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FTC Joins Department of Justice and Consumer Financial Protection Bureau in Filing Brief Supporting the Constitutionality of the Fair Credit Reporting Act

The Federal Trade Commission has joined the Department of Justice and the Consumer Financial Protection Bureau in filing a memorandum brief in support of the constitutionality of the Fair Credit Reporting Act (FCRA), the 1970 law that is designed to protect the privacy of credit report information and ensure that the information supplied by consumer reporting agencies (CRAs) is as accurate as possible. In the filing, the CRAs urge a federal district court to uphold an important provision of the FCRA, which has protected consumers’ privacy for more than 40 years.

The brief was filed in the case of Shamara T. King vs. General Information Services, Inc. (GIS). It specifically addresses a provision of the FCRA that balances the Act’s dual purposes – to protect consumers from privacy invasions caused by the disclosure of sensitive information by CRAs and to ensure a sufficient flow of information to allow the CRAs to fulfill their vital role. The provision in question bars CRAs, in most cases, from disclosing individuals’ arrest records or other adverse information that is more than seven years old.

The brief refutes GIS’s argument that this FCRA protection is an unconstitutional restriction of free speech. The brief points out that the recent U.S. Supreme Court case GIS cites to support its argument, Sorrell v. IMS Health Inc., “does not change the settled First Amendment standards that apply to commercial speech, nor does it suggest that restrictions on the dissemination of data for commercial purposes [such as those by CRAs] must satisfy stricter standards.” Therefore, the brief concludes, the court should not invalidate the FCRA provision, as it “directly advances the government’s substantial interest in protecting individuals’ privacy,” while also accommodating the interest of businesses.

The Commission vote authorizing the FTC to join in filing the brief was 5-0. The brief can be found on the FTC’s website and as a link to this press release. It was filed on May 3, 2012, in the U.S. District Court for the Eastern District of Pennsylvania. (FTC File No. P082105; Docket No. 2:10-cv-06850-PBT; the staff contact is John F. Daly, Office of the General Counsel, 202-326-2244)

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 and follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Seeks Return of $52 Million Worth of Bogus Phone Bill Cramming Charges; Agency Charges Nation’s Largest Third-Party Billing Company with Contempt

The Federal Trade Commission is seeking a civil contempt ruling against the nation’s largest third-party billing company, alleging that it placed more than $70 million in bogus “cramming” charges on consumers’ phone bills in violation of a previous court order. The FTC is asking a federal court to make the company pay more than $52.6 million, the total amount that the company billed consumers and failed to refund.

The FTC alleged that Billing Services Group (BSG) placed charges on nearly 1.2 million telephone lines on behalf of a serial phone crammer. The charges were supposedly for “enhanced services,” such as voicemail and streaming video, that consumers never authorized or even knew about. “BSG made it possible for con artists to steal people’s hard-earned money by placing charges on phone bills for services they never ordered or used,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “Under previous federal court orders, BSG cannot profit from the fraud of others and then deny responsibility for the harm they made possible.”

Billing aggregators act as intermediaries between third-party vendors and the local phone companies by contracting to have the local telephone companies collect charges for the vendors’ services from consumers. “Cramming” is the placement of unauthorized charges on phone bills.

In its contempt motion, the FTC said BSG failed to investigate either the highly deceptive marketing for the services or whether consumers even used them. BSG kept billing for these services despite voluminous complaints from consumers and even after major telephone companies refused to do so, the FTC’s motion stated.

The FTC alleged that by putting the bogus charges on consumers’ phone bills, BSG violated the terms of a 1999 settlement with the agency, which prohibits unauthorized billing, misrepresentations to consumers, and billing for vendors who fail to clearly disclose the terms of their services. The contempt action is the FTC’s fourth action addressing extensive cramming by BSG entities. In addition to the 1999 order, the FTC previously obtained two other cramming orders against BSG companies: Nationwide Connections Inc., which addressed $34.5 million in charges for collect calls that never occurred, and Enhanced Services Billing Inc., which addressed crammed charges for enhanced services.

