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FEDERAL TRADE COMMISSION

A Positive Agenda
For Consumers:
The FTC Year In Review
Federal Trade Commission
April 2003

FEDERAL TRADE COMMISSION

1.877.FTC.HELP

FOR THE CONSUMER

WWW.FTC.GOV

Federal Trade Commission

A Positive Agenda
For Consumers:
The FTC Year In Review

April 2003

Timothy J. Muris, Chairman
Sheila F. Anthony, Commissioner
Mozelle W. Thompson, Commissioner
Orson Swindle, Commissioner
Thomas B. Leary, Commissioner

The FTC Year in Review

Federal Trade Commission

A Positive Agenda for Consumers

Federal Trade Commission

Federal Trade Commission

Contents
Introduction ................................................................................................................................... 1
A. Goals ...................................................................................................................................... 1
B. 2002-2003 Highlights ............................................................................................................. 1

Chapter 1: Competition Law Enforcement .................................................................................. 2
A. Nonmerger Enforcement ........................................................................................................ 3
1. Bringing More Nonmerger Cases .................................................................................................. 3
2. Focusing on Key Sectors of the Economy .................................................................................... 4
3. Clarifying the Scope of Antitrust Coverage ................................................................................... 6

B. Merger Enforcement............................................................................................................... 7
1. Non-HSR Reportable Transactions ............................................................................................... 7
2. Mergers in Key Economic Sectors ................................................................................................ 8
3. Improving Merger Review and Resolution .................................................................................. 10

C. Part 3 Administrative Process ............................................................................................... 11

Chapter 2: Consumer Protection Law Enforcement and Rulemaking .................................... 12
A. Fraud and Deception ............................................................................................................ 12
1. Tools to Identify Fraud and Deception ......................................................................................... 12
2. Law Enforcement ........................................................................................................................ 14

B. Consumer Privacy ................................................................................................................ 17
1. Law Enforcement ........................................................................................................................ 17
2. Rulemaking ................................................................................................................................. 19

Chapter 3: Special Policy Instruments for Assisting and Complementing Law Enforcement ... 19
A. Competition Policy ................................................................................................................ 19
1. Hearings, Workshops, Studies, and Reports .............................................................................. 19
2. Advocacy ..................................................................................................................................... 21
3. Competition Policy “Research and Development” ...................................................................... 22

B. Consumer Protection ............................................................................................................ 22
1. Workshops and Reports .............................................................................................................. 22
2. Advocacy ..................................................................................................................................... 24
3. Consumer and Business Education and Outreach ..................................................................... 25

Chapter 4: International Activities ............................................................................................. 27
A. Competition ........................................................................................................................... 28
1. Cooperation in Enforcement and Policy Development ............................................................... 28
2. Multilateral Competition Cooperation .......................................................................................... 28
3. Trade/Competition Fora .............................................................................................................. 29

B. Consumer Protection ............................................................................................................ 29
1. Cross-Border Fraud ..................................................................................................................... 29
2. Other International Cooperation .................................................................................................. 30
3. Cross-Border Law Enforcement .................................................................................................. 31

C. International Technical Assistance ........................................................................................ 31
The FTC Year in Review

Conclusion: Honoring the FTC’s Past and Building Its Future ............................................... 32

A Positive Agenda for Consumers

Federal Trade Commission

Federal Trade Commission

This report offers the competition policy and
consumer protection communities an overview of the
activities of the Federal Trade Commission (FTC) in
the last twelve months. The report summarizes the
agency’s chief initiatives and describes the aims that
motivate the use of its resources. In many areas, the
discussion of matters begun in the past year also
indicates the agenda that the FTC will pursue in the
coming years.

A. Goals
The FTC acts to ensure that markets operate
efficiently to benefit consumers. The FTC’s twin
missions of competition and consumer protection
serve a common aim: to enhance consumer welfare.
The Commission’s competition mission promotes
free and open competitive markets, bringing
consumers lower prices, innovation, and choice
among products and services. The Commission’s
consumer protection mission fosters the exchange of
accurate, non-deceptive information, allowing
consumers to make informed choices in their
purchases. Thus, these missions complement each
other – accurate information in the marketplace
facilitates fair and robust competition – and maximize
benefits for consumers.
Five principles guide the development of the
Commission’s positive agenda for consumers. In
exercising its competition and consumer protection
authority, the FTC should:

•

•

•

Promote competition and the unfettered
exchange of accurate, non-deceptive information
through strong enforcement and focused
advocacy;
Stop conduct that most threatens consumer
welfare, such as horizontal agreements and
fraudulent and deceptive practices;
Employ a systematic approach for identifying and
addressing serious misconduct, with special
attention to harmful behavior in key economic
sectors;

•

•

Apply all elements of the agency’s distinctive
portfolio of policy instruments – prosecuting
cases, conducting studies, performing research,
holding hearings and workshops, engaging in
advocacy before other government bodies, and
educating businesses and consumers – to
address competition and consumer protection
issues; and
Improve the institutions and processes by which
competition and consumer protection policies are
formulated and applied.

B. 2002-2003 Highlights
In the past year, the FTC used its unique
complement of enforcement and other policy
instruments to address critical consumer concerns in
several areas. Highlights include:

•

Health Care: Prescription Drugs. Medical
therapy increasingly relies on new
pharmaceuticals as alternatives to more invasive
treatments, such as surgery. To help ensure that
anticompetitive practices do not injure consumers
by reducing the availability or increasing the price
of drugs, the FTC published a study examining
the frequency of anticompetitive abuses to block
market entry of lower-cost generic drugs;
provided comments to the Food and Drug
Administration (FDA) on the potential for
misusing procedures under the Hatch-Waxman
Amendments governing generic entry; and
brought law enforcement actions against
branded drug companies alleging improper
efforts to delay generic entry. Among other
significant matters, the Commission reached a
settlement with Bristol-Myers Squibb (BMS)
resolving charges that BMS abused the HatchWaxman process to obstruct the entry of generic
competition for two anti-cancer drugs and an
anti-anxiety agent.

•

Energy: Gasoline. In an administrative
complaint filed last month, the FTC alleged that
Union Oil Company of California (Unocal)
improperly manipulated the process by which the
California Air Resources Board set regulations

The FTC Year in Review - 1

Introduction

Federal Trade Commission

Force to analyze state regulations that may
restrict the entry of new Internet competitors and
to share its findings with bodies whose acts might
affect the development of Internet commerce.
The agency hosted a three-day public workshop
to examine potential anticompetitive barriers to ecommerce in various industries. The
Commission also brought significant law
enforcement actions that continue its historical
role of leading efforts to keep the Internet free
from fraud, deception, and abuse.

for phase 2 reformulated gasoline. The agency
contended that Unocal’s anticompetitive conduct
potentially could cost California consumers
hundreds of millions of dollars per year in higher
gasoline prices.

•

A Positive Agenda for Consumers - 2

•

Privacy: “Do Not Call.” During the past year
the Commission promulgated far-reaching
amendments to its Telemarketing Sales Rule.
Among the most important changes, the FTC
launched its National Do Not Call registry,
possibly the most significant consumer protection
initiative in recent years. The registry will be a
central database of telephone numbers of
consumers who choose not to receive
telemarketing calls. The agency will implement
the system by making it operational in specific
geographic areas over several months and
expanding the system until it covers the entire
nation. Once the registry is complete,
telemarketers will be required to pay a fee to gain
access to the registry and then to scrub their
telemarketing lists against the telephone
numbers in the database. This fall, consumers
who have placed their telephone numbers on the
registry will begin to receive fewer unwanted
telemarketing calls.
Financial Practices: Deceptive Lending. Last
September, the Commission reached a
settlement with Associates First Capital
Corporation and Associates Corporation of North
American to resolve charges that the firms had
engaged in systematic and widespread deceptive
and abuse practices involving subprime lending.
Among other obligations, the companies agreed
to pay consumers $215 million in redress – the
largest consumer protection settlement in FTC
history.

The chapters below describe these and other
initiatives more fully. These achievements attest to
the vision and dedication of the agency’s five
Commissioners and its exceptional staff.

Chapter 1
Competition Law Enforcement
The FTC’s competition mission seeks to promote
and protect rivalry in the marketplace to give
consumers the benefit of robust price competition
and the best possible array of product choices and
prices. While some of its work involves responding
to external developments, such as Hart-Scott-Rodino
premerger filings and consumer and business
complaints, the FTC nevertheless sets a positive
competition agenda systematically. In deciding how
to use its competition resources, the FTC considers
several factors, including:

•
•
•
•

•

E-Commerce: A Unified Approach to
Maintaining Efficient Markets. The Internet’s
development has created a bounty of consumer
issues, requiring the FTC to draw on all of its
competition and consumer protection capabilities.
In the past year, the FTC formed an Internet Task

the type of conduct involved and the danger it
poses to consumer welfare;
the economic sector involved and its importance
to consumer welfare;
the selection of the best policy tool to correct
competitive problems; and
the performance of competition policy research
and development to improve the agency’s
understanding of marketplace phenomena and
their impact on consumers.

Moreover, in carrying out its competition agenda,
the FTC seeks to work as efficiently as possible,

Federal Trade Commission

created opportunities for the Commission to reemphasize nonmerger antitrust work.
1. Bringing More Nonmerger Cases
In 2001, the FTC began restoring balance
between merger and nonmerger matters to its
competition agenda. In 2001, the FTC staff opened
56 new nonmerger investigations, compared to 25 in
2000. In 2002, the staff opened 59 new nonmerger
investigations. (See Figure 1.) Guiding the FTC’s
renewed focus on nonmerger matters is a systematic
approach to case generation. Key areas of concern

•

Rambus. Last June, the FTC filed an
administrative complaint charging that Rambus,
a participant in an electronics industry standardsetting organization, failed to disclose – in
violation of the organization’s rules – that it had a
patent and several pending patent applications
on technologies that eventually were adopted as
part of the industry standard. The standard at
issue involved a common form of computer
memory used in personal computers and other
electronic products. According to the complaint,

The FTC Year in Review - 3

Investigations

Transactions (In Trillions)

both to stretch its resources and to
Figure 1
limit the burden imposed on private
Relationship Between Merger and Nonmerger Enforcement
parties.
The FTC’s competition mission
has flourished. In the past year, the
70
3.50
Nonmerger Investigations
FTC approved 31 antitrust
60
3.00
Value of HSR Transactions
enforcement actions, including two
50
2.50
Part 3 administrative enforcement
40
2.00
actions, four preliminary injunction
30
1.50
actions, one temporary restraining
order action, and 19 consent
20
1.00
agreements (ten merger cases and
10
0.50
nine nonmerger cases). In an
0
0.00
additional five instances, FTC
1995
1996
1997
1998
1999
2000
2001
2002
investigations led parties to abandon
proposed mergers. The agency also
pursued many non-enforcement
initiatives – studying various markets
and business practices, examining the intersection of
have included standard setting, professional
antitrust with other areas of law, giving the bar and
associations, state boards, exceptions to and
the business community guidance on compliance,
immunities from antitrust laws, and health care and
performing competition advocacy before other
prescription drugs. This approach has yielded a
government bodies, improving and streamlining FTC
number of notable cases.
procedures, and cooperating with competition
agencies worldwide.
Standard-Setting Cases. Most standard-setting
activities are legitimate and enhance the efficient
operation of markets. On occasion, however, the
A. Nonmerger Enforcement
standard setters, acting alone or in concert,
The FTC’s nonmerger program has been
manipulate the process to anti-consumer ends.
especially active in the past year. During the 1990s,
Some standard setting involves quasi-governmental
a tidal wave of mergers forced the FTC to divert
entities, and the anticompetitive conduct may
substantial resources from its nonmerger programs
resemble the abuse of governmental process. In the
to scrutinize proposed transactions. The decline in
past year, two standard-setting matters led to
recent years from the historically unprecedented
administrative litigation.
peaks of merger activity in 1999 and 2000 has

Federal Trade Commission

the inclusion of Rambus’s patented technology in
the standard allowed it to gain millions of dollars
in royalty fees each year, and potentially more
than a billion dollars over the life of the patents,
all at the expense of consumers in the form of
higher prices.

A Positive Agenda for Consumers - 4

•

Unocal. As mentioned above, the FTC recently
issued an administrative complaint charging that
Unocal subverted the process by which the
California Air Resources Board (CARB) adopted
regulations on phase 2 reformulated gasoline.
The complaint alleges that Unocal made
materially false and misleading statements to
CARB and others, which led CARB unknowingly
to adopt regulations requiring the use of
technology covered by Unocal patents.

