust Laws contains fact sheets on individual topics, such
as price fixing, refusals to deal, and merger review, and provides case
examples and answers to Frequently Asked Questions. The guides can
be found on the agency’s website and are downloadable in PDF format.
With newly designed web pages, these resources include links to the
Commission’s competition guidance material, such as the Horizontal
Merger Guidelines, Guidelines for Collaborations Among Competitors,
and policy statements in health care and international operations.
Bureau of Competition User’s Guide. In April 2007, BC Director
Jeff Schmidt released the Bureau of Competition User’s Guide, a resource
for anyone needing to know about the work of the Bureau and who to
contact about competition issues. The guide contains helpful information
about the Offices and Divisions of the Bureau of Competition, describes
the types of investigations handled by each shop, and includes contact
information for managers and staff. The User’s Guide is available in print
and online, and was updated in March 2008.
Industry-specific Websites. The Commission’s website is organized
to provide “few clicks” access for the public and practitioners to access
important information relating to its competition work in a variety of
vital industries. The FTC maintains four mini-websites with all the
latest developments in FTC policy and enforcement in the oil and gas,
health care, real estate, and technology fields. In the past year, the agency
also developed three new mini-websites devoted to attorney regulation,
alcohol regulation, and optometry regulation, to highlight the FTC’s
efforts to promote competition in these important sectors.
Competition-related Consumer Education. The Commission
continues to supplement its antitrust enforcement and policy work
with information aimed at consumers and businesses to assist them in
recognizing anticompetitive conduct and understanding the potentially
detrimental effects of corporate mergers or other restrictive corporate
behavior. For example, when issuing the joint FTC/DOJ Real Estate
The FTC in 2008: A FORCE for consumers and competition
Report, the FTC published “Buying a Home – It’s a Big Deal” offering
home buyers information on tips for selecting a real estate broker, using
the Internet to shop for homes, and new choices available from brokers
offering nontraditional services which can result in a lower purchase
price.
31
Federal Trade Commission
32
The FTC in 2008: A FORCE for consumers and competition
Section Two: Consumer Protection
Mission
The FTC protects the public from unfair, deceptive, and fraudulent practices
in the marketplace and addresses consumer protection issues that touch all
Americans. Dedicated to carrying out this mission, the Commission has pursued
a vigorous and effective law enforcement program in a dynamic marketplace.
Increased globalization, fast-paced changes in technology,
and scams that adapt and evolve with the marketplace
“Our job continues to be empowering consumers to
are just three issues that the FTC faces. Through the
participate fully in the global marketplace that presents new
efforts of a dedicated, professional staff, the FTC handles
opportunities. We ensure that consumers receive adequate
a growing workload, invigorated by the challenges of the
market information; that consumers are not buried under an
21st century. During the past year, the agency’s consumer
onslaught of unwanted noise masquerading as information;
protection work has focused on data security and identity
and that consumers’ own personal information is protected
from unauthorized access in the marketplace.”
theft, technology risks to consumers such as spam and
spyware, fraud in the marketing of health care products,
– Chairman Majoras, Keynote Address before the Federal
deceptive financial practices in the subprime mortgage
Communications Bar Association’s Annual Meeting (June 27, 2007)
and credit repair industries, telemarketing fraud, and
Do Not Call enforcement. Because many of the frauds
that the FTC pursues civilly also often are criminal violations, the Criminal
Liaison Unit cooperates with criminal authorities bringing the collective powers
of different government agencies to bear upon serious misconduct in many
consumer protection areas.
In fulfilling its consumer protection mission, the FTC employs a variety
of cutting-edge tools to help the agency stay at the forefront of emerging
technologies and rapidly evolving fraudulent schemes. These tools include law
enforcement, consumer education, business guidance, market research, and the
encouragement of sound self-regulatory programs. The FTC’s informationgathering arsenal includes public workshops, rulemakings, reports, and domestic
and international databases. The FTC combines these efforts to empower
consumers and to inform policymakers, businesses, and the public as a whole.
33
Federal Trade Commission
Chapter 4. Consumer Protection Law Enforcement
A. Fraud and Deception Law Enforcement
One of the FTC’s highest priorities is vigorously fighting fraudulent and
deceptive practices that harm consumers. From March 2007 through February
2008, the FTC filed 38 actions in federal district court and obtained 111
judgments and orders requiring defendants to pay over $240 million in remedies.
This figure includes more than $161 million in consumer redress and referrals
to the Department of Justice which resulted in 16 civil penalty orders and more
than $11 million in civil penalties. In many of these cases, the FTC worked with
local, state, federal, and international law enforcement authorities to achieve
effective results. The following are examples of enforcement actions initiated
by the Bureau of Consumer Protection challenging a myriad of illegal conduct
extending across various industries.
Top Consumer Fraud Complaints in 2007
1. Identity Theft
2. Shop-at-Home/Catalog Sales
3. Internet Services
4. Foreign Money Offers
5. Prizes/Sweepstakes and Lotteries
6. Computer Equipment and Software
7. Internet Auctions
8. Health Care Claims
9. Travel, Vacations, and Timeshares
10. Advance-Fee Loans and Credit Protection/Repair
258,427 complaints
62,811 complaints
42,266 complaints
32,868 complaints
32,162 complaints
27,036 complaints
24,376 complaints
16,097 complaints
14,903 complaints
14,342 complaints
32%
8%
5%
4%
4%
3%
3%
2%
2%
2%
Deceptive Lending and Other Credit Schemes. Financial issues impact all
consumers – whether they are purchasing a home, trying to establish credit or
improve their credit rating, or managing rising debt. Thus, protecting consumers
in the financial services marketplace is a critical part of the FTC’s consumer
protection mission. The FTC has focused recent efforts in this area on subprime
lending, misleading mortgage claims, abusive debt collection practices, and
deceptive marketing of debt reduction programs that can have financially and
emotionally devastating effects on consumers, resulting in higher-cost loans,
foreclosures, ruined credit histories, bankruptcy, and unwarranted fears of arrest
and incarceration.
34
Debt Negotiation and Settlement. In March 2007, the Commission
filed a complaint in Debt Set, Inc., alleging that the defendants, marketers
of debt reduction programs, had deceptively represented to consumers
the amount of debt they could reduce, the associated fees, and other
key loan terms. In January 2008, five of the six defendants agreed to a
settlement prohibiting them from making any such misrepresentations,
The FTC in 2008: A FORCE for consumers and competition
requiring disclosures of all fees and costs, and imposing a $1 million
judgment suspended upon payment of $390,000. In October 2007,
in Edge Solutions, Inc., the FTC filed a complaint against marketers of
debt settlement services for failing to provide the promised services, and
instead, increasing many consumers’ debt. The complaint alleges that
defendants, who marketed their services on several websites posting a
toll-free number, often failed to contact each of the consumers’ creditors
and to negotiate settlements – causing consumers to accumulate fees and
litigation costs.
Debt Collection. In November 2007, the Commission obtained its
largest civil penalty ever against a debt collector, LTD Financial Services,
for violations of the Fair Debt Collection Practices Act (FDCPA). In
that case, the debt collector agreed to pay $1.3 million in civil penalties
to resolve charges that it misled, threatened, and harassed consumers.
Notably, the FTC charged the individual owners and top managers
with the violations, and the order enjoins them individually from such
violations in the future. Additionally, in September 2007, the Third
Circuit Court of Appeals upheld a judgment in favor of the FTC in
Check Investors, Inc., ordering the debt collector who deceived and
harassed consumers to pay $10.2 million in consumer redress – the
largest amount of monetary relief the Commission has ever obtained
against a debt collector.
Mortgage/Subprime Credit. The FTC has brought 21 enforcement
actions in the past decade against both large and small companies
in the mortgage lending industry in various regions of the country,
collectively returning more than $320 million to consumers. In the past
year, there has been a sharp increase in delinquencies and foreclosures
in the mortgage market. As a result, unscrupulous actors now have
greater opportunities to take advantage of people facing serious financial
hardship. Therefore, the FTC has intensified its focus on protecting
consumers in this area.
Safe Harbour Foundation. In February 2008, the Commission filed
a complaint against Safe Harbour Foundation, five other business
entities, and three individuals for their role in a mortgage foreclosure
fraud that saddled consumers with high-cost, interest-only, short-term
balloon loans, secured by second mortgages on their homes. The
complaint alleged that acting through Safe Harbour, the individual
defendants contacted consumers facing foreclosure with offers to “save
your home from foreclosure. GUARANTEED!” The Commission
charged that the defendants violated the Home Ownership and
Equity Protection Act (HOEPA), the Truth in Lending Act, and the
FTC Act by significantly understating the annual percentage rate for
the loans. In addition, the Commission alleged that the individual
defendants are in civil contempt for violating orders entered in
2004 in FTC v. Bay Area Business Council, Inc., which prohibited
Allison Brown
Bureau of Consumer
Protection
Division of Financial
Practices
A Division of Financial
Practices’ attorney since
2000, Allison is a skilled
advocate and litigator.
She has played a key
role in many of the FTC’s
landmark financial services
cases, including Fairbanks/
Select Portfolio Servicing,
AmeriDebt, and Mercantile
Mortgage. Allison’s skill at
analyzing financial policy
issues was evident in the
December 2007 FTC staff
comment to the Office of
Thrift Supervision explaining
the evolution of unfairness
concepts and their historical
application to financial
services issues. Allison
also assessed the policy
implications of innovations
in payment technology as
part of the Commission’s
November 2006 Tech-ade
Hearings, and has taken the
lead on consumer protection
policy issues related to
payment processing.
35
Federal Trade Commission
them from participating in the sale of “credit-related products” to
consumers.
Payday Loans. In the area of unsecured consumer credit, such as
payday loans, the FTC takes legal action when lenders fail to provide
disclosures or other information that the law requires. In February
2008, the Commission announced that three Internet payday lenders
agreed to settlements resolving charges that they violated the Truth
in Lending Act (TILA) by failing to disclose annual percentage rates
(APRs) in ads stating the cost of credit. APRs assist consumers in
comparison shopping for loans. The orders in these cases would
require the respondents to disclose APR information in similar ads
in the future, as well as to comply with TILA and its implementing
Regulation Z.
Mortgage Advertising. To address the growth in advertising of
nontraditional mortgage products, in the summer of 2007, FTC staff
conducted a nationwide review of home mortgage advertisements
that focused on claims for very low monthly payment amounts or
interest rates, without adequate disclosures of other important loan
terms. The review included advertisements
appearing in websites, newspapers, magazines,
direct mail, and unsolicited email and faxes,
including some advertisements in Spanish. As
a result of this review, in September 2007, FTC
staff sent letters to more than 200 mortgage
brokers, lenders, and media outlets warning
them that their advertisements for home
mortgage products may contain deceptive or
otherwise unlawful claims, and is currently
investigating several mortgage advertisers and
will continue to monitor the claims made in
mortgage advertising.
Deceptive Health, Safety, and Weight Loss Claims. Too often, consumers
fall prey to fraudulent health marketing because they are desperate for help. In
2006, Americans spent over $2.1 trillion on health care services and products and
that number is projected to increase to over $4.3 trillion by 2017. Fifty million
Americans suffer from a chronic pain condition and have found no effective cure
or treatment. Seventy million Americans are trying to lose weight. Through its
law enforcement efforts, the FTC continues to take action against companies that
take advantage of these consumers. From March 2007 through February 2008,
the FTC initiated or resolved 23 law enforcement actions challenging 36 such
products and associated claims.
36
Telebrands Corp. In August 2007, the FTC filed a federal court
action seeking redress for consumers who spent over $16 million on the
defendants’ ab belts and accessories. In 2005, the Commission upheld an
The FTC in 2008: A FORCE for consumers and competition
administrative law judge’s finding that Telebrands made deceptive claims
that using the electronic muscle stimulation belt caused weight loss, welldefined abdominal muscles, and was an effective alternative to regular
exercise. The Fourth Circuit Court of Appeals upheld the Commission’s
decision in 2006, paving the way for the Commission’s 2007 redress
action.
Contact Lens Rule. The Commission continued its enforcement of
the Contact Lens Rule, bringing cases this year involving the unlawful
sale of non-corrective, cosmetic contact lenses without a prescription.
The Commission obtained two consent orders imposing civil penalties
against defendants BeWild, Inc. and Pretty Eyes, LLC and their individual
owners. The BeWild defendants were ordered to pay $11,000 in civil
penalties; the settlement with the Pretty Eyes defendants includes a
$25,000 civil penalty, suspended upon payment of $2,500. Additionally,
the staff sent 25 warning letters in August and October 2007 to contact
lens prescribers who may have failed to provide patients with their
prescriptions, and to cosmetic contact lens sellers who appeared to be
selling lenses without prescriptions.
