House Lawmakers Call on FTC to Avoid Overstepping in Google Investigation

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

Two Democratic members of the House of Representatives have sent a letter to FTC Chairman Jon Leibowitz, expressing concerns over apparent leaks of information regarding the agency’s investigation into Google, Inc. and asking the agency to act within its statutory authority in pursuing the matter.

Rep. Anna G. Eshoo (California), Ranking Member of the House Energy and Commerce Committee's Communications and Technology Subcommittee, and Rep. Zoe Lofgren (California) suggested in the November 19 letter that the purported release of sensitive details from an internal draft FTC report was "irresponsible” and that it “potentially compromises an investigation that has yet to be voted on by the full Commission.”

The congresswomen stressed the need for the agency to “remain fair and impartial” and to protect “the confidentiality of internal discussions among the parties involved.”

In June 2011, Google announced that the FTC was conducting a formal review its business practices. Google did not disclose details of the investigation.

Recent reports have suggested that an FTC enforcement action will soon be announced. The European Commission has already announced an in-depth antitrust investigation into whether Google’s Internet search display practices were designed to shut out competitors.

The letter also questioned the Commission’s use of its authority under Section 5 of the FTC Act to reach allegedly anticompetitive conduct that might not be found illegal under Section 2 of the Sherman Act.

“Expanding the FTC’s Section 5 powers to include antitrust matters could lead to overbroad authority that amplifies uncertainty and stifles growth,” according to the representatives. “If the FTC intends to litigate under this interpretation of Section 5, we strongly urge the FTC to reconsider.”

Leibowitz, Pozen Discuss Year’s Highlights at ABA Spring Antitrust Meeting

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

FTC Chairman Jon Leibowitz and Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice Antitrust Division, discussed the active enforcement agendas at their agencies at the American Bar Association Section of Antitrust Law Spring Meeting on March 30 in Washington, D.C.


Acting Assistant Attorney General Pozen said that the Antitrust Division had an “amazing” year. With respect to criminal enforcement, she noted the recent conviction of AU Optronics Corporation of Taiwan, its U.S. subsidiary, and its former president and former executive vice president for conspiring to fix prices of thin-film transistor-liquid crystal display (TFT-LCD) panels.

On the civil enforcement side, Pozen mentioned two recent successes in the merger enforcement area. She called AT&T’s decision to abandon its proposed acquisition of T-Mobile USA Inc. in the face of a Justice Department challenge a “tremendous victory” and an example of federal/state cooperation. Pozen also noted a federal district decision enjoining H&R Block, Inc.’s proposed acquisition of 2SS Holdings, Inc.—the maker of “TaxACT” tax preparation software (2011-2 Trade Cases ¶77,678). She commended the decision, saying it read like a treatise. Other recommended reading, according to Pozen, is the competitive impact statement, explaining the consent decree resolving the government’s monopolization allegations against United Regional Health Care System of Wichita Falls (2011-2 Trade Cases ¶77,619).

The FTC continued to focus on the health care sector over the past year, the FTC chairman pointed out in his remarks. Leibowitz noted three hospital merger cases in litigation. First, he mentioned the Commission opinion requiring ProMedica Health System to divest rival St. Luke's Hospital in Toledo, Ohio. Second, he said that the FTC was waiting for a federal district court to rule on its request for a preliminary injunction to block OSF Healthcare System’s proposed acquisition of Rockford Health System, which would combine two of the three major hospital systems in Rockford, Illinois. Finally, the FTC chairman highlighted the U.S. Solicitor General’s Supreme Court petition questioning a decision of the U.S. Court of Appeals in Atlanta (2011-2 Trade Cases ¶77,722), holding that the proposed combination of the only two hospitals in Albany, Georgia, was immune from an FTC antitrust attack under the state action doctrine.

Looking ahead, Pozen, who is resigning effective April 30, said that she hoped for a smooth transition to her successor. William Baer—the head of the antitrust group at the Washington, D.C. office of Arnold & Porter, LLP, and a former director of the FTC Bureau of Competition—was nominated to serve as the Assistant Attorney General in charge of the Antitrust Division on February 6. The nomination is pending in the Senate Judiciary Committee.

FTC Chairman Leibowitz said that top enforcement priorities going forward would focus on technology and health care issues, as well as “last dollar fraud,” such as deceptive foreclosure rescue and bogus credit repair schemes. In the technology area, Leibowitz said the FTC was involved in a number of open investigations that he could not discuss. The chairman also noted in his remarks that, with the recent Senate confirmation of Maureen Ohlhausen, the Commission would be operating with a full five-member team.

Leibowitz, Ohlhausen Confirmed as FTC Commissioners

This posting was written by John W. Arden.

Federal Trade Commission Chairman Jon Leibowitz and Maureen K. Ohlhausen were confirmed yesterday by the U.S. Senate to serve as FTC Commissioners. On voice votes, the Senate confirmed the nomination of Leibowitz to serve a second term as Chairman of the Commission and the nomination of Ohlhausen to serve as a Commissioner.

“My fellow Commissioners and I look forward to welcoming Maureen Ohlhausen as a new Commissioner,” said Leibowitz. “Her exception experience, knowledge, and leadership will be of great service to the Federal Trade Commission and American consumers.”

“I am humbled and grateful to the Members of the U.S. Senate for their confidence in my continued service at the nation’s premier consume protection agency,” he added.

Leibowitz has chaired the agency since 2009 and has been a commissioner since 2004. Under his leadership, the Commission has focused on stopping scams that prey on consumers during the economic downturn, preserving competition in the health care industry, restricting anticompetitive “pay-for-delay” patent settlements in the pharmaceutical industry, and promoting competition and innovation in the technology sector. He is a graduate of the University of Wisconsin and New York University School of Law.

