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Investment Firm of MacAndrews & Forbes to Pay $720,000 Penalty to Resolve FTC Allegations Related to Premerger Filing Requirements

The investment firm of MacAndrews & Forbes has agreed to settle Federal Trade Commission charges that it violated the agency’s premerger filing requirements, and will pay a $720,000 civil penalty.

The Hart-Scott-Rodino (HSR) Act requires that parties notify the FTC and the Department of Justice of most large acquisitions. After doing so, parties must observe a waiting period before closing their transaction, while one of the agencies determines whether the transaction may result in a substantial lessening of competition. The violation alleged in the complaint is detailed below.

“The Premerger Notification Program is important and well-known to companies and individuals making acquisitions,” said Richard Feinstein, Director of the Bureau of Competition. “Although we may, in our discretion, not seek penalties for a first-time inadvertent violation, we will not hesitate to seek appropriate penalties where we believe individuals and companies subsequently failed to comply with their filing obligations.”

According to the complaint, MacAndrews & Forbes violated the HSR Act with respect to the acquisition of voting securities of Scientific Games (SG) Corporation in 2012. Based on a previous acquisition in February of 2007, MacAndrews & Forbes could acquire voting securities of SG for five years without making a new HSR filing – until February 9, 2012. MacAndrews & Forbes failed, however, to make a new HSR filing prior to its June 4 and 5, 2012, acquisitions of 800,000 shares of SG, which occurred after the five year grace period had expired. It made a corrective filing on August 16, 2012.

The complaint also notes that MacAndrews & Forbes had previously made a corrective filing in connection with the acquisition of voting securities of SIGA Technologies Inc. in 2011, but does not charge them with a violation in connection with this filing.

MacAndrews & Forbes has agreed to pay a civil penalty of $720,000.

The Department of Justice filed the complaint and settlement on behalf of the Commission in the U.S. District Court for the District of Columbia on June 20, 2013. The Commission vote to refer the complaint and proposed settlement to the DOJ was 4-0-1, with former Chairman Jon Leibowitz not participating.

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

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., 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.

Appeals Court Upholds Ruling Against Defendant Who Assisted Grant Writers’ Institute Scheme; Order to Pay $1.68 Million to Defrauded Consumers Survives Challenge

The U.S. Court of Appeals for the Tenth Circuit has upheld a district court judgment in favor of the Federal Trade Commission and four state attorneys general against a woman who assisted and facilitated a scheme that deceived consumers by falsely promising them a “guaranteed” $25,000 grant from the federal government.

In September 2011, after a two-day trial, the U.S. District Court for the District of Kansas ruled in favor of the FTC and the states of Illinois, Kansas, Minnesota and North Carolina, and ordered Meggie Chapman to pay $1.68 million in consumer redress for assisting and facilitating the government-grant scheme. The final court order against Chapman bans her from marketing money-making opportunities to individuals in the future. It also prohibits her from misrepresenting information about any products or services being offered for sale, failing to disclose information that is material to a consumer’s decision to make a purchase, and making any false or misleading statement in an attempt to induce anyone into buying a product or service.

In May 2013, the Court of Appeals affirmed the district court’s final judgment, which found that Chapman had violated the FTC’s Telemarketing Sales Rule. The Court of Appeals found that Chapman “played an integral part” assisting and facilitating the grant-related telemarketing scheme. The Court also denied Chapman’s post-judgment motion to amend or alter the monetary judgment against her.

Copies of the appellate court ruling can be found on the FTC’s website and as a link to this press release. The ruling announced today was issued against Meggie Chapman, individually and doing business as Meggie Chapman & Associates. (FTC File No. X090073; Civ. No. 5:09-cv-04104-JAR-KGS (D. Kan.); Case No. 11-3319 (10th Cir.); the staff contact is Gary L. Ivens, Bureau of Consumer Protection, 202-326-2330.)

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 Requires Tesoro to Sell Petroleum Terminal as a Condition for Acquiring Chevron Assets

Oil refiner Tesoro Corporation and one of its subsidiaries have agreed to sell their light petroleum products terminal in Boise, Idaho to settle Federal Trade Commission charges that their $335 million acquisition of pipeline and terminal assets from Chevron Corporation would be anticompetitive. Without the divestitures required by the FTC, the deal would have given Tesoro ownership of two of the three full service light petroleum terminals in Boise, significantly reducing competition for local terminal services.

“The proposed order announced today is another example of the Federal Trade Commission’s work to protect competition in U.S. petroleum markets, which are critical to consumers,” said Richard Feinstein, Director of the FTC’s Bureau of Competition. “The sale of Tesoro’s terminal will preserve the competitive conditions that exist today for terminal customers in Boise.”