“For the Q-Ray Ionized Bracelet . . . all statements about
how the product works – Q-Rays, ionization, enhancing the
flow of bio-energy, and the like – are blather. Defendants
might as well have said: ‘Beneficent creatures from the 17th
Dimension use this bracelet as a beacon to locate people who
need pain relief, and whisk them off to their homeworld every
night to provide help in ways unknown to our science.’”
– Chief Judge Frank Easterbrook, FTC v. QT, Inc., Civil Action No.
07-1662 (7th Cir. Jan. 3, 2008) upholding a ruling in favor of the FTC
requiring marketers of the “Q-Ray Ionized Bracelet” to relinquish
almost $16 million in net profits as part of a maximum $87 million
they must refund consumers.
Alternative Hormone Replacement Therapy Products. In October
2007 and January 2008, the FTC announced settlements with a total
of seven marketers of natural progesterone creams for claiming their
products prevented, treated, cured, or reduced the risk of developing
osteoporosis, estrogen-induced endometrial (uterine) cancer, and breast
cancer without supporting scientific evidence. The settlements bar the
marketers from making unsubstantiated health claims in the future.
Serious Disease Prevention Claims. In December 2007, the FTC
settled charges in the J.W. McLain case that the defendants made
deceptive claims that their herbal tea could prevent, treat, or cure AIDS,
diabetes, cancer, arthritis, strokes, and heart disease. The FTC obtained
a $31.7 million suspended judgment and an order for the defendants to
forfeit all of their frozen assets and proceeds of their business opportunity
Spear Systems, Inc.
In the first action brought
by the FTC using the U.S.
SAFE WEB Act, the court
granted an ex parte temporary
restraining order prohibiting
the defendants, operating
domestically and from Canada
and Australia, from sending
commercial email messages
that violate the CAN-SPAM
Act and from making false
and unsubstantiated product
claims about hoodia weightloss products and human
growth hormone anti-aging
products. The Commission
used its authority under SAFE
WEB to advance the case by
sharing non-public information
with Canadian and Australian
law enforcement authorities,
which enabled them to provide
assistance to FTC staff in its
pre-complaint investigation.
The U.S. SAFE WEB Act,
signed into law at the end of
2006, provides the FTC with
enhanced tools to cooperate
with foreign law enforcement
authorities on consumer
protection enforcement
matters that cross national
borders. In addition to
facilitating informationsharing for law enforcement
efforts, the U.S. SAFE WEB
Act also gives the FTC
enhanced authority to provide
investigative assistance,
protect the confidentiality
of information from foreign
sources, and strengthen
enforcement relationships.
37
Federal Trade Commission
Sunny Health
Nutrition Technology
& Products, Inc.
The Commission entered
into a stipulated final order in
2006 to settle charges alleging
that defendants had made
false and unsubstantiated
claims for three dietary
supplements. The order
required defendants to pay
$375,000, out of a total
monetary judgment of $1.9
million, based on their
purported inability to pay.
When the FTC subsequently
discovered that defendants
failed to disclose at least $1.8
million kept in an undisclosed
PayPal account, it immediately
sought and obtained a
temporary restraining
order to freeze the funds in
December 2006. In April 2007,
defendants were ordered
to remit $1.9 million, the
full amount of the monetary
judgment.
sales. In February 2008, the FTC settled charges that the defendants
in the 7 Day Marketing matter disseminated false and unsubstantiated
claims that their colon-cleansing program effectively prevented,
treated, and cured diseases such as AIDS, cancer, Alzheimer’s disease,
and diabetes, and caused rapid, safe, and substantial weight loss. The
settlement includes a $14.45 million suspended judgment upon payment
of $70,000.
Hispanic Law Enforcement Initiative. The FTC continues aggressively
to combat consumer fraud against Hispanics. Since the introduction of the
Hispanic Law Enforcement Initiative in 2004, the FTC has filed 42 actions
against 146 businesses and individuals alleged to have fraudulently sold a variety
of fraudulent products and services to Spanish-speaking consumers. Examples of
law enforcement successes this year include:
Tono Records. In June 2007, the FTC obtained a temporary restraining
order and an asset freeze against an operation that victimized Spanishspeaking consumers who had previously inquired about an Englishlanguage instruction course. The FTC charged that the defendants posed
as debt collectors and repeatedly called consumers seeking payments
that they did not owe. In August 2007, the FTC obtained a preliminary
injunction and in September, the court entered a default judgment
against the corporate defendants.
Remote Response. In August 2007, the FTC obtained federal court
orders against advance-fee credit card marketers who advertised on
Spanish-language television and whom the FTC alleged defrauded
consumers out of more than $4 million. The court ordered the
defendants to turn over assets valued at more than $500,000, and
banned them from telemarketing and from selling credit cards or similar
products.
“Lying to consumers about debts they don’t owe and
harassing and threatening them when they don’t pay are
illegal business practices, period. We will aggressively
pursue companies that use these tactics to extort money from
consumers.”
– BCP Director Lydia Parnes, “FTC Stops Alleged Extortion Scheme
Aimed at Hispanics Nationwide” (press release, June 21, 2007)
Natural Solutions. In September 2007, the FTC
obtained a district court judgment against dietary
supplement marketers advertising a purported cancer
treatment in Spanish-language infomercials. The
court ordered the defendants to pay over $3 million in
full redress to consumers. The court also permanently
barred the defendants from making unsubstantiated
health claims, and ordered the defendants to notify all
consumers that they had no evidence to substantiate
their cancer prevention and treatment claims.
Payment Processors. In December 2007, the FTC, joined by seven state
attorneys general, filed a complaint against payment processor Your Money
Access for attempting to debit more than $200 million from consumers’ bank
accounts on behalf of telemarketers and Internet-based merchants. This was the
seventh case filed by the FTC challenging illegal payment processing activity. In
38
The FTC in 2008: A FORCE for consumers and competition
March 2008, the FTC obtained a settlement with the largest billing aggregator,
BSG Clearing Solutions North America, LLC, and two of its subsidiaries, which
allegedly “crammed” approximately $30 million in unauthorized collect call
charges on consumers’ telephone bills. The settlement requires the defendants
to pay $1.9 million in redress and provides comprehensive injunctive relief
regarding the due diligence they must undertake before providing billing services
for a new vendor, and the minimum steps they must take when they learn about
complaints regarding unauthorized charges for telecommunications services.
Business Opportunity Schemes. For over a decade,
the FTC has led a federal-state partnership to aggressively
combat business opportunity and work-at-home frauds,
and to educate the public to detect and avoid these scams.
“I purchased the rights to sell franchise opportunities in
several different territories. After doing so, I came to realize
that I was lied to about the opportunity, which meant that I
would also have to lie to others about the opportunity in order
to sell franchises, or even to sell my territory.”
Home Business System. In August 2007, the
– Utah consumer, June 2007
FTC obtained preliminary relief in federal court
shutting down a work-at-home scheme that
promised Spanish-speaking consumers earnings of $1,400 a week to stuff
envelopes. The Commission alleged that most consumers who paid a
$45 “registration deposit” never heard from the company again and that
those who did were simply told to replicate the fraudulent envelopestuffing scheme by making the same false claims to other consumers. In
January 2008, the Court entered a stipulated preliminary injunction
that continued the asset freeze and the conduct prohibitions concerning
misrepresentations.
Business Card Experts, Inc. In
Significant Redress Orders
October 2007, the FTC announced a
settlement resolving allegations that the
International Product Design, Inc.
company and its principals deceptively
Nationwide Connections, Inc.
marketed business card dealerships,
Stefanchik Organization
using false earnings claims and phony
Centurion Financial Benefits
references, to convince nearly 1,300
Holiday Enterprises, Inc.
consumers to invest between $5,000
Prime One Benefits
and $25,000 each. In addition to
Business Card Experts
halting the scheme, the order includes
Bezeredi
Premier Benefits Inc. / Universal Premier Services Inc.
a judgment of more than $16 million
Blue Hippo Funding, LLC
and more than $3.5 million for
Zango, Inc. f/k/a 180solutions, Inc.
disgorgement which will be suspended
once the defendants have relinquished
assets subject to an asset freeze,
including accounts totaling approximately $5 million. The settlement is
a result of last year’s Project Fal$e Hope$, an FTC-led effort that targeted
bogus business opportunities and work-at-home scams.
$61,000,000
$34,426,697
$17,775,369
$10,552,162
$8,980,880
$8,089,774
$5,129,592
$4,755,363
$3,937,000
$3,500,000
$3,000,000
Project Scofflaw. In a comprehensive effort to detect repeat offenders and
deter order violations, FTC staff monitor compliance with administrative and
federal court orders entered in FTC consumer protection cases. These orders
39
Federal Trade Commission
address a wide range of consumer protection issues, including advertising and
financial practices, data security, high-tech fraud, and telemarketing. Project
Scofflaw has three basic purposes: (1) to conduct investigations and identify
those who violate FTC-obtained court orders; (2) to stop the deceptive acts as
quickly as possible through civil contempt actions; and (3) where appropriate,
to refer egregious and knowing violators to the Department of Justice for
criminal contempt prosecution. The following cases demonstrate the agency’s
commitment to enforcement of its orders.
Gumpel. In August 2007, the FTC obtained a $61 million judgment
in a civil contempt action against Julian Gumpel and related businesses
for violating a 1998 federal court order by orchestrating an invention
promotion scheme. Earlier, in May 2007, the court had held the
defendants in contempt for, among other things, failing to disclose to
consumers that none of its clients had successfully marketed an invention.
In July, the Court found that they were jointly and severally liable for
consumer losses, and finally, in August, permanently banned them from
offering invention promotion services.
Trudeau. In November 2007, the FTC obtained a contempt ruling
against Kevin Trudeau for violating a 2004 federal court order
that enjoins him from misrepresenting the content of his books in
infomercials. In the contempt action, the FTC charged Trudeau with
misrepresenting the contents of his book, “The Weight Loss Cure ‘They’
Don’t Want You To Know About,” by claiming in infomercials that the
book’s weight loss protocol was “easy” and ultimately enabled consumers
to eat “everything they want” without gaining weight. In fact, Trudeau’s
Commissioner Kovacic: Achieving Effective Deterrence for Serious Fraud:
The Development of the FTC’s Criminal Liaison Unit
Since the early 1970s, FTC enforcement efforts against serious fraud featured progressively
stronger efforts to use civil sanctions to deprive wrongdoers of the gains of illegal activity, to
compensate victims, and to deter misconduct. By the early part of this decade, the Commission
saw that even harsh monetary sanctions by themselves were unlikely to deter the worst forms of
misconduct. Those who engage in serious fraud knowingly operate illegitimate enterprises and
have no concern for building or preserving a good reputation. They often dissipate or hide wrongful
earnings, which leaves little to be recovered through nominally powerful civil orders for restitution,
disgorgement, or civil penalties.
To raise the stakes for egregious misconduct, the Commission in 2004 established a Criminal Liaison Unit (CLU)
to assist public authorities with criminal enforcement powers to bring criminal cases. Located in the Division of
Enforcement of the Bureau of Consumer Protection, the CLU helps criminal enforcement bodies to assemble criminal
fraud cases and builds relationships to assist in the identification and prosecution of future cases.
The FTC’s experience with the CLU underscores the possible gains for public policy from innovative measures to
engage individual government bodies in cooperative ventures with complimentary law enforcement agencies that yield
results unattainable from single agency efforts.
40
The FTC in 2008: A FORCE for consumers and competition
weight loss protocol contains hundreds of strict mandates, as well as lifelong dietary restrictions.
Criminal Liaison Unit. The FTC’s Criminal Liaison Unit works with
criminal authorities to encourage prosecutions of criminal consumer fraud and
to assist in those prosecutions where appropriate. From March 2007 to February
2008, federal and state criminal authorities have charged 81 FTC defendants
and their associates with crimes arising from acts investigated or prosecuted by
the Commission. During this period, 47 such defendants and their associates
were convicted or pled guilty. Sentences imposed totaled 141 years and 9
months (1,701 months) in prison, including four 10-year sentences, one 11‑year
sentence, and one 13-year sentence. In two cases, FTC attorneys were designated
as Special Assistant United States Attorneys in order to prosecute the offenders.
Bay Area Business Council. In March 2007, federal prosecutors
indicted Peter Porcelli for mail fraud, wire fraud, and for conspiracy
to engage in mail fraud, wire fraud, and money laundering. In May
2007, Porcelli entered into a plea agreement and in October, the court
sentenced him to 13 years in federal prison and ordered him to pay
restitution. The FTC had previously obtained summary judgment
against Porcelli and Bay Area Business Council for their deceptive
telemarketing of purported credit cards, including a $12.5 million
judgment, a result that was affirmed by the Seventh Circuit Court of
Appeals.
