On December 17, 2012, Federal Trade Commission Chairman Jon Leibowitz announced that the Director of the FTC’s Bureau of Consumer Protection will leave at the end of the year. David C. Vladeck will leave the position and return to the Georgetown University Law Center faculty community. Charles A. Harwood will serve as Acting Director of the Bureau of Consumer Protection. Leibowitz also announced that Executive Director Eileen Harrington will also leave at year’s end, and the Acting Executive Director position is to be filled by Pat Bak
On September 4, the FTC filed comments in response to the Federal Communications Commission ("FCC") Notice of Inquiry regarding development of a National Broadband Plan that will seek to ensure that every American has access to broadband capability. In its comments, the FTC states that the FCC should take into consideration the FTC’s two primary missions – promoting competition and protecting consumers in the marketplace.
On April 18, 2008, the Federal Trade Commission (“FTC”) filed a comment with the Federal Energy Regulatory Commission (“FERC”) regarding an earlier notice of proposed rulemaking (“NOPR”) that sought to provide consumers incentives to reduce power use. FERC proposed to provide consumers with incentives to reduce power use when electricity is scarce and expensive at the wholesale level.
On February 13, 2008, the Federal Trade Commission filed a complaint in federal district court against Pennsylvania-based pharmaceutical company Cephalon. The complaint charged that Cephalon engaged in a course of anticompetitive conduct that is preventing competition to its branded drug – Provigil. In 2007, U.S. sales of Provigil totaled more than $800 million and accounted for over 46% of Cephalon’s total sales. Based on such figures, the FTC alleged, it was obvious why Cephalon considered the prospect of generic drug competition to be a serious threat to its profitability.
The Federal Trade Commission stopped a father, his two sons, and their network of companies from deceptively selling a healthcare business opportunity with false promises of earning up to a million dollars in profits. In addition, the FTC halted their sale of an herbal tea product, marketed with claims that it could prevent, treat, or cure a number of diseases, including AIDS, diabetes, cancer, arthritis, strokes, and heart disease. The defendants will turn over all of their frozen assets to settle the FTC’s charges.
On June 21, a federal court stopped an operation that allegedly victimized Spanish-speaking consumers nationwide by posing as debt collectors seeking payments consumers did not owe.
From 2003 to 2005 the defendants had been allegedly selling an English-language instruction course, “Inglés con Ritmo,” advertised on Spanish-language television and the defendants’ Web sites, www.tonorecords.com and www.tonomusic.com, stating that it was free due to government or non-profit subsidies. Inquiring consumers were told that a shipping and handling fee of $100 to $169 applied. Since 2006, the complaint states, the defendants, posing as third-party debt collectors, told consumers they owed money, typically $900, and repeatedly called them, even though the evidence shows that they owe no money.
On June 12, the FTC asked the court to halt the deceptive practices and misrepresentations and to freeze the BurnLounge’s assets, pending a trial, to preserve them for consumer redress. On June 6, 2007, the FTC filed a complaint in the U.S. District Court for the Central District of California against BurnLounge, Inc. The complaint charged that BurnLounge held an illegal pyramid scheme by selling opportunities to operate on-line digital music stores. The FTC is seeking a permanent halt to the illegal pyramid practices as well as other illegal practices alleged in the complaint.
On May 31, the FTC asserts that public agencies can help reduce the incidence and impact of identity theft. The FTC, in a discussion with the Ohio Privacy and Public Records Access Study Committee in Columbus, also affirms that government agencies should limit the amount of information they collect, restrict access to the information, and implement procedures to respond to data breaches.
On May 15, the FTC banned Elliot Krasnow from ever promoting or selling franchises or business opportunities ever again. Along with his company Netvertise, Inc, Krasnow returned $160,000 to consumers after the FTC charged that they used bogus earnings claims to lure franchisees into buying their Web services businesses, and failed to tell customers that the owner was under a previous FTC order for deceptively promoting rare coins.
On May 8, the FTC banned a scammer from telemarketing and from selling any type of business program in the future. Richard C. Neiswonger, who boasted that consumers could earn a six-figure income if they purchased and used his $10,000 asset protection service business program, had previously been previously charged with falsely claiming that consumers would make a substantial income. Neiswonger had failed to disclose that his company’s references were paid for favorable reviews. An FTC order entered in 1997 barred those deceptive practices, but the scammer has violated the order by using the same deceptive business practices in his most recent scheme. In addition, he failed to disclose significant facts to consumers, especially his time spent in federal prison for money laundering and wire fraud – a violation of the FTC order.
