Tuesday, June 29, 2010

Airport Commission Shielded from Tenant’s Monopoly Claims

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

A Massachusetts municipal airport commission and its officials were shielded from monopoly claims based on the airport commission’s restriction on jet fuel sales, the U.S. Court of Appeals in Boston has ruled. Dismissal of an airport tenant's antitrust claims (2008-1 Trade Cases ¶76,045) was affirmed.

State Action Immunity

The tenant, which operated a hangar at the airport for private jets, claimed that it was prevented by the restrictions from competing with the airport commission in the sale of jet fuel. Municipal entities, such as the airport commission, and municipal officials acting for them could invoke state action immunity if they acted pursuant to a “clearly articulated and affirmatively expressed” state policy to displace competition with regulation.

The policy to suppress competition was expressed in a Massachusetts statute governing municipal airports. The statute granted airport commissions the power to adopt rules and regulations for the use of municipal airports and the authority to determine the charges or rentals for the use of any facilities and services. It also permitted airport commissions to lease airport land “under such terms and conditions as it may prescribe, for hangars, shops, storage, industrial purposes, offices and other space rental, and for concessions.”

The fact that the Massachusetts statute specifically prohibited exclusive contracts related to transportation to and from the airport suggested that the legislature perceived that the airport might otherwise employ exclusivity restrictions and chose to ban only this narrow set.

Dubious Claims

Even if the state action doctrine was inapplicable, the airport commission was “mistaken in its notion that its antitrust claim would otherwise face fair sailing.” The appellate court said that the antitrust claim was “dubious on the merits.”

The appellate court also rejected the tenant’s claims under the Racketeer Influenced and Corrupt Organizations Act. The tenant failed to establish that the airport commission engaged in a “pattern of fraudulent acts” in an effort to prevent the tenant from becoming a “fixed base operator” or “FBO” qualified to sell fuel and offer other services.

The June 23 decision is Rectrix Aerodrome Centers, Inc. v. Barnstable Municipal Airport Commission, 2010-1 Trade Cases ¶ 77,068.

Monday, June 28, 2010

Expanded Federal Trade Commission Authority Missing from Financial Reform Bill

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

In coming to a consensus on a broad overhaul of financial regulation, House and Senate lawmakers decided on June 25 to exclude from the reform legislation provisions that would have expanded the authority to the Federal Trade Commission.

The proposed “Dodd-Frank Wall Street Reform and Consumer Protection Act” does not include language, which appeared in the House-approved “Wall Street Reform and Consumer Protection Act,” that would have streamlined FTC rulemaking procedures and enabled the agency to pursue civil penalties in court actions for FTC Act violations. The bill passed by the Senate did not include similar amendments to the FTC Act.

The House proposal would have granted the FTC the authority to promulgate rules using Administrative Procedure Act (APA) “notice and comment” rulemaking procedures. The new APA procedures would have replaced the FTC's current Magnuson-Moss rulemaking procedures, which are far more time-consuming.

In addition, the bill would have made it an unfair or deceptive act or practice to knowingly or recklessly provide substantial assistance to another in violating unfair or deceptive acts or practices prohibitions of the FTC Act.

The reform bill also does not include a provision that would have authorized the FTC to seek civil penalties in federal court actions for violations of Sec. 5 of the FTC Act. Currently, the agency must first present actions seeking civil penalties for violations of Sec. 5 of the FTC Act to the Department of Justice so that it can decide whether to file the suit.

Consumer Financial Protection Bureau

The legislation would establish a new Consumer Financial Protection Bureau. The bureau would be housed within the Federal Reserve and would examine and enforce regulations for banks and credit unions with assets in excess of $10 billion. It would consolidate authority that had been dispersed over a number of federal agencies, including the FTC.

Auto dealers pushed hard to be exempt from bureau oversight. They will remain under the jurisdiction of the FTC.

Text of the Conference report appears here.

Friday, June 25, 2010

Twitter Agrees to Settle FTC Privacy and Security Charges

This posting was written by Cheryl Beise, Editor of CCH Guide to Computer Law.

Micro-blogging service Twitter has agreed to settle Federal Trade Commission charges that it “deceived consumers” about its privacy practices and failed to implement reasonable security measures to safeguard user information.

The Commission issued a complaint yesterday, alleging that Twitter violated Section 5 of the FTC Act by engaging in a number of practices that, taken together, failed to provide reasonable and appropriate security to prevent unauthorized access to nonpublic user information and honor the privacy choices exercised by such users. A proposed FTC consent order, resolving the allegations, was released at the same time.

Between January and May 2009, hackers twice exploited Twitter’s lax and ineffective security measures to obtain unauthorized administrative control of the Twitter system, according to the agency. The hackers gained access to nonpublic user information and reset users’ passwords to send unauthorized tweets from users’ accounts, including one from President-elect Barack Obama and another from Fox News.

Under the terms of the proposed FTC consent order, Twitter has agreed to:

· refrain from misrepresenting its efforts to maintain and protect the security, privacy, confidentiality, or integrity of any nonpublic information;

· adopt and maintain comprehensive information security program that is reasonably designed to protect the security, privacy, confidentiality, and integrity of nonpublic consumer information; and

· permit biennial assessments and reports from an independent third-party security professional.

“When a company promises consumers that their personal information is secure, it must live up to that promise,” said FTC Bureau of Consumer Protection Director David Vladeck. “Likewise, a company that allows consumers to designate their information as private must use reasonable security to uphold such designations.”

Twitter Blog Post

A post on Twitter’s corporate blog described the 2009 hacking incidents, occurring at a time when the company had fewer than 50 employees, as small in scale and duration—over the course of a few hours, 45 accounts were accessed in January and in April, 10 accounts were accessed before the hacker was detected and shut down within minutes. The blog post noted that, prior to the FTC settlement, “we’d implemented many of the FTC's suggestions and the agreement formalizes our commitment to those security practices.” No other privacy or security complaints have been brought against Twitter, according to Twitter General Counsel Alexander Macgillivray.