According to the FTC’s motion, from 2006 through 2010, BSG illegally billed consumers for nine crammed “enhanced services,” including three voicemail services, one streaming video service, two identity theft protection services, two directory assistance services, and one job skills training service. In one example cited in the FTC’s motion, a BSG subsidiary charged consumers for voicemail services without their consent, as demonstrated by “voluminous consumer complaints, astronomical refund rates,” and the fact that almost none of the consumers who were billed ever used the services. In 2007, as noted in the motion, Verizon notified BSG that it was terminating the ability of one of the voicemail services to bill Verizon customers, stating, “as they have not and will not bring cramming complaint level” down. Yet BSG continued billing consumers for the voicemail services through other local telephone service providers and subsequently billed other services for the voicemail services’ principals.

The FTC’s contempt motion noted that BSG billed tens of thousands of consumers for voicemail boxes each month from July 2009 through March 2010, but consumers used only 209 mailboxes during that time. The motion also stated that BSG billed over 250,000 consumers for a streaming video service, but only 23 total movies were streamed, some of them by the crammers’ employees. Despite overwhelming evidence of cramming, BSG billed consumers more than $30 million for the voicemail services and more than $12 million for the video service.

The FTC would like to thank the Federal Bureau of Investigation and the United States Attorney’s Office for the Southern District of Indiana for their assistance. The civil contempt action was filed in the U.S. District Court for the Western District of Texas, San Antonio Division.

(FTC File No. X980069)

Myspace Settles FTC Charges That It Misled Millions of Users About Sharing Personal Information with Advertisers

Social networking service Myspace has agreed to settle Federal Trade Commission charges that it misrepresented its protection of users’ personal information. The settlement, part of the FTC’s ongoing efforts make sure companies live up to the privacy promises they make to consumers, bars Myspace from future privacy misrepresentations, requires it to implement a comprehensive privacy program, and calls for regular, independent privacy assessments for the next 20 years.

The Myspace social network has millions of users who create and customize online profiles containing substantial personalized content. Myspace assigns a persistent unique identifier, called a “Friend ID,” to each profile created on Myspace. A user’s profile publicly discloses his or her age, gender, profile picture (if the user chooses to include one), display name, and, by default, the user’s full name. User profiles also may contain additional information such as pictures, hobbies, interests, and lists of users’ friends.

Myspace’s privacy policy promised it would not share users personally identifiable information, or use such information in a way that was inconsistent with the purpose for which it was submitted, without first giving notice to users and receiving their permission to do so. The privacy policy also promised that the information used to customize ads would not individually identify users to third parties and would not share non-anonymized browsing activity.

Despite the promises contained in its privacy policy, the FTC charged, Myspace provided advertisers with the Friend ID of users who were viewing particular pages on the site. Advertisers could use the Friend ID to locate a user’s Myspace profile to obtain personal information publicly available on the profile and, in most instances, the user’s full name. Advertisers also could combine the user’s real name and other personal information with additional information to link broader web-browsing activity to a specific individual. The agency charged that the deceptive statements in its privacy policy violated federal law.

In addition, Myspace certified that it complied with the U.S.-EU Safe Harbor Framework, which provides a method for U.S. companies to transfer personal data lawfully from the European Union to the United States. As part of its self-certification, Myspace claimed that it complied with the Safe Harbor Principles, including the requirements that consumers be given notice of how their information will be used and the choice to opt out. The FTC alleged that these statements were false.

The proposed settlement order bars Myspace from misrepresenting the extent to which it
protects the privacy of users’ personal information or the extent to which it belongs to or complies with any privacy, security or other compliance program, including the U.S.-EU Safe Harbor Framework. The order also requires that Myspace establish a comprehensive privacy program designed to protect consumers’ information, and to obtain biennial assessments of its privacy program by independent, third-party auditors for 20 years.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 4-0-1, with Commissioner Maureen K. Ohlhausen not participating. 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 June 8, 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 can be filed electronically at this link. 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.

