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Federal Trade Commission and Department of Justice Sign Antitrust Memorandum of Understanding With Chinese Antitrust Agencies

Federal Trade Commission Chairman Jon Leibowitz and Assistant Attorney General Christine Varney of the Department of Justice’s Antitrust Division today signed an antitrust memorandum of understanding (MOU) with China’s three antitrust agencies to promote communication and cooperation among the agencies in the two countries. The MOU also was signed by Gao Hucheng, China International Trade Representative and Vice Minister of the Ministry of Commerce (MOFCOM), Peng Sen, Vice Chairman of the National Development and Reform Commission (NDRC), and Zhong Youping, Vice Minister of the State Administration for Industry and Commerce (SAIC).

“In the three years since China’s antimonopoly law came into effect, its enforcement agencies have risen in prominence and have quickly developed many of the important analytical techniques used by leading antitrust agencies around the world,” Leibowitz said. “We look forward to continuing to share our experiences with China’s enforcement agencies as they confront many of the same challenges in implementing their laws that other agencies have faced, and we are confident that China will continue to build its agencies and enforcement mechanisms in positive ways.”

“Our cooperative relationship with the Ministry of Commerce, the National Development and Reform Commission and the State Administration for Industry and Commerce has steadily strengthened,” said Assistant Attorney General Varney. “This memorandum of understanding is a reflection of that relationship, and, by establishing a framework for enhanced cooperation among our agencies, the MOU also allows us to move to the next chapter in our collaboration on competition law and policy matters.”

The MOU provides for periodic high-level consultations among all five agencies as well as separate communications between individual agencies. It also lists several specific avenues for cooperation, including:

Exchanges of information and advice about competition law enforcement and policy developments;
Training programs, workshops and other means to enhance agency effectiveness;
Providing comments on proposed laws, regulations and guidelines; and
Cooperation on specific cases or investigations, when in the investigating agencies’ common interest.

The MOU will not change existing law in either country. China enacted its antimonopoly law in 2007, and the antimonopoly law took effect on August 1, 2008. China’s antimonopoly law enforcement responsibility is divided among three agencies: MOFCOM, which handles review of mergers and acquisitions; NDRC, which enforces the law against price-related anticompetitive conduct; and SAIC, which is responsible for non-price-related anticompetitive conduct.

The Commission vote authorizing Chairman Leibowitz to sign the MOU on behalf of the agency was 5-0.

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 [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 Testifies on Consumer Protection and the Rent-to-Own Industry

The Federal Trade Commission testified today on consumer protection issues relating to the rent-to-own industry. The testimony described the agency’s role in enforcing laws relating to financial issues, provided background on the rent-to-own industry, and described key findings of a 2000 report published by the FTC’s Bureau of Economics on the rent-to-own industry.

The testimony was presented by Bureau of Consumer Protection Deputy Director Charles Harwood, who told the House of Representatives Financial Institutions and Consumer Credit Subcommittee of the Financial Services Committee that the rent-to-own industry – known as RTO – consists of dealers that rent products to consumers, with an option to buy.

Typically, RTO agreements do not require a down payment or credit check, and provide consumers with immediate access to household goods for a weekly or monthly payment. They may be attractive to consumers who cannot afford a cash purchase, may be unable to qualify for traditional credit, or who want a product right away without the need to pay the full purchase price.

The FTC testimony noted concerns expressed by consumer advocates and others, such as the prices charged for buying RTO merchandise, which can be two to three times higher than retail price; the way consumers are treated during collection of overdue payments; and whether consumers receive enough information about RTO transactions, including disclosures about whether the merchandise they are renting is new or used. According to the testimony, RTO transactions currently are not specifically covered by federal laws that govern credit or lease transactions.

A report on the RTO industry published by the FTC’s Bureau of Economics in 2000 found that customers ultimately purchased 70 percent of the merchandise they obtained through RTO transactions. Most of these customers intended to buy the product when they signed the RTO contract. In general, the report found that three-quarters of all RTO customers were satisfied with their RTO experience.

In 2003, the report’s authors published a follow-up study on RTO transactions that reported additional findings. For example, the 2003 study found some evidence that state laws requiring the disclosure of the total purchase cost on RTO product labels were associated with lower levels of consumers who intended to purchase RTO merchandise, and higher levels of those who intended only to rent temporarily.