Ohlhausen, a partner at Wilkinson Barker Knauer LLP since 2009, was nominated to fill one of the two Commission positions reserved for Republicans. The other position is held by J. Thomas Rosch. At Wilkinson Barker, she has specialized in privacy, data protection, and cybersecurity. Prior to joining the firm, she spent 11 years at the FTC, as attorney advisor to Commissioner Orson Swindle, head of the FTC Internet Access Task Director of the Office of Policy Planning, and Director of the Office of Policy Planning.

She is a senior editor of the American Bar Association Antitrust Law Journal and has taught privacy law and unfair trade practices as an adjunct professor at George Mason University School of Law. Ohlhausen is a graduate of University of Virginia and George Mason University School of Law

FTC Commissioners Testify on Fiscal Year 2013 Appropriations Request . . .

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

In testimony before the U.S. House Appropriations Subcommittee on Financial Services and General Government on March 5, the FTC summarized the agency's Fiscal Year (FY) 2013 budget request and described its ongoing work to promote competition and protect American consumers.

The testimony, delivered by FTC Chairman Jon Leibowitz and Commissioner J. Thomas Rosch, outlined steps the agency has taken to carry out its mission. It described FTC consumer protection initiatives as well as recent efforts to ensure that American consumers benefit from competition in the health care, technology, and energy sectors.

The testimony requested $300 million to support 1,186 "full-time equivalent" employees (FTEs) to meet the challenges of FY 2013. This is an overall decrease of $11,563,000 below the FTC’s FY 2012 enacted appropriation, according to the testimony. The FTC anticipates a decrease of $25.5 million related to the replacement of satellite space at 601 New Jersey Avenue due to an expiring lease in August 2012. There are increases for mandatory pay adjustments and technology improvements, among other initiatives.

Commissioner Rosch dissented from the appropriations requested for the FTC, noting that “in these austere times we should do more to perform those [consumer protection or competition] missions with fewer resources.”

. . . Express Concern over GSA Study on Relocating Agency

In a March 8 letter to the leaders of the House Transportation and Infrastructure Committee, the four FTC commissioners expressed concerns with a resolution directing the General Services Administrator to prepare a plan to move the agency out of its headquarters building at 600 Pennsylvania Avenue to Constitution Center, a privately-owned building next to the U.S. Department of Housing and Urban Development.

The commissioners stated that the move would impose well over $100 million in wholly unnecessary costs. In addition, “it is completely infeasible for the FTC to shoehorn its entire Washington, DC operation into the available space at Constitution Center,” according to the commissioners.

The resolution is part of an effort led by House Transportation and Infrastructure Committee Chairman John Mica (Florida) to transfer control of the building at 600 Pennsylvania Avenue, called the Apex Building, to the National Gallery of Art. Rep. Mica introduced the proposed “Federal Trade Commission and National Gallery of Art Facility Consolidation, Savings, and Efficiency Act of 2011” (H.R. 690) in February 2011.

In response to that bill, the then-five commissioners sent a letter to members of the House committee expressing their opposition to the efforts and arguing that the move would impose additional costs on the American taxpayer.

Later in 2011, Congressman Mica included provisions calling for the relocation of the FTC and transfer of the 600 Pennsylvania Avenue property to the National Gallery of Art in legislation proposing a “National Women's History Museum” (H.R. 2844). Rep. Mica contends that relocating the FTC will save taxpayer dollars.

FTC Promotes Competition in Health Care, High Tech, Energy Markets, Chairman Testifies

This posting was written by John W. Arden.

In testimony before a House subcommittee yesterday, Federal Trade Commission Chairman Jon Leibowitz highlighted the agency’s recent efforts to promote competition and benefit consumers in the pharmaceutical, hospital, high tech, and energy markets.

“As members of this Subcommittee well know, competitive markets are the foundation of our economy, and effective antitrust enforcement is essential for those markets to function well,” Leibowitz told the House Judiciary Subcommittee on Intellectual Property, Competition, and the Internet.

“Vigorous competition promotes economic growth by keeping prices down, expanding output and the variety of choices available to consumers, and promoting innovation.”

Pay-for-Delay Agreements

In the health care industry, the FTC has focused on ending anti-competitive "pay-for-delay" pharmaceutical agreements, blocking anticompetitive mergers, and developing policy guidance regarding new health-care collaborations, said Leibowitz.

One of the Commission’s top competition priorities has been ending anticompetitive "pay-for-delay" agreements—settlements of patent litigation in which a branded drug manufacturer pays a generic drug manufacturer to keep its product off the market for a time. “Settlements like these enable branded manufacturers to buy more protection from competition than the assertion of their patent rights alone would provide.”

For the last 15 years, the agency has taken the position that these pay-for-delay agreements violate the antitrust laws. Some courts have upheld these agreements, causing them to become commonplace.

Health Care Mergers

This year the FTC has brought several merger enforcement actions in the health care markets of hospitals, dialysis centers, pharmaceutical manufacturers, and pharmacies, said Leibowitz. The Commission also continues to review mergers between pharmaceutical manufacturers and is investigating a merger involving pharmacy benefits managers.

“With the costs of prescription drugs increasing faster than other health care costs, the Commission is committed to preventing pharmaceutical and related mergers that may allow companies to exercise market power by raising prices,” the chairman noted.

Technology Industries

The Commission has ongoing investigations into potentially anticompetitive conduct by dominant firms in high-profile, high-tech industries. In 2009, a Commission action against Intel Corporation alleged that the computer chip giant used exclusive dealing agreements that punished companies wanting to utilize or distribute competing products. This blocked competitors from reaching consumers with their products and unlawfully
maintained Intel’s monopoly, he said.

Another probe of the high-tech industry—involving the Google-AdMob merger—culminated in a Commission decision not to file a case. “Taking account of Apple’s anticipated entry into the market, the Commission determined that future competition in mobile advertising was not likely to be harmed by the merger.”

