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In a recently released report, the Federal Trade Commission (FTC) cites its activities related to prescription drugs, gasoline, "Do Not Call," deceptive lending, and e-commerce as the highlights of the critical consumer concerns addressed during 2002. The report provides the competition policy and consumer protection communities with an overview of FTC activities during the last twelve months, summarizes the agency's chief initiatives, and describes the aims that motivate the use of its resources.
The report details activities including:
Health Care: Prescription Drugs - A study examining the frequency of anticompetitive abuses to block market entry of lower-cost generic drugs; law enforcement actions against branded drug companies alleging improper efforts to delay generic entry; and a settlement with Bristol-Myers Squibb and alleged abuses of the Hatch-Waxman Act process to obstruct the entry of generic competition for two anti-cancer drugs and an anti-anxiety agent.
Energy: Gasoline - An administrative complaint alleging that Unocal improperly manipulated the process by which the California Air Resources Board set regulations for phase 2 reformulated gasoline, anticompetitive conduct that potentially could cost California consumers hundreds of millions of dollars per year in higher gasoline prices.
Privacy: "Do Not Call" - Amendments to its Telemarketing Sales Rule, which among other changes, launched the National Do Not Call registry, providing a central database of telephone numbers of consumers who chose not to receive telemarketing calls.
Financial Practices: Deceptive Lending - A settlement with Associates First Capital Corporation and Associates Corporation of North America resolving charges that the firms had engaged in systematicand widespread deceptive and abuse practices involving subprime lending. Among other obligations, the companies agreed to pay consumers $215 million in redress - the largest consumer protection settlement in FTC history.
E-Commerce: A Unified Approach to Maintaining Efficient Markets - an Internet Task Force created to analyze state regulations that may restrict the entry of new Internet competitors and to share its findings with bodies whose acts might affect the development of Internet commerce. A three-day public workshop examined potential anticompetitive barriers to e-commerce in various industries.
The report notes that during 2002, the Commission approved a total of 31 competition law enforcement actions, including two Part 3 administrative enforcement actions, four preliminary injunction actions, one temporary restraining order action, and 19 consent agreements (10 merger cases and 9 nonmerger cases). In addition, FTC investigations led to five abandoned mergers. The agency has engaged in numerous non-enforcement initiatives as well - exploring various markets and business practices, studying the intersection of antitrust with other areas of law, providing guidance to lawyers and the business community on antitrust compliance, advocating the application of competitive principles, improving and streamlining its own procedures, and cooperating with competition agencies around the world.
Nonmerger Enforcement - According to the report, during 2002, the staff opened 59 new nonmerger investigations. Key areas of concern included standard-setting cases such as Rambus and Unocal; professional association cases such as those involving the American Institute for the Conservation of Historic and Artistic Works and the National Academy of Arbitrators; state boards; exceptions to and immunities from antitrust laws; and health care and prescription drugs.
Merger Enforcement - Merger enforcement remained prominent during 2002, the report notes, despite decreased merger activity and implementation of the Hart-Scott-Rodino (HSR) Act amendments that lowered the number of reported mergers. The FTC brought several merger enforcement actions against firms in the key industries of health care (Cytyc/Digene, Amgen/Immunex, Baxter/Wyeth, Quest/Unilab), energy, and food (Wal-Mart/Supermercados Amigo, Kroger/Raley's, Nestle/Dreyer's, Vlasic/Claussen); authorized the staff to seek preliminary injunctions to block four mergers and authorized the staff to seek a temporary restraining order to stop a merger in a fifth case; accepted consent agreements in 10 merger cases; and FTC investigations also resulted in the abandonment of five other mergers.
Addressing the FTC's consumer protection mission, the report notes that the agency's activities regarding current issues of importance to consumers, include identity theft, telemarketing fraud, Internet fraud, and credit reporting. The Commission employs tools such as its complaint databases, Consumer Sentinel, which contains over one million fraud complaints and is available to more than 650 enforcement agencies across the United States, Canada, and Australia, to keep abreast of consumer experiences in the marketplace; Internet surfs to single out the most serious online fraud and deception; and workshops, hearings, and conferences to advance the public policy debate. The FTC strives: to identify the most egregious fraud and deception; to enforce the law acting alone and with other government authorities; and to educate the agency about emerging issues, industry about complying with the law, and consumers about how to protect themselves from fraud and deception.