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 complaint is not a finding or ruling that the respondent has actually violated the law. A consent agreement is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. 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 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 and follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

New York City Funeral Home Settles FTC Charges it Failed to Disclose Casket Prices

The operator of a New York City funeral home has agreed to settle a Federal Trade Commission enforcement action charging it with a violation of the Funeral Rule, an FTC consumer protection rule designed to give consumers itemized price information so they can buy only the funeral goods and services they want. This is the FTC’s first case against a funeral home that previously participated in a compliance training program instead of facing an enforcement lawsuit.

The FTC’s settlement with James Donofrio and his company, Donmaz Ltd., doing business as Blair-Mazzarella Funeral Home is part of the FTC’s continuing efforts to make sure consumers have the information they need when arranging a funeral. According to the complaint, on two occasions in 2010, the funeral home failed to provide a casket price list before showing caskets, as required by the Funeral Rule. A previous undercover shop in 2003 had also found Donofrio with significant violations of the Rule.

The FTC conducts undercover inspections of funeral homes around the country every year to ensure that they are complying with the Funeral Rule. First-time offenders found with significant violations are offered the opportunity to enter the Funeral Rule Offenders Program (FROP), a three-year training program designed to increase compliance. The one-time FROP training opportunity is an alternative to an enforcement action, a court order, and civil penalties of up to $16,000 per violation.

The FROP program is run by the National Funeral Directors Association and provides participants with a legal review of the price disclosures required by the Funeral Rule, and ongoing training, testing and monitoring of their compliance. Participants must make a voluntary payment to the U.S. Treasury in place of a civil penalty, and pay annual administrative fees to the Association.

After a similar alleged failure in 2003, Donofrio enrolled in the Funeral Rule Offenders Program and received FROP training in how to comply with the Rule.

Under the proposed consent order, the defendants will be prohibited from violating the Funeral Rule, including failing to show a casket price list before showing caskets.

The order imposes a $32,000 civil penalty, all but $7,000 of which will be suspended due to the defendants’ inability to pay. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

The Funeral Rule, first issued in 1984, gives consumers important rights when making funeral arrangements. Key provisions of the Rule require funeral homes to provide consumers with a general price list itemizing the prices of the funeral goods and services they offer at the start of an in-person discussion of funeral arrangements, as well as a casket price list before consumers view any caskets. The Rule also prohibits funeral homes from requiring consumers to buy any item, such as a casket, as a condition of obtaining any other funeral good or service.

For more information about the Funeral Rule, read Paying Final Respects: Your Rights When Buying Funeral Goods & Services, Funerals: A Consumer Guide, and Complying with the Funeral Rule.

The Commission vote to authorize the staff to refer the complaint to the Department of Justice, and to approve the proposed consent decree, was 3-1, with Commissioner Rosch voting in the negative. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the Eastern District of New York on May 3, 2012. The proposed consent decree is subject to court approval.

NOTE: The Commission authorizes the filing of 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 complaint is not a finding or ruling that the defendant has actually violated the law. This consent order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent orders have the force of law when signed 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 and follow us on Twitter.

(Blair-Mazzarella Funeral Home)
(FTC File No. 1123016)

FTC Announces Preliminary Agenda for Workshop about Advertising Disclosures in Online and Mobile Media

The Federal Trade Commission will host a one-day public workshop on Wednesday, May 30, 2012 to consider the need for new guidance for online advertisers about making disclosures. New guidance is likely to address technological advancements and marketing developments that have emerged since the FTC first issued its online advertising disclosure guidelines known as “Dot Com Disclosures” 12 years ago. The workshop will be from 8:30 am to 5:00 pm, at the FTC Conference Center, 601 New Jersey Avenue, NW, Washington, DC. It is free and open to the public. The event will be webcast, and pre-registration is not required.