GoInternet. In September 2007, a grand jury in Philadelphia returned
a 26-count indictment against Neal Saferstein, Tyrone Barr, and Billy
D. Light, three officers responsible for GoInternet, a website design and
hosting firm that “crammed” charges onto consumers’ telephone bills.
The criminal case arose out of a June 2000 FTC action and a subsequent
civil contempt proceeding filed in August 2003. The indictment
included charges for conspiracy to commit perjury during the FTC’s civil
contempt proceeding. In November 2007, Billy D. Light pled guilty to
the criminal charge and awaits sentencing. An attorney from the FTC’s
East Central Regional Office is serving as a Special AUSA on the case.
Costa Rican Sweepstakes Fraud. In January 2008, after a one week
trial, a North Carolina jury returned a guilty verdict on all 23 charged
counts of a federal indictment against Giuseppe Pileggi, the ringleader
in a $15 million Costa Rican sweepstakes scam that convinced elderly
Americans to pay purported taxes and insurance on non-existent
lottery winnings. The jury also found Pileggi liable for $8.3 million in
victim losses. Pileggi now faces a sentence of 50 years (pursuant to an
extradition agreement with Costa Rica, Pileggi can only be sentenced
to 50 years rather than facing the Federal Sentencing Guidelines’
recommendation of up to life imprisonment). An attorney from the
FTC’s Division of Enforcement served as a Special AUSA on the case.
Forty-five defendants have been indicted; thus far, 27 have pled guilty,
The FTC’s Own
Privacy Initiatives
Chairman Majoras has
stated that the FTC must “set
the gold standard” when it
comes to protecting consumers’
sensitive information within the
agency. In an effort to meet
this challenge, Chief Privacy
Officer Marc Groman and the
Privacy Steering Committee
(PSC), intensified efforts to
strengthen the FTC’s policies
and educate staff about privacy
issues. The cornerstone of the
education program is “Privacy
Week,” now an annual event.
The FTC also introduced a
privacy portal on its internal
website, and published policies
in its Administrative Manual
governing the use, storage,
sharing, and disposal of
sensitive personally identifiable
information (PII).
The PSC reviewed the
FTC’s 38 existing Privacy Act
Systems of Records Notices,
completed three Privacy Impact
Assessments, and drafted
six others. It also initiated a
review of FTC use of Social
Security numbers, with the goal
of eliminating their unnecessary
use and storage by the end
of 2008. In June 2007, the
FTC became one of the first
federal agencies to develop
a formal Breach Notification
Response Plan. The Inspector
General ranked the FTC’s
program to control and protect
PII as “Excellent,” the highest
possible grade, and commented
that the “FTC staff are aware
of the heightened attention to
ensuring that PII is adequately
protected.”
41
Federal Trade Commission
Spyware Principles
Three guiding principles
inform the FTC’s efforts to
combat spyware:
(1) a consumer’s computer
belongs to him or her, not
to the software distributor;
(2) buried disclosures do
not work, just as they
have never worked in
more traditional areas of
commerce; and
(3) if a distributor puts a
program on a consumer’s
computer that the
consumer does not want,
the consumer must be able
to uninstall or disable it.
42
and three have been sentenced – two to 10-year sentences and one to
a 23‑month sentence. There currently are eight fugitives and three
defendants awaiting extradition from Costa Rica and Argentina.
B. Privacy and Data Security Law Enforcement
The protection of consumers’ privacy and data security is a central part of the
FTC’s consumer protection mission. The continued growth of the Internet and
sophisticated computer systems provides tremendous benefits to consumers, such
as enabling fast and convenient access to products, services, and information.
Yet, at the same time, if the sensitive information needed to enable these services
is not protected adequately, or if consumers’ identities are not authenticated
properly, consumers are subject to increased threats to the security of their
personal data, computers, and email. This year, the FTC fought vigorously to
protect consumers from these technology-driven threats.
Data Security Enforcement. Data security remained one of the agency’s top
enforcement priorities this year as a result of continued data security breaches
and losses or thefts of sensitive consumer information. The FTC’s enforcement
tools include laws and regulations such as the Safeguards Rule issued under the
Gramm-Leach-Bliley Act, which requires financial institutions to take reasonable
measures to protect customer data, and the Disposal Rule under the FACT Act,
which requires companies to properly dispose of credit report data. The FTC’s
data security enforcement seeks to protect the complete life-cycle of personal
data, including its collection, storage, use, and disposal. To date, the FTC has
brought 17 enforcement actions challenging inadequate security practices by
companies that handle sensitive consumer data.
American United Mortgage Company. In December 2007, the FTC
announced a $50,000 civil penalty settlement with a mortgage broker
resolving allegations that it left sensitive consumer loan documents in and
around an unsecured dumpster and otherwise failed to protect customer
information. This case was the first ever to allege violations of the FTC’s
Disposal Rule.
Other recent data security enforcement actions include Goal Financial,
filed in March 2008, settling allegations against a lender that it failed
to provide reasonable security for sensitive consumer loan information,
leading to a series of breaches from 2004 to 2006;
ValueClick, filed in March 2008, resolving allegations that
e-commerce marketers misrepresented that they encrypted
credit card information collected from consumers online
and used appropriate measures to protect sensitive
customer information; and Life is Good, filed in January
2008, resolving charges against a retailer that its failure
to secure customers’ credit card information, which led
to a breach in 2006, violated its privacy policy and was a
deceptive practice.
The FTC in 2008: A FORCE for consumers and competition
Pretexting. This past year, the FTC continued its enforcement against
the use of pretexting and other illegal practices to obtain and sell consumers’
confidential telephone and financial records. In three cases, Information
Search, Inc. (March 2007), Eye in the Sky Investigations, Inc. (June 2007), and
CEO Group, Inc.
(December 2007), the
“Every business, whether large or small, must take
FTC obtained orders
reasonable
and appropriate measures to protect sensitive
resolving charges
consumer
information,
from acquisition to disposal. This
against several online
agency
will
continue
to
prosecute companies that fail to
data brokers that they
fulfill their legal responsibility to protect consumers’ personal
allegedly obtained and
information.”
sold telephone records
without consumers’
– Chairman Majoras, “Company Will Pay $50,000 Penalty for
Tossing Consumer’s Credit Report Information in Unsecured
knowledge or consent.
Dumpster” (press release, Dec. 18, 2007)
The orders bar the
defendants from
marketing or selling
consumers’ phone records and impose over $260,000 in suspended judgments
requiring them to pay a total of approximately $138,000, their profits from their
scheme.
Spyware and Adware. This year, the FTC continued its enforcement
against spyware and adware programs that are installed on consumers’ computers
without their knowledge or consent and are used to monitor their computer use,
take control of or damage their computers, or send them volumes of disruptive
advertising.
Direct Revenue. In June 2007, the FTC approved a $1.5 million
administrative consent order with DirectRevenue LLC and four of its
principals addressing their allegedly unlawful practices in connection
with the distribution of adware. According to the FTC’s complaint, the
respondents, directly and through their affiliates, offered consumers free
content and software without disclosing adequately that downloading the
items would result in the installation of adware, which delivered pop-up
ads and was difficult to detect and remove. The FTC’s order prohibits
the respondents from delivering ads to any consumer’s computer through
adware that was installed on the computer before October 1, 2005,
downloading adware without consumers’ express consent, and exploiting
security vulnerabilities. The order further requires that DirectRevenue
clearly identify all of its ads, establish and maintain effective, user-friendly
mechanisms through which consumers can register complaints and easily
uninstall the adware, and monitor its affiliates’ compliance with the FTC
order.
Odysseus Marketing. In January 2008, the FTC initiated a civil
contempt action against Walter Rines, his company, and Sanford
Wallace, for violating a 2005 federal court order that enjoins them
from misrepresenting the features of their software and surreptitiously
Fair Credit
Reporting Act
In September 2007, the FTC
announced settlements with
Ingenix, Inc. and Milliman,
Inc., both of whom provide
individual medical profiles,
including prescription drug
purchase histories of insurance
policy applicants, to health
and life insurance companies
that use them in making
underwriting decisions. The
FTC’s complaints charged
that as consumer reporting
agencies (CRAs), the
companies failed to provide
insurance companies with the
Notice to Users of Consumer
Reports required by the Fair
Credit Reporting Act (FCRA).
According to the
complaints: (a) the medical
profiles are consumer
reports because they include
information that bears on
an individual’s personal
characteristics and are used to
determine their eligibility for
insurance; and (b) Ingenix and
Milliman are CRAs because
they assemble and evaluate
consumer report information
for the purpose of furnishing it
to third parties.
Under the FTC’s orders,
Ingenix and Milliman will
provide the required notices to
users of their consumer reports
and otherwise comply with the
FCRA. Both consent orders
became final in February 2008.
43
Federal Trade Commission
AdultFriendFinder
Using its unfairness
authority under the FTC
Act, in December 2007, the
FTC obtained a stipulated
permanent injunction
against the operator of
AdultFriendFinder.com,
touted as “the world’s
largest sex and swingers
personals community.” The
Commission had alleged that,
to lure consumers to its sites,
AdultFriendFinder delivered
pop-up ads containing
graphic, sexually explicit
images. These images often
were foisted on consumers,
including minors, who were
not visiting sexually-oriented
websites, but rather were
generally surfing the web.
The order bars the
defendant from disseminating
sexually explicit online ads
to consumers who are not
seeking out sexually explicit
material; it also requires
the defendant to monitor
its marketing affiliates and
other third parties involved in
advertising its sexually explicit
websites for compliance with
the order.
downloading spyware to consumers’ computers. The Commission
charged that the defendants violated the order by obtaining personal
information from users of the social networking site MySpace through
“phishing” messages that appeared to be sponsored by MySpace;
by “pagejacking” or redirecting users to other websites; and by
“mousetrapping” or modifying and disabling users’ web browser
navigation controls.
CAN-SPAM. Since 1997, when the FTC brought its first enforcement
action targeting unsolicited commercial email, or “spam,” the FTC actively
has pursued deceptive and unfair spam practices through 93 law enforcement
actions against 250 individuals and companies, 30 of which targeted violators
of the CAN-SPAM Act. This past year, the FTC continued its aggressive law
enforcement of the CAN-SPAM Act, which generally prohibits deceptive sender
and subject-line content in commercial email and provides consumers with
the right to opt out of future commercial email campaigns. The Commission
recently settled three cases targeting deceptive spam, Adteractive, Member
Source Media, and ValueClick, obtaining nearly $4 million in civil penalties
against three online advertisers offering “free” gifts that were not free. The $2.9
million civil penalty in ValueClick is the Commission’s highest CAN-SPAM
penalty on record, and is three times greater than the previous record amount.
In January 2008, the FTC obtained an over $2.5 million judgment against Sili
Neutraceuticals, LLC and its principal for making misrepresentations about
dietary supplements in violation of the FTC Act and for various CAN-SPAM
violations, including sending commercial email messages that had misleading
subject headings and that failed to provide clear and conspicuous notice of the
opportunity to decline to receive further spam from the sender, a functioning
return email address, and/or the senders’ valid physical postal address.
Children’s Privacy and Security. Making the Internet
more secure for children has long been a part of the FTC’s
civil law enforcement mission. The FTC actively enforces
the Children’s Online Privacy Protection Act of 1998
(COPPA) by bringing civil penalty actions against operators
of child-directed and general audience websites that fail
to obtain parental consent prior to collecting, using, or
disclosing personal information from children under age
13. Since COPPA’s enactment, the FTC has brought 13
actions, obtaining over $1.9 million in civil penalties. In
its 2007 “Implementing the Children’s Online Privacy
Protection Act: A Report to Congress,” the FTC committed to examine newly
emerging websites that offer to children aspects of the highly popular “social
networking” experience, in order to ensure that such sites are complying with
COPPA.
44
Imbee.com. In January 2008, the FTC announced a $130,000 civil
penalty settlement with the operators of the child-directed social
networking site imbee.com. The settlement resolves charges that the
The FTC in 2008: A FORCE for consumers and competition
defendants violated COPPA by collecting and maintaining personal
information from over 10,500 children without first obtaining parental
consent; failing to post a comprehensive privacy policy; and failing to
clearly and completely disclose the site’s information collection practices
in their direct notices to parents. In addition to the civil penalty, the
Commission’s settlement requires the defendants to comply with COPPA
and to link to the agency’s comprehensive children’s privacy website and
social networking educational materials.