On April 27, the FTC settled charges against two companies for unfair and deceptive rebate practices. The FTC’s complaint against Soyo, Inc., a Nevada corporation, alleges that most of Soyo’s rebates were delivered late – in some cases, consumers had to wait a year or longer for their checks to arrive. The FTC’s complaint against the InPhonic, a Delaware corporation, alleges that, in connection with its advertised rebate offers, among other things, the company failed to provide promised documents needed to obtain rebates, to send out rebate checks in the time promised, and to disclose adequately certain material terms and conditions prior to purchase. The settlements bar the companies from similar violations in the future and require them to pay outstanding rebates to affected consumers.
On April 24, the FTC mailed out an additional 1,500 claim forms for reimbursement to consumers who may have been victims of identity theft due to alleged security lapses at data broker ChoicePoint, Inc.
In December, 2006, the FTC mailed claim forms to 1,400 consumers.
In 2005, ChoicePoint, which compiles and sells personal information, announced that it had sold information about many consumers to people who turned out to be identity thieves. The FTC, after some investigation found this to be the case. In the settlement between the FTC and ChoicePoint the company was required to pay $5 million to be used to reimburse consumers for expenses due to identity theft caused by ChoicePoint’s security breach.
On March 12, Kmart Corporation agreed to settle FTC’s charges that it engaged in deceptive practices in advertising and selling its Kmart gift card. Kmart will implement a refund program and publicize it on its Web site. This is the agency’s first law enforcement action involving gift cards.
According to the FTC’s complaint, Kmart promoted the card as equivalent to cash but failed to disclose that fees are assessed after two years of non-use, and misrepresented that the card would never expire. Kmart has agreed to disclose the fees prominently in future advertising and on the front of the gift card.
On February 28, Nicholas C. Albert, an affiliate Webmaster who used the allure of “free” music downloads to spread malicious computer code, is settling FTC charges he violated federal law. The defendant, who was paid to distribute the code by the company that developed it, will give up all of his ill-gotten gains and is permanently bared him from interfering with consumers’ computer use, including distributing software code that tracks consumers’ Internet activity or collects other personal information, changes their preferred homepage or other browser settings, inserts new toolbars onto their browsers, installs dialer programs, inserts advertising hyperlinks into third-party Web pages, or installs other advertising software. He is also prohibited from making false or misleading representations; prohibited from distributing advertising software and spyware; and is required to perform substantial due diligence and monitoring if he is to participate in any affiliate program. Albert will also give up his ill-gotten gains – $3,300.
On February 2, a Canadian telemarketer that falsely claimed it could reduce U.S. consumers’ credit card rates, was stopped by a federal court.
The FTC’s complaint alleges that the defendants have sold credit card interest rate reduction services since December 2005, claiming affiliation with consumers’ credit card companies. The defendants promise to effect credit card rates between 4.75 percent and 9 percent, thus saving consumers at least $2,500, and that if consumers do not save that amount their money will be refunded. The complaint also alleges that the defendants engaged in Caller ID spoofing, causing consumers’ caller identification services to display telephone numbers that do not belong to the defendants, but rather to innocent victims whose telephone numbers are misappropriated.
The defendants sent consumers promotional materials with promises to reduce their interest rates, and a “financial profile form” that the consumers had to mail back for $675 plus $20 for shipping and handling. The form asks consumers to list their current balance, credit limit, interest rate, and suggested minimum payment for each of their credit card and other debts, as well as their social security number and other personal information.
On January 8th, a payment processor violated federal law when it debited, or tried to debit, more than $9.9 million from consumers’ bank accounts – at $139 each – without their approval. According to a complaint the FTC filed in federal court, Nevada-based InterBill Ltd. acted on behalf of a fraudulent enterprise known as “Pharmacycards.com.” In 2004 the FTC charged Pharmacycards with debiting millions of dollars from consumers’ checking accounts, without their consent, for nonexistent discount pharmacy cards.
Federal Trade Commission Reaches New Year’s Resolutions with Four Major Weight-Control Pill Marketers
The FTC filed complaints on January 4th, in four separate cases alleging that weight-loss and weight-control claims were not supported by competent and reliable scientific evidence. Marketers of the four products –Xenadrine EFX, CortiSlim, TrimSpa, and One-A-Day WeightSmart –settled with the FTC, surrendered cash and other assets worth at least $25 million, and agreed to limit their future advertising claims.