The workshop will cover revising the Dot Com Disclosures so they better illustrate how businesses can provide clear and conspicuous disclosures in the current online and mobile advertising environment. Any revisions will be consistent with the goals of the original guidelines and will continue to emphasize that consumer protection laws apply equally to online and mobile marketers, and to other media. The FTC began seeking input for revising the Dot Com Disclosures guidelines last year.

This is the preliminary agenda for the workshop:

Advertising and Privacy Disclosures in a Digital World
8:30 am	Registration
9:00 am	Welcome & Opening Remarks
9:15 am	Presentation on Usability Research
9:30 am	Panel 1: Universal and Cross-Platform Advertising Disclosures When, where, and how should required disclosures be made? When and how can hyperlinks and similar techniques be used to make required disclosures? What techniques increase or decrease the likelihood that consumers will actually read a required disclosure?
11:00 am	Break
11:15 am	Panel 2: Social Media Advertising Disclosures What are the challenges and best approaches to making adequate disclosures on social media platforms that restrict message length? How can required disclosures be made on social media platforms when consumers simply click a button to signify approval of a product or service?
12:30 pm	Lunch Break
1:30 pm	Panel 3: Mobile Advertising Disclosures What are the challenges and best approaches to making adequate disclosures, given the screen size constraints of mobile devices? Should all commercial websites be designed to ensure that their disclosures are clear and conspicuous when viewed on mobile devices? Are there device-specific or platform-specific constraints that the Commission should consider in providing disclosure guidance?
2:45 pm	Break
3:00 pm	Panel 4: Mobile Privacy What are the challenges in delivering short, effective, and accessible mobile privacy disclosures? What research exists regarding the effectiveness of privacy disclosures on mobile devices, and what steps can businesses take to communicate with consumers in a clear and consistent way about their privacy practices?
4:30 pm	Closing Remarks

Follow @FTC on Twitter and join the conversation online using the hashtag #FTCdisclose.

Ask questions live via the FTC’s Facebook page.

Submit questions via email to [email protected].

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

(Dot Com Media Advisory)

FTC Requires Kinder Morgan to Sell Rocky Mountain Pipelines as a Condition of Acquiring El Paso Corporation

The Federal Trade Commission will require Kinder Morgan, Inc., one of the largest U.S. transporters of natural gas and other energy products, to sell three natural gas pipelines and other related assets in the Rocky Mountain region as part of a settlement resolving charges that Kinder Morgan’s $38 billion acquisition of El Paso Corporation would be anticompetitive.

The case is the most recent example of the FTC’s ongoing efforts to promote competition in the energy sector. The FTC charged that the deal as originally proposed would have illegally reduced competition in several natural gas pipeline transportation and gas processing markets.

Kinder Morgan is a publicly traded company that provides pipeline transportation and storage for petroleum and natural gas. It owns more than 38,000 miles of pipelines and 180 terminals in North America for the transportation and storage of natural gas and other energy products. El Paso also is publicly traded, and is in the business of natural gas production, processing, and transportation. It owns, or has interests in, more than 43,000 miles of natural gas pipelines and gathering systems. In October 2011, Kinder Morgan announced an agreement to acquire all outstanding shares of El Paso for approximately $38 billion.

According to the FTC’s complaint, Kinder Morgan’s proposed acquisition of El Paso would harm competition in the markets for pipeline transportation and processing of natural gas in the Rocky Mountain gas production areas in and around Wyoming, Colorado, Nebraska, and Utah, in violation of Section 5 of the FTC Act and Section 7 of the Clayton Act. Without the pipeline divestitures, the combined firm would dominate natural gas transportation options in five Rockies’ production areas: 1) the Denver/Julesburg/Niobrara Basin, 2) the Powder River Basin, 3) the Wind River Basin, 4) the Western Wyoming areas, including the Green River Basin, the Red Desert Basin, and the Washakie Basins; and 5) the Piceance Basin.

