Antitrust Lawyer Blog

December 7, 2006

FTC Provides Senate Testimony on Sports Programming and Cable Distribution

The Federal Trade Commission’s Bureau of Economics Director Michael Salinger testified on December 7 before the U.S. Senate Committee on the Judiciary about the FTC’s January 2006 closure of its investigation into the proposed acquisition by Comcast Corporation and Time Warner Cable Inc. (“TWC”) of the cable assets of Adephia Communications Corporation (“Adelphia”).

Salinger explained the work of the agency that went into the investigation, how the transaction was structured, and why the Commission decided to close the case without taking antitrust enforcement action. In the course of the investigation, according to the testimony, the FTC staff gathered significant evidence on the workings of sports programming markets, as well as each of the relevant geographic markets affected by the transaction. In each of these markets, the staff reviewed whether TWC or Comcast would be able to enter into exclusionary sports programming contracts, whether such contracts would be a viable strategy from the perspective of the sports team itself, and whether exclusive contracts would be profitable for TWC or Comcast.

“After careful consideration, the staff concluded for various reasons that the evidence did not indicate that the proposed transaction was likely to make exclusive contracts profitable for either Comcast or TWC in the geographic markets impacted by the transaction,” the testimony continued.

November 28, 2006

FTC Targets Bogus Claims for Pill Advertised to Make Kids Taller

by Doyle, Barlow & Mazard PLLC

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.

The operation advertised HeightMax dietary supplements in English and Spanish on the Internet and radio. Ads also appeared in the back pages of magazines such as Newsweek, Rolling Stone, and Maxim. The FTC complaint charged that claims for the pills were unsubstantiated or false and that the defendants invented William Thomson, a supposed expert who appeared in the ads. According to the complaint, the ads for HeightMax Concentrate and HeightMax Plus misrepresented that:

HeightMax increases height in users ages 12-25 over what they would achieve without the product;

November 28, 2006

Court Allows Department of Justice Antitrust Lawsuit Against National Association of Realtors to Proceed

by Doyle, Barlow & Mazard PLLC

On November 28, 2006, the U.S. District Court in Chicago issued a 29-page opinion allowing the Department of Justice’s antitrust lawsuit against the National Association of Realtors (“NAR”) to proceed. The court rejected NAR’s argument that last-minute changes to its policies prevented judicial scrutiny. In denying NAR’s motion to dismiss the case, the district court stated in its opinion that “NAR has failed, with all respect, to demonstrate that this case should be dismissed at the outset.”

Background

In September 2005, the Antitrust Division filed a lawsuit challenging that NAR rules limit competition from real estate brokers who use the Internet to serve their customers. In its lawsuit, the Department alleges that NAR’s policy prevents consumers from receiving the full benefits of competition and threatens to lock in outmoded business models and to discourage discounting.

November 27, 2006

Cablevision Challenges FCC’s Integration Ban

by Doyle, Barlow & Mazard PLLC

In a November 27 filing with the FCC, Cablevision Systems (“Cablevision”) said the agency’s rule banning set-top boxes with integrated security functions should not require the operator to deploy CableCARD-based boxes because all of its digital set-tops already contain removable smart cards. In the filing, Cablevision requested a limited waiver of the July 1, 2007, integration ban because the company, “alone among the nation’s cable operators, already has deployed set-top boxes that use separable, removable security on smart cards.”

Cablevision “seeks either a clarification that navigation devices with separate security on removable smart cards are not ‘integrated devices’ for purposes of the integration ban or a waiver that will allow such devices to continue to be placed into service after July 1, 2007,” it said in the filing with the FCC. The FCC’s rule requires new set-top boxes deployed by cable operators as of July 1 to separate the functions for accessing TV services. The cable industry continues to lobby against the ban, drawing support this week from three Republican congressional leaders. The ban, enacted via the 1996 Telecommunications Act, is supposed to ensure that third-party consumer-electronics devices work within cable operators’ networks – using the Cable Television Laboratories-developed CableCARD hardware – by requiring cable operators to use the same standards themselves. Cablevision said it uses proprietary removable smart cards, developed with NDS Group (“NDS”), for security functions in all of its approximately 6 million digital set-top boxes in New York, New Jersey and Connecticut systems.

The NDS-developed smart cards, which look like credit cards, can also plug into a Cablevision-supplied CableCARD. That card can, in turn, be inserted into the CableCARD slot on any CableCARD-ready device, according to Cablevision. As of the second quarter of 2006, more than 12,000 customers were using Cablevision-supplied CableCARDs, the company claimed. Cablevision said that permitting it to meet the requirement of the integration ban by continuing to deploy smart-card-capable boxes “will not affect Cablevision’s continued support of CableCARDs for third-party, CableCARD-ready [consumer-electronics] devices and will not adversely impact customers’ experience with such CableCARDs.” The filing was signed by Michael Olsen, Cablevision’s vice president of legal and regulatory affairs, and was certified by James Blackley, the operator’s senior VP of corporate engineering and technology.