San Francisco-based Twitter was established in 2006 as a social networking website operating at Twitter.com that enables users to send “tweets,” SMS messages of up to 140 characters, to other users who sign up to “follow” them and receive updates via e-mail and mobile text messages. Today, Twitter has around two hundred employees and an estimated 75 million users worldwide.

First Data Security Case Against Social Network

The FTC noted in a press release that its action against Twitter was the first against a social networking service for faulty data security.

The complaint, consent order, and other documents in In the Matter of Twitter, Inc., FTC File No. 092 3093, are available here on the FTC's website. The documents are published at CCH Trade Regulation Reporter ¶16,469.

Further information regarding the CCH Trade Regulation Reporter appear here on the CCH Online Store.

Thursday, June 24, 2010

$12 Million Damage Award Sustained in RICO Insurance Fraud Suit

This posting was written by Mark Engstrom, Editor of CCH RICO Business Disputes Guide.

Health care providers could not receive post-trial relief from a jury verdict that found them liable for RICO violations, the federal district court in Philadelphia has ruled.

The jury awarded complaining insurers more than $4 million in compensatory damages ($12.1 million after trebling) for participating in a racketeering scheme to defraud the insurers by prescribing unnecessary tests, treatments, and prescriptions for accident victims and then billing the insurers for those services.

The providers’ motion for judgment as a matter of law was denied because defense counsel’s “vague comments” at the close of the plaintiffs’ case in chief did not sufficiently specify the contested issues. Although defense counsel contended that he had made an “oral motion” to “incorporate [his] arguments into a request for judgment as a matter of law, a general incorporation of all stated arguments was insufficient to put the court and plaintiffs on notice of the deficiencies being asserted, the court explained.

Moreover, a renewed motion made at the charging conference was limited to arguments concerning a single issue: RICO distinctiveness. Those arguments, however, were deemed abandoned because they were no raised in post-trial briefs.

Reliance, Proximate Cause

Even if the health care providers had properly moved for post-trial relief, the jury’s finding of RICO liability could not be overturned based on lack of reliance because “ample evidence” of the insurers’ reliance on provider misrepresentations was presented at trial, according to the court.

Evidence that the providers had proximately caused the insurers’ injuries was sufficient in light of testimony by an expert witness who, after examining more than 200 medical claim files, identified “inappropriate patterns of treatment, prescriptions, and testing” by the providers, which billed the insurers for the inappropriate services.

To the extent that the insurers were third-party victims, proximate cause was present because the insurers were the “direct target” of the providers’ scheme, the court found.


Trial evidence was sufficient for the jury to conclude that an individual doctor had knowingly and willingly participated in the providers’ scheme. The trial record was not critically deficient of that minimum quantity of evidence from which a jury might reasonably afford relief, the court explained.

A doctor testified that (1) he was a full-time employee of a medical office, the administrative practices and procedures of which he was familiar; (2) he received 90 percent of his accident patient referrals from another defendant, with whom he had merged his practice; and (3) he wrote prescriptions for patients he had not seen or examined. Combined with similar testimony from other witnesses, these facts were sufficient to conclude that the doctor’s participation in the fraudulent billing scheme was knowing and willful.

Jury Instructions

Jury instructions on the insurers’ RICO conspiracy claims, taken verbatim from the Fifth Circuit’s Pattern Jury Instructions, were adequately stated. The defendants argued that the jury instructions should have included a separate instruction for multiple conspiracies, but the argument had no merit, according to the court.

The defendants also argued that they were entitled to a separate instruction on intra-corporate conspiracy (i.e., that employees of a corporate entity who were acting within the scope of their employment could not conspire with each other or with the corporate entity). However, the Third Circuit has not yet decided whether the intra-corporate conspiracy doctrine barred RICO conspiracy claims, the court observed. Of the five circuits that have addressed the issue, three have held that the doctrine did not bar those claims; two have held that it did.


Evidence supported the amount of the jury award ($4 million in compensatory damages), in the court’s view. A witness provided testimony and exhibits that identified payments that the insurers had made to the providers as a result of the providers’ fraud.

In addition, the jury had sufficient evidence to conclude that providers’ insurance claims were indeed fraudulent. In lieu of the jury’s $11.4 million punitive damage award, the insurers chose to treble their damages—to $12.1 million—under RICO.

Attorney fees of nearly $1 million and costs totaling nearly $220,000 were reasonable and appropriate to the nature, extent, and duration of the litigation, the court determined.

The decision is State Farm Mutual Automobile Ins. Co. v. Lincow, CCH RICO Business Disputes Guide ¶11,870.

Further information regarding CCH RICO Business Disputes Guide appears here on the CCH Online Store.

Wednesday, June 23, 2010

FTC Alleges Suppression of Competition for Teeth Whitening Services

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

Dentists in North Carolina, acting through the state dental board, colluded to exclude non-dentists from competing in the provision of teeth whitening services, the FTC has alleged in an administrative complaint. The actions of the dental board unreasonably restrained competition and violated Sec. 5 of the FTC Act, according to the complaint.

The state dental board purportedly decided that the provision of teeth whitening services by nondentists constituted the unauthorized practice of dentistry.

The board allegedly engaged in extra-judicial activities aimed at preventing non-dentists from providing teeth whitening services in North Carolina, unilaterally ordering non-dentists to stop providing whitening services.

State Action Immunity

The agency contended that the board’s conduct was not shielded from FTC challenge by the state action immunity doctrine.

“Without active supervision by a disinterested state authority, a regulatory board whose members have a financial interest in the industry it is charged with regulating cannot exclude its competitors from the marketplace,” said FTC Bureau of Competition Director Richard Feinstein.

“The North Carolina Dental Board does not have authority to decide on its own to limit the whitening services available to North Carolina residents, and its actions have decreased competition and harmed consumers,” according to Feinstein.

The FTC seeks an order prohibiting the board from engaging in the challenged conduct. The Commission vote approving the administrative complaint was 4-0-1, with Commissioner Julie Brill recused.

The case is In the Matter of The North Carolina Board of Dental Examiners, FTC File No. 081 02137, June 17, 2010. Further details, and the text of the administrative complaint, appear here on the FTC website and at CCH Trade Regulation Reporter ¶16,465.

