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The FTC in 2010
Federal Trade Commission Annual Report, April 2010

Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
ftc.gov

Chairman Jon Leibowitz and Commissioners Julie Simone Brill,
Edith Ramirez, J. Thomas Rosch, and William E. Kovacic

LEFT TO RIGHT:

The FTC in 2010

April 2010

Federal Trade Commission
Jon Leibowitz, Chairman
William E. Kovacic, Commissioner
J. Thomas Rosch, Commissioner
Edith Ramirez, Commissioner
Julie Simone Brill, Commissioner

Contents
Letter from Chairman Jon Leibowitz
Focus Issues:
FTC in the Health Care Marketplace
Protecting Consumers in the Economic Downturn
The Digital Marketplace

Section One: Competition Mission . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 1
Chapter 1: Health Care Markets .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 3
A.	 Stopping Anticompetitive Pay-for-Delay Agreements .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 3
B.	 Preserving Competition in Pharmaceuticals and Medical Devices .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 5
C.	 Promoting Competition Among Health Care Facilities . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
D.	Defining Standards for Collaborations Among Physicians and Physicians Associations . 11
Chapter 2: Technology Markets . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 13
Chapter 3: Energy Industry . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 15
Chapter 4: Consumer Goods and Services . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 17
Chapter 5: Industrial and Chemical Sectors  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 20
Chapter 6: Other Competition Initiatives .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 21

Section Two: Consumer Protection Mission . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 25
Chapter 7: Protecting Consumers in a Troubled Economy  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 26
A.	 Deceptive Mortgage Foreclosure Rescue and Loan Modification Scams  .  .  .  .  .  .  .  .  .  .  .  . 26
B.	 Deceptive Work-at-Home and Get-Rich-Quick Schemes .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 29
C.	 Other Unfair or Deceptive Consumer Credit and Financial Services Practices . . . . . . . .32
D.	Fair Credit Reporting Act .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 37
Chapter 8: Privacy, Data Security, and Technology  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 38
A.	 Privacy  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 38
B.	 Data Security  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 41
C.	 Computer Security .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 42
D.	Children’s Privacy and Security Online .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 44

Chapter 9: Other Deceptive and Unfair Advertising and Marketing Practices .  .  .  .  .  .  .  .  .  .  .  .  .
A.	 False or Deceptive Health, Safety, and Weight Loss Claims .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
B.	 Environmental Marketing . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
C.	 Telemarketing Fraud .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
D.	Payment Systems  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
E.	 Prepaid Phone Cards . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
Chapter 10: Order Enforcement, Bankruptcy Collections, and Supporting Criminal
Prosecutions .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
A.	 Order Enforcement . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
B.	 Bankruptcy Claims .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
C.	 Criminal Liaison Unit  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
Chapter 11: Consumer Protection Law Enforcement Tools .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

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Section Three: International Activities .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 63
Chapter 12: Seeking International Cooperation and Consistent Outcomes in Cross-Border
Investigations .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 64
A. 	Competition Enforcement  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 64
B.	 Consumer Protection Enforcement . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 64
Chapter 13: Promoting Sound Competition and Consumer Policy Through International
Organizations . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 66
Chapter 14: Promoting Convergence and Cooperation Through Bilateral Relationships .  .  .  .  . 69
Chapter 15: Outreach and International Technical Assistance .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 70

Looking Ahead .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 75
Senior Staff of the FTC  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
2009 Annual Awards  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
Principal Contributors to Report .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
In Memoriam . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

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The online version of this report contains hyperlinks to news releases, reports, cases, campaigns, and other information
referenced in this report. The report is available at www.ftc.gov/os/2010/04/ChairmansReport2010.pdf.

Fred R. Conrad/The New York Times/Redux

We proudly present this year’s Annual Report, which describes the Federal
Trade Commission’s activities and initiatives since last March. To be sure,
this past year the continuing financial downturn has presented unprecedented
challenges for many Americans – and for our agency. Yet thanks to the
tremendous talent and commitment of our staff, the FTC has worked harder
than ever to protect consumers and promote competition.
The Commission has stepped up efforts to stop fraud that targets financially distressed consumers. In a
series of nationwide sweeps, the FTC joined with a number of states and other federal agencies to collectively
file hundreds of law enforcement actions against: mortgage modification and foreclosure “rescue” scams; phony
debt reduction and credit repair operations; abusive debt collectors and payday lenders; and con artists who
guarantee nonexistent jobs, get-rich-quick schemes, and bogus government grants.
This year, the FTC also brought a number of actions against national companies that should ensure greater
benefits for consumers. Lawsuits against Ticketmaster, LifeLock, Kellogg, MoneyGram, and others challenged
deceptive marketing or unfair practices. And cases against prerecorded “robocalls” hawking extended auto
“warranties” and interest-rate reduction programs should help silence unwanted telemarketing calls, especially
during the dinner hour.
In difficult times, consumers need to know that markets are working for them, not against them. Vigorous
antitrust enforcement is especially important in down cycles, to ensure that consumers have choices that fit
their needs, because every dollar must stretch farther. Despite a decline in merger activity, the Commission
has maintained a robust merger review program that resulted in a near record number of enforcement actions
to preserve competition in the health care, technology, chemical, and retail sectors. These cases impact
consumers young and old, involving products and services ranging from drug treatments for premature babies
to funeral and cemetery services.
The FTC also has targeted anticompetitive practices to help ensure that consumers can benefit from lower
prices and better quality goods and services. For example, the agency initiated an administrative action against
a computer chip manufacturer (Intel) and issued a Commission opinion and order to stop restrictive policies in
real estate services (RealComp II).
A top priority is putting an end to “pay-for-delay” patent settlements between brand-name and generic
drug companies. In a first-of-its-kind study, FTC staff found that these sweetheart deals keep lower-cost
generic drugs off the market for an average of 17 months longer than when no such agreements exist, and
will cost consumers and taxpayers $35 billion over the next ten years. The Commission continues to press
its antitrust claims against these agreements in federal court and actively supports legislation to ban these
unconscionable pay-for-delay deals in Congress.

Letter from Chairman Jon Leibowitz
In addition to rigorous law enforcement, the Commission embarked on several important policy initiatives
in the past year. Some examples:
zz

the FTC initiated a series of privacy roundtables to explore the challenges posed by 21st century
technology and business practices that collect and use consumer data, such as social networking, cloud
computing, online behavioral advertising, and mobile marketing;

zz

t
	 he FTC and the U.S. Department of Justice (DOJ) undertook a review of the 1992 Horizontal
Merger Guidelines, encouraging wide participation through public comments and workshops across
the country. We are now seeking additional comments on proposed revisions to ensure that the
Merger Guidelines bring clarity and enhanced compliance with the merger standards the agencies use
to promote competitive markets; and

zz

t
	 he FTC has been holding news media workshops to consider a range of economic and policy issues
relevant to how journalism will survive the Internet age.

The increasingly online and global marketplace requires increased international cooperation and
convergence. The FTC plays a strong leadership role in multilateral organizations to establish best practices
in antitrust and consumer protection policy and enforcement. The FTC’s December 2009 report to Congress
details the agency’s experience using its powers under the U.S. SAFE WEB Act of 2006 to build international
enforcement cooperation. And this year, the FTC and DOJ signed the first-ever direct agency-to-agency
Memorandum of Understanding with the Russian Federal Antimonopoly Services, which establishes a
framework for cooperation and communication among the agencies.
As always, we work to educate consumers on how to protect themselves and avoid being victims of the
next scam. This year the Commission produced, in English and Spanish, websites, publications, radio PSAs,
and videos on a variety of financial scams. We also developed Net Cetera: Chatting with Kids About Being
Online, a booklet that helps parents talk to their children about issues like cyberbullying, sexting, mobile
phone safety, and protecting the family computer. In all these efforts, we work with our many private and
public partners to ensure these resources get wide distribution.
All of us at the Commission are proud of our agency’s work this year on behalf of American consumers. It
is an honor and a privilege to be part of the more than 1,100 employees of the FTC, whose determination and
skill in protecting consumers is unmatched. We are also thrilled to welcome our two newest Commissioners,
Julie Brill and Edith Ramirez. With my fellow Commissioners, our outstanding staff, and our dedicated law
enforcement partners both here and abroad, we will do our best to ensure a competitive marketplace and
informed choice for American consumers.

FOCUS ISSUE:

FTC in the Health Care Marketplace
Promoting competition, stopping false and deceptive
health claims, and ensuring consumers have good
information to make choices about health care products
and services are top priorities at the FTC – and with good
reason. According to the U.S. Department of Health and
Human Services, health care expenditures climbed to $7,681
per person in 2008, taking a bigger bite out of consumer
spending every year. Whether dealing with a difficult health
crisis or simply adopting healthy lifestyle choices, consumers need options and the information to know which
products or services will help them to lead a long, healthy life.
The FTC uses every tool – enforcement, study, advocacy, and education – to advance policies that promote
competition and truthful information in health care markets. And this year was no exception. Health care highlights
include:
Support for Ban on Pay-For-Delay Agreements: The FTC’s longstanding commitment to ending these
anticompetitive, anti-consumer deals between branded and generic drug companies – whether in the courts or by
legislative means – remains one of the Commission’s highest priorities. Pay-for-delay patent litigation settlement
agreements deprive consumers of lower-cost generic drugs, to the tune of $3.5 billion each year. In June 2009,
the Commission released a first-of-its-kind study estimating savings of $35 billion over the next decade if these
deals were banned. As it presses for relief in two federal court actions involving pay-for-delay agreements, the
Commission also supports legislation to ban these agreements in the future, to finally put an end to these costly,
anticompetitive deals.
Promoting Competition for Innovative Treatments: Every year, the Commission
reviews dozens of proposed acquisitions between health care companies working
on cutting-edge medicines and devices. The Commission is particularly attentive
to these markets, where eliminating competition among existing firms may reduce
incentives to introduce new treatments or drugs. Competition among innovating
health care companies helps reduce costs, improve outcomes, and expand
access. Again this year, the FTC brought several significant enforcement actions
to preserve competition between two firms with innovative health care products, or
to prevent a company with an existing product from purchasing a company with a
new, potentially competing product in development. For instance, the FTC blocked

Emerging Health Care Issues:
Follow-on Biologic Drug Competition
Federal Trade Commission Report | June 2009

a proposed $3.1billion merger between two leading producers of plasma-derivative protein therapies and another
merger between the maker of a life-saving heart device and the only company positioned to obtain FDA approval for
a competing device.
Taking on Deceptive Health and Safety Claims: The Commission has a long history of challenging false or
unsupported claims that products can prevent, treat, or cure various ailments, including serious diseases, or help
consumers lose weight or stop smoking. The Commission is particularly concerned about false claims relating to
serious diseases, because consumers may forgo medical treatment when using products that do not perform as
promised. For example, a ‘surf’ of public websites by the FTC and other members of the International Consumer
Protection Enforcement Network (ICPEN) resulted in warning letters to website operators to remove or correct
claims about certain products – dietary supplements, homeopathic remedies, air filtration devices, and cleaning
agents – if there was no scientific support for claims that the products could prevent, treat, or cure the H1N1
virus. For consumers looking for up-to-date information on how to prevent or treat the swine flu, the FTC directed
consumers to information on FDA-approved antiviral drugs and to tips from the Centers for Disease Control.
In-Depth Study of Emerging Health Care Issues: The FTC plays an important role in
studying trends and topics in the health care industry from its unique perspective as a
consumer protection and competition enforcement agency. This year alone, the FTC
issued studies on the following health care topics: authorized generics, smokeless
tobacco, follow-on biologics, the cost of anticompetitive pay-for-delay patent

Sizing Up

Food Marketing and
Childhood Obesity
12•15•09

settlement agreements, as well as annual reports on cigarette advertising and certain
agreements between branded and generic pharmaceutical companies. The agency also
shares its expertise on health care topics with industry members and policy makers. For
instance, the FTC hosted a public forum to address food marketing to kids and childhood obesity. The FTC testified
before Congress three times on health care topics, and filed six comments with federal, state, and local officials.
Commission staff offered guidance in the form of an advisory opinion to a physician-hospital organization seeking to
clinically integrate its operations, lower its costs, and improve the quality of care its members provide.
The FTC will continue to devote significant resources to promote the interest of consumers in health care
markets.

FOCUS ISSUE:

Protecting Consumers in the Economic Downturn
Tough times call for a tough approach at the FTC to protect the millions of consumers struggling to make ends
meet in the economic downturn. Confronted with a significant uptick in fraudulent schemes targeting financially
stressed consumers, the Commission stepped up its efforts – combining forces with other law enforcement
authorities to stop egregious practices quickly before more consumers were harmed. Operation Short Change,
launched in July, and Operation Bottom Dollar, launched in February, targeted false promises of employment, job
placement, work-at-home schemes, get-rich-quick plans, government “grants,” and fraudulent debt relief programs
that often pushed consumers even further into debt. These law enforcement “sweeps” resulted in more than 20
FTC cases, more than 80 actions filed by the Department of Justice, and more than 30 state actions.
Of particular concern was last year’s wave of mortgage foreclosures, which spawned a number of fraudulent
mortgage relief or loan modification scams aimed at consumers struggling to keep their homes. One bogus
operation – shut down as a result of FTC action – went so far as to impersonate legitimate government assistance
programs by using websites with names resembling those of official sites. Operation Loan Lies, initiated in July,
and Operation Stolen Hope, announced in November, cracked down on many such operations with nearly 300
enforcement actions brought by federal
and state agencies. To deal with the
problem in the long term, the Commission
initiated a rulemaking proceeding
proposing to prohibit companies from
charging fees for loan modification before
services are rendered, to bar them from
making misleading claims, and to require

“This company sent me a check claiming
I had won a sweepstakes through a computer
generated ballot system. I want to report this
scam. These are tough economic times and
some may be very tempted to deposit this
check.”
- Consumer in Roanoke, VA

them to make disclosures about the real
nature of their services.
The FTC is also taking action to discourage payment processors from aiding scammers in taking money
from unwitting consumers. Working with Canadian law enforcement officials, the FTC charged that MoneyGram
International, the second-largest money transfer service in the United States, knowingly allowed its system to
be used to defraud people and that in some cases its agents in Canada actually participated in these schemes.
Consumers, who were bilked out of tens of millions of dollars, were falsely told they had won a lottery, were hired
for a secret shopper program, or were guaranteed loans. All of these schemes required payment of upfront fees
by consumers. Con artists prefer to use money transfer services because they can pick up transferred money

immediately; the payments are often untraceable; and victimized consumers have no chargeback rights or other
recourse. Targeting processors, therefore, is an effective way to disable fraud operations.
To help consumers identify and avoid fraudulent schemes, the Commission distributes education materials, in
English and Spanish, both directly to consumers and through a network of partnerships with other organizations.
These materials – offered on websites, in videos and print, and through radio spots – offer information on how to
avoid getting ripped off and where to look for legitimate
sources of help. For instance, Real People, Real Stories
is an FTC video telling the stories of people who actually
saved their homes from foreclosure. Fraud: An Inside
Look features a convicted, former fraudulent telemarketer
disclosing the secrets of his success and warning
consumers about the “tricks” they should not fall for.
Consumers everywhere are trying to stretch their
dollars, and the FTC is holding the line on marketplace
rules that help consumers struggling to get along on a
limited income. The FTC brought a near-record number
of competition enforcement actions this year to prevent
anticompetitive mergers or conduct that could drive prices
higher for already-struggling consumers. For example,
the Commission is working to break down obstacles
that reduce options for convenient, low-cost health care
services. This year, the Commission counseled state
policy makers in Louisiana to reject proposals that would
impose costs on portable and mobile dental offices that
bring dental services directly to Medicaid-eligible children
in a school setting. FTC staff also raised concerns about
a Kentucky proposal to restrict the number of limited service clinics, arguing that the restrictions are likely to
increase the cost of health services for consumers, particularly the uninsured. These clinics, which are located in
supermarkets or pharmacies, offer consumers basic health care services with valuable benefits such as convenient
locations, shorter wait times, longer operating hours, and lower prices.

FOCUS ISSUE:

The Digital Marketplace
Everywhere you go you see Americans connected to the Internet – in coffee shops, riding the train, and even
walking down the street. More people are online to read emails, check the weather, or update their social networking
page. Businesses too have adopted low-cost online methods to track deliveries, hire workers, and reach new
customers. Consumers are driving the evolution to new business models that rely on digital technology, and
businesses must adapt, which raises the stakes for both antitrust and consumer protection enforcement.
For example, as more home buyers seek information online, home sellers want their homes listed there. The
antitrust laws prevent existing competitors from working together to create rules that disadvantage new ways of
doing business in order to keep newcomers from offering products or services that consumers prefer. This year, the
FTC ruled that certain policies of a Multiple Listing Service (MLS) unfairly kept non-traditional and discount brokers
off publicly available websites listing homes for sale. The FTC found that Realcomp II, a Detroit-area MLS whose
members are predominately traditional, full service realtors, restricted consumers’ access to information about
homes listed by non-traditional discount brokers, ones who offered lower commission rates or less than a full range
of professional real estate services. The FTC found that Realcomp’s policies impeded competition from discount
brokers and restricted consumer choice.
A similar technological revolution is underway in the news industry. This year, the FTC hosted a series of
workshops, “How Will Journalism Survive the Internet Age?” to explore how the Internet has affected the delivery
of the news. As traditional journalism meets up with new media methods of delivering the news, old business
models are challenged, and new ways of funding the news are being explored. The implications of this revolution
are far reaching, as excessive concentration in media
markets goes to the very core of whether we are
able to maintain an informed, democratic society.
Do the Internet and new technology enhance the
ability to deliver news or undermine its integrity or its
very existence? Is it “creative destruction” or just
destruction? Perhaps only time will tell, but the FTC
will continue to discuss the implications of new media
in the news industry.

Representative Henry Waxman, Chairman Leibowitz, Arianna Huffington,
and panelists at FTC workshop on December 1, 2009.

New online technologies also provide new means by which scammers peddle old-fashioned schemes to
part consumers from their money. Con artists have gone high-tech, using the Internet to defraud consumers in a
variety of clever ways. Scammers are just a click away from launching emails with false promises about earnings,
hijacking consumers’ modems, or cramming hefty long-distance charges onto their phone bills. The FTC must
act quickly to deal with these cyber scams. This year, for example, in 3FN, the FTC shut down a rogue Internet

Service Provider that allegedly distributed illegal malicious and harmful content, including child pornography, spam,
spyware, viruses, trojan horses, phishing, and botnets. And these threats can come from anywhere in the world.
The FTC is working to protect U.S. consumers from scams originating in other countries, as demonstrated by its
settlement with Cash Today, Ltd. resolving charges that the international Internet payday lending operation failed to
provide consumers with key loan terms in writing and used unfair and deceptive collection tactics from its base in
the United Kingdom.
While the global digital marketplace can provide great benefits and convenience
for consumers, it can also entail some risk to consumers’ privacy, their identity,
and in some cases, their financial future. The FTC works with its international law
enforcement partners to keep pace with these cyber threats, making use of the
important tools provided by the Undertaking Spam, Spyware, And Fraud Enforcement
With Enforcers Beyond Borders Act of 2006 (the U.S. SAFE WEB Act). The U.S.
SAFE WEB Act enhanced the FTC’s ability to cooperate with foreign law enforcement
authorities on cross-border consumer protection enforcement matters, and the FTC
has recommended that Congress make the Act a permanent part of the FTC’s law
enforcement toolkit. The FTC also hosted an OECD conference on “Empowering E-consumers: Strengthening
Consumer Protection in the Internet Economy” for over 250 governmental officials, business leaders and
consumer advocates from around the world to explore global cooperation on a whole host of consumer Internet
issues.
Of particular concern is how best to protect our youngest consumers when they go online. This year the FTC
published a report, Virtual Worlds and Kids: Mapping the Risks, detailing the explicit sexual and violent content
available in virtual worlds and the ease with which minors gain access to it, and recommending ways to reduce
the risks to children. The FTC created Net Cetera: Chatting with Kids About Being Online, an easy-to-use guide
that prepares parents to talk to their kids about the dangers of inappropriate conduct, contact, and content on the
Internet, including sexting, and cyberbullying. The FTC also is investing in the future
by teaching tomorrow’s consumers how to avoid marketplace risks today, meeting
them where they live – online in a virtual shopping mall. The FTC opened a new area
of its website for kids, YouAreHere, with lessons to help kids protect their privacy, spot
frauds and scams, and avoid identity theft. To help deal with ads that are all around
them, the FTC launched a media literacy campaign to teach children ages 8-12 critical
thinking skills to decode the ads that surround them. Admongo.gov uses games to
teach “tweens” to answer important questions when they see a product logo – Who is
responsible for the ad? What is the ad actually saying? What does the ad want me to
do? The next generation may be ‘tech-savvy,’ but they also need to be savvy consumers.

Section One:
Competition Mission
This year, the FTC continued its vigorous program to protect consumers from anticompetitive
mergers and business conduct that can rob them of lower prices and better quality goods and services. Through enforcement, study, advocacy, and education, the FTC’s competition mission is to
protect consumers by ensuring that markets work well. Even in times of economic downturn, the
Commission’s priority is to adhere to time-tested standards, which take into account current market
conditions. To maintain competition through down cycles and into the future, the FTC enforces the
antitrust laws to prevent business conduct or structural changes that can have long-lasting adverse
effects in the marketplace.

The FTC is first and foremost a law enforcement agency, dedicated on the competition side to
stopping and preventing anticompetitive mergers and business conduct. The Commission reviews
premerger notification filings, trade press articles, business and consumer complaints, and other
industry information to uncover evidence of acquisitions and business practices that unreasonably
restrain competition. When necessary, the Commission acts to stop harmful conduct or prevent
business arrangements that threaten the competitive process.