Do Not Call Enforcement. This past year, the
“Consumers have made clear that they greatly value the
FTC continued to vigorously enforce the Do Not Call
Do Not Call Registry, and they must be able to depend on
(DNC) provisions of the Telemarketing Sales Rule, which
its privacy protection. By bringing enforcement actions, like
prohibits most commercial telemarketing to consumers
those announced today, we will ensure that the small number
who place their telephone numbers on the National Do
of bad actors pay a price for not adhering to the law and
Not Call Registry, and prohibits “abandoned calls” that
respecting consumers’ privacy requests.”
fail to connect consumers to a live operator within two
seconds. Since the FTC began enforcing compliance
– Chairman Majoras, “FTC Announces Law Enforcement Crackdown
on Do Not Call Violators” (press release, Nov. 7, 2007)
with the Registry in October 2003, the agency has filed
36 enforcement actions against 68 individuals and 93
corporate defendants. In 31 of those cases, the FTC
obtained orders requiring payment of more than $16 million in civil penalties,
and more than $8 million in consumer redress.
In November 2007, the Commission announced a major crackdown on
DNC violators, involving six settlements against telemarketers, including
ADT and Craftmatic, resulting in nearly $7.7 million in civil penalties.
One additional complaint, against Global Mortgage
Funding, remains in litigation. In January 2008, the
Significant Civil Penalty Cases
Commission announced a $3 million suspended civil penalty
judgment and a payment of $180,000 against Voice-Mail
Craftmatic Industries, Inc.
$4,400,000
Broadcasting Corp., a large “voice blaster” that allegedly
ADT Security Services, Inc.
$2,000,000
placed over 46 million unlawful recorded calls to consumers.
LTD Financial Services
$1,375,000
Ameriquest
$1,000,000
C. Consumer Protection Law Enforcement Tools
The FTC continually improves its methods for identifying fraud and
deception, as well as privacy and data security violations. The FTC’s tools,
including various databases, for collecting and analyzing information about
consumer experiences in the marketplace are critical to the FTC’s consumer
protection mission. Some of these databases and other resources are made
available to other law enforcement agencies to facilitate their use in stopping such
prohibited practices.
Consumer Response Center. The Consumer Response Center (CRC) is in
its 11th year of collecting key information from, and providing key information
to, consumers and law enforcement. This year, the CRC handled more than
35,000 inquiries and complaints from consumers and businesses each week.
These contacts come via the FTC’s toll-free numbers (1‑877‑FTC‑HELP and
1‑877‑ID‑THEFT), the FTC’s website, and by U.S. mail.
45
Federal Trade Commission
Consumer Sentinel. Consumer Sentinel, the FTC’s fraud and identity
theft complaint database, now contains over 4 million fraud and identity theft
complaints. Sentinel is accessible to more than 1,700 law enforcement agencies
worldwide that use the database to share information, coordinate investigations,
and pursue leads.
National Do Not Call Registry. The Registry protects consumers from
unwanted commercial telemarketing calls. In December 2007, Congress took
important steps reaffirming the continued success of the Do Not Call program by
passing legislation that permanently reauthorizes the Registry and eliminates the
need for consumers to re-register their telephone numbers. The legislation also
authorizes the Commission to collect fees from telemarketers, sellers, and service
providers who access registered telephone numbers through the Registry and
sets forth how those fees must be used. As of February
2008, more than 155 million telephone numbers were
“Just a THANK YOU for everything you are doing to
on the Registry. The Registry also collects Do Not Call
enforce the DO NOT CALL lists . . . . Keep up the good work
complaints from consumers and shares them with other
allowing us to eat dinner in peace and not being bombarded
law enforcement agencies through Consumer Sentinel.
by . . . other relentless violators.”
The Registry serves as a model for the international
community: Australia, Canada, and Mexico now have
– Massachusetts consumer, November 2007
established their own Do Not Call programs.
Identity Theft Tools. Consumers continue to file complaints and receive
assistance on resolving identity theft from both the FTC’s toll-free hotline and
website, and identity theft remains the leading type of consumer fraud complaint
received by the FTC. The FTC continues to cooperate with the Identity Theft
Assistance Center, a joint initiative of the financial services industry, which
provides its identity theft complaint data to the FTC. More than 1,600 law
enforcement agencies have access to identity theft complaints through Consumer
Sentinel. In addition, the FTC coordinates ID theft law enforcement training for
state and local law enforcers. To date, the FTC, together with its partners, has
conducted 28 training seminars attended by more than 3,800 officers from more
than 1,250 agencies.
Spam Database. For the last 10 years, the FTC has maintained an electronic
address to which the agency encourages consumers and businesses to forward
“spam” (unsolicited commercial email). This mailbox, spam@uce.gov, continues
to receive approximately 270,000 pieces of spam daily, demonstrating that spam
remains a serious source of concern for Internet users. The total amount of spam
received by the FTC increased from more than 407 million last year to more than
500 million this year. The spam database is instrumental to the development
of the FTC’s CAN-SPAM Act enforcement activities as well as cases brought by
other federal and state agencies.
46
The FTC in 2008: A FORCE for consumers and competition
Chapter 5. Consumer Protection Policy Tools
As a complement to its law enforcement actions, the FTC promotes
consumer protection interests through a variety of policy tools, including
rulemakings, reports, hearings and workshops, inter-governmental task forces,
advocacy letters and comments, amicus briefs, and congressional testimony.
These activities enable the FTC to work with industry, other government entities,
the media, and the public to effectively collect and disseminate information, and
to establish policies that protect consumers.
A. Rulemakings
The FTC engages in rulemakings where necessary to ensure that its rules
protect consumers, are consistent with its statutory mandate, and benefit
consumers without overly burdening business.
Model Privacy Notices. In March 2007, the FTC, joined by seven other
federal regulators, issued a notice of proposed rulemaking requesting
comment on a model privacy form that financial institutions can use for
their privacy notices to consumers required by the Gramm-Leach-Bliley
Act. The proposed model form resulted from a year of consumer research
and testing.
F A C T S
WHAT DOES [name of financial institution] DO
WITH YOUR PERSONAL INFORMATION?
Why?
Financial companies choose how they share your personal information. Federal law
gives consumers the right to limit some but not all sharing. Federal law also requires
us to tell you how we collect, share, and protect your personal information. Please
read this notice carefully to understand what we do.
What?
The types of personal information we collect and share depend on the product or
service you have with us. This information can include:
�
Social Security number and income
�
account balances and payment history
�
credit history and credit scores
When you close your account, we continue to share information about you according
to our policies.
All financial companies need to share customers’ personal information to run their
WHAT DOES [name of financial institution] DO
everyday business—to process transactions, maintain customer accounts, and report
WITH YOUR PERSONAL INFORMATION?
to credit bureaus. In the section below, we list the reasons financial companies
can share their customers’ personal information; the reasons [name of financial
Sharinginstitution]
practices chooses to share; and whether you can limit this sharing.
How?
F A C T S
We must notify you about our sharing practices when you open an account
How often does [name of financial
institution] notify me about their Does and
each
while you are a customer.
[name
of fiyear
nancial
Reasons we can share your
personal information
Can you limit this sharing?
practices?
institution] share?
For our everyday business purposes—
How maintain
does [name
financial
to process your transactions,
yourofaccount,
institution] protect my personal
and report to credit bureaus
information?
For our marketing purposes—
to offer our products and services to you
How does [name of financial
institution] collect my personal
Appliance Labeling Rulemaking. In August 2007, the FTC concluded
a two-year review of the FTC’s Appliance Labeling Rule. As a result of
substantial public comment and consumer research, the agency amended
the Rule to improve the design and content of the EnergyGuide label
required on most new appliances sold in the U.S. The new EnergyGuide
label has a streamlined look and will display estimated yearly operating
costs prominently for most appliance types. This will help consumers
assess trade-offs between the energy costs of their appliances and other
expenditures.
FACT Act. In November 2007, the FTC, together with other federal
financial regulatory agencies, completed work on three of the rules
required under the Fair and Accurate Credit Transactions Act of 2003
(the FACT Act), and issued notices of proposed rulemaking for two
additional rules. As part of this effort, the agencies issued the final
Affiliate Marketing Notice Rule, which provides consumers with notice
and a right to opt out of affiliates’ use of certain personal information for
marketing purposes. The agencies then issued the final Identity Theft Red
Flags and Discrepancy Rules, requiring creditors to establish reasonable
procedures to identify identity theft risks, and providing guidance for
users of consumer reports notified of a discrepancy between the address in
a consumer’s credit file and that on a credit application. The additional
proposed rules prescribe guidelines and regulations to ensure the accuracy
and integrity of information furnished to credit reporting agencies, and
identify the circumstances under which information furnishers must
investigate a dispute about the accuracy or completeness of information.
We collect your personal information, for example, when you
�
open an account or deposit money
For our affiliates’ everyday business purposes—
information about your transactions and experiences
�
pay your bills or apply for a loan
�
use your credit or debit card
For our affiliates’ everyday business purposes—
information about your creditworthiness
also collectWHAT
your personal
from
others,
such as credit
DOES information
[name of fi
nancial
institution]
DO
F A C TWe
S affiliates,
bureaus,
or YOUR
other companies.
WITH
PERSONAL INFORMATION?
Federal
gives you the right to limit sharing only for
Why
For our affiliates to market
tocan’t
you I limit all sharing?
If you want to limit
our law
sharing
For nonaffiliates to market to you
Contact us
�
affiliates’ everyday business purposes—information about your
By telephone: [toll-free telephone] — our menu will prompt you through your choices
creditworthiness
Onmarket
the web:
[web address]
� affiliates to
to you
Call [toll-free telephone] or go to �[web
address]
nonaffi
liates
to market
youchoices below, fill in and send form to:
By mail:
mark to
your
Contact Us
State laws and individual companies may give you additional rights to limit
[mailing address]
sharing.
p. 1 of 3
Definitions
Everyday business purposes
To protect your personal information from unauthorized access and use, we
use security measures that comply with federal law. These measures include
computer safeguards and secured files and buildings.
For joint marketing withinformation?
other financial companies
The actions necessary by financial companies to run their business and
Unless we hear from you, we can begin sharing your information 30 days from the
manage customer accounts, such as
date of this letter. However, you can contact us at any time to limit our sharing.
� processing transactions, mailing, and auditing services
�
providing information to credit bureaus
Check your choices
� responding to court orders and legal investigations
Affiliates
Nonaffiliates
Your choices will apply to
Check any/all you want to limit: (See page 1)
Companies related by common ownership or control. They can be financial
everyone on your account.
� Do
not share information about my creditworthiness with your affiliates for their
and nonfinancial
companies.
everyday business purposes.
� [affiliate information]
� Do not allow your affiliates to use my personal information to market to me.
(I will receive
a renewal
noticeorfor
this use
forcan
marketing
in 5 years.)
Companies not related
by common
ownership
control.
They
be
financial and nonfinancial companies.
� Do not share my personal information with nonaffiliates to market their products
� [nonaffiliate and
information]
services to me.
A formal agreement
between nonaffiliated financial companies that
Your name
together market financial products or services to you.
Joint marketing
�
Mail to:
[joint marketing]
Your address
[mailing address]
p. 2 of 3
Account number
p. 3 of 3
U.S. Government
Federal law prohibits removal of this label before consumer purchase.
Refrigerator-Freezer
Automatic Defrost
Side-Mounted Freezer
Through-the-Door Ice
XYZ Corporation
Model ABC-L
Capacity: 23 Cubic Feet
Estimated Yearly Operating Cost
$67
$57
$74
Cost Range of Similar Models
630
kWh
Estimated Yearly Electricity Use
Your cost will depend on your utility rates and use.
Cost range based only on models of similar capacity with automatic defrost,
side-mounted freezer, and through-the-door ice.
Estimated operating cost based on a 2007 national average electricity cost of
10.65 cents per kWh.
For more information, visit www.ftc.gov/appliances.
47
Federal Trade Commission
B. Reports
This year, the FTC continued to analyze marketplace issues of ongoing
importance to consumers and report its findings to the public. Such reports
often are the results of hearings, workshops, or independent analyses of industry
data.
Hispanic Initiative Surf Report. In January 2007,
the FTC led a Hispanic Work-at-Home web surf with
60 national and international partners to investigate
the incidence of deception in Spanish-language
work-at-home advertisements. The resulting report,
released in October 2007, revealed that two-thirds
of the advertisements reviewed exhibited indicia of
fraud, such as specific earnings claims, representations
that the business opportunity was free from risk, and
advertisements offering the types of work-at-home opportunities (e.g.,
craft assembly, envelope stuffing, and medical billing) that have been
identified as fraudulent in many past law enforcement cases.
