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FTC Shuts Down Robocallers Who Falsely Promised to Lower Credit Card Interest Rates

At the Federal Trade Commission’s request, a U.S. district court has approved a settlement shutting down two groups of Florida-based telemarketers that allegedly flooded consumers with misleading pre-recorded robocalls falsely promising to reduce their credit card interest rates.

The agency reached a settlement that permanently bans the two related operations from making robocalls and selling debt relief services. The settlement orders are the latest in a series of enforcement actions the FTC has taken to rein in robocallers, especially those who try to take advantage of consumers affected by the economic downturn.

According to the FTC, JPM Accelerated Services and related defendants made thousands of illegal pre-recorded robocalls to consumers, identifying themselves only as “card services” and offering lower credit card interest rates. Consumers who pressed “1″ after hearing the automated pitch were transferred to live telemarketers who falsely told consumers that JPM’s services would allow them to dramatically lower their credit card interest rates.

The complaint alleged that the telemarketers charged an up-front fee typically ranging from $495 to $995, and promised consumers they would save thousands of dollars in a short period of time as a result of the lower interest rates, and that they would be able to pay off their debts faster. The defendants also falsely stated that if consumers did not save thousands of dollars from lowered interest rates, they would receive a full refund of the up-front fee.

After collecting the fee from consumers, however, JPM allegedly failed to deliver the promised interest rate reductions and savings, and routinely refused to honor its money-back guarantee. The FTC complaint also charged the defendants with violating the Telemarketing Sales Rule by calling consumers on the Do Not Call Registry, blocking or “spoofing” caller ID, and making unlawful robocalls.

The settlement orders also impose judgments of $5.9 million against defendants associated with JPM, and $3.2 million against six individual defendants associated with an affiliated operation called IXE Accelerated Financial Centers, LLC. The judgments represent the amount of money consumers lost through these robocall schemes. The judgments are suspended, based on the defendants’ inability to pay, but will become due if the defendants are found to have misrepresented their financial condition. Two of the defendants in the IXE operation, Ivan X. Estrella and Jaime Hawley, also are liable for an unsatisfied $75,000 judgment recently entered against them in a case brought by the Florida Attorney General.

The Commission vote authorizing the consent orders settling the court action against the individual defendants was 5-0. The orders were filed in the U.S. District Court for Middle District of Florida, Orlando Division on November 9, 2010, against: 1) Ivan X. Estrella, Jamie M. Hawley, and Kimberly Nelson; and 2) Jeanie B. Robertson, Brooke Robertson, Alexander J. Dent, Micha S. Romano, Paul Pietrzak, and Ashley M. Westbrook. Estrella, Hawley, and Nelson worked with the IXE corporate defendants listed below. The rest of the individual defendants worked with the JPM corporate defendants. At the FTC’s request, the court also has dismissed the charges against Paige Dent.

The court is reviewing the FTC’s request for a default judgment against the corporate defendants in this case, including the IXE corporate defendants (IXE Accelerated Financial Centers, LLC; and IXE Accelerated Services Inc.), and the JPM corporate defendants (JPM Accelerated Services Inc.; IXE Accelerated Service Centers Inc.; MGA Accelerated Services Inc.; World Class Savings Inc.; Accelerated Savings Inc.; and B&C Financial Group Inc.). The proposed default judgment includes monetary judgments of $3.2 million against the IXE corporations, based in Orlando, Florida, and $5.9 million against the JPM corporations, based in Melbourne, Florida.

International Cooperation

The FTC brought this action with valuable assistance from other law enforcement agencies in the U.S. and Canada, including: the U.S. Postal Inspection Service; the Attorney General of Florida; the Florida Department of Agriculture and Consumer Affairs; the Canadian Radio-Television and Telecommunications Commission; and the Toronto Strategic Partnership, which includes as member agencies the Competition Bureau Canada; the Toronto Police Service Fraud Squad – Mass Marketing Section; the Ontario Provincial Police Anti-Rackets Section; the Ontario Ministry of Consumer Services; the Royal Canadian Mounted Police; and the United Kingdom’s Office of Fair Trading. Valuable assistance also was provided by the Better Business Bureau of Central Florida.

