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Technology Officer of PayDay Loan Marketer Settles FTC Charges That PayDay Loan Websites Were Unfair and Deceptive

The technology officer of a payday loan marketer has agreed to pay $850,000 to settle FTC charges for his role in an allegedly deceptive and unfair scheme that allegedly debited the bank accounts of hundreds of thousands of cash-strapped consumers in violation of federal law.

The FTC has been closely monitoring payday lending and other types of financial services as part of a broad campaign to protect consumers made vulnerable by the financial downturn.

According to the FTC complaint, Swish Marketing Inc., and its three officers, Mark Benning, Matthew Patterson, and Jason Strober, operated websites advertising short-term, or “payday,” loan matching services. The websites included an online loan application form that tricked consumers into unknowingly ordering a debit card when they applied for a loan online. . On numerous 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 the consumer’s consent to have their bank account debited. Consumers who simply 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 allegedly were improperly charged up to $54.95 each.

In August 2009, the FTC charged these marketers and VirtualWorks LLC, the debit card company that helped them design the online offers, with deceptive business practices. The debit card company paid Swish Marketing up to $15 for each transaction. The debit card company defendants have settled the charges against them. (See http://www.ftc.gov/opa/2009/08/everprivate.shtm)

In April 2010, the FTC filed an amended complaint against the payday loan marketers, adding an allegation that the defendants sold consumers’ bank account information to the debit card company without the consumers’ consent. The amended complaint further alleges that Benning, Patterson, and Strober were made aware of consumer complaints about the unauthorized debits, as indicated in their e-mail and instant messages. For example, Patterson explained that consumers were going “ballistic” about the debit because the offer was defaulted to yes . . . and customers don’t see it.” More than six months after first learning of the complaints, Benning allegedly described the practice of defaulting to “Yes” as “fraud and identity theft.”

The settlement order announced today with Jason Strober, the Vice President of Product Development and/or Engineering of Swish Marketing, bars him from misrepresenting material facts about a product or service, such as the cost or the method for charging consumers. He also is permanently prohibited from misrepresenting that a product or service is free or a “bonus” without disclosing all material terms and conditions, and from 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. The order further requires that transactions be affirmatively authorized by consumers, and that Strober, in marketing financial products or services, monitor his affiliates to ensure compliance with the order. He also is required to provide specific cooperation to the FTC in its ongoing litigation. In addition, the order requires him to pay $850,000.

The Commission vote to file the amended complaint and the stipulated final order as to Strober was 5-0. The order was filed and entered in the U.S. District Court for the Northern District of California, San Jose Division. Litigation will continue against the remaining defendants.

NOTE: Stipulated final 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 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 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. 0723241)
(Ever Private Card)

FTC Approves FY 2009 HSR Premerger Notification Report; FTC Approves Final Order Settling Charges that Novartis AGs Acquisition of Alcon, Inc. Was Anticompetitive in U.S. Eye Care Market

FTC Approves FY 2009 HSR Premerger Notification Report

The Federal Trade Commission, with the concurrence of the U.S. Assistant Attorney General for Antitrust, has approved and released the Thirty-Second Annual Report Regarding the Hart-Scott-Rodino Premerger Notification Program. The report summarizes Commission and Department of Justice actions conducted under the HSR Act in fiscal year 2009. During FY 2009 (October 1, 2008 through September 30, 2009), 716 premerger transactions were reported under the HSR Act; this is a decrease of 59 percent from the 1,726 transactions reported in FY 2008. The report describes the HSR Act and provides an overview of how the federal antitrust agencies have implemented the Act since its enactment in the late 1970s.

In addition to summarizing enforcement activities in FY 2009, the report reviews the agencies’ activities to insure that companies are complying with the Premerger Notification Rules and Procedures. Finally, the report concludes with an assessment that, as Congress intended, the HSR Act continues to give the government the opportunity to investigate and challenge mergers that are likely to harm consumers before the injury occurs. Appendices provide a summary of transactions for fiscal years 2000-2009, and the number of transactions reported as filings by month during this time. A statistical table presents data profiling HSR filings and enforcement interest during FY 2009.