Tesoro Corporation owns several petroleum products terminals, including its terminal in Boise that receives light petroleum from the Northwest Products Pipeline, a 760-mile long interstate pipeline owned by Chevron that carries petroleum products from Salt Lake City to Idaho and Washington. Chevron also owns petroleum terminals along the Northwest Pipeline in Idaho and Washington State, including one in Boise.

On December 6, 2012, Tesoro Corporation and its subsidiary, Tesoro Logistics Operations LLC, agreed to buy the Northwest Products Pipeline system and Chevron’s associated terminals, including the one in Boise, for $355 million. The FTC’s complaint alleges that the transaction as proposed would give Tesoro control over most of the terminal capacity in Boise, leading to substantially reduced competition in the local market and increased terminal costs which are passed on to consumers.

The proposed order settling the FTC’s charges resolves these alleged anticompetitive effects by requiring Tesoro to sell the terminal it currently owns in Boise to an FTC-approved buyer within six months of when the order becomes final. Under the proposed order, Tesoro can complete the acquisition of Chevron’s Northwest Products Pipeline and associated terminals immediately after the order is issued.

The proposed consent order also contains a separate order to maintain assets, which is designed to preserve the Tesoro’s Boise terminal as a viable, competitive, and ongoing business.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 4-0. The FTC will publish a description of 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 July 19, 2013, 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.

Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments also can be submitted electronically.

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.

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.

Statement of FTC Chairwoman Edith Ramirez on the U.S. Supreme Court’s Decision in FTC v. Actavis, Inc.

Federal Trade Commission Chairwoman Edith Ramirez issued the following statement regarding today’s decision by the U.S. Supreme Court in FTC v. Actavis, Inc., which held that pay-for-delay agreements between brand and generic drug companies are subject to antitrust scrutiny.

“The Supreme Court’s decision is a significant victory for American consumers, American taxpayers, and free markets. The Court has made it clear that pay-for-delay agreements between brand and generic drug companies are subject to antitrust scrutiny, and it has rejected the attempt by branded and generic companies to effectively immunize these agreements from the antitrust laws. With this finding, the Court has taken a big step toward addressing a problem that has cost Americans $3.5 billion a year in higher drug prices.”

“We look forward to moving ahead with the Actavis litigation and showing that the settlements violate antitrust law. We also are studying the Court’s decision and assessing how best to protect consumers’ interests in other pay for delay cases. Fighting anticompetitive patent settlements has been a priority for the Commission beginning under the Chairmanships of Robert Pitofsky, through Timothy J. Muris, Deborah Platt Majoras, William E. Kovacic, and culminating under the leadership of Chairman Jon Leibowitz.”

The Court’s decision stems from the FTC’s appeal of a ruling by the U.S. Court of Appeals for the Eleventh Circuit, which had dismissed the agency’s challenge to an alleged pay-for-delay agreement involving the testosterone-replacement drug AndroGel. Several courts, including the Eleventh Circuit, have found that these agreements were insulated from antitrust scrutiny. However, in July 2012, the Court of Appeals for the Third Circuit held that a reverse payment from a branded drug manufacturer to a generic competitor was presumptively unlawful, creating a split in the circuits and prompting the Supreme Court review.

FTC Chairwoman Edith Ramirez Names Senior Staff

Federal Trade Commission Chairwoman Edith Ramirez has named seven senior staff members with extensive experience in consumer protection and antitrust law.

“I am very pleased to have such a strong leadership team at the FTC,” Ramirez said. “Their knowledge and experience will help keep the FTC at the forefront in promoting competition and protecting American consumers.”

Deborah L. Feinstein, who will serve as Director of the Bureau of Competition, joins the agency from Arnold & Porter, where she was a partner and Chair of the Antitrust Practice Group, with a focus on merger and acquisition matters, and conduct investigations. Among many accolades bestowed upon Feinstein, Global Competition Review named her global “Lawyer of the Year” for 2010. Feinstein began her career at Arnold & Porter and joined the FTC in 1989. She served as an Assistant to former Bureau of Competition Director Kevin Arquit and as an Attorney Advisor to former Commissioner Dennis Yao. She is an honors graduate of Harvard Law School and the University of California at Berkeley.

Jessica Rich has been appointed Director of the Bureau of Consumer Protection, having served as Associate Director in charge of the Division of Financial Practices since January 2012. Rich was a Deputy Director of the Bureau from November 2009 to January 2012. In addition, she has served as the Acting Associate Director and Assistant Director of the Bureau’s Division of Privacy and Identity Protection, Assistant Director in the Division of Financial Practices, and counselor to the Bureau Director. She joined the FTC as a staff attorney more than 20 years ago, after starting her career in private practice in New York City. She is a graduate of New York University Law School and Harvard University.