“The Commission will continue to work with Congress to ensure that consumers are protected when they enter into RTO transactions,” the testimony said.

The Commission vote approving the testimony and its inclusion in the formal record was 5-0. It can be found on the FTC’s website and as a link to this press release.

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. P084805)

FTC Puts Conditions on Perrigo’s Proposed Acquisition of Paddock Labs

The Federal Trade Commission will require generic drug manufacturers Perrigo Company and Paddock Laboratories, Inc. to sell six generic drugs under a proposed settlement resolving charges that Perrigo’s proposed $540 million acquisition of Paddock would be anticompetitive. The proposed settlement also contains provisions to ensure future competition in the market for generic testosterone gel products.

The case is the most recent example of the FTC’s ongoing effort to promote competition in the health care sectors, which benefits U.S. consumers by keeping prices low and quality and choice of products and services high.

The FTC’s complaint alleges that the transaction would reduce the number of manufacturers for four products used to treat conditions such as skin disorders, allergic reactions, and nausea. It also charges that the deal would eliminate future competition for two other products, a generic topical steroid and a generic anti-inflammatory drug. Each product market is described below:

Ammonium lactate cream and ammonium lactate lotion are prescription moisturizers used to treat dry, scaly skin conditions, and help relieve itching. The same firms – Perrigo, Paddock, and Taro Pharmaceuticals Industries Ltd. – compete in both markets, although Paddock has temporarily withdrawn its products from the U.S. market. After the acquisition, the combined Perrigo-Paddock would control 87 percent of the ammonium lactate cream market. After the acquisition, the combined firm would control 93 percent of the ammonium lactate lotion market.

Ciclopirox shampoo is a prescription product used to treat seborrheic dermatitis, an inflammatory condition that causes flaky scales and patches on the scalp. Paddock is the leading manufacturer of this shampoo, with about 83 percent of the U.S. market. Perrigo is the second largest supplier in the U.S. market with a 16 percent share. A combined Perrigo-Paddock would control 99 percent of the market.

Promethazine suppositories are used to treat allergic reactions, prevent and control motion sickness, and relieve nausea and vomiting associated with surgery. Perrigo, Paddock, and G&W Laboratories, Inc. are the only U.S. suppliers of the 12.5 mg and 25 mg strengths of the product. Following the acquisition, the combined firm would have 34 percent of the market for the 12.5 mg strength and 35 percent of the market for the 25 mg strength.

Perrigo’s acquisition of Paddock allegedly would also illegally reduce future competition in the markets for generic clobestasol spray, a topical steroid used to treat moderate psoriasis in adults, and for generic diclofenac solution, a non-steroidal anti-inflammatory drug used to treat osteoarthritis of the knee. As Perrigo and Paddock are among a limited number of suppliers capable of entering these markets, the FTC’s complaint alleges that the acquisition would eliminate important future competition for these products, resulting in higher prices for U.S. consumers.

The complaint further alleges that the transaction could harm future competition in the generic testosterone gel market. Testosterone gel is used by men with testosterone deficiencies.

The Proposed Settlement Order. In the six generic drug markets, the proposed settlement order requires the combined Perrigo-Paddock to sell all Perrigo or Paddock assets related to these products to Watson Pharmaceuticals, Inc. within 10 days of the acquisition. The FTC has determined that Watson has the necessary experience in developing, manufacturing, and distributing generic drugs to replace the competition that the acquisition otherwise would have eliminated in these markets. The proposed order also requires the combined firm to provide Watson with the transitional services it needs to manufacture and sell the divested products successfully. The FTC has appointed an interim monitor to oversee the transfer of the assets to Watson.

To preserve competition in the testosterone gel market, the proposed settlement order prohibits Perrigo from accepting certain payments from Abbott Laboratories, the seller of branded testosterone gel (Androgel), which could give Perrigo incentive to slow the entry of its generic product into the market. The proposed settlement order also prohibits Perrigo from entering into any “pay-for-delay” arrangements with Abbott. When payments are made from a branded drug firm to its generic competitor to settle pending patent litigation and delay generic entry, they are known as “pay-for-delay” payments. The FTC has consistently opposed such payments as anticompetitive.

The Commission vote approving the complaint and proposed consent order was 5-0. The proposed order will be published in the Federal Register and subject to public comment for 30 days, until August 26, 2011, after which the Commission will decide whether to make it final. Comments can be submitted electronically here.