Energy Markets

In view of the importance of gasoline pricing to consumers and businesses, the FTC is conducting an investigation of petroleum industry practices and pricing. Among the issues under investigation are whether producers, refiners, transporters, marketers, or traders have:

(1) Engaged in practices that has lessened or may lessen competition in the production, refining. Transportation, distribution, or wholesale supply of crude oil or petroleum products or

(2) Provided false or misleading information about the wholesale price of crude oil or petroleum products to a federal department or agency.

The Commission monitors daily retail and wholesale prices of gasoline and diesel fuel in 20 wholesale regions and approximately 360 retail areas across the country.

Chairman Leibowitz also summarized the agency’s international initiatives and consumer protection enforcement actions, including those focused on Internet fraud and privacy.

Text of the Chairman’s prepared statement appears here on the FTC website.

FTC Should Attempt to Block Express Scripts’ Acquisition of Medco: Antitrust Institute

This posting was written by John W. Arden.

The American Antitrust Institute (AAI) has asked the Federal Trade Commission to seek an injunction against Express Scripts’ acquisition of Medco Health Solutions, which “poses a threat to substantially lessen competition in the provision of pharmacy benefit manager services throughout the United States.”

In a November 30 letter addressed to FTC Chairman Jon Leibowitz, the AAI stated that the combination of two of the three largest national pharmacy benefit management services (PBMs)—and the additional vertical integration that such a combination fosters—would threaten competition and raise prices to large plan sponsors and, ultimately, consumers.

The three largest providers of PBM services control more than 80 percent of the “large plan sponsor market,” and the combined Express Scripts-Medco firm would control approximately 50 percent of that market, according to AAI President Albert A. Foer and Advisory Board Member Dan Gustafson. The third of the “big three” PBMs is CVS Caremark.

This market share is particularly concerning because of the structure of the market and the substantial barriers to entry and expansion, the letter said. The three major PBMs already have significant cost advantages from economies of scale and from vertical integration in mail order and specialty pharmacy distribution.

“When faced with these difficult entry and expansion barriers, the remaining second tier PBMs cannot adequately constrain potential anticompetitive conduct because of their smaller size, geographic limitations, lack of buyer power, and, in some cases, perceived conflicts regarding their corporate affiliation with plan sponsors.”

Large Plan Sponsors

More than 40 of the “Fortune 50” corporations rely on the three largest PBM providers. “Not surprisingly, when one of the big three PBMs loses a large plan sponsor, it almost inevitably [goes] to another one of the big three.”

Smaller competitors typically lack adequate claims-processing capabilities to serve national accounts and have only limited ability to secure discounts and rebates from drug suppliers and to provide lower dispensing fees from pharmacies.

Specialty and Mail Order Distribution

The proposed combination of Express Scripts and Medco is likely to lead to the merged entity’s exercise of enhanced buyer market power in the market for specialty and mail order pharmacy distribution, according to the letter.

“The proposed merger would heighten the risk that these major PBMs would push compensation to many retail pharmacies below what would be competitive levels, ultimately leading to higher prices and lost jobs. An adverse impact on the delivery of pharmaceutical services at the retail level should be sufficient by itself to raise serious concerns about the proposed merger.”

Exclusion of Rivals in Specialty Pharmacy Services

The merged firm would have the ability and incentive to exclude rivals in the provision of specialty pharmacy services, it was alleged. All of the big three PBMs have acquired specialty pharmaceutical companies recently, reducing the number of independent specialty pharmacies and giving the big three power over the downstream specialty pharmacy distribution chain.

Exclusion of Rivals in Mail Order Pharmacy Services

The merger would create the largest mail order pharmacy in the country, accounting for nearly 60 percent of all mail order prescriptions processed, according to the AAI.

“This poses several potential competitive threats. First, further consolidation of the PBM market would exacerbate the competitive disadvantages that smaller, second tier PBMs without vertically integrated mail order operations already face. Second, consolidation of mail order pharmacies threatens to lead to anticompetitive self-dealing. A vertically integrated PBM can channel prescriptions to its own mail order facilities instead of to retail pharmacy competitors, even if the cost of filling the prescription is more than it would be at a local pharmacy.”

Small community pharmacies may also be threatened by this mail order business, the letter maintained.

In light of these competitive threats, the AAI urged the FTC to seek to enjoin the merger.

Text of the letter appears here on the American Antitrust Institute’s website.

Leibowitz Recites FTC Accomplishments, Future Plans at Nomination Hearing

This posting was written by John W. Arden.

At a hearing on his nomination for a second term as Commissioner yesterday, FTC Chairman Jon Leibowitz recounted some of the achievements of the agency during the last few years and spoke about a “portfolio of issues” that he plans to address during his next term.

Speaking before the Senate Committee on Commerce, Science, and Transportation, Leibowitz said that it has been “a wonderful opportunity” to serve on the FTC for the past seven years, including more than two years as Chairman.

“Just three years shy of our centennial, the FTC is the nation’s premier consumer protection agency,” he said in a prepared statement. “We play a critical role in freeing the marketplace from predatory, fraudulent, and anticompetitive conduct that tilts the playing field against consumers and honest business people.”

According to the Chairman, the “small agency with a big mission” has prioritized the pursuit of unfair and deceptive practices aimed at financially distressed consumers, addressed consumer privacy from both enforcement and policy perspectives, focused on health care competition, and monitored closely petroleum markets.

The growth of the Internet, together with the economic downturn, has fueled a resurgence of “last dollar frauds” aimed at the most vulnerable consumers. These include foreclosure rescue scams, sham debt relief, and bogus job opportunities. The Commission has partnered with state attorneys general and other state agencies to bring more than 400 cases against such schemes.

Consumer privacy has been—and will continue to be—a major focus on Commission enforcement and policy, according to Leibowitz. In the past decade, the FTC has brought more than 100 spam and spyware cases, more than 30 data security cases, and nearly 80 cases for violation of the Do Not Call rule.