Jonathan E. Nuechterlein will serve as General Counsel. He joins the agency from Wilmer Cutler Pickering Hale & Dorr, where he was a partner and Chair of the Communications, Privacy, and Internet Law Practice Group. He previously was Deputy General Counsel for the Federal Communications Commission and an Assistant to the Solicitor General at the U.S. Department of Justice. Nuechterlein also clerked for U.S. Supreme Court Justice David H. Souter and U.S. Court of Appeals Judge Stephen F. Williams. He is a graduate of Yale Law School and Yale College.

Andrew I. Gavil will continue as Director of Policy Planning, having joined the Commission in September 2012. A professor at Howard University School of Law, he has written and spoken extensively in the U.S. and abroad on various aspects of antitrust law, policy, jurisdiction, and procedure. He is a graduate of Northwestern University School of Law and Queens College, CUNY.

Randolph W. Tritell will continue as Director of the Office of International Affairs, previously having led the FTC’s International Antitrust Division. He was formerly a staff attorney in the Bureau of Consumer Protection, Assistant to the Director of the Bureau, Attorney Advisor to former Commissioner Terry Calvani, and Executive Assistant to the Chairman. A former Weil, Gotshal & Manges partner, Tritell is a graduate of the University of Pennsylvania Law School and an honors graduate of the State University of New York at Stony Brook.

Jeanne Bumpus will continue to serve as Director of the Office of Congressional Relations. She previously was a principal advisor to Arizona Senator John McCain and served as Staff Director and Chief Counsel for the U.S. Senate Committee on Commerce, Science, and Transportation. Bumpus was formerly Legislative Counsel to Washington State Senator Slade Gorton. She is a graduate of the University of California Berkeley School of Law and the University of California, San Diego.

Heather Hippsley serves as Chief of Staff to the Chairwoman. Before starting her new role, Hippsley was Assistant Director for the Division of Advertising Practices for more than 10 years. She previously has served as Acting Deputy Director for the Bureau of Consumer Protection, Acting Associate Director for the Division of Advertising Practices, Assistant Director in the Division of Enforcement, and an Attorney Advisor to former FTC Commissioners Dennis A. Yao and Andrew J. Strenio, Jr. Hippsley is an honors graduate of Lewis and Clark School of Law and Georgetown University.

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 Announces New Date for Internet of Things Workshop

The Federal Trade Commission has announced a new date for its planned workshop on the privacy and security of the Internet of Things. The workshop will now be held on Nov. 19, 2013, in Washington, D.C.

The workshop will address a wide variety of issues related to the ability of everyday devices to communicate with each other and with people, which is becoming more prevalent and is often referred to as the Internet of Things.

FTC Staff Submits Comments to DC Taxicab Commission on Proposed Passenger Motor Vehicle Transportation Rules

Federal Trade Commission staff submitted written comments to the District of Columbia Taxicab Commission (DCTC) on proposed rulemakings regarding passenger motor vehicle transportation services, including rules that would apply to new smartphone software applications for arranging and paying for such services. The staff comments note that recent DC legislation appears designed to facilitate new and beneficial forms of competition for the services, but express concern that some of the subsequent rules proposed by DCTC may unnecessarily impede competition.

The staff comments recommend that DCTC avoid unwarranted regulatory restrictions on competition, and that any regulations should be no broader than necessary to address legitimate public safety and consumer protection concerns. For example, regarding a proposal to restrict how software applications can affiliate with taxicab operators, the comments recommend that DCTC allow for flexibility and experimentation and avoid unnecessarily limiting how consumers can obtain taxis.

Regarding proposed rules addressing disclosure and data security issues that applications may raise, the comments note that requiring certain advance disclosures or provision of certain information in a receipt may be efficient ways to promote pricing transparency, protect consumers from misleading pricing practices, and help avoid or resolve significant consumer confusion. Staff recommends, however, that any such disclosure requirements be reasonably tailored to avoid unnecessarily inhibiting the entry and operation of applications. The comments also emphasize that applications should implement security practices that are reasonable and appropriate in light of the types of information they collect, the risks and vulnerabilities they face, and associated implementation costs.

The Commission vote approving the comments was 4-0. (FTC File No. V130008; the staff contact is Christopher Grengs, Office of Policy Planning, 202-326-2612).

FTC Issues Revised Business Guide on ‘Red Flags’ Identity Theft Rule

For Your Information

June 12, 2013

The Federal Trade Commission has issued revised guidance designed to help businesses comply with the requirements of the Red Flags Rule, which protects consumers by requiring businesses to watch for and respond to warning signs or “red flags” of identity theft.

