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Marketers Who Sent ‘Gift Card’ and ‘Free iPhone’ Text Spam Settle FTC Complaint

A group of affiliate marketers has agreed to settle Federal Trade Commission charges that they blasted consumers with more than 30 million deceptive spam text messages and directed recipients of the spam text messages to deceptive websites.

Cresta Pillsbury, Jan-Paul Diaz, Joshua Brewer and Daniel Stanitski, and their company Ecommerce Merchants, LLC, which did business as Superior Affiliate Management, were among the subjects of a series of FTC complaints filed in March against the senders of text message spam.

The FTC’s complaint alleged that the defendants sent spam text messages to consumers across the country, offering supposedly free iPhones, iPads, and $1000 gift cards to those who clicked on links in the messages. A typical message stated, “FREE MSG: You Have Been Chosen To Test & Keep The New iPad For Free Only Today!! Go To [scam website] And Enter 2244 And Your Zipcode To Claim It Now!”

Those who clicked on the links did not receive the promised items, but were taken instead to sites that requested personal information and required them to sign up for numerous additional offers – often involving other purchases or paid subscriptions.

The stipulated final order against Pillsbury, Diaz, Brewer and Stanitski permanently bans them from any involvement with sending unauthorized or unsolicited text messages. In addition, they are prohibited from deceptively presenting an offer as “free,” or misleading consumers about the use of personal information collected in the process of such an offer or the steps required and costs involved in redeeming it.

The defendants also allegedly operated a network of affiliates who blasted out spam text messages on their behalf. The stipulated final order prohibits defendants from operating an affiliate network for deceptive purposes, and requires them to inform members of any future affiliate network they operate of the terms of the order and to monitor the affiliates to prevent them from conducting deceptive or unfair activities.

The order also contains a monetary judgment of $356,950, which represents the full amount of money the defendants earned from the scam after paying their affiliates. The judgment is suspended due to their inability to pay. It also requires the defendants to cooperate with the FTC in any future investigations.

The court also entered a default judgment against the defendants’ company, Ecommerce Merchants, LLC.

This marks the third settlement in the FTC’s cases against the operators of massive text spam operations. Previous settlements have been entered with Henry Nolan Kelly and Rentbro, Inc.

The Commission’s vote authorizing staff to file the stipulated final order was 4-0. The FTC filed the stipulated final order for permanent injunction in the U.S. District Court for the Northern District of Illinois, Eastern Division. The District Court judge signed and approved the order, along with the default judgment, on Nov. 12, 2013.

NOTE: Stipulated orders have the force of law when signed and approved by the District Court judge.

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.

FTC Settlement and Default Judgment Impose Permanent Ban on Marketers of Scam ‘Recovery’ Kits

An operation that allegedly bilked consumers by falsely claiming it could help them recover money they lost in previous scams will be banned from selling recovery services under a default judgment against Business Recovery Services LLC and a consent judgment against its owner, Brian Hessler.

The judgments permanently ban the defendants from selling any services that are represented to recover or otherwise assist in the return of money or any other item of value paid for by, or promised to, a person in a previous transaction.

“In effect, this scheme rubbed salt in the wound of people who had already been victimized, targeting them and defrauding them all over again,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC is committed to taking action against these types of egregious scams.”

The FTC charged Hessler and his company in 2011 with selling worthless do-it-yourself kits, priced up to $499, for people who had lost money to business opportunity and work-at-home operations. The case was part of an enforcement sweep targeting scams that took advantage of financially strapped consumers.

In addition to the ban on recovery sales, the judgments prohibit the defendants from misrepresenting material facts about any products and services or any refund or cancellation policy, the total cost, or that any person is affiliated with or endorsed by another person, program, or government entity. The defendants are also barred them from disclosing or otherwise benefitting from customers’ personal information, failing to dispose of this information properly, and misrepresenting any facts material to a consumer’s decision to buy a product, donate to charity, or enter a contest.

The default judgment imposes a $5.2 million judgment against Business Recovery Services. The consent judgment against Hessler imposes a $5.2 million judgment that was suspended upon payment of $90,000. The full judgment will become due immediately if he is found to have misrepresented his financial condition.