Professional Association Cases. The FTC
pursued significant investigations involving the rules
of conduct for various professional associations.
Agreements among professionals that limit
competition among themselves, often under the
guise of professional association by-laws or codes of
conduct, harm consumers much like “smoke-filled
room” conspiracies. The FTC recently accepted two
consent agreements from professional groups. The
American Institute for the Conservation of Historic
and Artistic Works settled charges that its
Commentaries to the Guidelines for Practice
condemn as unprofessional behavior the consistent
undercutting of local or regional market rates. The
National Academy of Arbitrators settled charges that
its Code of Professional Responsibility violated the
law in forbidding virtually all forms of advertising.
The FTC is pursuing other potentially harmful
restrictions imposed by professional associations,
trade associations, or boards, using means including
sophisticated “spider” software to search the Internet
for restrictions of this kind.
2. Focusing on Key Sectors of the Economy
As part of its proactive approach, the FTC
concentrates resources on anticompetitive conduct
in areas of the economy that have a major impact on

the consumer budget, including health care and
energy.
Health Care. Health-related products and
services account for more than 15 percent of the
U.S.’s gross domestic product, an increase of 25
percent since 1990. Without effective antitrust
enforcement, those figures could grow even higher.
In the 20 years since the Supreme Court affirmed the
FTC’s jurisdiction over health care professionals in
the American Medical Association case, the agency
has worked to remove artificial barriers to the
development of new and more efficient
arrangements for delivering and financing health
care services. The FTC’s major health care cases
have involved physicians and prescription drugs.
Physicians. In the past year, the FTC accepted
settlements with four groups of physicians for
allegedly colluding to raise consumers’ costs. The
number of physicians involved ranged from 41 in one
matter in the Denver area to more than 1,200 in a
case in Dallas-Fort Worth. The FTC’s orders will put
a stop to collusive conduct by these physicians that
harms employers, individual patients, and health
plans by depriving them of the benefits of
competition in the purchase of physician services.
Similar cases are currently under investigation.
Prescription Drugs. The growing cost of
prescription drugs is another significant concern for
consumers, employers, governments, and health
plans. A major focus of the FTC’s nonmerger
enforcement program has been anticompetitive
conduct to forestall generic entry. The agency has
challenged three types of conduct that
pharmaceutical firms allegedly have used to delay
generic competition: (1) agreements between a
brand-name drug manufacturer and a generic firm to
keep the generic off the market for a period of time,
(2) unilateral conduct by branded manufacturers to
delay generic entry, and (3) agreements among
generic drug manufacturers to divide the generic
market.

Federal Trade Commission

Bristol-Myers Squibb (BMS). Last month, the
FTC reached a landmark consent agreement
with BMS, mentioned above, to resolve charges
that the company engaged in anticompetitive
acts over the past decade to obstruct the entry of
low-price generic competition for three of BMS’s
widely-used pharmaceutical products: two anticancer drugs, Taxol and Platinol, and the antianxiety agent, BuSpar. The complaint alleged
that, over the course of the past decade, BMS
engaged in various anticompetitive acts across
the three drug products.
According to the complaint, BMS abused
Food and Drug Administration (FDA) regulations
to obstruct generic competitors; misled the FDA
about the scope, validity, and enforceability of
patents to secure listing in the FDA’s Orange
Book; breached its duty of good faith and candor
with the Patent and Trademark Office (PTO)
while pursuing new patents claiming these drugs;
filed baseless patent infringement suits against
generic drug firms that sought FDA approval to
market lower-priced drugs; and paid a would-be
generic rival $72.5 million to abandon its legal
challenge to the validity of a BMS patent and to
stay out of the market until the patent expired.
Alleged to be central to BMS’s strategy was the
abuse of the regulatory scheme arising under
Hatch-Waxman Amendments, which govern the
FDA’s process for approving generics.
The FDA does not review whether patents
listed in the Orange Book actually meet the
statutory criteria. The FTC alleged that BMS
repeatedly violated Orange Book listing criteria to
trigger Hatch-Waxman’s provision for a 30-month
stay on FDA approval of generic drugs,
extending without justification its monopoly
power. The FTC’s proposed consent order
contains strong – and in some respects,
unprecedented – relief. The relief includes a
provision prohibiting BMS from triggering a 30month stay based on any patent that BMS lists in
the Orange Book after the filing of an application
to market a generic drug. This provision, by
itself, should protect consumers from the risk that

BMS will engage in many of the abuses set forth
in the Commission’s complaint.
The BMS case is the most recent in a series of
cases alleging anticompetitive conduct to delay the
introduction of lower-cost generic drugs. Others
include:

•

Biovail. In October 2002, the Commission
approved a consent order resolving charges that
Biovail Corporation (Biovail) illegally acquired a
license to a patent and improperly listed the
patent in the Orange Book as claiming Biovail’s
high blood pressure drug, Tiazac. Under current
law, that action and the subsequent filing of a
lawsuit by Biovail against a potential generic
entrant triggered an automatic 30-month stay of
FDA approval of the generic competitor to the
branded product.

•

Biovail/Elan. The Commission alleged that two
generic competitors, Biovail and Elan
Corporation, entered into an agreement that
provided substantial incentives for the two firms
not to compete in the markets for the 30 mg and
60 mg dosage forms of generic Adalat CC, an
anti-hypertension drug. The Commission
approved a consent order in August 2002
requiring the firms to terminate their agreement
and prohibiting them from entering similar
agreements in the future.

•

Schering (Settlement with American Home
Products). An April 2002 settlement resolves
charges that American Home Products entered
into an agreement with Schering-Plough
Corporation to delay introduction of a generic
potassium chloride supplement in exchange for
millions of dollars. This action is related to the
matter involving Schering Plough and UpsherSmith, which remains in administrative litigation.

Energy. Antitrust enforcement helps ensure that
the markets for gasoline and other refined petroleum
products are, and remain, competitive. Although
most FTC energy-related enforcement actions have

The FTC Year in Review - 5

•

Federal Trade Commission

Warehousemen, Inc. (IHM&W). The settlement
will bar IHM&W, which represents approximately
70 household goods movers doing business in
Indiana, from filing collective intrastate rate tariffs
with the Indiana’s Department of Revenue.
According to the Commission’s complaint, in
filing tariffs on its members’ behalf, IHM&W
illegally reduced competition for household goods
moving services within Indiana by setting and
maintaining collective rates to the detriment of
consumers. The FTC concluded that, because
Indiana did not actively supervise IHM&W’s price
fixing, the entity did not qualify for immunity. The
proposed settlement and the agency’s Analysis
to Aid Public Comment give the business
community significant guidance concerning the
state action doctrine’s scope and the standards
that must be met to immunize anticompetitive
conduct as an activity of the state.

involved mergers, the nonmerger side also has been
active. Notably, the FTC’s recent administrative
complaint against Unocal, described above, alleges
that Unocal’s anticompetitive conduct potentially
could cost California consumers hundreds of millions
of dollars per year in higher gasoline prices.

A Positive Agenda for Consumers - 6

3. Clarifying the Scope of Antitrust Coverage
The state action and Noerr-Pennington doctrines
immunize substantial areas of commerce from
competition’s beneficial discipline. While the core
principles underlying these antitrust doctrines are
valid, some lower court decisions have expanded
their reach well beyond the precepts the Supreme
Court originally articulated. The scope of these
immunities remains ambiguous and controversial in
some respects. Through study and analysis, and by
bringing carefully selected enforcement actions, the
FTC is seeking to clarify the scope of the state action
and Noerr-Pennington immunities.
State Action. The state action doctrine confers
antitrust immunity upon certain private conduct taken
pursuant to state policy. When first articulated in
Parker v. Brown, the doctrine rested on the notion
that Congress did not intend to limit the states’
sovereign regulatory power when it passed the
antitrust laws. Since then, however, some courts
have not considered whether the anticompetitive
conduct in question was intended to be protected by
the state legislature or was necessary to accomplish
the state’s aims. In other instances, courts have
granted broad immunity to quasi-official bodies,
including entities composed of market participants,
with only a tangential connection to the state. The
FTC is pursuing matters that should clarify the two
prongs of the state action defense: a “clear
articulation” of the state’s intent to displace
competition and “active supervision” of
anticompetitive private agreements.

•

Indiana Household Movers and
Warehousemen, Inc. In a major attempt to
clarify the requirements for state action immunity,
the FTC last month announced a proposed
settlement with Indiana Household Movers and

Noerr. Noerr immunity shields certain efforts by
firms to petition government bodies to suppress
competition. Noerr, however, sometimes is invoked
to shield efforts to exclude rivals through the misuse
of governmental process. Such conduct is
particularly harmful to consumers and beyond
Noerr’s original scope. The FTC is developing cases
that focus on issues such as:

•

Material misrepresentations to the
government. Noerr immunity rests on the
assumption that the government knowingly has
granted petitions for action having
anticompetitive effects. Conduct that deceives
the government should lack immunity. The
FTC’s Unocal complaint, mentioned above,
alleges that Unocal defrauded CARB into
adopting a standard for low emissions gasoline
covered by the company’s patents. Only after
passage of the new standard did Unocal disclose
the existence of its patent and demand royalties,
according to the complaint. Similarly, the FTC
complaint in the Bristol-Myers Squibb case
alleged, inter alia, that the firm misled the
government by taking inconsistent positions
before two agencies – obtaining a patent by

Federal Trade Commission

Acts on the fringe of possible Noerr protection
become more troublesome when taken in
combination. For example, the FTC’s recently settled
case against BMS relied on the alleged combination
of the firm’s inequitable conduct at the PTO, wrongful
Orange Book listings, sham litigation, and payments
for generics not to enter – all undertaken in an
attempt to obtain or maintain monopoly power.

also resulted in the abandonment of five other
mergers.
1. Non-HSR Reportable Transactions
In the past year, the FTC investigated several
nonreportable mergers, including Meade/Tasco. In
addition, the Commission reached a consent
agreement with MSC.Software Corporation (MSC).

•

Meade/Tasco. In May 2002, the Commission
authorized the staff to seek a temporary
restraining order and a preliminary injunction in
federal district court to pre-empt any attempt by
Meade Instruments Corporation, the leading
manufacturer of performance telescopes and
Schmidt-Cassegrain telescopes in the United
States, to buy assets of Tasco Holdings, Inc.’s
Celestron International (Celestron), the numbertwo performance telescope provider in the United
States and the only other supplier of SchmidtCassegrain telescopes. According to the
Commission, Meade’s purchase of Celestron
assets would have reduced competition in the
performance telescope market and created a
monopoly in the market for Schmidt-Cassegrain
telescopes. Meade had indicated its strong
interest in acquiring all or some of Celestron’s
assets, an acquisition that might not have been
reportable. The parties subsequently abandoned
the transaction.

•

MSC. The FTC finalized a consent order to
resolve competitive concerns at issue in the MSC
case, which the Commission placed in
administrative litigation in 2001. Under the
settlement, MSC must divest at least one clone
copy of its current advanced Nastran software,
including the source code. The divestiture will be
through royalty-free, perpetual, non-exclusive
licenses to one or two acquirers. This case is
notable because it requires MSC to divest not
only the assets acquired but also additional
assets that were needed to restore the lost
competition.

telling the PTO that its application claimed solely
the use of the metabolite of buspirone and not
the use of buspirone itself, while listing the patent
in the FDA’s Orange Book and affirming to the
FDA that the patent did claim a method of using
buspirone. (See Box 1.)

•

Merely triggering ministerial actions. If Noerr
protects petitioning, the immunity is inappropriate
for conduct that merely triggers ministerial
government action, as the party has not truly
sought a discretionary decision. For example, a
pharmaceutical firm’s listing of a patent in the
FDA’s Orange Book, together with an
infringement suit against a generic producer,
would result in an automatic FDA stay on generic
entry under current law. Because the result is
automatic and therefore involves no government
“decision,” Noerr should not give the firm antitrust
immunity.

B. Merger Enforcement
Merger enforcement remains prominent,
although merger activity has fallen and amendments
to the Hart-Scott-Rodino (HSR) Act have lowered the
number of reported mergers. In the past year, the
FTC brought numerous merger enforcement actions,
including actions against firms in the key industries
of health care, energy, and food. The Commission
authorized the staff to seek preliminary injunctions to
block four mergers and authorized the staff to seek a
temporary restraining order to stop a merger in a fifth
case. The Commission also accepted consent
agreements in ten merger cases. FTC investigations

The FTC Year in Review - 7

Pursuing a Pattern

Box 1

Federal Trade Commission

A Positive Agenda for Consumers - 8

Examining Vertical Mergers

Box 2

Although vertical mergers are less likely to have
anticompetitive effects than mergers between direct
rivals, anticompetitive vertical mergers can occur.
The FTC’s review of the proposed Cytyc/Digene and
Avant!/Synopsys vertical mergers show how different
facts lead to different outcomes.
Cytyc/Digene involved the merger of two
complementary cervical cancer screening tests.
Synopsys/Avant! combined two complementary
integrated circuit design software products. The FTC
voted to block the former and to close the latter
investigation. The theory of competitive harm in both
cases involved the combined firm’s incentive to use
its market power in one product to harm competition
in the complementary product. The method by which
harm would occur, the incentives of the firms to act
anticompetitively, and the potential impact on
competition and consumers differed significantly
between the cases, as did the FTC’s ability to forecast
the likelihood of future events.
The means by which the combined Cytyc firm
could harm rivals were well-defined. The theory was
that Digene would not support rival liquid pap test
suppliers in obtaining FDA approval necessary for use
of the Digene product in combination with the rivals’
products. In contrast, the Synopsys theory was that
the firm would make improvements to its logical
synthesis product that worked better with the Avant!
place-and-route product than with rival products.
Exactly what changes would occur was unclear.
Cytyc/Digene appeared to have strong incentives to
act anticompetitively, while Synopsys/Avant!’s
incentive to limit interoperability with its rivals (and
antagonize customers) was unclear.
Moreover, in Cytyc, TriPath (the other liquid pap
test competitor) and new entrants allegedly would be
substantially impeded without the merged firm’s
cooperation. In contrast, Avant! faced significant
competitors downstream who would not be
substantially impeded from competing. That those
competitors might lose sales to Avant! post-merger
did not show that the transaction would likely be
anticompetitive. Another difference between the
cases involved the timing of the anticompetitive
threat. In Cytyc, the alleged potential harm would
occur in the short term; industry participants
anticipated that TriPath could be severely threatened
immediately. In contrast, the competitive harm in
Synopsys was not anticipated to happen until
sometime in the future, if at all.
Potential efficiencies and customer views also
were important. Synopsys/Avant! had the strong
ability to create an improved, more integrated product.

