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Commission Announces Workshop to Explore How Fraud Affects Different Communities

The Federal Trade Commission will host a workshop entitled “Fraud Affects Every Community” on Oct. 29, 2014, in Washington to examine how fraud affects groups including older adults, servicemembers and veterans, low-income communities, and African-Americans, Latinos, Asians, and Native Americans.

The FTC’s law enforcement experience, input from consumer advocates, and survey research reveal that some broadly-targeted frauds – such as telemarketing fraud, debt-relief services, phony opportunities to earn income, and unauthorized billing schemes – are more likely to affect certain communities. Meanwhile, some scams target specific populations – such as service-members shopping for cars, or people seeking help with the immigration process.

This workshop will examine the marketplace experiences of people in these communities, identify areas of concern in different communities, and seek to find actionable remedies through cooperation, law enforcement, industry fraud-prevention initiatives, community outreach and education. The event will bring together consumer advocates, state and federal regulators, fraud prevention experts, academics and researchers to discuss the issues. Its findings will enhance the FTC’s ongoing efforts to fight fraud in the marketplace in every community.

The workshop will address the following issues:

What are the top consumer protection concerns in each community?
What types of fraud are most prevalent in each community?
What are the different experiences consumers have on the Internet?
What interventions by consumer groups, industry, or academics have been and could be successful to prevent fraud?

Individuals who are interested in speaking at the workshop can email [email protected] with information about any relevant experience in this area by Sept. 24, 2014. The workshop, which is free and open to the public, will be held at the FTC’s Headquarters location at 600 Pennsylvania Avenue, NW, Washington, DC 20580.

The Commission will publish a more detailed agenda at a later date.

Reasonable accommodations for people with disabilities are available upon request. Requests should be submitted to Lara Kittleson via email at [email protected] or by calling 202-326-3388. Requests should be made in advance, and include a detailed description of the accommodations needed and contact information.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

Pass It On: New FTC Education Campaign Encourages Older Consumers to Share Their Knowledge to Help Fight Fraud

The Federal Trade Commission’s newest education campaign, Pass It On, encourages older adults to help raise awareness about fraud by talking to their family, friends, and neighbors about avoiding common scams.

Pass it On resources take a new approach to current consumer protection issues that affect all consumers, including identity theft, paying too much for bills, and scams involving imposters, fundraising, prizes and lotteries, and health care. They offer short and direct reminders of the signs of scams, suggest tools to start a conversation, and encourage older consumers to pass the information on.

“Older people not only have a lot of experience and expertise to share, but they’re also trusted and respected sources of information within their social networks,” said Carolyn Shanoff, associate director, FTC’s Division of Consumer and Business Education. “Pass It On is based on the concept that older people are part of the solution to the problem, not just the victims of scammers.”

While consumers of all ages are targets for scams, the consequences often are more severe for older people, many of whom have no way recoup their losses.

Agency staff is reaching out to libraries, social and civic clubs, senior centers, adult living communities, and veteran’s facilities to share the new resources.

The campaign includes fact sheets, bookmarks, word games, presentations, and a new video that describes how consumers can start a conversation about spotting fraud.

Visit Pass It On online to download or order free materials. The site is also available in Spanish: Pásalo.

Liquidity Coverage Ratio:

FIL-46-2014
September 9, 2014

Liquidity Coverage Ratio:

Final Rule

Summary:

The Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve System (the agencies) are issuing a final rule that implements a quantitative liquidity requirement consistent with the liquidity coverage ratio (LCR) established by the Basel Committee on Banking Supervision. The requirement is designed to improve the liquidity risk profile of international banking organizations and to strengthen the measurement and management of liquidity risk.

Statement of Applicability to Institutions with Total Assets Under $1 Billion: This Financial Institution Letter is not applicable to depository institutions with total assets of less than $1 billion.