The Commission vote to issue the report was 5-0. It is available on the FTC’s website and as a link to this press release at http://www.ftc.gov/os/2010/10/101001hsrreport.pdf. (FTC File No. P110014; the staff contact is Stefano Sciolli, Bureau of Competition, 202-326-2740.)

FTC Approves Final Order Settling Charges that Novartis AG’s Acquisition of Alcon, Inc. Was Anticompetitive in U.S. Eye Care Market

Following a public comment period, the Federal Trade Commission has approved a final order settling charges that Novartis AG’s acquisition of Alcon, Inc., as proposed, would have been anticompetitive in the U.S. market for certain eye care treatments. Novartis and Alcon are the only two U.S. providers of the class of drugs known as injectable miotics, and the FTC alleged that the acquisition would have created a monopoly in the market for these drugs. To preserve competition, the settlement requires Novartis to sell its drug Miochol-E to Bausch & Lomb, Inc.

The Commission vote approving the final order was 4-0-1, with Commissioner William E. Kovacic recused. (FTC File No. 101-0068; Docket No. C-4296; the staff contact is Kari A. Wallace, Bureau of Competition, 202-326-3085. See press release dated August 16, 2010 at http://www.ftc.gov/opa/2010/08/novartis.shtm.)

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 39.2010.wpd)

Victims of Suntasia Telemarketing Scam Sent Second Round of Redress Checks

Starting today, a second round of reimbursement checks will be mailed to consumers nationwide who were victimized by a fraudulent telemarketing scheme operated by Suntasia Marketing in Largo, Florida. An administrator working for the Federal Trade Commission will send approximately $5.7 million to consumers who were charged for one or more Suntasia programs, with the average check totaling $33.17. According to the FTC, between 1999 and July 2007, Suntasia deceptively marketed a series of memberships in buyers’ and travel clubs to nearly one million consumers nationwide.

In January 2010, the FTC redress administrator sent the first round of Suntasia redress checks to consumers. More than 356,000 checks totaling $14.1 million were distributed nationwide (see press release at http://www.ftc.gov/opa/2010/01/suntasia.shtm). Consumers who received and cashed a check valued at more than $10 during the first round of redress payments are eligible to receive a second check.

The reimbursement checks stem from a December 2008 settlement in which the Suntasia defendants agreed to pay more than $11 million in cash to the FTC and also to turn over various property to be sold, including the Largo facility where they operated their business (see press release at: http://www.ftc.gov/opa/2009/01/suntasia.shtm).

The FTC charged that Suntasia called consumers to offer supposedly “free” trial memberships in its programs. The company then deceived consumers into disclosing their bank account information and later debited funds from their bank accounts without authorization. Using what are known as “negative option” programs, Suntasia took consumers’ silence or failure to cancel as acceptance of the offer and permission to debit funds from their accounts. In debiting consumers’ bank accounts, Suntasia used several different names, including: Distinct Advantage, Freedom Gold, Variety!, Credit Life, Capital Vacations, Agents Travel Network, Florida Passport, Travel Agents Go Direct, Floridaway, Freedom Ring ULD, and Lucid Long Distance.

Wachovia Bank, N.A., which processed many of the remotely created checks, or “demand drafts,” used in the Suntasia scheme, already has mailed out approximately $33 million in restitution to Suntasia victims (see http://www.ftc.gov/opa/2009/01/wachovia.shtm). It is possible that consumers who already received a restitution check from Wachovia may receive an additional check from the FTC claims administrator if some of their payments to Suntasia were processed by a bank other than Wachovia.