1

Competition Mission

In September 2009, the FTC and Department
of Justice (DOJ) announced that they would solicit
public comment and hold public workshops to explore updating the 1992 Horizontal Merger Guidelines. The goal of the workshops was to evaluate
whether the Guidelines accurately reflect the current
merger review practice at the FTC and DOJ, as well
as to take into account legal and economic developments that have occurred since the last significant
Guidelines revision. The review process was headed
by senior enforcement officials from both agencies, and included public comments in response to a
set of initial questions, as well as five workshops held in Washington, D.C., New York, Chicago, and
Stanford, California. At these workshops, nearly 100 panelists engaged in a wide-ranging discussion
of topics, such as the use of more direct forms of evidence of competitive effects; market definition;
the relevance of large buyers; efficiencies; entry; and the non-price effects of mergers. The agencies
plan to issue revised joint guidelines later this year.

FTC Antitrust Enforcement Actions
Nonmerger Enforcement Actions

Merger Enforcement Actions

Consents

Part 3
Complaints
and
Injunctions

Consents

Part 3
Complaints
and
Injunctions

Total

Abandoned

4

4

0

14

9

1

4

2006

6

5

1

16

9

0

7

2007

11

9

2

22

14

3†

5

2008

4

3

1

21

13

2‡

6

2009

7

6

1

19

9

7

3

2010*

4

3

1

11

9

0

2

Fiscal
Year

Total

2005

*	 October 1, 2009 to March 31, 2010
†	 In FY 2007, the Commission authorized staff to file an administrative complaint and a federal court action in
three matters. To avoid double counting these matters are included only once.
‡	 In FY 2008, in one matter the Commission authorized staff to file an administrative complaint and a federal
court action. To avoid double counting this matter is included only once.

Mergers: The FTC’s merger review program is critical to maintaining competitive markets, and
despite a drop in merger filings, the Commission has kept pace with previous years in the number of
mergers challenged. The breadth and variety of markets reviewed reinforces the importance of rigorous market analysis in merger review and demonstrates the critical importance of applying antitrust
principles consistently in defense of lower prices, better service, more choices, and more innovation.
Anticompetitive conduct: This year, the FTC focused especially on harmful conduct in the
health care, pharmaceutical, technology, retail goods, and real estate sectors where consumer spending is high. Some actions were resolved by consent agreements, putting an end to the unlawful
conduct, while in others, the CommisEnforcement Actions by Sector
FY 2006 Through FY 2010*
sion is seeking relief in federal court or via
Real Estate 8%
its administrative process. Through these
Health Care &
Pharmaceutical 44%
enforcement actions, the FTC remains at the
Chemicals 7%
forefront of developing antitrust standards
for competitor collaboration, vertical reConsumer &
Retail Goods 19%
straints, and single-firm conduct.
The Commission focuses on industries
that most directly affect consumers, such as
health care, technology, energy, retail goods,
and chemicals, so that the FTC’s compe-

2

Other 8%
Technology 6%

Energy 8%

* Represents Fiscal Year 2010 through March 31, 2010.

tition work has a direct impact on consumers by maintaining competition for the products and
services they buy. From generic drugs and computer chips to eyeglasses and portable batteries, the
Commission seeks to prevent the kinds of anticompetitive mergers and conduct in markets large and
small that affect consumers every day.

Chapter 1: Health Care Markets
During the national debate on the future of health care policy, there was consensus on one key
point: competition throughout the health care system is critical to reduce costs and encourage innovation. The Commission is working to promote competition among health care companies on
many fronts. For instance, the Commission
stepped up efforts to stop pay-for-delay agree“Antitrust enforcement improves
health care in two ways. First, by
ments, which cost consumers, employers, and
preventing or stopping anticomthe government an extra $3.5 billion each year
petitive agreements to raise prices,
by forestalling the entry of lower-cost generic
antitrust enforcement saves money
drugs. The Commission supports legislation
that consumers, employers, and
governments otherwise would spend
to ban these agreements, as it continues to
on health care. Second, competivigorously prosecute antitrust claims against
tion spurs innovation that improves
such agreements in federal court. The Comcare and expands access... [T]he
mission has used its enforcement authority to
FTC has been a cop on this beat for
the past 30 years.”
undo agreements among health care providers
– Richard Feinstein, Director, BC,
to fix reimbursement rates with payers. And
testimony before the Senate Committee on
again this year, the Commission intervened in
Commerce, Science, and Transportation,
Subcommittee on Consumer Protection,
a number of potentially harmful mergers that
Product Safety, and Insurance,
threatened to raise prices for important pharmaJuly 16, 2009.
ceutical and medical treatments.

One of the Commission’s top priorities is putting an end to anticompetitive pay-for-delay patent
settlement agreements. These settlements involve payments from brand-name pharmaceutical manufacturers to generic drug manufacturers to delay marketplace entry, usually within the framework for
generic entry established by the Hatch-Waxman Act.  More than two decades ago, Congress passed
the Hatch-Waxman Act, which was designed to make it easier for generic drugs to enter the market,
while giving brand-name manufacturers the patent protection they need to encourage lifesaving
research. While the legislation initially worked as intended, resulting in significantly lower prices for
consumers through the rollout of generic drugs, drug companies eventually found they could delay

3

Competition Mission

A.	 Stopping Anticompetitive Pay-for-Delay Agreements

generic entry by raising
patent disputes and obtaining pay-for-delay agreements to settle the patent
dispute.

Enforcement

Elizabeth Schneirov, Bureau of Economics
Since joining the Bureau of Economics in
1997, Elizabeth has provided economic analysis
in a number of competition matters in a wide
variety of industries, from medical devices
and pharmaceuticals to consumer products
and retail drug stores. Most recently, she has
been instrumental in analyzing the effects of
pay-for-delay patent settlements, serving as
staff economist on several major investigations
and estimating the harm to consumers caused
by these settlements. Elizabeth is also involved in the Commission’s
international technical assistance program, through which she served as
a long-term technical advisor to competition officials in South Africa, and
completed many other short-term missions.

The Commission
continues to pursue two
matters in federal court in
which brand-name drug
companies allegedly paid
generic rivals to delay the
introduction of a generic formulation. The FTC also brought its first civil penalty action to enforce
the reporting requirements of the Medicare Modernization Act (MMA).
iiProvigil. The Commission’s case charging Cephalon, Inc. with an illegal pay-for-delay
agreement for its branded drug, Provigil, is pending in the Eastern District of Pennsylvania.
Provigil is an FDA-approved treatment for excessive sleepiness in patients with sleep apnea,
narcolepsy, and shift-work sleep disorder, with annual U.S. sales of over $800 million. The
court denied the defendants’ motions to dismiss the complaint, finding the agreements may
violate antitrust laws.
iiAndroGel. In February 2009, the Commission and the California Attorney General challenged an agreement between Solvay Pharmaceuticals, Inc., maker of AndroGel, and two
generic drug manufacturers to abandon their patent challenges and delay marketing a generic formulation until 2015. Androgel is Solvay’s branded testosterone-replacement drug,
a prescription pharmaceutical with sales of more than $400 million a year. This case, which
was transferred to the Northern District of Georgia, was dismissed by the court in February
2010.
iiPlavix. The Commission obtained $2.1 million – the largest fine allowed by law – from
Bristol-Myers Squibb Company (BMS) for failing to inform the FTC of agreements reached
with Apotex, Inc., regarding potential generic competition to its blockbuster drug Plavix.
BMS’s conduct allegedly violated a 2003 FTC Order and the MMA, which require that certain drug company agreements be accurately reported to both the Commission and the DOJ.
In this first action under the MMA, the Commission charged that BMS failed to disclose

4

that, as part of a patent settlement with Apotex, BMS orally promised that it would not compete with Apotex during the first 180 days that Apotex marketed its new generic drug.

Reports & Testimony
This year, the Commission released a staff report, “Pay-for-Delay:
How Drug Company Pay-Offs Cost Consumers Billions,” that studied the
impact on consumers and the economy of over six years of pay-fordelay pharmaceutical settlements. The report found that, on average,
these agreements delayed generic entry nearly 17 months longer than
agreements without such payments.  The study observes that most of
these agreements are still in effect and currently protect at least $20 billion in sales of brand-name pharmaceuticals from generic competition. 
The study projects that over the next 10 years pay-for-delay agreements
will cost American consumers an estimated $35 billion – $3.5 billion per year.

Pay-for-Delay:
How Drug Company Pay-Offs
Cost Consumers Billions

An FTC Staff Study
January 2010

Federal Trade Commission | ftc.gov

The Commission twice presented testimony to committees of the U.S. House of Representatives supporting legislation to ban anticompetitive pay-for-delay agreements between generic and
brand‑name drug companies. The testimony explained that pay-for-delay agreements were successfully challenged by FTC enforcement actions between 2000 and 2004, but recent appellate decisions
have significantly undermined these efforts, leading to a dramatic increase in the number of these
agreements.

B.	 Preserving Competition in Pharmaceuticals and Medical
Devices
The Commission reviewed a number of proposed acquisitions in the pharmaceutical industry,
mergers that threatened to reduce the number of firms working on innovative treatment options and
cost-saving drugs. In total, the Commission reviewed acquisitions valued in excess of $117 billion,
and the merger enforcement actions described below preserved competition in pharmaceutical and
medical devices markets totaling more than $5.5 billion in sales.

iiBlood Plasma Therapies. The Commission blocked CSL Limited’s proposed $3.1 billion
acquisition of Talecris Biotherapeutics, two leading makers of plasma protein therapies
used to treat blood borne illnesses such as primary immunodeficiency. The Commission’s
complaint alleged that a history of consolidation in the plasma industry has shown that the
industry uses consolidation as a tool to limit supply and drive prices higher. According to

5

Competition Mission

Enforcement

the complaint, the proposed acquisition of Talecris was particularly concerning because it
was undergoing substantial expansion that – absent the acquisition – would have increased
availability, and lowered prices, of these life-saving therapies. Soon after the FTC filed its
complaint, the companies announced their decision to abandon the merger.
iiHeart Pumps. The Commission successfully challenged Thoratec’s proposed $282 million
acquisition of rival medical device maker HeartWare, charging that the proposed
“We can’t have health care
acquisition would have enhanced Thorreform that truly benefits American
consumers unless we have comatec’s existing monopoly in the market
petition, and competition is parfor left ventricular assist devices (LVADs)
ticularly important when it comes
used to treat patients with advanced heart
to life-saving devices such as the
failure. Prior to the proposed acquisition,
LVAD.”
HeartWare was positioned to obtain FDA
– Richard Feinstein, Director, BC
(press release, July 30, 2009)
approval for its LVAD device in 2012,
making it the only LVAD device to challenge Thoratec’s LVAD monopoly. The parties abandoned the transaction after the Commission announced its intention to challenge it.
iiDrug Treatment for Heart Defects in Premature Babies. The Commission is seeking a
permanent injunction to remedy harmful effects from Ovation Pharmaceutical’s 2006
acquisition of the rights to sell NeoProfin, a drug used to treat congenital heart disease in
approximately 30,000 premature babies each year in the United States. At the time of the
acquisition, Ovation sold Indocin, the only other drug used to treat the condition. In the
week-long trial in December before the U.S. district court in Minneapolis, the Commission argued that Ovation used its monopoly position to raise prices for the drug from $36
to $500 per vial. The Commission is seeking divestiture and disgorgement of all unlawfully
obtained profits since the merger; closing arguments were heard on March 11.
iiAnti-Nausea Drugs and Animal Health Products. The Commission’s review of ScheringPlough’s $41.1 billion acquisition of Merck resulted in significant divestitures to resolve
concerns that the merger would have reduced competition in several animal health care
markets and in the market for drugs used to treat nausea and vomiting in surgical and
chemotherapy patients. Before the merger, the companies were two of the leading animal
health pharmaceutical suppliers in the United States, and competed head-to-head in several
markets. In addition, Merck’s Emend product is the first and only drug approved for human
use to treat side effects of chemotherapy. Schering-Plough was in the process of licensing
an equivalent drug to a third party when the Merck transaction was announced. Accord-

6

ing to the FTC, the
Sarah Mathias, Office of the General Counsel
merger would likely
As Associate General Counsel for Project
have reduced the comManagement, Sarah leads several intra-agency
bined firm’s incentives to
groups working on matters such as the latest
launch Schering-Plough’s
insurance study, the Social Media Task Force, and
the renewed Remedies Task Force. Previously,
competing drug. To
Sarah worked in the OGC’s Policy Studies group
resolve FTC concerns in
on seminal projects such as the FTC/DOJ hearings
on health care and on intellectual property, as well
the market for anti-nauas the 2005 report “Gasoline Price Changes: The
sea treatments, ScheringDynamic of Supply, Demand, and Competition.”
Plough agreed to divest
Before returning to the OGC a year ago, Sarah served as an advisor to
Commissioner Kovacic and as his Chief of Staff while he was Chairman.
its related assets to Opko
Health, Inc. To remedy
concerns about animal health product competition, Merck agreed to sell its interest in Merial to Sanofi-Aventis, its joint venture partner in animal health products. The FTC worked
closely with competition authorities in Australia, Canada, Israel, Mexico, New Zealand, and
the European Commission (EC) throughout its investigation.

iiGeneric Drugs. The Commission challenged Watson Pharmaceutical’s $1.7 billion
acquisition of rival generic drug company Arrow Pharmaceuticals. Prior to the merger,
both Watson and Arrow developed important generic drugs used to treat Parkinson’s disease
and the side effects of chemotherapy. The Commission alleged that the merger, as originally
proposed, would have substantially reduced competition in the U.S. markets for these generic drugs. In order to remedy the Commission’s concerns, Watson and Arrow agreed to sell

7

Competition Mission

iiAnimal Vaccines. As originally structured, the $68 billion merger of Wyeth and Pfizer,
Inc. would have reduced competition in several markets for the manufacture and sale of
animal vaccines and pharmaceutical products, leaving veterinarians and other animal health
product customers with limited options, according to Commission charges. To settle the
FTC’s claims, the companies agreed to sell animal health business assets to an FTC-approved
buyer. FTC staff thoroughly investigated other business lines where the companies may
compete against each other in the human pharmaceutical area, and the transaction’s broader
impact on incentives to innovate and marketing practices. The Commission concluded that
the transaction likely would not harm consumers in any prescription drug market where
the companies currently overlap, reduce incentives to innovate, create intellectual property
barriers, or allow Pfizer to engage in anticompetitive marketing practices. The FTC worked
closely with competition authorities in Canada, Australia, Mexico, New Zealand, and South
Africa during this investigation.

Commissioner J. Thomas Rosch
With the economic downturn, Commissioner J. Thomas Rosch believes vigorous
enforcement is more important than ever. Notwithstanding the decrease in M&A activity,
the number of FTC merger enforcement actions dropped by only ten percent in our fiscal
year ending September 30, 2009, compared to the prior year. Moreover, the drop in
merger work has provided the agency with resources to go after anticompetitive conduct
under Section 5, which remains a top priority. In the fall out from the financial crisis,
the FTC has likewise stepped up its consumer protection efforts. In 2009 alone, the
FTC and the states, working in close coordination, brought more than 200 cases against
firms that peddled phony mortgage modification and foreclosure rescue scams. The
Commission’s litigation efforts demonstrate that it continues to take its missions of protecting competition and
consumers seriously.

assets related to the two drugs to FTC-approved buyers and to ensure that those buyers have
the means to compete effectively in the future.
iiLaser Microdissection Devices. To settle Commission charges, Danaher Corporation and
MDS Analytical Technologies agreed to divest MDS’s assets related to its laser microdissection business as a condition to allowing the companies to proceed with their merger. Microdissection devices are used in scientific research to separate small groups of cells – or even one
cell – from larger tissue samples for specialized testing, such as DNA analysis, RNA analysis,
or protein profiling. As such, they are a key tool used in scientific research. Danaher and
MDS are two of only four North American suppliers of these devices. The FTC contended
that the combination of Danaher and MDS would have led to increased prices and decreased
innovation for the devices. Under the consent order, Danaher and MDS must sell to Life
Technologies, an FTC-approved buyer, all of the products and equipment needed to operate
the MDS laser microdissection business.

Reports & Advocacy
The Commission released three policy reports addressing issues in pharmaceutical innovation and
competition and filed two comments on pending health care plan proposals.
iiFollow-On Biologics. As Congress considered legislation to provide the FDA with authority to approve follow-on biologics (FOBs), the Commission report, “Emerging Health Care
Issues: Follow-On Biologic Drug Competition,” examined whether special incentives are warranted to encourage FOBs to enter and compete with branded biologics. Based on its study,
the FTC concluded that special procedures are unnecessary to encourage FOBs to enter and
compete with branded biologics and are likely to harm consumers. Rather, the patent system
and the ability to charge a monopoly price during the patent term likely will continue to
incentivize further innovation by brand firms and entry by FOB firms.

8

iiAuthorized Generics. The Commission issued an interim report, which provided the first
set of results from the FTC’s study of the effects of authorized generics on competition in the
prescription drug marketplace. Authorized generics exist when a pharmaceutical manufacturer sells a drug under both a brand-name and generic label. The interim report addressed
effects of authorized generic competition on wholesale and retail generic prices during the
Hatch-Waxman Act’s 180 days of marketing exclusivity, as well as effects on the revenues
and sales quantities of independent generics during that period. The report also presented
analysis of patent settlement agreements in which a brand agreed not to compete against
an independent generic with an authorized generic for a certain amount of time and the
independent generic agreed to defer its entry for a certain period. Staff is preparing a final
report that will extend the analysis to include consideration of authorized generics’ long-term
competitive effects.

iiComments on Health Care Plan Proposals
zz

Bureau of Economics
Economists in the Bureau of
Economics conduct policyrelevant research to inform the
FTC’s decisions. With more
than 70 Ph.D. economists and
more than a dozen research
and financial analysts, BE is
the center of the Commission’s “R&D.” BE co-sponsors
an annual microeconomics
workshop with Northwestern
University to bring together
scholars working in industrial
organization, information economics, game theory, quantitative marketing, consumer
behavior, law and economics,
behavioral and experimental
economics, and other areas
related to the FTC’s antitrust,
consumer protection and public policy missions.

New York PBMs. FTC staff commented on proposed
New York legislation to regulate the contractual relationships between pharmacy benefit managers (PBMs)
and health plans. The comments concluded that
the bill’s mandatory disclosures of PBM information
could excessively restrict PBMs’ ability to negotiate efficient, mutually advantageous contracts with health plans, which might unintentionally increase prescription drug prices
for New York consumers and health plans, and also could facilitate collusion among third
parties like pharmaceutical manufacturers.

9

Competition Mission

iiThe Success of Divestitures in Merger Enforcement:
Evidence from the J&J – Pfizer Transaction. This
Bureau of Economics working paper examines the divestitures relating to Johnson & Johnson’s $16.6 billion acquisition of Pfizer’s consumer health division in 2006. Six
brands were divested in this matter to alleviate antitrust
concern. The results show that for three of the brands,
their pre- and post-divestiture performance is similar,
while the remainder underwent changes that do not
appear to be divestiture related. Overall, the results are
consistent with the view that the divestitures maintained
the pre-transaction level of competition.

Information About Medicare Advantage and Prescription Drug Plans. The Commission submitted a comment to the Department of Health and Human Services (HHS)
supporting a proposed rule change to improve the information that health insurers give
to enrollees in Medicare Advantage and Medicare prescription drug benefit plans, in
order to facilitate consumer ability to compare and select among various plans. The comment further suggested that standardized disclosures should
be based on objective tests of how well consumers understand
“I am truly thankful
for the FTC ... at least
them and that they should be updated regularly. In addition,
one government agency
the FTC urged that HHS explore ways to permit third parties
who is willing to go to
to use health insurers’ claim and performance data to develop
bat for the consumers.”
quality measures that further competition and consumer
– Consumer in Arlington, TX
choice.
zz

C.	 Promoting Competition Among Health Care Facilities
Competition between health care facilities, such as hospitals and clinics, helps control health care
costs and provides vital incentives to improve services to patients at their most vulnerable times.

Enforcement
iiOutpatient Clinics. This year, the Commission took action to prevent higher health care
costs due to Carilion Clinic’s 2008 acquisition of two outpatient clinics in the Roanoke,
Virginia area. According to the Commission’s administrative complaint, the two clinics had
strong reputations for offering high-quality care and convenient services at prices much lower
than Carilion’s. The acquisitions therefore eliminated important competition that benefitted
patients, employers, and health plans in the Roanoke area, the complaint alleged. In light
of the Commission’s challenge, Carilion agreed to sell the two outpatient clinics and related
assets to FTC-approved buyers.
iiHospital Merger. In order to improve transparency in the merger review process, BC Director Richard Feinstein issued a statement on the agency’s decision to close its investigation of
a consummated hospital merger between Scott & White Healthcare and King’s Daughters
Hospital in Temple, Texas. According to the letter, King’s Daughters Hospital’s precarious
financial condition made it likely that it could not continue as an independent competitor.
Therefore, the determinative issue in the investigation was whether there was a viable alternative purchaser that would not pose a danger to competition. Scott & White had offered to
sell to another company identified as the most likely alternative purchaser, but that company
declined. Under the circumstances, Commission staff concluded that Scott & White was the

10

only viable acquirer of the
King’s Daughters Hospital assets, and accordingly,
closed the investigation.