2. Mergers in Key Economic Sectors
A number of the FTC’s merger cases involved
economic sectors with major consumer impact.
Health Care. The FTC completed investigations
of several health-related merger cases in the past
year, including:

•

Cytyc/Digene. An action challenging Cytyc
Corporation’s (Cytyc) proposed $420 million
purchase of Digene Corporation (Digene), in
which the FTC was prepared to allege that the
merger of these two manufacturers of
complementary cervical cancer screening tests
would allow the combined firm to use its market
power in one market to impede competition in
another market – liquid pap tests. The parties
abandoned the merger before the FTC staff filed
a motion in a federal district court to enjoin the
transaction. (See also Box 2.)

•

Amgen/Immunex. A consent agreement
requiring divestiture of assets and licensing of
intellectual property rights in three
biopharmaceutical markets to cure
anticompetitive effects of Amgen Inc.’s $16 billion
acquisition of Immunex Corp.

•

Baxter/Wyeth. A settlement in Baxter
International Inc.’s $316 million acquisition of
Wyeth Corporation to preserve competition in
markets for certain general anesthetics,
neuromuscular blocking agents, antiemetics, and
new injectable iron replacement therapies.

•

Quest/Unilab. A consent agreement to resolve
concerns that Quest Diagnostics, Inc.’s $827
million acquisition of Unilab Corporation would
harm competition for clinical lab services in
Northern California.

In addition, the FTC in 2002 formed a Merger
Litigation Task Force, whose mission includes
investigating recently consummated hospital
mergers. The antitrust agencies have not fared well
in challenging proposed hospital mergers in recent

Federal Trade Commission

years. The Task Force is screening consummated
mergers and, if it finds competitive problems, will
consider recommending enforcement actions. The
Task Force also is analyzing which litigation
strategies worked and which failed in the previous
hospital merger cases. The Task Force will report its
findings regarding consummated mergers that it
does not recommend be challenged.

•

Nestle/Dreyer’s. The Commission last month
authorized the staff to seek a preliminary
injunction to block the $2.8 billion proposed
merger of Nestle’s and Dreyer’s ice cream
businesses. The FTC would allege that Nestle
and Dreyer’s along with Unilever, the marketer of
Ben & Jerry’s ice cream, account for about 98
percent of the sales of superpremium ice cream,
and that acquiring Dreyer’s would give Nestle
alone 60 percent of this market. This matter
highlights the importance of fact-intensive
product market analysis, including the use of
quantitative data, which in this case indicated the
existence of a distinct superpremium ice cream
market. The competitive importance of effective,
not readily duplicatable distribution systems also
was important in the staff’s analysis.

•

Vlasic/Claussen. The FTC last fall authorized
the staff to seek a preliminary injunction to stop
the proposed combination of Claussen, the
dominant firm in the market for refrigerated
pickles, with Vlasic, its most significant
competitor in refrigerated pickles and also the
largest national brand of shelf-stable pickles.
The FTC’s complaint alleged that the merger
could reduce competition and raise prices in the
pickle market because Vlasic’s products acted as
price constraints on Claussen. The parties
abandoned the transaction after the
Commission’s action.

Food. The food sector has immense
significance for American consumers. The FTC has
carefully monitored mergers at all levels of this
industry from production to retail sales.

•

•

Wal-Mart/Supermercados Amigo. In the recent
acquisition of Amigo, the largest supermarket
chain in Puerto Rico, by Wal-Mart, the largest
general merchandiser in the world, the
Commission required the divestiture of four
Amigo stores where direct competition would be
eliminated between Wal-Mart club stores or a
supercenter and Amigo supermarkets. Although
in past cases the FTC has defined the relevant
product market as supermarkets, evidence here
indicated that Puerto Rico consumers use club
stores interchangeably with full-service
supermarkets and supercenters. The FTC
modified its analysis in this case to incorporate
an expanded market definition.
Kroger/Raley’s. Kroger’s acquisition of 18
Raley’s supermarkets in the Las Vegas, Nevada

The FTC Year in Review - 9

Energy. In recent years, the FTC has
investigated numerous oil mergers and has analyzed
the competitive effects of these transactions in many
individual product/geographic market combinations.
When necessary, the agency has insisted on
remedial divestitures to cure potential harm to
competition. Matters in the last 12 months include
Conoco/Phillips, a $35 billion merger, for which the
Commission accepted a settlement requiring the
firms to divest two refineries and related marketing
assets, terminal facilities for light petroleum and
propane products, and certain natural gas gathering
assets.

area last year also illustrates how the FTC
accounts for facts specific to each transaction.
The Commission authorized its staff to seek a
temporary restraining order. After further
analysis indicated that the merger was unlikely to
harm competition, the FTC closed the
investigation without requiring divestitures.
Although the FTC had taken enforcement action
in a Las Vegas supermarket merger in 1999, it
found that substantial new competition in the
market reduced Raley’s significance as a
competitive force.

Federal Trade Commission

Other Mergers. Although health care, energy,
and food dominated agency merger investigation
resources during the past year, the FTC also
resolved through consent orders challenges to
proposed mergers in other sectors of the economy.

•

Bayer AG/Aventis CropScience Holdings. In
Bayer’s $6.2 billion proposed acquisition of
Aventis CropScience, the Commission required
divestitures in markets for new generation
chemical insecticides, herbicides for spring
wheat, and other products.

•

Shell Oil Company/Pennzoil-Quaker State
Company. In this $1.8 billion acquisition, the
FTC obtained a settlement requiring divestitures
to preserve competition in the U.S. and Canadian
market for a paraffinic base oil.
Solvay/Ausimont. The FTC obtained a
settlement requiring divestitures to modify a
transaction that threatened competition in the
world market for a fluoropolymer used in a wide
variety of applications.

•

A Positive Agenda for Consumers - 10

•

Dainippon/Bayer. In a proposed merger
between Bayer’s high performance pigment
business and Dainippon Ink and Chemicals, the
Commission required the divestiture of
Dainippon’s perylene business to Ciba Speciality
Chemicals.

Bayer/Aventis and Solvay/Ausimont also raised
concerns in both the U.S. and Europe, and the FTC
worked closely with the European Commission’s
Competition Directorate and the merging parties to
obtain remedies satisfactory to both competition
authorities.
3. Improving Merger Review and Resolution
A major undertaking in the Bureaus of
Competition and Economics has been to streamline
the merger review process to make it faster, less
burdensome, more transparent, and more effective.

Premerger Notification. As part of an overall
movement to make government more accessible
electronically, the FTC, working with the Department
of Justice (DOJ), has accelerated efforts to complete
an electronic system for filing HSR premerger
notifications. E-filing will reduce burdens for both
business and the government and create a valuable
database of information on mergers to inform future
policy deliberations. The FTC also has made
available to the public a searchable database of
thousands of letters memorializing advice from the
agency staff in response to inquiries about
interpretation of the HSR rules.
Streamlined Investigations. In 2002, the
Bureau of Competition held a series of public
workshops around the country on possible
improvements in the merger investigation process.
In December, the Bureau announced a new set of
Guidelines for Merger Investigations, which
incorporate the staff’s learning from those
workshops. The new measures include a host of
reforms – prompt release of investigational hearing
transcripts to testifying witnesses, simplification of
Second Requests responses, more information
about the standards used in evaluating Second
Request compliance, and easier submission of
electronic materials. The Bureau of Economics also
released a statement on best practices for empirical
analyses, encouraging those practices that facilitate
effective incorporation of empirical analyses, while
reducing the burden on parties in complying with
data requests. Further efforts to improve the merger
investigation process continue. Among other
reforms, the staff is completing work on a revised
Model Second Request, including industry-specific
variations.
Transparency of Decision Making. Greater
transparency about the types of conduct likely to be
challenged helps to serve the FTC’s objectives
through greater deterrence: understanding fully what
kinds of transactions or conduct the FTC is likely to
challenge – and why – facilitates antitrust counseling,
and prevents the proposal or implementation of
many anticompetitive mergers. In the past year, the

Federal Trade Commission

Remedies. Several of the merger best practices
workshops held last spring focused on issues
involved in fashioning remedies, especially in merger
cases. Topics about which the FTC sought the
public’s views included identifying which assets
should be divested and the terms of a proposed
divestiture; criteria for evaluating proposed buyers;
when “up front” divestiture is necessary or desirable;
use of crown jewels provisions; third-party rights;
pre-divestiture risks to competition; and divestiture
success. The workshops provided further insights
on the crafting of remedies in merger cases, which
are included in a recent paper on merger remedy
best practices.

C. Part 3 Administrative Process
A unique feature of the FTC’s antitrust law
enforcement portfolio is its ability to bring cases
before its administrative law judges. FTC
administrative adjudication offers the opportunity for
extensive analysis of complicated policy questions,
often involving cutting-edge issues, by a body with

Box 3

Efficiencies in Antitrust Review
In a speech in November 2002, Commissioner
Thomas Leary discussed the treatment of efficiencies
in antitrust law, providing a historical perspective on
how antitrust policy concerning efficiencies has
evolved over the past 25 years based on academic
learning, rather than fluctuating as a result of political
change. Commissioner Leary stated that the most
significant issues in current efficiency analysis are the
problems of quantifying and comparing predictions
about the offsetting effects of higher concentration
and greater efficiencies. He expressed concern that
significant efficiencies may tend to be ignored
because, while significant, they may be hard to
quantify, or even identify. He concluded that there
has been immense, continuing improvement by the
antitrust agencies in efficiencies analysis over the last
25 years and there currently is near-universal
agreement that efficiencies are important.

specialized expertise in how markets work. The
resulting adjudicative opinions by the Commission,
based on a thorough record and full briefing on the
applicable legal issues, help to improve transparency
in the Commission’s decision-making and can give
considerable guidance to the bar and the business
community on applicable standards and enforcement
policy.
The FTC’s administrative docket expanded in the
past year, and the recent trend toward more
intensive use of this mechanism is expected to
continue. Since last April, the Commission heard
oral arguments in two competition cases, the staff
litigated one merger before an administrative law
judge, and the Commission voted out two new
administrative complaints.

•

Schering-Plough. The Commission heard
arguments in Schering-Plough Corporation in
January after FTC complaint counsel appealed
the ALJ’s Initial Decision to dismiss the complaint
after a trial. The complaint alleges that Schering
illegally paid Upsher-Smith Laboratories and
American Home Products millions of dollars to
delay marketing generic versions of K-Dur 20, a
prescription potassium chloride supplement used

The FTC Year in Review - 11

FTC has sought new ways to expand public
awareness and understanding of its actions in ways
beyond the traditional adjudicative opinions, press
releases, and analyses to aid public comment on
consent agreements. In particular, the FTC has
provided more insight into Commission decisions not
to intervene by issuing statements in matters in
which the agency conducted a significant inquiry but
brought no enforcement action.
Notable examples of the FTC’s increased
commitment to transparency include the
Commission-issued statement in the investigation
into the competing proposed acquisitions of P & O
Princess Cruises, plc, the press release issued in the
Kroger/Raley’s matter, the statements accompanying
the decision not to prosecute in Synopsis/Avant!, and
the detailed responses to comments received in
response to the proposed settlement (now finalized)
in the WalMart/Supermercados Amigo acquisition.
These explanations follow recent FTC statements (in
2001) in the Phillips/Tosco and AmeriSource Health/
Bergen Brunswig merger investigations. (See also
Box 3.)

Federal Trade Commission

to treat patients with low blood potassium levels.
In the spring of 2002, the Commission settled its
charges against American Home Products.