Improving Consumer Mortgage Disclosures: An
Empirical Assessment of Current and Prototype
Disclosure Forms. In June 2007, the FTC reported
that, based on testing of disclosure forms with hundreds
of consumers, current mortgage disclosures fail to
convey key loan costs to many consumers, and that
better disclosures (as shown by the models developed
for the study) can significantly improve consumer
understanding of their loans.
Spam Summit Report. In July 2007, staff hosted
a two-day “Spam Summit: The Next Generation of
Threats and Solutions.” The resulting December 2007
report details panelists’ views that spam has increasingly
become a significant global vector for the dissemination
of malware and the propagation of financial crimes. It
also provides an update on technological solutions, such
as email authentication and email reputation services,
and highlights the importance of anti-spam and antiphishing education.
Children’s Exposure to TV Advertising in 1977 and
2004: Information for the Obesity Debate. In July
2007, the FTC issued a comprehensive analysis of the
exposure of children to television advertising that found
that, while children in 2004 were exposed to more
television ads, there were fewer paid ads, and fewer food
ads compared to 30 years ago. This report provides a
Janis K. Pappalardo
Bureau of Economics
Division of Consumer
Protection
Jan is an economist
specializing in the role of
consumer information in
markets. She has worked on
many consumer protection
issues related to health,
finance, and the environment,
including advertising case
analysis, policy advocacy,
and original research.
Recently, Jan played a key
role in the consumer research
underlying the redesign of
the EnergyGuide label that
brought cost of operation
back to prominent placement
on the label.
In June 2007, Jan coauthored a study, Improving
Consumer Mortgage
Disclosures, with James M.
Lacko, in which the authors
developed and tested
a prototype mortgage
disclosure that significantly
improved both prime and
subprime consumers’ ability
to recognize mortgage costs
compared to current federal
forms.
48
The FTC in 2008: A FORCE for consumers and competition
baseline against which to measure future changes in children’s exposure
to television advertising as policymakers, industry, and parents react to
concerns about childhood obesity.
Credit-Based Insurance Scores in Automobile Insurance. In
July 2007, the FTC issued a report presenting the results of a study
concerning the use of credit-based insurance scores by the automobile
insurance industry. Insurance companies increasingly are using creditbased insurance scores in deciding whether and at what price to offer
coverage to consumers. The study found that scores are effective
predictors of the automobile insurance claims that consumers will file
and that, on average, higher-risk consumers will pay higher premiums.
The study also found that African-Americans and Hispanics tend to
have lower scores than non-Hispanic whites and Asians, and that the
use of scores would likely lead these groups, on average, to pay more for
automobile insurance. The study further noted that use of credit-based
insurance scores may result in certain benefits for consumers, including
offering insurance to higher-risk consumers as a result of the greater
accuracy in evaluating risk, and making the process of granting and
pricing insurance quicker and cheaper, thus passing on cost savings to
consumers in the form of lower premiums.
“The FTC uses a one-two punch to fight fraud. Our
Consumer Fraud in the United States: The
enforcement
program stops the most widespread and
Second FTC Survey. In October 2007, the FTC
egregious practices, and our education program helps alert
issued a report detailing the results of a statistical
consumers to the tricks of the fraud trade. We encourage
survey taken in 2005 of consumer fraud in the
everyone to click on our Web site – ftc.gov – not only to find
U.S. The survey showed that 30.2 million adults
out how to recognize a scam, but also to report it. That’s the
– 13.5% of the adult population – were victims
best way to help end rip-offs of all kinds.”
of fraud. More people – an estimated 4.8 million
– BCP Director Lydia Parnes, “FTC Releases Consumer Fraud
consumers – were victims of fraudulent weight
Survey: 30.2 Million Americans – 13.5 Percent of U.S. Adults – Fell
loss products than any of the other frauds covered
Victim to Fraud” (press release, Oct. 29, 2007)
by the survey. Fraudulent foreign lottery offers
and buyers club memberships tied for second
place. Twenty percent of African Americans, 18%
of Hispanics, and 12% of non-Hispanic whites are estimated to have
been victims. The survey also found that younger consumers, those who
did not complete college, and those with high levels of debt were more
likely to be victims of fraud. Finally, consumers between 65 and 74 years
of age were 32% less likely to report having experienced fraud than those
between 35 and 44.
Identity Theft Survey. In November 2007, the Commission released
the second national survey of the incidence and impact of identity theft.
Reflecting consumer experience from calendar year 2005, the survey
found that identity theft continues to exact a heavy toll on consumers
and the marketplace. More than 8 million adults reported that they
experienced identity theft, with about one-third reporting “new account”
fraud (where the thief opens new accounts in the victim’s name) and two49
Federal Trade Commission
thirds reporting “existing account” fraud (where the thief gains access to
the victim’s existing account(s)). The median amount stolen per identity
theft incident was $500.
C. Hearings and Workshops
FTC public workshop
The FTC holds hearings and workshops to engage in in-depth analysis of
important, emerging, and often contentious marketplace issues. These hearings
and workshops are powerful policy research and development tools that enable
the FTC to study and learn from the experiences of consumers, businesses,
academia, as well as government and other experts in various fields.
Proof
Positive
Conference on Behavioral Economics and Consumer Policy. In
April 2007, the FTC’s Bureau of Economics sponsored a conference to
explore research into how consumer behavior should influence consumer
protection policy; in September 2007, FTC staff issued a summary report
of the conference. The event brought together economists and other
professionals from academia and government. Discussions included
the rapidly growing field of Behavioral Economics, which uses insights
from psychological research to identify ways in which consumers may
systematically fail to act in their own best interests due to behavioral traits
such as self-control problems, failure to process information objectively,
and inaccurately predicting the costs and benefits of prospective choices.
Workshops on Consumer Authentication. During the past year, the
Commission held two workshops to explore ways to improve consumer
authentication – the process by which organizations establish that a
consumer is whom he or she purports to be – and thus reduce identity
theft. The April 2007 workshop, Proof Positive: New Directions for ID
Authentication, discussed the broad issues of consumer authentication, the
use of new technologies to authenticate consumers, and the challenges
of implementing those technologies. The December 2007 workshop,
Security in Numbers: SSNs and ID Theft, provided an in-depth look at
the role of Social Security numbers in the authentication process. These
workshops will culminate in a series of recommendations to the President
on the issues of consumer authentication and Social Security number use
on behalf of the President’s Identity Theft Task Force.
Forum on Childhood Obesity. In July 2007, the FTC and the
Department of Health and Human Services conducted a Forum on
Childhood Obesity. The 2007 Forum showcased some significant selfregulatory initiatives adopted after the FTC’s 2005 Childhood Obesity
workshop, including the Children’s Food and Beverage Advertising
Initiative launched by the Council of Better Business Bureaus and the
BBB’s National Advertising Review Council. To date, 13 major food
companies have joined the Initiative, which seeks to change the profile of
food advertising directed to children under 12 and to encourage healthier
eating choices.
New Directions for ID Authentication
weighing in
a check-up on
marketing,
self-regulation, &
childhood obesity
7 18 2007
50
The FTC in 2008: A FORCE for consumers and competition
Debt Collection Workshop. In October 2007, FTC staff hosted
a two-day workshop examining technological, economic, and legal
changes in the debt collection industry and their impact on consumers
and businesses. The workshop brought together consumer advocates,
industry representatives, state and federal regulators, and other experts to
discuss a wide range of topics, including consumer and debt collectors’
perspectives, methods for locating consumers, credit reporting, and
collection litigation practices.
Behavioral Advertising Town Hall. In November 2007, the FTC
hosted a Town Hall meeting on behavioral advertising, the practice of
tracking consumers’ activities online to provide advertising targeted
to individual consumers’ interests. Interested parties discussed recent
changes in the online advertising marketplace, how data is collected and
used for behavioral advertising, the effectiveness of consumer disclosures
in this area, and what standards currently, or should, govern behavioral
advertising in the future. In December 2007,
the FTC staff issued for public comment
proposed self-regulatory principles for
behavioral advertising. FTC staff drew on
the concerns raised at the Town Hall, while
remaining mindful of the need to maintain
vigorous competition in the online advertising
sector.
Guides for the Use of Environmental
Marketing (Green Guides). The
Commission is holding a series of public
workshops in connection with its review of the Green Guides and in
response to the increase in green marketing claims. In January 2008,
the Commission held the Carbon Offsets and Renewable Energy
Certificates Workshop that was widely attended by experts, academics,
industry members, and other federal agencies to address the marketing
of greenhouse gas reduction credits (commonly referred to as “carbon
offsets”) and renewable energy certificates. The workshop explored
advertising claims related to these products, as well as issues of consumer
perception, substantiation, and self-regulation. The next workshop,
addressing green packaging claims, is scheduled for April 2008.
Collecting
Consumer
The Challenges of Change
ehavioral Advertising
Tracking, Targeting, & Technology
ftc
eco in the market
carbon offsets & renewable energy certificates
D. Inter-governmental Task Force
The President’s Identity Theft Task Force. In April 2007, the
President’s Identity Theft Task Force, led by the Attorney General and
the FTC Chairman, released its coordinated plan to address identity
theft, Combating Identity Theft: A Strategic Plan. Developed by the 17
Task Force agencies, the plan addresses the life cycle of identity theft and
proposes 31 initiatives to: (1) prevent identity theft by making consumer
data less available through improved data security, and less valuable to
51
Federal Trade Commission
“I am filing this complaint on behalf of my elderly
father. He was contacted by [Company X] two months after
my mother passed away. They are very aggressive, and
misrepresented why he should buy the [product]. He has now
spent all his retirement savings, paid large penalties for early
withdrawal, and has over $100,000 in credit card debt. He is
now needing in-home health care and he has no money. . . .
We want this company stopped from doing this to someone
else.”
– Nevada consumer, March 2007
E. Advocacy Letters, Comments, and
Amicus Briefs
Filing advocacy letters, comments, and amicus briefs
helps the FTC to advance its consumer protection
mission and serves as an important complement to the
FTC’s law enforcement efforts. This past year, the FTC shared its widespread
expertise by submitting comments and advisory opinions to other agencies
considering actions that affect consumers’ rights, and by filing amicus briefs in
appellate courts where important consumer litigation is pending.
Electronic Payments System. In April 2007, FTC staff submitted a
comment to the Electronic Payments Association (NACHA) supporting
its proposed rule changes to adopt stronger self-regulatory measures to
prevent payment processing fraud. The FTC staff comment also noted
that NACHA’s proposals were consistent with the FTC’s efforts to stop
processing of unauthorized debits from consumer bank accounts.
Attorney Advertising.
52
thieves by improving consumer authentication; (2) help
consumers recover from identity theft by providing them
with more and better resources; and (3) enhance efforts
to prosecute and punish identity thieves. Agencies and
departments throughout the government already have
implemented many of the recommendations.
In re Petition for Review of Committee on Attorney Advertising
Opinion 39, No. 60,003. The Commission filed an amicus brief in
May 2007 urging the New Jersey Supreme Court to overturn a ruling
issued by that court’s Committee on Attorney Advertising, which had
held that it was impermissible for lawyers to advertise that they had
been designated by organizations such as “Super Lawyers” or “Best
Lawyers in America.” The Commission’s brief noted that consumers
benefit from non-deceptive advertising by attorneys, and also pointed
out that there are other means of assuring that attorney ratings are
not used deceptively. In addition, the Commission’s brief urged the
court to clarify its Rules of Professional Conduct so that the attorney
advertising provisions in those rules would apply only to false or
misleading advertising.
Staff Comments. In May 2007, FTC staff filed comments with the
Indiana Supreme Court on proposed amendments to state rules for
attorney advertising, expressing general support for the amendments
because they would prohibit false, deceptive, and misleading
advertisements, but would not impose blanket prohibitions on
specific forms of advertising. Staff, however, recommended revisions
to clarify that some programs that offered efficient and lower-cost
The FTC in 2008: A FORCE for consumers and competition
referrals for consumers, such as online legal matching services, were
permitted. In August 2007, FTC staff filed comments with the
Louisiana State Bar Association cautioning against adopting rules that
ban an entire class of attorney advertising without some evidence that
it actually or inherently is deceptive or misleading.
Protecting Military Consumers from Predatory Lending Practices. In
June 2007, FTC staff submitted comments to the Department of Defense
supporting its proposed regulation implementing limitations on terms
of credit extended to service members and dependents. The proposed
regulation required oral and written disclosures, a 36% rate cap, and
other lending limitations. The FTC comments supported these proposed
regulations as narrowly tailored to protect military consumers while still
allowing them to seek and obtain credit.