Advocacy

Michael Wroblewski, Office of Policy Planning
As Deputy Director of the Office of Policy
Planning, Michael Wroblewski continues his
distinguished service to the FTC, where he has
directed many of the Commission’s studies on
competition issues in the pharmaceutical and
electric power industries. Recently, his work has
focused on emerging health care competition
and consumer issues. Michael led the agency’s
effort to examine the regulatory pathway by which
“follow on biologics” might enter and compete
once the pioneer drug’s patent expires. Michael also drafted comments to
the U.S. Department of Health and Human Services promoting the use of
consumer-tested, standardized information about plan choices for Medicare
enrollees.

iiPortable and Mobile
Dental Services for
Kids. FTC staff filed
comments in May asserting that proposed Louisiana legislation to restrict
the practice of in-school
dentistry raised competition concerns and could harm children seeking dental care. After
a bill was passed allowing dentistry to continue in schools but mandating that the Board of
Dentistry adopt rules to ensure safe delivery of care, the Commission filed additional comments in December, advocating that the Board strike proposed provisions that would make
it more difficult to conduct dentistry in a mobile setting. The comment explained that, if
enacted, the bill is likely to make the most vulnerable of Louisiana’s children – particularly
Medicaid-eligible children – worse off by denying many the opportunity to receive dental
care.

iiLimited Service Clinics. Commission staff commented on a Kentucky Cabinet for Health
and Family Services proposed rule to set licensing requirements for limited service clinics (LSCs), noting that several provisions would impose costs and restrictions on LSCs but
would not apply to the same professionals when practicing in other limited care settings such
as urgent care centers. The comment expressed concern that such disparate regulation may
reduce both price and quality competition among different types of facilities, without any
evidence of countervailing consumer protection benefits.

D.	 Defining Standards for Collaborations Among Physicians and
Physicians Associations

The Commission monitors joint price setting by physicians groups and acts to stop collective action that keeps reimbursement rates high without providing pro-competitive benefits for patients.

11

Competition Mission

Enforcement

iiAlta Bates Medical Group, Inc. A 600-physician independent practice association serving
the Berkeley and Oakland, California area agreed to settle FTC claims that it fixed prices
charged to health care insurers. The FTC order prohibits Alta Bates from collectively negotiating fee-for-service reimbursements or engaging in a related group boycott.
iiRoaring Fork Valley Physicians I.P.A. Inc. The Commission charged a Colorado physicians’ group with violating the FTC Act by orchestrating agreements among its members to
set higher prices for medical services and to refuse to deal with insurers that did not meet its
demands for higher rates. According to the Commission’s complaint, Roaring Fork doctors
demanded that contracts with insurers include automatic annual cost of living adjustments
and banned a cost-lowering provision commonly used by insurers that links reimbursement
rates to Medicare rates. The group agreed to terminate the anticompetitive agreements and
notify the FTC before participating in any collaborative arrangement with doctors.
iiIn the Matter of M. Catherine Higgins. The Commission also took action against the executive director of Boulder Valley IPA for her alleged attempts to evade a previous FTC order
against the association. The Commission alleged that shortly after Boulder Valley IPA agreed
to stop negotiating prices on behalf of competing doctors, M. Catherine Higgins represented
doctors in her individual capacity. The Commission’s consent order with Ms. Higgins provides effective relief to protect competition and health care consumers in Boulder County,
Colorado.

Advisory Opinions
Under its Rules, the Commission or its staff may offer industry guidance in the form of an advisory opinion regarding proposed conduct in matters of significant public interest. In recent years,
the staff of the Bureau of Competition has issued several advisory opinions in the area of health care
provider collaboration. These competition advisory opinions, which can be found on the Commission website, inform the public about the Commission’s analysis in novel or important areas of
antitrust law.
iiClinical Integration Advisory Opinion. Commission staff reviewed a proposal from
TriState Health Partners, Inc., a physician-hospital organization based in Hagerstown,
Maryland, to clinically integrate its operations, including joint contracting by its members
with health plans and self-insured employers. Bona fide clinical integration efforts have the
potential to achieve significant cost savings while improving the quality of care, especially
when the members coordinate their clinical practice in a substantial way. Even though the
group has a large market presence, the program will be non-exclusive, allowing members to
contract individually outside of the proposed program. Under these conditions, TriState’s

12

Commissioner Edith Ramirez
Rapid advancements in the high-tech sector not only bring tremendous benefits
to consumers, but also are a fundamental driver of economic growth. The proper
application of antitrust law is essential to promote vigorous competition in technology
markets, while also maintaining adequate incentives to innovate tomorrow’s solutions.
As demonstrated by the Commission’s long history of research, advocacy, and
enforcement, achieving the right balance between competition and intellectual property
policy is an ongoing challenge. Based on her IP litigation experience, Commissioner
Ramirez plans to further the Commission’s unique and consumer-focused role in
analyzing rapidly evolving markets.

joint contracting with payers would be subordinate and reasonably necessary to achieve clinical integration of its members. Based on these representations, the Commission staff did not
recommend a challenge to the program.

Chapter 2: Technology Markets
Technological advances are critically important to growing our economy, creating jobs and introducing more efficient products and processes into the marketplace. As a result, the Commission
is especially vigilant to promote competition in technology sectors of the economy. Again this year,
the Commission reviewed a number of proposed acquisitions that raised concerns about the number
of firms devoted to advancing current technology in a given market and challenged business conduct
allegedly aimed at thwarting new products in the marketplace.

Enforcement

in violation of Section 5 of the FTC Act. The
administrative complaint alleges that Intel
carried out an anticompetitive campaign using
threats and rewards aimed at the world’s largest
original equipment manufacturers (OEMs) to
coerce them not to buy rival CPUs and used exclusive or restrictive dealing to prevent OEMs
from marketing machines with rival CPUs. In addition, the complaint alleges, Intel secretly

13

Competition Mission

iiComputer Chips. The Commission charged
chip manufacturer Intel Corporation with
illegally using its dominant position in the
markets for central processing units (CPUs)
and graphics processing units (GPUs) to stifle
competition and to strengthen its monopoly

redesigned key software, known as a compiler, in a way that deliberately stunted the performance of competing CPUs, and then claimed that the software performed better on Intel’s
CPUs, without disclosing that the difference was largely or entirely due to Intel’s compiler
redesign. The complaint also alleges that Intel’s CPU dominance was threatened by the innovation of GPU manufacturers, prompting Intel to engage in similar unfair practices to obtain
a monopoly in the relevant GPU markets. The administrative trial is set to begin September
15, 2010.
iiEngineering Process Software. The Commission modified an FTC order requiring Aspen
Technology, Inc. to restore competition in the U.S. markets for several engineering process
simulation software products. Under the 2004 order, Aspen Tech was required to divest
overlapping software assets in order to alleviate FTC concerns that its 2002 merger with
Hyprotech would substantially lessen competition. The Commission charged that Aspen
Tech failed to fully and timely divest the assets to Honeywell, the FTC-approved buyer, and
it agreed to additional requirements and oversight to settle the FTC charges.
iiInterlocking Directorates. The Commission also monitors business relationships between
firms with competing technology products. Section 8 of the Clayton Act prohibits, with
certain exceptions, the same person from serving as a director or officer of two competing
corporations. After an FTC investigation raised concerns about two individuals serving on
the boards of Apple and Google, these individuals stepped down from the boards of one of
the companies in order to resolve the FTC’s concerns without the need for litigation.

Public Hearings
iiThe Evolving IP Marketplace. During 2009, the FTC completed a series of eight hearings
to explore the competitive dynamics of evolving markets for intellectual property. Hearings
were held in Washington, D.C. and Berkeley, California to examine a number of important
issues: the role of patents in promoting innovation and technology transfer; the operation of
secondary patent markets; and the impact of substantive legal doctrines on the patent marketplace. In particular, participants at the hearings undertook an in-depth study of patent
infringement remedies, such as injunctions and damages. The Commission heard from more
than 100 experts and received 47 public comments. FTC staff is drafting a report analyzing
the competitive implications of information learned from the hearings.

14

Chapter 3: Energy Industry
The petroleum industry plays a crucial role in our economy. Few issues are as important to
consumers and businesses as the prices they pay for gasoline and for energy to heat and light their
homes and businesses. The Commission devotes significant resources to monitoring energy markets.
For example, the Commission monitors retail and wholesale prices of gasoline and diesel fuel in 20
wholesale regions and approximately 360 retail areas in the U.S. Each year, the Commission issues a
number of reports on market statistics and trends, such as semi-annual reports on oil and gas activities, and an annual ethanol report.
Retail and Wholesale Gasoline
and Diesel Price Monitoring

On the merger front, the Commission received premerger filings under the Hart-Scott-Rodino
Act for 33 proposed acquisitions involving products in energy markets during 2009. The agency
reviewed each of these transactions and also monitors the industry for non-reportable transactions
that may raise competitive concerns. This year, the Commission investigated acquisitions involving
refined petroleum products pipelines and terminals, liquefied petroleum gas (propane), lubricant oils,
natural gas, and natural gas liquids storage and transportation.

iiPetroleum Market Manipulation Rule. This year, the Commission added another tool to
combat higher prices for wholesale petroleum products. Pursuant to its authority under the
Energy Independence and Security Act of 2007, the Commission issued its Petroleum Mar-

15

Competition Mission

Rulemaking & Comments

ket Manipulation Rule, which
became effective in November.
A Deputy Assistant Director of the Bureau
In a rulemaking proceeding that
of Competition, Patricia Galvan is one of the
generated over 150 comments
agency’s oil and gas experts. In 1999, Patricia
from consumers and businesses,
joined the Mergers III Division, where she has
investigated numerous oil industry mergers
the Commission crafted a Rule
such as BP Amoco/ARCO and Chevron/Texaco.
that prohibits fraud or deceit in
Patricia also led a litigation team seeking a federal
court injunction blocking Equitable Resources,
wholesale petroleum markets,
Inc.’s acquisition of Dominion Resources, Inc.,
including omission of material
two natural gas distribution companies serving
information, that is likely to
customers in Pittsburgh. This year, Patricia headed up an agency-wide
task force to develop an FTC rule prohibiting manipulation in wholesale
distort petroleum markets. The
petroleum markets.
Commission staff prepared a
compliance guide for businesses,
which sets out examples of Rule violations, such as false public announcements of planned
pricing or output decisions, false statistical or data reporting, and
wash sales intended to disguise the actual liquidity of a market or
the price of a particular product. Suspected violations of the Rule
can be reported to mmr@ftc.gov.
Patricia Galvan, Bureau of Competition

iiComments to the Federal Energy Regulatory Commission 	
zz

zz

16

Partial Acquisitions by Energy Companies. The Commission
submitted two comments concerning Federal Energy Regulatory Commission’s (FERC) competitive assessments of partial
acquisitions of electric power providers, including acquisitions
by private equity firms holding investments in competing electric power providers. The
FTC encouraged FERC to avoid adopting policies that assess competitive effects based
solely on control, but rather to examine closely the competitive effects of partial acquisitions that fall short of control.
Improving the Power Grid. The Commission commented during a FERC proceeding concerning how to improve regional planning. The FTC advised that planning for
new transmission lines will be most effective if it covers a geographic area that matches
the scope of power flows, taking into account congestion, reliability, and environmental
impact. When determining how to divide up the costs of new lines, FERC should recognize that the transmission system’s functions are evolving to include new attributes, such
as “smart grid” technology, that can improve the efficiency of grid operations and give
consumers more control over their energy use and energy bills.

zz

Effective Energy Use. The FTC provided comments on FERC’s draft action plan to
support programs that could help consumers manage their electricity use, so the electrical
grid can be run more efficiently, with increased reliability, and at lower cost. The Commission applauded the draft plan for including these “demand response” programs. The
FTC recommended expanding the use of consumer research to better understand consumers’ preferences, motives, decision-making, and ability to use technology effectively.

zz

Assessing Regional Transmission Organizations.  In response to a FERC request for
comments, the Commission recommended that FERC adjust the proposed metrics that
it would use to measure the performance of electric regional transmission organizations
(RTOs) and independent system operators (ISOs). The Commission proposed that
FERC metrics evaluate RTOs’ and ISOs’ performance in relation to their prescribed
minimum characteristics and functions, and that FERC consider augmenting these criteria to measure the organizations’ efficiency.

Chapter 4: Consumer Goods and Services

This year, the Commission ruled that certain policies of a Multiple Listing Service (MLS) operating in Southeastern Michigan violated Section
5 of the FTC Act by impeding competition from
“The Realcomp Policies are,
non-traditional and discount brokers. The Comin essence, an agreement among
mission’s unanimous opinion in Realcomp II Ltd.
horizontal competitors to restrict
the availability of information that
found that the group’s policies restricted consumconsumers can use to evaluate
ers’ access to information about property listings
the prices and other features of
from discount brokers on popular real estate webcompeting providers’ offerings, the
sites and restricted brokers’ access to such listings
effect of which is to make such information more difficult and costly
within its own MLS database.  The Commission
to obtain.”
found that the restrictions reduced consumer
– Commission Opinion in
choice, protected prevailing commission rates,
Realcomp II Ltd., November 2, 2009
and harmed the competitive process without any

17

Competition Mission

The Commission also focuses its enforcement resources on mergers and anticompetitive business
conduct that threaten competition for goods and services that consumers buy every day. In the past,
this has resulted in Commission actions involving a variety of products, from groceries and health
care products, to soft drinks and video stores. The Commission’s merger investigations in these areas
can be very time and resource-intensive because they often involve dozens, sometimes hundreds, of
local markets or the analysis of extensive retail pricing data.

offsetting benefits for home buyers and sellers.  The Commission’s order requires Realcomp to cease
and desist from enforcing its unlawful restrictions or otherwise discriminating against non-traditional
listings. Respondents have filed an appeal.

Enforcement
The Commission also took action to preserve or promote competition in the following consumer
goods markets.
iiPhotochromic (Darkening) Treatments for Eyeglass Lenses. The Commission charged
Transitions Optical, Inc. with violating Section 5 of the FTC Act by using exclusionary contracts to maintain its monopoly in photochromic lenses. Transitions, the leading maker of
treatments that darken lenses exposed to sunlight, allegedly imposed exclusive dealing policies on its lens makers, retailers and wholesaler labs, foreclosing rivals from key distribution
channels and leading to higher prices, reduced innovation, and fewer choices for consumers.
According to the complaint, as a result of these restrictive policies, Transitions lenses account
for over 85 percent of the photochromic lenses sold in the United States, and new entrants
offering competing photochromic lens treatments could not find outlets for their products.
Under a settlement with the FTC, Transitions agreed to end existing exclusive dealing contracts and not enter into new ones.
iiCarbonated Soft Drinks. The FTC required PepsiCo, Inc. to restrict its access to the confidential business information of rival Dr Pepper Snapple Group as a condition for proceeding
with a proposed $7.8 billion acquisition of its two largest bottlers and distributors, which
also distribute Dr Pepper Snapple Group carbonated soft drinks. Under a separate 20-year
exclusive license to bottle, distribute and sell Dr Pepper, Crush and Schweppes, Pepsi bottling employees will receive confidential Dr Pepper Snapple marketing and brand plans. The
FTC consent agreement requires Pepsi bottling employees not to share sensitive business
information with other Pepsi employees who manage concentrate sales, so as to eliminate opportunities for Pepsi to reduce competition between Pepsi products and the other carbonated
soft drinks to the detriment of consumers.
iiPortable Batteries. In November 2009, two major consumer electronics manufacturers,
Panasonic Corporation and Sanyo Electric, agreed to sell portable nickel metal hydride
(NiMH) battery assets in order to alleviate Commission concerns regarding their proposed
$9 billion merger. NiMH batteries are used to power the two-way radios used by first responders such as police and fire departments. Prior to the merger, Panasonic and Sanyo were
the world’s two largest manufacturers of NiMH batteries. Under the terms of the Commission’s settlement, Sanyo’s NiMH assets located in Japan were sold to a subsidiary of Fujitsu.

18

Global Competition Review: FTC One of Top Competition Agencies
Again this year, the Global Competition Review named the FTC one of the top three elite
competition agencies in the world. “With a budget equivalent to more than €75 million and
some of the most experienced staff of any antitrust agency in the world, it again deserves to
take a place near the top of the Rating Enforcement table.”

iiCemetery Services. The Commission entered into two consent agreements with Service
Corporation International (SCI), the nation’s largest cemetery operator, to resolve competitive concerns related to two separate acquisitions. Last fall, SCI proposed to acquire Palm
Mortuary, the third-largest provider of cemetery services in Las Vegas, Nevada, which would
have given SCI control of 76 percent of the market for cemetery services in that area, according to the FTC. Under the consent order, SCI must divest its only cemetery in the Las Vegas
area, as well as the funeral home on the same property. The FTC was assisted by the Office
of the Nevada Attorney General throughout its investigation. In March, to settle FTC charges and proceed with a separate proposed acquisition of Keystone North America Inc. (KNA),
SCI agreed to divest 22 funeral homes and four cemeteries in 19 areas throughout the country. Under the terms of the FTC’s proposed consent, in order to preserve existing competition, SCI must divest SCI or KNA assets in 16 local funeral services markets affected by the
acquisition: Yuma, Arizona; Monterey, California; Denver, Colorado; Auburndale/Winter
Haven, Florida; Vidalia, Georgia; Bossier City, Louisiana; Lansing, Michigan; East Aurora,
New York; Northern Rockland County, New York; Charlotte, North Carolina; Greensboro,
North Carolina; Columbia, South Carolina; West Columbia/Lexington, South Carolina;
New Tazewell, Tennessee; Lynchburg, Virginia; and Yakima, Washington. The consent also
requires divestitures in the following three local cemetery services markets: Yuma, Arizona;
Macon, Georgia; and Columbia, South Carolina.

iiResale Price Maintenance. Resale Price Maintenance
(RPM) involves an agreement between a manufacturer
and retailer setting the prices at which the retailer will
resell the manufacturer’s goods to consumers. In 2009,
the FTC held a series of workshops to explore, for the
purposes of enforcing Section 1 of the Sherman Act and Section 5 of the FTC Act, how to
best distinguish between uses of RPM that benefit consumers and those that do not.

19

Competition Mission

Workshops

Chapter 5: Industrial and Chemical Sectors
The Commission also reviewed several proposed acquisitions between chemical companies that
raised competitive concerns, resulting in the following enforcement actions.

Enforcement
iiBattery Separators. This year was an important one in analyzing competition in the industrial and chemical sectors as Commission staff presented evidence in a month-long
administrative trial challenging Polypore International Inc.’s February 2008 acquisition of
Microporous Products. The Commission’s complaint alleged that the acquisition decreased
competition in four North American markets: deep cycle, motive, automotive, and uninterruptible power supply battery separators. The Commission’s complaint also challenged a
Polypore joint marketing agreement as an illegal market allocation agreement to prevent new
competition for its polyethylene battery separators. The hearing before an Administrative
Law Judge (ALJ) included testimony from 33 fact witnesses and two expert witnesses, as well
as more than 2,100 exhibits. In February, the ALJ issued an initial decision finding that the
merger violated Section 7 of the Clayton Act, and that a mutual non-compete clause in the
joint marketing agreement violated Section 5 of the FTC Act as an unlawful market allocation. The ALJ’s order requires complete divestiture of the acquired assets in order to restore
competition in the four battery separators markets and prohibits continued performance
under the non-compete clause.
iiRoad Salt. The Commission challenged K+S Aktiengesellschaft’s $1.68 billion acquisition
of Morton International, two major suppliers of bulk de-icing salt to state and local governments. The Commission’s complaint alleged that the transaction as originally proposed
would have substantially reduced competition in both the Maine and Connecticut local
markets, leading to higher prices for this essential commodity sold to local and state governments to treat roads. To remedy these concerns, the parties agreed to sell bulk de-icing assets
in Maine and Connecticut to FTC-approved buyers. Commission staff worked closely with
the Attorneys General for Maine and Connecticut in its investigation.
iiHigh Performance Pigments. BASF settled FTC charges that its proposed $5.1 billion
acquisition of Ciba would lead to reduced competition for two widely used high performance pigments (bismuth vanadate and indanthrone blue). High performance pigments
provide color to a range of products, including inks, coatings, plastics, and fibers, used in a
wide variety of every day products. High performance pigments offer superior durability and
light-fastness compared to other types of chemical pigments, making them particularly suited

20

for products exposed to sunlight and weather, such as car coatings and building materials.
Under the terms of the Commission’s settlement, BASF agreed to sell all assets, including
intellectual property, related to the two pigments to an FTC-approved buyer.
iiFarm Fertilizer. Agricultural products supplier Agrium Inc. agreed to sell a range of assets
as part of an agreement allowing it to move forward with its acquisition of CF Industries
Holdings Inc. The consent order settled FTC charges that the acquisition would have eliminated competition in the market for anhydrous ammonia fertilizer, a product that farmers
rely on to grow their crops, including corn and beans. Absent the FTC challenge, the merger
would have reduced competition in three markets: the Pacific Northwest; East Dubuque,
Illinois; and Marseilles, Illinois. The consent order requires Agrium to divest assets in each of
these markets to an FTC-approved buyer.