NOTE: The Commission issues 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 issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent order is for settlement purposes only and does not constitute an admission of a law violation. 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.

Copies of the complaint, consent order, and an analysis to aid public comment are available from the FTC’s website at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. 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 Extends Public Comment Period to August 15, 2011 for Aristotle’s Proposed Safe Harbor Program Under the Children’s Online Privacy Protection Rule

The Federal Trade Commission today announced that it is extending until August 15, 2011, the deadline for public comments relating to a proposed safe harbor program that Aristotle International, Inc. has submitted for Commission approval under the Children’s Online Privacy Protection Rule.

On June 21, 2011, the FTC announced that it is seeking public comment about Aristotle’s proposed self-regulatory guidelines to implement the FTC’s COPPA Rule; whether the proposed guidelines provide “the same or greater protections for children” as those contained in the Rule; whether the mechanisms used to assess operators’ compliance are effective; whether incentives for operators’ compliance with the guidelines are effective; and whether the guidelines provide adequate means for resolving consumer complaints. The announcement stated that the 45-day public comment period would last until August 8, 2011. The public comment period has now been extended until August 15, 2011.

Aristotle’s safe harbor application and the public comments received are posted on the FTC’s website at: http://www.ftc.gov/privacy/safeharbor/shp.htm. Comments can be submitted here.

NOTE: Publication of this Federal Register notice does not indicate Commission approval of the safe harbor application. The Commission has 180 days to review proposed self-regulatory guidelines and must set forth its conclusions in writing.

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.

(aristotle extension)

FTC Approves Final Order Settling Charges That Grifols, S.A.’s Acquisition of Talecris Biotherapeutics Holding Corp. Was Anticompetitive

Following a public comment period, the Federal Trade Commission approved a final order settling charges that Grifols, S.A.’s acquisition of Talecris Biotherapeutics Holdings Corp., a rival in the market for plasma-derived drugs, was anticompetitive and would have resulted in higher prices for consumers.

The FTC’s order requires Grifols to sell the Talecris fractionation facility in Melville, New York, and Grifols’ plasma collection centers in Mobile, Alabama, and Winston-Salem, North Carolina, to Kedrion S.p.A. Kedrion is a manufacturer of plasma-derived products in Europe and other markets, and is a new entrant in the U.S. plasma-derived products industry. The order also requires Grifols to manufacture three plasma-derived products for Kedrion for several years under a manufacturing agreement.

The Commission vote approving the final order was 5-0. It can be found on the FTC’s website and as a link to this press release. (FTC File No. 101-0153, Docket No. C-4322; the staff contact is Peter Herrick, Bureau of Competition, 202-326-2876; see press release dated June 1, 2011)

Copies of the document mentioned in this release are available from the FTC’s website at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP. Like the FTC on Facebook and follow us on Twitter.

FTC Proposes ‘Lighting Facts’ Labels for Additional Types of Light Bulbs to Help Consumers

The Federal Trade Commission is seeking public comments on proposed amendments to the Appliance Labeling Rule that would require a “Lighting Facts” label on additional types of light bulbs to help consumers select the most efficient bulbs to meet their lighting needs, and a specific test procedure for light-emitting diode (LED) bulbs.

Under direction from Congress to examine the effectiveness of light bulb labels, the FTC introduced a new “Lighting Facts” label in July 2010 for medium screw-base light bulbs. The new labels will help consumers choose among incandescent bulbs and high-efficiency compact fluorescent (CFL) and LED bulbs as new energy standards imposed by Congress begin to phase out traditional incandescent bulbs from the market. The new label, which will appear on these bulb packages beginning next year, provides information on brightness, annual energy cost, life, color appearance, and energy use.

The Commission is now seeking comments on whether to expand the label’s coverage to additional bulb types and to require a specific test procedure for LED bulbs. Specifically, the agency proposes to require the labels on all screw-base bulbs, including smaller base candelabra bulbs, and certain pin-base bulbs. Manufacturers would have at least two and a half years to begin using the new labels for these additional bulb types. The FTC also proposes requiring a specific test procedure, LM-79, for measuring LED light output and color characteristics to help ensure consistent label content.