The Suntasia redress checks must be cashed by November 15, 2010, after which the checks will become void. These are legitimate checks, and the FTC urges consumers to cash them. They can be cashed directly by the recipients of the checks. The FTC never requires the payment of money up-front, or the provision of additional information, before consumers cash redress checks issued to them. Consumers should call 1-800-427-5290 with any questions.

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. X070036; Civ. No. 8:07-cv-1279-T-30TGW)
(Suntasia Redress 2.final)

At FTC’s Request, Court Permanently Shuts Down Massive Cramming Operation; Orders Defendants to Refund Almost $38 Million in Unauthorized Charges Placed on Consumers’ Phone Bills

At the request of the Federal Trade Commission, a U.S. district court has permanently shut down the illegal operations of a firm that placed bogus charges on the telephone bills of thousands of small businesses and consumers for Internet-related services they never agreed to buy. The court has barred the defendants from charging consumers’ telephone bills and barred them from telemarketing unless they get prior approval from the FTC and the court. It also ordered third parties through which charges were placed, including local exchange telephone companies, or LECs, to return money in escrow to consumers, and ordered the defendants to pay nearly $38 million in restitution for consumers.

In January 2010 the FTC sued Inc21, charging that the company hired offshore telemarketers to call prospective clients to sell its Web-based services. The defendants then used LECs to place charges, usually between $12.95 and $39.95 per month, for those services on the phone bills of consumers and businesses that either:

were told by telemarketers that the call was only to verify business information;
declined Inc21’s offer of Internet services; or
were told they would receive a free trial offer, but were not informed that they would be charged if they did not cancel.

The FTC charged that the defendants violated the FTC Act and the Telemarketing Sales Rule (TSR).

In his opinion, Judge William Alsup agreed and granted the FTC’s motion for summary judgment. “The FTC has produced overwhelming evidence that defendants’ practice of billing tens of thousands of businesses and consumers via their telephone bills – a fraud-friendly practice called ‘LEC billing’– was both deceptive and unfair,” the judge’s opinion states. “The most compelling proof of these violations is a comprehensive expert survey of 1,087 of defendants’ so-called ‘customers.’ This survey revealed that nearly 97 percent of defendants’ ‘customers’ had not agreed to purchase defendants’ products. Even more egregious, only five percent of them were even aware that they had been billed.”

“Indeed, over a five-year span from 2004 through 2009, defendants successfully extracted over $37 million in unauthorized payments from the telephone bills of unsuspecting businesses and consumers,” the judge wrote.

“As for defendants’ telemarketing activities, the FTC’s evidence is equally compelling. Taken together, the FTC has easily met its burden of demonstrating that the TSR has been violated,” Judge Alsup’s order states.

“In short, the record contains mountains of undisputed evidence showing fraud at every step of defendants’ telemarketing process,” Judge Alsup wrote.

Inc21.Com Corporation; Jumpage Solutions, Inc.; GST U.S.A., Inc.; Roy Yu Lin and John Yu Lin were the defendants named in this matter. Sheng Lin, who did not participate in the scheme, but who profited from it, was named as a relief defendant and ordered to give up $434,000 in financial benefits he received from the defendants’ unlawful practices.

The FTC thanks the United States Attorney’s Office for the Northern District of California, the United States Postal Inspection Service, and the Internal Revenue Service, Criminal Investigation Division for their work in connection with the case.

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

FTC Staff Expresses Support for Proposed Modification to New Jersey Gasoline Pricing Law; FTC Approves Modified Final Order Settling Charges that PepsiCos Acquisition of Pepsi Bottling Group and PepsiAmericas was Anticompetitive

FTC Staff Expresses Support for Proposed Modification to New Jersey Gasoline Pricing Law

The staff of the Federal Trade Commission’s Office of Policy Planning, Bureau of Economics, and Bureau of Competition has submitted comments to the New Jersey State Senate expressing support for Senate Bill 484, which would modify current law to allow gasoline retailers to set their prices below cost in certain circumstances. Current New Jersey law prohibits a “retail dealer” from selling motor fuel “at a price which is below the net cost of such motor fuel to the retail dealer plus all selling expenses.”