Chapter 6: Other Competition Initiatives

iiCompetition Education and Outreach. The Commission uses
education and outreach to help prevent consumer injury, increase
business compliance with the antitrust laws, and augment its law
enforcement efforts. The Bureau of Competition released an updated version of its User’s Guide, which describes the work of the
Bureau and who to contact about competition issues in Washington, D.C. and the three regional offices doing competition work.
In order to facilitate e-discovery in antitrust investigations, the
Bureau issued the BC Production Guide, a resource for companies
and individuals that receive document requests such as a Request for Additional Information
or a Civil Investigative Demand. As responses to these requests can often lead to production

21

Competition Mission

iiPremerger Filing Violations. The FTC administers the Hart-Scott-Rodino (HSR) premerger notification program for both the FTC and DOJ. This program is a critical tool in the
government merger enforcement program and is used to identify and investigate proposed
acquisitions that may be anticompetitive. This year, the Commission staff, deputized by
DOJ, obtained a judgment for $1.4 million in civil penalties against John C. Malone, CEO
and Chairman of Discovery Holding Company, for failing to file the necessary premerger notifications in connection with acquisitions of Discovery shares in 2005 and 2008. The FTC
alleged that Malone failed to file the required notice in 2005 after buying Discovery shares,
and then in 2008 purchased additional Discovery shares before the expiration of a waiting
period required by the HSR Act.

of large volumes of electronic documents and data, this resource provides suggested formats
based on the Bureau’s experience with many different submissions in order to minimize incompatibilities and expedite review.
iiSubpoena Compliance. The FTC brought three subpoena enforcement actions challenging
tactics that delayed agency investigations. First, the U.S. Circuit Court for the District of
Columbia affirmed a district court decision enforcing three subpoenas for videotape testimony issued to three individuals as part of the FTC’s Androgel investigation. In the same
investigation, the FTC also petitioned the district court for an order requiring Boehringer
Ingelheim Pharmaceuticals, Inc. to fully comply with a subpoena for data and documents
after a delay of over nine months. Finally, Church & Dwight petitioned to quash a Commission subpoena, first on grounds that it requires production of Canadian documents and
subsequently on grounds of relevance. The Commission denied both motions, and then filed
a motion to compel in the District Court for the District of Columbia; the matter has been
referred to a magistrate judge for settlement.
iiAmicus Briefs
zz

zz

22

American Needle v. NFL. The Commission and DOJ filed a joint amicus brief in the
U.S. Supreme Court. The brief urged the Court to reject a holding that the NFL and
its separately owned teams were a single entity when licensing and marketing their
individual logos and trademarks under an exclusive licensing agreement with Reebok,
because the standard would unduly limit the application of the antitrust laws.
Princo v. ITC. The FTC filed an amicus brief with the Federal Circuit to address the
applicability of antitrust analysis in a patent misuse case. The FTC’s brief, which does
not support either party, states that, to the extent the Court draws on antitrust law to
resolve “patent misuse” claims, it should recognize that pro-competitive efficiencies may
justify some competitive restraints, but only if they are reasonably necessary to facilitate a
productive collaboration between companies, such as a joint venture to invent, develop,
and commercialize new technologies.

From Town Criers to Bloggers:
How Will Journalism Survive the Internet Age?
Consumers are increasingly turning to the Internet for free news and information.
Some news organizations are struggling with large debts that were acquired during better
times. Advertisers have scaled back ad buys as a result of the recession. Perhaps of
most concern, advertisers are following readers online, where an almost infinite supply of
advertising space has dramatically reduced the prices that can be charged to advertisers.
The reduced profitability of online advertising has had a devastating effect on
newspapers, where print advertising basically subsidized news reporting for most of
the twentieth century. News organizations that once derived 80 percent of their revenue
from print advertising are now confronting substantial – and ongoing – revenue losses.
In response, newspapers have cut their staffs significantly over the past few years, with
corresponding cuts in news stories and coverage. As just one example, in six states, no
journalists are currently covering the activities of the state legislature. Changes such as
these have led many to question how journalism will evolve in the future and to wonder
whether any changes in government policies might be appropriate to support journalism.
This year, the FTC hosted two public workshops to discuss the future of journalism
in the Internet age. In December 2009, a diverse group of owners of news organizations,
journalists, bloggers, technologists, economists, and other academics discussed the
changing dynamics of the news business and what new business models for journalism
might evolve in the future. Participants included Representative Henry Waxman, Rupert
Murdoch, Chairman and CEO of News Corp., Arianna Huffington, Co-Founder and Editorin-Chief of The Huffington Post, Josh Marshall, Founder of Talkingpointsmemo.com, and
Aneesh Chopra, Chief Technology Advisor to the President, as well as representatives
from E.W. Scripps Co., The Wall Street Journal, The Washington Post, The Milwaukee
Journal Sentinel, Yahoo!, Google, the National Newspaper Association, NorthwestCitizen.
com, and many others.

In June 2010, the Commission will hold a final
public workshop to compare, contrast, and seek
consensus about the policy options that have been
proposed as ways to better support journalism. The
Commission will produce a report on this project in the
fall.

23

Competition Mission

In March 2010, experts in a variety of fields joined panel discussions at the FTC
on ways in which the costs of journalism could be reduced through greater availability
of, and more easily managed, government data; possible changes to copyright law
to require news aggregators to pay fees to news-gathering operations; the viability of
various non-profit and for-profit models for “new” news organizations; and collaborations
that news organizations may use to both increase
coverage and lower their costs.

Section Two:
Consumer Protection Mission
The FTC works to combat fraud, deception, and unfair practices in the marketplace. The economic turmoil of the past year has posed new challenges for the FTC’s consumer protection mission.
As more consumers face financial distress – such as loss of work or inability to meet mortgage or loan
payments – fraud operators have seized upon new schemes to take advantage of those most affected
by the economic downturn. They offer bogus job placement assistance, work-at-home schemes,
mortgage foreclosure relief services, or interest rate reduction plans – always requiring payment of
substantial fees before consumers realize the promises are empty. This year the Commission has
worked aggressively to protect consumers in this troubled economy, partnering with other federal
and state authorities to maximize its efforts to halt such fraudulent practices. The FTC also remains
committed to enforcement against abusive payday lending practices, discrimination in lending, and
other unfair or deceptive conduct by financial services providers.
At the same time, the FTC has continued to build upon its record in other priority areas of
enforcement activity – including protection of consumer privacy, computer security, and the security
of sensitive consumer data, as well as prosecuting false or deceptive health and environmental claims
and telemarketing fraud.

In addition to bringing law enforcement actions, the FTC promotes consumer welfare through
several additional tools, such as conducting rulemaking proceedings and issuing industry guidance;
publishing reports; holding hearings and workshops to explore options and develop policy through
dialogue with outside experts and organizations; testifying before Congress; and making the Commission’s views known through letters or comments to other agencies. These activities enable the
FTC to work with industry members, other government agencies, the media, and the public to
gather information and establish policies that protect consumers.

25

Consumer Protection Mission

From March 2009 through March 2010, the Commission filed 80 actions in federal district
court and obtained 83 judgments and orders requiring defendants to pay more than $393 million in
consumer redress or disgorgement of ill-gotten gains. In addition, cases referred to the DOJ resulted
in 18 civil penalty orders and $25.8 million in assessed civil penalties. Furthermore, the Commission gave final approval to 22 administrative orders. In many cases, the FTC worked closely with
other law enforcement authorities – local, state, federal, and foreign – to achieve the best results for
consumers.

Consumer Outreach and
Education
In the past year, the FTC has distributed
over 14 million print publications in
English and Spanish and logged nearly
27 million accesses to materials on Commission websites. In addition, the FTC
expanded its online outreach by creating
several new videos, starting a blog in
support of National Consumer Protection
Week, and encouraging social networkers to post FTC content on their sites.

	
The FTC is committed to using education and outreach as cost-effective methods to
prevent consumer injury, increase business compliance, and leverage its law enforcement program. Virtually every consumer protection effort
contains an education component. Through print
publications, websites, electronic media, videos,
interactive quizzes, tutorials, special events, and
partnerships, the agency reaches out to millions of
consumers and businesses every year on issues that
directly affect their daily activities.

Chapter 7: Protecting Consumers in a Troubled Economy
A.	 Deceptive Mortgage Foreclosure Rescue and Loan
Modification Scams
Enforcement
To stop fraud and help distressed homeowners, the FTC continues to crack down on mortgage
relief scams. The Commission filed 22 federal lawsuits in the past year against operators who falsely
claimed they would obtain a loan modification or halt a foreclosure on behalf of consumers. In a
typical scheme, the perpetrators collect a high up-front fee from consumers, but do little or nothing to help homeowners renegotiate their mortgages or stop foreclosure. Some also misrepresent
themselves as affiliated with a federal government agency or program. The FTC obtained relief in all
cases – preliminary or temporary relief in 21 actions, a litigated permanent injunction in one case,
and stipulated permanent injunctions against some or all defendants in eight cases. The Commission
also led two federal-state coordinated law enforcement sweeps against bogus mortgage relief operations. Operation Loan Lies, announced in July in southern California – where many of the schemes
originated – involved 189 actions by 25 federal and state agencies. Operation Stolen Hope, announced in Nevada in November, involved 118 actions by 26 federal and state agencies. In addition,
the FTC participates in ten mortgage fraud task forces around the country in order to coordinate its
efforts with those of state and local enforcement agencies. Some examples of enforcement actions:
iiIn two related cases, Hope Now Modifications LLC and New Hope Property LLC, the FTC
charged that defendants misled consumers about their ability to provide mortgage loan modification relief; misrepresented that they would refund consumers’ money if they were unable

26

Commissioner Julie Simone Brill
In light of our national economic crisis, Commissioner Julie Brill has made
financial fraud her top priority. Commissioner Brill is particularly interested in
ensuring that the Commission addresses scams designed to take advantage of
consumers’ economic insecurity. Through aggressive, coordinated enforcement with
the states, the Commission is working hard to ensure that unscrupulous businesses
that engage in deceptive practices and falsely promise help are prosecuted and
quickly shut down. In addition, through new or revised rules and guidelines
setting standards for unfair or deceptive mortgage related marketing practices and debt relief services, the
Commission aims to enhance its ability to prosecute wrongdoers.

to do so; and falsely claimed affiliation with the HOPE NOW Alliance, a non-profit, HUDendorsed organization that offers free assistance to homeowners unable to pay their mortgages. According to the FTC’s complaints, consumers who contacted the defendants were
told they must pay a substantial fee before any work could be performed, but were promised
a full refund if they were not satisfied. After consumers paid the up-front fee, the defendants
often failed to obtain a mortgage modification, and, in many instances, never even contacted
the mortgage lender, the complaints charged. Consumers who complained generally were
not able to get the promised refund. In both cases, the court issued a preliminary injunction with an asset freeze against the defendants to stop any further harm to consumers. The
Commission is pursuing permanent relief.

iiAnother mortgage foreclosure “rescue” company, U.S. Foreclosure Relief Corp., and its
principals reached a settlement with the FTC, as well as the states of California and Missouri,
which prohibits the defendants from selling mortgage relief services.  The order imposes a
judgment of $8.6 million that will be suspended, due to inability to pay, after the defendants
turn over jewelry, cars, and nearly $1 million in cash.
iiIn Dinamica Financiera, the Commission charged a mortgage foreclosure “rescue” operation with falsely promising Spanish-speaking consumers who were behind on their mortgage

27

Consumer Protection Mission

iiThe Commission reached a settlement with Foreclosure Solutions, LLC and its principal,
barring the defendants from making misrepresentations about their services, including the
likelihood that they can or will stop a foreclosure. The FTC alleged that many consumers
who paid the defendants a fee – often exceeding $1,000 – ultimately lost their homes, and
others avoided foreclosure only through their own efforts. The order imposed an $8.5 million judgment against the defendants, some of it suspended (based on their inability to pay)
upon turnover of cash and other property, including proceeds from the sale of five homes.

payments that it would stop foreclosure. According to the complaint, many people who paid
the defendants ultimately lost their homes; others avoided foreclosure only through their own
efforts. At the FTC’s request, a federal court temporarily halted the defendants’ practices and
froze their assets, pending trial.
iiOften cash-strapped homeowners desperate for mortgage relief search the Internet for help.
Too often they find unscrupulous entities seeking to take what little they have left. The FTC
settled charges that Thomas Ryan misled homeowners about his association with the U.S.
government through websites – bailout.hud-gov.us and bailout.dohgov.us – that featured an
official looking seal and the names of federal homeowner relief plans. The settlement order
bans Ryan from offering mortgage relief services in the future and prohibits him from making misrepresentations about any goods or services.

Rulemaking & Comment
The Commission testified numerous times about its efforts to protect consumers subject to possible mortgage foreclosure from fraudulent foreclosure rescue and loan modification schemes. It also
is conducting rulemaking and filed comments on various mortgage products and services.
iiMortgage Assistance Relief Services and Mortgage Acts and Practices Rulemaking.
The Omnibus Appropriations Act of 2009, as amended by the Credit CARD Act of 2009,
required the FTC to initiate rulemaking proceedings relating to unfair or deceptive mortgage practices. The FTC is conducting three mortgage rulemakings. The first addresses the
practices of foreclosure rescue and loan modification services. The Commission published an
Advance Notice of Proposed Rulemaking (ANPR) on June 1, 2009 and a Notice of Proposed
Rulemaking on March 9, 2010 seeking public comment. The proposed rule would prohibit
companies from charging up-front fees for such services and telling consumers to stop communicating with their lenders or mortgage servicers. In addition, it would bar misrepresentations about the likelihood of favorable results, affiliation with public or private entities, and
refund and cancellation policies. The Commission anticipates publishing a second notice of
proposed rulemaking in the near future addressing mortgage advertising practices, followed
by a third proposed rulemaking addressing mortgage servicing. The ANPR for these two
rulemakings was also published on June 1, 2009.
iiComment on Proposed Guidance on Reverse Mortgages. The FTC staff has submitted comments to the Federal Financial Institutions Examination Council (FFIEC) – whose
members include both federal and state banking agencies – in support of a measure designed
to protect consumers from deceptive claims and help them make informed decisions about
“reverse mortgages.” These “mortgages” are actually home-secured loans that allow older

28

consumers to draw on their equity even as they continue to live in their houses. However,
they are complex transactions, not always fully understood by home-owners entering into
them. The staff supports the FFIEC’s efforts to provide lenders with concrete guidance as to
the kinds of claims about “reverse mortgages” that may be deceptive and violate the FTC Act.

Consumer Education
iiMortgage Foreclosure Rescue Scams. In Spring 2009, the
Commission created a website, print publication, flyer, bookmark, radio PSAs, dwell time spots, and video in cooperation
with the Hope Now Alliance, the Homeownership Preservation Foundation, and the Making Home Affordable program. The materials provide tips on how to spot a mortgage
relief scam and information on where to go for free housing
help from legitimate sources. The FTC has distributed more
than 131,000 copies of the English-language flyer (9,600 in
Spanish) and nearly 125,000 English-language bookmarks (54,000 in Spanish). Mortgage
servicers play the FTC’s dwell time spots when callers are on hold.
iiReal People, Real Stories. This video, produced in English and Spanish, features the stories
of people who saved their homes from foreclosure. The Commission mailed copies of the
video to nearly 5,000 community groups, legal aid offices, attorneys general, housing counseling agencies, and consumer protection organizations.

B.	 Deceptive Work-at-Home and Get-Rich-Quick Schemes
Enforcement

In February, the FTC announced Operation Bottom Dollar, a stepped-up multi-agency effort to
target con artists that prey on unemployed Americans through bogus job-placement, work-at-home,
and other money-making schemes. This second sweep resulted in seven FTC cases, 43 criminal actions by DOJ, an action by the Postal Inspection Service, and 18 actions by state attorneys general.

29

Consumer Protection Mission

In July, the FTC announced a law enforcement crackdown on scam operators taking advantage
of the economic downturn to bilk vulnerable consumers by: promising non-existent jobs; promoting get-rich-quick plans or bogus government grants; offering phony debt-reduction services; or
simply placing unauthorized charges on consumers’ credit or debit cards. Dubbed Operation Short
Change, this law enforcement sweep resulted in 15 FTC cases, 44 law enforcement actions by the
DOJ, and actions by 13 states and the District of Columbia.

The FTC’s enforcement actions to protect
financially stressed consumers include the
following:
iiGoogle Money Tree. Defendants, doing
business as Google Money Tree, allegedly
misrepresented affiliation with Google
and lured consumers into divulging their
financial account information by advertising a “low-cost” kit that purportedly would
enable consumers to earn $100,000 in six
months by filling out forms and running searches on Google and Yahoo. As alleged, they
then failed to disclose adequately that the fee for the kit would trigger monthly charges of
$72.21. The FTC shut defendants down, first obtaining a TRO, then a stipulated preliminary injunction, with an asset freeze and appointment of a receiver.
iiJohn Beck/Mentoring of America. Defendants used infomercials and telemarketing to
market three get-rich-quick schemes – “John Beck’s Free & Clear Real Estate System,” “John
Alexander’s Real Estate Riches in 14 Days,” and “Jeff Paul’s Shortcuts to Internet Millions” –
to hundreds of thousands of consumers, who paid them a total of at least $300 million. The
FTC charged the defendants with making false and unsubstantiated claims about potential
earnings for users of these systems. According to the complaint, they used frequently aired
infomercials to sell the systems for $39.95, and then contacted the purchasers via telemarketing to offer “personal coaching services,” which cost several thousand dollars and purportedly
would enhance consumers’ ability to use the systems to earn money quickly. In addition, the
Commission complaint charged that all purchasers were signed up for continuity programs,
costing an additional $39.95 per month, which was not adequately disclosed. The Court
entered a preliminary injunction halting the deceptive infomercials, preventing unauthorized
billing, and appointing a monitor to ensure defendants’ compliance with the order.
iiJob Safety USA. Through a host of front companies, Wagner Ramos Borges marketed
maintenance and cleaning jobs online and in newspaper classified advertisements throughout
the country. The Commission charged that Borges tricked consumers into paying $98 for
a worthless and needless credential called a “certificate registration number” that supposedly
would enable them to get the advertised maintenance and cleaning jobs. However, after consumers paid Borges to obtain the number, he allegedly failed to provide the promised jobs.
The FTC obtained a TRO, asset freeze, and a litigated preliminary injunction against the de-

30

fendants. Subsequently, the court entered
a default judgment ordering Borges to disgorge his alleged ill-gotten gains of nearly
$415,000.

“Federal and state law enforcement officials will not tolerate those
who take advantage of consumers in times of economic misfortune. If you falsely advertise that
you will connect people with jobs
or with opportunities for them to
make money working from home,
we will shut you down. We will
give your assets to the people you
scammed, and, when it’s appropriate, we’ll refer you to criminal
authorities for prosecution.”

iiReal Wealth, Inc. This company and
its principal allegedly conned more than
100,000 people by selling them booklets
that supposedly explained how they could
earn money by applying for government
grants and working from home mailing
postcards and envelopes. Using direct
mail campaigns that sometimes targeted
– David Vladeck, Director, BCP
(press release, February 17, 2010)
the elderly and disabled, Real Wealth
lured consumers, according to the FTC
complaint, with deceptive solicitations such as “Collect up to $9,250 with my simple 3 minute form” or “All I do is mail 30 postcards everyday and I make an extra $350 a week!” Real
Wealth also claimed that consumers could “rake in up to $1,500+ per week or more in solid
cash” by learning “secrets” about the “$700 billion banking industry bailout.” The court issued a temporary restraining order, and the case remains in litigation.
iiZoilo Cruz, d/b/a International Marketing and Universal Wealth. A federal court jailed
the marketer of a work-at-home scheme after the FTC filed a motion alleging that the marketer ignored a court order requiring him to stop his deceptive envelope-stuffing operation.
The defendant targeted Spanish-speaking consumers throughout the United States and in
Puerto Rico.

Consumer Education

iiFraud in the Economic Downturn. In addition to alerting consumers to scam operators
who promise non-existent jobs and promote get-rich-quick plans, bogus government grants,
and phony debt-reduction services, the Commission created Fraud: An Inside Look, a video
featuring a once-fraudulent telemarketer convicted for his role in a business opportunity
scheme. The former con artist tells the secrets of his success, how he got people to part with
their money, and spells out the tricks consumers should listen for.

31

Consumer Protection Mission

Educating consumers how to protect themselves in this environment is a critical adjunct to effective law enforcement.

iiJob Scams. To educate consumers on how to spot and
avoid job scams, the Commission produced a video (in
English and Spanish), two audio public service announcements (PSAs), and an article. The FTC partnered with
Microsoft’s Digital Crime Unit to create a set of PSAs for its
Bing search engine, so that when web searchers use certain
key words, FTC resources turn up as a sponsored result.

C.	 Other Unfair or Deceptive Consumer Credit and Financial
Services Practices
In the wake of the recent economic crisis, the FTC remains committed to protecting consumers
at every stage of the credit life cycle. To that end, the Commission continues to be active in the areas
of fair lending, debt collection, payday lending, credit repair, and debt relief. It also works to ensure
that consumers get free access to their credit reports and meaningful information about their credit
and creditworthiness.

Enforcement

“...this debt collection
agency continues to harass
me and insult me. I am
unemployed and doing
the best I can. I do not
need a collection agency
degrading me in these
economic times.”

iiFair Lending. Continuing its efforts to eliminate
unlawful discrimination in mortgage pricing, the
Commission filed a federal court action against
Golden Empire Mortgage, Inc. The complaint
alleges that the company and its owner violated the
– Consumer in Portland, OR
Equal Credit Opportunity Act by charging Hispanic
consumers higher prices for mortgage loans than
non-Hispanic whites – price disparities that cannot be explained by the applicants’ credit
characteristics or underwriting risk. The Commission also entered a modified order against
Gateway Funding Diversified Mortgage Services, L.P. and Gateway Funding, Inc., a
lender that previously settled FTC allegations that it had violated the Equal Credit Opportunity Act by charging African-American and Hispanic consumers discriminatory higher prices
for mortgage loans. Gateway allegedly failed to create the fair lending monitoring program
required by the earlier settlement. It agreed to a modified order that requires it to hire an
outside consultant to develop and implement its fair lending monitoring program and limits
its discretion over pricing until the consultant certifies that an adequate monitoring program
is in place.