Tuesday, June 22, 2010

Manufacturer Not Liable for Seller's Alleged False Advertising of Products

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

Taiwanese bicycle component manufacturer Tien Hsin was not directly or vicariously liable under the Lanham Act or Washington law for allegedly false advertising by a separate corporation (FSA)—whose trademark was held by the manufacturer—that sold Tien Hsin's products to North American distributors and retailers, the federal district court in Seattle has ruled.

Direct Liability

A competing seller's direct liability theory was rejected because none of Tien Hsin's employees contributed to, commissioned, reviewed, or participated in the creation of FSA's advertisements. There was no evidence that Tien Hsin had knowledge of the advertisements, or more importantly of their falsity, the court found.

Vicarious Liability

The competitor asserted vicarious liability on grounds that FSA was Tien Hsin's alter ego and agent. The relationship between the two was akin to a subsidiary-parent relationship, the court said. At least at a high level, Tien Hsin had the power to control FSA because it supplied substantially all the products FSA sold and owned the FSA trademark. FSA was wholly owned by one of Tien Hsin's four shareholders who was related through marriage to the other three shareholders.

Parent/Subsidiary Relationship

However, a parent corporation generally is not liable for acts of its subsidiary, the court observed. There was no evidence that the corporate formalities were disregarded. The close relationship between the two firms was not grounds for an alter ego finding.

To hold a parent firm liable on an agency theory would require that the parent exercise total control over the subsidiary. The control that Tien Tsin was able to exercise because of trademark ownership, stock ownership, and near sole supplier status did not rise to the level of total domination that could justify holding it liable for torts committed by a separately incorporated entity, the court concluded.

The decision is Campagnolo S.R.L. v. Full Speed Ahead, Inc., CCH Advertising Law Guide ¶63,897.

Monday, June 21, 2010

Consumer Protection Class Action Certified Against Kansas Gas Stations

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

A class of Kansas motor fuel purchasers who purportedly did not receive the amounts of fuel that they paid for were certified to proceed with a Kansas Consumer Protection Act (CPA) claim.

The multidistrict class action was filed by persons who purchased motor fuel from a number of gas stations in Kansas that sold fuel from various oil companies and fuel retailers across the country. The claim was based on the sale of motor fuel for a specified price per gallon without disclosing or adjusting for temperature expansion.

Class Certification Standard

In order to obtain class certification, the purchasers had to meet the Federal Rule of Civil Procedure 23(a) requirements. Specifically, the purchasers needed to show that the class was so numerous that joinder of all members was impracticable, questions of law or fact were common to the class, the claims of the representative parties were typical of the class’ claims, and the representative parties would fairly and adequately protect the class’ interests.


Although the companies argued that the issues of the class representatives were not typical because one of the representatives bought the fuel for his business, the court found that the purchasers met the typicality requirement of Rule 23. The claims of the representatives need not be identical to the rest of the class. The claims of the representatives were based on the same legal and remedial theories and arose out of the same pattern of conduct.

However, the representatives did not have standing to bring claims against companies they did not buy fuel from because the claims would not be typical to the rest of the class that did purchase fuel from those defendants. Thus, certain claims were dismissed based on the named representatives’ lack of requisite injury caused by certain defendants.

In order to obtain class certification, the representatives needed to satisfy Rule 23(a)(4) by showing that their interests did not conflict with the rest of the class and would prosecute the action vigorously through qualified counsel.

Conflict of Interest

Because certification would not benefit some consumers at the expense of others, the court certified the class. The companies argued that the representatives could not adequately represent the class because a conflict of interest existed because not every class member wanted temperature adjustment of retail motor fuel sales. However, class certification is precluded only when class members would be benefited unevenly by a certain outcome.

Finally, an action under Rule 23(b)(2) requires the purchasers to show that the defendant’s actions were based on grounds applicable to all class members and that the injuries to the class members were similar enough to be remedied by a single injunction.

The purchasers presented sufficient evidence that the conduct at issue, purchasing motor fuel, was common to all class members. Also, a court could construct an injunction that would benefit all class members because the injuries were not incohesive.

The decision, In re: Motor Fuel Temperature Sales Practices Litigation, appears at CCH State Unfair Trade Practices Law ¶32,066.

Friday, June 18, 2010

Renewal of Franchises Did Not Trigger California Disclosure Obligation

This posting was written by Pete Reap, Editor of CCH Business Franchise Guide.

A gasoline station franchisor did not violate the California Franchise Investment Law (CFIL) by failing to make prescribed disclosures when it renewed the agreements of many of its franchisees, the federal district court in San Jose, California, has ruled.

The franchisor’s motion to dismiss the franchisees’ Franchise Investment Law claim was granted, and the franchisees were given 20 days leave to amend.

Renewal as “Offer” or “Sale”

The CFIL did not require the franchisor to make the disclosures specified in the claim when an existing franchise agreement was renewed, the court held. Franchise renewals were excluded from the statutory definitions of “offer” and “sale.”

The CFIL was enacted to ensure that prospective franchisees were adequately informed of their duties and obligations under franchise relationships before entering into them, the court observed.

The franchisees cited dicta from an unpublished decision to support their argument that disclosure obligations applied whenever a franchise agreement was renewed. The franchisor correctly noted, however, that the cited statement was dicta, the decision an unpublished one, and a subsequent decision in that same case confirmed that the CFIL did not apply to renewals of existing franchises.

Modification of Franchise Agreement

The franchisees contended that service station rent increases put into effect upon nonrenewal constituted “material modifications” of the franchise agreements under the meaning of the CFIL, triggering the disclosure requirements.

Even assuming that the rental increase was a material modification, such modification would not give rise to a suit for damages under the statute for failure to provide the comprehensive disclosures required for an offer or sale of a franchise to a prospective franchisee, the court held.

The June 2, 2010, decision is In re: ConocoPhillips Co., CCH Business Franchise Guide ¶14,397.

Thursday, June 17, 2010

Failure to Disclose Business Plans to Prospective Franchisee Did Not Violate Washington Law

This posting was written by Pete Reap, Editor of CCH Business Franchise Guide.