On December 29, the Federal Trade Commission announced its decision to challenge the conduct of several organizations representing more than 2,900 independent Chicago-area physicians for agreeing to fix prices and for refusing to deal with certain health plans except on collectively determined terms. The FTC’s complaint charges that the actions of Advocate Health Partners (“AHP”) and other related parties unreasonably restrained competition in violation of Section 5 of the FTC Act. The consent order settling the FTC’s charges prohibit the respondents from engaging in such anticompetitive conduct in the future.
At the request of the Federal Trade Commission, on December 20, a federal court shut down a payment processing operation that allegedly helped fraudulent telemarketers take millions of dollars from consumers’ bank accounts. According to the FTC’s complaint, since at least January 2003 the operation has aided at least nine Canada-based, advance-fee credit card schemes that induce consumers to allow an electronic debit of several hundred dollars from their bank account in exchange for an unsecured credit card; but consumers never receive a credit card or, at best, they receive a “benefits package” containing relatively worthless items.
On December 14, operators who promised Spanish-speaking consumers “designer” merchandise but delivered knock-offs and outdated electronics will give up approximately $235,000 to settle FTC charges that their scam violated federal laws including the Do Not Call Rule. The telemarketers called Spanish-speaking customers, telling them they had been selected to get a valuable “prize,” such as a laptop or digital video camera.
On November 28, a Florida business and its owner, who marketed purported height-enhancing pills for kids and young adults, agreed to pay $375,000 to settle charges that their advertising claims were deceptive. The Federal Trade Commission charged the defendants with making false and unsubstantiated claims for HeightMax, as well as for two other supplements, Liposan Ultra Chitosan Fat Blocker and Osteo-Vite.
On November 16, Guidance Software Inc. agreed to settle Federal Trade Commission charges that its failure to take reasonable security measures to protect sensitive customer data contradicted security promises made on its Web site and violated federal law. According to the FTC, Guidance’s data-security failure allowed hackers to access sensitive credit card information for thousands of consumers. The settlement will require the company to implement a comprehensive information-security program and obtain audits by an independent third-party security professional every other year for 10 years.
Federal Trade Commission Chairman Deborah Platt Majoras announced on November 14 that Mary Beth Richards will join the agency as Deputy Director of the Bureau of Consumer Protection. Richards comes to the FTC from the Federal Communications Commission, where she served as Deputy Bureau Chief and Chief of Staff in the Consumer and Governmental Affairs Bureau.
On November 13, a U.S. District Court shut down an operation that secretly downloaded multiple malevolent software programs, including spyware, onto millions of computers without consumers’ consent, degrading their computers’ performance, spying on them, and exposing them to a barrage of disruptive advertisements. The Federal Trade Commission asked the court to order a permanent halt to these deceptive and unfair downloads, and to order the outfit to give up its ill-gotten gains.
A company that sent unsolicited commercial e-mail after consumers asked it to stop agreed to pay a $50,717 civil penalty on November 6 to settle Federal Trade Commission charges that it violated federal law. The FTC charged Yesmail Inc., doing business as @Once Corporation, with sending e-mail on behalf of its clients more than 10 business days after recipients asked it to stop.
On November 3, Zango, Inc., formerly known as 180solutions, Inc., one of the world’s largest distributors of adware, and two principals agreed to settle Federal Trade Commission charges that they used unfair and deceptive methods to download adware and obstruct consumers from removing it, in violation of federal law. The settlement bars future downloads of Zango’s adware without consumers’ consent, requires Zango to provide a way for consumers to remove the adware, and requires them to give up $3 million in ill-gotten gains.
On October 5, an Internet business that advertised and sold consumers’ phone records and records of credit card accounts to third parties agreed to settle Federal Trade Commission charges that it violated federal law. The settlement bars the defendants from obtaining or selling consumers’ confidential phone and credit account records unless authorized by law or court order’ and requires that they give up the money they made selling phone records in the past.
The Federal Trade Commission (“FTC”) sent letters on September 27, 2006 to 166 advertisers and 77 media outlets warning them that their advertisements targeting Hispanics are potentially deceptive. The ads were spotted during a one-day surf of Spanish-language newspaper, magazine, Internet, radio, and television advertisements by 60 partners around the United States and Latin America, coordinated by the FTC.
On September 20, 2006, the federal district court in Chicago ruled for the Federal Trade Commission (“FTC”) in its case against the marketers of the Q-Ray ionized bracelet following a bench trial earlier this summer. In a decision issued September 8, the court found that advertising by Que Te (Andrew) Park and his companies was false and misleading in representing that the bracelet provides immediate, significant, and/or complete pain relief, and that scientific tests proved that it relieves pain.