32

iiPayday Lending. The Commission seeks to ensure that consumers receive the information
they need to understand the substantial costs of payday loans. An international Internet
payday lending operation, comprising of Cash Today, Ltd. and other entities, settled FTC
and state of Nevada charges that it failed to provide U.S. consumers with key loan terms in
writing before consummating their loans. The stipulated order also settles FTC charges that
the defendants violated the FTC Act by using unfair and deceptive collection tactics, including falsely threatening consumers with arrest or imprisonment. The settlement order requires
the defendants to pay $970,125 to the FTC and $29,875 to Nevada, and it bars future
violations. In another matter, a debit card company and a payday lender, VirtualWorks,
LLC, and Swish Marketing Inc., were charged with working together to deceive consumers

33

Consumer Protection Mission

iiDebt Collection.
Maureen Wilkin, Office of the Executive Director
The FTC settled
As the Benefits Officer with the Human
charges that
Resources Management Office, Maureen
Oxford Collection
works with employees on a range of items,
Agency, Inc. and its
from complicated retirement cases to telework
concerns. Each year, she prepares a health
principals used false
benefits fair for FTC employees. In some
threats and other
circumstances, her service reaches beyond the
FTC, counseling family members of deceased
unlawful tactics to
employees. Maureen’s work is significant to
collect consumthe well-being of FTC employees and to the
ers’ debts. The
successful operation of the agency.
complaint alleged
that the defendants
violated the Fair Debt Collection Practices Act and the FTC Act by misleading, threatening,
and harassing consumers, including calling many times a day, calling back immediately after
a consumer hung up, and using profane language. The settlement included a civil penalty
of $1,060,000, with all but $225,000 suspended based on inability to pay, and prohibits the
defendants from further violations. In another action, Credit Bureau Collection Services
(CBCS) and two of its officers agreed to settle Commission charges of unlawful debt collection practices. According to the FTC’s complaint, even after receiving information that a
debt was paid off or did not belong to the consumer, the company continued to assert that
the consumer owed the debt, without a reasonable basis and without trying to confirm or
dispute the consumer’s information. CBCS is also charged with violating the Fair Credit
Reporting Act by reporting to credit agencies information that consumers had proved was
inaccurate, failing to inform credit agencies that consumers had disputed debts, and failing
to investigate after receiving a notice of dispute from a credit reporting agency. The consent
decree prohibits future violations, and CBCS will pay a civil penalty of $1,095,000.

who applied online for a loan. Because of a pre-clicked “yes” box buried on many application websites, consumers applying for a loan also unknowingly paid $54.95 for an unrelated
product – a prepaid debit card with a zero balance. A stipulated order bars the debit card
company from such conduct and imposes a $5.5 million judgment, much of it suspended
based on the company’s financial condition. The Swish case remains in litigation.
iiCredit Repair. The Commission announced settlements in five actions against bogus credit
repair organizations. In Ace Group, Inc., defendants were charged with falsely representing
that they could remove negative but accurate information from consumers’ credit reports by
sending dispute letters to credit reporting agencies. The order bars defendants from violating
the Credit Repair Organizations Act by making such misrepresentations and charging clients
fees in advance. In stipulated orders with Successful Credit Service Corp., Lee Harrison
Credit Restoration, Advantage Credit Repair LLC, and Credit Restoration Brokers, LLC,
the defendants were similarly prohibited from making false claims when marketing credit
repair services and charging fees before services are performed. The five settlements contain
monetary judgments totaling more than $32 million, most of which has been suspended
because of the defendants’ inability to pay.
iiInterest-Rate Reduction Robocalls. A
number of fraudulent marketers used
robocalls – automated prerecorded messages sent randomly to hundreds of
thousands or even millions of telephone
numbers – to sell consumers so-called
interest-rate reduction services. The FTC
took enforcement action to stop unlawful
behavior in the following cases.
zz

34

“The FTC has heard the public
outcry against robocalls and has
taken swift action to stop them.
During these difficult economic
times, the last thing anyone needs
is to be bombarded by robocalls
pitching worthless interest-rate
reduction programs or making
deceptive claims about so-called
warranty extensions. The Commission will protect consumers from
intrusive, illegal, and deceptive
telemarketing robocalls.”

Economic Relief Technologies, LLC,
Dynamic Financial Group (U.S.A.)
– Chairman Jon Leibowitz
(December 2009)
Inc., and JPM Accelerated Services
Inc. Three telemarketers were charged
with violating the Do Not Call Rule and other laws by using robocalls to sell allegedly
worthless credit-card interest-rate reduction programs for hefty up-front fees of as much
as $1,495. According to the FTC complaints, the defendants used names like “card services,” “credit card services” or “account services” in their automated telephone messages.
Consumers who then pressed 1 to receive more information were transferred to live telemarketers who allegedly misrepresented that they could dramatically lower the interest

rates on consumers’ credit card debts. The court issued an order temporarily halting the
robocalls by all three defendants pending trial.
zz

Mutual Consolidated Savings. The FTC charged this company, its affiliates, and principals with using deceptive robocalls and Internet marketing to sell a so-called “Rapid
Debt Reduction” program to consumers in the United States and Canada. According to
the Commission’s complaint, the defendants convinced consumers to pay them $690 to
$899 by allegedly misrepresenting that their program would reduce credit card interest
rates, save consumers thousands of dollars, and enable them to pay off their debts three
to five times faster than they could under their current payment schedules. The defendants allegedly also failed to make the promised refunds of their fees if consumers’ credit
card interest rates were not reduced. The Commission obtained a TRO and a stipulated
preliminary injunction, with an asset freeze and appointment of a receiver, to stop further
harm to consumers.

Workshops & Rulemaking

iiFree Credit Report Rule. The FTC amended the Free Credit Report Rule to prevent deceptive marketing of “free credit reports,” pursuant to the Credit CARD Act of 2009. The
amended rule requires prominent disclosures for “free credit report” advertising in order to
prevent consumers from confusing these so-called “free” offers with the federally mandated
free annual credit reports. In addition, the amended rule delays advertising of other products
and services on the federally mandated “centralized source” website for free annual credit
reports. The original rule allowed such advertising at any time; the amended rule delays such
advertising until after consumers have obtained their free annual credit reports.

35

Consumer Protection Mission

iiDebt Collection Roundtables. More than 100 state court judges, debt collector representatives, consumer advocates, and government regulators participated in a
series of three FTC roundtable discussions on protecting consumers
in debt collection litigation and arbitration. Held in Chicago,
San Francisco, and Washington, D.C., the Roundtables examined consumer protection issues in consumer debt collection
proceedings. Drawing on information from the roundtable
discussions and provided in response to a call for public comments, the FTC is preparing a report containing findings, conclusions, and recommendations for how to best protect consumers in
debt collection litigation and arbitration proceedings without unduly burdening debt collection.

FTC Named In Top Ten Places to Work
FTC was named one of the top ten small federal agencies at which to work. The highly
coveted Best Places to Work rankings – the most comprehensive and authoritative rating of
employee satisfaction and commitment in the federal government – are determined by the
Partnership for Public Service and American University’s Institute for the Study of Public
Policy Implementation (ISPPI).

iiTelemarketing Sales Rule – Debt Relief Services. The Commission published a Federal
Register notice on August 19, 2009, seeking public comment on proposed changes to the
Telemarketing Sales Rule. The proposed revisions seek to combat unfair, deceptive, and
abusive telemarketing of services that purport to be able to reduce consumer credit card and
other unsecured debt. One proposal would prohibit a telemarketer from receiving payment
for debt relief services until such services have been fully performed and documented to the
consumer. In addition, FTC staff convened a one-day public forum to discuss the scope of
the proposed debt relief amendments, including a ban on the collection of advance fees.
iiRisk-Based Pricing Rule. The FTC and the Federal Reserve Board published final regulations requiring a creditor to give a consumer a risk-based pricing notice when, based on the
consumer’s credit report, the creditor offers or provides credit to the consumer on terms less
favorable than the terms it offers or provides to a substantial proportion of its other customers. As an alternative to providing risk-based pricing notices, the final rules permit creditors
to provide consumers who apply for credit with a free credit score and information about
their score.

Education
iiDebt Collection. The Commission produced a video (in English and Spanish) to help
people understand their rights under the Fair Debt Collection Practices Act (FDCPA) when
dealing with debt collectors. The agency distributed the video to more than 1,000 partners,
including local and national non-profit organizations, consumer credit counselors, HUD-certified housing counselors,
and state employment and community services agencies.
The FTC also has reached out to daily and community
newspapers, radio stations, and online outlets focusing on
mainstream, African American, and Hispanic audiences.

36

iiAnnual Credit Report.com. The FTC released two short videos spoofing ads for supposedly
free credit reports that actually come with enrollment in a costly plan. The FTC’s videos,
online at ftc.gov/freereports, garnered considerable attention when they were released in the
spring of 2009. The videos remind people that AnnualCreditReport.com is the only site for
the truly free credit report to which they are entitled under federal law. The FTC’s videos
have been viewed more than 400,000 times on ftc.gov and more than 65,000 times on
YouTube.
iiFinancial Literacy Campaign. The Commission is active in the Jump$tart Coalition for
Personal Financial Literacy at the national and local levels and this year participated in
Jump$tart’s first-ever National Teachers Conference for Financial Educators, which drew
more than 250 classroom teachers from 46 states. The Commission is a member of the
Financial Literacy Education Commission (FLEC), an initiative of the Treasury Department,
and contributes to MyMoney.gov, the FLEC’s national strategy for financial literacy, and the
FLEC’s periodic e-newsletter that provides information on new financial literacy activities at
member agencies.

D.	 Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) places obligations on consumer reporting agencies
(CRAs), furnishers (entities that provide information to CRAs), and users of credit reports to promote the accuracy, fairness, and privacy of information in consumers’ credit reports.

The FTC announced five settlements involving FCRA violations. TALX Corporation, a CRA
that sells income and employment history about consumers, was charged with failing to provide
required disclosures to furnishers of information and users of credit reports. Four settlements were
obtained against users of credit reports. The FTC charged Quality Terminal Services, LLC and
Rail Terminal Services, LLC with firing workers and rejecting job applicants based on background
checks without informing them of their rights under the FCRA. Metropolitan Home Mortgage
settled charges that it violated FCRA rules relating to prescreened credit solicitations. Finally, Direct
Marketing Associates, Corp. agreed to settle charges of making misrepresentations in its marketing
to consumers and obtaining consumer report information from a CRA without a permissible purpose. The Commission obtained civil penalties totaling $447,000 and another $157,000 suspended
penalty for these five FCRA enforcement actions.

37

Consumer Protection Mission

Enforcement

Rulemaking
iiFurnisher Rules. The FTC, together with other federal regulatory agencies, issued two final
rules applicable to financial institutions and other entities that provide information to consumer reporting agencies. The first rule promotes the accuracy and integrity of information
given to consumer reporting agencies. The second rule allows consumers to dispute inaccurate information in their credit reports directly with the furnishers of the information (in
addition to disputing errors with consumer reporting agencies).

Chapter 8: Privacy, Data Security, and Technology
Over the past decade, data security and consumer privacy have become a central focus of the
Commission’s consumer protection mission. In recent years, advances in computer and Internet
technology have made it possible for detailed information about people to be compiled and shared
more easily and cheaply than ever.

A.	 Privacy
A number of significant actions were either initiated or resolved during the past year.

Enforcement
The FTC works aggressively to address privacy issues through law enforcement. Using its authority under Section 5 of the FTC Act, the Commission has brought cases against businesses that
use unfair or deceptive practices. As part of these efforts, the Commission has undertaken law enforcement to protect consumer privacy as information travels across borders.
iiSafe Harbor Cases. Six companies agreed to settle FTC charges that they deceived consumers by falsely claiming they were abiding by the EU/U.S. Safe Harbor, an international privacy framework that provides a means for U.S. companies to transfer data from the European
Union (EU) to the United States in keeping with EU and U.S. law. The complaint alleged
that the six companies – World Innovators, Inc., ExpatEdge Partners LLC, Onyx Graphics, Inc., Directors Desk LLC, Collectify LLC, and Progressive Gaitways LLC – deceptively
claimed they held current certifications under the EU/U.S. Safe Harbor framework when in
fact they had allowed those certifications to lapse.
iiControlScan, Inc. and Richard Stanton. The FTC settled cases with ControlScan, Inc.,
and its founder and former CEO Richard Stanton to resolve allegations that they made
deceptive privacy and security claims to consumers through seals that they provided to online
companies. The complaint alleged that ControlScan and Richard Stanton violated the FTC

38

Act by falsely representing to consumers that ControlScan had verified the privacy and data security
practices of companies displaying its website seals,
when in fact it had not. In addition to injunctive relief against the defendants, the settlement
requires Richard Stanton to disgorge $102,000
and suspends disgorgement of $750,000 by
ControlScan due to the company’s financial
condition.
iiFTC v. Accusearch, Inc. The Tenth Circuit held
that Accusearch’s unfair practices – obtaining and
selling confidential consumer telephone records
without consumers’ knowledge or authorization
– were not shielded by an exemption provision in
the Communications Decency Act. Accusearch
procured these records from vendors who could
have obtained them only by deception or other
illegal means. The court held that the immunity
provision of the Communications Decency Act
did not apply because the information Accusearch
obtained from its vendors was not “information
provided by another information content provider.”

FTC Privacy Program
The FTC continued in 2009 to implement and develop its awardwinning privacy program. While
the FTC continually assesses
privacy risks and its own efforts
to safeguard information within
the agency, through its participation in the CIO Council’s Privacy
Committee and its various working groups, it has also taken a
leadership role to help others address privacy issues throughout
the federal government.
For instance, in September 2009,
the FTC hosted CPO Boot Camp,
a first of its kind event co-chaired
by the FTC’s Acting Chief Privacy Officer, Kellie Cosgrove Riley.
The one-day Boot Camp trained
senior privacy officials from
throughout the federal government through a comprehensive
curriculum, with an extensive
overview of the many legal and
policy issues facing privacy officials and the tools to address
them.

zz

DIRECTV. The company paid a $2.3 million civil penalty to settle charges that it placed
prerecorded calls to consumers who previously had told the company not to call them
again. The Commission alleged violation of both the TSR and a 2005 federal court order
barring such conduct. Voicecast Systems, Inc., the telemarketer for DIRECTV, paid
$115,000 to settle charges that it had also violated the TSR.

39

Consumer Protection Mission

iiDo Not Call Rule Enforcement. The Do Not Call Rule and related privacy provisions of
the Telemarketing Sales Rule (TSR) prohibit most commercial telemarketing to consumers
who place their telephone numbers on the National Do Not Call Registry. Since the FTC
began enforcing compliance with the Registry in 2003, the Commission has filed 68 enforcement actions for rule violations, requiring payment of nearly $21.2 million in civil penalties
and more than $14 million in consumer redress. This year’s cases include:

zz

Comcast Corp. Comcast entered into a consent order and paid a $900,000 civil penalty
to settle charges that it violated the TSR by calling, or having its telemarketers call, consumers who specifically had told Comcast not to call them again.

zz

Dish Network/Echostar. On the FTC’s behalf, the DOJ, together with the Attorneys
General of California, Illinois, Ohio, and North Carolina, filed suit in federal district
court charging that satellite television provider Dish Network, directly and through its
authorized dealers, called numerous consumers whose numbers are on the National
Do Not Call Registry. Dish Network, previously known as EchoStar, was also charged
with violating the TSR by assisting and supporting its authorized dealers in telemarketing Dish Network services via robocalls that deliver prerecorded telemarketing messages
when consumers answer their phones. The case is in litigation.

This year, the FTC also brought five cases targeting telemarketers who violated the Do Not Call
Rule and other laws by making millions of illegal prerecorded robocalls – many of them containing
misleading claims about interest-rate reduction or auto warranty extensions.

Workshops, Rules & Policy Initiatives
iiExploring Privacy Roundtables. FTC
staff convened three public roundtables in
Washington, D.C. and Berkeley, California
to explore challenges in protecting consumers’ privacy. Participants discussed social
networking, cloud computing, online behavioral advertising, mobile marketing, and
the collection and use of information by data brokers and other businesses. The goal of the
roundtables was to explore how best to protect consumer privacy without curtailing technological innovation and beneficial uses of information.
iiHealth Breach Notification Rule. The FTC issued a final rule requiring vendors of personal
health records and related entities to notify consumers when the security of certain electronic
health information is breached, as required by the American Recovery and Reinvestment Act
of 2009.
iiModel Financial Privacy Notices. The FTC, joined by seven other federal regulatory agencies, released a model privacy notice form that financial institutions can opt to use for their
privacy notices to consumers required by the Gramm-Leach-Bliley (GLB) Act. Use of the
model form will constitute a legal safe harbor for compliance with the GLB Privacy Rule.

40

The agencies conducted extensive consumer research and testing in developing the model
form to ensure that consumers can easily understand what financial institutions do with their
personal information and compare different institutions’ information sharing practices.
iiGoogle Books Letter. BCP Director David Vladeck sent a letter to Google addressing
privacy concerns related to Google’s plans to digitize millions of books. The letter requests
that Google disclose how it will use the personal information it collects when it offers books
online and delivers targeted advertising to consumers. In addition, it urges Google to commit to complying with the FTC’s self-regulatory principles for online behavioral advertising.

B.	 Data Security
To promote data security through law enforcement, the Commission
brings actions against businesses that fail to implement reasonable security
measures to protect sensitive consumer data. The FTC enforces several laws
and rules that contain data security requirements. The Commission’s Safeguards Rule under the GLB Act, for example, sets forth data security requirements for financial institutions. The Commission’s Privacy Rule, also under
the GLB Act, requires financial institutions to provide their customers written
notices describing their privacy policies and practices, including their data security practices. The
Commission also enforces the FTC Act’s proscription against unfair or deceptive acts or practices in
cases where a business makes false or misleading claims about its data security procedures or where
its failure to employ reasonable security measures causes or is likely to cause substantial consumer
injury. To date, the FTC has brought 29 enforcement actions against businesses for failing to protect
consumers’ personal information. The Commission also testified before Congress about the FTC’s
efforts to promote better security for sensitive consumer information, to prevent inadvertent sharing of consumers’ personal or sensitive data over Peer-to-Peer Internet file-sharing networks, and to
combat identify theft, including recommended legislative remedies to enhance the effectiveness of
these efforts.

iiLifeLock, Inc. Working with 35 state attorneys general,
the FTC entered into a settlement with LifeLock, Inc. and
two of its founders, resolving claims that LifeLock deceptively advertised its identity theft prevention service by
claiming that customers would receive far more protection
than they actually did. The complaint also alleged that LifeLock failed to protect customers’

41

Consumer Protection Mission

Enforcement

data in the manner in which it claimed in its privacy policy. The settlement requires LifeLock to pay $11 million in consumer redress and $1 million to the state attorneys general.
The settlement also requires LifeLock to cease misrepresentations about its products and to
develop an appropriate data security program.
iiJames B. Nutter & Company. The Commission announced a settlement with James B.
Nutter & Company, which makes and services residential mortgage loans around the country, to resolve allegations that the company failed to provide reasonable security for sensitive
consumer information in violation of the FTC’s Safeguards Rule. In addition, the company
allegedly violated the FTC’s Privacy Rule by failing to provide privacy notices for several
years and, when it began providing privacy notices, those notices were inaccurate. The settlement requires the company to establish and maintain a comprehensive data security program
to protect personal information and to obtain independent audits of its security procedures
every two years for 10 years.
iiDave & Busters, Inc. Dave & Busters, a restaurant chain that features arcade-style games,
agreed to settle Commission charges that it engaged in unfair practices in violation of the
FTC Act. The case arose from a data breach that compromised the credit card numbers and
expiration dates of approximately 130,000 customers. The complaint alleged that Dave &
Busters failed to employ reasonable and appropriate security measures to protect customer
information, including failing to employ sufficient measures to detect and prevent unauthorized access to computer networks. Under the settlement, Dave & Busters must implement a
comprehensive data security program and obtain biennial security assessments for 10 years.
iiChoicePoint, Inc. The FTC obtained a stipulated modified order against Choicepoint after
charging that the company failed to implement a comprehensive information security program to protect consumers’ sensitive information, as required by a 2006 federal court order.
According to the complaint, the company turned off a key electronic security tool used to
monitor access to one of its databases for four months, leaving sensitive consumer information vulnerable. During that period, an unknown person conducted unauthorized searches
that compromised the personal information of more than 13,000 consumers. The modified
order requires ChoicePoint to pay $275,000 and to submit additional reports to the FTC
detailing how it protects databases containing sensitive personal information.

C.	 Computer Security
The FTC continues its efforts to protect consumers from online threats, as well as from deceptive
claims that can induce them to install unwanted or useless software on their computers.