For more information about the Lighting Facts Label, watch the FTC’s light bulb video or visit FTC.gov/lightbulbs. The FTC also offers Shopping for light bulbs? Learning about lumens is a bright idea and Labeling Your Light Bulbs with“Lighting Facts”: Questions
and Answers for Manufacturers.

The Commission vote approving the Notice of Proposed Rulemaking was 5-0. 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. Instructions for filing comments appear in the Federal Register Notice. Comments must be received by September 22, 2011. All comments received will be posted at www.ftc.gov/os/publiccomments.shtm. (FTC File No. P084206; the staff contact is Hampton Newsome, Bureau of Consumer Protection, 202-326-2889)

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.

(Light Bulbs NPR)

FTC Settles Charges That Cardinal Health’s Purchase of Biotech Was Anticompetitive

The Federal Trade Commission will require Cardinal Health, Inc. to reconstitute and sell nuclear pharmacies in Las Vegas, Nevada; Albuquerque, New Mexico; and El Paso, Texas under a settlement order resolving the agency’s charges that Cardinal’s purchase of nuclear pharmacies from Biotech reduced competition for low-energy radiopharmaceuticals in the three cities.

Nuclear pharmacies provide radiopharmaceuticals to hospitals and cardiology clinics, which use the products to diagnose and treat various diseases. Radiopharmaceuticals contain a radioisotope that is combined with a chemical compound. Because radioisotopes used in radiopharmaceuticals have short half-lives and decay rapidly, nuclear pharmacies can only serve customers in their local areas. Accordingly, competition among nuclear pharmacies occurs at a local level.

On July 31, 2009, Cardinal acquired certain assets of Biotech, including its nuclear pharmacies in Las Vegas, Albuquerque, and El Paso. Before the acquisition, Cardinal and Biotech had both operated nuclear pharmacies in these cities. The pharmacies produced, sold, and distributed low-energy radiopharmaceuticals. After the acquisition, Cardinal relocated its nuclear pharmacy businesses to the former Biotech nuclear pharmacy locations and closed its own locations.

As a result of the acquisition, Cardinal now holds a low-energy radiopharmaceuticals monopoly in Albuquerque. In El Paso, Cardinal held a monopoly until November 2010, when another nuclear pharmacy opened in the city. Cardinal still holds a large market share in El Paso. In Las Vegas, there were three competitors before the acquisition, and Cardinal and Biotech were the two leading providers. As a result of the acquisition, Cardinal obtained, and has since held, a large market share.

According to the FTC’s complaint, Cardinal’s acquisition of Biotech’s nuclear pharmacies may substantially lessen competition for the production, sale, and distribution of low-energy radiopharmaceuticals in Las Vegas, Albuquerque, and El Paso by eliminating direct competition between Cardinal and Biotech, reducing Cardinal’s incentive to improve customer service, and allowing Cardinal to increase prices.

The order settling the FTC’s charges is designed to remedy the anticompetitive effects of Cardinal’s acquisition by restoring the competition lost in Las Vegas, Albuquerque, and El Paso. To accomplish this, the order requires Cardinal to reconstitute the three nuclear pharmacies it had operated in these markets prior to the acquisition, and sell each one to an FTC-approved buyer.

In addition, Cardinal must divest to each buyer the intellectual property related to the nuclear pharmacies that Biotech owned before the acquisition. Cardinal also must obtain, maintain, and transfer all regulatory approvals, licenses, permits, clearances, and other assets needed to operate the pharmacies being acquired. Further, Cardinal must demonstrate to the FTC that each buyer has a supply of two vital low-energy radiopharmaceutical inputs, the radioisotope technetium 99 and a heart-perfusion agent. If suitable acquirers are not found within six months, the FTC may appoint a divestiture trustee to carry out Cardinal’s obligations to reconstitute and sell the nuclear pharmacy assets.

Other terms of the order require Cardinal to grant its customers in Las Vegas, Albuquerque, and El Paso a two-year right to terminate – without penalty or charge – their existing contracts with Cardinal to buy low-energy radiopharmaceuticals. This will ensure that the acquirer(s) have the chance to compete with Cardinal for business. Cardinal must notify each relevant customer of its right to terminate its existing contract.