A pizza restaurant franchisor did not violate the Washington Franchise Investment Protection Act (WFIPA) by failing to disclose to a prospective franchisee that the franchisor was planning to discontinue its outlet franchises at the time that the franchisee purchased its franchise, according to a Washington appellate court.

Thus, a Washington trial court’s dismissal of the franchisee’s claim that the franchisor’s silence as to its plans was a “material omission” under the WFIPA was affirmed.

The franchisor sold two different models of franchises: an outlet model that sold only “take-and-bake” pizzas and a restaurant model that sold both "take-and-bake" pizzas and “ready-to-eat” pizzas that could be consumed at the store.

The proposed franchise agreement between the parties did not require the franchisee to specify which model they would follow and provided that the franchisor could change store operating methods in the future.

Material Omission

Case law held that nondisclosure of a fact would qualify as a material omission under the WFIPA if a reasonable person would consider that fact important in determining what action to take with respect to the transaction in question, the appellate court observed.

The franchisor presented evidence demonstrating that it had not discontinued its outlet stores after the franchise purchase. In fact, it continued to support outlet store franchisees in several locations throughout the country.

In response, the franchisee pointed to evidence that approximately seven months after its franchise purchase, the franchisor announced a plan to require new franchises to offer some dining facilities. However, under this plan, existing outlet stores were not required to change their operations and they continued to receive support from the franchisor.

The franchisee failed to offer any evidence that this prospective policy affected existing outlet stores such as its franchise, the court determined. At most, it showed that the franchisor was considering a shift in its mix of stores going forward. Moreover, the franchisor disclosed in both its offering circular and the franchise agreement that such a shift could occur if the franchisor decided to change its store operating methods.


As to materiality, the franchisor’s mix of outlet and restaurant models was not a key feature of the franchise agreement, the court ruled. Indeed, the number of outlet versus restaurant stores was not mentioned in the franchise agreement. Further, the agreement did not require franchisees to specify which model they would follow or limit their ability to change methods. Thus, there was no reason to expect that the mixture of store models would remain static.

Even assuming that the franchisor was considering a change to the way new stores could operate in the future, the franchisee failed to show that disclosure of this fact would have been necessary to make the franchise offering not misleading, according to the court.

The June 1 unpublished decision is Something Sweet v. Nick-N-Willy’s Franchise Co. It will appear at CCH Business Franchise Guide ¶14,398.

Wednesday, June 16, 2010

State Action Doctrine Shields California Tourism Commission . . .

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

The California Travel and Tourism Commission (CTTC) was shielded by the state action immunity doctrine from consumers' claims that the CTTC conspired with the passenger rental car companies to pass on CTTC tourism assessments to consumers, the U.S. Court of Appeals in San Francisco has decided. Dismissal of the antitrust claims (2008-2 Trade Cases ¶76,370) was affirmed.

The CTTC is a California nonprofit mutual benefit corporation created by a state tourism marketing statute for the benefit of the industry and the state. As required for state action immunity, the CTTC’s alleged anticompetitive conduct constituted an authorized and reasonably foreseeable result of a statutory authorization, the court ruled.

The California legislature had explicitly authorized tourism assessment fees on passenger car rentals for the funding of state tourism. Moreover, it appeared that the legislature envisioned the fee being uniformly passed on to rental car customers.

Because the CTTC was not a private party, but a state agency created by statute to promote tourism in California, adequate state supervision of the challenged conduct was irrelevant. The court rejected the plaintiffs' argument that active supervision was required because the CTTC was industry-controlled.

The June 8 decision is Shames v. California Travel and Tourism Commission, 2010-1 Trade Cases ¶77,044

. . . And Florida County Waste System from Antitrust Liability

A Florida county was immune under the state action doctrine from antitrust claims for establishing a franchise system for waste collection, the U.S. Court of Appeals in Atlanta has decided.

A district court's decision (2009-2 Trade Cases ¶76,695), denying dismissal of the antitrust claims based on “faulty application of the state action immunity framework” was reversed.

Florida law empowered the county to take “exclusive control over the collection and disposal of solid waste” within the county. Pursuant to the law, the county passed an ordinance establishing a franchise system for waste disposal.

Award of Franchises

Under the system, the county awarded franchises within the service area to waste disposal services for both residential and commercial customers. The county's board of commissioners determined the collection charges assessed residential customers; however, it did not set collection rates for commercial entities, leaving those to negotiation between the franchisees and commercial customers.

Hybrid Restraint of Trade

A commercial customer located within the county and a disposal service that was not awarded a franchise by the county filed suit to enjoin application of the ordinance. They alleged a “hybrid restraint” on trade. They contended that the county’s restriction on the size of the competitive market essentially authorized the franchisees to collude and impose fixed prices on their customers.

Preemption by Sherman Act

Challenges to state action that are not preempted by the Sherman Act fail, the court explained. Preemption required an “irreconcilable conflict” between the underlying state statute and the antitrust laws. Assuming that the Sherman Act preempted both the statute on its face and the county’s application of the ordinance, the county—acting in its authorized capacity as regulator of waste collection services—was immune because it acted pursuant to a clearly articulated anticompetitive policy of the state.

The challenged conduct was a “foreseeable result” of the state’s authorizing statute. Because the defendant was a municipality and not a private actor, active state supervision of the regulatory scheme was not required, according to the court.

The June 8 decision is Danner Construction Co. v. Hillsborough County Florida, 2010-1 Trade Cases ¶77,045.

Tuesday, June 15, 2010

Limits on Antitrust Damage Exposure for Cooperating Cartelists Extended

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

Provisions in the Antitrust Criminal Penalties Enforcement and Reform Act (ACPERA) of 2004 that limit the civil liability in private antitrust actions of cartel participants who are accepted into the Department of Justice Antitrust Division's leniency program have been extended for ten years.

Legislation extending the provisions through June 22, 2020, was signed into law on June 9. The text of ACPERA, as amended by Public Law 111-190, begins at CCH Trade Regulation Reporter ¶27,750.