The Commission vote to approve the proposed consent judgment was 4-0. The Department of Justice filed the proposed consent judgment on behalf of the Commission in the U.S. District Court for the District of Arizona. The consent judgment and default judgment were entered by the court on September 30, 2013.

NOTE: Consent judgments have the force of law when approved and signed by the District Court judge.

Tech Support Scheme Participant Settles FTC Charges

One of the defendants in an alleged tech support scheme has agreed to settle a Federal Trade Commission complaint against him and give up the money he made from the scheme.

Navin Pasari is a defendant in one of six complaints filed by the FTC in September 2012 as part of the Commission’s ongoing efforts to protect consumers from online scams. According to the complaint against Pasari and his co-defendants, the defendants placed ads with Google, which appeared when consumers searched for their computer company’s tech support telephone number. After getting consumers on the phone, the defendants’ telemarketers allegedly claimed they were affiliated with legitimate companies, including Dell, Microsoft, McAfee and Norton, and told consumers they had detected malware that posed an imminent threat to their computers. The scammers then offered to rid the computer of the non-existent malware for fees ranging from $139 to $360.

The stipulated final order against Pasari imposes a $14,369 monetary judgment, which represents the total amount of money Pasari received in connection with the scam. The final order also requires him to divest his ownership interest in PCCare247 Inc., another defendant in the action, and transfer any proceeds he receives from the divestiture to the FTC.

In addition, the final order prohibits Pasari from opening or assisting with the opening of payment processing accounts for a company or other entity unless he personally supervises the accounts. The final order also prohibits Pasari from misrepresenting or assisting others in misrepresenting any information to consumers.

While the stipulated final order announced today resolves the FTC’s claims against Pasari, litigation continues against the remaining defendants in each of these actions.

The Commission vote approving the stipulated final order was 4-0. The U.S. District Court for the Southern District of New York entered the judgment on Nov. 12, 2013.

NOTE: Stipulated orders have the force of law when signed and approved by the District Court judge.

FTC Approves Pinnacle Entertainment, Inc.’s Application to Divest Ameristar Casinos, Inc.’s Assets in Lake Charles, Louisiana to GNLC Holdings, Inc.

Following a public comment period, the Federal Trade Commission has approved an application by Pinnacle Entertainment, Inc. to divest all of the assets associated with Ameristar Casinos, Inc.’s casino and hotel project under construction in Lake Charles, Louisiana to GNLC Holdings, Inc., the parent company of Landry’s Inc., which owns the Golden Nugget casinos and approximately 450 restaurants nationwide. In a proposed order, the FTC requires Pinnacle to divest these assets to a Commission-approved buyer to resolve charges that Pinnacle’s acquisition of Ameristar would reduce competition among casinos in Lake Charles, in violation of the antitrust laws.

Pinnacle currently operates a casino in Lake Charles, where Ameristar is building a casino on an adjacent property, scheduled to open in 2015. Pinnacle also is required by the order to divest a casino and two hotels in St. Louis, Missouri. According to the FTC’s complaint, Pinnacle’s acquisition of Ameristar would result in increased prices and lower quality for casino customers in the St. Louis and Lake Charles areas.

The Commission vote to approve the application was 4-0. (FTC File No. 131-0064, Docket No. 9355; the staff contact is Daniel P. Ducore, Bureau of Competition, 202-326-2526; see related press release dated August 12, 2013)

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, 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.

FTC Testifies Before Congress on Fraud Affecting Military Community

The Federal Trade Commission testified before a U.S. Senate Committee regarding the agency’s law enforcement and educational efforts to combat deceptive and unfair practices that impact servicemembers and their families.

Testifying before the Senate Committee on Commerce, Science, and Transportation, Charles Harwood, Deputy Director of the Bureau of Consumer Protection, said that although all consumers are potential targets for fraudsters, certain scams are more likely to affect the military community. The testimony describes the work the Commission has done to identify illegal conduct that impacts servicemembers and to stop it – including through a recent case against one of the nation’s largest refinancers of home loans for allegedly making misleading claims targeted at current and former servicemembers.