Highlights:

The final rule:

Establishes a quantitative requirement of liquid assets (liquidity buffer) that covered companies must hold to meet a defined level of liquidity stress.
Provides a method to measure liquidity stress by applying a series of shocks, with prescribed run-off and inflow rates, against a bank’s assets, obligations, and other funding sources.
Requires at least 60 percent of the liquidity buffer of covered companies to consist of the most liquid assets (Level 1 liquid assets).
Provides enhanced information about liquidity risk to managers and supervisors, allowing for more effective oversight and supervision of liquidity risk and appropriate supervisory responses.
Requires covered companies to notify their primary federal regulator when the LCR drops below 100 percent and develop a remediation plan if the shortfall persists.
Establishes a phase-in period, requiring covered companies to comply with a minimum LCR of 80 percent as of January 1, 2015; 90 percent as of January 1, 2016; and 100 percent thereafter.

Green Coffee Bean Manufacturer Settles FTC Charges of Pushing its Product Based on Results of “Seriously Flawed” Weight-Loss Study

A Texas-based company, Applied Food Sciences, Inc. (AFS), has settled Federal Trade Commission charges that it used the results of a flawed study to make baseless weight-loss claims about its green coffee extract to retailers, who repeated those claims in marketing finished products to consumers.

The FTC complaint alleges the study was so hopelessly flawed that no reliable conclusions could be drawn from it. The flawed study, which purported to show that the product causes “substantial weight and fat loss,” was later touted on The Dr. Oz Show.

The FTC’s settlement with Applied Food Sciences, Inc. (AFS), which sells a green coffee ingredient used in dietary supplements and foods, requires the company to pay $3.5 million, and to have scientific substantiation for any future weight-loss claims it makes, including at least two adequate and well-controlled human clinical tests.

“Applied Food Sciences knew or should have known that this botched study didn’t prove anything,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “In publicizing the results, it helped fuel the green coffee phenomenon.”

According to the FTC’s complaint, in 2010, Austin, Texas-based AFS paid researchers in India to conduct a clinical trial on overweight adults to test whether Green Coffee Antioxidant (GCA), a dietary supplement containing green coffee extract, reduced body weight and body fat.

The FTC charges that the study’s lead investigator repeatedly altered the weights and other key measurements of the subjects, changed the length of the trial, and misstated which subjects were taking the placebo or GCA during the trial. When the lead investigator was unable to get the study published, the FTC says that AFS hired researchers Joe Vinson and Bryan Burnham at the University of Scranton to rewrite it. Despite receiving conflicting data, Vinson, Burnham, and AFS never verified the authenticity of the information used in the study, according to the complaint.

Despite the study’s flaws, AFS used it to falsely claim that GCA caused consumers to lose 17.7 pounds, 10.5 percent of body weight, and 16 percent of body fat with or without diet and exercise, in 22 weeks, the complaint alleges.

Although AFS played no part in featuring its study on The Dr. Oz Show, it took advantage of the publicity afterwards by issuing a press release highlighting the show. The release claimed that study subjects lost weight “without diet or exercise,” even though subjects in the study were instructed to restrict their diet and increase their exercise, the FTC contends.

The proposed order settling the FTC’s charges bars AFS from misrepresenting any aspect of a test or study related to the products it sells, and prohibits the company from providing anyone else with the means of falsely advertising, labeling, promoting, or using purported substantiation material in marketing their own products.

The order further requires AFS to notify trade customers of the FTC’s conclusion that the company lacked reasonable scientific support for the weight-loss and fat-loss claims it made. Finally, the proposed order requires AFS to pay $3.5 million.

Information for Consumers

The FTC advises consumers to carefully evaluate advertising claims for weight-loss products. For more information, see the FTC’s guidance for consumers of products and services advertised for Weight Loss & Fitness.

The Commission vote authorizing the staff to file the complaint and proposed stipulated final order was 5-0. The complaint and order were filed in the U.S. District Court for the Western District of Texas, Austin Division. The proposed order is subject to court approval.

The FTC is a member of the National Prevention Council, which provides coordination and leadership at the federal level regarding prevention, wellness, and health promotion practices. The National Prevention Strategy, released June 16, 2011, aims to guide our nation in the most effective and achievable means for improving health and well-being. This case advances the National Prevention Strategy’s goal of increasing the number of Americans who are healthy at every stage of life.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated orders have the force of law when approved and signed by the District Court judge.