The FY 2010 National Do Not Call Registry Data Book

The FTC today also issued the National Do Not Call Registry Data Book for Fiscal Year 2010, which can be found on the FTC website and as a link to this press release. In its second year of publication, the Data Book contains a wealth of information about the Registry for FY 2010, including:

The number of active registrations and consumer complaint figures since the Registry began in 2003;
FY 2010 complaint figures by month and complaint type;
FY 2010 registration and complaint figures for all 50 states by population;
The number of entities accessing the Registry by fiscal year; and
An appendix on registration and complaint data by consumer state and area code.

According to the Data Book, at the end of FY 2010 (September 30, 2010), the Do Not Call Registry contained 201,542,535 actively registered phone numbers, up from 191,453,515 at the end of FY 2009. In addition, the number of consumer complaints about unwanted telemarketing calls decreased from 1,808,354 at the end of FY 2009 to 1,633,819 at the end of FY 2010.

This year’s Data Book also reveals trends in complaint data. In addition to providing information on the total number of consumer complaints per month, it also has data on the number of monthly complaints specifically related to pre-recorded telemarketing, or robocalls, and requests for a telemarketer to stop calling. After the FTC issued a Rule banning virtually all telemarketing robocalls starting on September 1, 2009, for example, the data show that the number of complaints about such calls decreased from 66,574 in October 2009 to 58,161 in November 2009 and just 51,882 in December 2009. The FTC remains committed to stopping deceptive, misleading, and otherwise unlawful robocalls, and will take action against entities violating the new rule.

Click here for information about the Do Not Call Registry or to register a phone number. Once a number is on the Registry, it never has to be re-registered.

NOTE: The stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of law violations. Stipulated final orders require approval by the court and have the force of law when signed by the judge.

Copies of the stipulated final orders and default judgment are available now 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 1,800 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.

(FTC File No. X100009;
Civ. No. 6:09-cv-2021-ORL-28-KRS)
(JPM Orders.final)

FTC Action Puts Deceptive Marketer Out of the Debt Relief Business

A deceptive advertising operation has been banned from the debt relief business under a settlement agreement with the Federal Trade Commission. As part of a continuing crackdown on scams that target consumers in financial distress, the FTC charged the defendants with deceptively claiming they could save consumers thousands of dollars by reducing their credit card debt.

According to the FTC’s complaint, an operation that did business under the names 800 Credit Card Debt and Debt.com deceptively claimed they would eliminate or reduce consumers’ debts quickly and put an end to calls from debt collectors. In ads that ran nationally, they used statements such as, “We’re 800 Credit Card Debt, America’s leader in helping settle debt . . .
[W]e have programs available to help you eliminate your debt by up to 60%.” The ads allegedly featured phony testimonials from people posing as the defendants’ customers.

The complaint also alleges that the defendants falsely claimed they provided the debt settlement services they advertised. In some cases, they also claimed their services were part of a public, non-commercial program, through statements such as, “The following is a public announcement . . . Americans who are behind on their credit card payments must take action immediately. If YOU have ten thousand dollars or more in credit card debt, a new relief program is now available. . .”

In reality, the defendants had no substantiation for their debt elimination or reduction claims, and did not provide debt settlement services, according to the FTC’s complaint. Instead, the FTC alleged, they merely sold the sales leads generated by their ads to debt settlement providers, or to other lead generators or lead brokers that re-sold them. The complaint alleges that the defendants had no information about whether the companies that bought the leads could fulfill the promises the defendants made in their ads. In fact, the FTC charged that because many of their leads were sold to other lead generators and lead brokers, the defendants typically did not even know the identity of the debt settlement providers that ultimately purchased the leads.

The defendants are Debt.com Marketing, LLC; Media Choice, LLC; 800 Credit Card Debt, LLC; and Stephen Todd Cook. The settlement order imposes a $28.2 million judgment that will be suspended when the defendants surrender all funds in their corporate bank accounts, as well as the proceeds from the sale of Cook’s two properties in California, his real estate in the Virgin Islands, and his ownership interests in two overseas investment funds. The full judgment will be imposed immediately if the defendants have misrepresented their financial condition.