The testimony also highlights Military Sentinel, part of the FTC’s Consumer Sentinel Network that the Commission uses to collect complaints from consumers and other federal agencies and organizations. In 2012, the FTC received 42,200 fraud complaints from the military community. The top complaint categories were debt collection, imposter scams, fraud involving prize offers, sweepstakes or gifts, unlawful banking or lending practices, and scams that offer mortgage foreclosure relief or debt management services. Notably, these complaint categories overlap with some of the FTC’s highest consumer protection priorities – particularly its aggressive recent work to stop frauds related to consumer financial products and services.

The Commission is working with the DoD, VA, Departments of Education and Justice, and the Consumer Financial Protection Bureau to collect feedback from the military community regarding education institutions that may not have lived up to the promises they made to their students. The agency also is coordinating with the Defense Department on possible amendments to DoD’s military lending rule.

In addition to its law enforcement efforts and coordinating with its partners on policy initiatives, the FTC uses a variety of resources to educate military families about their rights when dealing with certain consumer protection issues. Some of the FTC’s military specific resources include information on limiting the harm from identity theft, placing an active duty alert on a credit report, and understanding military protections with respect to payday loans.

Most recently, the FTC published Eight Questions to Ask When Choosing a College After Military Service. Last year, the agency launched its first Military Consumer Protection Day, an annual partnership campaign and new website to inform the military community and veterans about a variety of consumer issues from dealing with debt to avoiding fraud.

The Commission vote approving the testimony was 4-0.

FTC Stops Online ‘Yellow Pages’ Scam; Canada-Based Operation Targeted Small Businesses and Churches in United States

At the Federal Trade Commission’s request, a federal judge has temporarily halted, and frozen the assets of, a Montreal operation that bilked more than $14 million from small businesses and churches in the United States for unwanted listings in online business directories. The FTC seeks to permanently stop the illegal practices and make the defendants return victims’ money – the scheme has generated more than 13,000 complaints from consumers.

“Hiding behind borders to scam churches and small businesses is a tactic that we’ve seen before,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Scammers need to know that we have great relationships with our law enforcement partners in Canada and, as this case shows, we can and will work together to protect our consumers.”

According to court papers filed by the FTC, the defendants operated from Montreal, using corporate shells and mail drops in the U.S. to hide their actual location. Typically, they made phone calls pretending they were verifying contact information to update or confirm existing directory listings. In some cases, the defendants said they were calling in response to a cancellation request, and asked to verify the organization’s contact information to confirm the cancellation. In fact, the defendants had no prior relationship with the consumers.

The bills sent by the defendants averaged $499.99 or more and had a “walking fingers” image often associated with a local yellow pages directory. Some consumers paid, thinking someone in their organization had ordered these listings. Other consumers paid after the defendants used partially recorded phone conversations with consumers who had verified their contact information to convince them that they had a binding oral contract with the defendants, according to the FTC’s complaint.

Consumers who ignored the bills or refused to pay received collection calls and dunning notices, often with added interest charges, late fees, and legal fees, as well as threats of collection agency referral, credit rating damage, and legal action, the FTC alleged. To make consumers believe third-party debt collectors were involved, the defendants created two debt collection companies, CC Recovery and M&A Recovery, which also made threats. The defendants’ threats convinced many consumers to pay the bills, the FTC alleged.

The FTC’s complaint alleges that the defendants violated the FTC Act by misrepresenting that they had a preexisting business relationship with consumers, that consumers had agreed to buy directory listings, and that consumers owed them money.

The defendants are Mohamad Khaled Kaddoura, Derek Cessford, and Aaron Kirby, and 15 companies they ran: Modern Technology Inc., also doing business as Online Local Yellow Pages; Strategic Advertisement Ltd., also d/b/a Local Business Yellow Pages; Dynamic Ad Corp., also d/b/a Yellow National Directory and Yellowpages Local Directory; Wisetak Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Wisetak, Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Internet Solutions LLC, also d/b/a Public Yellow Pages; Yellow Pages Express Inc., also d/b/a Yellow Pages Express; Yellow Pages Online Inc., also d/b/a Yellow Pages Online; CessTech Inc., also d/b/a Yellow US Pages; SEO Online Inc., also d/b/a Yellow Local Directory; SEO Online LLC; SEOOnline, also d/b/a Public Yellow Pages; SEM Pundits Inc., also d/b/a Yellow Pages Online; CC Recovery Corporation, also d/b/a CC Recovery; and M&A Recovery Inc., also d/b/a MA Recovery.