Judge Issues Order to Jail Two Dietary Supplement Sellers for Contempt

A federal district judge in Atlanta has issued an order finding that two dietary supplement marketers failed to comply with a previous court order that required them to recall purported weight-loss products that they deceptively pitched to consumers.

The current order, issued on September 2, requires Jared Wheat and Stephen Smith to be jailed until they comply with the recall requirements. Both Wheat and Smith have surrendered.

The defendants, who ran an operation known as Hi-Tech Pharmaceuticals, Inc., continued to deceptively market weight-loss products in violation of a 2008 federal court order, with unsubstantiated claims such as “rapid fat loss,” “fat burner,” “thermogenic,” and “curbs the appetite.” Earlier this year, the FTC received a $40 million judgment in the case – one of the largest ever against a dietary supplement manufacturer.

Specifically, in order to be released from jail, Wheat and Smith must: 1) ensure that the products are not available for purchase from retail stores; 2) send out a proper recall notice for each product; 3) ensure the recall notice has been distributed to all retailers and anyone else associated with the products; and 4) ensure that links to the recall notices are prominently displayed on each page of the company’s website.

In issuing the order, the judge wrote: “The continued availability of the violative products in retail stores is not surprising considering the lack of effort by the defendants to comply with the court’s order to effectuate a complete recall. Despite [their] assurance to the contrary, a recall was and is necessary to protect consumers.”

A summary of the FTC’s ongoing case against Wheat and the other Hi-Tech defendants is provided in a press release the Commission issued last month, in anticipation of the court’s most recent ruling.

This case is part of the FTC’s ongoing efforts to protect consumers from misleading advertising. The order determining the sanctions against Hi-Tech Pharmaceuticals, Inc.; Jared Wheat, Stephen Smith, and Dr. Terrell Mark Wright was issued by the U.S. District Court for the Northern District of Georgia, Atlanta Division, on May 15, 2014.

The FTC is a member of the National Prevention Council, which provides coordination and leadership at the federal level regarding prevention, wellness, and health promotion practices. This case advances the National Prevention Strategy’s goal of increasing the number of Americans who are health at every stage of life.

FTC Sues Pharmaceutical Companies for Illegally Blocking Consumer Access to Lower-Cost Versions of the Blockbuster Drug AndroGel

Note: A conference call for media with FTC Chairwoman Edith Ramirez will occur as follows:

Date: Sept. 8, 2014
Time: 1:00 p.m. ET

Call-in lines, which are for media only, will open 15 minutes prior to the start of the call. Chairwoman Ramirez and FTC staff will be available to take questions from the media about the case.

In its latest action to ensure competition in the nation’s healthcare markets, the Federal Trade Commission has filed a complaint in federal district court charging several major pharmaceutical companies with illegally blocking American consumers’ access to lower-cost versions of the blockbuster drug AndroGel.

The FTC’s complaint alleges that AbbVie Inc. and its partner Besins Healthcare Inc. filed baseless patent infringement lawsuits against potential generic competitors to delay the introduction of lower-priced versions of the testosterone replacement drug AndroGel. While the lawsuits were pending, AbbVie then entered into an anticompetitive pay-for-delay settlement agreement with Teva Pharmaceuticals USA, Inc. to further delay generic drug competition.

“The FTC is acting today to stop anticompetitive conduct by AbbVie, Besins Healthcare and Teva which has forced consumers to overpay hundreds of millions for the drug AndroGel,” said FTC Chairwoman Edith Ramirez. “This action also reinforces the Commission’s longstanding commitment to protect American consumers from collusive arrangements between branded and generic pharmaceutical companies that inflate the prices of prescription drugs and harm competition.”

Today’s complaint follows a long line of cases the FTC has brought to stop anticompetitive conduct in the pharmaceutical industry.

The FTC is seeking a court judgment declaring that the defendants’ conduct violates the FTC Act, ordering the companies to disgorge their ill-gotten gains, and permanently barring them from engaging in similar anticompetitive behavior in the future.

