The FTC is back to business after officials attended the annual ABA Antitrust Spring Meeting held in Washington, DC. Standing on the fundamental principles of antitrust, the FTC has issued orders protecting competition in the market of innovative cancer technology. The FTC has also been busy on the consumer protection front, issuing a flurry of orders, remarks, and letters regarding review hijacking, robocalls, right to repair, chargeback deception, franchise agreements, and online marketing. In addition, Commissioners Khan and Bedoya gave speeches about hot topics in competition, and the Supreme Court issued a decision making it easier to challenge the constitutionality of agency proceedings. These stories and more after the jump.
Monday, March 27, 2023
Bureau of Consumer Protection: Anti-Doping and Medication Control Rule
- The FTC approved the Anti-Doping and Medication Control Rule ("ADMC") proposed by the Horseracing Integrity and Safety Authority following a public comment period. Under the Horseracing Integrity and Safety Act of 2020, 15 U.S.C. §§ 3051–3060, which took effect last year, the Horseracing Integrity and Safety Authority ("HISA") is a self-regulatory nonprofit organization charged with developing proposed rules subject to FTC approval. The FTC must approve a proposed rule if it is consistent with the FTC Act and procedural rules. The FTC found that many of the public comments in opposition to the ADMC were unrelated to the the FTC's statutory criteria and had "little bearing on the Commission's decision." The Commission also rejected procedural concerns that the HISA failed to submit all of the initial rules required by the Horseracing Integrity and Safety Act for public comment simultaneously. The ADMC proposes a framework to establish an Equine ADMC Protocol by penalizing the improper administration of prohibited substances and prohibited procedures to certain covered horses. The protocol is to be implemented and enforced by the HISA and state racing commissions acting under delegated authority. The ADMC defines personal liability and procedures for horses that test positive for an ADMC violation.
Wednesday, March 29, 2023
FTC Operations: House Judiciary Subcommittee Testimony
- Jeanne Bumpus, Director of the Office of Congressional Relations, testified before the House Judiciary Subcommittee on Responsiveness and Accountability to Oversight on the responses the FTC has provided to the Subcommittee since the beginning of the current legislation session on the FTC's Notice of Proposed Rulemaking on Non-Compete Clauses in employment contracts. Director Bumpus reported that the FTC has answered the questions posed by Chairman Jordan and has produced approximately 1,400 pages of documents pursuant to the Subcommittee's document requests. The Commission is in the process of responding the Subcommittee's March 10, 2023 request for documents connected to Elon Musk's purchase of Twitter and any FTC investigation of the company.
Thursday, March 30, 2023
Bureau of Consumer Protection: Made in USA Labeling Rule
- The FTC announced that it is sending nearly $45,000 in payments to consumers who purchased DreamCloud mattresses sold by Resident Home, LLC. In October 2021, the Commission filed a complaint against Resident Home and its owner, Ran Reske for violating the Made in USA Labeling Rule for allegedly claiming that their mattresses were "proudly made with 100% USA-made premium quality materials." According to the Complaint, the Commission alleged DreamCloud mattresses were finished overseas and that some were wholly imported or made of significantly imported materials. Under the June 2022 decision and order, Resident Home and Reske were to pay $753,000 in civil penalties and were prohibited from making qualified or unqualified deceptive claims in the future concerning their products. FTC records show that this is the first refund mailed to consumers under the order, with 29 recipients receiving a median $1,518 refund.
Bureau of Competition: Digital Markets Act (DMA)
- The FTC, Justice Department's Antitrust Division, and European Commission held the third meeting of the U.S.-EU Joint Technology Competition Policy Dialogue ("TCPD") in Washington, D.C. The discussions focused on (1) the reasons mergers between digital players may lead to competition concerns, (2) abuse of dominance and monopolization in the digital sector, and (3) evolving business strategies of big tech companies. FTC Chair Lina Khan, Attorney General Jonathan Kanter, and Executive Vice President Margrethe Vestager met in person on March 30th, and the agencies announced that the FTC and the Brussels Antitrust Division will each send an official agency expert liaison to assist with implementation of the Digital Markets Act ("DMA").