•

Three Tenors. The Commission heard oral
argument in November 2002 in Polygram
Holding, Inc. (The Three Tenors), which involves
allegations that music distribution companies
entered into an illegal agreement not to advertise
or discount earlier albums and video recordings
of concerts featuring the Three Tenors in an
effort to promote the the recording of their most
recent concert. The ALJ upheld the FTC’s
charges and ordered the respondents to cease
and desist from entering into any agreement on
price with wholesale producers or sellers of audio
or video products. The Commission settled
these charges with Warner Communications in
July 2001.
Chicago Bridge. During the past year, the FTC
staff litigated this case, which involves a
consummated merger, before an ALJ. This case
involves the combination of two firms that
construct field-erected specialty industrial storage
tanks. A decision is expected later this year.

•

A Positive Agenda for Consumers - 12

•

Rambus. Last June, the FTC issued an
administrative complaint charging that Rambus,
a participant in an electronics industry standardssetting organization, failed to disclose – in
violation of the organization’s rules – that it had a
patent and several pending patent applications
for technologies that eventually were adopted as
part of the industry standard. The hearing is
expected to begin this spring.

•

Unocal. Last month, the FTC issued an
administrative complaint charging that Unocal
subverted the process under which the California
Air Resources Board (CARB) adopted
regulations on phase 2 reformulated gasoline.

Chapter 2
Consumer Protection Law
Enforcement and Rulemaking
The FTC’s consumer protection mission
promotes the agency’s positive agenda by protecting
consumers against fraud, deception, and unfair
practices in the marketplace. The agency addresses
current issues of importance to consumers, including
identity theft, telemarketing fraud, Internet fraud, and
credit reporting. The FTC uses targeted law
enforcement and consumer and business education
to ensure that consumers have accurate information
for their purchasing decisions. More and more, the
FTC is acting to safeguard consumer privacy.
The FTC uses various policy tools to set priorities
for its consumer protection mission. The
Commission’s rich complaint databases inform the
agency about consumer experiences in the
marketplace; Internet surfs help single out the most
serious online fraud and deception; and workshops,
hearings, and conferences advance the public policy
debate. As the FTC tracks trends using state-of-theart technology, its fundamental mission remains the
same: to identify the most egregious fraud and
deception; to enforce the law acting alone and with
other government authorities; and to educate the
agency about emerging issues, industry about
complying with the law, and consumers about
protecting themselves against fraud and deception.

A. Fraud and Deception
1. Tools to Identify Fraud and Deception
Over the past year, the agency continued to
improve its methods for identifying fraud and
deception, thereby enhancing the implementation of
its positive agenda for consumers. The FTC added
thousands of consumer complaints to its internal
databases, reached more groups of consumers, and
recruited more law enforcement partners at home
and abroad. The agency continued to use electronic
tools extensively to ferret out fraud, especially in the
cyberworld. For example, the FTC teamed up with
law enforcement authorities nationwide to conduct

Federal Trade Commission

the central clearinghouse for ID theft complaints and
provides a valuable source of consumer complaint
data. Calls to the FTC have increased, from more
than 100,000 calls in fiscal year 2001 to more than
185,000 in fiscal year 2002. The ID theft database
now holds more than 430,000 entries. Building on its
experience with Consumer Sentinel, the FTC began
making the data available to law enforcement
partners through an online database, and now more
than 540 law enforcement agencies access the data.
Working with the Secret Service, FTC investigators
develop preliminary investigative reports that are
referred to regional Financial Crimes Task Forces for
possible prosecution.

Box 4

Top 10 Consumer Fraud Complaints
Calendar Year 2002
1. Identity Theft - 43%
2. Internet Auctions - 13%
3. Internet Services & Computer Complaints - 6%
4. Advance-Fee Loans & Credit Protection - 5%
5. Shop-at-Home/Catalog Sales - 5%
6. Foreign Money Offers - 4%
7. Prizes, Sweepstakes & Lotteries - 4%
8. Business Opportunity & Work-at-Home Plans - 3%
9. Telephone Services - 2%
10. Health Care - 2%

Internet “surfs” to find the latest frauds that afflict
consumers.

Spam Database. “Spam,” the popular name for
unsolicited commercial e-mail, is a growing problem
for consumers and businesses alike. Since 1998,
the FTC has maintained an electronic mailbox to
which Internet customers are encouraged to forward
spam (uce@ftc.gov). This database currently
receives an average of 100,000 new pieces of spam
daily. The total number of spam has grown from
700,000 in the first year to more than 30 million
today. (See Figure 2.) The database is searchable,
allowing the FTC staff to track trends and identify law
enforcement targets.

Consumer Response Center (CRC). The CRC
responds to complaints and inquiries submitted by
consumers using the FTC’s toll-free number (1-877FTC-HELP), filing complaints online, and sending
letters. In fiscal year 2002, the CRC added 680,000
complaints and inquiries to the FTC’s database,
raising the total number of entries to 2.3 million.

0.7

0.0

Identity Theft Tools. The FTC’s
toll-free number (1-877-ID-THEFT) is

1998

1999

2000

2001

Calendar Year
*Projected: Based on 6.2 million for January 1 to March 5, 2003.

2002

2003*

The FTC Year in Review - 13

In Millions

Consumer Sentinel. Created by the FTC in
1997, Consumer Sentinel has grown to contain over
one million fraud complaints. It is now available
online to over 650 enforcement
agencies across the United States,
Figure 2
Canada, and Australia. Consumer
Unsolicited Commercial E-mail Forwarded to Spam Database
Sentinel is the richest source of
consumer fraud data available to law
40.0
enforcement agencies. (See Box 4.)
35.1
35.0
Consumers also can access publicly
available sections of this Web site and
30.0
find a wealth of statistics about fraud.
25.0
This past year, Consumer Sentinel
20.0
was one of 25 finalists to receive the
17.4
Excellence.Gov award, which
15.0
recognizes government programs that
10.0
demonstrate excellence in E4.0
5.0
Government innovation.
1.7
1.3

Federal Trade Commission

Military Sentinel. In September 2002, the FTC
and the Department of Defense (DOD) launched
Military Sentinel, the first online consumer complaint
database specifically tailored to the military
community’s unique needs. The system offers
members of the military and their families a way to
file complaints and gain immediate access to the
FTC’s large collection of educational materials and
information. It also gives DOD and law enforcement
officers secure access to the complaints entered.

A Positive Agenda for Consumers - 14

Cross-Border Fraud Web Site. In September
2002, the FTC launched its redesigned
“econsumer.gov” Web site. The complaints filed
through econsumer.gov are accessible to the 17
member countries, which use this information to
decide whether to take further action. This past
January, the FTC unveiled a new Web site,
www.ftc.gov/crossborder, to help consumers spot,
stop, and avoid cross-border fraud. New features on
both Web sites make it easier for consumers to
navigate the site and file their complaints.
Internet Surfs. The law enforcement Internet
surf continues to be an essential tool for the FTC
and other agencies to identify online scams. In the
typical surf, the FTC first identifies a type of
deceptive practice that warrants investigation. The
FTC then recruits partners to search the Web for a
specified time using a protocol tailored to the surf’s
subject matter. Surfs achieve two goals: they
provide a window into online practices, and an
opportunity to alert new Web site providers – some
of whom are new entrepreneurs unaware of existing
laws – if their sites appear to violate the law. In the
last year, the agency conducted five surfs, focusing
on claims about unsubscribing from spam, e-tailer
holiday shopping, medical test kits, energy saving
products, and on the harvesting of e-mail addresses
for the purpose of sending spam to those addresses.
2. Law Enforcement
Drawing heavily on data obtained from Consumer
Sentinel and Internet surfs, the FTC promotes its
positive agenda for consumers by filing enforcement
actions in federal court to stop fraud and deception.

While numbers tell only part of the story, they are
impressive. Since April 2002, the FTC has brought
120 cases targeting fraud and deception. Of these,
66 cases resulted from eight sweeps conducted with
over 100 law enforcement partners. The eight
sweeps targeted Internet scams, telemarketing
fraud, work-at-home opportunities, deceptive weight
loss products, and advance-fee credit-related fraud.
In the past year, the FTC obtained more than 55
judgments ordering more than $650 million in
consumer redress. In addition, the FTC is awaiting
court approval of its settlement with The Associates
First Capital Corporation and its successor,
Citigroup, Inc., which requires the defendant to pay
$215 million to consumers to resolve allegations of
deceptive lending practices and other law violations.
(See Figure 3.) Key areas of consumer protection
litigation have included:
Deceptive Billing Practices. In FTC v. Access
Resource Services, the Commission charged
promoters of “Miss Cleo” psychic services with
deceptive advertising, billing, and collection
practices. The defendants stipulated to a court order
stopping all collection efforts on accounts or claims
from consumers who purchased or purportedly
purchased their pay-per-call or audiotext services
and forgiving an estimated $500 million in
outstanding consumer charges.
Netforce Regional Sweeps. Last year, the FTC
created a series of regional “Netforces” composed of
law enforcement agencies that participated in the
agency’s Internet Fraud Investigations Training
Program. This year, the FTC announced two
regional Netforce sweeps. In the Midwest sweep,
announced in July 2002, the FTC, the Federal
Bureau of Investigation (FBI), the U.S. Postal
Inspection Service (USPIS), the Securities and
Exchange Commission (SEC), and the Commodity
Futures Trading Commission (CFTC) joined ten state
attorneys general and 11 other state and local law
enforcement agencies to target scams on the
Internet. Together, these agencies brought 19 civil
and criminal law enforcement actions against
cyberscammers who have bilked tens of thousands

Federal Trade Commission

Significant Redress Orders

Figure 3

April 2002 - March 2003
Skybiz.com
(1/03) $20m

FAMCO
(9/02) $60m

Other Matters
$65m

International Drivers Permit
The
Miss Cleo
Associates/Citigroup
(12/02) $505m
Sweep. Operation License for
(9/02) $215m*
Trouble is a nationwide law
enforcement sweep targeting
spammers and Web site operators
$865 million
*pending court approval
who deceptively market fake
international driving permits (IDPs).
Authentic IDPs, which cost about $10, are intended
packed credit insurance into its loans,
simply to help ease language barriers for those who
misrepresented loan terms, and engaged in
have a license and who want to drive while traveling
violations of the Truth in Lending and fair credit
abroad. The sellers of fake IDPs falsely represent
statutes. The settlement, which requires court
that their alternative (which cost between $65 and
approval, compels the defendants to return
$375) can be used to drive legally in the United
approximately $215 million to injured consumers.
States; to avoid sanctions for traffic violations; and as
an identification document. The FTC filed six federal
• First Alliance Mortgage. The FTC finalized its
court actions against sellers of fake IDPs and
settlement with First Alliance Mortgage Co.
obtained preliminary injunctions in all six matters.
(FAMCO) and its principal, Brian Chisick, for the
defendants’ alleged deception in representing
Deceptive Lending Practices. Some
loan terms and origination fees. The settlement
unscrupulous lenders deceive consumers about loan
provides for injunctive relief as well as
terms, rates, or fees. The results can be severe,
approximately $60 million in consumer redress,
including the loss of a home. The FTC initiates
$20 million of which is to be contributed by the
cases to root out deception and other unlawful
principals.
practices by lenders, especially in the subprime
market (i.e., borrowers whose credit ratings do not
• Mercantile Mortgage. The FTC entered into a
qualify them for prime loans). Last year, the FTC
settlement with Mercantile Mortgage Co. for
obtained settlements for nearly $300 million in
allegedly deceiving consumers about loan terms,
consumer redress for deceptive lending practices
including the existence of balloon payments. In
and other law violations.
addition to requiring $250,000 in consumer
redress, the settlement gives hundreds of
consumers the opportunity to refinance loans at
• The Associates/Citigroup. As noted above, the
low or no cost. This case marks the first time the
FTC last September announced a settlement of
FTC has held a lender responsible for a
its litigation with The Associates and its
mortgage broker’s misconduct.
successor, Citigroup, Inc. The FTC’s complaint
charged that The Associates had deceptively

The FTC Year in Review - 15

of consumers out of millions of
dollars. The Northeast Netforce,
announced in November 2002, also
targeted various Internet frauds and
deceptive spamming practices. The
sweep’s lead case marked the first
time the FTC has attacked the
practice of deceptively gathering
sensitive financial information from
consumers via spam.