In addition to banning the defendants from the debt relief business, the settlement order prohibits them from making unsubstantiated claims about financial related products or services, or misrepresenting material facts about any product or service. The order also prohibits the defendants from disclosing or otherwise benefitting from customers’ personal information, and failing to dispose of this information properly.

The FTC recently amended its Telemarketing Sales Rule to require debt relief companies to make certain disclosures and prohibit them from making false claims or collecting fees before delivering the services they promise. Because the defendants’ advertisements predated these amendments, the FTC did not allege any violations of the Rule in this case.

The Commission vote to file the complaint and stipulated final order was 5-0. The documents were filed in the U.S. District Court for the Central District of California.

Click here for more information about settling credit card debts.

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 defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the 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 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. 0923040)
(800 Credit Card Debt)

FTC’s 2010 Report Concludes U.S. Ethanol Market Still Unconcentrated

The market for ethanol fuel in the United States is still unconcentrated, with 160 firms nationwide either producing ethanol or likely to be in production within the next 18 months, according to the Federal Trade Commission’s 2010 report on the state of U.S. ethanol production.

The FTC report is the agency’s sixth annual report on ethanol market concentration. In the report, staff calculated market concentration for the ethanol production industry using different measures. It concluded that as of September 2010, there were the same number of ethanol producers in the United States as were listed in the FTC’s 2009 report. The largest ethanol producer’s share of capacity increased slightly to 12 percent of domestic ethanol production capacity – above the 11 percent share in 2008 and 2009, but still below the largest producer’s capacity share, between 2000 and 2007, which ranged from 16 percent in 2007 to 41 percent in 2000.

The annual reports are required by the Energy Policy Act of 2005. The 2010 report is available on the FTC’s website and as a link to this press release. It was submitted to Congress and the Administrator of the U.S. Environmental Protection Agency, as required by the Act. The Commission vote to issue the 2010 report, which was prepared by the staff of the Bureaus of Competition and Economics, was 5-0. (FTC File No. P063000; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel, 202-326-2702)

Copies of the documents 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.

(FYI 53.2010.wpd)

FTC Offers Businesses Tips for Securing Data on Digital Copiers

The Federal Trade Commission, the nation’s consumer protection agency, has tips for businesses on how to safeguard sensitive data stored on the hard drives of digital copiers. Here are the highlights of the FTC’s new publication, Copier Data Security: A Guide for Businesses:

Before acquiring a copier, plan to have the information technology staff manage and maintain it just as they would a computer or a server.
When buying or leasing a copier, evaluate your options for securing the data on its hard drive – including the encryption or overwriting features that will be used. Encryption scrambles the data on the hard drive so it can only be read by particular software. This ensures that even if the hard drive is removed from the machine, the data cannot be retrieved. Overwriting – also known as file wiping or shredding – replaces the existing data with random characters, so that the file cannot be easily reconstructed.
Take advantage of all of the copier’s security features. Securely overwrite the entire hard drive at least once a month.
When returning or disposing of a copier, find out whether it is possible to have the hard drive removed and destroyed, or to overwrite the data on the hard drive. Generally, it is advisable for a skilled technician to remove the hard drive to avoid the risk of rendering the machine inoperable.

For more information about securing sensitive data, see Protecting Personal
Information: A Guide for Business.

The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a new video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad.

(FYI copier data security)

FTC Testifies on Do Not Track Legislation

The Federal Trade Commission told Congress today that while the Commission recognizes that consumers may benefit in certain ways from the practice of tracking consumers online to serve targeted advertising, the agency supports giving consumers a “Do Not Track” option because the practice is largely invisible to consumers, and they should have a simple, easy way to control it. The FTC proposes that Do Not Track would be a persistent setting on consumers’ Web browsers.

David Vladeck, Director of the FTC’s Bureau of Consumer Protection, told the House Committee on Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection that the practice of tracking consumers’ activities online to target advertising, known as behavioral advertising, holds value for consumers because it supports content and services on the Web and delivers more personalized ads. He noted, however, that more transparency and consumer control regarding the practice are needed.

The testimony describes the FTC’s efforts to protect consumer privacy for 40 years through law enforcement, education, and policy initiatives. It also provides highlights from the FTC staff’s new report on consumer privacy, released yesterday, and proposes a framework to promote privacy, transparency, business innovation, and consumer choice.