Debt Collection Practices. In October 2007, the FTC issued an
advisory opinion concluding that the Fair Debt Collection Practices
Act (FDCPA) allows a debt collector to notify a consumer that it has
ceased trying to collect a debt the consumer has disputed in writing.
ACA International, a debt collection trade association, had asked the
Commission to address whether this activity would violate the FDCPA’s
provisions which prohibit debt collectors from contacting a consumer
once the consumer has disputed a debt in writing. The FTC’s opinion
found that such a notification would benefit consumers, in that they
would no longer have to worry about further contacts from that collector.
Disclosures for Subprime Mortgage Lending. In November 2007,
FTC staff submitted comments to several federal banking agencies in
response to their request for comments on proposed mortgage disclosure
documents for subprime mortgage lending. Based on FTC staff research
demonstrating that consumers frequently do not understand current
mortgage disclosures, the comments stated that consumers likely would
benefit from one clear disclosure document alerting them to the major
costs and features of a mortgage.
Unfair and Deceptive Practices in Financial Services. In December
2007, the FTC filed a comment with the Office of Thrift Supervision
(OTS) in response to its request for information regarding whether the
OTS should expand its current prohibitions against unfair or deceptive
acts and practices of financial institutions under its jurisdiction. The
comment set forth the general principles of unfairness and deception
under the FTC Act and described how the Commission has applied
these principals to protect consumers of financial services. Further, it
recommended that the OTS consider the Commission’s experience in
determining whether to use its authority to issue new rules.
Alcohol Labeling. In January 2008, the FTC filed a comment with the
Department of the Treasury’s Alcohol and Tobacco Tax and Trade Bureau
53
Federal Trade Commission
(TTB) on alcohol labeling. TTB had proposed to adopt a mandatory
“Serving Facts” panel, require that labels contain a disclosure of alcohol
content by volume (ABV), and permit disclosure of pure alcohol
content in fluid ounces per serving. The FTC comment supported
TTB’s proposal to increase substantially the amount of information
contained on alcohol labels, but also recommended several refinements
in an effort to help consumers identify products containing lower levels
of “pure alcohol” and to facilitate compliance with government health
recommendations.
F. Congressional Testimony
The FTC’s Commissioners and senior Commission staff testified in the last
year before the U.S. Congress on a wide range of pressing consumer protectionrelated issues, including tobacco advertising, financial services, telemarketing, and
identity theft, consistently advocating strong consumer protection measures and
initiatives.
Identity Theft. In March 2007, BCP Director Lydia Parnes testified
before the House Judiciary Subcommittee on Crime, Terrorism and
Homeland Security to discuss innovative solutions for
the evolving problem of identity theft. In June 2007,
“In November 2006, I went to purchase a car. When the
Joel Winston, Associate Director for the Division of
car salesman was checking my credit, he asked if I would be
Privacy and Identity Protection, testified before the House
able to pay off this car because I had other loans. He said
Ways and Means Subcommittee on Social Security on
that I had purchased two houses and two Mercedes in Los
protecting privacy of the Social Security number from
Angeles, CA. That’s when I had found out that I was a victim
of identity theft. . . . I am reporting my complaint hoping to get
identity theft; in December 2007, he testified before the
help with the identity theft.”
House Judiciary Subcommittee on Crime, Terrorism, and
Homeland Security on protecting consumer privacy and
– Georgia consumer, June 2007
combating identity theft.
54
Financial Services. In June 2007, Chairman Majoras presented
testimony before the House Financial Services Committee summarizing
the FTC’s efforts to combat unfair, deceptive, and other illegal practices
in the consumer financial services industry. In July 2007, BCP Director
Lydia Parnes testified before the Subcommittee on Oversight and
Investigations of the House Financial Services Committee to discuss the
FTC’s efforts to combat unfair, deceptive, and other illegal practices in
the mortgage lending industry, including its fair lending enforcement
program. In October 2007, Commissioner J. Thomas Rosch testified
before the Subcommittee regarding the findings of the FTC’s study of
credit-based insurance scores in automobile insurance.
Telemarketing. BCP Director Lydia Parnes testified in July 2007 before
the Senate Committee on Commerce, Science, and Transportation on
FTC enforcement of the anti-fraud provisions of the Telemarketing
Sales Rule, the requirements of the Do Not Call Registry, and the Credit
Repair Organizations Act. In October 2007, she testified before the
The FTC in 2008: A FORCE for consumers and competition
House Subcommittee on Commerce, Trade, and Consumer Protection of
the Committee on Energy and Commerce on enhancing FTC consumer
protection in financial dealings, with telemarketers, and on the Internet.
Cigarette Testing. The FTC renewed its recommendation that
Congress consider giving authority over cigarette testing to one of the
federal government’s science-based public health agencies. In testimony
presented before the Senate Committee on Commerce, Science, and
Transportation in November 2007, Commissioner William Kovacic
discussed the FTC’s responsibilities in the area of tobacco advertising
generally, and specifically explained cigarette testing and the marketing of
cigarettes based on machine-measured tar and nicotine yields.
Chapter 6. Consumer Protection – Consumer and
Business Education and Outreach
Through print and online publications, websites and
“The FTC has long been a leader in educating consumers
videos, interactive quizzes and tutorials, special events and
about
market facts and risks and how to avoid those risks
interviews, the FTC educates consumers and businesses
and
in
educating business about compliance, and now more
about their rights and responsibilities in the marketplace.
than ever, with the Internet global marketplace developing so
The FTC also provides tools to enable law enforcement to
rapidly, education is critical.”
help identity theft victims and to learn how to recognize,
investigate, and prepare an identity theft case. Since
– Chairman Majoras, Remarks before the Computer and
Communication Industry Association (Apr. 17, 2007)
March 2007, the FTC has distributed more than 7.6
million print publications in English and Spanish and
logged more than 34.1 million accesses to publications on
the FTC website. FTC campaigns and materials give consumers the tools they
need to protect their sensitive data, make informed decisions, find help, and spot
a scam, whether they are dealing with credit, telemarketing, weight loss promises,
social networking, spam, or any other issue under the FTC’s jurisdiction.
Business Education
Slip Showing? Federal Law Requires All Businesses to Truncate
Credit Card Information on Receipts. In May 2007, the Commission
distributed this alert to remind merchants to comply with this provision
of the FACT Act.
In December 2007, the FTC premiered Protecting Personal
Information: A Guide for Business – An Interactive Tutorial, an
innovative online tutorial that guides businesses on practical and low- or
no-cost ways to keep sensitive data secure. Although the specifics depend
on the type of company and the kind of information it keeps, the basic
principles on securing sensitive data are the same: any business that keeps
personal information needs to take stock, scale down, lock it, pitch it, and
plan ahead. The tutorial explains each of these principles, and includes
checklists of steps to take to improve data security.
55
Federal Trade Commission
Green Lights
Hispanic Outreach. Staff held presentations for the sales teams of 12
Hispanic media outlets, as well as staff at the standards and compliance
departments of Univision and Telemundo, focusing on advertising law and
spotting ads with questionable claims targeted at Hispanic consumers.
Other business education outreach events this past year included the
FTC’s Green Lights & Red Flags seminars, held in four cities across the
U.S., which teach businesses how they can comply with state and federal
truth-in-advertising standards.
&Red Flags:
FTC Rules of the Road
for Advertisers
Consumer Education: Identity Theft
56
Deter∙Detect∙Defend campaign. The one-stop shop for information
on preventing and dealing with ID theft continues to be www.ftc.
gov/idtheft with over 6.1 million accesses to the website. In addition
to articles, videos, forms, and sample letters for consumers, businesses,
and law enforcement, the site includes a Statement of Rights for victims.
Since March 2007, the FTC also has distributed more than 22,000 of its
Consumer Education Kits, which equip consumers to give presentations
in their communities on avoiding ID theft. In February 2008, the
President’s Task Force and the U.S. Postal Service sent the FTC’s ID theft
brochure to every household in the U.S., numbering 121 million pieces.
Resources for Law Enforcement and the Military. Because it often
falls to local law enforcers to help ID theft victims, the FTC created
Fighting Identity Theft: A Law Enforcer’s Resource. This CD shows law
enforcement officers and investigators how to assist victims, coordinate
efforts, reach out to the community, and advise local businesses about
data security. As a result of FTC efforts to reach out to the military, the
Naval Media Center worked with the FTC to create short television
and radio items, video clips, podcasts, and print and online articles for
thousands of sailors and civilians. The associations for military credit
unions and banks gave out the FTC’s Consumer Education Kit to their
member institutions for use with their customers.
Officer and Prosecutor Training. The FTC worked with partner
agencies to train state and local law enforcement officers how to
recognize, investigate, and prepare an ID theft case. Staff have given onsite training to more than 3,300 officers from more than 1,000 agencies,
as well as to newly appointed identity theft coordinators in every
U.S. Attorney’s Office. The training involves using the Identity Theft
Data Clearinghouse, a repository of more than 1.4 million consumer
complaints, maintained by the FTC.
The FTC in 2008: A FORCE for consumers and competition
Consumer Education: Online Safety and Security
OnguardOnline.gov, the FTC’s interagency website that educates
consumers about how to guard against Internet fraud, secure their
computers, and protect personal information, continues to grow.
Articles on malware, broadband services, and securing laptops, as well as
interactive quizzes and updated versions of popular articles for parents
and teens on social networking, were added this past year. The site also
added a “Safer Surfing for Kids” page targeted to parents offering tips on
how to protect their younger children online. Since last March, the site
has logged more than 2.8 million unique visits to the English and Spanish
versions.
Consumer Education: Phishing and Telemarketing Fraud
To educate consumers about the practice of phishing, a scam where
Internet fraudsters send spam or pop-up messages to lure personal and
financial information from unsuspecting victims, the FTC is releasing
three 30-second videos featuring a “fishy” visitor whose fin-fitted business
suit clues consumers into the fact that they are being scammed. BCP also
is holding a roundtable with communications and technology experts in
Washington, D.C. in April 2008 on how financial institutions can better
educate their customers about phishing.
Consumer Education: Financial Literacy
FinancialLiteracy
a Sound Investment
The FTC promoted consumer education through the 10th annual
National Consumer Protection Week in March 2008. This year’s theme,
“Financial Literacy: A Sound Investment,” allowed the FTC to provide
consumers information about making well-informed financial decisions,
avoiding credit and mortgage scams, reviewing their credit report, and
protecting their personal information.
National Consumer Protection Week
March 2-8, 2008
Timely Consumer Education
With mortgage concerns on many minds this year, the FTC published
a variety of relevant articles for consumers in both English and Spanish,
including: Deceptive Mortgage Ads: What They Say; What They
Leave Out, Mortgage Payments Sending You Reeling? Here’s What to
Do, and How to Manage Your Mortgage If Your Lender Closes or Files
for Bankruptcy. To help consumers understand the jargon they may
encounter when buying or selling a home, the FTC also created The Real
Estate Marketplace Glossary: How to Talk the Talk. More than 20,000
of these publications already have been distributed, and 44,000 accessed
online.
When the California wildfires struck, and later during the 2007 winter
holidays, the FTC gave consumers information on how to avoid charity
57
Federal Trade Commission
scams and make the most of their donations. In addition, in November
2007, the FTC released 10 Tips For Smart Holiday Shopping Online,
with staff doing a radio media tour on Cyber Monday, the Monday
immediately following Black Friday, the ceremonial kick-off of the
holiday online shopping season in the U.S. between Thanksgiving Day
and Christmas.
58
The FTC in 2008: A FORCE for consumers and competition
Section Three: International Activities
Through its Office of International Affairs (OIA), created in January 2007,
the FTC continues to develop strong working relationships with overseas
antitrust and consumer protection agencies, as well
as assuming a major role in important multilateral
“I have become keenly aware that enforcing our antitrust
organizations. Over the past year, the OIA’s priorities
laws,
while critical, is not enough. Rather, . . . we must serve
have been to use its new authority under the U.S. SAFE
as ambassadors and defenders of competitive markets; that
WEB Act to facilitate greater cross-border cooperation
means standing up for competition in the face of business
in its consumer protection cases, to pursue convergence
interests seeking government protectionism and overin antitrust enforcement through the International
intervention.”
Competition Network and other venues, and to examine
– Chairman Majoras, Remarks before the U.S. Chamber of
the FTC’s future role in providing technical assistance
Commerce, Global Regulatory Cooperation Project (July 17, 2007)
to newer competition and consumer protection agencies
developing their own enforcement and policy agendas.