Under the Antitrust Division’s corporate leniency program, a company is protected from criminal prosecution for antitrust violations if it is first to come forward to advise the Antitrust Division of an antitrust offense and cooperates with the government’s investigation.

The ACPERA provides the added incentive of reducing liability in private damages suits to actual damages rather than treble damages. Under the law, the cooperating company must also cooperate in the private litigation in order for the de-trebling provision to apply.

For futher details about the legislation, see Trade Regulation Talk, May 28, 2010 posting.

Monday, June 14, 2010

Federal Antitrust Agency Heads Testify at Senate Subcommittee Oversight Hearing

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

The Senate Judiciary Committee's antitrust subcomittee on June 9 held its first oversight hearing to examine antitrust enforcement under the Obama Administration. Subcommittee Chairman Herb Kohl (D, Wisconsin) began the hearing by saying that antitrust enforcement was sorely in need of revival at the beginning of the administration.

Christine A. Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, and FTC Chairman Jon Leibowitz testified on the enforcement efforts of their respective agencies. The FTC prepared statement appears here on the agency website, and the Antitrust Division statement appears here on the Department of Justice website.

Merger Enforcement

“Merger enforcement continues to be a core priority for the Antitrust Division,” Assistant Attorney General Varney told the subcommittee. She cited the Antitrust Division's pending action against Dean Foods—the nation’s largest dairy processor—to undo the company's 2009 merger with Foremost Dairy.

The antitrust chief also noted the recent settlement permitting Ticketmaster—the World’s largest ticketing company—to proceed with its proposed merger with Live Nation Inc.

In response to questioning from Senator Kohl about the way the Antitrust Division handled the Ticketmaster case, Varney said that settling the case was the right thing to do. The proposed relief has both structural and behavioral remedies, Varney noted.

The antitrust chief discussed other enforcement efforts, including anti-cartel efforts during what she described as a remarkable year.

“Pay-for-delay” Agreements

FTC Chairman Jon Leibowitz told the subcommittee that his agency's top competition priority was “stopping `pay-for-delay’ agreements between brand-name pharmaceutical companies and generic competitors that delay the entry of lower-priced generic drugs into the market.”

Section 5 of FTC Act

Leibowitz also discussed how “the Commission is actively considering how it can best use Section 5 of the FTC Act to enhance enforcement in a responsible and transparent manner.”

The chairman noted as an example of the agency's efforts in the Section 5 area its action—announced that same day—against U-Haul International, Inc. and its parent company for inviting it closest competitor, Avis Budget Group, Inc., to fix prices for truck rentals.

Ranking Member Senator Orrin Hatch (R, Utah) questioned the FTC's efforts in these areas. While acknowledging the importance of targeting “pay-for-delay” patent settlement that are anticompetitive, Senator Hatch said that it was important not to impose undue burdens on parties settling patent disputes.

With respect to the FTC's increasing use of Sec. 5 of the FTC Act to combat, Hatch noted that uncertainty inherent in the use of Sec. 5 might lead companies to compete less aggressively. Hatch said there was a need for clear, specific standards.

In response to Senator Hatch's concerns over Sec. 5 enforcement, Chairman Leibowitz agreed that there need to be standards and said that the agency was moving carefully. “Ultimately the courts will decide the outer limits of Sec. 5,” the Chairman said.

Friday, June 11, 2010

Best Buy “Price Match” Refusal Would Be Consumer Fraud

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

A Best Buy customer stated plausible claims that the retailer violated the Illinois Consumer Fraud Act and engaged in unjust enrichment by failing to honor its advertised “price match guarantee,” the federal district court in Chicago has ruled.

In a class action complaint, the customer alleged that he purchased a 42-inch wide-screen high definition Samsung television at a Best Buy store in Niles, Illinois. The customer stated that he “considered and relied upon Best Buy’s price match guarantee in making this shopping decision.”

Within the applicable time period, he discovered that a Circuit City store located in the same market area offered a lower price on the same television, which was in stock and available.

The customer stated that he returned to the Niles Best Buy with Circuit City’s print advertisement showing the lower price, and requested the benefit of Best Buy’s price match guarantee—refund of the price difference, plus an additional 10% of that difference. Best Buy refused to honor the request.

Internal Policy

According to the complaint, Best Buy maintains an undisclosed internal policy under which it discourages and denies customers’ proper price match requests. For example, Best Buy allegedly provides weekly bonuses to its salespeople based, in part, on their denying proper price match requests.

Pleading Fraud with Particularity

Best Buy argued that the customer did not adequately plead his Consumer Fraud Act claim because he failed to allege sufficient facts to establish that he was entitled to the price matches he requested. The parties agreed that the case was governed by the heightened standards for pleading fraud under Rule 9(b) of the Federal Rules of Civil Procedure.

The court did not find Best Buy’s argument persuasive. The customer alleged that Circuit City offered a lower price on “an available in-stock product of the same brand and model” as the 42-inch wide-screen high definition Samsung television purchased from Best Buy; that Circuit City was a retail store located in the same market area as the Best Buy store where the customer bought the Samsung television; and that the customer, armed with a print advertisement verifying the lower price, returned to the Best Buy store within the applicable 30-day time period and requested a price match.

The customer sufficiently alleged the elements of the Consumer Fraud Act claim, as well as the common law claim that Best Buy received an unjust benefit from its denial of the price match request, the court determined.

Diversity Jurisdiction

The court observed that the customer failed to plead federal diversity jurisdiction and ordered that an amended complaint be filed.

The June 3 opinion in Laff v. Best Buy Stores, L.P. will be reported at CCH Advertising Law Guide ¶63,874.

Thursday, June 10, 2010

Data Breach Notice, Anti-Spam Laws Proposed in Canada

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

Proposed privacy legislation introduced on May 25, 2010 in the Canadian Parliament would create an obligation for Canadian businesses to notify the government and, in some cases, individuals of data security breaches and would place new restrictions on Internet and wireless spam.

Bill C-29 would add provisions to Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA) (CCH Privacy Law in Marketing ¶42,200) to require organizations to report material breaches of data security safeguards to the Privacy Commissioner. Organizations would have to notify individuals of data security breaches only when such breaches create a risk of significant harm.