The testimony states that while some in the industry have taken steps to improve consumer control of behavioral advertising, industry efforts have largely fallen short. Given the limitations of existing mechanisms, “the Commission supports a more uniform and comprehensive consumer choice mechanism for online behavioral advertising,” sometimes referred to as “Do Not Track.”

The most practical way to do that “would likely involve placing a setting similar to a persistent cookie on a consumer’s browser, and conveying that setting to sites that the browser visits, to signal whether or not the consumer wants to be tracked or receive targeted advertisements,” according to the testimony.

The testimony states that such a mechanism could be accomplished through legislation or potentially through robust, enforceable self-regulation. “If Congress chooses to enact legislation, the Commission urges Congress to consider several issues,” including:

It should not undermine the benefits online behavioral advertising provides consumers, including funding content and services;
Unlike the FTC’s Do Not Call Registry for telemarketers, it should not require a registry of unique identifiers; rather, the Commission recommends a browser-based mechanism;
It should consider an option that lets consumers choose to opt out completely or to choose certain types of advertising they wish to receive or data they are willing to have collected about them;
The mechanism should be simple, and easy to find and use;
The FTC should be given Administrative Procedures Act rulemaking and the ability to fine violators to “provide a strong incentive for companies to comply with any legal requirements, helping to deter future violations.”

The Commission vote approving the testimony and its inclusion in the formal record was 4-1, with Commissioner William E. Kovacic dissenting. Copies of the testimony 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 1,800 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.

(FTC File No. P095416)
(DNTTestimony.final)

FTC Charges Marketers with Making Unsubstantiated Claims that They Could Eliminate Consumers Debt

As part of its continuing crackdown on scams that target consumers in financial distress, the Federal Trade Commission has charged three debt relief operations with making unsubstantiated claims to lure consumers nationwide into paying thousands of dollars in up-front fees, but failing to reduce credit card debts as promised.

According to the FTC’s two complaints, the defendants made deceptive claims that consumers who enrolled in their programs could eliminate 30 to 60 percent of their credit card debt and be out of debt in 18 to 36 months. The defendants marketed their services via websites and TV and radio ads that urged consumers to call toll-free numbers for a free consultation and to enroll in their debt relief programs. One operation claimed to use “secret programs most credit card companies won’t tell you about.” The other operation touted its “established relationships” with creditors and claimed that its program would “save you literally thousands of dollars.” The defendants charged consumers up-front administrative fees, monthly maintenance fees, negotiation fees, and in some instances, a cancellation fee.

The FTC’s complaints charge that few consumers received the promised results. Many consumers canceled or dropped out of the programs before their debt was reduced because they couldn’t afford to pay the defendants’‘ sizable advance fees and accumulate money to pay off their debts.

Consumers looking for help with credit card debt should be wary of anyone who tells them to stop paying their bills, to pay someone other than their creditors, or to stop talking to their creditors. Consumers should also be careful about paying for financial assistance before they receive it. The FTC recently announced changes to the Telemarketing Sales Rule that prohibit companies that sell debt relief services over the telephone from charging fees before they settle or reduce a customers’ credit card or other unsecured debt. This ban on advance fees protects all consumers who enroll in a debt relief service after October 27, 2010, and specifies that fees for debt relief services may not be collected until:

the debt relief service successfully settles or changes the terms of at least one of the consumer’s debts;
there is a settlement agreement, debt management plan, or other agreement between the consumer and the creditor that the consumers has agreed to; and
the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

The new provisions of the Rule also prevent debt relief providers from front-loading their fees if a consumer has enrolled multiple debts in one debt relief program. Click here for more information about the advance-fee ban. In addition, the Rule requires debt relief providers to make truthful and substantiated claims about their services. The FTC will actively enforce the Rule and these new provisions, as will the states, which also have enforcement authority under the Telemarketing Sales Rule.

The defendants in one of the two cases announced today are Financial Freedom of America, Inc., now known as Financial Freedom Processing Inc., Corey Butcher, and Brent Butcher. The second case names Debt Consultants of America Inc., Debt Professionals of America Inc., Robert Creel, Corey Butcher, and Nikki Creel, also known as Nikki Vrla.