Chapter 7. Competition
A. Promoting Cooperation and Convergence Through
Bilateral Relationships
The FTC routinely cooperates with foreign antitrust agencies to further its
competition enforcement agenda, resulting in closer collaboration on crossborder cases and convergence toward consistent competition policies based on
sound economic principles. The FTC closely coordinates its efforts with antitrust
agencies abroad to resolve cases of mutual concern, resulting in more effective
review of multijurisdictional mergers and suspected anticompetitive behavior. In
the past year, the Commission coordinated its international efforts in its merger
enforcement program in several cases, including:
Google/DoubleClick. In December 2007, the Commission closed
its investigation of Google, Inc.’s proposed $3.1 billion acquisition
of Internet advertising server DoubleClick Inc., concluding that the
acquisition was unlikely to substantially lessen competition. While the
Commission stated that the acquisition would not harm competition in
the relevant market, it noted its potential impact on consumer privacy
and issued a set of proposed behavioral marketing principles. FTC staff
59
Federal Trade Commission
cooperated closely on the transaction with agency staff in Australia,
Canada, and the European Union.
Dina Kallay
Office of
International Affairs
As Counsel for
Intellectual Property and
International Antitrust, Dina
is at the center of some
of the FTC’s most exciting
international antitrust
activities. Dina came to the
FTC having worked for the
antitrust agencies of Israel
and the European Union (DG
COMP), in private practice
in Israel and the U.S., and
as an academic and author
on antitrust and intellectual
property interface issues.
Dina has focused on
furthering the FTC’s antitrust
work with China, preparing
comments on China’s new
Antimonopoly Law, and
delivering a speech on U.S.
and Chinese merger law at
a Beijing conference hosted
by the Chinese government.
Dina also contributes greatly
to the agency’s work in the
International Competition
Network, serving as the lead
drafter of a report on the
objectives of monopolization
rules around the world.
60
Owens Corning/St. Gobain. The FTC worked closely with the
European Commission (EC), Canada’s Competition Bureau, and the
Mexican Federal Competition Commission to resolve the proposed
combination of Owens Corning and St. Gobain, which competed
in markets for certain types of glass fiber reinforcements used in the
construction, automotive, and electronics sectors. The FTC and EC both
accepted a consent order with the parties in October 2007.
The OIA continues to build the FTC’s bilateral connections through ongoing
discussions and continuing case coordination both in the U.S. and abroad. The
OIA regularly communicates on competition cases and policy matters with
our counterpart law enforcement partners abroad, including those in Canada,
Mexico, the EU and its members, Australia, Japan, and Korea. Chairman
Majoras led formal bilateral consultations with the EU and Japan, and met
with counterparts from Chile, Brazil, the Russian Federation, and the United
Kingdom. The FTC also continues to consult with colleagues from India and
China, the world’s two most populous nations, as they develop and implement
their antitrust laws. FTC senior staff visited both jurisdictions over the past year
and, along with the DOJ Antitrust Division, provided valuable advice to their
competition officials, including through a four-day merger training program.
The FTC also participates in the cabinet-level Strategic Economic Dialogue
between the U.S. and China.
The OIA also uses its strong bilateral relationships with foreign agencies
to promote convergence toward sound competition policy. Many foreign
jurisdictions request FTC input on new competition policy matters. For
example, during the past year, the FTC consulted with the EC regarding its
review of its nonhorizontal merger guidelines and merger remedies guidelines,
with the Japan Fair Trade Commission on its revised intellectual property
guidelines, with the Korea Fair Trade Commission regarding proposed
amendments to its enforcement decree concerning excessive pricing, and with
Canada’s Competition Policy Review Panel concerning the relationship between
competition and competitiveness. Through the OIA, the FTC will continue to
share its expertise when requested with its foreign competition counterparts.
B. Promoting Convergence Through Multilateral
Competition Fora
Multilateral competition organizations provide valuable opportunities to
promote international cooperation and for competition officials to share insights
on law enforcement and policy initiatives. The FTC participates actively in
several such organizations, including the International Competition Network
(ICN), the Organization for Economic Cooperation and Development (OECD),
the United Nations Conference on Trade and Development (UNCTAD), and the
Asia-Pacific Economic Cooperation (APEC).
The FTC in 2008: A FORCE for consumers and competition
Commissioner Rosch: Global Convergence
Commissioner J. Thomas Rosch has given thought to the forces driving the current phenomenon
of technological and commercial convergence. He considers the principal factors contributing to
this convergence to include product markets that are increasingly worldwide in scope, the growth of
business transactions conducted online, and the ability of standard setting to enable interoperability.
However, protectionism, threats to computer security, disparate national standards governing how
data is transmitted internationally, the unlawful capture of the standard-setting process, and the
failure of firms to make their products interoperable may impede the continued pace of global
convergence. Commissioner Rosch believes that the FTC and its counterparts around the world can do much to
neutralize the threats to convergence by promoting convergence among the world’s substantive antitrust rules and
policies and among the various consumer protection laws governing privacy and data security. He is heartened by the
FTC’s participation in various regional frameworks governing the cross-border transfer of personal data, by efforts to
update laws on consumer dispute resolution and redress, and by efforts to strengthen the international cooperation in
U.S. law enforcement efforts. Commissioner Rosch looks forward to continuing to work with the FTC’s counterparts to
protect consumers and competition on a worldwide basis.
ICN. The ICN, currently consisting of 102 competition agency members
from 91 jurisdictions, is an important venue in which antitrust authorities
work towards procedural and substantive convergence, including promoting
best practices in antitrust enforcement and policy. The FTC plays a major
role in significant ICN projects. For example, the FTC co-chairs the ICN’s
Unilateral Conduct Working Group, which is developing guidance documents
on the definition and analysis of market dominance, including by state-created
monopolies, and is laying the groundwork for future convergence on the analysis
of types of unilateral conduct beginning with predatory pricing and exclusive
dealing. The Commission also chairs the ICN subgroup on Merger Notification
and Procedures, which just held a successful workshop on the implementation
of the ICN’s Recommended Practices for Merger Notification and Review
Procedures in the Czech Republic, attended by nearly 100 delegates from over
40 jurisdictions. This ICN subgroup is also developing guidance for member
jurisdictions on setting notification thresholds with a sufficient nexus to the
jurisdiction. The OIA staff also play an important role in the ICN’s working
group on Competition Policy Implementation, which assists new antitrust
authorities in developing their institutional capabilities. Finally, the FTC serves
on the ICN’s Steering Group, and will play an active part at the ICN’s eighth
annual conference in Kyoto, Japan in April 2008.
OECD. The OECD Competition Committee is a key forum for
competition officials from developed countries to share their experiences and
discuss best practices. Topics addressed at the Committee’s recent sessions
include refusals to deal, facilitating practices in oligopolies, regulation and
competition involving taxi services, providing effective guidance to businesses
on monopolization and abuse of dominance, competitive restrictions in the
legal profession, and dynamic efficiencies in merger analysis. Upcoming topics
include resale price maintenance, the use of market studies, and monopsony.
Most U.S. OECD submissions to the Committee are available on the FTC’s
61
Federal Trade Commission
website. The OECD held in February 2008 a Global Forum on Competition
with representatives from 51 agencies in non-member developing countries that
included a program on the relationship between competition and consumer
protection, with Chairman Majoras chairing a key panel. The FTC staff also
continues to participate in regional OECD programs designed for non-members,
including the Latin American Competition Forum.
UNCTAD. OIA staff also is involved in UNCTAD’s Intergovernmental
Group of Competition Experts and regional competition programs. In the
past year, the Commission participated in UNCTAD’s programs on agency
independence and accountability and on the relative competency between
different agencies in applying competition rules. FTC staff will participate in
UNCTAD’s future work, including the development of reports on intellectual
property and the abuse of dominance.
Free trade agreements. U.S. free trade agreements often include provisions
regarding competition matters. The FTC monitors competition issues in free
trade negotiations and participates as appropriate in U.S. delegations that
negotiate these provisions.
Chapter 8. Consumer Protection
The emergence of new consumer markets and consumer policy models
around the world, together with ever-evolving technological advances, have
raised new and complex global consumer protection challenges. Issues such as
spam, phishing, spyware, telemarketing fraud, identity theft, data security, and
privacy cross national borders and raise both enforcement and policy issues that
require the FTC to work closely with its counterparts in foreign agencies and
international organizations. The continued growth of Internet and mobilebased business-to-consumer commerce, as well as the dawn of technologyenabled consumer-to-consumer interactions, raise fresh consumer protection and
privacy concerns. To confront these challenges, the FTC, through its OIA staff,
provides a broad-based international consumer protection program that focuses
on providing consumers in the global marketplace with sound and effective
protections that maximize economic benefit and consumer choice.
A. The U.S. SAFE WEB Act and International Law
Enforcement Cooperation
SAFE WEB. The FTC continues to expand its international enforcement
cooperation efforts using the tools provided by the U.S. SAFE WEB Act of 2006.
The Act enhances the FTC’s ability to cooperate with foreign law enforcement
authorities on consumer protection enforcement matters that cross national
borders, including spam, spyware, and telemarketing fraud, misleading health
and safety claims, and privacy and security breaches.
In the past year, the FTC focused on implementing the Act, and published
new (and amended) rules to facilitate international information sharing. Since
62
The FTC in 2008: A FORCE for consumers and competition
the rules went into effect in May 2007, the FTC has shared information 17 times
with foreign agencies in cross-border consumer protection matters involving
fraudulent telemarketing scams, deceptive mail schemes, and spam cases. This
information sharing has benefitted U.S. consumers. For example, the FTC used
its SAFE WEB authority to share key information obtained in its investigation of
a Canadian-based allegedly bogus lottery and prize-promotion scam, Cash Corner
Services, with Canadian partners for use in related Canadian law enforcement
activities. In Spear Systems, the FTC shared information with counterparts in
Australia and Canada about an international spam enterprise, with defendants in
the U.S., Canada, and Australia, in which spammers drove traffic to websites that
deceptively sold two kinds of purported weight loss and anti-aging products. The
FTC has also used its new authority to provide investigative assistance to foreign
agencies in two other spam investigations in foreign countries. The increasing use
of the FTC’s new authority is removing some of the key roadblocks to effective
international enforcement cooperation.
The FTC will continue to focus on the U.S. SAFE WEB Act in 2008,
including its efforts to enter into cooperation agreements with several important
foreign jurisdictions, and to improve its ability to obtain remedies, including
restitution for injured U.S. and foreign consumers, in cross-border cases. The
FTC will continue its outreach efforts to international and domestic partners to
achieve the promise of the U.S. SAFE WEB Act.
Canada. The FTC maintains its strong working relationship with consumer
protection and other law enforcement officials in Canada, in particular to
confront the mutual problem of mass-marketing fraud, including telemarketing
fraud, across the U.S.-Canadian border. For example, the FTC works closely
with Competition Bureau Canada on numerous cases and projects, and
participates in regional partnerships with Canadian enforcers based in Canada’s
Atlantic Provinces, Project Colt in Quebec, the Vancouver-based Project
Emptor, and the Toronto Strategic Partnership. In the past year, the FTC has
used its SAFE WEB authority to augment these efforts, resulting in successful
investigations and cases on both sides of the border.
International Enforcement Organizations. The FTC continues to
cooperate with law enforcement partners in international organizations on
consumer protection matters. For example, the FTC continues to participate
actively in the International Consumer Protection Enforcement Network
(ICPEN). It supported ICPEN’s operations this year by hosting the Secretariat
and working with its Chilean president to include non-member Latin American
consumer protection agencies at ICPEN’s fall 2007 meeting. The FTC also
participates in the leadership of the London Action Plan (LAP), a global network
of industry representatives and law enforcement agencies from more than 20
countries involved in the fight against spam, phishing, and other online threats.
Through its participation in the LAP, in October 2007, the FTC organized a
first ever joint meeting in the U.S. of the Contact Network of Spam Authorities,
a network of spam enforcement authorities from EU Member States, and the
Messaging Anti-Abuse Working Group, a global organization of private network
Steven M.
Wernikoff
Midwest Region
Steve is an attorney
with the Midwest Region
who serves as lead counsel
in complex cases involving
spam, online advertising,
credit card fraud, privacy, and
Internet auctions.
Working closely with U.S.
and international partners,
Steve has coordinated
sweeps leading to dozens of
civil and criminal actions. In
October 2007, Steve filed the
first case involving the FTC’s
use of the U.S. SAFE WEB
Act to pursue defendants in
Australia, Canada, and the
U.S.
He also serves as
an adjunct professor at
Northwestern University
School of Law, teaching a
course on Internet fraud
and advertising law. Steve
received the FTC’s Paul Rand
Dixon Award in 2003.
63
Federal Trade Commission
The Safe Web Fellows
Program
In response to the U.S.