AndroGel is a topical pharmaceutical gel product approved for testosterone replacement therapy in men with low testosterone. It has annual U.S. sales of more than $1 billion.

The FTC’s lawsuit centers on two main allegations of anticompetitive conduct:

AbbVie and Besins filed baseless patent infringement lawsuits against generic drug marketers Teva and Perrigo Company to delay FDA approval of a generic version of AndroGel and extend the monopoly profits for the branded version. The complaint charges AbbVie and Besins with monopolization.
After countersuing AbbVie and Besins and alleging that the infringement suit was baseless, Teva subsequently accepted illegal payments from AbbVie to drop its patent challenge and refrain from bringing its competing testosterone gel product to market. The complaint charges AbbVie and Teva with illegally restraining trade.

At issue in the alleged sham patent infringement suit is an ingredient in branded AndroGel, called isopropyl myristate or IPM. IPM is known as a “penetration enhancer” because it speeds the delivery of the drug’s active ingredient, testosterone, through the skin and into the bloodstream. The patent on branded AndroGel covers only a formulation using IPM as the penetration enhancer, according to the FTC complaint.

Although Teva and Perrigo developed testosterone gel products that did not contain IPM and used different penetration enhancers than AndroGel, AbbVie and Besins sued Teva and Perrigo for patent infringement. Under federal law, these lawsuits triggered an automatic 30-month stay of the FDA’s authority to approve Teva’s and Perrigo’s applications to market their testosterone gel products, regardless of the merits of the infringement claims.

The FTC alleges that AbbVie and Besins had no reasonable basis to contend that Teva’s and Perrigo’s penetration enhancers were equivalent to IPM and therefore covered by the narrow AndroGel formulation patent. AbbVie and Besins had in fact surrendered any claim to those penetration enhancers in gaining patent approval for AndroGel from the Patent and Trademark Office.

Thus, as alleged in the FTC complaint, the actual motivation for filing the infringement suits was to extend the large profits AbbVie and Besins were making from AndroGel sales in the U.S. market, at the expense of consumers and competition.

And, as further noted in the FTC complaint, AbbVie’s predecessor company publicly declined to bring the same suit against Perrigo just two years earlier, when Perrigo first sought FDA approval of its generic AndroGel product.

When AbbVie and Besins sued Teva, Teva asserted an antitrust counterclaim that the infringement suit constituted sham litigation. But, according to the FTC’s complaint, Teva subsequently recognized that it would be more profitable to reach an agreement with AbbVie to share the monopoly profits from AndroGel than to compete.

Under the agreement, Teva abandoned its countersuit and agreed to refrain from launching its lower-cost AndroGel alternative until a specified date, according to the complaint. In exchange, AbbVie paid its potential rival in the form of an authorized generic deal for an unrelated product – a cholesterol drug called Tricor, with annual U.S. sales of more than $1 billion in 2011– that was highly profitable for Teva, but made no independent business sense for AbbVie.

Overall, this anticompetitive conduct blocked competition from both Teva’s and Perrigo’s lower-cost substitutes for brand-name AndroGel and preserved AbbVie’s and Besins’s AndroGel monopoly for a substantial period of time.

The complaint also names AbbVie’s predecessor company, Abbott Laboratories, and its wholly owned subsidiary, Unimed Pharmaceuticals, LLC, as defendants in the case.

The Commission vote to file the complaint was 3-2, with Commissioners Maureen K. Ohlhausen and Joshua D. Wright dissenting. It was filed under seal in the U.S. District Court for the Eastern District of Pennsylvania on September 8, 2014. A redacted version was made public.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

In Phoebe Putney Hospital Merger Case, FTC Rejects Proposed Consent Agreement; Parties to Return to Litigation

The Federal Trade Commission rejected a proposed settlement agreement with Phoebe Putney Health System, Inc., and returned the matter to administrative court to assess whether Phoebe’s 2011 merger with rival hospital Palmyra Park Hospital, Inc. in Albany, Georgia violated the antitrust laws.

“We’ve argued all along that this merger would create a monopoly in Albany that would harm consumers and employers in the region,” said Deborah Feinstein, Director of the FTC’s Bureau of Competition. “Meaningful structural relief is needed to restore competition to this marketplace.”