The proposed legislation would change New Jersey law to allow below-cost pricing to meet competition, so long as such prices are not set “with intent to injure competition or destroy or substantially lessen competition.” The FTC staff explained that because below-cost pricing can benefit consumers, and because the proposed legislation would allow New Jersey gasoline retailers to compete more aggressively on price, New Jersey consumers will likely benefit from the proposed legislation.

The Commission vote approving the staff letter to the New Jersey State Senate was 5-0. It is available on the FTC’s website and as a link to this press release at http://www.ftc.gov/os/2010/09/100928gasolineretailers.pdf. (FTC File No. V100011; the staff contact is Gustav P. Chiarello, Office of Policy Planning, 202-326-2633.)

FTC Approves Modified Final Order Settling Charges that PepsiCo’s Acquisition of Pepsi Bottling Group and PepsiAmericas was Anticompetitive

Following a public comment period, the Federal Trade Commission has approved a modified final order settling charges that PepsiCo, Inc.’s, acquisition of bottler-distributors Pepsi Bottling Group, Inc. and PepsiAmericas, Inc., was anticompetitive. The order requires PepsiCo to restrict its access to confidential commercially sensitive business information of rival Dr Pepper Snapple Group as a condition for proceeding with the $7.8 billion acquisition of its two largest bottlers. In its February 2010 complaint, the FTC charged that PepsiCo’s unrestricted access to this information would have harmed competition in concentrate and carbonated soft drink markets throughout the United States.

The modified final order includes a new provision that requires PepsiCo – for bottler acquisitions that do not require premerger notification – to give the FTC 45 days advance notice of proposed acquisitions of bottlers that have been distributing both PepsiCo and Dr Pepper Snapple brands. As long as PepsiCo complies with this notice provision, and unless the Commission takes action to enjoin any such acquisition, PepsiCo will be allowed to complete the acquisition as well as use confidential commercially sensitive Dr Pepper Snapple information, consistent with the limitations of the consent order. Without the modified language of the final order, PepsiCo would have been required to seek Commission modification of the original consent order for each new bottler deal. The FTC also has approved a monitor agreement and appointed Eric A. Croson, as the monitor, to ensure PepsiCo complies with the terms of the final order.

The Commission vote approving the modified final order, monitor agreement, and monitor appointment was 4-0-1, with Commissioner Edith Ramirez recused. (FTC File No. 091-0133; the staff contact is Joseph S. Brownman, Bureau of Competition, 202-326-2605. See press release dated February 26, 2010 at http://www.ftc.gov/opa/2010/02/pepsi.shtm.)

(FYI 38.2010.wpd)

Victims of Bogus Debt Negotiation Scam to Receive Refund Payments

An administrator working for the Federal Trade Commission is mailing checks to 360 consumers who were victims of Innovative Systems Technology doing business as Briggs & Baker, an operation that claimed it could “drastically” reduce consumers’ debt by negotiating directly with creditors. The FTC charged that Briggs & Baker’s ads were false and misleading and that as a result of purchasing its debt negotiation services, consumers’ credit ratings suffered, their total debt increased, and that some consumers even became the target of legal action.

The FTC is sending refund checks for $104.09 to Briggs & Baker customers.

These consumer refund checks can be cashed directly by the recipients of the checks. The FTC never requires the payment of money up-front, or the provision of additional information, before consumers cash refund checks issued to them.

Consumers who have questions or believe they were victims of Briggs & Baker, but who did not receive a refund check from the FTC may contact the fund administrator at 1-866-535-1622.

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.

