Confidence in Internet Depends on Privacy Protections: FTC

This posting was written by Thomas A. Long, Editor of CCH Privacy Law in Marketing.

Consumers must be confident that their privacy will be protected if they are to take advantage of all the benefits offered by the Internet marketplace, the FTC told the Senate Committee on Commerce, Science and Transportation on June 29.

Commissioner Julie Brill delivered testimony on behalf of the FTC at a hearing examining how entities collect, maintain, secure, and use personal information in today’s economy and whether consumers are adequately protected under current law.

“Privacy has been an important component of the Commission’s consumer protection mission for 40 years,” Brill said. “During this time, the Commission’s goal in the privacy arena has remained constant: to protect consumers’ personal information and ensure that they have the confidence to take advantage of the many benefits offered by the dynamic and ever-changing marketplace.”

FTC Approach

According to the testimony, the FTC has taken a three-pronged approach to preserving consumers’ privacy: law enforcement actions, consumer and business education efforts, and policy initiatives.

In the last 15 years, the FTC has brought more than 300 privacy-related actions, including 34 data security cases; 84 Fair Credit Reporting Act cases; 97 spam cases; 15 spyware cases; and 16 cases enforcing the Children’s Online Privacy Protection Act.

The FTC noted that, while the Commission has not taken positions advocating any particular legislative proposals, it favors data security legislation “that would (1) impose data security standards on companies, and (2) require companies, in appropriate circumstances, to provide notification to consumers when there is a security breach.”

Based on roundtable discussions that involved privacy experts, business representatives, and academics, the FTC staff issued a preliminary report on December 1, 2010, proposing a privacy framework with three main concepts, the testimony stated. First, companies should adopt a “privacy by design” approach by building privacy protections into their everyday business practices, FTC staff recommended.

Second, companies should provide an easy way for consumers to control the collection and use of their personal information—for example, by offering a mechanism to opt out of online behavioral tracking, often referred to as “Do Not Track.” A Do Not Track system should have five key attributes, the FTC said:

(1) It should be universal;

(2) It should be easy to find, understand, and use;

(3) Choices offered should be persistent;

(4) It should be comprehensive, effective, and enforceable; and

(5) It would not only opt consumers out of receiving targeted ads, but it also would opt them out of collection of behavioral data for all purposes other than certain commonly accepted practices.

Third, the staff report called on companies to improve their privacy notices so that consumers, advocacy groups, regulators, and others can compare data practices and choices across companies, thus promoting competition.

The Commission vote to issue the testimony was 5-0, with Commissioner J. Thomas Rosch dissenting in part and issuing a separate statement recommending that the Commission and Congress learn more about Do Not Track before proceeding.

Commissioner Rosch’s Statement

“The root problem with the concept of ‘Do Not Track’ is that we, and with respect, the Congress, do not know enough about most tracking to determine how to achieve the five attributes identified in today’s Commission testimony, or even whether those attributes can be achieved,” Rosch said.

“This is not to say that a Do Not Track mechanism is not feasible. It is to say that we must gather competent and reliable evidence about what kind of tracking is occurring before we embrace any particular mechanism. We must also gather reliable evidence about the practices most consumers are concerned about.”

Antitrust Agencies Defend Health Care Enforcement Efforts at Congressional Hearing

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The FTC and Department of Justice were called upon to defend their records of antitrust enforcement in the health care industry by House Judiciary Committee Chair John Conyers (D, Mich.) at a hearing held yesterday by the Judiciary Committee’s Subcommittee on Courts and Competition Policy.

The hearing considered the role of antitrust in light of the health care reform effort. Conyers expressed concern that the enforcers were not following through with President Obama’s plan to reinvigorate antitrust enforcement in the health care area.

“Pay-for-Delay” Drug Patent Settlements

FTC Bureau of Competition Director Richard A. Feinstein delivered the FTC testimony. Chief among the anticompetitive tactics targeted by the FTC are “pay-for-delay” drug patent settlements, in which a branded drug company compensates a generic competitor for not bringing its lower-cost drug to market for a certain period of time, according to the agency’s testimony.

Agency challenges to mergers involving hospitals, drug manufacturers, and medical device makers were also discussed.

“The FTC has an important role to play: by protecting and promoting competition we can help to lower costs and improve quality,” Feinstein said. “Years of experience have shown us that continued effective antitrust enforcement is a necessary component of any plan to improve health care.”

The FTC testimony is available here at the FTC website.


Health Care Delivery, Insurance

Sharis A. Pozen, Chief of Staff and Counsel to the Assistant Attorney General in charge of the Department of Justice Antitrust Division, delivered a statement on behalf of the Antitrust Division. Pozen’s remarks focused on two areas:

(1) The importance of encouraging innovation and efficiency in health care delivery and the ways in which coordination and integration among health care providers can help achieve these goals while still preserving competitive markets; and

(2) The importance of measured, responsible antitrust enforcement in preserving open and vigorous competition in health insurance markets.