The FTC’s 2011 complaint challenging the merger of Phoebe and Palmyra Park alleged that it would significantly reduce competition in the market for acute-care hospital services sold to commercial health plans in the six-county area surrounding Albany, Georgia – raising prices, harming patients and their employers, and giving the new hospital a market share of more than 85 percent.

Because Phoebe Putney is owned by the Hospital Authority of Albany-Dougherty County, which is organized and exists under Georgia’s Hospital Authorities Law, the parties argued that the transaction was exempt from federal antitrust scrutiny under the so-called “state action” doctrine. However, in February 2013, the U.S. Supreme Court unanimously reversed the Eleventh Circuit Court of Appeals, which had previously affirmed the district court’s determination, and ruled that the merger was not exempt from antitrust scrutiny.

Despite the favorable Supreme Court decision, it initially appeared that, even if the transaction were ultimately deemed illegal after a trial and appeals, a structural remedy requiring Phoebe Putney to divest the Palmyra assets was precluded by Georgia Certificate of Need laws. Believing that meaningful structural relief was unavailable, the FTC accepted for public comment a proposed settlement with non-structural relief last year.

As the Commission explained in its statement, based on public comments received, as well as other information, it now appears that Georgia’s CON laws may not, in fact, preclude structural relief. The Commission therefore voted to withdraw its acceptance of the proposed consent agreement and return the matter to administrative litigation.

The Commission vote to file the administrative complaint was 3-0-2, with Commissioners Joshua D. Wright and Terrell McSweeny not participating.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.

FTC Approves Sales of Airport Car Rental Assets in Portland, Oregon and San Jose, California

Following a public comment period, the Federal Trade Commission has approved an application submitted by Franchise Services of North America, Inc. (FSNA) to sell two former Advantage Rent A Car airport rental car concessions, neither of which is currently operating. FSNA will sell assets located in Portland, Oregon to Avis Budget Group, and assets located in San Jose, California to Sixt Rent-A-Car.

FSNA acquired the locations from Hertz Global Holdings, Inc. under a 2012 FTC settlement that required Hertz to sell its Advantage rental car business, also doing business as Simply Wheelz LLC, and other assets to a Commission-approved buyer to resolve charges that its proposed $2.3 billion acquisition of Dollar Thrifty Automotive Group, Inc. would have been anticompetitive. Under the terms of the settlement, if FSNA sells any of the divested assets within three years, Commission approval is required.

The Commission vote approving the final order was 3-0-2, with Commissioners Joshua D. Wright and Terrell McSweeny not participating. (FTC File No. C4376; the staff contact is Daniel P. Ducore, Bureau of Competition, 202-326-2526.)

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Approves Final Order Preserving Competition in Four Generic Drug Markets

Following a public comment period, the Federal Trade Commission has approved a final order settling charges that Actavis plc’s acquisition of Forest Laboratories, Inc. would likely be anticompetitive.

Under the order, first announced in June 2014, the companies have agreed to relinquish their current rights to market generic diltiazem hydrochloride extended release capsules (AB4), which are used to treat hypertension and chronic stable angina; generic ursodiol tablets used to treat primary biliary cirrhosis of the liver; and generic propranolol hydrochloride extended release capsules used to treat hypertension. The companies also will relinquish future marketing rights for generic lamotrigine orally disintegrating tablets, which are used to treat seizures.

The Commission vote approving the final order was 5-0. (FTC File No. 1410098; the staff contact is Christine L. Tasso, Bureau of Competition, 202-326-2232)

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20001. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

Google to Refund Consumers at Least $19 Million to Settle FTC Complaint It Unlawfully Billed Parents for Children’s Unauthorized In-App Charges

Note: A conference call for media with FTC Chairwoman Edith Ramirez will occur as follows:

Date: Sept. 4, 2014
Time: 1:30 p.m. ET
Call-in lines, which are for media only, will open 15 minutes prior to the start of the call. Chairwoman Ramirez and FTC staff will be available to take questions from the media about the case.