(Briggs&Baker)

FTC Complaint Charges Deceptive Advertising by POM Wonderful

As part of its ongoing efforts to uncover over-hyped health claims in food advertising, the Federal Trade Commission has issued an administrative complaint charging the makers of POM Wonderful 100% Pomegranate Juice and POMx supplements with making false and unsubstantiated claims that their products will prevent or treat heart disease, prostate cancer, and erectile dysfunction.

The FTC complaint charges that POM Wonderful LLC, sister corporation Roll International Corp., and principals Stewart Resnick, Lynda Resnick, and Matthew Tupper violated federal law by making deceptive disease prevention and treatment claims. The ads in question appeared in national publications such as Parade, Fitness, The New York Times, and Prevention magazines; on Internet sites such as pomtruth.com, pomwonderful.com, and pompills.com; on bus stops and billboards; in newsletters to customers; and on tags attached to the product. POM Wonderful Pomegranate Juice is widely available at grocery stores nationwide, and a 16 oz. bottle retails for approximately $3.99. POMx pills and liquid extract are sold via direct mail, with a one-month supply costing approximately $30.

“Any consumer who sees POM Wonderful products as a silver bullet against disease has been misled,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “When a company touts scientific research in its advertising, the research must squarely support the claims made. Contrary to POM Wonderful’s advertising, the available scientific information does not prove that POM Juice or POMx effectively treats or prevents these illnesses.”
The advertisements touted POM Juice and POMx supplements with statements such as:

“SUPER HEALTH POWERS! … 100% PURE POMEGRANATE JUICE. … Backed by $25 million in medical research. Proven to fight for cardiovascular, prostate and erectile health.”
“NEW RESEARCH OFFERS FURTHER PROOF OF THE HEART-HEALTHY BENEFITS OF POM WONDERFUL JUICE. 30% DECREASE IN ARTERIAL PLAQUE … 17% IMPROVED BLOOD FLOW … PROMOTES HEALTHY BLOOD VESSELS … ”
“Prostate health. Prostate cancer is the most commonly diagnosed cancer among men in the United States and the second-leading cause of cancer death in men after lung cancer.
Time pill. Stable levels of prostate-specific antigens (or PSA levels) are critical for men with prostate cancer. Patients with quick PSA doubling times are more likely to die from their cancer. According to a UCLA study of 46 men age 65 to 70 with advanced prostate cancer, drinking an 8 oz glass of POM Wonderful 100% Pomegranate Juice every day slowed their PSA doubling time by nearly 350%. … 83% of those who participated in the study showed a significant decrease in their cancer regrowth rate.”
“You have to be on pomegranate juice. You have a 50 percent chance of getting [prostate cancer]. Listen to me. It is the one thing that will keep your PSA normal. You have to drink pomegranate juice. There is nothing else we know of that will keep your PSA in check. … It’s also 40 percent as effective as Viagra.” The FTC’s administrative complaint against POM Wonderful alleges that these claims are false and unsubstantiated:
Clinical studies prove that POM Juice and POMx prevent, reduce the risk of, and treat heart disease, including by decreasing arterial plaque, lowering blood pressure, and improving blood flow to the heart;
Clinical studies prove that POM Juice and POMx prevent, reduce the risk of, and treat prostate cancer, including by prolonging prostate-specific antigen doubling time;
Clinical studies prove that POM Juice prevents, reduces the risk of, and treats, erectile dysfunction.

The FTC complaint alleges that POM Wonderful’s heart disease claims are false and unsubstantiated because many of the scientific studies conducted by POM Wonderful did not show heart disease benefit from use of its products. It alleges that the prostate cancer claims are false and unsubstantiated because, among other reasons, the study POM Wonderful relied on was neither “blinded” nor controlled. Finally, it alleges that the erectile dysfunction claims are false and unsubstantiated because the study on which the company relied did not show that POM Juice was any more effective than a placebo.