In each of these areas, the FTC contends, the market for natural gas pipeline transportation is highly concentrated. The agency charged that the proposed acquisition would significantly increase this concentration, while eliminating the current direct competition between Kinder Morgan and El Paso, and might lead to higher transportation costs for natural gas shippers in these areas. The FTC also alleges the deal would lead to anticompetitive effects and higher prices for transportation to the Colorado Front Range.

The FTC’s complaint also alleges that the deal would harm competition in two other markets: natural gas processing, which removes natural gas liquids before natural gas can be transported by pipeline; and “no-notice” pipeline transportation services, which allow customers to ship natural gas without advance notice. The FTC’s concerns related to no-notice service are confined to the Colorado Front Range.

The proposed settlement order requires Kinder Morgan to divest its Rockies Express pipeline, Kinder Morgan Interstate Gas Transmission pipeline, and Trailblazer pipeline, as well as two gas processing plants in the Rocky Mountain region and associated storage capacity, within 180 days. Kinder Morgan also is required to provide transitional support, such as licensing necessary intellectual property to the company purchasing the divested assets. In addition, the proposed order allows the buyer to recruit any Kinder Morgan employees who work on the assets to be sold, and for two years bars Kinder Morgan from trying to rehire employees who are hired by the buyer.

If Kinder Morgan fails to divest the required assets within 180 days, the proposed order allows the FTC to appoint a divestiture trustee to oversee their sale. It also requires Kinder Morgan to maintain the assets as competitive entities and to hold them separate from the rest of its operations until they are divested to a Commission-approved buyer.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 4-0-1, with Commissioner Edith Ramirez recused. 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, through June 4, 2012, 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 can be submitted electronically. 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.

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 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook and follow us on Twitter.

(FTC File No. 121-0014)
(El Paso-KM.final)

FTC Wins Court Judgment Against Massive Get-Rich-Quick Infomercial Scam

The Federal Trade Commission won a court judgment against the marketers of three get-rich-quick systems who deceived nearly a million consumers. As part of its ongoing efforts to stop scams that prey upon financially distressed consumers, the FTC is seeking more than $450 million in monetary relief.

On April 20, 2012, Federal District Judge Jacqueline H. Nguyen, of the U.S. District Court for the Central District of California, granted the FTC’s request for summary judgment and asked the agency and defendants to submit arguments on the appropriate remedy for the violations. The marketers are behind the infomercials for “John Beck’s Free & Clear Real Estate System,” “John Alexander’s Real Estate Riches in 14 Days,” and “Jeff Paul’s Shortcuts to Internet Millions.” The court found that the infomercials misled consumers in violation of the FTC Act, and that despite the marketers’ easy-money claims for the systems, which cost $39.95 each, nearly all the consumers who bought them lost money.

Regarding the John Beck system, the court found that the defendants falsely represented that consumers could purchase homes at tax sales in their own area for pennies on the dollar and that they could make money easily with little financial investment. The court found that the earnings claims in the John Alexander infomercial were false, and that the Jeff Paul infomercial misled consumers by creating an overall impression that “a typical consumer can easily, quickly, and ‘magically’ earn thousands of dollars per week simply by purchasing and using” the system. In contrast to the infomercials’ easy-money claims, the court found that less than one percent of consumers who purchased the systems made any profit whatsoever.

Consumers who purchased the systems were automatically enrolled in continuity programs that charged recurring fees and cost an extra $39.95 per month. The court found that the defendants failed to adequately disclose that consumers who purchased the systems would be enrolled in the continuity plans and submitted consumers’ payment information without their express informed consent, in violation of the FTC Act and the Telemarketing Sales Rule (TSR).