42

Enforcement
iiSears Holdings Management Corporation. The
Commission settled allegations that Sears failed to
disclose adequately the scope of consumers’ personal
information collected via software that Sears represented would merely track their “online browsing.”
The FTC charged that the software also monitored
consumers’ online secure sessions – including those
on third-party websites – and collected information such as the contents of shopping carts, online
bank statements, and other sensitive data. Only in a
lengthy end user license agreement, available to consumers at the end of a multi-step registration process, did Sears disclose the full extent of the information the software tracked. In addition
to requiring that Sears destroy information previously collected, the settlement provides that
if Sears advertises or disseminates tracking software in the future, it must clearly and prominently disclose the types of data the software monitors, records, or transmits and whether any
of the data will be used by a third party. Such disclosure must be made prior to installation
and separate from any end user license agreement.

iiWinFixer. The FTC obtained a TRO and preliminary injunction against the international
syndicate responsible for the marketing and sale of thousands of “rogue” computer security
products, including WinFixer, WinAntivirus, DriveCleaner, ErrorSafe, and XP Antivirus.
The complaint alleged that, to sell their “scareware” security products, the defendants disseminated more than one billion deceptive online advertisements, which featured bogus computer scans that falsely claimed to detect viruses, spyware, and illegal pornography on consumers’ computers. At the conclusion of these scans, the defendants allegedly marketed their
security software aggressively as a cure for the non-existent threats “detected” on consumers’
computers. The Commission alleged that the defendants generated more than $165 million

43

Consumer Protection Mission

ii3FN. The FTC obtained a TRO and preliminary injunction shutting down a rogue Internet
Service Provider that recruited, knowingly hosted, and actively participated in the distribution of spam, child pornography, and other harmful electronic content. The FTC complaint
alleged that the defendant, Pricewert LLC, which does business under a variety of names
including 3FN and APS Telecom, actively recruited and colluded with criminals seeking to
distribute illegal, malicious, and harmful electronic content, including child and other pornography, spyware, viruses, trojan horses, phishing, and botnet command and control servers.

in ill‑gotten gains over a period of five years. The court
entered default judgments in the amount of $163,167,539
against three of the defendants in the case – Sam Jain, Innovative Marketing, Inc., and Daniel Sundin. Final orders
against these defendants ban them from selling security
software of any type and from disseminating any computer
program that interferes with consumers’ computer use.
Litigation continues against the remaining defendants.
iiData Breach Warning Letters. The Commission notified
nearly 100 public and private entities – including businesses, schools, and local governments – that personal information, including sensitive data about customers and/or employees, has been shared from the organizations’ computer
networks and is available on peer-to-peer (P2P) file-sharing
networks. Network users could use the information, which
may include financial records and Social Security numbers,
to commit identity theft. The FTC has also released new
education materials about the risks involved and how to
manage them.

Digital Rights
Management
Town Hall
The FTC co-hosted a
conference of entertainment and technology industry representatives, consumer
advocates, academics,
and Copyright Office
representatives to
examine the impact of
digital rights management (DRM) technologies on consumers.
The discussion helped
both Commission staff
and sellers of DRMprotected content and
services to understand
the legal and business
implications of the use
of these technologies,
as well as ways of
providing better notice
to consumers.

D.	 Children’s Privacy and Security Online
Enforcement
The FTC works to make the Internet more secure for children by enforcing the Children’s Online Privacy Protection Act of 1998 (COPPA) and the FTC’s COPPA Rule. To date, the FTC has
brought 15 actions to enforce COPPA, obtaining a total of $3,220,000 in civil penalties. In March
2010, the Commission launched a full-scale review of its COPPA Rule, and will host a public roundtable on issues relating to the Rule review in Washington, D.C. on June 2, 2010. In its most recent
action, the Commission charged Iconix Brand Group, Inc., owner and marketer of several apparel
brands popular with children and teens, with collecting and storing personal information from
approximately 1,000 children without first notifying their parents or obtaining parental consent.
According to the complaint, on one brand website, Iconix enabled girls to share personal stories and
photos publicly online. To settle the charges, Iconix agreed to pay a $250,000 civil penalty. An
injunction prohibits future violations and requires the company to delete information collected in
violation of COPPA.

44

Reports
iiVirtual Worlds and Kids: Mapping the Risks. In December, the
FTC issued a report to Congress examining the types of content
available in online virtual worlds, the ease with which minors can
access both sexually and violently explicit content in virtual worlds,
and the methods used by virtual world operators to restrict minors’
access to such content. The report presents the results of an empirical survey of the explicit content offerings in 27 online virtual
worlds, selected as a cross section of worlds specifically intended for
children under 13, worlds that appeal to teens, and worlds intended
only for adults. At least one instance of sexually or violently explicit content was observed

iiMarketing Violent Entertainment to Children. Over the past decade, the Commission
has issued seven reports to Congress on the marketing of violent entertainment to children,
including the results of undercover shopping excursions by underage shoppers. In the latest
report, the Commission found that movie theaters denied 72 percent of underage shoppers
admission to R-rated movies (the best results obtained to date) and electronic game retailers denied 80 percent of such shoppers access to M-rated games. On the other hand, the
survey also found that music retailers permitted 7 in 10 underage shoppers to buy CDs with
a Parental Advisory Label and more than half to buy violent R-rated and unrated DVDs.
The report makes recommendations for increased enforcement of age restrictions; tighter
restrictions for online and viral marketing of these products; limitations on the marketing of
PG‑13 movies to young children; and improved display of rating information in advertising
and on packaging.

45

Consumer Protection Mission

in 19 of the 27 virtual worlds surveyed. Of the 14 virtual worlds included in the study that
were, by design, open to children under age 13, seven contained no explicit content, six
contained a low amount of such content, and one contained a moderate amount. Much of
the explicit content was in the form of text posted in chat rooms, on message boards, and in
discussion forums, with the remainder appearing as still or moving images, occasionally accompanied by audio. The report assesses the tools used by virtual world operators to attempt
to prevent minors from gaining access to explicit content, such as age screens and age-segregation initiatives, as well as community policing measures like abuse reporting, flagging, and
the use of filters and live moderators. The report concludes with a set of recommendations to
reduce the risk of youth exposure to explicit content and encourages parents and children to
become better educated about online virtual worlds.

Consumer Education
iiNet Cetera: Chatting with Kids About Being Online. This fall, the FTC released
Net Cetera, a new guide to help parents talk to their children about Internet safety. The
guide, part of the federal government’s OnGuardOnline program, is designed to help parents
address three areas related to their children’s online activities: inappropriate conduct, inappropriate contact, and inappropriate content. Net Cetera encourages parents to reduce the
risks by talking to kids about how they communicate – online and off – and covers what parents need to know, where to go for more information, and issues to raise with kids about social networking, sexting, cyberbullying, mobile phones, protecting the family computer, and
parental controls. Since its publication in October, the Commission has distributed more
than two million copies, including copies to school districts in Georgia, Texas, California,
and Washington State and schools in Washington, D.C., Florida, and
California. A variety of organizations are featuring Net Cetera on their
websites or helping promote it, including Sprint, Facebook, MySpace,
Ning, the national Better Business Bureaus, Boys and Girls Clubs of
America, and the National Association of Independent Schools.
Net Cetera is at OnGuardOnline.gov, a website maintained by the
FTC. OnGuardOnline.gov provides practical tips from the federal
government and the technology community to help people guard
against Internet fraud, secure their computers, and protect their
privacy. This year, OnGuardOnline launched a new module about searching for health care
information or buying health care products online. OnGuardOnline.gov logs more than
150,000 visits per month.

Chapter 9: Other Deceptive and Unfair Advertising and
Marketing Practices
A.	 False or Deceptive Health, Safety, and Weight Loss Claims
Health and safety cases continue to be a high priority for the Commission, as consumers are
victimized by false or unsupported claims that dietary supplements and other products can prevent, treat, or cure various ailments, including serious diseases; cause substantial weight loss; enable
smokers to quit smoking; improve mental focus; or make unsafe conduct safer. From March 2009
through March 2010, the Commission initiated or resolved 19 law enforcement actions challenging
false or deceptive health or safety claims.

46

Enforcement
iiRemedies for Cancer and Other Serious Diseases. The FTC targeted supplement sellers
who claim their products can prevent, treat, or cure cancer and other serious diseases.
zz

A federal district court ordered defendants in Direct Marketing Concepts – a case
involving the sale of dietary supplements “Coral Calcium” and “Supreme Greens” – to
pay a total of nearly $70 million for consumer refunds for products they claimed would
treat, cure, or prevent cancer and other
serious diseases, including Parkinson’s
“I ordered a sample of (a health
disease, heart disease, diabetes, arthritis,
care supplement) for $1.99. I was
charged $84.71 plus shipping and
and autoimmune disorders. A permanever received the initial sample.
nent injunction bars future deceptive
... After reading your website, I now
claims, the failure to disclose that prounderstand more about these types
motional programming is in fact paid
of internet deals.”
advertising, and charging consumers on
– Consumer in Los Angeles, CA
an ongoing basis without their consent.
The Commission upheld an administrative law judge’s ruling that Daniel Chapter One and its principal James Feijo made
unsubstantiated claims that four dietary supplements could prevent, treat, or cure cancer.
The respondents advertised their products – Bio*Shark, GDU, 7 Herb Formula, and
BioMixx – on their website, in print publications, and on their radio program, “Daniel Chapter One HealthWatch.” Among other defenses, the respondents asserted that
Daniel Chapter One is a religious ministry and therefore not subject to FTC jurisdiction.
The Commission determined that, notwithstanding the respondents’ religious status and
activities, the respondents’ business of selling these supplements and other products does
not meet the FTC Act standard for an exempt nonprofit entity. The Commission entered an order that prohibits Daniel Chapter One and Feijo from making false or unsubstantiated health claims and requires them to send a letter notifying purchasers of their
products of the FTC’s action. Respondents have filed an appeal.

zz

Roex, Inc. The company, its principal, and one of its radio show hosts settled charges
they made deceptive claims that an infrared sauna device could treat cancer and that various dietary supplements would treat, reduce the risk of, or prevent cancer, HIV/AIDS,
diabetes, strokes, heart attacks, Alzheimer’s disease, Parkinson’s disease, and various other
disorders. The products were sold by means of a nationally broadcast, live, call-in radio
program titled “The Truth About Nutrition” and the company’s website. Defendants

47

Consumer Protection Mission

zz

paid $3 million in consumer redress. More than 5,700 checks were sent to consumers in
March 2010.  The average consumer refund was $500.
iiCereal to Improve Kids’ Attentiveness. Kellogg Company agreed to settle FTC charges
that its advertising – appearing on TV, cereal boxes, and the Internet, as well as in print –
falsely claimed that a breakfast of Frosted Mini-Wheats was clinically shown to improve
children’s attentiveness by nearly 20 percent. The administrative consent order requires that
claims about the benefits to cognitive health, processes, or function from eating cereal, or
any other morning food or snack food, be true and supported by scientific evidence. The
settlement also prohibits Kellogg from misrepresenting the results of tests, studies, or research
regarding any morning or snack food product.
iiWeight Loss Supplements. A federal district court judge ordered Bronson Partners, LLC
(doing business as New England Diet Center and Bronson Day Spa) and its owner Martin
Howard to pay more than $1.9 million as restitution
for consumers who bought defendants’ Chinese Diet
From March 2009 through
Tea and Bio-Slim Patch based on deceptive claims that
March 2010, the FTC’s Redress
these products could cause significant weight loss withAdministration Office mailed
redress checks to 2,598,799
out diet or exercise. The defendants represented, for
consumers for a total of more
example, that consumers could lose up to 25 pounds
than $63.6 million.
in four weeks simply by drinking a cup of tea after
each meal. The court entered a permanent injunction
barring the defendants from representing that any weight loss product can cause rapid or
substantial weight loss without diet or exercise.
iiCold and Flu Products. In 2008, the Commission settled charges that Airborne Health,
Inc. disseminated false and unsubstantiated claims that Airborne effervescent tablets prevent
and treat colds and flu and protect against exposure to germs in crowded environments.
Subsequently, the Commission turned its attention to Airborne “copycat” products – settling
similar charges against three major retail chains, each of which marketed its own store-brand
cold and flu product by promoting the product’s similarity to Airborne at a lower cost. All
three retailers agreed to permanent injunctions, as well as payment of consumer redress:
CVS Pharmacy, Inc. $2,783,047; Rite Aid Corp. $500,000; and Walgreen Co. $5,970,000.
Another action was filed against Improvita Health Products, Inc., distributor of Airborne
“copycat” products sold by several retail stores, as well as Improvita’s two principals, Thomas
Klamet and Daniel Kohler. The principals agreed to a permanent injunction and payment of
a total of $565,000; the court entered a default against Improvita.

48

iiSmoking Cessation Devices. The Commission settled charges that online marketer NextClick Media LLC misrepresented the efficacy of its smoking cessation product and failed to
disclose that consumers who accepted its so-called “free trial offer” were actually signing up
for a continuity program and would be billed nearly $100 each month until they canceled. 
Consumers found that cancellation was often difficult or impossible. A stipulated final order
entered by the court bars the defendants from making certain smoking cessation claims,
as well as misrepresenting the health benefits of any supplement, food, drug or device, or
the results of tests, studies, or research on such products. In addition, the order mandates
disclosures in connection with the use of negative-option continuity plans, and requires the
defendants to obtain the express consent of consumers to whom they sell any product or service through such a plan. The order imposes a $3.4 million judgment that will be suspended
upon payment of $315,000 for consumer redress.
iiAlcohol Energy Drinks. The Commission settled charges that Constellation Brands, Inc.,
a major alcohol marketer, deceptively advertised that its caffeinated alcohol drink, Wide Eye

49

Consumer Protection Mission

iiH1N1 Flu Virus. The FTC sent
Significant Redress Orders*
warning letters to 20 website
WinFixer
$163,167,539
operators who made questionDirect Marketing Concepts
$69,253,547
able claims that their products
National Prize Information Group Corp.
$26,885,186
$19,170,824
– including dietary supplements, Herbal Kings/Lance Atkinson
$18,827,528
homeopathic remedies, air filtra- Network Services Depot, Inc.
$18,000,000
tion devices, and cleaning agents MoneyGram International, Inc.
LifeLock, Inc.
$12,000,000
– can prevent, treat, or cure the
Select Management Solutions
$ 7,845,795
H1N1 virus, commonly known
Timothy Jackson/Grant Info Systems LLC
$ 7,452,569
as swine flu. These warnings
Walgreens
$ 5,970,000
resulted from an Internet sweep
Internet Listing Service Corp.
$ 4,251,876
conducted by members of the
Roex, Inc.
$ 3,000,000
International Consumer ProCVS Pharmacy, Inc.
$ 2,783,047
tection Enforcement Network
* These do not include amounts suspended by the court based
on inability to pay. Default judgments are included.
(ICPEN) in September. The
Commission referred another 13
website operators – believed to be located outside the United States – to foreign law enforcement authorities. Sixty percent of the domestic websites and half of the foreign ones have
now removed the claims or the entire website. In addition, the FTC and the FDA sent their
first joint warning letter to Weil Lifestyle LLC regarding a product the company claimed
could prevent, treat, or cure human infection with the H1N1 virus.

Schnapps, would keep consumers alert. The administrative consent order bars Constellation
from making untruthful claims that any alcohol beverage containing caffeine or any other
stimulant will keep consumers awake, or that any ingredient in an alcohol product will counteract the effects of consuming alcohol.
iiIndoor Tanning Salons. Based on studies showing that indoor tanning is associated with
an increased risk of melanoma and non-melanoma skin cancers, the Commission charged
the Indoor Tanning Association (ITA) with making false health and safety claims for indoor
tanning. The Commission’s complaint alleged that ITA deceptively represented that indoor
tanning does not increase the risk of skin cancer,
is government-approved, and is safer than tanning outdoors. The consent order entered into
by ITA bars these claims and requires that future
ads about the safety or health benefits of indoor
tanning disclose, clearly and conspicuously, that
exposure to ultraviolet radiation may increase the
likelihood of skin cancer.

Guides & Workshops
iiRevised Endorsement and Testimonial Guides. The FTC also reviewed and revised its
Guides Concerning the Use of Endorsements and Testimonials in Advertising. In one revision the Guides advise that when ads using consumer testimonials convey that the endorser’s
experience is representative of what consumers generally will achieve, and the advertiser does
not possess adequate substantiation for this claim, the advertiser should clearly and conspicuously disclose the results consumers actually can expect to achieve, rather than simply
inserting a disclaimer of typicality, such as “results not typical.” Advertisers can still use such
disclaimers, but the revised Guides no longer provide a “safe harbor” under Section 5 of the
FTC Act to those who do so. The Guides also advise that celebrities are potentially liable for
false and unsubstantiated statements they make in the course of an endorsement. In addition, because consumer endorsements will be interpreted as representing that the advertised
product or service is effective for the purpose
depicted in the ad, the revised Guides advise that the advertiser must have adequate
substantiation to support such claims, just
as it would be required to do if it had made
the representation directly (i.e., without us-

50

ing endorsements). Finally, a number of new examples apply the principles set forth in the
Guides (e.g., that material connections between advertisers and endorsers should be disclosed) to new social media, such as blogs, that did not exist when the Guides were issued in
1980.
iiFood Marketing and Childhood Obesity. Since 2005, the FTC has hosted three public
forums to address the issues surrounding food marketing to kids and childhood obesity. At
the most recent event, in December 2009, Secretary of Health and Human Services Kathleen
Sibelius served as the keynote speaker. Panels presented new research on the impact of food
advertising on children’s food choices; discussed the legal ramifications of possible restrictions
on food advertising to children; and assessed food industry self-regulatory efforts to impose
nutritional standards on their advertising to children. Finally, the Interagency Working
Group on Food Marketed to Children, of which the FTC is a member, presented its tentative, proposed nutritional standards for foods marketed to children, followed by audience
questions and discussion.

B.	 Environmental Marketing
Consumers are increasingly making purchasing decisions based on the environmental impact of
products. As a result, marketers are making “green” claims about their products. The FTC continues
bringing enforcement actions to weed out deceptive “green” claims.

Enforcement

iiTextiles Labeled as Bamboo. The Commission has settled charges that four sellers of clothing and other textiles, Sami Designs, LLC, d/b/a Jonäno; CSE, Inc., d/b/a Mad Mod; Pure
Bamboo, LLC; and The M Group, Inc., d/b/a Bamboosa, violated both the FTC Act and
the Textile Fiber Products Identification Act by deceptively labeling and advertising their
products as made of bamboo fiber, when in fact they are rayon. The Commission further
alleged that some of the companies made false and unsubstantiated claims that their products are manufactured using an environmentally friendly process; that they retain the natural

51

Consumer Protection Mission

iiBiodegradability Claims. The Commission announced three actions charging Kmart
Corp., Tender Corp., and Dyna-E Int’l with making false and unsubstantiated claims
that their products are biodegradable. According to the FTC’s complaints, the defendants’
products typically are disposed of in landfills, incinerators, or recycling facilities, where it is
impossible for waste to biodegrade within a reasonably short time period. The companies
have agreed to orders that bar deceptive “degradable” product claims and require competent
and reliable scientific evidence to support environmental product claims.

antimicrobial properties of the bamboo plant; and that they are biodegradable. Following
these actions, the Commission sent warning letters to 78 retailers that appeared to market
rayon products as being made of bamboo fiber.

C.	 Telemarketing Fraud
The Commission has continued its aggressive efforts to combat telemarketing fraud, including
the use of robocalls – that is, automated calls placed to random phone numbers with prerecorded
voice messages.

Enforcement
iiInc21.com Corporation. A U.S. district court issued a preliminary injunction to halt the
illegal practices of an Internet services company charged with “cramming” unauthorized
charges onto the telephone bills of thousands of consumers and small businesses for services
they never agreed to buy. The FTC charged that Inc21 and its affiliated companies used
offshore telemarketers to sell Internet services, including website design and hosting, Internet
directory listings, search-engine advertising, and Internet-based faxing, for monthly charges
up to $40. The complaint further alleged that Inc21 used third-party billing aggregators to
place charges on the phone bills of consumers and businesses that either were never contacted, declined the services, or were offered a purportedly free trial without being informed that
they would be charged monthly if they did not cancel.
iiAuto Warranty Robocalls. The FTC filed two
related complaints and a federal court shut down
“I applaud the FTC for
beginning to take action
a telemarketing campaign that had been bombardagainst the automobile
ing consumers with hundreds of millions of allegextended warranty
edly deceptive robocalls in an effort to sell them
industry’s robo-calls.”
vehicle service contracts under the guise that they
– Consumer in Albuquerque, NM
were extensions of original vehicle warranties.
Transcontinental Warranty, Inc. and its owner,
Christopher Cowart, settled with the FTC and are barred from using deceptive tactics to
sell vehicle service contracts and selling their customer lists. In addition, they are required
to cooperate in the FTC’s ongoing investigation of a related case against the telemarketers
who made the prerecorded calls. The settlement includes a $24 million judgment against
the defendants, which is suspended because of their inability to pay. Voice Touch, Inc. and
its principal, brokers for Transcontinental Warranty, also settled commission charges in this
matter, agreeing to be permanently barred from telemarketing activities and from assisting

52

anyone else in telemarketing. They will pay more than $655,000 in consumer redress. Litigation continues against other participants in this scheme.
iiOperation Mirage. The Commission filed suit to halt the illegal activities of three telemarketing boiler-room operations in Montreal, Canada. According to the complaints, these
operations defrauded thousands of small- and medium-sized U.S. businesses and non-profit
organizations, including churches, schools, and charities, out of millions of dollars by deceiving them into paying for unwanted listings in worthless business directories. The lawsuits,
filed in federal court in Illinois, are part of Operation Mirage, a joint initiative with Canadian law enforcement authorities aimed at cracking down on business directory scams. The
court has issued preliminary injunctions in all three cases.

The Commission made news when
it settled charges that Ticketmaster
L.L.C. and its ticket reseller affiliate,
TicketsNow.com, Inc., used
deceptive tactics to sell tickets for
various popular events. According
to the FTC complaint, last year when
Bruce Springsteen concert tickets
were offered on ticketmaster.com,
Ticketmaster displayed a “No Tickets
Found” message when it could
not fulfill a customer’s initial ticket
request. Ticketmaster then allegedly
steered unsuspecting consumers to
TicketsNow.com, a reseller offering tickets at much higher prices – double, triple, or even
quadruple the face value.