Google Inc. has agreed to settle a Federal Trade Commission complaint alleging that it unfairly billed consumers for millions of dollars in unauthorized charges incurred by children using mobile apps downloaded from the Google Play app store for use on Android mobile devices. Under the terms of the settlement, Google will provide full refunds – with a minimum payment of $19 million – to consumers who were charged for kids’ purchases without authorization of the account holder. Google has also agreed to modify its billing practices to ensure that it obtains express, informed consent from consumers before charging them for items sold in mobile apps.

The Commission’s complaint against Google alleges that since 2011, Google violated the FTC Act’s prohibition on “unfair” commercial practices by billing consumers for charges by children made within kids’ apps downloaded from the Google Play store. Many consumers reported hundreds of dollars of such unauthorized charges, according to the complaint.

The FTC infographic 'Keeping Up With Kids' Apps', which includes information on 4 things your kids' apps might do but might not tell you, and what you can do at the online app store, on your couch, and on your phone or tablet.

Keeping Up With Kids’ Apps infographic – click to view full-size.

“For millions of American families, smartphones and tablets have become a part of their daily lives,” said FTC Chairwoman Edith Ramirez. “As more Americans embrace mobile technology, it’s vital to remind companies that time-tested consumer protections still apply, including that consumers should not be charged for purchases they did not authorize.”

This marks the Commission’s third case concerning unauthorized in-app charges by children. In January, the Commission announced a settlement with Apple Inc., requiring Apple to provide full refunds to consumers who were billed for unauthorized charges by children – paying a minimum amount of $32.5 million – and obtain express, informed consent for in-app charges. And in July, the Commission filed a complaint in federal court against Amazon.com, Inc., similarly seeking full refunds for consumers and an order requiring informed consent for in-app charges.

In-app charges are a component of many apps available from Google Play and can range from 99 cents to $200. In many apps used by children, users are invited to accumulate virtual items that help them advance in the game, though as the FTC’s complaint notes, the lines between virtual money purchases and real money purchases can be blurred. The FTC’s complaint alleges that Google billed consumers for many such charges by children without obtaining account holders’ authorization, leaving consumers holding the bill.

When Google first introduced in-app charges to the Google Play store in 2011, the complaint alleges, Google billed for such charges without any password requirement or other method to obtain account holder authorization. Children could incur in-app charges simply by clicking on popup boxes within the app as they used it.

According to the complaint, in mid- to late 2012, Google began presenting a pop-up box that asked for the account holder’s password before billing in-app charges. The new pop-up, however, did not contain any information about the charge. Google also did not inform consumers that entering the password opened up a 30-minute window in which a password was no longer required, allowing children to rack up unlimited charges during that time.

During this time, many thousands of consumers complained to Google about children making unauthorized in-app charges, according to the complaint. Some parents noted that their children had spent hundreds of dollars in in-app charges without their consent. Others noted that children buying virtual in-game items with real money were unaware they were causing their parents to be billed.

Google employees referred to the issue as “friendly fraud” and “family fraud” in describing kids’ unauthorized in-app charges as a leading source of refund requests, according to the complaint. The complaint further alleges that Google’s practice has been to refer consumers seeking refunds first to the app developer.

The settlement will require Google to provide full refunds of unauthorized in-app charges incurred by children and to modify its billing practices to obtain express, informed consent from consumers before billing them for in-app charges. If the company gets consumers’ consent for future charges, consumers must have the option to withdraw their consent at any time.

The settlement requires Google to contact all consumers who placed an in-app charge to inform them of the refund process for unauthorized in-app charges by children within 15 days of the order being finalized. Google must make these refunds promptly, upon request from an account holder. Should Google issue less than $19 million in refunds to consumers within the 12 months after the settlement becomes final, the company must remit the balance to the Commission for use in providing additional remedies to consumers or for return to the U.S. Treasury.

The Commission vote to accept the proposed consent order for public comment was 4-0-1, with Commissioner Joshua D. Wright recorded as recused.

The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through Oct. 6, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

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Liquidity Coverage Ratio:

Final Rule

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