Disclosure of Personal Information

In addition, the measure would amend PIPEDA to permit the disclosure of personal information without the knowledge or consent of the individual for the purposes of:

(1) Identifying an injured, ill, or deceased individuals and communicating with their next of kin;

(2) Performing police services;

(3) Preventing, detecting, or suppressing fraud; and

(4) Protecting victims of financial abuse.

Spam, Spyware

Another bill (Bill C-28) proposes the enactment of a new statute, the “Fighting Internet and Wireless Spam Act.” That legislation would prohibit the sending of commercial electronic messages without the prior consent of the recipient and would provide rules governing the sending of such messages, including a mechanism for the withdrawal of consent.

The statute would also prohibit the alteration of data transmissions and the unauthorized installation of spyware programs on computers. Violations would be subject to administrative monetary penalties by the Canadian Radio-television and Telecommunications Commission. Persons affected by violations would be able to bring a private action for actual and statutory damages.

Bill C-28 also would amend PIPEDA to prohibit the collection of personal information by means of unauthorized access to computer systems, as well as the unauthorized compilation of lists of electronic addresses.

“Canadian shoppers should feel just as confident in the electronic marketplace as they do at the corner store,” said Minister of Industry Tony Clement.

“With today’s two pieces of legislation, we are working toward a safer and more secure online environment for both consumers and businesses—essential in positioning Canada as a leader in the digital economy,” he added.

Wednesday, June 09, 2010

Lost Future Royalties—Pundits Were Wrong; Sealy Not Dead

This posting was written by Bruce S. Schaeffer of Franchise Valuations, Ltd., co-author of CCH Franchise Regulation and Damages.

When the case of Radisson Hotels International, Inc. v. Majestic Towers, Inc. (CCH Business Franchise Guide ¶13,680) was decided in 2007, many claimed that the holding of Postal Instant Press, Inc. v. Sealy (CCH Business Franchise Guide ¶10,893)—that lost future royalties claims would not be allowed where the franchisor terminated the franchisee—was dead.

But as Mark Twain (and this author) said, perhaps the rumors of Sealy's demise were premature. Several recent decisions following Sealy have come down recently.(See e.g. Meineke Car Care Centers, Inc. v. RLB Holdings (W.D. N.C. 2009) CCH Business Franchise Guide ¶14,212; Meineke Car Care Centers, Inc. v. L.A.C. 1603, LLC (W.D. N.C. 2008) 2008 U. S. Dist. LEXIS 33566; and Meineke Car Care Centers, Inc. v. Duvall (W.D. N.C. 2007) 2007 U. S. Dist. LEXIS 27120).

In the recent case of Meineke Car Care Centers, Inc. v. RLB Holdings, (CCH Business Franchise Guide ¶14,212), the argument accepted in Radisson (that it took the franchisor a time certain to find a replacement franchisee) was specifically rejected with the court finding that Meineke's "generic calculation for lost profits based on the CFO's claim that it usually takes two to three years to re-franchise a location" was either irrelevant or not believed. All claims for lost future royalties were denied.

The court also noted that Meineke admitted that it typically did not try to refranchise a shop once it had closed, and there was no evidence that it had done so in this case in an attempt to mitigate damages.

Shaggy Dog Story—Hotel Franchisor Not Liable for Franchisee's Alleged Negligence

Here's a beauty: A hotel franchisor was held not vicariously liable for a franchisee's alleged negligence and violation of the California Unruh Civil Rights Act in connection with an incident at the franchisee's hotel during which an individual was denied accommodations. There was no evidence that the franchisee and its employees were actual or ostensible agents of the franchisor, a California appellate court has decided.

The plaintiff arrived at the hotel with his allegedly disabled cousin and a dog. The plaintiff's cousin declared that he had a form of muscular dystrophy and used the dog to help him maintain mobility. As the incident was recalled by the hotel's desk clerk, a big, unleashed dog walked into the hotel, "just roaming through the lobby," sniffing the hotel's clientele.

According to the clerk, the dog was not wearing anything that would indicate that it was a service dog. The plaintiff, wearing only swim trunks and smelling strongly of alcohol, then proceeded to cut in front of the line at the hotel service desk, butting aside a client that the clerk was assisting. He claimed that the dog was a service animal, and became angry and uttered obscenities when the clerk asked him to leash the dog. The clerk later told the manager that he refused to rent a room to the individual because he was "drunk and surly."

The decision is Stites v. Hilton Hotels Corp., CCH Business Franchise Guide ¶14,296.

Expert Witnesses—Testimony of New Expert Limited to First Expert's Report

In a contest between two sandwich shop franchisors (Subway and Quiznos), Subway was permitted to substitute a new expert for its originally-disclosed expert witness. However, the court ruled that the substitute's testimony at trial would be limited to establishing the veracity and integrity of the original expert witness and the conclusions reached in the original witness' expert report.

The substitute's opinion, which sought additional damages, would not be permitted in evidence. Therefore, Quiznos' motion seeking costs and expenses incurred to rebut the damages analysis of Subway's original damages expert was denied.

The decision is Doctor's Associates, Inc. v. QIP Holder LLC (D. Conn. 2009) CCH Business Franchise Guide ¶14,289.

Additional information on the issues discussed above is available in CCH Franchise Regulation and Damages by Byron E. Fox and Bruce S. Schaeffer.

Tuesday, June 08, 2010

Antitrust Enforcers Support Rehearing in Cipro Reverse Payment Patent Suit

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

The Department of Justice Antitrust Division, the FTC, and 34 states have asked the U.S. Court of Appeals in New York City for an en banc hearing to consider a three-judge panel’s decision (2010-1 Trade Cases ¶76,989) rejecting an antitrust challenge to a settlement in a patent infringement lawsuit involving the antibiotic ciprofloxacin hydrochloride (Cipro).

In that decision, the court—noting that it was bound by an earlier Second Circuit decision, Joblove v. Barr Labs., Inc. (In re Tamoxifen Citrate Antitrust Litig.), 2006-2 Trade Cases ¶75,382—invited the plaintiffs to petition for rehearing en banc so that the full appeals court might consider the issue.