Last December, the FTC issued a report setting forth critical self-regulatory principles that seek to promote consumer privacy, while allow industry to innovate on the Internet, he said.

“Of course, protecting privacy in the face of new technologies will remain a challenge. We are aware of this Committee’s concerns about the privacy implications of mobile apps, flash cookies, geolocation, and facial recognition; the value of industry-wide codes of conduct; and the difficulty safeguarding privacy when users of electronic devices every year seem to grow younger as well as more tech-savvy than their parents.”

Health care competition will remain a top priority for the Commission, particularly challenging hospital mergers that are likely to raise prices and “pay for delay” pharmaceutical settlements, he said.

In light of the impact of gasoline prices on American families, the FTC will continue to monitor petroleum markets closely. Recently, the FTC staff issued a study on examining the various factors that increase the price of gasoline, including OPEC’s inherently anticompetitive behavior and the rising demand in China and India.

The agency will continue to issue industry studies such as the periodic reports about the marketing of violent entertainment to children and the marketing of healthy food to children, the Chairman concluded.

Text of Commissioner Leibowitz’s prepared statement appears here on the FTC website.

FTC Opens Investigation into Gasoline Prices

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

The FTC is looking into the recent rise in prices at the gas pump. The agency disclosed the investigation in a June 20 letter to Senator Maria Cantwell (D, Wash.).

In a March 25 letter, a bi-partisan group of senators, led by Cantwell, asked the agency whether it was fully utilizing its “regulatory authority . . . to ensure that American consumers are paying a fair price for gasoline.”

At that time, the senators requested information on: (1) FTC efforts to enforce the Petroleum Market Manipulation Rule since it was finalized in 2009; (2) steps taken or planned to be taken by the Commission in response to recent price volatility in the petroleum market; and (3) FTC current and planned efforts to work with the Commodity Futures Trading Commission and other agencies to prevent fraud or deceit in the petroleum market.

In light of substantial increases in crude oil and refined petroleum product prices and profit margins this year and other developments, the FTC decided that an investigation was appropriate, according to a letter signed by FTC Chairman Jon Leibowitz.

“[T]he Commission has opened an investigation and has authorized the use of compulsory process to determine whether certain oil producers, refiners, transporters, marketers, physical or financial traders, or others (1) have engaged or are engaging in practices that have lessened or may lessen competition—or have engaged or are engaging in manipulation—in the production, refining, transportation, distribution, or wholesale supply of crude oil or petroleum products; or (2) have provided false or misleading information related to the wholesale price of crude oil or petroleum products to a federal department or agency.”

The agency is trying to determine whether there has been a violation of Section 5 of the FTC Act (CCH Trade Regulation Reporter ¶25,245), the Commission’s Petroleum Market Manipulation Rule (CCH Trade Regulation Reporter ¶38,065), or Sections 811 or 812 of the Energy Independence and Security Act of 2007 (CCH Trade Regulation Reporter ¶27,801; ¶ 27,802).

“The information to be secured through this investigation may include, but is not limited to, utilization and maintenance decisions, inventory holding decisions, product supply decisions, product import and export strategies and volumes, product output decisions, capital planning decisions, product margins and profitability, and any other information which may be relevant to determining whether there is a reason to believe that there have been violations of any of the foregoing statutes or of the Rule,” the letter states.

Oil and Gas Price Fraud Working Group

The FTC also said that it would continue to assist the recently announced federal/state Oil and Gas Price Fraud Working Group. The group was established to help identify civil or criminal violations in the oil and gasoline markets, and to ensure that American consumers are not harmed by unlawful conduct.

The group includes representatives from the Justice Department, the FTC, the Commodity Futures Trade Commission, the Department of the Treasury, the Federal Reserve Board, the Securities and Exchange Commission, the Department of Agriculture, the Department of Energy, and the states.

A press release, including the text of the letter from Commissioner Liebowitz, appears here on Senator Cantwell's website.

Antitrust Agency Heads Discuss Recent Enforcement Efforts at ABA Spring Meeting

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

Attendees of the American Bar Association Section of Antitrust Law 59th Annual Spring Meeting on April 1 heard from the heads of the two federal antitrust agencies on recent enforcement efforts.

“Balanced Activism”

FTC Chairman Jon Leibowitz described the past year as another one of “balanced activism.” He suggested that, when viewed in tandem, the FTC’s review of the Google/AdMob transaction and the settlement with Intel Corporation demonstrate this balanced enforcement.

In May 2010, the FTC announced that it would not challenge Google’s proposed acquisition of mobile advertising network company AdMob because the transaction was unlikely to harm competition in the emerging market for mobile advertising networks. The agency’s concerns about the deal were outweighed by Apple’s planned entry into the market (CCH Trade Regulation Reporter ¶16,453).

In August 2010, the agency announced that Intel Corporation agreed to settle FTC charges that it unlawfully maintained its monopoly by stifling competition in the market for computer chips in violation of Sec. 5 of the FTC Act (CCH Trade Regulation Reporter ¶16,483). Chairman Leibowitz cautioned that businesses run the risk of facing a Sec. 5 case if they “compete by sabotaging competitors” instead of using innovation.

Injunction in Hospital Merger Case

The FTC’s recent victory in the federal district court in Toledo, Ohio, in its challenge to ProMedica Health System Inc.’s proposed acquisition of St. Luke’s Hospital was also discussed. Chairman Leibowitz told attendees that he was very pleased with the decision (2011-1 Trade Cases ¶ 77,395). He mentioned that Judge Katz cited extensively to the recently issued Department of Justice/FTC Horizontal Merger Guidelines (CCH Trade Regulation Reporter ¶13,100).

Chairman Leibowitz noted that the decision is the first preliminary injunction win in an FTC hospital merger challenge since a federal district court in Missouri temporarily blocked the merger of the only two commercial hospitals in Poplar Bluffs, Missouri (1998-2 Trade Cases¶72,227). That decision was reversed by the U.S. Court of Appeals in St. Louis (1999-2 Trade Cases ¶72,578), however, and the FTC eventually dismissed that matter.