SAFE WEB Act provision
authorizing the FTC to
strengthen international
enforcement relationships
with counterpart agencies
abroad, the FTC created an
International Fellows Pilot
Program to enable foreign
competition and consumer
protection agency officials to
work at the FTC. In the past
year, the FTC hosted fellows
from Brazil’s Administrative
Council for Economic Defense,
Canada’s Competition Bureau,
the New Brunswick (Canada)
Office of the Attorney General,
and Hungary’s Office of
Economic Competition.
Each fellow spent three
months working with FTC
legal and economic staff
on investigations and
enforcement actions. The
FTC also envisions exchange
programs for its staff with
agencies abroad, and already
has detailed an OIA attorney
to the United Kingdom’s
Office of Fair Trading. The
pilot program will evolve into
a permanent program in the
coming year.
operators, email service providers, and vendors that works against online abuse
and exploitation.
Cross-Border Cases. In the past year, the FTC’s Bureau of Consumer
Protection, with assistance from the OIA, filed six new cases with a major
international aspect in the federal courts, including five cases that involved
significant cooperation with its Canadian counterparts, and continued to litigate
and investigate dozens of other matters involving foreign parties, witnesses,
and evidence. The FTC sought cooperation from enforcement agencies in 15
countries in these litigation matters.
B. International Policy Cooperation
New global trends also require the FTC to engage in policy efforts to develop
flexible, market-oriented standards to address long-standing, as well as emerging,
consumer protection issues. To achieve these goals, the FTC works directly with
its counterparts on a bilateral level, and also participates actively in international
organizations.
Bilateral Relationships. The FTC works closely on consumer protection
and privacy issues on a bilateral basis both with developed economies – such as
those in the European Union and Canada – and with emerging economies like
China. In June 2007, the FTC signed a memorandum of understanding (MOU)
with China’s consumer protection agency, the State Administration for Industry
& Commerce (SAIC), to facilitate greater policy-level cooperation in consumer
protection matters affecting both nations. The key provisions of the non-binding
MOU provide for the exchange of views on consumer protection laws and policy
issues, consideration of possible collaborative projects such as seminars, and staff
visits to both countries. The FTC will continue these contacts with SAIC and
other Chinese agencies in the coming year.
International Consumer Policy. The FTC continues to participate actively
in the OECD’s consumer protection policy work. In July 2007, the FTC,
working through the OECD, agreed with its partners on a set of principles to
address the practical and legal obstacles that many consumers face when trying
to resolve disputes with businesses, in their own country or abroad, particularly
in cross-border e-commerce transactions. The FTC has also been providing
input on international consumer protection issues that will be on the agenda at
the OECD’s June 2008 ministerial-level meeting on the “Future of the Internet
Economy,” which is intended to provide guidance to governments and other
stakeholders developing policies relating to technology and the Internet. The
FTC will also continue to work with other international organizations such as the
Organization of American States on consumer policy matters.
Privacy and Security Issues. The FTC also has been engaged in recent years
in furthering international cooperation on privacy and data security matters,
focusing the international community on the critical importance of enforcement.
In June 2007, the FTC, working with its foreign partners through the OECD,
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The FTC in 2008: A FORCE for consumers and competition
Commissioner Jones Harbour: APEC Privacy Framework
In 2007, Commissioner Harbour focused on the FTC’s privacy work within the Asia Pacific Economic
Cooperation (APEC) forum. This year, APEC’s privacy work centered around implementation of
its Privacy Framework through the development of cross-border privacy rules. As part of the U.S.
delegation, Commissioner Harbour participated in numerous meetings of APEC’s Electronic Commerce
Steering Group and its Data Privacy Subgroup, as well as related gatherings in Australia, Mexico,
Japan, and Vietnam. The Commission’s involvement in APEC will continue in 2008.
APEC’s Privacy Framework includes nine broad privacy principles, along with domestic and
international implementation guidance. The project is an effort to coordinate cross-border enforcement so that
participating global businesses may transfer consumer data internationally, pursuant to a set of uniform rules. Each
APEC economy may implement the cross-border rules network differently, and the likely approach in the U.S. will be a
combination of industry self-regulation and backstop government enforcement through Section 5 of the FTC Act. APEC
recently approved an official pilot project, and participating economies currently are working to develop system details
and to test it on a small scale.
developed a framework for privacy regulators and law enforcement authorities to
facilitate cross-border privacy law enforcement cooperation and provide greater
protection for consumers’ personal information. The FTC also continues to
participate actively in privacy and data security work at the Asia Pacific Economic
Cooperation (APEC) and other multilateral organizations. In 2008, the FTC
will participate, along with other U.S. government agencies and APEC member
economies, in a pilot project to develop a system for cross-border data transfers
under the APEC Privacy Framework.
Chapter 9. Outreach and International Technical
Assistance
OIA staff continue to assist developing nations moving towards marketbased economies by assisting with the development and implementation of
competition and consumer protection laws and policies. In addition to a formal
technical assistance program, staff also met with hundreds of foreign officials in
Washington, D.C. and in foreign capitals on both competition and consumer
protection issues.
The OIA’s technical assistance program is actively engaged in providing
training sessions to enforcement agency staff in developing nations, in close
cooperation with DOJ’s Antitrust Division when antitrust issues are involved.
Beginning in the early 1990s, the program has conducted many training missions
in developing nations, building on the Commission’s legal and economic
expertise. In a typical session, an FTC/DOJ lawyer and economist team might
conduct a three- or four-day interactive case simulation that involves substantive
matters likely to arise in an actual investigation. These programs, which have to
date primarily been funded by the U.S. Agency for International Development
(USAID), play a significant role in the Commission’s efforts to promote sound
competition and consumer protection policies around the world. The FTC plans
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to continue its work with USAID and other funding sources to pursue additional
opportunities to enlarge this program, particularly regarding consumer protection
issues.
In 2007, the Commission sent 26 different staff experts to 13 countries on 31
technical assistance missions. The FTC was most active in the 10‑nation ASEAN
community (including Indonesia and Vietnam), India, Russia, Azerbaijan,
Armenia, South Africa, Moldova, Guatemala, and Egypt. In the early part of the
year, the FTC maintained a resident advisor in Jakarta, Indonesia, who worked
with the ASEAN Office of the Secretary General, as well as with the competition
and consumer protection officials in Indonesia, Thailand, and Vietnam. In
related work, the FTC assisted USAID in a worldwide project assessing the
progress of commercial law reform. In 2007, FTC staff joined USAID teams of
experts in the Philippines and Tanzania.
In its appropriations to the FTC for fiscal year 2008, Congress encouraged
the FTC to use appropriated funds for international competition and consumer
protection technical assistance to developing nations. The FTC is identifying
high priority assistance targets, and is launching a program of assistance that will
operate in tandem with its long-standing USAID-funded program.
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In February 2008, the FTC and DOJ conducted a one-day workshop,
Charting the Future Course of International Technical Assistance, involving
foreign and domestic experts, to describe how their programs have
worked and to obtain perspectives of other aid providers, academics, and
private practitioners with a view toward improving the Commission’s
program and charting a course for its future.
The FTC in 2008: A FORCE for consumers and competition
Looking Ahead
This year, the FTC reaffirmed its presence as a force for consumers and
competition both in the U.S. and abroad as we focused on industries directly
impacting consumers. Increased globalization and lightning-speed changes in
technology required us to adapt and evolve our efforts, and at every turn, the
FTC responded with powerful initiatives.
At its core, the FTC is a law enforcement agency, and in the coming year,
we will continue to focus our antitrust and consumer protection scrutiny on
areas of high impact for consumers – health care, privacy, real estate, financial
services, energy, and technology. Moreover, we will maintain our strong tradition
of holding those responsible for fraudulent business schemes civilly, and where
appropriate, criminally accountable for their actions. Fraud often does not stop
or start at our borders, and we will expand our successful implementation of the
U.S. SAFE WEB Act so that we may assist others in reaching fraud wherever it
lies.
We are experiencing a time of economic, as well as technological, change,
and the FTC’s enforcement initiatives will continue to be supported by research
and public exploration of matters of grave concern to consumers. For example,
in the coming year, we will explore recent health care delivery innovations, such
as limited service clinics, price and quality transparency, and health information
technology. We will continue to study mortgage disclosures, with an eye towards
developing improved disclosures to help consumers better understand the
mortgage products available to them. As consumers become more conscious of
the impact consumption has on the economy and on the environment, we will
continue the public dialogue on green marketing claims. We also will report on
energy markets in the 21st century, including a review of the security of energy
supplies and proposals for addressing climate change concerns.
Consumers must be well-informed in order to participate in the global
marketplace. We will continue our outstanding tradition of issuing clear,
practical guidance to consumers, not only explaining their consumer protection
rights and responsibilities in the marketplace, but also promoting competition
and explaining why competition matters.
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Federal Trade Commission
We must continue to serve as ambassadors and defenders of competitive
markets. As such, the FTC commits to strengthening relationships with our
enforcement counterparts around the world, and to pursuing global antitrust
convergence. Through our technical assistance programs, we will reach out
to young competition and consumer protection agencies, including in key
jurisdictions such as China and India.
Throughout, the FTC is proud to remain a steady hand for consumers and
competition.
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The FTC in 2008: A FORCE for consumers and competition
Senior Staff of the FTC
Chief of Staff
Brian Huseman
Executive Director
Deputy Executive Director
Charles Schneider
Sonna L. Stampone
Director, Bureau of Competition
Deputy Directors
Jeffrey Schmidt
Kenneth L. Glazer
David P. Wales
Director, Bureau of Consumer Protection
Deputy Directors
Lydia B. Parnes
Eileen Harrington
Mary Beth Richards
Director, Bureau of Economics
Deputy Directors
Michael R. Baye
Mark Frankena
Pauline Ippolito
Paul A. Pautler
General Counsel
Deputy General Counsels
William Blumenthal
William E. Cohen
John F. Daly
Christian S. White
Director, Office of International Affairs
Deputy Directors
Randolph W. Tritell
James C. Hamill
Elizabeth Kraus
Hugh G. Stevenson
Director, Office of Congressional Relations
Jeanne Bumpus
Director, Office of Public Affairs
Nancy Ness Judy
Director, Office of Policy Planning
Deputy Director
Maureen K. Ohlhausen
James C. Cooper
Secretary of the Commission
Donald S. Clark
Chief Administrative Law Judge
Stephen J. McGuire
Inspector General
Howard L. Sribnick
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Federal Trade Commission
FTC Annual Awards – September 2007
Chairman’s Award
Matthew Reilly
Louis D. Brandeis Award
John Jacobs
Janet D. Steiger Outstanding Team Award
Privacy Steering Committee
Redress/Enforcement Database Team
Rambus Team
FOIA Team
Richard C. Foster Award
James Baker
Jeanne McGraw
Neal Reed
James M. Mead Award
Jose Cocoa
Pete Dykstra
Michelle Kambara
Diane Pierce
Paul Rand Dixon Award
Christopher Adams
Loretta Garrison
Jonathan Klarfeld
Gregory Luib
John Parisi
Carole Reynolds
Nadine Samter
Anne R. Schenof
Mary Gardiner Jones Award
Voni Eason
Ed Glennon
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The FTC in 2008: A FORCE for consumers and competition
Awards for Excellence in Supervision
Jacalyn Johnson
Nancy Judy
Peter Richman
David Robbins
Aileen Thompson
Otis B. Johnson Award
Bonnie Curtin
Sheryl Drexler
Teresa Martin
Elisabeth Murphy
Francis Walker Award
David Schmidt
Outstanding Scholarship Award
John Simpson
Stephen Nye Award
Sarah Botha
Richard Cunningham
Gerry Sachs
Leon Higgenbotham, Jr. Award
David Shonka
Eleanor F. Greasley Award
Judy Armstrong
Bernadette Harding
Bernadette Harmon
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Federal Trade Commission
Principal Contributors to Report
Michael D. Bergman and Phyllis H. Marcus
Project Coordinators
Dawne Holz and Jonathan Morgan
Graphics and Design
Jeanine Balbach and Kelly Signs
Bureau of Competition
Laura Schneider
Bureau of Consumer Protection
Liz Callison
Bureau of Economics
Russell W. Damtoft
Office of International Affairs
Gregory P. Luib
Office of Policy Planning
Contributing staff members also include William E. Cohen, Rachel Miller
Dawson, Stacy Feuer, Marc Groman, Brian Huseman, Daniel Kaufman, Vincent
Law, Brandon Remington, Stefano Sciolli, John H. Seesel, Marianne Watts, Larry
DeMille-Wagman, and Beth Arvan Wiggins.
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Federal Trade Commission Satellite Building
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