In addition, the defendants offered personal coaching services, which cost up to $14,995, to consumers who purchased any of the three systems. The court found that, contrary to the defendants’ claims that consumers would quickly and easily earn back the cost of the coaching program and that the coaching would substantially enhance consumers’ chances of making money, almost all consumers who purchased coaching programs lost money. The telemarketers also violated the TSR by repeatedly calling consumers who previously asked the defendants not to contact them.

The court found John Beck Amazing Profits LLC, John Alexander LLC, Jeff Paul LLC, Family Products LLC, and Mentoring of America LLC liable for the misrepresentations in the infomercials and those made by the defendants’ telemarketers. Gary Hewitt and Douglas Gravink were found to have controlled each of the corporate defendants and to be liable for injunctive and monetary relief. In addition, Beck, Alexander, and Paul were found liable for the misrepresentations concerning their own systems because they participated directly in the deceptive advertising, knew that the infomercials made material misrepresentations, “or at least were recklessly indifferent to the truth or falsity of the infomercials.”

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 and follow us on Twitter.

(John Beck)

FTC Settlement Bans Bogus Timeshare Resellers from Timeshare Business, Telemarketing

A telemarketing operation that allegedly deceived consumers who were trying to sell their timeshare properties is permanently banned from the timeshare resale and rental business, and from all telemarketing, under settlements with the Federal Trade Commission. The case is part of the FTC’s ongoing effort to crack down on con artists who use fraud and deception to take advantage of consumers in financial distress.

According to the FTC’s complaint against Vacation Property Sellers Inc., Vacation Property Services Inc., Higher Level Marketing Inc., Frank M. Perry, Jr., David S. Taylor, and Albert M. Wilson, the defendants deceived consumers who were trying to sell their timeshare properties into paying an up-front fee ranging from $200 to more than $8,000, claiming they had buyers lined up or would find buyers for consumers’ properties. When consumers realized they had been duped, the defendants allegedly ignored their phone calls and denied refund requests. The FTC charged the defendants with misrepresenting their refund policies and the existence of potential buyers, and calling consumers whose phone numbers were on the FTC’s Do Not Call Registry.

In addition to the timeshare and telemarketing bans, the settlement order against Perry, Vacation Property Sellers, and Higher Level Marketing prohibits them from misrepresenting material facts about any goods or services, and selling or otherwise benefitting from consumers’ personal information. The order imposes a $23.5 million judgment that was suspended when Perry and the companies surrendered almost all of their assets. The settlement order against Taylorcontains the same conduct prohibitions and imposes a $3.7 million judgment, which was suspended based on his inability to pay. The full judgments will become due immediately if the defendants are found to have misrepresented their financial condition. Litigation continues against the remaining defendants, Vacation Property Services Inc. and Albert M. Wilson.

To avoid pitfalls when selling a timeshare unit, read the FTC’s Selling a Timeshare Through a Reseller: Contract Caveats.

The Commission vote approving the proposed consent order against Perry, Vacation Property Sellers, and Higher Level Marketing was 5-0. The Commission vote approving the proposed consent order against Taylor was 3-1, with Commissioner Rosch voting in the negative. The orders were entered by the U.S. District Court for the Middle District of Florida, Tampa Division, on September 30, 2011, and March 20, 2012, respectively.

NOTE: This consent order is for settlement purposes only and does not constitute an admission by the defendants that the law has been violated. Consent orders have the force of law when approved and signed by the District Court judge.

FTC Places Conditions on CoStar’s $860 Million Acquisition of LoopNet

The Federal Trade Commission will require CoStar Group, the largest provider of commercial real estate information services in the United States, to sell LoopNet’s ownership interest in Xceligent, under a proposed order settling charges that CoStar’s $860 million acquisition of LoopNet would be anticompetitive.

The proposed FTC order requires the combined firm to sell LoopNet’s interest in Xceligent, a significant provider of U.S. commercial real estate information. CoStar’s, LoopNet’s, and Xceligent’s listings databases and information services are used by brokers, lenders, investors, appraisers, developers, and others in the commercial real estate industry.