“Last Dollar Fraud”

On the consumer protection front, the FTC’s efforts to combat “last dollar fraud” were highlighted. According to Chairman Leibowitz, the agency is focusing on loan modification, foreclosure rescue, and other scams that are taking the last dollar from consumers suffering from the economic downturn.

Sherman Act, Section 2 Enforcement

Saying that “Section 2 is alive and well,” Assistant Attorney General Christine Varney touted the Justice Department Antitrust Division’s recent settlement with United Regional Health Care System of Wichita Falls (CCH Trade Regulation Reporter ¶50,988). This is the first case in over a decade challenging a monopolist with engaging in traditional anticompetitive unilateral conduct

Criminal Enforcement

In the criminal area, the antitrust chief said that, while the air cargo price fixing inquiry was entering its last chapter, attendees should continue to pay attention to the ongoing municipal bonds industry investigation. The Justice Department has already obtained nine guilty pleas as a result of this investigation. Additionally, a number of former executives at financial service companies and financial institutions have been indicted and are awaiting trial.

AAG Varney also noted Bank of America’s December 2010 agreement to pay a total of $137.3 million in restitution to federal and state agencies as a condition of admission into the Department of Justice's antitrust corporate leniency program for its role in the conspiracy.

State Enforcement

James A. Donahue III, Pennsylvania Chief Deputy Attorney General and Chair of the National Association of Attorneys General Antitrust Task Force, discussed the states’ efforts to ensure that their citizens were “getting the benefits of competition.” Donahue noted the states’ cooperation with the U.S. Justice Department in the municipal bonds investigation.

He also highlighted state actions targeting resale price maintenance. In particular, Donahue noted two settlements between the California attorney general’s office and cosmetics firms in the last year (2010-1 Trade Cases ¶76,922 and 2011-1 Trade Cases ¶77,306).

Donahue also pointed out that the State of New York was appealing a state court’s denial of an order enjoining mattress manufacturer Tempur-Pedic International, Inc. from restricting discounting by its authorized retailers (2011-1 Trade Cases ¶77,311).

FTC Testifies on the State of Online Consumer Privacy to Senate Committee

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

Industry stakeholders have made important progress in implementing “Do Not Track,” a mechanism proposed by the Federal Trade Commission last December that would allow consumers to choose not to have their Internet browsing tracked by third parties, the FTC said today in testimony before the Senate Committee on Commerce, Science and Transportation.

The FTC’s testimony discussed its efforts to protect consumer privacy through enforcement actions, consumer education, and policy initiatives like the FTC staff’s recent preliminary privacy report.

That report—titled “Protecting Consumer Privacy in an Era of Rapid Change”—proposed a framework to balance consumer privacy with industry innovation by building privacy protections into everyday business practices (“privacy-by-design”); simplifying privacy choices for consumers; and improving transparency with clearer, shorter privacy notices.

Consumer Choice Mechanisms

“Do Not Track is no longer just a concept, it is becoming a reality,” said FTC Chairman Jon Leibowitz,. “It’s encouraging to see companies responding positively to our call for more consumer choice about their online privacy.”

The testimony noted that two of the major Internet browser vendors—Microsoft and Mozilla—have announced that they are developing choice mechanisms for online behavioral advertising.

In addition, the World Wide Web Consortium has accepted a submission by Microsoft to consider a technical standard for a universal choice mechanism and has announced that it is conducting a workshop in April 2011 on how to incorporate Do Not Track preferences into Internet browsing.

In the FTC’s view, an effective Do Not Track regime would:

• Be implemented universally, so consumers do not have to opt out as they go from site to site;

• Have an opt-out mechanism that is easy to find and easy to use;

• Offer choices to consumers that are persistent and that would not be deleted if, for example, consumers cleared their cookies or updated their browsers;

• Be effective and enforceable; and

• Let consumers opt out of being tracked for reasons other than commonly accepted uses, such as fraud prevention.

Universal Opt-Out

“A robust, effective Do Not Track system would ensure that consumers can opt out once, rather than having to exercise choices on a company-by-company or transaction-by-transaction basis,” the testimony stated. “Such a universal mechanism could be accomplished through legislation or potentially through robust, enforceable self-regulation.”

Consumers may want to opt out of more than targeted ads, the FTC said. For example, they might want to prevent prospective employers or insurers from examining their browsing habits. An effective Do Not Track system would go beyond simply opting consumers out of receiving targeted advertisements; it would opt them out of having their behavior tracked online, the testimony states.

“Commission staff will monitor further industry innovation in this area, which may build upon existing industry initiatives and incorporate elements of the different mechanisms being proposed today,” said the FTC.

Privacy Protection Efforts

The Commission stated that protecting consumers’ privacy had been a priority for 40 years.

“During this time, the Commission has employed a variety of strategies to protect consumer privacy, including law enforcement, regulation, outreach to consumers and businesses, and policy initiatives,” the FTC said.

According to the testimony, in the last 15 years, the FTC has brought more than 300 privacy-related actions, including:

• 32 data security cases,

• 64 cases against companies for improperly calling consumers on the Do Not Call registry,

• 86 cases against companies for violating the Fair Credit Reporting Act (FCRA),

• 97 spam cases,

• 15 spyware (or nuisance adware) cases, and

• 15 cases against companies for violating the Children’s Online Privacy Protection Act (COPPA).

The FTC has obtained $60 million in civil penalties in Do Not Call cases; $21 million in civil penalties under the FCRA; $5.7 million under the CAN-SPAM Act; and $3.2 million under COPPA, the testimony noted.

The Commission vote to approve the testimony was 4-1, with Commissioner William E. Kovacic dissenting. Text of the testimony can be found here on the FTC website.