November 16, 2006

Guidance Software Inc. Settles FTC Charges

by Doyle, Barlow & Mazard PLLC

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.
Guidance sells software and related training, materials, and services customers use to investigate and respond to computer breaches and other security incidents. According to the FTC complaint, Guidance failed to implement simple, inexpensive and readily available security measures to protect consumers’ data. In contrast to claims about data security made on Guidance’s Web site, the company created unnecessary risks to credit card information by permanently storing it in clear readable text. In addition, the complaint alleges that Guidance failed to protect the information by:

November 16, 2006

Senate Votes to Confirm Chairman Martin to Second Term

by Doyle, Barlow & Mazard PLLC

On November 16, the Senate voted unanimously to confirm FCC chairman Kevin Martin to a second five-year term, according to the office of Senate Commerce Committee chairman Ted Stevens (R-Alaska). Martin was nominated by President George W. Bush to a Republican seat on the Commission and sworn in on July 3, 2001. Bush named him chairman on March 18, 2005.
For more information contact:

Olev Jaakson at ojaakson@dbmlawgroup.com.

November 14, 2006

Mary Beth Richards Appointed Deputy Director of the FTC’s Bureau of Consumer Protection

by Doyle, Barlow & Mazard PLLC

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.

During her 23 years at the FCC, Richards served as Deputy Chief in the Enforcement Bureau, Special Counsel to the Chairman, Deputy Chief of the Common Carrier Bureau, Chief of the Enforcement Division of the Common Carrier Bureau, Deputy Managing Director of the FCC, and Special Counsel to the Commission for Reinventing Government. In many of these positions, she worked with FTC staff on a variety of consumer protection issues.

Richards received numerous honors for her outstanding service, including the FCC’s Award for Distinguished Service (Gold Medal) and its Chairman’s Award for Outstanding Service. She was named as a Presidential Meritorious Executive in 1995.

November 14, 2006

Commission approves merger of Gaz de France and Suez, subject to conditions

by Doyle, Barlow & Mazard PLLC

On November 14, the European Commission approved the merger of Gaz de France (“GDF”) and the Suez group. After an in-depth investigation, the Commission initially found that the deal would have anticompetitive effects in the gas and electricity wholesale and retail markets in Belgium and in the gas markets in France. The Commission’s concerns related mainly to the removal of the increasing competitive pressure that GDF and Suez had so far exerted (and would have exerted in the foreseeable future) on each other in both Belgium and France. Given the conditions on the markets, including the very high barriers to entry, their respective dominant positions would have been considerably strengthened by the merger.

In response to these concerns, the parties offered extensive remedies including the divestiture of Distrigaz and SPE and Suez relinquishing its control of Belgian network operator Fluxys. In light of these structural remedies, the Commission concluded that the merger would not significantly impede competition in the European Economic Area or any substantial part of it.

Gaz de France is active in the gas sector at all levels, in electricity generation, electricity retail, and in energy services. It operates throughout Europe, but mainly in France and Belgium. In Belgium, Gaz de France, along with Centrica, has joint control over SPE, the second biggest player in the Belgian electricity and gas markets.

November 13, 2006

Court Shuts Down Media Motor Spyware Operation

by Doyle, Barlow & Mazard PLLC

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.

The FTC charged ERG Ventures, LLC and one of its affiliates with tricking consumers into downloading malevolent software by hiding the Media Motor program within seemingly innocuous free software, including screensavers and video files. Once downloaded, the Media Motor program silently activated itself and downloaded “malware” – software that is intrusive, disruptive, and makes it difficult for consumers to use their computers. Among other effects, the malware installed by the Media Motor program:

• changes consumers’ home pages;

November 10, 2006

Qualcomm may face probe from Japanese. Inquiry likely to involve antitrust complaints

by Doyle, Barlow & Mazard PLLC

Wireless technology giant Qualcomm said on November 10 that the Japan Fair Trade Commission might investigate the company’s licensing and business practices. The antitrust regulatory agency notified the company that it might launch an investigation. The agency did not give a start date or disclose which company or companies filed complaints.

If Japan’s Fair Trade Commission does investigate, it is likely to involve many of the same antitrust complaints already being probed in the United States, Europe and South Korea. Qualcomm President Steve Altman said the company will cooperate in any investigation to show that its activities in Japan are lawful and foster competition.

Qualcomm is best-known for developing the code-division multiple access (“DMA”) wireless technology for cell phones. The company collects royalties and licensing fees on its patented technology from cell-phone makers and other chip makers. In addition, Qualcomm’s chips for CDMA phones dominate the market.