The Commission vote to file the complaints was 5-0. The complaints were filed in the U.S. District Court for the Northern District of Texas, Dallas Division.

Click here for facts about settling credit card debts.

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 1,800 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.

(FTC File Nos. 0923056, 0923152)
(Financial Freedom, Debt Consultants)

FTC Testifies on Antitrust Enforcement in the Health Care Industry

The Federal Trade Commission testified today before Congress on how it protects and promotes competition in the health care industry to help make sure U.S. consumers get high-quality care at competitive prices. Continuing effective antitrust enforcement is a critical part of any plan to improve the health care system, according to the testimony. The testimony also describes the FTC’s efforts, along with other agencies, to provide guidance on how health care professionals can form collaborations envisioned under the Affordable Care Act consistent with the antitrust laws.

Before the U.S. House Judiciary Committee’s Subcommittee on Courts and Competition Policy, the FTC’s Bureau of Competition Director Richard Feinstein said antitrust enforcement improves health care by preventing or stopping anticompetitive agreements to raise prices, and fostering competition that spurs innovation, improves quality, and expands patients’ access to care.

“The FTC has an important role to play: by protecting and promoting competition we can help to lower costs and improve quality. Years of experience have shown us that continued effective antitrust enforcement is a necessary component of any plan to improve health care,” Feinstein said.

Chief among the anticompetitive tactics targeted by the FTC are “pay-for-delay” drug patent settlements, in which a branded drug company compensates a generic competitor for not bringing its lower-cost drug to market for a certain period of time. This tactic delays patient access to less-expensive generic drugs, and the FTC has estimated that it costs U.S. consumers $3.5 billion a year.

The testimony explains how the FTC has worked to preserve competition in health care markets by carefully scrutinizing a number of proposed deals involving hospitals, drug manufacturers, and medical device makers. In one case, the FTC challenged the proposed merger of Inova Health System and Prince William Hospital in Virginia in 2008. After the Commission and the Virginia Attorney General sued to block the deal, the companies abandoned their planned merger.

The testimony also explains that antitrust laws do not act as barriers to health care provider collaborations that could lower costs and improve quality. Instead, the FTC has challenged price-fixing and boycott agreements in which health care providers jointly seek to increase the fees they get from health plans. However, bona fide, efficiency-enhancing joint ventures are not necessarily anticompetitive.

Finally, the testimony addresses Accountable Care Organizations, or ACOs. The Affordable Care Act encourages the formation of ACOs, to allow a variety of market participants to provide coordinated patient care that can improve quality and lower costs. To examine the competitive issues created by the development of ACOs, the FTC recently held a workshop with other federal agencies and interested stakeholders. The workshop was part of the FTC’s ongoing effort to provide clarity and guidance to the health care community as it moves forward in implementing the new health care law.

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 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” at http://www.ftc.gov/competitioncounts.

(FTC File No. P859910)
(Antitrust HC Testimony.final.wpd)

FTC Staff Issues Privacy Report, Offers Framework for Consumers, Businesses, and Policymakers

The Federal Trade Commission, the nation’s chief privacy policy and enforcement agency for 40 years, issued a preliminary staff report today that proposes a framework to balance the privacy interests of consumers with innovation that relies on consumer information to develop beneficial new products and services. The proposed report also suggests implementation of a “Do Not Track” mechanism – likely a persistent setting on consumers’ browsers – so consumers can choose whether to allow the collection of data regarding their online searching and browsing activities.

“Technological and business ingenuity have spawned a whole new online culture and vocabulary – email, IMs, apps and blogs – that consumers have come to expect and enjoy. The FTC wants to help ensure that the growing, changing, thriving information marketplace is built on a framework that promotes privacy, transparency, business innovation and consumer choice. We believe that’s what most Americans want as well,” said FTC Chairman Jon Leibowitz.

The report states that industry efforts to address privacy through self-regulation “have been too slow, and up to now have failed to provide adequate and meaningful protection.” The framework outlined in the report is designed to reduce the burdens on consumers and businesses.

“This proposal is intended to inform policymakers, including Congress, as they develop solutions, policies, and potential laws governing privacy, and guide and motivate industry as it develops more robust and effective best practices and self-regulatory guidelines,” according to the report, which is titled, “Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for Businesses and Policymakers.”