FTC Chair Leibowitz Nominated for Second Term

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

The White House announced on March 4 that President Barack Obama intends to nominate FTC Chairman Jon D. Leibowitz for a second seven-year term at the Commission. The chairman's term expired last September.

Leibowitz was sworn in as a member of the Commission in September 2004. President George W. Bush nominated Leibowitz in April 2004. He was appointed during a congressional recess after his nomination—and the nomination of Deborah Platt Majoras to serve as the agency's chair—was stalled in the Senate.

Leibowitz was designated as FTC chairman by President Obama in March 2009.

Before his time at the Commission, Leibowitz served as vice president for congressional affairs for the Motion Picture Association of America from 2000 to 2004. Prior to that, he worked on Capitol Hill.

Leibowitz was the Democratic chief counsel and staff director for the U.S. Senate Antitrust Subcommittee from 1997 to 2000. He also worked for Senators Herb Kohl (D., Wis.) and Paul Simon (D., Ill.).

Congress Approves Measure Aimed at Deceptive Internet Sales

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

Legislation aimed at protecting consumers from certain aggressive sales tactics on the Internet has cleared Congress.

The proposed “Restore Online Shoppers’ Confidence Act” (S. 3386), which passed the House of Representatives on December 15, would create new rules for companies using post-transaction marketing and negative options. The measure passed the Senate on November 30 and was presented to the President on December 17.

“We’re pleased Congress passed this legislation,” FTC Chairman Jon Leibowitz said in a December 15 statement. “Too many companies are trying to use phony monthly billing to rip off Americans and this bill will help strengthen our hand. Consumers should be able to make informed decisions, so the terms and conditions of any offer must be disclosed clearly and conspicuously.”

Protections for Online Consumers

The FTC statement explains that the legislation would provide important protections for online consumers. It would prohibit a post-transaction third-party seller—a seller who markets goods and services online through an initial merchant after a consumer has initiated a transaction—from charging a consumer for any good or service sold in an online transaction, unless the seller clearly discloses all the material terms of the transaction and has obtained the consumer’s consent directly from the consumer before charging them.

The sellers must obtain directly from the consumer the full financial account number to be charged. In addition, the legislation would make it unlawful for any online seller to transfer a consumer’s financial account number to a third party seller.

Negative Option Plans

The legislation would also restrict marketers that use negative option plans, under which the seller interprets the consumer’s silence or failure to reject goods or services, or to cancel the sales agreement, as acceptance of the offer.

The proposed Restore Online Shoppers’ Confidence Act would make it unlawful for a seller to charge a consumer for any good or service with a negative option feature in an online transaction, unless:

(1) The seller clearly discloses to the consumer all the material terms of the transaction;

(2) The seller has obtained the consumer’s consent before charging them; and

(3) The seller provides a simple way for the consumer to stop charges.

Further details regarding this bill will appear in CCH Trade Regulation Reporter.

FTC Addresses Consumer Privacy at Congressional Hearings

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

The Federal Trade Commission recently appeared before two congressional committees to testify about FTC efforts to protect consumer privacy.

Chairman Jon Leibowitz appeared before the Senate Commerce, Science, and Transportation Committee on July 27 and David Vladeck, Director of the FTC’s Bureau of Consumer Protection, appeared before the Subcommittee on Commerce, Trade, and Consumer Protection of the House Committee on Energy and Commerce on July 22.

The testimonies described the FTC’s actions to hold companies accountable for protecting consumer privacy (focusing on data security, identity theft, and children’s privacy) and protecting consumers from intrusive spam, spyware, and telemarketing.

The FTC has brought 28 actions charging businesses with failing to protect consumers’ personal information, 15 actions charging website operators with collecting information from children without parents’ consent, 15 spyware cases, and dozens of actions challenging illegal spam, including an action against a rogue Internet Service Provider that resulted in a temporary 30 percent drop in spam worldwide.

In addition, the FTC brought 64 actions alleging violations of the Do Not Call Rule, resulting in violators paying almost $40 million in civil penalties and giving up nearly $18 million, including consumer redress.

New Technologies, Business Models

The testimonies also described the FTC’s recent initiatives to examine consumer privacy protection in light of new technologies and business models, including hosting a series of roundtables discussions addressing (1) integrating privacy into everyday business practices; (2) simplifying consumer choices about commercial data practices, and (3) increasing transparency of those practices.

Chairman Leibowitz said that consumers do not understand the extent to which companies are collecting, using, aggregating, storing, and sharing their personal information, particularly with regard to companies’ affiliate information sharing.

Data Use Transparency

The Commission “is considering a number of other ways to increase transparency about commercial data practices,” Leibowitz said. In an upcoming report, the Commission will discuss ways to improve the disclosures in privacy policies. One possible approach is the use of standardized terms or formats, Leibowitz said. The Commission also favors giving consumers the right to opt-in to how their data will be used.

Repeal Common Carrier Exemption

Chairman Leibowitz renewed the FTC’s request for repeal of the telecommunications common carrier exemption from the FTC Act. Currently, the FTC Act exempts common carrier activities from the FTC Act’s prohibitions on unfair and deceptive acts or practices and unfair methods of competition.

House Legislation

David Vladeck expressed the FTC’s general support for two legislative proposals—H.R. 5777 (the “BEST PRACTICES Act”) and a discussion daft of legislation to require consumer notice and consent regarding collection and use of personal information.

H.R. 5777, the Building Effective Strategies To Promote Responsibility Accountability Choice Transparency Innovation Consumer Expectations and Safeguards Act (the "BEST PRACTICES Act"), was introduced by Bobby Rush (D-IL), Chairman of the Subcommittee on Commerce, Trade, and Consumer Protection, on July 19, to foster transparency about the commercial use of personal information. The text of Chairman Rush’s BEST PRACTICES Act can be found here.