To provide the acquirer(s) with access to any necessary employees, the order requires Cardinal to facilitate and not interfere with the recruitment of former Biotech employees and current Cardinal nuclear pharmacy employees in Las Vegas, Albuquerque, and El Paso. Such employees also are released from any restrictions on their ability to work for the acquirer(s).

Finally, the order provides for the appointment by the Commission of Katherine L. Seifert, of Seifert and Associates, Inc., to serve as an independent monitor with fiduciary responsibilities to the Commission to help ensure that Cardinal carries out all of its responsibilities and obligations under the order.

The Commission vote approving the complaint and proposed consent order was 4-0-1, with Commissioner William E. Kovacic recused. The proposed order will be published in the Federal Register subject to public comment for 30 days, until August 22, 2011, after which the Commission will decide whether to make it final. Comments can be submitted electronically here.

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, 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. 091-0136)

FTC Action Leads to $4.8 Million Judgment Against Deceptive Marketer; Company Tricked Payday Loan Applicants into Buying Prepaid Debit Cards

At the request of the Federal Trade Commission, a federal court has ordered Swish Marketing, Inc. to pay more than $4.8 million for tricking hundreds of thousands of payday loan applicants into paying for an unrelated debit card. The FTC is closely monitoring payday lending and other financial services to protect financially distressed consumers.

According to the FTC’s complaint, Swish Marketing, Matthew Patterson, Mark Benning, and Jason Strober operated websites advertising short-term, or “payday,” loan matching services that purportedly matched loan applicants with lenders. The websites included an online loan application form that tricked online loan applicants into unknowingly ordering a debit card. On many sites, clicking the button for submitting loan applications led to four product offers unrelated to the loan, each with tiny “Yes” and “No” buttons. “No” was pre-clicked for three of them; “Yes” was pre-clicked for a debit card, with fine-print disclosures asserting consumers’ consent to have their bank account debited. Consumers who clicked a prominent “Finish matching me with a payday loan provider!” button were charged for the debit card. Other websites touted the card as a “bonus” and disclosed the fee only in fine print below the submit button. As a result, consumers were improperly charged up to $54.95 each.

In August 2009, the FTC charged Swish Marketing and VirtualWorks LLC, the seller of the debit card, and their principals with deceptive business practices. In April 2010, the FTC filed an amended complaint against the Swish Marketing defendants, adding allegations that they sold consumers’ bank account information to VirtualWorks without the consumers’ consent, and that Patterson, Benning, and Strober were aware of consumer complaints about the unauthorized debits. Strober, Patterson, Benning, and the VirtualWorks defendants settled the charges against them.

The court order announced today requires Swish Marketing to pay more than $4.8 million and bans it from marketing any product with a “negative-option” program, in which a consumer’s silence or failure to reject a product is treated as an agreement to make a purchase. The order also requires the company to obtain consumers’ informed consent before it can use their personal information collected for a particular purpose for any other purpose or by a different entity, and bars the company from:

misrepresenting material facts about any product or service, such as the cost or the method for charging consumers;
misrepresenting that a product or service is free or a “bonus” without disclosing all material terms and conditions;
charging consumers without first disclosing what billing information will be used, the amount to be paid, how and on whose account the payment will be assessed, and all material terms and conditions; and
failing to monitor their marketing affiliates to ensure that they are in compliance with the order.

The summary judgment was entered in the U.S. District Court for the Northern District of California, San Jose Division.

Click here for information about payday loans.

(EverPrivate Card)

Statement by FTC Chairman Jon Leibowitz Regarding Senate Judiciary Committee Mark-up of Legislation Stopping Illegal Pay-for-Delay Drug Settlements

Federal Trade Commission Chairman Jon Leibowitz issued the following statement today regarding the mark-up of legislation to stop anticompetitive drug patent settlements (S.27, Preserve Access to Affordable Generics Act (sponsored by Sens. Kohl [WI], Grassley [IA], Brown [OH], Collins [ME], Durbin [IL], Franken [MN], Johnson [SD], Klobuchar [MN], and Sanders [VT]) in the Senate Judiciary Committee.

“In the midst of all the Congressional work to reduce the nation’s deficits, I think it’s especially commendable that the Senate Judiciary Committee passed legislation that would put an end to the collusive pay-for-delay deals to keep generics off the market, which cost consumers – including taxpayers – $3.5 billion a year in higher drug prices. Further, ending these sweetheart deals would save the government billions of dollars by reducing the cost of prescription drugs the government pays through programs such as Medicare Part D and others.”