Leibowitz added that the FTC, in addition to making policy recommendations, “will take action against companies that cross the line with consumer data and violate consumers’ privacy – especially when children and teens are involved.”

The FTC staff developed the proposed framework in recognition of increasing advances in technology that allow for rapid data collection and sharing that is often invisible to consumers. Although many companies use privacy policies to explain their information practices, the policies have become long, legalistic disclosures that consumers usually don’t read and don’t understand if they do. Current privacy policies force consumers to bear too much burden in protecting their privacy.

To reduce the burden on consumers and ensure basic privacy protections, the report first recommends that “companies should adopt a ‘privacy by design’ approach by building privacy protections into their everyday business practices.” Such protections include reasonable security for consumer data, limited collection and retention of such data, and reasonable procedures to promote data accuracy. Companies also should implement and enforce procedurally sound privacy practices throughout their organizations, including assigning personnel to oversee privacy issues, training employees, and conducting privacy reviews for new products and services.

Second, the report states, consumers should be presented with choice about collection and sharing of their data at the time and in the context in which they are making decisions – not after having to read long, complicated disclosures that they often cannot find. The report adds that, to simplify choice for both consumers and businesses, companies should not have to seek consent for certain commonly accepted practices. It is “reasonable for companies to engage in certain practices – namely, product and service fulfillment, internal operations such as improving services offered, fraud prevention, legal compliance, and first-party marketing,” the report states. “By clarifying those practices for which consumer consent is unnecessary, companies will be able to streamline their communications with consumers, reducing the burden and confusion on consumers and businesses alike.”

One method of simplified choice the FTC staff recommends is a “Do Not Track” mechanism governing the collection of information about consumer’s Internet activity to deliver targeted advertisements and for other purposes. Consumers and industry both support increased transparency and choice for this largely invisible practice. The Commission recommends a simple, easy to use choice mechanism for consumers to opt out of the collection of information about their Internet behavior for targeted ads. The most practical method would probably involve the placement of a persistent setting, similar to a cookie, on the consumer’s browser signaling the consumer’s choices about being tracked and receiving targeted ads.

The report also recommends other measures to improve the transparency of information practices, including consideration of standardized notices that allow the public to compare information practices of competing companies. The report recommends allowing consumers “reasonable access” to the data that companies maintain about them, particularly for non-consumer facing entities such as data brokers. Finally, FTC staff proposes that stakeholders undertake a broad effort to educate consumers about commercial data practices and the choices available to them.

The vote approving the preliminary staff report was 5-0, with Commissioners William E. Kovacic and J. Thomas Rosch issuing concurring statements. Public comments on the report will be accepted until January 31, 2011. To file a public comment electronically, please click here and follow the instructions.

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 1,800 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.

FTC Chairman to Hold Telephone Press Availability on New Privacy Report

The Federal Trade Commission will issue a report on privacy at 11 a.m. today, outlining a new framework for consumers, businesses and policymakers. Following the announcement of the report, the FTC’s Chairman, Deputy Director of Consumer Protection, and Chief Technologist will hold a media availability at 1 p.m. to answer reporters’ questions.

WHO:	Jon Leibowitz, Chairman Jessica Rich, Deputy Director, Bureau of Consumer Protection Edward W. Felten, Chief Technologist Federal Trade Commission
WHEN:	Wednesday, December 1, 2010, 1 p.m. ET Dial-in: United States: (800) 398-9367 International: (612) 332-0820 Confirmation Number: 182971 Host: Cecelia Prewett Call-in lines are for press only
CONTACT:	FTC Office of Public Affairs 202-326-2180

WHO:

Jon Leibowitz, Chairman
Jessica Rich, Deputy Director, Bureau of Consumer Protection
Edward W. Felten, Chief Technologist
Federal Trade Commission

WHEN:

Wednesday, December 1, 2010, 1 p.m. ET

Dial-in:
United States: (800) 398-9367
International: (612) 332-0820
Confirmation Number: 182971
Host: Cecelia Prewett
Call-in lines are for press only

CONTACT:

FTC Office of Public Affairs
202-326-2180

Questions will be restricted to media only

FTC Challenges LabCorp’s Acquisition of Rival Clinical Laboratory Testing Company

As part of its ongoing efforts to ensure competition in U.S. health care markets, the Federal Trade Commission today challenged Laboratory Corporation of America’s $57.5 million acquisition of rival clinical laboratory testing company Westcliff Medical Laboratories, Inc., alleging that the transaction would harm competition in Southern California.