The Justice Department’s civil antitrust lawsuit against Blue Cross Blue Shield of Michigan alleging that the insurer used its dominance to impose anti-competitive “Most Favored Nation” provisions in its agreements with Michigan hospitals was cited as an example of the agency’s “measured enforcement to prevent . . . anticompetitive behavior.”

With respect to merger enforcement, Pozen warned that the Justice Department “will carefully review mergers in the health insurance industry and will continue to challenge those mergers that are likely to substantially lessen competition.”

Text of the remarks is available here on the Department of Justice Antitrust Division’s web site.


Accountable Care Organizations

Conyers spoke about the perceived disparity in prosecutorial treatment between health care providers on the one hand and health insurers on the other. He questioned the continuing need for antitrust immunity for health insurance companies, while physicians fear antitrust attack for coordinated activity.

Pozen noted that Accountable Care Organizations or ACOs are a good example of how providers might work together to provide more efficient, high-quality care without inhibiting competition. The Affordable Care Act permits the formation of ACOs to enable competing physicians and other providers to coordinate care for Medicare beneficiaries in an effort to improve quality and lower costs.

Pozen said that the Justice Department was actively working with Health and Human Services and the FTC as the ACO regulator process evolves. She added that the Justice Department was committed to “providing efficient, quick review to any new business model that plans to deliver integrated care.”

A video webcast of the hearing is available here on the House Judiciary Committee’s website.

FTC Testimony Highlights Privacy Protection, Competition Efforts

This posting was written by Preston Carter and Darius Sturmer.

In testimony before the U.S. Senate Subcommittee on Financial Services and General Government of the Committee on Appropriations on May 20, the FTC described the agency’s continuing work to promote competition and protect American consumers, including initiatives to stop fraud targeting financially distressed consumers and protect privacy.

FTC Chairman Jon Leibowitz summarized the FTC’s Fiscal Year 2011 budget request, noting that strong support from Congress has made the agency more effective in its consumer protection efforts.

The testimony stated that, in the past year, the FTC has brought almost 40 law enforcement actions to stop scams that prey on consumers suffering from the financial downturn, and the agency is also engaged in rulemaking and consumer education efforts related to financial services.

In the financial services area alone, the FTC has filed more than 100 actions over the past five years, and obtained nearly $500 million in redress for consumers in the past 10 years.

Privacy Protection

The testimony noted that the FTC has taken 29 actions against companies that failed to protect consumers’ personal information. These actions resulted, for example, in the agency’s securing of $11 million for consumer redress from LifeLock, Inc. for allegedly making false identity theft prevention claims (CCH Trade Regulation Reporter ¶16,421); its shutting down of a rogue Internet service provider that helped distribute illegal spam, child pornography, and other harmful content (CCH Trade Regulation Reporter ¶16,451); and its settlement of a lawsuit against Sears for not fully disclosing the scope of consumers’ personal information the company collected (CCH Trade Regulation Reporter ¶16,308).

To help consumers check for inaccurate information on their credit reports, the FTC amended the Free Credit Report Rule to help consumers avoid “free” offers that cost money. The FTC also stated that it is examining consumer privacy more broadly, especially in light of merging technologies and business models, including social networking, cloud computing, online behavior advertising, and mobile marketing.

Noting the FTC’s continuing enforcement of the Do Not Call Registry, which protects almost 200 million telephone numbers, the testimony stated that in the past year the FTC filed nine law enforcement actions against “robocallers” making deceptive telemarketing pitches.

Among these were suits against DirecTV and Comcast, which paid $2.3 million and $900,000, respectively, to settle charges that they called consumers who had asked not to be called (CCH Trade Regulation Reporter ¶16,291). More recently, the FTC announced a $500,000 settlement with Diamond Phone Card, Inc. for overstating the number of calling minutes on its prepaid calling cards (CCH Trade Regulation Reporter ¶16,452).

Also, as stated in the testimony, the FTC has worked to protect children by filing more than 14 lawsuits to enforce the Children’s Online Privacy Protection Act, obtaining more than $3.2 million in civil penalties for law violations.

Anticompetitive Practices

According to the testimony, “[o]ne of the Commission’s highest antitrust priorities is stopping pay-for-delay patent settlements in the pharmaceutical industry, a practice that costs consumers $3.5 billion each year.”

The agency “has devoted substantial resources to this issue, and is continuing to conduct new investigations into pay-for-delay agreements.”

The text of the testimony can be found here on the FTC website.