The plaintiffs, indirect purchasers of Cipro, had challenged the patent settlement agreement between the owner of the patent for the active ingredient in Cipro and potential generic manufacturers of Cipro as an illegal market-sharing agreement.

In separate briefs, the Antitrust Division, the FTC, and the states asked the Second Circuit to reconsider the Tamoxifen standard.

Department of Justice Brief

According to the Justice Department’s June 3 amicus brief, the Tamoxifen standard “has encouraged ‘pay for delay’ settlements in the pharmaceutical industry . . . [b]y shielding most private reverse payment settlement agreements from antitrust liability.”

In Tamoxifen, a divided court held that a reverse payment settlement of a patent lawsuit involving a drug used to treat breast cancer did not violate the antitrust laws. Under Tamoxifen, a settlement agreement did not exceed the scope of the patent and was valid where (1) there was no restriction on marketing noninfringing products; (2) a generic version of the branded drug would necessarily infringe the branded firm’s patent; and (3) the agreement did not bar other generic manufacturers from challenging the patent.

FTC Arguments

The FTC contended in its brief that the Tamoxifen decision “shields a pernicious practice, which imposes enormous costs on American consumers of pharmaceutical drugs, from robust antitrust scrutiny.”

The agency cited three additional reasons for granting rehearing en banc:

(1) the Tamoxifen decision made “mistaken assumptions about the pharmaceutical industry”;

(2) five years of empirical evidence confirmed delayed generic entry and increased consumer costs resulting from the challenged conduct; and

(3) the Tamoxifen rule threatens to undermine congressional policy against agreements between big pharmaceutical firms and generic drug companies intended to keep lower-cost drugs out of the market.

States’ Views

Thirty-four states, led by Vermont, California, and Florida, said in their brief that “the Tamoxifen Court’s endorsement of reverse payment agreements to thwart generic competition requires further review to avoid continued undue financial hardship on both consumers and the states.”

The states also suggested that a rehearing en banc in the Cipro case might provide more certainty in the law in light of the U.S. Supreme Court’s refusal to review the split among the circuits on the issue.

The case is Arkansas Carpenters Health Welfare Fund v. Bayer AG, Bayer Corp., Civ. Nos. 05-2851-CV(L) and 05-2852-CV(CON).

Monday, June 07, 2010

Kellogg Agrees to Tougher Restrictions to Resolve FTC Ad Claims

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

After resolving an FTC complaint last year that it had engaged in false advertising by claiming that eating a bowl of Frosted Mini-Wheats cereal would improve childrens’ attentiveness, the Kellogg Company has agreed to settle agency allegations that it made questionable immunity-related claims for its Rice Krispies cereal. The cereal maker has agreed to new advertising restricts.

Under the FTC consent order resolving the 2009 complaint, Kellogg was barred from making claims about the benefits to cognitive health, process, or function provided by any cereal or any morning food or snack food unless the claims were true or substantiated.

The modified consent order prohibits Kellogg from making claims about any health benefit of any food unless the claims are backed by scientific evidence and are not misleading.

On product packaging, Kellogg claimed that Rice Krispies cereal “now helps support your child’s immunity,” with “25 percent Daily Value of Antioxidants and Nutrients—Vitamins A,B,C, and E.” The back of the cereal box stated that “Kellogg’s Rice Krispies has been improved to include antioxidants and nutrients tht your family needs to help them stay healthy.”

Concurring Statements

FTC Chairman Jon Leibowitz and Commissioner Julie Brill issued a concurring statement, expressing their concern “that at the same time that Kellogg was making promises to the Commission regarding Frosted Mini-Wheats, the company was preparing to make problematic claims about Rice Krispies.”

The statement noted that “[i]n light of the timing of the launch of the Rice Krispies campaign, it is reasonable to conclude that planning for the new `immunity’ claims was well underway while Kellogg was negotiating and finalizing its agreement with the FTC to not make unsubstantiated `cognitive ability’ claims about Frosted Mini-Wheats.”

The case is In the Matter of Kellogg Co., FTC File No. 082 3145, June 3, 2010. A news release on the case appears here on the FTC website. An order to show cause and order modifying order appears here. Further details will appear in CCH Trade Regulation Reporter.

Friday, June 04, 2010

Australia Franchising Code Requires Additional Disclosures, Notice of Nonrenewal

This posting was written by John W. Arden.

Revisions to the Australia Franchising Code of Conduct, announced yesterday, will add categories of presale disclosures that must be provided to prospective franchisees and require franchisors to provide six months’ notice of nonrenewal, among other things.

“These amendments seek to increase franchisor disclosure on a number of different matters and to establish guidance to franchisees and franchisors on the conduct expected of them during dispute resolution processes,” said an explanatory statement issued by the authority of the Treasurer.

“The amendments should place franchisees in a better position to understand the risks of entering into a franchising system by giving them clearer information up front about the terms and conductions on offer.”

The amendments contained in Select Legislative Instrument 2010 No. 125 will become effective on July 1, 2010 and apply to franchise agreements entered on or after that date.

Changes to the disclosure document include the following:

Nonrenewal. A new clause 20A requires franchisors to inform franchisees, at least six months prior to the end of the franchise agreement, of their decision to renew or not renew the franchise agreement. Where franchise agreements are for less than six months, franchisors must give one month notice.

Good faith. A new clause 23A requires inclusion of a statement that nothing in the Code limits any common law obligation to act in good faith.

Dispute resolution. A new subclause 29(8) includes a listing of conduct expected of franchisors and franchisees when engaging in dispute resolution processes, such as attending and participating in mediation and observing duties of confidentiality.

Franchise business failure. Item 22 requires franchisors to provide a statement that franchising is a business and, like any business, the franchise (or franchisor) could fail during the term of the franchise agreement, with consequences to the franchisee.

Other payments. New item 13.6 requires franchisors to disclose details of payments by the franchisee payable to the franchisor (or its associate) or collected by the franchisor for another.