The complaint sets forth a proposed order that would prevent future law violations by POM Wonderful. In part, the proposed order would require that future claims that any pomegranate-based product cures, prevents, treats, or reduces the risk of any disease not be misleading and comply with Food and Drug Administration regulations for the claim. Although FDA approval of health claims generally is not required for compliance with the FTC Act, the proposed order would require FDA pre-approval before POM Wonderful makes future claims that certain products prevent or treat serious diseases, in order to provide clearer guidance for the company, facilitate POM Wonderful’s compliance with the proposed order, and make it easier to enforce. The complaint also proposes to prohibit the respondents from making any other health claim about any food, drug, or dietary supplement without competent and reliable scientific evidence.

In a related case, Mark Dreher, POM Wonderful’s former head of scientific and regulatory affairs and expert endorser, has agreed to a settlement that bars him from making any disease treatment or prevention claims in advertising for a POM Wonderful product unless the claim is not misleading and comports with FDA requirements for the claim. The settlement also prohibits Dreher from making other health claims for a food, drug, or dietary supplement for human use without competent and reliable scientific evidence to support the claim. The settlement contains a cooperation clause and reporting provisions to assist the FTC in monitoring compliance with the order.

The FTC votes to approve the two administrative complaints, the notice order against the proposed respondents, and the proposed consent agreement with Dreher were 5-0.

Copies of the POM Wonderful complaint and notice order, and of the Dreher complaint and consent agreement, are available from the FTC’s website at http://www.ftc.gov and the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The Dreher consent agreement will be subject to public comment for 30 days, until October 27, 2010, after which the Commission will decide whether to make it final. Written comment should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. To file a public comment electronically, please click on the following hyperlink: https://ftcpublic.commentworks.com/ftc/markdreher.

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 respondents have actually violated the law. A hearing will be held before the administrative law judge in eight months. The consent agreement is for settlement purposes only and does not constitute an admission by respondents 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.

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. 0823122)
(POM NR)

FTC Puts Conditions on Coca-Cola’s $12.3 Billion Acquisition of its Largest North American Bottler

The Federal Trade Commission today announced that it will require The Coca-Cola Company to restrict its access to confidential competitive business information of rival Dr Pepper Snapple Group as a condition for completing Coca-Cola’s proposed $12.3 billion acquisition of its largest North American bottler, which also distributes Dr Pepper Snapple carbonated soft drinks.

Under a settlement with the FTC, Coca-Cola will set up a “firewall” to ensure that its ownership of the bottling company does not give certain Coca-Cola employees access to commercially sensitive confidential Dr Pepper Snapple marketing information and brand plans. In a complaint filed with the settlement, the FTC charged that access to this information likely would have harmed competition in the U.S. markets for carbonated soft drinks. On February 26, 2010, the FTC approved a proposed settlement order in which PepsiCo agreed to set up a similar information firewall after acquiring its two largest bottlers and distributors (see press release at http://www.ftc.gov/opa/2010/02/pepsi.shtm).

Coca-Cola agreed on February 25, 2010, to acquire the North American operations of Coca-Cola Enterprises Inc., its largest North American bottler, for $12.3 billion. When the agreement was announced, Coca-Cola already owned about 34 percent of Coca-Cola Enterprises. After the acquisition is completed, the North American operations of Coca-Cola Enterprises will be known as Coca-Cola Refreshments USA, Inc.

In a related deal, after Coca-Cola agreed to acquire Coca-Cola Enterprises, it sought a license to continue to bottle and distribute the Dr Pepper Snapple brands that Coca-Cola Enterprises had distributed, including Dr Pepper brand products and Canada Dry products, in specific franchised geographic areas. Coca-Cola paid $715 million for the exclusive 20-year distribution license.

According to the FTC’s complaint, Coca-Cola and Dr Pepper Snapple are direct competitors in the highly concentrated and difficult-to-enter markets for branded soft drink concentrate and branded carbonated soft drinks sold in stores. In all, the total sales of soft drink concentrate in the United States are about $9 billion annually, and the total U.S. sales of soft drinks sold by retailers are about $70 billion.