The Federal Trade Commission (“FTC”) brought a permanent halt on September 14, 2006 to four illegal spamming operations – including one that offered the opportunity to “date lonely wives” and two that hijacked the computers of unwitting third parties and used them to pelt consumers with graphic sexually explicit e-mail. The FTC charged the operators with sending spam that violated provisions of the CAN-SPAM Act, and halted the illegal spamming.
On September 11, 2006, a federal judge ordered a magazine subscription seller to pay a civil penalty of more than $5.4 million and give up more than $1.6 million of his ill-gotten gains for violating a 1996 Federal Trade Commission (“FTC”) consent order and the FTC’s Telemarketing Sales Rule (“TSR”). This amount is the largest civil penalty the FTC ever obtained for a violation of a consent order in a consumer protection matter.
Social networking Web site operators Xanga.com, Inc. and its principals, Marc Ginsburg and John Hiler, will pay a $1 million civil penalty for allegedly violating the Children’s Online Privacy Protection Act (“COPPA”), and its implementing Rule, under the terms of a settlement with the Federal Trade Commission (“FTC” or “Commission”) announced on September 7, 2006. According to the FTC, Xanga.com collected, used, and disclosed personal information from children under the age of 13 without first notifying parents and obtaining their consent. The penalty is the largest ever assessed by the FTC for a COPPA violation, and is more than twice the next largest penalty.
It was announced on September 6, 2006 that an operation placing spyware on consumers’ computers in violation of federal laws will give up more than $2 million to settle Federal Trade Commission (“FTC”) charges. Under a stipulated final judgment and order, the defendants are permanently prohibited from interfering with a consumer’s computer use, including but not limited to distributing software code that tracks consumers’ Internet activity or collects other personal information, changes their preferred homepage or other browser settings, inserts new advertising toolbars or other frames onto their browsers, installs dialer programs, inserts advertising hyperlinks into third-party Web pages, or installs other advertising software code, file, or content on consumers’ computers.
On August 22, the manufacturer of a magnetic “fuel saving” and emissions-reduction device that did not save fuel or reduce emissions will pay $4.2 million to settle Federal Trade Commission (“FTC”) charges that his advertising claims were false. The FTC will seek to provide redress to consumers who bought the device based on the false advertising claims. In addition, the defendants will be banned from selling or manufacturing magnetic fuel savings and emissions reduction devices.
The Federal Trade Commission filed a complaint on August 15 in U.S. district court, seeking to halt an operation that downloads software barraging consumers with pop-ups demanding payment to make the pop-ups go away. The Office of the Attorney General of the State of Washington also sued the operators.
The Federal Trade Commission (“FTC”) announced on August 10 that it entered into a court settlement with Nomrah Records, Inc. and its president, Mark Harmon – named defendants in the recent DIRECTV telemarketing case. Under the settlement, filed by the U.S. Department of Justice on the FTC’s behalf, Harmon will pay a $75,000 civil penalty and both he and the company will be barred from violating the Do Not Call (“DNC”) Rule and Telemarketing Sales Rule (“TSR”) in the future.
An operation selling Chinese herbal supplements was banned on August 9 from claiming its products treated or cured diseases, to settle Federal Trade Commission (“FTC”) charges it violated a previous court order. The FTC alleged the sellers of Dia-Cope, a pill claimed to prevent, treat, and cure diabetes, violated the order by misrepresenting the health benefits of their product and misrepresenting that clinical trials proved their claims. The defendants will also give up their ill-gotten gains – all of the assets they received from the sale of Dia-Cope.
The FTC and the Federal Reserve Board on August 7 issued a joint report to Congress on compliance with the consumer dispute provisions of the Fair Credit Reporting Act (“FCRA”). The Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”), which generally amends the FCRA, required the FTC and the Board to conduct a study of the extent to which consumer reporting agencies and furnishers of information to consumer reporting agencies (“CRAs”) complied with certain FCRA requirements.
A company and its owner selling contact lenses directly to consumers via three Web sites are settling Federal Trade Commission (“Commission” or “FTC”) charges they violated federal law by failing to verify consumers’ prescriptions as required by the Commission’s Contact Lens Rule. They will pay $40,000 in civil penalties and will be prohibited from violating the Rule in the future.