The guidance outlines which businesses – financial institutions and some creditors – are covered by the Rule and what is required of businesses to protect consumers from identity theft. The rule was revised late last year to more narrowly define the types of creditors subject to the rule’s requirements.

Contact Information

MEDIA CONTACT:

Jay Mayfield
Office of Public Affairs
202-326-2181

STAFF CONTACT:

Steve Toporoff
Bureau of Consumer Protection
202-326-3135

FTC Proposes Changes to Align the Fur Labeling Rule Guarantee Provisions with Similar Proposed Provisions in the Textile Rules

The Federal Trade Commission is seeking public comment on proposed changes to the guaranty provisions of the Fur Rules, under the Fur Products Labeling Act. These changes would align the Fur Rules with proposed changes to the guaranty provisions of the Rules under the Textile Fiber Products Identification Act.

The Fur Rules require manufacturers and retailers to label fur products with certain information, such as the animal’s name and an imported fur’s country of origin. The Textile Rules require that certain textiles sold in the United States carry labels disclosing the generic names and percentages by weight of the fibers in the product, the manufacturer or marketer name, and the country where the product was processed or manufactured.

The Fur and Textile Acts shield entities that obtain guaranties from product providers from liability – guaranties that designate particular products, and continuing guaranties that apply to all products transferred from a particular guarantor. The guaranty protections apply only to entities that receive a guaranty in good faith. In April 2013 the FTC proposed changes to the Textile Rules’ guaranty provision which are similar to these proposed Fur Rules changes.

In September 2012, the FTC proposed changes addressing other issues in the Fur Rules. The FTC will seek comment on the proposed changes to the Fur Rules’ guaranty provisions before finalizing the changes proposed in September 2012, and then publish a single document announcing all Fur Rules changes at once in order to help businesses understand their compliance obligations.

Interested parties can submit written comments electronically or in paper form by following the instructions in the “Request for Comments” part of the “Supplementary Information” section of the Federal Register Notice. Comments must be received by July 23, 2013. All comments received will be posted on the FTC website.

The Commission vote approving the Notice of Proposed Rulemaking was 4-0. It is
available on the FTC’s website and as a link to this press release and will be published in the Federal Register soon. (FTC File No. P074201; the staff contact is Matthew Wilshire, Bureau of Consumer Protection, 202-326-2976)

For more information, read How to Comply with the Fur Products Labeling Act and the complete Rules and Regulations Under the Fur Products Labeling Act.

FTC Closes its Investigation into GenCorp’s Proposed Purchase of Pratt & Whitney Rocketdyne

The Federal Trade Commission has closed its investigation into the proposed acquisition of rocket engine manufacturer Pratt & Whitney Rocketdyne by aerospace company GenCorp Inc. Although the FTC concluded that the deal will give GenCorp a monopoly in the market for a type of advanced missile defense interceptor propulsion system, the Commission decided not to challenge the transaction, primarily because the Department of Defense wishes to see the transaction go forward for national security reasons.

On July 22, 2012, GenCorp agreed to purchase Pratt & Whitney Rocketdyne (PWR) for about $550 million. Both PWR and GenCorp’s Aerojet-General Corporation (Aerojet) subsidiary develop and manufacture liquid rocket propulsion systems for launch vehicles, spacecraft, strategic missile systems and ballistic missile defense systems.

Based on its investigation, the FTC found that the deal would give GenCorp a monopoly in the market for liquid divert and attitude control systems (LDACS), which are very high-performance, small pressure-fed liquid rocket propulsion systems that have a highly specialized application on missile defense interceptors. As stated in the FTC staff’s letter to Defense Department Deputy General Counsel Susan P. Raps,“the transaction therefore is likely to lead to an increase in price and a reduction in the pace of innovation for LDACS, to the detriment of the Defense Department, the ultimate customer for LDACS.” In addition, the FTC concluded that there are few, if any, cognizable efficiencies that would result from the merger. It also found that there are substantial barriers preventing new companies from entering the LDACS market. “For this reason, absent countervailing public interest considerations, the proposed acquisition would violate Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act if consummated,” the letter states.

The Department of Defense, however, identified potential non-economic benefits that may result from the transaction, including sustainment of certain industrial base assets and capabilities necessary to meet the Department of Defense’s space launch requirements and determined that a divestiture of either company’s LDACS business is “impossible due to highly unusual national security circumstances.” The Department requested in a letter to the FTC that “the Commission allow [Aerojet] to acquire PWR despite the anticompetitive result in the LDACS market.”

Based on the Department of Defense position, the Commission concluded that it was not feasible to remedy the loss of competition in the LDACS market. The Commission therefore voted to close the investigation and allow the transaction to proceed unchallenged to preserve the potential benefits cited by the Department of Defense.

The Commission vote to close the investigation 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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