Capital expenditures. Item 13A.1 mandates that franchisors disclose whether a franchisee will be required to undertake significant capital expenditures not foreseen or disclosed before the signing of the franchise agreement.

Unilateral contract variation. Item 17A provides that a franchisor disclose the circumstances in which it has unilaterally varied a franchise agreement within the previous three fiscal years and the circumstances in which unilateral variations may take place in the future.

End of franchise arrangements. Item 17C requires a franchisor to disclose the process that will determine arrangements at the end of the franchise agreement, including options to renew or extend the agreement, exit payments to the franchisee, repurchase of inventory or assets, the franchisee’s right to sell the business, and the franchsior’s right of first refusal in such sale.

In addition to the new disclosures, the amendments make minor technical changes to the formatting of the disclosure document.

Full text of the revisions appears here on the Commonwealth of Australia Law website. An updated version of the Franchising Code of Conduct will appear in the CCH Business Franchise Guide.

Thursday, June 03, 2010

Dismissal of Antitrust Claims Against Orthopedic Device Makers Upheld

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

The U.S. Court of Appeals in Philadelphia has rejected antitrust claims against five of the nation’s largest manufacturers of orthopedic devices. A decision of the federal district court in Pittsburgh (2009-1 Trade Cases ¶76,567), dismissing the action, was affirmed.

The claims were brought by a husband and wife, who sometimes purchased products from competitors of the defending manufacturers for demonstration and resale purposes. The private suit followed a 2007 Department of Justice investigation, which revealed that each defendant had paid kickbacks and bribes to orthopedic surgeons to induce them to use its products.

The companies, which accounted for nearly 95 percent of the market in hip and knee surgical implants, avoided criminal prosecution by agreeing to new corporate compliance procedures and federal monitoring. The government’s investigation did not suggest that the defendants had colluded or otherwise coordinated their illicit conduct.

Antitrust Injury

The antitrust claims could not proceed because the husband and wife suffered no antitrust injury from the challenged conduct, the court held. The plaintiffs argued that they were both competitors and consumers in the relevant market entitled to antitrust standing. However, they were only commission-based sales representatives who did business with competitors and consumers in the market for surgical orthopedic devices, not as competitors or consumers themselves.

As mere intermediaries in the supply chain, they suffered no cognizable antitrust injury as a result of the alleged anticompetitive conduct, the court explained. Because “a cognizable antitrust injury was a necessary precursor to antitrust standing,” the remaining factors for determining antitrust standing were irrelevant.

The appellate court also rejected the plaintiffs’ argument that they had standing because their claims were “inextricably intertwined” with the alleged antitrust violations. The husband and wife cited several cases holding that plaintiffs who were neither competitors nor consumers in the relevant market nonetheless had antitrust standing because their injuries were “inextricably intertwined” with alleged antitrust violations.

The injury suffered by the plaintiffs was not an integral aspect of the alleged scheme by the defending manufacturers to pay kickbacks and bribes, according to the court. Any harm to the couple’s business was a byproduct of the illegal kickbacks and bribes paid by the defending firms to numerous doctors and hospitals.

The June 1, 2010, not-for-publication decision in McCullough v. Zimmer, Inc., No. 09-2105, will appear at 2010-1 CCH Trade Cases ¶77,035.

Wednesday, June 02, 2010

Focus on Franchising

This posting was written by Pete Reap, Editor of CCH Business Franchise Guide, and John W. Arden.

News and notes on franchising and distribution topics:

□ Manitoba has proposed a franchise disclosure and relationship statute that would require franchisors to make presale disclosures to prospective franchisees, prohibit presale misrepresentations, and impose a duty of good faith and fair dealing on parties to franchise agreements. The proposal would also guarantee franchisees the right to associate and a right of rescission. As with franchise legislation enacted by Prince Edward Island and New Brunswick within the past five years, the Manitoba bill is based on the Uniform Franchises Act (CCH Business Franchise Guide ¶7021), a model law that was adopted by the Uniform Law Conference of Canada. Text of the Manitoba proposal appears at CCH Business Franchise Guide ¶14,378.

□ The ABA Forum on Franchising has announced the program for its 33rd annual Forum, to be held October 13-15, 2010 at the Hotel Del Coronado, San Diego, Calfornia. “Franchising: Some Like It Hot” will feature two half-day intensive workshops on Wednesday, October 13, followed by the two-day regular program, consisting of two plenary sessions and 24 workshops. The plenary sessions are “Strategic and Tactical Decision- Making: What Do Your Peers Think of Your Decisions” (presented by Kerry L. Bundy, Dr. Melissa M. Gomez, Harris J. Chernow, and Joesph Schumacher) and the Annual Franchise and Distribution Law Developments program (presented by Bethany L. Appleby and William K. Whitner). Co-Chairs of the meeting are Deb Coldwell and Kathy Kotel. Further information—and the meeting brochure—appear here at the Forum on Franchising website.

□ Provisions of South Africa’s Consumer Protection Act (Act No. 68 of 2008) that apply to franchise agreements came into effect on April 24, 2010. The Act requires franchise agreements to be in writing and signed by or on behalf of the franchisee. The agreement must include any prescribed information and comply with the Act’s plain language requirements. Regulations detailing franchise disclosure requirements are expected to be promulgated in the near future, but are not in the Act itself. The Act authorizes franchisees to cancel a franchise agreement without cost or penalty within ten business days after the agreement’s execution by the provision of written notice to the franchisor. Full text of the Consumer Protection Act appears at CCH Business Franchise Guide ¶7245. According to an alert posted by DLA Piper, “there has been some confusion about the scope of South Africa’s Consumer Protection Act (whether the whole Act or only parts of the Act would apply to franchising) . . . It is important to keep in mind that the Act, while imposing some consumer protection-type requirements in franchise transactions in some places (e.g., the right to be treated equally), specifically excludes franchise transactions from other provisions that apply to consumer transactions (e.g., the right with respect to the goods or services supplied).” Alert authors Philip F. Zeidman and Tao Xu advise franchisors to “carefully examine the Act and consult with counsel to determine which provisions are applicable to a franchise transaction.”

Tuesday, June 01, 2010

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.