The discussion draft of legislation proposed by Rick Boucher (D-VA), Chairman of the Subcommittee on Communications, Technology, and the Internet, would require consumer notice to and consent prior to collection and use of personal information. The text of Chairman Boucher's discussion draft bill can be found here.

The FTC supported overlapping provisions in both proposals’ concerning data security and accuracy, simplification of consumer choice in determining collection and use of personal information, and enhanced FTC rulemaking authority. David Vladeck also urged Congress to (1) require standardized, clear disclosures to enable consumers to compare privacy protections, (2) ensure that disclosures be given at the time of relevant transactions, and (3) not necessarily exempt business affiliates from consent requirements.

Chairman Leibowitz’s Senate testimony is available here. David Vladeck’s House testimony is available here.

House Oversight Committee Hears from Antitrust Agency Heads

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

The heads of the federal antitrust agencies provided an update to members of the House Judiciary Committee's Courts and Competition Policy Subcommittee this morning on their agencies' enforcement priorities and recent actions.

The July 27 hearing was the subcommittee's first oversight hearing to examine antitrust enforcement under the Obama Administration.

FTC Competition Priorities

A top competition priority at the Commission is to stop “pay-for-delay” agreements between branded and generic drug makers, according to the FTC testimony delivered by FTC Chairman Jon Leibowitz. The agency estimates that these sweetheart deals cost consumers $3.5 billion a year.

Efforts are under way in the courts and congress to reign in patent settlement agreements under which the brand-name drug firm pays its potential generic competitor to abandon a patent challenge and delay entering the market.

The agency is currently pursuing two major pay-for-delay cases: one against Solvay Pharmaceuticals (owned by Abbott Laboratories) and generic manufacturers (Watson Pharmaceuticals, Par Pharmaceutical, and Paddock Laboratories) regarding AndroGel, a testosterone replacement drug often used by victims of testicular cancer, and the other against Cephalon regarding the drug Provigil, a sleep disorder medication with nearly $1 billion in annual U.S. sales.

According to the FTC testimony, the agency is continuing to initiate new investigations into other pay-for-delay agreements. However, the testimony noted that legislation would be the most effective way to stop these deals.

The FTC’s tactics in investigating the patent settlement agreements have come under scrutiny. At the House subcommittee’s oversight hearing and a Senate subcommittee oversight hearing in June, the FTC chairman was questioned about the agency’s misuse of a subpoena in the Cephalon case.

A U.S. Magistrate Judge on July 13 ruled that the president and CEO of Watson Pharmaceuticals made a “colorable claim that the FTC may have exceeded its authority by using its investigative power to pressure Watson to enter into a business deal that the FTC considers desirable.” The CEO was entitled to limited discovery to determine if the agency acted outside its authority.

Today's FTC testimony also outlined other agency priorities, including revising the Horizontal Merger Guidelines. The FTC and the Department of Justice Antitrust Division in April released for public comment a proposed update of the Horizontal Merger Guidelines.

Since the last major revision to the Guidelines was in 1992, the agencies proposed revisions to more accurately reflect the way the FTC and Department of Justice currently conduct merger reviews. Last month, the comment period closed. According to the testimony, the agencies are currently considering the viewpoints of 31 commenters as they work to finalize the new guidelines.

Antitrust Division Enforcement Activities

Christine A. Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, also noted the joint, ongoing review of the Horizontal Merger Guidelines in testifying on behalf of the Antitrust Division. She cited the effort as an example of the Antitrust Division's efficient and effective collaboration with the FTC on a number of fronts.

Assistant Attorney General Varney also discussed merger enforcement, which “continues to be a core priority for the Antitrust Division.” 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.

“[T]his enforcement action is indicative of this Department of Justice's commitment to our nation's farming industries,” according to the testimony.

Commissioner Leibowitz’s testimony is available here on the FTC website. Assistant Attorney General Varney’s statement appears here on the Department of Justice website.

Public Interest Groups Urge FTC to Create Comprehensive Privacy Plan

This posting was written by John W. Arden.

Seventeen public interest and privacy groups sent a letter yesterday to Federal Trade Commission Chairman Jon Leibowitz, urging the FTC to “draft a comprehensive plan that both details the deficiencies in Americans’ privacy rights, and proposes comprehensive statutory and regulatory solutions to those problems.”

The letter asserted that U.S. privacy law was “in a state of disarray,” that existing laws “don’t adequately address new business practices,” and that entire industries have sprung up “with little or no regulation.”

“Under the guise of `self regulation,’ companies routinely revise privacy policies so that they can do essentially whatever they wish with the data they collect,” the letter stated. “Meanwhile, public support for stronger privacy safeguards is growing as consumer protests continue to mount.”

Opportunity to Act

After hosting a series of roundtable discussions on privacy challenges posed by technology and business practices that collect and use consumer data, the FTC is well positioned to issue a “wide-ranging report” addressing problems of online and offline data collection, the groups observed. The agency was urge to “seize this opportunity.”

The groups recommended that the Commission take the following steps:

 Propose a comprehensive privacy law that would provide consumers with safeguards and control over their personal information;

 Set out regulations for the collection of information by the online advertising industry to help ensure that consumers have meaningful control over their personal information;

 Identify specific new business practices that raise possible privacy concerns and propose solutions; and

 Improve the agency’s transparency so the public can understand the significance and effectiveness of an enforcement action.

Need for Comprehensive Regulation

The letter pointed out that current U.S. privacy law is piecemeal, protecting personal information in one area, while leaving it uncovered in another context.

“We believe a comprehensive overview of the problems and a discussion of the potential solutions—similar to the recent Federal Communications Broadband Plan—is the best way to begin to address these systemic problems.”

The letter was signed by 17 groups, including the ACLU, the Center for Digital Democracy, the Electronic Frontier Foundation, the Electronic Privacy Information Center, Public Citizen, US PIRG, and the World Privacy Forum.

Text of the letter appears here on the Center for Digital Democracy’s web site.