Under the FTC settlement, eligible consumers who have not previously received
a refund will be reimbursed the extra money they paid for the higher-priced tickets. In
addition, the Final Order requires detailed disclosures about any link between a primary
ticket sale website and a resale website and about the status of any tickets listed for sale
on the resale website that are not “in hand” – thus providing new transparency in the
ticket resale market. Warning letters were sent to other ticket resellers that may engage in
similar practices.

53

Consumer Protection Mission

The FTC charged that, in some cases, consumers were not informed the resale tickets
were not actually “in hand” but merely offered on a speculative basis. Some consumers
never received the tickets they had paid for, and although ultimately their money was
returned, Ticketmaster allegedly kept the sales proceeds for several months without
having a reasonable basis to believe it could fulfill the orders.

D.	 Payment Systems
iiThe FTC settled charges that MoneyGram International, Inc., the second-largest money
transfer service in the United States, helped fraudulent telemarketers and other con artists
trick U.S. consumers into wiring them more than $84 million, based on false statements that
the consumers had won a lottery, were hired for a secret shopper program, or were guaranteed loans. MoneyGram agreed to pay $18 million in consumer redress to settle allegations
that, between 2004 and 2008, it allowed its money transfer system to be used to facilitate
fraud. The FTC charged that MoneyGram knew its system was being used to defraud people
but did very little to prevent it, and that its Canadian agents, in some cases, participated
directly in these schemes. Under the terms of the settlement, MoneyGram is required to
implement a comprehensive anti-fraud and agent-monitoring program.

E.	 Prepaid Phone Cards
Deceptive claims about minutes and charges for prepaid phone cards continue to be a problem
that especially targets Hispanics, as well as others with ties to foreign countries. The FTC testified
before Congress on its efforts to crack down on deceptive marketing of prepaid phone cards and
expressed support for pending legislation that would benefit consumers by giving the Commission
stronger tools to combat this deceptive activity.
iiDiamond Phone Card, Inc. The FTC
charged Diamond, a seller of prepaid calling
cards, and its principals with advertising that
their cards provided more phone minutes
than were actually delivered. The complaint
also alleged that the defendants failed to adequately disclose fees that reduced the value
of the calling cards. Diamond marketed the
cards to recent immigrants, many of whom
rely on calling cards to stay in touch with
family and friends in other countries. According to the complaint, the defendants’
ads made bold claims about the number of
minutes the cards would provide for calls to
international locations, including the Do-

Hispanic Law
Enforcement Initiative
The FTC continues to work aggressively to combat other kinds of consumer
fraud perpetrated against the Hispanic
community. Since the introduction of
the Hispanic Law Enforcement Initiative in 2004, the FTC has filed 51
actions against 184 businesses and
individuals alleged to have fraudulently
sold a variety of products and services
to Spanish-speaking consumers. Recent examples of such actions include
Dinamica Financiera and Zoilo Cruz,
d/b/a/ International Marketing and
Universal Wealth.

minican Republic, El Salvador, Mexico, India, Pakistan, and Guatemala. The FTC charged,
however, that consumers did not receive the number of represented minutes. For example, a

54

card that was advertised to deliver 400 calling minutes to Mexico actually provided only 106
minutes, and a card that was claimed to deliver 50 minutes to Honduras actually delivered
only 20 minutes. The case is in litigation.
iiClifton Telecard Alliance. A leading U.S. distributor of prepaid calling cards agreed to pay
$1.3 million to settle charges that it misrepresented the number of calling minutes consumers would get with its calling cards, charged hidden fees, and failed to disclose that minutes
would be deducted whether or not the calls were actually connected. In tests conducted by
the FTC, the cards on average provided fewer than half of the advertised calling minutes.

Chapter 10: Order Enforcement, Bankruptcy Collections,
and Supporting Criminal Prosecutions
The Commission places a high priority
Significant Civil Penalty Cases
on aggressively enforcing its orders against
Civic Development Group
$18,775,000
repeat offenders and those who act with
DIRECTV, Inc.
$2,310,000
them. These enforcement efforts aim to
Credit Bureau Collection Services, Inc.
$1,095,000
identify violators quickly in order to limit
Comcast Corporation
$900,000
consumer harm, obtain compensation for
TALX Corporation	
$350,000
injured consumers, and modify orders to
Iconix Brand Group, Inc.
$250,000
$225,000
provide additional protection for consum- Oxford Collection Agency, Inc.
ers. The Commission also acts to secure
its judgments when malefactors attempt to protect their assets through bankruptcy. In addition, the
Commission refers particularly egregious violators to criminal law enforcement agencies for prosecution.

iiBlueHippo. The FTC brought a contempt action against BlueHippo and its owner, Joseph
Rensin, charging that they violated a 2008 federal court order by falsely informing creditchallenged consumers that BlueHippo is in the business of financing computers, and by
failing to disclose material terms of the company’s refund policy. The Commission alleged
that Blue Hippo collected more than $14 million from consumers based on claims it would
finance their purchases of new computers, but, in many instances, delivered neither the
financing nor the computers. The Commission is seeking compensation for consumers, as
well as a modified order banning BlueHippo from financing any product or service and from
selling consumer electronics.

55

Consumer Protection Mission

A.	 Order Enforcement

iiNeovi, Inc., d/b/a
Michael Mora, Bureau of Consumer Protection
Neovi Data CorpoAs a member of the Division of Enforcement,
ration and Qchex.
Mickey heads up the bankruptcy program for the
com. The CommisCommission’s Bureau of Consumer Protection.
sion brought a conHe represents the Commission in bankruptcy
court, ensures that its law enforcement actions are
tempt action against
not thwarted by defendants’ bankruptcy filings,
Thomas Villwock,
and enforces FTC money judgments. In 2009,
under Mickey’s leadership, the bankruptcy group
James M. Danforth,
preserved over $230 million of FTC judgments
and G7 Productivfrom discharge. Mickey also serves as the Bureau’s
ity Systems, Inc.
primary expert on a wide variety of other commercial law issues, and he is
the lead attorney in the Commission’s ongoing contempt litigation against
for violating a 2009
Kevin Trudeau.
federal court order
through their operation of a check creation and delivery service via the Internet. The defendants allegedly issued
e*checks without taking steps required by the order to verify the identity of users and their
authority to draw funds on designated financial accounts – thereby leaving unsuspecting
bank account holders vulnerable to unauthorized withdrawals. The FTC seeks imposition of
a daily fine or imprisonment if the unlawful conduct is not stopped, as well as an order requiring defendants to compensate affected consumers and to relinquish their ill-gotten gains.
iiCivic Development Group. In 1998, Civic Development Group (CDG) and its principals
agreed to an administrative order to settle charges that they misled consumers about how
their donations would be used.  Undeterred, in 2004, the defendants initiated a scheme
whereby charities “hired” CDG’s telemarketers (although CDG continued to hire, fire, pay,
and supervise them), so that it could misrepresent that 100 percent of a prospective do“This scheme packed a onetwo punch: it deceived the people
nor’s donation would go to the charity.  In
who donated, and it siphoned
fact, CDG retained all but 10 to 15 percent
much-needed funds from police,
of the donations.  Based on the Commisfirefighters, and veterans groups.
sion’s referral, the DOJ filed an order violaThe court’s final settlement order
packs a one-two punch of its own:
tion case against the defendants, who settled
a record-breaking financial penalty
on the eve of trial for a court order permafor violating an FTC order and a
nently banning them from soliciting for
lifetime ban on soliciting charitable
charities and entering a record $18.8 million
donations.”
civil penalty.
–David Vladeck, Director, BCP
(press release, March 31, 2010)

56

B.	 Bankruptcy Claims
In 2009, Commission bankruptcy lawyers protected more than $230 million in FTC judgments
from discharge in nine bankruptcy cases, including $48 million in suspended judgments that are
subject to reinstatement. In John Stefanchik/Warwick Properties LLC, the Commission filed a
reverse veil piercing case against a shell corporation set up by Stefanchik to shield his multi-million
home and other assets from creditors. The FTC holds a $17 million judgment against Stefanchik for
operating a deceptive scheme in which he promised to teach consumers how to make large amounts
of money selling mortgages and promissory notes.

C.	 Criminal Liaison Unit
Since its inception in 2002, the FTC’s Criminal Liaison Unit (CLU) has promoted the criminal
prosecution of consumer fraud by state and federal prosecutors. The CLU works to ensure that FTC
defendants and their associates who have committed crimes are charged, prosecuted, and brought to
justice. Through partnerships with the DOJ, U.S. Attorneys, and state prosecutors, the CLU program has assisted in the prosecution of hundreds of fraudulent telemarketers, sellers of bogus cancer
cures, and those operating sweepstakes scams. In the last year, federal and state criminal authorities
have charged 40 FTC defendants and their associates with crimes arising from activities investigated
or prosecuted by the Commission. During this period, 32 such defendants and their associates were
convicted or plead guilty. Prison sentences imposed totaled more than 220 years; the average sentence was six years.

Chapter 11: Consumer Protection Law Enforcement Tools
In order to improve its methods for identifying law violations, the FTC maintains various
databases for collecting and analyzing information about consumer experiences in the marketplace.

57

Consumer Protection Mission

iiTransnet Wireless Corp. In 2005, the FTC sued promoters of a “sure fire” Internet kiosk business opportunity. Consumers paid $14,000 per kiosk, but often received nothing
in return. Others found that the kiosks failed to produce anything close to the promised
revenues. The FTC successfully completed its action, and now the DOJ has charged the
ringleaders – Paul Pemberton and Bradley Cartwright – as well as the operation’s salesmen
and shills, with conspiracy to commit wire fraud. Following a guilty plea, Pemberton was
sentenced to an 11 year prison term and ordered to pay restitution of $7.7 million. One of
the shills was sentenced to three and one-half years. Altogether, five individuals have been
convicted in this ongoing investigation.

Some of these databases are also made available to other law enforcement agencies to enhance their
efforts to investigate and stop illegal practices.
iiConsumer Response Center. The Consumer Response Center collects information from,
and provides information to, consumers and law enforcement authorities. Last year, the
CRC handled nearly 40,000 inquiries and complaints from consumers and businesses each
week. These contacts come from the FTC’s toll-free numbers (1-877-FTC-HELP and
1-877-ID-THEFT), the FTC’s website, and by mail.

Top Consumer Complaints in 2009
Category

Number

Identity theft

278,078

Debt collection (third party and creditor)

119,549

Internet services

83,067

Shop-at-home and catalog sales

74,581

Foreign money offers and counterfeit checks

61,736

Internet auctions

57,821

Credit cards

45,203

Prizes, sweepstakes, and lotteries	

41,763

Advance-fee loans and credit protection/repair

41,448

Banks and lenders

32,443

Credit bureaus, information furnishers, and credit report users

31,629

Television and electronic media

26,568

Health care

25,414

Business opportunities, employment agencies, and work-at-home plans

22,896

Computer equipment and software

22,621

Telecom equipment

22,377

Automobiles

22,372

iiConsumer Sentinel. Complaint information collected by the FTC is entered into a secure,
online database within the Commission’s Consumer Sentinel Network. The agency shares
the more than 13.4 million complaints collected during the past five years with more than
1,900 law enforcement organizations in the U.S., Canada, and Australia. The database
enables the FTC and its law enforcement partners to spot trends quickly, target the most serious illegal practices reported by consumers, and coordinate law enforcement efforts with its
counterparts.

58

iiDo Not Call Registry. The
Registry protects consumers from
receiving unwanted commercial
telemarketing calls. At the end
of December 2009, the Registry
contained more than 197 million
telephone numbers.

How to File a Complaint
The FTC produced a short video in English and
in Spanish, explaining how to file a complaint
with the FTC. The video shows and tells what
kinds of complaints the FTC collects, and how
it uses them to build cases that eventually can
help put con artists out of business. In addition,
the Commission has created sets of tweets on
a variety of consumer issues like cybersecurity,
holiday shopping, general credit issues, and
charitable giving that people can share with their
online networks, friends, and followers. The
tweets are posted at ftc.gov.

iiIdentity Theft Tools. Since 2002,
the FTC and its partners – which
now include the U.S. Secret
Service, the DOJ, the U.S. Postal
Inspection Service, the Federal
Motor Carrier Safety Administration, and the FBI – have provided state and local law enforcement officers with practical tools to assist victims of identity theft, investigate the crime,
and work with local prosecutors. To date, the FTC and its partners have conducted 39 seminars, training more than 5,150 law enforcement officers from more than 1,680 agencies.

59

Consumer Protection Mission

iiSpam Database. The FTC maintains an electronic address to which consumers and businesses can forward unsolicited commercial email or “spam.” The spam database is important
to Commission enforcement of the CAN-SPAM Act – which prohibits deceptive sender
and subject lines in commercial email and provides consumers the right to opt out of future
commercial email campaigns – and to law enforcement actions by other federal and state
agencies. From March 2009 through March 2010, this mailbox, spam@uce.gov, received
approximately 111,000 pieces of spam daily. The total amount of spam received by the FTC
to date exceeds 612 million.

Certificate of Excellence in Accountability Reporting
The FTC was recognized for meeting the highest standards of federal fiscal accountability
reporting for the third year in a row when the Association of Government Accountants’
(AGA) awarded the agency its prestigious Certificate of Excellence in Accountability
Reporting (CEAR). The CEAR is awarded to federal government entities whose
Performance and Accountability Reports (PARs) achieve the highest standards of clarity
in communicating financial information and demonstrating accountability. “FTC is to
be commended for issuing a PAR that provides a good sense of what the FTC does, and
how well it does it, even to those not familiar with the agency. It conveys the impression
that FTC is clearly in compliance with the many different elements of transparency and
accountability,” said Relmond P. Van Daniker, AGA’s Executive Director.

60

FTC Comments to the FCC
Using its substantial expertise in Internet and broadband issues, the FTC often
provides input to the Federal Communications Commission (FCC) on key media and
telecommunications issues. This year, the Commission filed three comments on how
best to promote competition and protect consumers online in connection with particular
FCC proposals.
National Broadband Plan. The FCC’s National Broadband Plan (Plan) incorporates
the FTC’s comments on the proper role of competition and consumer protection in
the development of nationwide broadband. The FCC’s Plan recognizes, as the FTC
advised, that competition and consumer protection policies must work together to
benefit consumers in the broadband area, and that these policies form a critical part of
the foundation on which to build a sound national broadband plan. The Plan adopts
the FTC’s recommendation that the FCC use economically sound analytical tools
to evaluate competition in broadband and to tailor appropriate regulatory policies
that benefit consumers. The FTC also emphasized the importance of meaningful
consumer protection to foster broadband development, and the FCC’s Plan specifies
that consumers should receive meaningful and timely disclosures of service terms by
broadband providers, and that providers must use strong data security policies. As
the FTC explained, privacy protections are important because new technologies allow
broadband providers to track consumers’ online activities and use that data to target
advertising online.
Advertising and Billing for Communications Services. The FTC urged the FCC
to require that advertised prices of communications services – telephone, cable, and
Internet access – reflect the price consumers actually pay, including taxes, fees, and
other charges, and to consider whether requiring certain information disclosures would
help consumers understand competing offers. Based on its own experience, the FTC
also advised the FCC on ways to enforce against the cramming of unauthorized charges
onto consumer telephone bills.

61

Consumer Protection Mission

Empowering Parents and Protecting Children. The FTC expressed its support for
the FCC’s initiative to examine the media landscape to determine how best to empower
parents and protect children from inappropriate contact, conduct, and content. To aid
in the FCC’s efforts, the FTC’s comment described the agency’s own enforcement and
education efforts in these areas.

Section Three:
International Activities
Globalization continues to reshape the world in which consumers and businesses operate.
Thanks to the Internet and other new technologies, marketing practices that once remained within
national borders now reach around the globe. This not only creates unprecedented opportunities for
commerce, but also new challenges for antitrust and consumer protection agencies around the world,
including the FTC. Fraud, deceptive practices, and anticompetitive conduct that once might have
been contained within a single nation can now instantaneously affect consumers worldwide.

Notable developments this year include the FTC’s continued use of its authority under the
Undertaking Spam, Spyware, And Fraud Enforcement With Enforcers Beyond Borders Act of 2006
(U.S. SAFE WEB Act). The agency reported to Congress on the Act’s effectiveness and recommended that it be made permanent. The FTC also engaged in cross-border enforcement assistance to better protect American consumers by cooperating with consumer protection, antitrust and other law
enforcement authorities worldwide. The FTC maintained its strong record of working with foreign
antitrust agencies to reach consistent outcomes in several high-visibility antitrust cases and developed
new tools to promote common competition policy and enforcement approaches. The agency expanded its International Fellows and Interns Program to bring foreign agency officials to Washington
to work side-by-side with expert FTC staff and also sent several FTC staff to work for several months
at foreign agencies. The Commission hosted a high profile Organisation for Economic Co-operation
and Development (OECD) conference on consumer protection in electronic commerce. With other
U.S. agencies, the FTC negotiated a Memorandum of Understanding (MOU) with the 21 Asian
Pacific Economic Cooperation (APEC) countries to establish a framework for cross-border transfer
of enforcement data. The FTC also hosted an International Cooperation Network (ICN) workshop
on unilateral conduct. In response to growing demand, it expanded its technical assistance program
into new areas and increased the number of consumer protection programs offered.

63

International Activities

To meet these challenges, the FTC coordinates with foreign law enforcement agencies to halt
unfair, deceptive, or anticompetitive conduct wherever it occurs and to obtain necessary information
and assistance for investigations and enforcement actions. The FTC engages with competition and
consumer protection agencies in other countries, bilaterally and through multilateral organizations,
to provide policy leadership and promote sound approaches to common problems. The FTC also
reaches out to both new and established competition and consumer protection authorities to help
them develop their institutions and train their staff to deal with challenges in evolving to a marketbased economy.

Commissioner William E. Kovacic
“No public agency prospers without superior people. Create a great team, and
you build the path to success. Today, the pool of exceptional talent in competition and
consumer protection policy is truly global. Agencies that tap this pool effectively boost
their performance. Citizens of foreign countries are playing a valuable and growing role
at the FTC. They serve as fulltime employees and as U.S. SAFE WEB Act International
Fellows seconded from the FTC’s foreign counterparts. Their presence not only
strengthens the FTC’s substantive programs, but also creates the deeper understanding
of comparative systems and forms the enduring friendships that draw nations together.”

Chapter 12: Seeking International Cooperation and
Consistent Outcomes in Cross-Border
Investigations
A. 	Competition Enforcement
The FTC worked on almost 40 international antitrust investigations in the past year, many of
which involved coordination or cooperation with foreign counterparts. The FTC has enhanced its
coordination in cases of suspected unilateral anticompetitive conduct and has conducted effective
reviews of multi-jurisdictional mergers. Significant examples from this year are:
iiPanasonic/Sanyo. The Commission worked with its counterparts in the EU, Canada, and
Japan to resolve competitive concerns raised by Panasonic’s proposed $9 billion acquisition of
Sanyo. The FTC and the EC’s Directorate General for Competition coordinated on a divestiture package in the market for portable NiMH batteries that power two-way radios used by
police and fire departments nationwide.
iiPfizer/Wyeth. The FTC cooperated with the competition agencies of Australia, Canada,
the EU, Mexico, New Zealand, and South Africa to address competitive concerns raised by
Pfizer’s $68 billion acquisition of Wyeth with respect to a wide variety of animal health products, including vaccines. FTC staff worked with counterparts in Australian, Canadian, and
the EU agencies to obtain coordinated, non-conflicting remedial decisions and orders.

B.	 Consumer Protection Enforcement
The FTC continued to expand its international enforcement cooperation efforts by making
greater use of the tools provided by the U.S. SAFE WEB Act. The Act enhances the FTC’s ability
to cooperate with foreign law enforcement authorities on cross-border consumer protection enforce-

64

ment matters, including in investigations and enforcement proceedings involving Internet fraud and
other technological abuses and
deceptive schemes that take advantage of U.S. consumers.

Laureen France, Northwest Region
Serving as the liaison between the Northwest
Regional Office and British Columbia law
enforcement and with the U.S. Attorney’s Office
in Los Angeles, Laureen plays a critical role in
criminal prosecution of cross-border targets. In
2009, Laureen’s work contributed to convictions
(including guilty pleas) or sentencing of four
criminal defendants, and the extradition of a fifth
from Canada to the United States. In addition,
Laureen played a lead role investigating and
supporting the litigation against U.S. Magazine Services and coordinating
the investigation of loan modification and debt relief targets.