Federal Trade Commission

Health and Safety Claims. Truthful and
substantiated health benefit claims in advertising can
be an important source of information for consumers.
For that reason, combating deceptive health claims,
both online and off, continues to be a major focus of
the FTC’s positive agenda. In the past year, the
agency sued in federal court marketers of dietary
supplements, cosmetics, devices, and services, all of
which purportedly improve the health or appearance
of consumers. Highlights include:

•

•

A Positive Agenda for Consumers - 16

•

Project ABsurd. In May 2002, the FTC filed
actions in federal court (still pending) to
challenge advertising claims for three popular
electronic abdominal (“abs”) exercise belts. In
three of the most frequently aired infomercials of
early 2002, the abs belt promoters allegedly
promised that users would get “six-pack” or
“washboard abs” without exercise. The
complaints allege false advertising for a variety of
claims, including that the belts were safe for all
users, could cause fat or weight loss, and could
eliminate cellulite.
Rexall Sundown. In March 2003, Rexall
Sundown, which manufactures and markets a
variety of nutritional supplements and consumer
health products, agreed to pay up to $12 million
to resolve charges that it made unsubstantiated
claims about “Cellasene,” a purported cellulite
treatment product. The settlement also prohibits
unsubstantiated claims regarding cellulite, body
fat, or weight loss for drugs or dietary
supplements.
Blue Stuff. In November 2002, the FTC
announced a $3 million settlement with Blue
Stuff, Inc. The FTC alleged that, through
nationally-televised infomercials and on the
Internet, the defendants made unsubstantiated
severe pain relief claims for two topical creams,
Blue Stuff and Super Blue Stuff. The settlement
also bars the defendants from making
unsubstantiated health claims about dietary
supplements and related products.

•

Mark Nutritionals. In December 2002, a federal
court entered a preliminary injunction against
Mark Nutritionals, Inc. to enjoin its allegedly
deceptive ads for Body Solutions Evening Weight
Loss Formula and to prohibit unsubstantiated use
of the term “weight loss” in the product name.
The FTC’s complaint alleged that the defendants
falsely claimed that Evening Formula would
result in consumers losing as much as 20 to 40
pounds without the need to diet or exercise. The
injunctions also freeze the defendants’ assets to
preserve them for potential refunds for
consumers.

•

FTC v. Dr. Clark Research Association. In
January of this year, the FTC filed a federal
complaint against a Switzerland-based company
and its U.S. counterpart, alleging that the
defendants made unsubstantiated efficacy claims
for various dietary supplements and devices
marketed on the Internet for the treatment and
cure of advanced and terminal cancers, AIDS,
and other serious diseases. The ad also said the
defendants’ products rendered surgery and
chemotherapy unnecessary for patients with
advanced cancer.

International Pyramid Scheme. In January
2002, the FTC obtained a permanent injunction in
FTC v. SkyBiz against an alleged massive
international pyramid scheme. The final settlement
includes $20 million in consumer redress which will
be distributed to both domestic and foreign victims.
The settlement also bars the principal individual
defendants for several years from multi-level
marketing.
Advance-Fee Credit Scheme. In FTC v. Assail,
the FTC alleged that the defendants operated an
advance-fee credit card scam through a network of
dozens of telemarketing boiler rooms, Canadian
front men, and outsourced fulfillment and customer
service centers. In this action filed in January 2003,
the FTC has identified and shut down the hub of this
fraudulent empire, which generated at least $100
million in fraudulent revenues.

Federal Trade Commission

ordered to pay over $13 million to the victims of
Deceptive Charitable Telemarketing. Two
these criminal activities.
months ago, the FTC announced settlements with
five individual defendants in FTC v. Mitchell Gold.
The FTC alleged that these defendants engaged in
• Robert Febre. Sentenced last May to 14 months
deceptive telephone solicitations for nonprofit
for criminal contempt of the final order in FTC v.
organizations purporting to support police, fire
Robert Febre for operating a new identity credit
fighters, veterans, and sick children. According to
repair scam in direct violation of the order.
the FTC’s complaint, between 1995 and 1999 the
defendants raised more than $27 million, but
B. Consumer Privacy
provided less than three percent of it to the
Consumer privacy is a key focus of the FTC’s
nonprofits. The settlement bans further fundraising
positive consumer protection agenda. As mentioned
and further telemarketing
above, the FTC just
(while still allowing one
launched its most farBox 5
defendant to telemarket
reaching privacy initiative
From the White House
only upon posting a bond).
ever, the National Do Not
“The President commends the Federal Trade
Defendant Gold has
Call Registry. (See Box
Commission for voting to create a national “Do Not
agreed to a $10 million
5.) The registry and other
Call” registry to allow consumers the option to stop
judgment. He was
amendments to the
unwanted telephone solicitations. Time with family is a
indicted, pled guilty, and
Telemarketing Sales Rule
precious commodity, and families should be given the
tools they need to help prevent unwanted calls from
sentenced to 96 months in
will redefine the nature of
telemarketers. Today’s action by the FTC to approve
prison for his involvement
telemarketing for both
the creation of a national “Do Not Call” registry will
in this and another
consumers and
make it easier for consumers to stop getting the sales
fraudulent telemarketing
calls they do not want.”
businesses. These
scheme.
White House Press Secretary, December 18, 2002
amendments will protect

•

Robert Ferrara. Sentenced last October to 125
months in prison for criminal contempt and
ordered to pay over $100,000 in restitution to the
victims.

•

Dennis W. Vaughan. Sentenced last August to
84 months in jail for criminal contempt of the final
order in FTC v. Parade of Toys, conspiracy to
commit wire fraud, and money laundering, and

consumers’ privacy in
their homes by putting
them in charge of the number of telemarketing calls
they receive. The amendments also will give the
agency new tools in the fight against fraudulent and
deceptive telemarketing.
1. Law Enforcement
In the last year, the FTC continued its aggressive
enforcement of existing laws to protect consumer
privacy. Law enforcement actions ranged from a
settlement with Microsoft addressing the privacy and
security of its Passport single sign-on service, to
cases attacking deceptive spam, to the largest civil
penalties obtained in Children’s Online Privacy
cases.
Personal Information. In the past year, the FTC
completed two matters involving the protection of
personal information.

The FTC Year in Review - 17

Project Scofflaw.
The FTC created Project Scofflaw in 1996 to target
individuals who flout Commission orders and
continue to prey upon consumers. Since its
inception, Project Scofflaw has resulted in 33 civil
and/or criminal contempt actions; 54 years of
incarceration or home detention for 14 defendants;
and a total of $58 million in penalties, fines, and
redress. Individuals who have been sentenced this
past twelve months include:

Federal Trade Commission

•

A Positive Agenda for Consumers - 18

•

Microsoft. In December 2002, the FTC finalized
a consent agreement with Microsoft Corporation
resolving charges about the privacy of personal
information collected from consumers through its
Passport web services. The complaint alleged
that Microsoft misrepresented the security of
consumers’ personal information collected
through the Passport services, the amount of
information collected by the Passport system,
and the control that the Kids Passport program
provided parents over what information
participating Web sites could collect from their
children. The consent order bars any
misrepresentation of information practices in
connection with Passport and other similar
services and requires Microsoft to implement a
comprehensive information security program.
Microsoft also must have its security program
certified as meeting or exceeding the standards
in the consent order by an independent
professional every two years.
Eli Lilly. In May 2002, the Commission accepted
a final consent order resolving charges that Eli
Lilly and Company unintentionally disclosed the
e-mail addresses of users of its Prozac.com and
Lilly.com Web sites by failing to take appropriate
steps to protect the confidentiality and security of
that information. The consent order requires Lilly
to establish a security program to protect
consumers’ personal information against
reasonably anticipated threats to its security,
confidentiality, or integrity.

Spam. The FTC has brought 47 law
enforcement actions targeting deceptive spam, half
of them since February 2002. The following matters
indicate the range of the Commission’s spam-related
enforcement measures. In BTV Industries, the FTC
took action against a promoter of spam that claimed
consumers had won a free Sony PlayStation 2 but
“hijacked” them when they responded to an adult
Internet site via a 900-number modem connection
that charged up to $3.99 a minute. Other spam
cases challenge senders of spam for deceptively
collecting sensitive financial information. In Global

Mortgage Funding, the FTC alleged that the
defendants used the logos of well-known financial
institutions (Radian Bank, Prudential, Fannie Mae) to
induce victims to disclose sensitive financial
information, such as income, mortgage balances,
rates, and type. This was the first spam case
challenging e-mail “spoofing” (forging the “from” or
“reply-to” lines in email to disguise the email’s origin),
deceptive “remove me” promises, and alleged
pretexting in violation of the Gramm-Leach-Bliley Act.
In 30 Minute Mortgage Inc., the FTC alleged similar
deceptive practices. Because the company
represented itself as a national mortgage broker, the
FTC also alleged another first – that the company
had violated the Gramm-Leach-Bliley Privacy Rule.
Children’s Privacy. Since April 2001, the FTC
has brought eight cases to enforce the Children’s
Online Privacy Rule, which requires Web sites to
obtain parental consent before collecting, using, or
disclosing personal information from children under
13. The companies under order agreed to pay civil
penalties totaling $360,000. Most recently, Mrs.
Fields Cookies and Hershey Foods Corporation
agreed to settle charges that their Web sites violated
the COPPA Rule by collecting personal information
from children without first obtaining parental consent.
Mrs. Fields will pay civil penalties of $100,000, and
Hershey Foods will pay civil penalties of $85,000.
The separate settlements, announced in February
2003, bar the companies from violating the Rule in
the future and represent the biggest COPPA
penalties awarded to date.
Students’ Privacy. Since October 2002, the
FTC has announced settlements with three
companies that allegedly collected extensive
personal information from millions of high school
students and then sold that information to
commercial marketers, despite promising that the
information would be shared only with colleges,
universities, and other education-related service
providers. The consent agreements bar these
companies from using student information for noneducation-related marketing purposes and prohibit
any further deceptive statements. Moreover, the

Federal Trade Commission

Credit Reporting and Debt Collection
Practices. The FTC brought two important privacyrelated credit cases last year. In D.C. Credit
Services, the company and its co-owner, David
Cohen, agreed to pay a $300,000 civil penalty as
part of a settlement of charges that they violated the
Fair Credit Reporting Act (FCRA) and the Fair Debt
Collection Practices Act (FDCPA). The consent
decree permanently bans defendant David Cohen
from engaging in debt collection activity. In Quicken
Loans, the FTC acted against a Michigan mortgage
lender for allegedly failing to comply with FCRA
provisions that require credit grantors who take
adverse action to notify the consumer when the
action is based wholly or partly on the consumer’s
credit report. The proposed consent agreement
would require Quicken to provide consumers with the
adverse action notices, as required by FCRA.
2. Rulemaking
Congress has directed the FTC to issue rules to
implement a number of statutes that are critical to
protecting the privacy of consumers. In the past
year, the FTC exercised this authority in two
particularly noteworthy instances.
Telemarketing Sales Rule. In addition to
creating the National Do Not Call Registry, the
Commission adopted other significant changes to the
TSR that give consumers added protection against
deceptive telemarketing and unwanted intrusions.
The Rule requires telemarketers to transmit
information to consumers’ caller ID systems to
increase accountability in telemarketing and assist in
law enforcement. It also will greatly reduce
abandoned calls that result in dead air. This change
will help alleviate the obvious concerns that arise
when a consumer picks up the phone and no one is
there. The TSR now will apply to for-profit
telemarketers who solicit contributions for charitable
organizations. These telemarketers will have to

disclose promptly the identity of the charity for which
they are calling and also state that they are soliciting
a contribution, providing consumers with the
information they need to determine whether to
continue with the call.
Gramm-Leach-Bliley Safeguards Rule. In
August 2002, the FTC finalized the Safeguards Rule
to implement the GLB’s security provisions and
establish standards for financial institutions to
maintain the security of customers’ financial
information. In October, the FTC issued a new
publication, Financial Institutions and Customer
Data: Complying with the Safeguards Rule, to help
businesses understand and comply with the Rule.

Chapter 3
Special Policy Instruments for
Assisting and Complementing Law
Enforcement
Congress has given the FTC a distinctive mix of
litigation and non-litigation policy instruments to
exercise its competition and consumer protection
responsibilities. Consequently, the Commission
performs numerous roles in addition to its law
enforcement activities. (See Figure 4.) In the past
year, the FTC has been especially active in holding
hearings and workshops to study specific sectors,
issuing reports of its findings, and providing
advocacy comments on competition issues. The
agency’s consumer protection work has featured
many business and consumer education projects.

A. Competition Policy
1. Hearings, Workshops, Studies, and
Reports
Although the Commission has a rich tradition of
performing research and preparing studies, the past
decade has witnessed a true renaissance of the
FTC’s role in building the foundation of knowledge
that supports the formulation of competition policy.
The past year has continued and extended recent
efforts along these lines.

The FTC Year in Review - 19

consent agreements will require these companies to
disclose how the information will be used if they wish
to employ it for non-education-related marketing
purposes.

Federal Trade Commission

A Positive Agenda for Consumers - 20

•

Health Care. Last September, the FTC held a
workshop on competition law and policy in health
care, featuring presentations by academics,
providers, insurers, employers, patient groups,
and representatives of the FTC, DOJ, and state
attorneys general. The workshop, featuring five
panels and more than a dozen speakers, focused
on clinical integration, payor/provider issues,
group purchasing organizations, generics and
branded pharmaceuticals, and direct-toconsumer advertising of pharmaceuticals.
Participants presented a broad range of views to
the several hundred attendees. The workshop
made clear there is a range of views on the role
of enforcement agencies in improving the
delivery of health care services. The workshop
demonstrated the value of more extensive
examination of these complex and
interdependent issues, and the FTC and DOJ
have undertaken an extended set of health care
hearings. The hearings, which began in
February and will run through the fall of 2003, will
examine the state of the health care marketplace
and the role of antitrust and consumer protection
in satisfying the preferences of Americans for
high-quality, cost-effective health care.