Dr Pepper Snapple will provide the commercially sensitive information about its marketing plans to Coca-Cola Refreshments USA, the newly created Coca-Cola bottling subsidiary. Dr Pepper Snapple currently provides the same sensitive information to Coca-Cola Enterprises to help it perform its bottler and distribution functions, according to the complaint. According to the complaint, Coca-Cola’s access to this information could harm consumers by eliminating competition between Coca-Cola and Dr Pepper Snapple.

The FTC’s proposed settlement order is designed to remedy these potential problems by requiring Coca-Cola to set up a “firewall” so the sensitive information cannot be accessed by anyone at Coca-Cola who may be in a position to use it against Dr Pepper Snapple. The proposed Coca-Cola order will expire in 20 years.

The FTC vote approving the complaint and proposed consent order was 4-0-1, with Commissioner Edith Ramirez recused. The order will be published in the Federal Register shortly, and will be subject to public comment for 30 days, until October 27, 2010, after which the Commission will decide whether to make it final. Comments can be submitted electronically at the following link: https://ftcpublic.commentworks.com/ftc/coca-cola.

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 Web site 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 383, 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. 101-0107)
(Coke.final.wpd)

Per Congress, FTC Rescinds Regulations on Smokeless Tobacco, Authority to Move to HHS

In the wake of legislation passed by Congress last year, the Federal Trade Commission will rescind its regulations governing the format and display of health warnings on smokeless tobacco packages and advertising. The FTC was given the authority to issue these regulations under the Comprehensive Smokeless Tobacco Health Education Act of 1986, which also directed the FTC to review and approve plans specifying how smokeless tobacco companies planned to comply with the Act’s requirement to display health warnings on a rotating basis.

In a notice that will be published shortly in the Federal Register, the FTC notes that the 2009 Family Smoking Prevention and Tobacco Control Act revised the mandatory health warnings, issued new size, format, and display requirements for those warnings, and transferred authority for review and approval of rotational warning plans from the FTC to the Department of Health and Human Services. Due to the transfer of authority, the Commission’s regulations no longer serve any purpose and are being rescinded.

The Commission vote authorizing the Federal Register notice was 5-0. The rescission of the FTC’s regulations, which were found in 16 C.F.R. Part 307, will take effect immediately when the Federal Register notice is published.

The FTC 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.

(FYI smokeless)

FTC Chairman Leibowitz and Commissioner Kovacic to Speak at Fordham International Antitrust Law Conference on September 23 and 24

For Your Information

September 23, 2010

Federal Trade Commission Chairman Jon Leibowitz and Commissioner William E. Kovacic will speak at the Fordham Law 37th Annual Conference on International Antitrust Law and Policy on September 23 and 24, 2010, which is being held at the McNally Amphitheater in New York City.

Chairman Leibowitz will participate in a panel discussion September 23 at 9 a.m. on “Enforcers’ Perspectives on International Antitrust.” Chairman Leibowitz and other panelists will discuss a range of competition and consumer protection issues. Chairman Leibowitz’s remarks will cover:

The FTC’s strengthened cooperative relationship with the Department of Justice’s Antitrust Division, including against pay-for-delay pharmaceutical settlements;
the significance of the new FTC/DOJ horizontal merger guidelines;
the FTC’s enforcement against monopolistic conduct;
the FTC’s increased use of Section 5 of the FTC Act to protect consumers;
new approaches to the protection of personal and data privacy, including through multilateral efforts such as the APEC Cross-border Privacy Initiative and the Global Privacy Enforcement Network; and
the FTC’s continued commitment to working closely with its international partners to achieve sound competition and consumer protection policies that benefit consumers.

Commissioner Kovacic will be featured on a panel on “Competition Policy, Abusive Dominance and Economic Development” on Friday, September 24 at 9 a.m., also at the McNally Amphitheater.

(FordhamPanels FYI.wpd)

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