In the first three years of its
authority under the U.S. SAFE
WEB Act, the FTC has shared
information in response to 38 requests from 14 foreign law enforcement agencies, resulting in over
17 enforcement actions by U.S. and foreign authorities, and it issued 26 civil investigative demands
on behalf of 6 foreign agencies in 12 investigations. In many of these cases, the foreign agencies have
been investigating conduct that directly harms U.S. consumers, while in others, the FTC’s assistance
has led to reciprocal assistance in other FTC investigations. Given the success of its enhanced authority, the FTC recommended that Congress repeal the Act’s seven-year sunset provision in the next
legislative session.
In addition, since the Act went into effect, the FTC has obtained formal negotiating authority
from the U.S. Department of State to negotiate and enter into binding international agreements
with foreign counterpart agencies, and the FTC has shared draft text for such agreements with key
foreign partners. The agency also has asserted its cross-border jurisdictional and remedial authority
under the Act in legal briefs defending against spurious challenges to its ability to protect U.S. consumers from cross-border harm.

iiTackling U.S. – Canada Cross-Border Fraud in Operation Mirage. To address the everconstant telemarketing and other fraud taking place across the U.S.-Canadian border, the
FTC works closely with its law enforcement partners in Canada, including the Competition
Bureau Canada and the members of seven regional bi-national partnerships. In June, for
example, the FTC joined with Canadian law enforcement authorities in Operation Mirage,
a cross-border enforcement sweep aimed at cracking down on business directory scams. As
part of the sweep, the FTC brought three cases against telemarketing operations based in

65

International Activities

During the past year, the FTC filed or obtained judgment in the federal courts in at least 21 cases
with a major international aspect, including cases that involved cooperation with counterparts in
Australia, Canada, China, Hungary, Nigeria, and the United Kingdom. For example:

Montreal alleging that they targeted U.S. businesses and other organizations with schemes
to mislead them into paying hundreds of dollars each for unwanted business directory listings. The FTC used its U.S. SAFE WEB Act authority to share information with Canadian
enforcers in two of the cases.
iiStopping an International Payday Loan Scam. In September, the FTC obtained a $1 million settlement from an Internet-based payday loan operation, based mainly in the United
Kingdom, which used unfair and deceptive tactics in consumer credit transactions with U.S.
consumers. In Cash Today, Ltd. the defendants allegedly provided consumers with payday
loans without disclosing in writing key loan terms such as the annual percentage rate, the
payment schedule, the amount financed, the total number of payments, and any late payment fees. The FTC alleged that the defendants also falsely claimed that consumers were
legally obligated to repay the loans and threatened consumers with arrest and imprisonment.
During its investigation, the FTC shared non-public information with authorities in the
United Kingdom. The U.K.’s Office of Fair Trading assisted the FTC by obtaining corporate
records for the foreign defendants and providing a declaration regarding those records, which
the FTC filed in court.
iiInternational Electronics Fraud. The FTC works hard to ensure that the United States
does not become a haven for the types of Internet frauds that so often target American consumers from abroad. In a first under the U.S. SAFE WEB Act, the FTC filed suit against a
U.S.-based Internet seller that allegedly deceived British consumers. In Jaivin Karnani, the
FTC charged, among other things, that the U.S. defendants duped British consumers into
purchasing goods that carried no manufacturer warranties in the United Kingdom, denied
consumers the option of cancelling orders, and shipped goods that were different from those
depicted on their websites and in some cases were unusable. The case is in litigation in federal court in California.

Chapter 13: Promoting Sound Competition and Consumer
Policy Through International Organizations
The FTC continues to provide leadership in several multilateral policy organizations including
the ICN and the consumer, privacy, and competition committees of the OECD, the United Nations
Conference on Trade and Development (UNCTAD), and APEC. The FTC’s work with each of
these organizations provides valuable opportunities to advance cooperation and sound policy in both
the competition and international consumer protection and privacy arenas. Its leadership and activities in these international organizations are particularly noteworthy.

66

iiICN. Currently comprised of 112 competition agency members
from 99 jurisdictions, the ICN is a key venue for antitrust authorities to exchange ideas and to work together to promote convergence
through the development of best practices. Significant accomplishments this year include:
zz

First Unilateral Conduct Workshop and Webinar. As co-chair for the Unilateral Conduct Working Group, the FTC hosted the Group’s first workshop and its first webinar on
excessive pricing in which over 100 delegates participated. The Group also issued two reports on tying and bundled discounting and loyalty discounts and rebates, and organized
a second webinar to discuss remedies in single firm conduct cases.

zz

ICN Vice-Chair for Outreach. Commissioner Kovacic serves as the ICN’s Vice-Chair
for Outreach and, with the FTC team, launched the ICN Blog and Bulletin Board.

zz

ICN Merger Notification and Procedures. The FTC also chairs the ICN’s Merger
Notification and Procedures subgroup, which this year issued a report on notification
information requirements, and promoted implementation of its Recommended Practices.

iiOECD.
zz

Competition Committee. The FTC actively participates in the
OECD Competition Committee, where it plays a lead role in highlevel dialogue on key competition issues. For instance, the FTC organized the Committee’s roundtable discussion of competition issues in
the pharmaceutical products market, including entry by generic drugs.
The FTC also shared experiences on competition issues related to patents and innovation,
the financial crisis, the failing firm defense, and procedural fairness.

zz

Global Forum on Competition. The FTC participated with representatives from almost 90 agencies, the majority from non-member developing countries, and in regional

zz

Consumer Policy Committee – Conference on the Internet Economy. The FTC
hosted an OECD conference marking the tenth anniversary of the 1999 Guidelines on
Consumer Protection in the Context of Electronic Commerce. The three-day event,
“Empowering E-consumers: Strengthening Consumer Protection in the Internet Economy,” brought together over 250 government officials, business leaders, consumer advocates, and academics from around the world to explore the new opportunities, obstacles,
and risks consumers face in today’s online world. The conference laid the groundwork
for global cooperation on a variety of consumer and Internet issues relating to the Com-

67

International Activities

OECD programs for non-members, including the Latin American Competition Forum.

mittee’s review of the 1999 Guidelines. The FTC has also played a leadership role in
other aspects of the Committee’s portfolio, including work on green marketing claims,
the appropriate role of self-regulation, and policy insights from informational and behavioral economics.
zz

Working Party on Information Security Privacy. The FTC actively participates in the
OECD’s Working Party on Information Security and Privacy (WPISP), which is marking the 30th anniversary of the 1980 OECD Privacy Guidelines this year with a series of
events to prepare for an assessment of the Guidelines in 2011. In March, the FTC spoke
at the first event about the need for international enforcement cooperation in the privacy
area, and worked with OECD WPISP members and others to launch a new informal
network of privacy enforcement agencies.

iiICPEN. The FTC also participates actively in the International
Consumer Protection and Enforcement Network (ICPEN), a global
network of almost 40 governmental consumer protection authorities.
ICPEN facilitates the exchange of information about cross border commercial activities affecting consumers, shares best practices in legislative
and enforcement approaches to consumer protection, and encourages international enforcement cooperation among its members. In May, the FTC will host the bi-annual meeting of
ICPEN in Washington, D.C. with participants from all over the globe.
iiAPEC.
zz

68

Developing an Enforcement Framework for Cross-Border
Data Transfers. With WPISP, APEC’s Electronic Steering
Group, and the International Conference on Data Protection
and Privacy Commissioners, the FTC has strengthened international cooperation on privacy and data security issues, focusing the international community on the critical importance of aggressive law enforcement in this area.  In November,
APEC Ministers endorsed a MOU for multilateral cooperation on cross-border privacy
enforcement by the 21 APEC member economies.  The FTC played a key role in negotiating this arrangement, which it has now also endorsed.  The MOU is an important step
towards establishing a voluntary system of privacy rules for cross-border data flow consistent with the APEC Privacy Framework.

Chapter 14: Promoting Convergence and Cooperation
Through Bilateral Relationships
The FTC has worked to develop flexible market-oriented standards and to address both longstanding and emerging consumer protection issues with its counterparts in developed economies like
the EU and Canada, as well as in emerging economies in Latin American, the Caribbean, and Africa.
iiMOU with the Royal Canadian Mounted Police. The FTC executed an MOU with the
Royal Canadian Mounted Police (RCMP), Canada’s national police force, allowing the
RCMP online access to the upgraded Consumer Sentinel Network. The FTC participates
with the RCMP and other Canadian law enforcers in six regional cross-border fraud enforcement partnerships, including Project COLT in Montreal, Project Emptor in British Columbia, and the Toronto Strategic Partnership.
With respect to competition issues, the FTC continued to strengthen its bilateral relationships
with sister agencies, including a MOU on antitrust cooperation with Russia’s Federal Antimonopoly
Service. The FTC also worked on antitrust policy and enforcement issues with agencies from the
EU, its member states, Australia, Canada, China, Israel, Japan, Korea, Mexico, Singapore, and other
jurisdictions and provided requested input on their competition policies.

iiMOU with Russian Antitrust Agency. In what was the first of its kind, the U.S. antitrust
agencies entered into a MOU directly with the Russian Federal Antimonopoly Service (FAS).
The MOU encourages the U.S. and Russian antitrust agencies to keep each other informed
of significant competition policy and enforcement developments in their respective jurisdictions. It also establishes a framework for technical cooperation and communication among
the agencies, providing for consultation and periodic meetings on competition enforcement,
policy, and priorities.

69

International Activities

The MOU was signed in Washington, DC, by
FAS Head Igor Artemyev and FTC Chairman Jon Leibowitz.

iiChina. As part of U.S. efforts to
encourage China to adopt sound
antitrust policies and enforcement
practices as it implements its new
antitrust laws, senior FTC officials and
staff held discussions with the Chinese
antitrust agencies in the United States
and China. Among the highlights of
the past year was a week-long workshop on antitrust law with China’s Supreme Peoples Court. The FTC also
contributes to the cabinet-level strategic and economic dialogue between
the United States and China.

Judicial Training in China
Successful enforcement of China’s Antimonopoly Law depends on the capabilities of
China’s judiciary, as well as its three antitrust
agencies. The Honorable Douglas Ginsburg
of the United States Court of Appeals for the
D.C. Circuit and the Honorable Sarah Vance
of the United States District Court for the
Eastern District of Louisiana, along with FTC
and DOJ staff, helped train 70 judges from
China’s Supreme Peoples Court. Topics included antitrust economics, anticompetitive
agreements, single-firm conduct, mergers,
intellectual property, evidence, jurisdiction,
and standing. A highlight of the program
was the oral arguments based on the Leegin
and 3M antitrust cases.

Chapter 15: Outreach and International Technical
Assistance
With more than 100 jurisdictions enforcing competition or consumer protection laws, the FTC
has expanded its long standing technical assistance program to help both newer and more established
agencies apply their laws to support free markets. The FTC continues to work with other U.S. government funders, including the United States Agency for International Development (USAID), the
U.S. Trade and Development Agency (USTDA), and the Department of Commerce Commercial
Law Development Program (CLDP), to provide this support. While USAID and other long standing players in the development field have taken the lead in providing support to developing countries, they are unable to serve all countries and all needs. Recognizing the importance and quality of
the FTC’s work, Congress provided the FTC additional funding to provide international technical
assistance. Again this year, the FTC funded programs in countries not typically served by USAID
and addressed topics historically outside the ambit of the program funded by USAID.
iiTechnical Assistance. This year, the FTC sent 66 staff experts to 30 countries on 63 technical assistance missions. These included continued USAID-funded work in the 10‑nation
ASEAN community (including Cambodia and Vietnam), and training programs in Egypt,
Brazil, Kenya, Mexico, South Africa, Bulgaria, and Tanzania. The Commission also provided
technical assistance to Brazil, Bulgaria, CARICOM (the Caribbean Community), Poland,
and Turkey, among others. Commission staff also served as resident advisors to competition
agencies in Latin America and Southeast Asia. Because consumer protection programs have

70

not attracted substantial
external funding, the FTC
expanded its technical
assistance program to consumer protection agencies
in Central America, Colombia, Hungary, India,
Indonesia, Liberia, Malaysia, Mexico, Nigeria, and
Ukraine.

Timothy Hughes, Office of International Affairs
After 18 years of working on competition and
consumer protection cases in the FTC’s Midwest
Regional Office, Tim Hughes came to FTC
Headquarters to pursue his interest in international
economic development. Tim has been part of
the FTC’s International Technical Assistance
program from its inception, serving as an advisor
in countries throughout Southeast Asia, Southeast
Europe, and the Middle East. Tim also develops
training materials and conducts staff workshops
to prepare other FTC staff for assistance missions. Last year, he advised
the Vietnamese Competition Authority and the Vietnamese Competition
Council, helping to draft new consumer protection and competition laws
and regulations.

zz

China. The most significant technical assistance opportunities
and challenges involve China. The FTC’s engagement with China includes participation
in an extensive public/private sector technical assistance program for the three Chinese
antitrust enforcement agencies. Partially funded by USTDA, the program included
training on anticompetitive agreements and theories of anticompetitive harm in merger
investigations.

zz

India. The FTC is working with India’s Competition Commission on antitrust enforcement and policy as it begins to implement its 2002 Competition Act.

Long Term Advisors

71

International Activities

Other In-country Programs

iiThe International Fellows Program. The
FTC’s International Fellows and Interns program provides opportunities for counterparts
from foreign agencies to spend several months
working directly with FTC staff on investigations, subject to appropriate confidentiality
protections. During the past year, the FTC
hosted 12 International Fellows and Interns
from Argentina, Australia, Austria, Brazil, Canada, the EC, Egypt, Hungary, Israel, Mexico,
Poland, Singapore, Switzerland, and Turkey.

International Fellows Program
“I am fortunate to spend my five
month Fellowship in BCP’s Division
of Advertising Practices, where I’ve
worked on several Internet-related
investigations from their inception.
I work alongside the FTC case attorneys to draft civil investigative
demands, a consent order, and a
complaint recommendation, and
generally work on all substantive
aspects of the matters. I’ve learned
a lot about Internet marketers’
techniques and the FTC’s working
practices, especially in the area of
collecting and capturing Internetbased evidence. I look forward to
bringing this knowledge back to the
Office of Fair Trading.”

iiBuilding Cooperative Relationships Through
Staff Exchanges. The Commission sent staff
members to work in foreign competition and
consumer protection agencies on short-term
Robert MacDougall
assignments. This year an FTC economist
United Kingdom
Office of Fair Trading
worked for the U.K. Competition Commission, a merger attorney worked for the EC’s
Directorate General for Competition, and an
Office of International Affairs attorney worked with the United Kingdom’s Office of Fair
Trading. These assignments provide invaluable opportunities for FTC staff to obtain a deep
understanding of their international partners’ laws and challenges. This knowledge provides
critical support for coordinated enforcement and promotes convergence toward sound policy.
iiExpanding Outreach to Developing Agencies. Building on the approach the FTC pioneered in Latin America and the Caribbean, the FTC launched an informal network of
African consumer protection agencies and NGOs to discuss consumer protection policy and
enforcement issues through monthly teleconferences. The FTC also organized the first regional conference for African consumer protection agencies in South Africa and will continue
to develop its relationships with English- and French-speaking African countries in the year
ahead.

72

International Activities

73

Looking Ahead
This was a challenging year for many consumers. The FTC’s mission to protect a free, fair market economy remains the same in good times and bad, but the FTC’s work takes on greater urgency
when consumers are struggling. As Americans, we are hopeful that things will turn around soon for
more of our neighbors, and when they do, that we can all reap the benefits of a renewed economy.
Until such time, the Commission will continue to use its resources to protect consumers, especially
those made vulnerable by the economic downturn.
Here at the Commission, there is a sense of excitement as we meet our challenges with two new
Commissioners. As a Commission, we can look forward to building on our strong relationships
with the Department of Justice, state attorneys general, and other law enforcement partners here and
abroad that share our mission to protect consumers and promote competition.
On the competition side, the Commission will continue to promote vigorous, competitive markets so that consumers have the broadest possible selection of goods and services and that businesses
strive to improve their offerings. The FTC will continue to advocate for competition-based solutions
to contain health care costs, and will bring enforcement actions to stop anticompetitive agreements
or preserve existing competition in health care markets. We will press to eliminate anticompetitive
pay-for-delay patent settlements that deprive consumers of low-cost drugs. The Commission will encourage competition among innovation firms, while sweeping away anticompetitive impediments to
technological change. And we will endeavor to make our merger review process as transparent and
predictable as we can through updated guidelines that reflect current approaches.

The expanding global marketplace, coupled with ever-changing technologies, presents both
tremendous opportunities and considerable risk for consumers. The FTC will continue to work to
ensure a competitive and safe global marketplace for the benefit of all Americans. It will continue to

75

Looking Ahead

On the consumer protection side, we will work tirelessly to address the most pressing needs of
consumers. Rising unemployment, shrinking credit, record-setting foreclosures, and disappearing
retirement accounts are causing consumers tremendous anxiety about making ends meet. To con
artists, today’s challenging economy presents another opportunity to play on consumers’ worries and
bilk them out of money. Their new scams increasingly promise job placement, access to free government grant money, or the chance to work-at-home. They promise to help consumers modify their
home mortgages to make them more affordable, but they deliver nothing. They raise people’s hopes
and then drive them deeper into a hole. The FTC will continue to act aggressively to stop these
scams, through coordinated law enforcement actions with our state and federal partners and through
extensive consumer education.

be a world leader on international consumer protection, competition, and privacy issues. In order to
do so, it will continue to devote its international resources to forging strong bilateral and multilateral
relationships with enforcement partners and policymakers, promoting sound policies and best practices, and building the capacities of competition and consumer protection agencies across the globe.
In all our work, we are mindful that the FTC is the nation’s only agency with both consumer
protection and competition jurisdiction in broad sectors of the economy. From that unique perspective, we will continue to advance the interests of consumers by promoting a vigorous, competitive
marketplace where consumers can make informed choices.

76

	

Senior Staff of the FTC
Joni Lupovitz

Executive Director	
Acting Deputy Executive Director	

Charles Schneider
Pat Bak

Director, Bureau of Competition	
Deputy Directors	
	
	

Richard Feinstein
Norman Armstrong, Jr.
Marian Bruno
Peter Levitas

Director, Bureau of Consumer Protection	
Deputy Directors	
	

David Vladeck
Chuck Harwood
Jessica Rich

Director, Bureau of Economics	
Deputy Directors	
	
	

Joseph Farrell
Pauline Ippolito
Paul Pautler
Howard Shelanski

General Counsel	
Principal Deputy General Counsel	

Willard K. Tom
David C. Shonka

Director, Office of International Affairs	
Deputy Directors	
	
	
	

Randy Tritell
Alden Abbott
James Hamill
Elizabeth Kraus
Hugh Stevenson	

Director, Office of Congressional Relations	
Deputy Director

Jeanne Bumpus
Judith Bailey

Director, Office of Policy Planning	
Deputy Directors	
	

Susan S. DeSanti
Suzanne Michel
Michael Wroblewski

Director, Office of Public Affairs	
Deputy Director	

Cecelia Prewett
Peter Kaplan	

Secretary of the Commission	

Donald Clark

Inspector General 	

John Seeba

77

Senior Staff of the FTC

Chief of Staff 	

2009 Annual Awards
Chairman’s Award
Christian White, OGC

Mary Gardiner Jones Award
Jonathan Kessler, ECR

Lifetime Achievement Award
Gloria Brown, BCP
Joseph Brownman, BC
John Crowley, BCP

Excellence in Supervision Award
Cynthia Davis, OED
Stacy Feuer, OIA
James Lacko, BE
Jeffrey Perry, BC
Nathaniel Wood, BCP

Louis D. Brandeis Award
Douglas Wolfe, BCP
Janet D. Steiger Team Award
Part 3 Team
SAFE Team
CSL/Talecris Team
CompuCredit Team
Patent Settlement Team
Richard C. Foster Award
James Baker, OED
Renee Chapman, BC
Regina Duarte, OGC
Matthew Eaton, BE
Stella Schuller, NWR
Jonathan Soileau, BCP
Maureen Wilkin, OED
James M. Mead Award
James Mantiply, OED
James McLaughlin, BCP
Susan Taylor, OS
Paul Rand Dixon Award
Imad Abyad, OGC
Molly Crawford, BCP
Russell Deitch, BCP
Elizabeth Jex, OPP
Robert Jones, BC
Kenneth Libby, BC
Peter Vander Nat, BE

78

Otis B. Johnson Award
Holly Frost, BC
Consuella Goosby, OGC
Andrew Hernacki, BCP
Michelle Thornton, OED
The Francis Walker Award
Chetan Sanghvi, BE
Outstanding Scholarship
Steven Tenn, BE
Stephen Nye Award
Elizabeth Nach, BCP
Evan Rose, WRSF
Jennifer Steifvater, BC
Christian Woolley, BC
A. Leon Higginbotham, Jr. Award
Carolyn Hann, Commissioner Rosch’s Office
Jennifer Lee, BC
Leah Frazier, BCP
Eleanor F. Greasley Award
Nancy DeLuca, OGC
Alethea Fields, BE

Principal Contributors to Report
Kelly Signs and Pat Bak	

Project Coordinators

Dawne E. Holz and Jessica Skretch	

Graphics and Design

Carol J. Jennings	

Bureau of Consumer Protection

Abigail A. Slater	

Bureau of Competition

J. Elizabeth Callison	

Bureau of Economics

Russell W. Damtoft	

Office of International Affairs

Christopher M. Grengs	

Office of Policy Planning

William P. Golden	

Office of the General Counsel

79

Principal Contributors to Report

Contributing staff members also include Heather Allen, Betsy Broder, Rachel Miller Dawson,
Laura DeMartino, Janet Evans, Stacy Feuer, Kathy French, Frank Gorman, Nathan Hawthorne,
Carol Kando-Pineda, Mitchell Katz, Janis Kestenbaum, Gail M. Kingsland, James Kohm,
Tara Isa Koslov, Laura Koss, Nicholas Mastrocinque, Maria Mayo, Mickey Mora, Jon Morgan,
Elizabeth Nach, Amanda Reeves, Kellie Cosgrove Riley, Stefano Sciolli, John H. Seesel,
Pavneet Singh, Jonathan Soileau, Christopher Taylor, James Whitelaw, and Rebecca Wolozin.

In Memoriam
Pat Foster
Mary Gardiner Jones
Jesse William Markham
Steve Rurka
Cameron Williams

80

Federal Trade Commission
LEFT TO RIGHT:

Jon Leibowitz, Chairman;
J. Thomas Rosch, Commissioner;
Julie Simone Brill, Commissioner;
William E. Kovacic, Commissioner;
Edith Ramirez, Commissioner

The FTC in 2010
Federal Trade Commission Annual Report, April 2010

Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
ftc.gov


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102