•

•

Intellectual Property. In November 2002, the
FTC and DOJ concluded 24 days of hearings
over nine months on Competition and Intellectual
Property Law and Policy in the Knowledge-Based
Economy. The hearings responded to the growth
of the knowledge-based economy, the increasing
role of dynamic, innovation-based considerations
in antitrust policy, and the importance of
managing the intersection of intellectual property
and competition law to realize their common goal
of promoting innovation. Later this year, the FTC
and DOJ will issue a report that incorporates the
insights of business persons, consumer
advocates, inventors, practitioners, and
academics who participated in the hearings, as
well as other research.

E-Commerce. The Internet boom, heralded as
the next industrial revolution, has great potential
as an engine for commerce and offers
consumers enormous freedom. Contrary to the
perception of the Internet as an almost unfettered
free market, the extension of new or existing
state regulations to the Internet may limit cost
savings and convenience severely without
providing offsetting benefits. The FTC’s Internet
Task Force has been analyzing state regulations
that may have pro-consumer or pro-competition
rationales, but that nevertheless may
restrict the entry of new Internet
Figure 4
competitors. It also is examining
Significance of Non-Enforcement Competition Activities
barriers that arise when private parties
ACTIVITY
INTERMEDIATE RESULT
ULTIMATE OUTCOME
employ potentially anticompetitive
Policy makers more
informed about market
tactics, such as when suppliers or
Advocacy
principles
dealers apply collective pressure to
limit online sales. This work has
Understanding law and
Public
policy facilitates more
Education
resulted in several investigations into
compliance
possible anticompetitive curbs on eMore Competitive
commerce, and the Task Force has
More Effective
Coordination with other
Economy / Improved
Enforcement
Authorities
taken the lead in drafting FTC staff
Consumer Welfare
comments on several state
Continuing Learning
regulations that affect electronic
More Efficient
(conferences, hearings,
Enforcement
research projects, etc.)
commerce. In October, the FTC
hosted a three-day public workshop
Process
Reduced Burden
examining potential barriers to eImprovements
on the Public
commerce in ten different industries.

Federal Trade Commission

•

Prescription Drugs. In July 2002, the FTC
released a report, Generic Drug Entry Prior to
Patent Expiration, focusing on certain aspects of
generic drug competition under the HatchWaxman Amendments. The study examined
whether drug firm conduct that the FTC has
challenged in several enforcement actions
represents a typical pattern of behavior or only a
few isolated instances. The study also examined
more broadly how the process that HatchWaxman established to permit generic entry
before the expiration of a brand-name drug
product’s patents has worked between 1992 and
2000. The report suggested certain changes to
Hatch-Waxman’s attempt to balance competition
and intellectual property law, including permitting
only one automatic 30-day stay per drug product
for each Abbreviated New Drug Application
(ANDA) to resolve infringement disputes over
patents listed in the Orange Book prior to the
filing date of the generic applicant’s ANDA.
President Bush cited the FTC report last October
when he announced regulatory measures to
foster competition in the pharmaceutical industry.
(See Box 6.)
Energy. The FTC is pursuing a number of
projects involving the petroleum industry. First, in
light of increased public concern about the level
and volatility of gasoline prices, the agency is
studying the main factors that may affect the
level and volatility of prices of refined petroleum
products and soon will publish findings from two
public conferences. Second, a major revision of
the 1982 and 1989 FTC Bureau of Economics
staff reports on oil mergers is underway, as is an
empirical study of the effects of various oil
mergers of the past decade. Third, the agency
continues to monitor wholesale and retail prices
of gasoline, by far, the largest single refinery
product. The Bureau of Economics staff inspects
wholesale gasoline prices for 20 cities and retail
gasoline prices for 360 cities across the country
and seeks explanations of any pricing anomalies.

Box 6

FTC Generic Drug Study
Has Prominent Role
“For more than a year, the Federal Trade
Commission has investigated delays and abuses in
the process of bringing generic drugs to the market. I
have reviewed the FTC findings and I am taking
immediate action to ensure that lower cost, effective
generic drugs become available to Americans without
any improper delays.
By this action, we will reduce the cost of
prescription drugs in America by billions of dollars and
ease a financial burden for many citizens, especially
our seniors ...”
– Remarks by President George W. Bush in the
White House Rose Garden, Monday, October 21,
2002

2. Advocacy
When the FTC cannot use its enforcement
authority to challenge competitive restraints, it seeks
to persuade policymakers of the benefits of
competition. Major advocacy efforts include:

•

Professions. In many licensed professions,
regulatory bodies and groups of practitioners
regularly attempt to restrict advertising and
prevent competition from those outside the
profession. These restrictions often result in
higher prices, less information, and fewer choices
for consumers. The FTC and DOJ recently
submitted a joint letter to the American Bar
Association urging it to narrow substantially or
reject a proposed model definition of the practice
of law, which likely would reduce or eliminate
competition from non-lawyers in providing certain
services. Previously, the FTC submitted a joint
letter with the Antitrust Division urging the North
Carolina State Bar to approve a proposed opinion
that explicitly would permit non-lawyers to
compete in real estate and mortgage closing
services, and in January, the North Carolina State
Bar adopted an opinion permitting non-lawyers to
obtain signatures on closing documents and
receive and disburse funds for real estate
transactions. The FTC and DOJ also recently

The FTC Year in Review - 21

•

Federal Trade Commission

provided comments to the Georgia State Bar
Association addressing concerns similar to those
raised in the North Carolina proceeding. Other
advocacy work involving professions during the
past year included comments to the Alabama
Supreme Court urging care in fashioning attorney
advertising rules only to prevent unfair or
deceptive acts or practices and an amicus brief in
a private case seeking to overturn an Oklahoma
law that permits only funeral directors to sell
caskets.
Energy. The FTC undertook three noteworthy
advocacy initiatives involving energy. First, the
Commission authorized its staff to provide
comments to the Environmental Protection
Agency in connection with its study of the impact
of different environmental regulations on product
distribution and, ultimately, on supply and price of
products in various markets. Second, at the
invitation of state officials, the FTC staff
submitted comments on Hawaii’s law establishing
gasoline price controls and on proposed New
York legislation that would have prohibited “below
cost” gasoline pricing and would have banned
construction of new company-operated gas
stations within a certain distance of existing
stations operated by franchised dealers. Third,
the FTC staff addressed competition issues
raised by the deregulation of electricity in four
separate comments filed with the Federal Energy
Regulatory Commission.

•

A Positive Agenda for Consumers - 22

•

Connecticut Board of Examiners for
Opticians. In March 2002, the FTC filed a staff
comment before the Connecticut Board of
Examiners for Opticians, which currently is
considering whether to require stand-alone
sellers of replacement contacts to obtain
Connecticut optician and optical establishment
licenses. Working with the Connecticut Attorney
General’s Office, the FTC staff comment argued
that such a requirement “would likely increase
consumer costs while producing no offsetting
health benefits,” and that such a requirement in
fact “could harm public health by raising the cost

of replacement contact lenses, inducing
consumers to replace the lenses less frequently
than doctors recommend.” In June 2002, the
FTC staff testified before the Board to discuss its
comment.
3. Competition Policy “Research and
Development”
As the Supreme Court noted in the 1997 Khan
case, Congress intended the antitrust laws to be
evolutionary, “adapting to changed circumstances
and the lessons of accumulated experience.” The
rapid changes in many markets require competition
policymakers to conduct competition policy “research
and development” to analyze these trends and derive
new competitive strategies. Many activities
described above, such as the generic drug study, are
important examples of the FTC’s investment in
competition policy R&D. These initiatives are part of
a larger set of R&D projects the FTC has undertaken
to inform its decision making on antitrust issues. For
example, to assess the efficacy of merger
enforcement, the FTC is analyzing the effects of past
enforcement actions, including non-enforcement
decisions, and industry and firm-specific conditions
relating to the potential for both procompetitive and
anticompetitive effects.
In December, the Bureau of Economics held a
Roundtable discussion assembling experts on
mergers from economics departments, business
schools, M&A consulting firms, antitrust law, and
business. The goals included a better understanding
of the M&A process in its entirety and obtaining a
broader perspective on factors that make mergers
succeed or fail. BE economists also published
papers on topics such as the use of econometric
evidence in merger investigations and the
development of various policy issues under the
Merger Guidelines.

B. Consumer Protection
1. Workshops and Reports
In addition to using electronic databases and
Web sites to track consumer fraud, the FTC holds
hearings and workshops to study marketplace
developments and to learn from the experiences of

Federal Trade Commission

consumers, business persons, representatives from
other government agencies, academics, and a host
of other experts in various fields. The agency also
conducts numerous studies of marketplace issues
affecting consumers and publishes its findings in
reports.

•

Weight-Loss Advertising Report and
Workshop. Last September, the FTC released
its staff report, Weight-Loss Advertising: An
Analysis of Current Trends, which analyzed 300
weight-loss ads that ran in 2001. The report
concluded that the use of false or misleading
claims is rampant in weight-loss product
advertising. To prepare the report, the FTC
worked with the Partnership for Healthy Weight
Management, a coalition of representatives from
science, academia, the health care profession,
government, commercial enterprises, and other
organizations whose mission is to promote sound
guidance for achieving and maintaining a healthy
weight. To follow up, the FTC held a workshop in
November 2002 in which participants – scientific
and medical experts, industry members, and
representatives of media organizations and
outlets – discussed the current science of weight
loss, deceptive weight-loss advertising, and
possible ways for the media to screen weightloss ads more effectively. (See Box 7.)
Cross-Border Fraud Workshop. In February
2003, the FTC held a public workshop on Public/
Private Partnerships to Combat Cross-Border
Fraud. Participants from Australia, Canada,
Germany, the United Kingdom, the Organization
for Economic Cooperation and Development
(OECD), and the International Consumer
Protection and Enforcement Network (ICPEN)
joined American law enforcement officials,
business representatives, and consumer
advocates to discuss how the private and public
sectors can cooperate to choke the growth of
cross-border fraud. The workshop generated
several proposals for the private and public
sectors to work together to identify, stop, and
bring effective enforcement actions against

Box 7

The FTC is continuing to discuss diet-ad issues
with media representatives, and others, and plans to
release another staff report and guidance to assist
publishers and advertisers in avoiding false weight
loss claims. Commissioner Sheila Anthony has been
a leader on this issue, and has actively encouraged
the media to screen deceptive weight loss ads. In an
opinion piece in Advertising Age, Commissioner
Anthony commented that the Commission cannot
solve this problem alone and made clear that the
industry and the media have a significant role to play.
Sheila Anthony, “Let’s clean up the diet-ad mess,”
Advertising Age, Feb. 3, 2003, at 18.

cross-border fraud operators and produced ideas
for other measures that the private sector can
take to help FTC combat cross-border fraud.

•

Advertising Nutrition & Health: Evidence
from Food Advertising 1977-1997. The Bureau
of Economics staff produced a report that
reviews data on the types of nutrition and health
claims made in over 11,000 advertisements taken
from a sample of eight leading magazines
between 1977 and 1997. The study documents
an increased focus on diet and health advertising
in the late 1980s and reviews how nutritionrelated claims in advertising changed before and
after the passage of the Nutrition, Labeling and
Education Act of 1990 (NLEA). The results for
heart disease and serum cholesterol claims are
illustrative. At their peak in 1989, heart disease
and serum cholesterol claims were made in 8.2
percent of advertisements, before dropping
substantially in the early 1990s following the
NLEA’s passage. By 1997, heart disease and
serum cholesterol claims had again risen
somewhat, but still well below one-half of 1989
levels. (See Figure 5.) Together with other
research on consumer food choices, this study
should contribute to more informed policy
choices on advertising and labeling policy.

The FTC Year in Review - 23

•

The Need for a
Broad-Based Approach

Federal Trade Commission

the first FTC report. The
Commission plans to release a
fourth follow-up report.