“FTC staff found that the number of these deals skyrocketed more than 60 percent in FY 2010, from 19 in FY 2009 to 31. The increasing number of these deals is a win-win proposition for the pharmaceutical industry, and leaves consumers to dig deeper into their household budgets to pay for prescription drugs. The Committee action builds on the President’s resolute support for this bipartisan initiative.”

(PFD Mark-up Statement)

FTC Sues Two Funeral Homes for Failing to Provide Price Lists; Undercover Inspections in Eight States Find Violations of FTCs Funeral Rule

At the request of the Federal Trade Commission, the U.S. Department of Justice has charged funeral homes in Chicago and Washington, D.C. with violating an FTC consumer protection rule designed to ensure that people have the information they need to compare prices and buy only the funeral services and goods they want. The FTC’s complaints are based on inspections by FTC staff posing as consumers seeking to make funeral arrangements. The FTC conducts undercover inspections every year to ensure that funeral homes are complying with the Funeral Rule. All funeral homes found with significant violations are offered a chance to enter a three-year training program designed to increase compliance, as an alternative to possible legal action that could otherwise lead to a court order and civil penalties of up to $16,000 per violation.

The FTC seeks civil penalties against the two funeral homes being sued, Carter Funeral Chapels, Ltd. and B.K. Henry Funeral Chapel, Inc., because they allegedly violated the FTC’s Funeral Rule by failing to provide consumers with itemized price lists. Among other things, the Rule requires funeral homes to provide consumers with an itemized price list 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.

The FTC alleges that Harry J. Carter III, doing business as Carter Funeral Chapels, Ltd., of Chicago, provided neither a general price list nor a casket price list during two inspections, as required by the Rule. The complaint against B.K. Henry Funeral Chapel of Washington, D.C., and its owners, Brian and Lisa Henry, alleges that they failed to provide a casket price list during two inspections. The cases are part of the FTC’s longstanding efforts to make sure consumers are treated fairly when going through the difficult process of arranging a funeral.

In 2010, undercover inspections of funeral homes in eight states found significant violations in 35 of the 126 homes inspected:

In Santa Clara County, California, significant violations were found at one of 11 funeral homes inspected;
In Wilmington and Newark, Delaware, seven of 17 funeral homes inspected had significant violations;
In Louisville, Kentucky, three of 32 funeral homes inspected had significant violations;
In the New York Tri-State Region (Connecticut, New Jersey and New York), six of 25 homes inspected had significant violations;
In Greensboro and Charlotte, North Carolina, seven of 16 funeral homes inspected had significant violations;
In Corpus Christi and Lubbock, Texas, 11 of 25 funeral homes inspected had significant violations.

These funeral homes will participate in the training program known as the Funeral Rule Offenders Program (FROP). 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. Funeral homes that participate in the FROP program must make a voluntary payment to the U.S. Treasury in place of a civil penalty, and pay annual administrative fees to the Association.

Since the FROP program began in 1996, the FTC has inspected more than 2,400 funeral homes and found that 396 were significantly out of compliance with the Rule. In conducting its annual enforcement sweeps, the agency has received assistance from several state attorneys general. This year, the FTC wishes to thank Kentucky Attorney General Jack Conway and his staff for their invaluable assistance.

In addition to the significant violations turned up in this year’s inspections, the FTC identified several funeral homes with minor compliance problems. In this situation, the FTC requires funeral homes to prove that they have corrected the problems.

The FTC educates consumers in English and Spanish about their rights under the Funeral Rule, and provides guidance to businesses in how to comply. During 2010, more than 140,000 consumers and businesses ordered copies of these publications – Paying Final Respects: Your Rights When Buying Funeral Goods & Services, Funerals: A Consumer Guide, and Complying with the Funeral Rule – or viewed them at www.ftc.gov.

The Department of Justice filed the two complaints on behalf of the Commission in the U.S. District Court for the Northern District of Illinois and the District of Columbia, respectively. The defendants in these cases are not participating in the FROP program. The Commission votes to refer the complaints to the DOJ for filing was 5-0.

NOTE: The Commission refers a complaint to the DOJ for filing 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 complaints are not a finding or ruling that the defendant has actually violated the law. The cases will be decided by the court.

(Funeral2010)

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