The FTC also will require conduct relief that is unusual in a merger settlement. In order to allow for others, including Xceligent, to expand or enter into the space, CoStar will lift non-compete provisions and allow customers in longer-term contracts to terminate them early. CoStar also will refrain from bundling its products together in ways that could impede its competitors.

“The listings databases and information services provided by these companies are critical to their customers in the commercial real estate industry,” said Richard Feinstein, Director of the agency’s Bureau of Competition. “By maintaining Xceligent as an independent competitor and ensuring Xceligent’s ability to grow and expand, the FTC’s settlement order will foster continued competition in these markets.”

CoStar actively tracks and aggregates commercial real estate listings and property-specific information nationwide and provides subscription-based access to its comprehensive database. LoopNet operates the most heavily trafficked commercial real estate listings database in the United States and offers some commercial real estate information services. Xceligent, like CoStar, actively tracks and aggregates commercial real estate listings and property-specific information and maintains a detailed and comprehensive database.

The FTC’s complaint alleges the proposed acquisition would be anticompetitive and would violate the FTC and Clayton Acts by reducing competition in the markets for these listings databases and information services. Listings databases allow parties to publicize and to search for commercial real estate properties for sale or lease. Information services compile the in-depth data necessary to evaluate commercial real estate assets and opportunities. For example, parties use commercial real estate information services to make better-informed decisions about both asking price, and whether to execute sales or lease agreements.

The complaint states that CoStar and LoopNet are the only two providers of commercial real estate listings databases with nationwide coverage. The complaint also states that CoStar is the largest provider of actively researched listings databases and comprehensive information services. CoStar’s most similar competitor for information services is Xceligent, which currently provides comprehensive commercial real estate information covering 33 metropolitan areas. CoStar’s proposed acquisition of LoopNet would eliminate the direct and substantial competition between the two companies and may reduce competition between CoStar and Xceligent, due to LoopNet’s ownership stake in Xceligent.

Under the proposed settlement order, CoStar will sell LoopNet’s stake in Xceligent to DMG Information, Inc. (DMGI), a U.S.-based subsidiary of British media and data conglomerate Daily Mail & General Trust, PLC. The order also requires the combined CoStar-LoopNet to take certain steps that will ensure that Xceligent is able to continue to compete and expand aggressively in the U.S. market for commercial real estate listings databases and information services.

The proposed order maintains Xceligent’s competitive position and is designed so that the acquiring firm, DMGI, will be able to rapidly grow Xceligent into a more complete, national listings database and information services alternative to the merged CoStar-LoopNet. DMGI specializes in information services and has significant experience in the commercial real estate information industry. DMGI’s industry-specific expertise, coupled with its substantial long-term investments in other commercial real estate information firms, will enable DMGI and Xceligent to be an effective competitor to the combined CoStar-LoopNet, according to the FTC.

In addition, under the terms of the proposed order, CoStar and LoopNet will sell the URL “commercialsearch.com” to DMGI, and transfer to DMGI information that will assist Xceligent in expanding coverage to additional metropolitan areas.

Importantly, the proposed settlement order includes provisions that, for five years, will protect Xceligent while it expands its services. Specifically, the order:

prohibits CoStar and LoopNet from restricting customers’ ability to support Xceligent;
requires CoStar and LoopNet to allow customers to terminate their existing contracts, without penalty, with one year’s prior notice. This provision is designed to prevent long-term CoStar subscription commitments from hindering competition;
bars the merged CoStar and LoopNet from requiring customers to buy any of its products as a condition for receiving other products, and from requiring customers to subscribe to multiple geographic coverage areas to gain access to a single area in which they are interested; and
requires CoStar and LoopNet to continue to offer their customers certain core products on a stand-alone basis for three years after the acquisition.

The proposed order also requires the combined CoStar-LoopNet to notify the FTC in advance before acquiring any firm that gathers, markets, or sells commercial real estate information in the United States in the next 10 years.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. 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 [email protected], or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook and follow us on Twitter.