Figure 5

Heart and Serum Cholesterol Ad Claims in Food Advertising
10%

•

9%

Percentage of Food Ads

8%
7%
6%
5%
4%
3%
2%
1%
0%
77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97
Calendar Year

•

A Positive Agenda for Consumers - 24

•

Information Security Workshop. In May 2002,
the FTC held a two-day workshop to explore the
myriad issues raised by information security. The
workshop discussion highlighted one very
important and timely point: that good information
security is everyone’s responsibility –
government, industry, and individual consumers.
Workshop participants emphasized the
importance of the FTC playing its traditional role
to educate consumers and businesses and help
create a “culture of security.”
Marketing Violent Entertainment to Children.
In June 2002, the FTC released its third follow-up
report to its September 2000 report, Marketing
Violent Entertainment to Children: A Review of
Self-Regulation and Industry Practices in the
Motion Picture, Music Recording & Electronic
Game Industries. The June report found that the
movie and electronic game industries were
routinely including rating information in
advertising, and that the music industry was now
including a parental advisory in many of its ads.
The review of advertising placements showed
that, unlike the movie and electronic games
industries, the music industry had not
substantially altered its marketing practices since

Mortgage Roundtable. Last
October, the Bureau of Economics
hosted a research roundtable,
Economic Perspectives on the
Home Mortgage Market, with
some of the nation’s leading
consumer mortgage experts.
Discussion focused on the likely
sources of problems in this
market, the strength of the
empirical support for key theories,
and various regulatory and
enforcement options for improving
market performance.

2. Advocacy
Advocacy also was an important part of the
FTC’s consumer protection mission during 2002.
The agency lends its expertise to other government
agencies and intervenes in court proceedings when
important issues affecting consumers are at stake.
Class Actions. Since January 2002, the FTC
has intervened or appeared as an amicus curiae in
three private class actions where the agency
concluded that a proposed settlement was flawed –
for example, when consumers would receive relief of
little or no value or when class counsel would receive
unreasonable fees. In Erikson v. Ameritech, the
FTC, several state attorneys general, and other
objecting parties convinced the judge to reject a
settlement that would have provided relief of little or
no value to consumers (and potentially harmful to
many consumers) but would have provided class
counsel with fees of about $1 million. In Carter v.
ICR Services, the FTC succeeded in getting the
court to improve the claims process, but the court
affirmed the attorneys’ fees over the agency’s
objection. In First Databank Antitrust Litigation,
which followed an existing FTC enforcement action,
the court cut class counsel’s fee in half in response
to the agency’s brief.

Federal Trade Commission

FDA Trans Fat Labeling. The FTC staff
continued efforts to ensure that consumers get
accurate and useful health information by filing a
comment on the FDA’s proposed rule to govern trans
fatty acid (trans fat) information in food labeling. In
2000, the FDA proposed to amend the Nutrition
Facts panel on food labels to include trans fat
information, and the FTC staff comment supported
that change, noting that truthful information is an
important factor for consumers seeking preventive
health care. In 2002, the FDA reopened the
comment period to allow feedback on a new
proposal to require an asterisk on the label
information on trans fat directing consumers to a
footnote on the Nutrition Facts panel saying “Intake
of trans fat should be as low as possible.” The FTC
staff comment again supported the FDA’s efforts to
allow more truthful information about fats in food
labeling but also expressed concern that the footnote
may suggest to consumers that there is a significant
qualitative difference between saturated fats and
trans fats, a suggestion that appears inconsistent
with current dietary advice. Accordingly, the staff
recommended that FDA conduct consumer research
on the proposed footnote.
HUD Mortgage Disclosure Rules. In October
2002, the FTC staff filed a comment on a proposed
rule of the Department of Housing and Urban

Development (HUD) to simplify the process of
obtaining home mortgages and reduce settlement
costs for consumers. The comment noted that HUD’s
general approach in these proposed changes is to
require brokers and lenders to give consumers more
information about the mortgage process or to
provide information in a revised format. The FTC
staff urged HUD to consider carefully whether the
information disclosed would be useful to consumers
and whether it would be disclosed in an easily
understood way.
3. Consumer and Business Education and
Outreach
Consumer and business education continued to
be a significant part of the FTC’s positive agenda.
Through publications, Web sites, media outreach,
partnerships, and exhibits, the agency reached
millions of consumers and business people. From
April 2002 through February 2003, the FTC
distributed more than 6.2 million publications in
English and more than 126,000 in Spanish. The
FTC logged more than 11.8 million accesses to the
English-language publications on its Web sites and
more than 207,000 accesses to the Spanishlanguage publications on its sites. The FTC
distributed articles that were featured in literally
thousands of community newspapers and reached
more than 236 million readers in fiscal year 2002.
The national media featured stories about consumer
fraud and identity theft on a daily basis, citing the
FTC’s plain language, practical tips, as well as its
Helpline numbers (1-877-FTC-HELP and 1-877-IDTHEFT) and Web site addresses.
Highlights of the past year include:
Identity Theft. Continuing a program initiated in
March 2002, the FTC, the U.S. Secret Service, and
DOJ conducted a series of training seminars for local
and state law enforcement officers. To date, the FTC
and its partners have conducted six regional training
sessions for more than 600 law enforcement officers.
The FTC also has conducted outreach to the
business community on identity theft. In April 2002,
the FTC held a roundtable discussion with
representatives from universities, health care

The FTC Year in Review - 25

FDA Regulation and the First Amendment.
Complementing the agency’s own efforts to ensure
that consumers have access to truthful information,
the FTC staff responded to the Food and Drug
Administration’s request for comment on whether its
regulations and practices continue to comply with the
First Amendment in light of recent judicial decisions.
The comment sets out the FTC’s enforcement
approach as a model that reflects the principles
embodied in the First Amendment’s commercial
speech doctrine. The comment also discussed
empirical research findings, which suggested that
enforcement approaches that seek to maximize the
free flow of truthful commercial speech promote
consumer welfare as well as survive constitutional
challenge.

Federal Trade Commission

providers, creditors, and banks to discuss the steps
they could take to reduce the likelihood of ID theft in
their institutions, and steps that can be taken
following a compromise of personally identifying
information to mitigate the victim’s loss and
inconvenience. The second phase of this effort will
include a forthcoming business guide on ID theft. To
date, the FTC has distributed more than 1,665 CDs
of the booklet Identity Theft: When Bad Things
Happen to Your Good Name to public and private
sector organizations. The agency produced a video
news release on ID Theft, which was broadcast more
than 113 times on 60 stations, representing an
audience of more than 5.3 million; updated the ID
Theft and Military Sentinel Web sites to provide
customized information to 530,000 TriWest
customers whose personal information was stolen in
December 2002; and co-produced Identity Theft:
Reduce Your Risk with American Express. (See also
Figure 6.)
Information Security. In September 2002, the
Commission launched a consumer and business
education initiative for information security, featuring
Dewie, the e-turtle, and the FTC’s consumer and
business publications (in English and Spanish) on
security, e-commerce, spam, online privacy,
children’s online privacy, and identity theft. A

dedicated Web site, www.ftc.gov/infosecurity, links to
FTC press releases on security and other
security-related Web sites,
and includes a section
for children.
The site has
registered
100,000 hits
through the end
of 2002, placing it
in the top 15 FTC pages
visited.
Green Lights & Red Flags: FTC Rules of the
Road for Advertisers. Offering businesses practical
guidance on FTC policies is an important priority.
One key initiative, begun in 2001, is on federal truthin-advertising standards. The agency has sponsored
seminars in the San Francisco area, Cleveland, New
York, and Chicago. Additional seminars have been
conducted in New York, in conjunction with the Better
Business Bureau of Metropolitan New York and the
Association of the Bar of the City of New York, and in
Chicago, in cooperation with the Electronic Retailing
Association, the Promotion Marketing Association,
and the Better Business Bureau of Chicago and
Northern Illinois.

Figure 6

Complaints Entered Into the Identity Theft Data Clearinghouse
1999

2000

2001

2002
Cumulative Complaints:
280,580

A Positive Agenda for Consumers - 26

Total: 161,886

Total: 86,197

Total: 31,117

Total: 1,380
Since February 2001, complaint data also have been provided to the Clearinghouse by the Social Security Administration-Office of Inspector General.

National Consumer Protection
Week. This year, the FTC
coordinated the fifth annual event, this
year on the theme of information
security, with a consortium of public
and private-sector organizations.
(See Box 8.) A dedicated Web site
allowed consumers and businesses to
access an Outreach Toolkit (readymade press releases, public service
messages, a letter to the editor, fullcolor Dewie poster, and banner ads
and buttons.) The site logged more
than 14,000 accesses at the end of
NCPW, making it among the most
popular sites on www.consumer.gov
that month.

Federal Trade Commission

A Culture of Security

Box 8

A major forum for the development of government
policy concerning information security is Organization
for Economic Cooperation and Development. In
December 2001, Commissioner Orson Swindle
became head of the U.S. delegation to the OECD
Experts Group for Review of the 1992 OECD
Guidelines for the Security of Information Systems.
This Expert Group drafted and negotiated a revised
set of OECD Security Guidelines in a matter of
months, and the OECD issued the revised guidelines
in July 2002. Commissioner Swindle also has
addressed privacy and security issues at the OECD in
Paris, the Global Business Dialogue on Electronic
Commerce in Brussels, and the International
Conference of Data Protection Commissioners in
Cardiff. He also delivered a keynote address at the
OECD-APEC Forum on the Digital Economy in
Honolulu held in January 2003.

Hispanic Outreach. Last October, the FTC
posted a Consumer Complaint form in Spanish on its
Web site, which already has yielded more than 2,000
complaints from Spanish-speaking consumers, and
translated some 42 publications so far. The FTC
also is managing an aggressive media outreach
campaign that has resulted in staff interviews in
major national dailies, major market dailies, and
magazines, national radio and television, and local
TV and radio stations.
Do Not Call/Telemarketing Sales Rule. The
FTC created a new website at www.ftc.gov/donotcall,
which logged a record 127,689 hits in December
(over 71,000 in its first day), and created several
brochures for consumers and businesses about the
provisions of the amended Rule.
Cross-Border Fraud. The FTC created a micro
Web site – www.ftc.gov/crossborder – featuring
information on the recent workshop that dealt with
public/private partnerships to fight cross-border
fraud.

Gramm-Leach-Bliley. The FTC released four
publications for businesses to help them understand
and comply with their obligations under GrammLeach-Bliley: How to Comply with the Privacy of
Consumer Financial Information Rule of the GrammLeach-Bliley Act; In Brief: The Financial Privacy
Requirements of the Gramm-Leach-Bliley Act;
Financial Institutions and Customer Data: Complying
with the Safeguards Rule; Getting Noticed: Writing
Effective Financial Privacy Notices.

Alaska Native Art. The FTC has published and
distributed over 120,000 copies of a brochure,
Alaskan Native Art, in cooperation with the Alaska
State Council on the Arts, U.S. Department of
Interior’s Indian Arts and Crafts Board, and the
Alaska Attorney General’s Office to help consumers
identify genuine Alaskan native art. The FTC also
produced and distributed over 100,000 informational
postcards featuring Alaskan Native art and consumer
tips.

COPPA. To assist the operators of children’s
Web sites in drafting COPPA-compliant privacy
policies, the FTC issued a new publication, You, Your
Privacy Policy and COPPA, in April 2002. The
agency also announced the results of an April 2001
COPPA compliance survey reviewing information
collection practices on 144 children’s Web sites. The
2001 survey follows up on an earlier 1998 survey
and indicates that much progress has been made
since the COPPA Rule has gone into effect.

Chapter 4
International Activities
The FTC has became increasingly involved with
international activities. Since 1990, the international
focus has expanded with participation in a growing
number of bilateral and multinational cooperation
initiatives and with efforts – which continue today – to
assist new democracies in developing competition
and consumer protection agencies in new market-

The FTC Year in Review - 27

Spam Harvest. The FTC released a new
publication to educate consumers and businesses on
how e-mail addresses are harvested and how to
reduce the amount of spam received.

Federal Trade Commission

based economies. The growth of communications
media and electronic commerce present new
challenges – fraud and deception now know no
borders. The FTC works more and more with other
nations to protect American consumers who can be
harmed by both anticompetitive conduct and frauds
that are perpetrated beyond the water’s edge.

A. Competition
1. Cooperation in Enforcement and Policy
Development
Cooperation with competition agencies of other
jurisdictions is a key component of an effective
enforcement program. The FTC has broadened and
deepened its cooperation with agencies around the
world on individual cases and on policy issues. The
FTC’s relationships with counterparts in Brussels,
Ottawa, and other capitals remain active as the
agencies’ staffs continue to work closely on
investigations of mutual interest. For example:

•

A Positive Agenda for Consumers - 28

•

Bayer/Aventis CropScience. As noted above,
the FTC, aided by the parties’ confidentiality
waivers, worked with the staffs of the European
Commission (EC) and Canadian Competition
Bureau to analyze the likely effects of the merger
on a number of crop protection markets and to
effect remedies tailored to the concerns in each
jurisdiction to avoid subjecting the parties to
conflicting demands.
P & O Princess Cruises. In the cruise line
cases, the FTC worked closely with the EC on
Carnival’s bid for P&O Princess lines and
simultaneously with the United Kingdom’s Office
of Fair Trading and Competition Commission
regarding Royal Caribbean’s competing bid.
Officials from these agencies later met to analyze
the handling of the cases with a view toward
further improving coordination.