“Competition is one of the keys to keeping health care costs under control and ensuring that patients receive high-quality care, and laboratory services are an essential part of that,” said Richard Feinstein, Director of the FTC’s Bureau of Competition. “Physicians use lab testing to help diagnose patients and accurately evaluate their conditions, and the FTC is committed to protecting competition in this important sector.”

The FTC has issued an administrative complaint charging that LabCorp’s acquisition of Westcliff, which was completed June 16, 2010, violates antitrust laws and would lead to higher prices and lower quality in the Southern California market for the sale of clinical laboratory testing services to physician groups.

The complaint also alleges that LabCorp’s acquisition of Westcliff would leave only two significant laboratories in Southern California competing to provide critical testing services to most physician groups. LabCorp and Westcliff, along with a third competitor, Quest Diagnostics Incorporated, currently serve the vast majority of the physician groups in the region. The transaction would leave LabCorp and Quest in control of approximately 89 percent of the market, according to the FTC’s complaint.

LabCorp and Westcliff perform clinical laboratory testing services at the request of patients’ individual physicians, but the ultimate payer varies depending on the patient’s health plan. In California, physician groups typically contract to pay for laboratory tests performed for patients in health maintenance organizations. Usually, a physician group will contract on a per-member, per-month basis, known as “capitation.” Some physician groups pay laboratories for each individual test, known as “fee-for-service.”

According to the FTC complaint, Westcliff is an upstart competitor that has been expanding its share of physician group business and has priced its capitated laboratory testing services to physician groups more aggressively than its most significant competitors, LabCorp and Quest. In several instances, the complaint states, Westcliff thwarted LabCorp’s attempts to raise prices by offering lower capitated contract rates to physician groups.

LabCorp’s acquisition of Westcliff would make it more likely that the only two remaining competitors in the market – LabCorp and Quest – would increase prices. By eliminating competition from Westcliff, the complaint charges, the transaction would deprive physician groups of leverage to keep prices low for clinical laboratory testing services.

The complaint states that it is unlikely that a new competitor would enter or expand into the Southern California market for the sale of clinical laboratory testing services to physician groups sufficient to restore the competition lost as a result of LabCorp’s acquisition of Westcliff.

The Commission vote approving the administrative complaint was 4-1, with the majority issuing a statement. Commissioner J. Thomas Rosch voted no and issued a separate dissenting statement. Both statements can be found on the FTC’s website and as a link to this press release. The FTC’s administrative complaint was issued yesterday, and a public version will be available shortly. The trial is scheduled before an Administrative Law Judge at the FTC, beginning on May 2, 2011.

The FTC also is filing an action in federal court to prevent LabCorp from integrating the Westcliff assets while the case is being tried in the administrative court. On June 25, 2010, LabCorp agreed to hold the Westcliff assets separate and apart while the agency investigated the transaction; the FTC is seeking a federal court order requiring LabCorp to continue that separation during the administrative proceeding.

The majority statement explained that the Commission voted to issue the complaint because “We find reason to believe that the acquisition of Westcliff by LabCorp will raise prices for health care for millions of people in Southern California.” The Commission added that “We should not lose sight of the critical fact with which we all agree: this merger merits further scrutiny.”

In his dissent, Commissioner Rosch wrote that “I do not fault my colleagues for voting out the product market alleged in the complaint where, as here, they have been put in an untenable position: either they accept the complaint’s improper definition of the relevant product market, or, alternatively, they must conclude that they currently lack reason to believe that the merger violates the antitrust laws.”

NOTE: The Commission issues or files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the named parties have violated the law. The administrative complaint marks the beginning of a proceeding in which the allegations will be ruled upon after a formal hearing by an administrative law judge.

(FTC File No. 101-0152)
(LabCorp.final)

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