The FTC would like to thank the Canadian Anti-Fraud Centre; the Attorneys General of Illinois, Florida, New York, Nevada and Vermont; the Wisconsin Department of Agriculture, Trade and Consumer Protection; the Better Business Bureaus of Arkansas and of Chicago and Northern Illinois; and the Kahnawake Mohawk Peacekeepers for their valuable assistance with this matter.

The FTC also would like to acknowledge the Royal Canadian Mounted Police (RCMP news release in English and French) and the Centre of Operations Linked to Telemarketing Fraud (Project COLT) for their valuable assistance. Launched in 1998, Project COLT combats telemarketing-related crime, and includes members of the Royal Canadian Mounted Police, Sureté du Québec, Service de Police de la Ville de Montréal, Canada Border Services Agency, Competition Bureau of Canada, Canada Post, U.S. Department of Homeland Security (U.S. Immigration and Customs Enforcement and the U.S. Secret Service), the U.S. Postal Inspection Service, the Federal Trade Commission, and the Federal Bureau of Investigation. Since its inception, Project COLT has recovered $22 million for victims of telemarketing fraud.

To learn more about directory scams, read the FTC’s When Yellow Pages Invoices are Bogus and Throwing the Book at Business Directory Scams.

The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division.

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. The case will be decided by the court.

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.

FTC Names Latanya Sweeney as Chief Technologist; Andrea Matwyshyn as Policy Advisor

Federal Trade Commission Chairwoman Edith Ramirez announced the appointments of Latanya Sweeney as the agency’s Chief Technologist and Andrea Matwyshyn as a Senior Policy Advisor on privacy and data security issues.

Dr. Sweeney is a professor of government and technology at Harvard University and the founder and director of Harvard’s data privacy lab. She has testified before Congress and the European Commission and participated in numerous federal regulatory and advisory committees. She is a fellow of the American College of Medical Informatics. Sweeney holds a Ph.D. in computer science, master’s degrees in electrical engineering and computer science from the Massachusetts Institute of Technology, and a bachelor’s degree in computer science from Harvard.

Dr. Sweeney’s research has focused on the de-identification of data, developing privacy technologies, and the protection of health information.

“Technology issues are increasingly central to the FTC’s work, and I am delighted to welcome Latanya to the FTC,” Chairwoman Ramirez said. ”She has done groundbreaking work in the anonymization of sensitive consumer information and privacy technology, and I look forward to the contributions she will make to the FTC’s efforts to protect consumers.”

Dr. Sweeney will join the FTC as Chief Technologist in January; she will advise the agency on evolving technology and policy issues.

Dr. Matwyshyn is an assistant professor for legal studies and business ethics at the Wharton School of the University of Pennsylvania, an affiliate in the Center for Technology, Innovation and Competition at the University of Pennsylvania Law School, and a faculty affiliate of the Center for Internet and Society at Stanford Law School. She has a J.D, a Ph.D.in human development and social policy, and a master’s degree in international relations from Northwestern University. Dr. Matwyshyn’s research focuses on technology and innovation, data security, consumer privacy, and technology entrepreneurship.

“Andrea is a rising academic star whose insights on the intersection of technology innovation and data privacy and security law will be enormously valuable to the FTC’s efforts to protect consumer privacy while promoting innovation,” Chairwoman Ramirez said.

Dr. Matwyshyn will join the FTC’s Office of Policy Planning as a Senior Policy Advisor in December; she will advise the agency on privacy and data security policy issues.