Law Enforcement Targeting Fraud - Drawing on data from Consumer Sentinel and Internet surfs, the FTC has brought 120 cases targeting fraud and deception since April 2002. In the past year, the FTC obtained more than 55 judgments ordering more than $650 million in consumer redress. In addition, the FTC is awaiting court approval of its settlement with The Associates First Capital Corp. and its successor, Citigroup, which requires the defendant to pay $215 million to consumers to resolve deceptive lending practices allegations. Key areas of consumer protection litigation have included deceptive billing in the "Miss Cleo" psychic services, in which the defendants forgave an estimated $500 million in outstanding consumer charges; deceptive lending schemes by Mercantile Mortgage, The Associates/Citigroup and First Alliance Mortgage, which returned more than $375 million to consumers; a host of cases targeting deceptive claims for dietary supplements, cosmetics, devices and services; international pyramid schemes; advance-fee credit schemes; and deceptive charitable telemarketing.
Privacy Enforcement - The report notes that the FTC continued its aggressive enforcement of existing laws to protect consumer privacy. It has brought 47 law enforcement actions targeting deceptive spam, half of them since 2002; eight cases to enforce the Children's Online Privacy Rule, including settlements with Mrs. Fields Cookies and Hershey Foods Corporation which yielded $100,000 and $85,000 respectively, and represent the biggest COPPA penalties awarded to date; three cases targeting companies that allegedly collected extensive personal information from millions of high school students and sold it to commercial marketers, despite promising that the information would be used only for education-related service providers; two cases for violations of the Fair Credit Reporting Act and the Fair Debt Collection Practices Act; and settlements with the Microsoft Corporation and Eli Lilly and Company for misrepresenting their privacy and security policies.
Privacy Rulemaking - In the past year, the FTC implemented rules in two areas to enhance and protect consumer privacy. Through amendments to the Telemarketing Sales Rule, the agency created a National Do Not Call Registry to allow consumers to limit the number and type of unwanted telemarketing calls. Finalization of the Gramm-Leach-Bliley Safeguards Rule, establishes standards for financial institutions to maintain the security of consumers' financial information.
As detailed in the report, the past year has continued and extended FTC efforts to support the formulation of competition policy through hearings, workshops, studies and reports.
The report notes that the FTC also acts as an advocate when it cannot use its enforcement authority to challenge competitive restraints. The FTC provided comments to the North Carolina and Georgia Bar Associations, the Alabama Supreme Court, state legislatures in New York and Hawaii, the Environmental Protection Agency, the Federal Energy Regulatory Commission and the Connecticut Attorney General's Office.
To advance understanding of marketplace developments and issues, the agency conducts workshops and studies and publishes its findings in reports. In the past year, the FTC has conducted a weight-loss advertising workshop and issued a staff report, "Weight-Loss Advertising: An Analysis of Current Trends;" a cross-border fraud workshop with participation from Australia, Canada, Germany, the United Kingdom, the Organization for Economic Cooperation and Development, and the International Consumer Protection and Enforcement Network; a report on food advertising, "Advertising Nutrition & Health: Evidence from Food Advertising 1997-1997"; an information security workshop; a report on marketing violent entertainment to children; and a research roundtable, "Economic Perspectives on the Home Mortgage Market."
The agency lends its expertise to other government agencies and intervenes in court proceedings when important issues affecting consumers are at stake, the report says. In the past year, the FTC has appeared as a friend of the court in three private class action law suits and filed comments with the Food and Drug Administration and the Department of Housing and Urban Development.
The report notes that consumer and business education continued to be a significant part of the FTC's positive agenda, and through publications, Web sites, media outreach, partnerships and exhibits, the agency reached millions of consumers and business people. In the past year, the FTC distributed more than 6.2 million publications in English and more than 126,000 in Spanish. The FTC logged more than 11.8 million accesses to English-language publications on its Web sites and more than 207,000 accesses to the Spanish-language publications.
The report states that the FTC works more and more with other nations to protect American consumers, who can be harmed by both anticompetitive conduct and frauds that are perpetrated beyond water's edge. For example, it worked with the European Commission (EC) and Canadian Competition Bureau to review the likely effects of the Bayer/Aventis CropScience merger. Similarly, the agency worked with the EC and the United Kingdom's Office of Fair Trading and Competition Commission regarding Carnival's bid for P&O Princess Cruises and Royal Caribbean's competing bid.
The FTC participates in various multilateral competition fora that further international cooperation and convergence. In 2001, in coordination with 16 agencies including the Department of Justice, the FTC founded the International Competition Network to provide a venue for antitrust officials worldwide to achieve consensus on proposals for procedural and substantive convergence on best practices in antitrust enforcement and policy. The organization's membership has now grown to 77 agencies from 67 jurisdictions. The FTC also participates in the OECD and during the past year has participated in OECD work on merger process convergence, regulatory reform, and examination of the issues at the trade and competition intersection.