Monday, April 3, 2023
Bureau of Competition
- reversed an Administrative Law Judge's dismissal of antitrust charges against Illumina, Inc, ordering the DNA sequencing provider to divest Grail, Inc., a producer of multi-cancer early detection (MCED) tests. GRAIL makes non-invasive, early detection liquid biopsy tests that can screen for multiple types of cancer in asymptomatic patients, using DNA sequencing. Illumina is currently the dominant producer of next-generation sequencing platforms, which are used to analyze the blood samples drawn from MCED tests. Illumina acquired Grail in the name of efficiency and in hopes of yielding results that save lives. The Commission concluded the acquisition would likely diminish innovation in the U.S. market for research, development, and commercialization of MCED tests while increasing prices and decreasing choice and quality of tests. Respondents will have a chance to petition for review of the order in a federal Court of Appeals.
Friday, April 7, 2023
Bureau of Consumer Protection
- The DOJ filed an order and civil penalty judgment on behalf of the FTC against funeral service companies- Funeral & Cremation Group of North America, LLC, and Legacy Cremation Services, LLC (doing business as Heritage Cremation Provider, Evergreen Funeral Home and Crematory, and Carolina Central Crematory)- and Anthony Joseph Damiano, owner of the companies. The order follows an April 22 joint complaint, alleging the companies misrepresented their location, advertised deceptively low prices, threatened and failed to return cremated remains to bereaved consumers, and failed to provide disclosures required by the Funeral Rule. The defendants agreed to post price lists online, fully disclose all third-party provider, and pay $275,000 in civil penalties.
Monday, April 10, 2023
Bureau of Consumer Protection: Review Hijacking
- In a unanimous 4-0 vote, the FTC approved a final consent order against The Bountiful Company based upon a complaint filed in February 2023. As previously reported in this blog, this is the first action by the agency in relation to "review hijacking" where a marketer steals or repurposes reviews of an established product to boost sales of new products. Under the final order, Bountiful must pay $600,000 in monetary relief for consumers and prohibits the company from using similar deceptive review tactics in the future.
FTC Operations: Commissioner Bedoya Remarks
- Commissioner Bedoya delivered prepared remarks before the Utah Project on Antitrust and Consumer Protection. Entitled "Aiming at Dollars, Not Men," the remarks focused on the interaction between the antitrust laws and labor organizing, both historically and currently. Mr. Bedoya outlined the history of the Sherman Act, and how it was not intended to target organizing workers, but nevertheless was quickly used against unions and organizers because it lacked an explicit labor exemption. Mr. Bedoya provided additional examples, the most recent being a Sherman Act lawsuit against striking horse jockeys in Puerto Rico in 2016, and reiterated his point that Congress likely intended for its antitrust laws to be aimed at large trusts, not at organizing laborers.
Tuesday, April 11, 2023
Bureau of Consumer Protection: Robocalls
- In an effort to stop illegal overseas robocalls, the Commission has implemented Project Point of No Entry, in which warning letters or cease and desist letters are sent to Voice over Internet Protocol ("VoIP") service providers who are alleged to have transmitted illegal call traffic. The letters contain call logs with links to associated robocall recordings identified via tracebacks. The letters advise each company to immediately cease any illegal robocall activity or risk running afoul of the FTC ACT and the FTC's Telemarketing Sales Rule. Thus far, the Project has resulted in 22 of 24 VoIP providers significantly reducing or stopping the flow of illegal robocalls entering the U.S. from their networks.
Bureau of Consumer Protection: Right to Repair
- Dan Salsburg, the Chief Counsel for Development and Innovation in the Bureau of Consumer Protection, testified before the California State Senate about SB-244, a "right to repair" bill under consideration. Mr. Salsburg's remarks highlighted the FTC's May 2021 "Nixing the Fix" report, which evaluated manufacturer practices that restrict the ability of consumers and repair shops to fix items. Mr. Salsburg noted that some of the restrictions in the report were addressed by SB-244, and so he devoted the bulk of his remarks to rebutting manufacturers' justifications for those restrictions. He first asserted that there is scant evidence to support concerns about the safety of repairs conducted by repair shops and owners, and added that there is no empirical evidence to suggest that an independent repair shop is more likely to misuse a customer's data than an authorized repair shop. Mr. Salsburg concluded his remarks by noting that the FTC would be happy to continue to work with California legislators on this issue.