FTC Settlements Crack Down on Payment Processing Operation that Enabled ‘Google Money Tree’ Scammers to Charge Consumers $15 Million in Hidden Fees

The Federal Trade Commission is continuing its crackdown on payment processing operations that enable scam artists to charge consumer accounts despite signs of ongoing fraud and unauthorized transactions. Today, the Commission announced a proposed settlement resolving allegations that a payment processor, Process America Inc., and its owners, Kim Ricketts, Keith Phillips and Craig Rickard, used unfair tactics to open and maintain scores of merchant accounts for Infusion Media Inc., which perpetrated the “Google Money Tree” work-at-home scheme. Using these merchant accounts, Infusion Media charged more than $15 million in unauthorized charges on consumers’ debit and credit card accounts.

Payment processors and Independent Sales Organizations (ISOs) enable merchants to charge consumers’ credit cards for products and services. In exchange, payment processors and ISOs get paid for each payment transaction the merchant processes.

In June 2009, the FTC charged the Infusion Media defendants with falsely claiming that consumers could earn $100,000 in six months, misrepresenting an affiliation with Google, and tricking consumers into signing up for automatic monthly charges that would continue until the consumer took affirmative steps to cancel.

The complaint against Process America alleges that the defendants knew or should have known that they were processing charges that consumers had not authorized. Evidence that consumers were being charged without their permission included plainly deceptive statements on merchant websites, notices that the merchant should be placed in Visa and MasterCard chargeback monitoring programs, and chronically excessive chargeback rates – the percentage of charges that are challenged by consumers and result in the charges being reversed. From 2008 through 2009, the defendants opened and maintained 131 merchant accounts through which the perpetrators processed more than $15 million in unauthorized charges on consumer debit and credit card accounts.

To keep Infusion Media’s merchant accounts open, the defendants allegedly engaged in tactics that were designed to evade fraud monitoring programs implemented by Visa and MasterCard. These tactics included submitting merchant applications containing false information and “load balancing” – distributing transaction volume among numerous merchant accounts. As a result, Infusion Media’s scam operated for nearly a year, and Process America continued to earn fees from its payment processing activity.

To resolve the allegations in the complaint, the individual defendants have agreed to separate permanent injunctions containing prohibitions and restrictions on their future payment processing activities:

Rickard is banned from payment processing and acting as an ISO. He is prohibited from acting as a sales agent for any client engaged in (a) unfair or deceptive business practices; (b) certain categories of high-risk activities, including negative-option marketing (where the seller interprets consumers’ silence or inaction as permission to charge them), money-making opportunities, credit card or identity theft protection, timeshare resale services, buying clubs, medical discount plans; or (c) conduct that has qualified a client for a chargeback monitoring program.
Rickard is also prohibited from acting as a sales agent for any client without first screening them for unfair or deceptive business practices. The order imposes a judgment of more than $184,000 that will be suspended based on his inability to pay. The full judgment will become due immediately if Rickard is found to have misrepresented his financial condition.
Ricketts and Phillips are prohibited from acting as payment processors, ISOs, or sales agents for any client engaged in (a) unfair or deceptive business practices; or (b) certain categories of high-risk activities certain categories of high-risk clients. They also are barred from acting as a sales agent for any client without screening and monitoring them for unfair or deceptive business practices.

In addition, Process America’s Chief Restructuring Officer has agreed to recommend and seek authority from the United States Bankruptcy Court for the Central District of California to enter into the proposed settlement with the FTC. Under the proposed settlement:

Process America is prohibited from payment processing or acting as an ISO or sales agent for any client engaged in negative-option marketing or unfair or deceptive business practices, and from failing to screen, monitor, and promptly investigate clients for such practices.

The orders prohibit all of the defendants from selling or otherwise benefitting from consumers’ personal information, and failing to properly dispose of customer information.

The Commission vote authorizing the staff to file the complaint and approving the proposed consent judgment was 4-0. The proposed settlement with Process America is subject to the United States Bankruptcy Court for the Central District of California’s approval of a Federal Rule of Bankruptcy Procedure 9019 Motion for Compromise. The proposed consent judgments with Process America and the individual defendants are also subject to court approval.

How to Submit Your Questions Online for the FTC’s Internet of Things Workshop

The Federal Trade Commission is hosting a one-day workshop on the Internet of Things on Nov. 19, 2013 in Washington, D.C., and invites participants watching the webcast to submit questions for moderators online. Staff will live-tweet the workshop and take questions via Twitter, Facebook, and email.