Bill Aimed at Stopping Drug Company “Pay-for-Delay” Patent Settlements Passes House

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

The House of Representatives yesterday passed legislation that would restrict the ability of drug companies to enter into pay-for-delay patent settlements. The measure was one of a number of amendments to a war funding bill (H.R. 4899). The bill will now require action by the Senate.

Presumption of Anticompetitive Effects

Under the measure, patent settlements would be presumed to have anticompetitive effects and be unlawful where a potential generic competitor receives “anything of value” from a branded drug company in return for agreeing “to limit or forego research, development, manufacturing, marketing, or sales” of a competing drug.

Parties to an agreement would have to demonstrate that the procompetitive benefits of the agreement outweighed the anticompetitive effects of the agreement.

The proposed “Preserve Access to Affordable Generics Act'' would amend the Federal Trade Commission Act to authorize the agency to initiate a proceeding to challenge the agreements. The agency would also be authorized to issue regulations.

FTC Chairman’s Reaction

“Congress has taken a critical step towards ending a practice that is dramatically increasing the cost of prescription drugs,” FTC Chairman Jon Leibowitz said in a July 2 statement following the House vote.

“This bipartisan legislation would save American consumers and taxpayers billions of dollars by stopping sweetheart deals that delay the entry of low-cost generics, while at the same time allowing settlements that benefit consumers,” he said.

According to the Chairman, FTC economists estimate that the challenged deals cost consumers approximately $3.5 billion a year by delaying consumers’ access to lower-cost generic drugs. Leibowitz has frequently said that stopping pay-for-delay patent settlements in the pharmaceutical industry is one of the Commission’s highest antitrust priorities.

Industry Response

The Pharmaceutical Research and Manufacturers of America (PhRMA), which represents the country’s leading pharmaceutical research and biotechnology companies, has come out against the legislation.

“PhRMA believes including the provision on restricting patent settlements can discourage pro-consumer settlements that often bring generics to market years before patent expiration,” said PhRMA Senior Vice President Ken Johnson in a June 28 statement.

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.

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.

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.

Agency Heads Discuss Revisions to Merger Guidelines at ABA Antitrust Meeting

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

Antitrust practitioners reviewing proposed revisions to the federal antitrust agencies’ Horizontal Merger Guidelines should have a better understanding of current agency practice, according to federal antitrust enforcers speaking April 23 at an enforcement roundtable during the American Bar Association’s Section of Antitrust Law Spring Meeting in Washington, D.C.

The proposed revisions to the guidelines, which outline how the federal antitrust agencies evaluate the likely competitive effects of mergers in order to determine compliance with U.S. antitrust law, were released on April 20 in anticipation of the meeting. The proposed revised guidelines appear at CCH Trade Regulation Reporter ¶ 50,252.

Reflection of Agency Practice

Christine Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, told meeting attendees at the enforcement roundtable that, while the proposed revised guidelines are not all that different in substance from the current 1992 guidelines, the 1992 guidelines do not reflect the actual practice at the agencies. This latest update is an effort to be transparent, according to Varney.

The antitrust chief reminded attendees that each transaction is viewed on the facts of that transaction. She noted the importance of direct evidence of a potential merger’s competitive effects in evaluating a merger. The role of direct evidence in merger analysis is reflected in the proposed updated guidelines, Varney said.

FTC Chairman Jon Leibowitz also described the proposed revisions to the guidelines as an effort to explain to practitioners and judges what the agencies are doing when evaluating the competitive effects of mergers.

Leibowitz discussed the role of direct evidence of competitive effects in actions challenging Evanston Northwestern Healthcare Corporation’s 2000 acquisition of Highland Park Hospital and Western Refining, Inc.’s proposed acquisition of rival energy company Giant Industries, Inc., in 2007. He suggested that the judge in the latter case took a mechanistic view of the Horizontal Merger Guidelines in rejecting the FTC’s request for a preliminary injunction blocking Western Refining’s acquisition of Giant Industries.

Market Concentration

The proposed updates also raise the Herfindahl-Hirschman Index (HHI) measures for market concentration in order to be more consistent with current agency practice, Leibowitz explained. As a result, mergers that would have appeared to be highly concentrated under the 1992 guidelines, based on HHI measures, would be considered only moderately concentrated under the proposed revised updates.

According to the guidelines, mergers that cause a significant increase in concentration and result in highly concentrated markets are presumed to be anticompetitive.

Merger Enforcement

Both agency heads took the opportunity to tout recent merger enforcement activity. Chairman Leibowitz said that the FTC was on “a little bit of a winning streak” in the merger enforcement area. He pointed to the decision of CCC Information Services Inc. to abandon its merger with Mitchell International Inc., in light of the agency’s challenge to the transaction.

The federal district court in Washington, D.C. had granted the FTC’s request for a preliminary injunction (PI) to block the transaction pending administrative litigation. The 2009 decision was the agency’s first PI win since 2003, according to the Commissioner.

Assistant Attorney General Varney discussed the Antitrust Division’s recent settlement with Ticketmaster Entertainment, Inc. In order to proceed with its proposed acquisition of concert promoter Live Nation, Inc., ticket seller Ticketmaster was required to license ticket software and divest a subsidiary ticketing business. In addition, behavioral remedies were imposed on Ticketmaster.

Varney told attendees that the agency’s preference was for structural relief, but that sometimes there is a need for both structural and behavioral remedies.

Canada Competition Bureau Merger Procedures

Canada Competition Commissioner Melanie Aitken, who was also on the roundtable panel, discussed recent changes to the merger review process north of the border. Aitken said that the changes “make for a far more effective merger review process.”

While she described the process as “Made in Canada,” Aitken noted that the reforms, which have to do with process and not substance, bring the merger review process more in line with U.S. practice. For instance, the two-stage review process replicates the second request process utilized by the federal antitrust agencies in the United States. Aitken said that the changes make coordination with her counterparts in the United States easier.