International Monthly: February 2020

FTC To Examine Past Acquisitions by Large Technology Firms

The FTC issued Special Orders to five large technology firms – Alphabet, Inc. (including Google), Amazon, Apple, Facebook, and Microsoft – requiring them to provide information about transactions that each consummated from 2010 to 2019.  The Commission issued the orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct studies.  They will help the FTC understand these firms’ acquisition activity and whether large technology firms are making potentially anticompetitive acquisitions of nascent or potential competitors that fall below merger notification thresholds, and therefore are not subject to prenotification to the antitrust authorities.  The Commission also seeks to learn more about how small firms perform after acquisition by large technology firms.

The FTC filed a complaint in federal court against Vyera Pharmaceuticals, LLC and others, alleging an anticompetitive scheme to preserve a monopoly for Daraprim.  The complaint, filed jointly with the New York State Office of the Attorney General, alleges that when Vyera acquired Daraprim, it immediately raised the list price from $17.50 to $750 per tablet.  The complaint alleges that Vyera, knowing that the increase would attract generic competition, impeded would-be generic entrants with restrictive agreements that blocked competitors’ access to samples necessary to conduct FDA-mandated equivalence tests, and to data relevant to the generic entrant’s assessment of the market.  The complaint asserts that consumers and other purchasers of Daraprim likely would have saved millions of dollars by purchasing generic versions of the drug, but that as a result of the defendants’ anticompetitive conduct, there is no generic version on the market currently.

Razor Manufacturer Abandons Proposed Acquisition of Disruptive Rival After FTC Sues To Block Merger

Edgewell Personal Care Company announced that it has terminated its merger agreement with Harry’s, Inc. after the FTC authorized staff of the Bureau of Competition to file suit to enjoin Edgewell’s proposed $1.37 billion acquisition of its key competitor.  The complaint alleged that the proposed combination would have eliminated Harry’s as an independent competitor, thereby removing a critical disruptive rival that has driven down prices and spurred innovation in an industry previously dominated by two main suppliers, one of which was the acquirer.

A court has granted the FTC’s request to preliminarily halt a scheme in which the defendants operated hundreds of websites that promised a quick and easy government service, such as renewing a driver’s license, or eligibility determinations for public benefits.  The defendants include foreign companies that operate the scheme’s call center and web development offices in Costa Rica and Uruguay, respectively, and serve as offshore asset holding companies in Bahamas, Belize, and Nevis.  Following an evidentiary hearing, the court held that the FTC was likely to prevail in proving that “the websites were patently misleading.”  The FTC’s filings in the case allege that consumers provided their information because they believed the websites would actually provide these services.  Instead, consumers received only a PDF containing publicly available, general information about the service they sought.  The complaint alleges that defendants have received millions of dollars from selling the personal data they collected from consumers through deceptive marketing.

The operators of a website that compares student loans, personal loans, and credit cards have agreed to settle FTC allegations that they misled consumers by providing higher rankings, higher positions on ratings tables, and inflated star ratings to companies that paid for placement.  Specifically, the defendants misrepresented that the information on its website was not affected by compensation from advertisers.  The FTC also alleged the company touted fake positive reviews of its services on its own website and on third-party review platforms.  “LendEDU told consumers that its financial product rankings were based on objective and unbiased information about the quality of the product being offered, but in fact LendEDU sold its rankings to the highest bidder,” said Andrew Smith, Director of the Bureau of Consumer Protection.  “These misrepresentations undermine consumer trust, and we will hold lead generators like LendEDU accountable for their false promises of objectivity.”  The proposed settlement puts court-enforceable provisions in place to address the company’s deceptive practices and includes a financial remedy.

A company that provides security and investigative services, including background check services, has agreed to settle FTC allegations that the firm misrepresented its participation in and compliance with the EU-U.S. Privacy Shield framework, which enables companies to transfer consumer data legally from European Union countries to the United States.  In a complaint, the FTC alleges that New York-based T&M Protection Resources, LLC continued to claim participation in the EU-U.S. Privacy Shield after its certification lapsed.  In addition, the company failed to verify annually that statements about its Privacy Shield practices were accurate and failed to affirm that it would continue to apply Privacy Shield protections to personal information collected while participating in the program.

New data released by the FTC shows that FTC actions led to more than $232 million in refunds to consumers in 2019.  A new data site also provides detailed refund data, broken down by case, amounts paid, and date.  In addition, the site maps out refunds paid to consumers in other countries.  Between July 2018 and the present, the FTC paid $4.5 million to more than 33,000 consumers outside the United States.

The newly released data also shows that in 2019 the FTC received 3.2 million reports to its Consumer Sentinel Network.  In addition to taking consumer reports directly from people who call the FTC’s call center or report online, Sentinel also includes reports filed with federal, state, local, and foreign law enforcement agencies as well as other organizations.  The top complaint categories were identity theft, imposter scams, telephone and mobile services, online shopping, and credit bureaus.

A new study by the FTC shows that fake check scams led to reported individual median losses of nearly $2,000 – losses far higher than for any other of the top ten scams reported to the FTC.  According to the study, consumers in their twenties are more than twice as likely as people 30 and older to report losing money to these scams.  Complaints about fake check scams are up 65 percent since 2015.  Fake check scammers send consumers a check that looks real, with a request to send some of the money to a third party.  When a consumer deposits the check, the money initially shows up in their bank account, making it seem as though the check was real.  The consumer then sends the money on, as instructed by the scammer.  Eventually, the consumer’s bank discovers the check was fake and removes the full amount from the account. 

The FTC is seeking public comment on whether to make changes to its Endorsement Guides.  The Guides, formally entitled the Guides Concerning the Use of Endorsements and Testimonials in Advertising, first enacted in 1980 and amended in 2009, provide guidance to businesses and others to ensure that advertising using endorsements or testimonials abide by the FTC Act.  Among other things, the Guides state that when there is a connection between an endorser and a seller of an advertised product that could affect the weight or credibility of the endorsement, the connection must be clearly and conspicuously disclosed.

FTC Submits Annual Budget Request, Performance Plan, and Performance Report to Congress

The FTC submitted to Congress its Fiscal Year 2021 budget request, in support of the President’s FY 2021 budget for the federal government.  The Commission vote to submit the budget request, performance plan, and performance report to Congress was 4-1, with Commissioner Slaughter dissenting  and issuing a separate statement.  The FTC also published its Fiscal Year 2018-2022 Strategic Plan, which is the FTC’s roadmap of goals, objectives, and strategies that will guide the agency’s work over the next four years.