The Federal Trade Commission will host three days of public hearings to examine how evolving technology will shape and change the habits, opportunities and challenges of consumers and businesses in the coming decade. The event will bring together experts from business, government and technology sectors, consumer advocates, academicians, and law enforcement officials to examine emerging technologies and to explore technologies that are currently evolving.
On July 31, the U.S. District Court for the Northern District of Georgia barred a purported former preacher, his two sons, and his companies from selling a healthcare business opportunity promising consumers millions of dollars if they participated in an alleged network of Medicaid providers. In fact, according to the Federal Trade Commission (“FTC”) complaint, the defendants’ business model required participants to break numerous state and federal laws.
Canadian telemarketers settled Federal Trade Commission (“FTC”) charges on July 26 that they fraudulently marketed and sold credit card loss protection and healthcare discount plans to U.S. consumers in violation of federal law. Their telemarketing boiler rooms were shut down, and they will pay $200,000 in consumer redress as part of the settlement.
On July 25, the Federal Trade Commission (“FTC” or “Commission”) told the Subcommittee on Housing and Community Opportunity of the House Financial Services Committee that changes in the real estate industry, which increasingly incorporate the Internet into their business models, give consumers “the choice to save potentially thousands of dollars in commissions in exchange for taking on more work.” Maureen Ohlhausen, Director of the FTC’s Office of Policy Planning told the Committee that the Commission has a long history of preventing unfair methods of competition and ensuring that real estate markets remain competitive.
FTC Releases Report on its “Investigation of Gasoline Price Manipulation and Post-Katrina Gasoline Price Increases”
On May 22, the Federal Trade Commission today issued a report entitled “Investigation of Gasoline Price Manipulation and Post-Katrina Gasoline Price Increases.” The report details the results of an intensive, Congressionally-mandated Commission investigation into whether gasoline prices nationwide were “artificially manipulated by reducing refinery capacity or by any other form of market manipulation or price gouging practices” and into gasoline pricing by refiners, large wholesalers, and retailers in the aftermath of Hurricane Katrina.
On April 28, the Federal Trade Commission (“Commission”) authorized the staffs of the Bureau of Consumer Protection, Bureau of Economics and the Office of Policy Planning to file comments with the U.S. Food and Drug Administration (“FDA”) concerning the FDA’s recently issued draft guidance for industry and agency staff on labeling statements about the whole grain content of food products. The 2005 Dietary Guidelines for Americans, issued by the FDA and the Department of Health and Human Services (“HHS”), include a new and greater emphasis on whole grains as a way to reduce the risk of chronic diseases and manage weight. For the first time, they also contain a specific recommendation that people consume three or more ounce-equivalents of whole grain products per day. U.S. Department of Agriculture consumption data suggests, however, that Americans are falling far short of these dietary recommendations.
On April 28, the Federal Trade Commission approved the publication of a notice of proposed rulemaking in the Federal Register that would amend the Telemarketing Sales Rule to revise the fees charged for industry access to the National Do Not Call Registry. The FTC is currently accepting comments on these proposed fee changes. Under the proposed new fee structure, the annual fee for each area code of data accessed would become $62, and the maximum amount charged to entities accessing 280 area codes or more would become $17,050.
The FTC announced on April 19 it joined its foreign partners in calling for stepped up cross-border law enforcement cooperation and increased public/private sector cooperation to combat spam. The Organization for Economic Cooperation and Development (“OECD”) issued recommendations in this area on the same day. To date, the FTC already implemented many of the OECD recommendations. For example, it engages in aggressive law enforcement against international spammers; works with an international network of spam enforcement authorities; partners with the private sector on consumer education; and, encourages the private sector to implement domain-level authentication systems.
On April 18, two companies and their owner, who were charged with selling bogus bartender and mystery shopper certification programs, were banned for life from telemarketing. The owner also will pay $115,000 and turn over his Porsche convertible to settle the Commission’s charges. The owner, Stevan P. Todorovic, is a repeat-offender who also is under a court order from October 2001, following FTC charges that he deceptively sold auction information guides. The defendants placed “help wanted” ads in local newspapers seeking bartender trainees and mystery shoppers. When job-seekers responded to the advertisements, the defendants’ telemarketers represented that positions were available, but only for those consumers who had been “certified” by defendants as bartenders or mystery shoppers. The defendants led consumers to believe that upon being “certified,” they would receive concrete information on available job openings. Yet after charging consumers between $58.90 and $98.90 for their at-home certification programs, the defendants provided consumers with only general lists of potential employers that are available elsewhere at no cost, which often had never heard of the defendants and attached no significance whatsoever to their “certifications.”