FTC Chairwoman Edith Ramirez will provide the opening remarks at the Internet of Things: Privacy & Security in a Connected World, and Commissioner Maureen Ohlhausen will provide remarks after lunch. Vint Cerf, co-creator of the Internet’s key networking technology, will give the keynote address. Panelists will discuss privacy, the smart home, connected health and fitness devices and apps, connected cars, and broader privacy and security issues raised by the Internet of Things. A complete agenda is available now online.

The live webcast will begin at 8:30 a.m. ET. Viewers can submit questions throughout the day via the following channels:

Twitter: Commission staff will tweet workshop agenda and highlights from the @FTC Twitter account and use the hashtag #FTCIoT.

Facebook: Post questions to the FTC’s Facebook page in the workshop status thread.

Email: Submit questions via email to [email protected].

Staff will do their best to answer as many questions as possible from the audience and online during the workshop.

FTC Chairwoman Ramirez Testifies Before House Judiciary Subcommittee on Agency’s Enforcement of U.S. Antitrust Laws to Promote Competition and Protect Consumers

In testimony presented to a U.S. House of Representatives Judiciary subcommittee the Federal Trade Commission described its ongoing efforts to protect competition and consumers in many important sectors of the economy, including health care, pharmaceuticals, and technology.

Testifying on behalf of the FTC before the Subcommittee on Regulatory Reform, Commercial and Antitrust Laws, Chairwoman Edith Ramirez said that, “In an effort to be most effective with limited resources, we pay particular attention to sectors where our action will provide the greatest benefit to the largest number of consumers. Chief among those are health care and the technology sector.”

The testimony outlines the FTC’s critical work promoting competition in health care markets, noting that health care consolidation can threaten to undermine efforts to control rising health care costs. Examples of FTC actions to prevent anticompetitive health care mergers include litigation involving proposed hospital mergers that threaten higher prices and lower quality of care, as well as divestitures in pharmaceutical mergers to preserve competition and maintain competitive pricing for needed medications.

The testimony also discusses the Commission’s ongoing work to prevent branded drug companies from using anticompetitive “pay-for-delay” agreements to stifle generic entry, a bipartisan effort in which the Commission has been involved for more than a decade. The testimony highlights the U.S. Supreme Court’s ruling in FTC v. Actavis Inc., overturning the so-called “scope-of-patent” test, which some courts had held effectively immunized pay-for-delay settlements from antitrust scrutiny.

The testimony also details the FTC’s efforts to promote competition in technology markets by using a balanced and fact-based approach to enforcement. For instance, the Commission recently challenged the proposed merger between Honeywell and Intermec, makers of two-dimensional scan engines used in products such as retail scanners. The testimony further discusses the Commission’s interest in the problem of “patent hold-up” that can arise during an industry standard-setting process. Patent hold-up occurs when the holder of a standard essential patent (SEP), which has previously committed to license that SEP on reasonable and non-discriminatory (RAND) terms, violates its RAND commitment and uses the leverage of the standard setting process to negotiate higher royalties than it could have before the patent was incorporated into the standard. The FTC recently pursued several enforcement actions related to patent holders who seek injunctive relief or exclusion orders for alleged infringement of their RAND-encumbered SEPs.

The testimony also notes that the FTC is addressing concerns about the rise of patent assertion entities (PAEs) — firms with a business model focused primarily on acquiring patents and then attempting to generate revenue by asserting intellectual property against persons who are already practicing the patented technology. Last month, the Commission proposed to study the issue using its authority under Section 6(b) of the FTC Act, in order to develop a fuller and more accurate picture of the impact of PAE activity.

The testimony concludes with a summary of the FTC’s work to preserve competition in U.S. energy markets, citing recent merger reviews in the energy sector and describing the agency’s ongoing monitoring of daily retail and wholesale gasoline and diesel prices in 20 regions and 360 retail markets nationwide.

The Commission vote approving the testimony and its inclusion in the formal record was 4-0.

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, 601 New Jersey Ave., N.W., 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.

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