Wednesday, April 12, 2023
Bureau of Consumer Protection: Fraudulent Chargeback Services
- The FTC and the State of Florida have sued Chargebacks911 and its co-founders Gary Cardone and Monica Eaton for impeding consumers trying to dispute credit card charges. The complaint brings counts under the Florida Deceptive and Unfair Trade Practices Act and Section 5(a) of the FTC Act, including unfairly injuring consumers by (1) submitting misleading chargeback documentation in connection with disputing consumer chargeback requests and (2) administering a microtransaction service that artificially lowered a merchant's overall chargeback rate. In other words, Chargebacks911 allegedly sent screenshots to credit card companies to purportedly show that the consumer had agreed to the disputed charges. These activities are alleged to have caused numerous consumers to be denied a chargeback of a disputed transaction. The FTC and Florida AG request a permanent injunction to prevent future similar activity, and monetary relief and civil penalties.
Thursday, April 13, 2023
Bureau of Consumer Protection: Request for Comment on Franchise Agreements
- At the request of several interested parties, the Commission has extended the deadline to submit public comments on its Request for Information on franchise agreements and franchisor business practices from May 9, 2023 to June 8, 2023. Instructions for filing comments can be found at this link.
Bureau of Consumer Protection: Online Marketing
- The FTC submitted Notices of Penalty Offenses to approximately 670 companies marketing over-the-counter drugs, homeopathic products, dietary supplements, and functional foods. The notices, which are not meant to serve as indication that a company has done anything wrong, advise each company that it must adequately substantiate claims related to its products. Failure to have such support could mean that the claim is deceptive or unfair. Commissioner Slaughter issued a statement joined by Chair Khan and Commissioner Bedoya highlighting the principles animating the substantiation requirement, and how unreliable health claims distort the health-product market. Commissioner Slaughter referenced the Supreme Court's AMG decision and noted that, while the FTC cannot relitigate that case, "we cannot accept the argument that the FTC should ignore or accept these kinds of unlawful schemes to protect an ever-narrowing scope of our authority by deploying it only against 'hardcore criminals.'" Departed Commissioner Wilson issued a dissenting statement noting that the process of using a Notice to obtain civil penalties is too complex and uncertain for substantiation cases.
Bureau of Competition: Chair Khan Remarks on Noncompete Agreements
- At the Small Business Majority Event on Non-Compete Agreements, Chair Khan delivered prepared remarks about the FTC's own efforts to help small businesses participate fairly in the marketplace. Chair Khan highlighted the FTC's own proposed rule to ban employers from imposing noncompete clauses in employment contracts with workers, and noted the agency has received thousands of comments. She opined that noncompete agreements cut off a worker's main alternative employment options and are a significant burden on the economy. She added that noncompetes harm innovation, entrepreneurship, and new business formation. As an example, she outlined a recent case against two manufacturers in the glass container industry to show how their noncompete agreements locked up highly specialized workers in a concentrated industry. The Small Business Majority issued a statement in support of the FTC's efforts to enact the rule. The deadline to submit comments occurred on April 19, 2023.
Friday, April 14, 2023
Supreme Court Ruling on Ability to Challenge FTC
- The Supreme Court issued a unanimous decision in Axon Enterprise, Inc. v. FTC. The Court ruled that constitutional challenges to the agency could be brought directly in federal court without first having to go through the FTC's in-house proceedings. In the case heard by the Court, the FTC had brought an enforcement action against Axon, a manufacturer of police equipment, alleging that Axon's acquisition of its closest competitor violated the FTC Act. Axon bypassed the FTC's internal process and sued in federal court, asserting that the FTC's internal process was unconstitutional on multiple grounds. The district court dismissed the case for lack of jurisdiction. In the Axon decision, Justice Kagan made it clear that the court was not resolving Axon's constitutional challenges. Rather, the Court's task "is to decide where they may be heard," and the Court ruled that a district court should be able to review Axon's challenge that "the structure, or even existence, of an agency violates the Constitution." Such claims, per the Court, "cannot receive meaningful judicial review through the FTC Act" and are outside the FTC's sphere of expertise. The case is reversed and remanded to the Arizona district court for further proceedings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.