(FTC File No. 111-0172)
(CoStar.final)

FTC Settlement Bans Swindlers from Prize Promotion Business

The Federal Trade Commission put a stop to an operation that allegedly conned hundreds of thousands of consumers into paying $20 apiece by posing as government agencies and luring them with fake sweepstakes prizes. Under settlements reached as part of the FTC’s ongoing crackdown on schemes that prey on financially strapped consumers, the defendants are banned from the prize promotion business.

According to the FTC’s amended complaint, operators of the scheme sent consumers personalized mailers, some with fictitious government agency names and official-looking seals, with misleading statements such as, “Your identification as recipient for reported cash award entitlements totaling over $2,500,000.00 has been confirmed!” What the mailers did not tell consumers is that they had not actually won any prize. The defendants operated through a network of companies, used multiple business names, and sent dozens of versions of their mailers, according to the FTC’s complaint.

The settlement order against Tully Lovisa and his two companies, International Award Advisors Inc. and Spectrum Caging Service Inc., imposes a judgment of almost $15.5 million. It also imposes a $170,000 judgment against his wife, Lisa Lovisa, a relief defendant who allegedly profited from the scam. The judgment against Tully Lovisa and his companies will be suspended when they have given up nearly $196,000 held by third parties, proceeds from the sale of the Lovisas’ Las Vegas home and other personal property, more than $6,000 in cash, and a 2007 BMW.

The settlement order against Steven McClenahan and his four companies, Prize Registry Bureau Inc., Consolidated Data Bureau Inc., Registered Data Analytics Inc., and Lloyd Brannigan Exchange Inc., imposes a judgment of almost $15.5 million, which will be suspended when McClenahan has surrendered more than $97,000 in corporate bank accounts and paid $7,800.

The settlement order against Geovanni Sorino, Jorge A. Castro, and two companies they control, National Awards Service Advisory LLC and Central Processing of Nevada LLC, imposes a judgment of more than $5.5 million, which will be suspended.

In addition to banning the defendants from the prize promotion business, the settlement orders also permanently prohibit the defendants from making misrepresentations about any product or service, and bar them from selling or otherwise benefitting from customers’ personal information, and require them to properly dispose of customers’ personal information within 30 days. Under each order, the full judgments will become due immediately if the defendants are found to have misrepresented their financial condition.

The Commission vote approving the proposed consent order against Tully Lovisa, International Award Advisors Inc., Spectrum Caging Service Inc., and Lisa Lovisa, and the consent order against Steven McClenahan, Prize Registry Bureau Inc., Consolidated Data Bureau Inc., Registered Data Analytics Inc., and Lloyd Brannigan Exchange Inc., was 4-0-1, with Commissioner Ohlhausen not participating. The Commission vote approving the proposed consent order against National Awards Service Advisory LLC, Central Processing of Nevada LLC, Geovanni Sorino, and Jorge A. Castro was 2-1-2, with Commissioner Rosch voting in the negative, and Commissioners Ramirez and Ohlhausen not participating. The orders were entered by the U.S. District Court for the Northern District of California.

Legitimate sweepstakes don’t require you to pay or buy something to enter or improve your chances of winning, or to pre-pay “taxes” or “shipping and handling charges” to get your prize. FTC consumer information reminds consumers that if you have to pay to receive your “prize,” it’s not a prize at all. For more information read Prize Offers: You Don’t Have to Pay to Play, Putting a Lid on International Scams: 10 Tips for Being a Canny Consumer, and Scammers Exploit the FTC’s Good Name, Promise Phony Sweepstakes Prizes.

NOTE: These consent orders are for settlement purposes only and do not constitute an admission by the defendants that the law has been violated. Consent orders have the force of law when approved and signed 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 and follow us on Twitter.

(FTC File No. X110010)
(Prize Information Bureau settlements)

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