The EC and the U.S. agencies also are generally
working to streamline cooperation in merger cases.
The agencies published merger process best
practices to institutionalize and make more
transparent the means by which the agencies, along

with the parties, can review more efficiently the
merger cases subject to review on both sides of the
Atlantic.
So long as policy differences remain, there is
potential for conflicting outcomes in cases reviewed
by two or more jurisdictions. Given differences in
laws, cultures, and priorities, it is unrealistic to expect
complete convergence in the foreseeable future.
However, areas of agreement far exceed those of
divergence, and instances in which differences result
in conflicting outcomes are likely to remain rare. The
FTC and DOJ and their bilateral partners remain
committed to addressing and minimizing policy
divergences. The U.S. agencies and the EC, for
example, have established several working groups
that have contributed to a greater understanding and
convergence in areas including competitive effects in
conglomerate mergers, efficiencies, and remedies.
Similarly, the U.S. agencies are working with the
Canadian Competition Bureau on a number of policy
and procedure initiatives.
2. Multilateral Competition Cooperation
The FTC participates actively in various
multilateral competition fora that further international
cooperation and convergence.

•

ICN. The International Competition Network
(ICN) provides a venue for antitrust officials
worldwide to achieve consensus on proposals for
procedural and substantive convergence on best
practices in antitrust enforcement and policy.
The FTC and DOJ were among the 16 agencies
that founded the ICN in 2001; its membership
since has grown to 77 agencies from 67
jurisdictions. (See Figure 7.) In September
2002, the ICN hosted its inaugural annual
conference to showcase its work on multijurisdictional merger control and the role of
competition advocacy. Based on
recommendations of the Merger Working
Group’s Subgroup on Notification and
Procedures, which the FTC chairs, the members
adopted a set of guiding principles for merger
notification and review and endorsed three
detailed recommended practices on merger

Federal Trade Commission

notification concerning
Figure 7
Albania
jurisdictional nexus, clear and
International Competition Network Members
Lithuania
Andean Community
Macedonia
Argentina
objective notification thresholds,
Malta
Armenia
Mexico
Australia
Netherlands
and notification timing.
Austria
New Zealand
Barbados
Norway
In November 2002, the U.S.
Belgium
Pakistan
Brazil
Panama
antitrust agencies hosted a twoCanada
Peru
Chile
Philippines
Costa Rica
day ICN conference on merger
Poland
Croatia
Portugal
Cyprus
investigative techniques. In
Romania
Czech Republic
Russia
Denmark
Slovak Republic
preparation for the ICN’s June
EFTA
Slovenia
Estonia
South Africa
2003 annual conference, the
European Union
Spain
Finland
Sri Lanka
Merger Working Group is
France
Sweden
Germany
Switzerland
Greece
preparing new recommended
Taiwan
Hungary
Thailand
Iceland
practices on the timing of review,
Tunisia
Indonesia
Turkey
Ireland
Ukraine
initial information requirements,
Israel
United Kingdom
Italy
United States
transparency, and periodic review
Jamaica
Uzbekistan
Japan
Venezuela
of the merger regime, a paper and
Kenya
Yugoslavia
Korea
Zambia
Latvia
template on merger guidelines,
and a manual on recommended
specified in the Doha Ministerial Declaration relating
practices in investigative techniques. The
to the possible negotiation of a competition chapter
Competition Advocacy Working group is
to the WTO Agreement. The FTC, along with DOJ,
developing an online information and resource
has been working with the other nations in the
center, preparing a compilation of advocacy
Western Hemisphere to develop competition
provisions, conducting sectoral studies of
provisions for a Free Trade Agreement of the
advocacy, and assembling a “tool kit” of
Americas. The U.S. antitrust agencies have
competition advocacy mechanisms. The new
completed negotiating competition chapters of
working group on Capacity Building and
proposed bilateral Free Trade Agreements with Chile
Competition Policy Implementation is preparing a
and Singapore.
report on the challenges developing countries

•

OECD. The OECD is an important forum for
competition officials from developed countries to
share experiences and promote best practices.
During the past year, the FTC has participated
actively in the OECD’s continuing work on, inter
alia, merger process convergence, regulatory
reform, and examining the issues at the trade
and competition intersection.

3. Trade/Competition Fora
Trade agreements increasingly involve
competition issues. In the World Trade Organization
(WTO), the FTC and DOJ participate in the Working
Group on the Interaction between Trade and
Competition Policy, which is examining the issues

B. Consumer Protection
1. Cross-Border Fraud
The globalization of the marketplace poses new
and difficult challenges for consumer protection law
enforcement. Developments in trade and technology
have created unprecedented access to new
products, information, and markets, providing
consumers and businesses with considerable
benefits. But fraud operators also have exploited
these developments to deceive large numbers of
consumers in numerous jurisdictions. Pyramid and
lottery schemes, travel and credit-related ploys, and
high-tech scams, such as modem and page
hijacking, are examples of the types of frauds
perpetrated across national borders that victimize
consumers, harm legitimate businesses, and reduce
consumer confidence in the global marketplace.

The FTC Year in Review - 29

face in implementing competition policies and
establishing credible enforcement agencies.

Federal Trade Commission

Consumer Sentinel statistics released by the FTC in
February show total cross-border fraud complaints
from U.S. consumers increased from 13,905 in 2001
to 24,213 in 2002. Total cross-border complaints
have risen from 12 to 14 percent of all non-identity
theft-related fraud complaints.

•

A Positive Agenda for Consumers - 30

Workshop on Public-Private Sector
Cooperation to Combat Cross-Border Fraud.
As discussed above, in February 2003, the FTC
held a workshop to explore Public-Private Sector
Cooperation to Combat Cross-Border Fraud.

2. Other International Cooperation
Other cooperative activities of the FTC’s
consumer protection mission include:

•

Bilateral Activities. The FTC continues to
strengthen its bilateral ties with consumer
protection agencies in other countries. The FTC
staff and the Competition Bureau of Industry
Canada held a bilateral meeting at which the two
organizations agreed on a work plan for future
cooperation, a protocol for information-sharing,
and a consumer education brochure. The FTC
staff and the United Kingdom Office of Fair
Trading and the United Kingdom Department of
Trade and Industry held a bilateral meeting at
which the agencies agreed on a work plan for
future cooperation, a joint statement of principles
for fighting cross-border fraud, and a protocol for
information sharing.

•

Cross-Border Health Fraud. The FTC
participated in an international health claims surf
day sponsored by ICPEN in spring 2002. The
FTC’s participation focused on Web sites
specifically marketing products and therapies for
arthritis, cancer, and HIV/AIDS, while other
ICPEN surfing partners searched sites promoting
weight loss and other products. The international
surf identified over 1,400 questionable sites.
Countries participating in the international surf
included Australia, Austria, Belgium, Canada,
Denmark, Ireland, Finland, France, Hungary,
Japan, Korea, New Zealand, Norway, Poland,
Portugal, Switzerland, Sweden, the United
Kingdom, and the United States.

Five-Point Plan. On October 31, 2002,
Chairman Muris presented the FTC’s Five-Point
Plan for attacking cross-border fraud. Speaking
before the Fordham Corporate Law Institute’s
29th Annual Conference on International Antitrust
Law and Policy in New York, Chairman Muris
outlined that, under the Five-Point Plan, the FTC
will:
1. advocate adoption of an OECD
Recommendation on Cross-Border Fraud;
2. seek legislative changes to improve the
FTC’s ability to fight cross-border fraud;
3. hold a workshop on public/private sector
cooperation to combat cross-border fraud;
4. enter into new multilateral and bilateral
agreements, and strengthen existing
arrangements, to combat cross-border fraud
through cooperation and coordinated
enforcement activities; and
5. provide targeted technical assistance to
developing countries.
Implementation of the Plan is underway.

•

•

econsumer.gov. As mentioned above, the FTC
continues to work with its international partners to
develop the econsumer.gov project.

The FTC also has been active in the MexicoU.S.-Canada Health (MUCH) health fraud task force,
and has worked on developing an action plan to
move forward in combating cross-border health care
fraud in North America. One example of what
cooperation on this front can produce is FTC v.
CSCT. The FTC, in coordination with Canadian and
Mexican officials, filed this case in February of 2003,
charging a Canadian company offering treatments at
clinics in Mexico with making false claims that it can
treat cancer by using an electromagnetic device to
kill cancer cells.

Federal Trade Commission
Box 9

Recent years have featured the development of
stronger international programs for cooperation on
consumer protection issues. Commissioner Mozelle
Thompson has played a highly active and visible role
in representing the FTC in these international
endeavors. Since March 2002, he has chaired the
OECD’s Committee on Consumer Policy. Under his
leadership, the Committee has issued numerous
documents on consumer protection issues, including
a report on protections for payment card holders, a
report on alternative dispute resolution for online
consumer transactions, and an educational
instrument for consumers considering the use of
alternative dispute resolution. The Committee
currently is drafting a Recommendation Concerning
Guidelines on the Protection of Consumers From
Fraudulent and Deceptive Commercial Practices
Across Borders. Commissioner Thompson also
heads the U.S. delegation to ICPEN.

3. Cross-Border Law Enforcement
The FTC has brought numerous enforcement
actions over the past year in which it has received
assistance from its counterparts abroad. For
example, the FTC received substantial assistance
from the Toronto Strategic Partnership, a group of
U.S. and Canadian law enforcement partners, in FTC
v. STF Group (credit-card loss protection); FTC v.
Pacific First Benefit (advance-fee credit cards); and
FTC v. Efficient Telesales (advance-fee credit cards).
The FTC received substantial assistance from its
British Columbia partners in FTC v. D&C National
Services (lottery) and FTC v. Royal Flush (lottery);
from the U.K. Office of Fair Trading in FTC v. TLD
Networks (sale of bogus domain names) and FTC v.
BTV Industries (prize scheme); and from numerous
foreign consumer protection agencies in FTC v.
Skybiz International (pyramid scheme). (See Box 9.)

C. International Technical Assistance
For over a decade, the FTC has assisted
transition economies that have made the
commitment to market and commercial law reforms.
With funding principally from the U.S. Agency for
International Development (USAID), and in

partnership with DOJ, about 30 nations have
received technical assistance with the development
of their competition laws. In this past year, the
technical assistance program was active in Asia,
South and Central America, South Africa, and
Southeastern Europe. The FTC began a new
resident advisor program in Indonesia and, with
DOJ, continued its resident advisor program in South
Africa. The Commission’s short-term programs have
emphasized the development of investigative skills.
These programs rely on a combination of resident
advisors, regional workshops, and targeted shortterm missions. The agency schedules these
technical assistance activities to enable career FTC
staff to share their expertise with their counterparts in
the newer competition agencies of the world. In the
past year, the FTC received funding to begin a new
program of short-term assistance in North Africa and
Eurasia and funding to continue ongoing programs in
Southeastern Europe and the Andean Community.
To broaden international cooperation on
consumer protection and ensure that no country
becomes a haven for fraud, the FTC is conducting
USAID-funded training missions in Eastern Europe.
Last year, FTC staff conducted consumer protection
training missions in Budapest, Hungary in April and
in Ljubljana, Slovenia in November. These sessions
trained more than 100 government officials from
Albania, Bosnia and Herzegovina, Bulgaria, Croatia,
Estonia, Hungary, Latvia, Macedonia, Poland,
Romania, the Slovak Republic, and Slovenia,
covering such issues as basic consumer protections,
consumer credit, advertising principles,
advertisement interpretation, and advertising
substantiation.

The FTC Year in Review - 31

International Consumer
Protection Cooperation

Federal Trade Commission

Conclusion
Honoring the FTC’s Past and
Building Its Future

A Positive Agenda for Consumers - 32

Recent years have provided a number of
occasions to reflect upon the Commission’s rich
history. In September 2001, the Commission
celebrated the 25th anniversary of the enactment of
the Hart-Scott-Rodino Antitrust Improvements Act of
1976. In 2001, the Commission inaugurated the
Miles W. Kirkpatrick Award for distinguished service
to the agency. Chairman Timothy Muris presented
the inaugural Kirkpatrick Award to Basil Mezines in
2001 and bestowed the honor upon the second
recipient, Robert Pitofsky, in 2002. Former FTC
Chairman Caspar Weinberger assisted in the first
presentation, and Ira Millstein, a prominent member

of the private bar, assisted in the second. Most
recently, in February 2003, the FTC recognized the
100th anniversary of the creation of the Bureau of
Corporations, which Congress incorporated into the
FTC upon the passage of the FTC Act in 1914.
These events provide opportunities not only to
honor the Commission’s past but also to consider its
future. Many of the measures summarized above
demonstrate an awareness that future improvements
in competition and consumer protection policy
depend upon the agency’s continuing investment in
activities that strengthen the institution over the long
term. The good case announced today typically is
the result of efforts undertaken months or years
before. The program described in this report seeks
to make the best use of past investments and to
ensure that future reports have equally impressive
results to summarize.

FEDERAL TRADE COMMISSION

A Positive Agenda
For Consumers:
The FTC Year In Review
Federal Trade Commission
April 2003

FEDERAL TRADE COMMISSION

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