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‘Telefunder’ to Pay $300,000 for Abandoning Millions of Telemarketing Calls to Potential Charity Donors

The president of a Georgia-based telemarketing company will pay $300,000 to settle Federal Trade Commission charges that his company “abandoned” millions of calls when consumers answered their telephones. The FTC also alleged that the defendants made thousands of illegal calls to consumers who had told the company that they did not wish to be called.

According to the FTC’s complaint, JAK Productions, Inc. and its president John Keller, worked as “telefunders” – for-profit telemarketers who call potential donors seeking donations on behalf of charities. JAK operates out of Atlanta, Georgia, and has used call centers in West Virginia.

It is not illegal for telefunders to call telephone numbers on the FTC’s Do Not Call Registry, but consumers can stop such calls by telling telefunders and charities to place their number on the charity’s internal do-not-call list. All telemarketers, including telefunders like JAK, are required to honor such requests.

Telefunders and other telemarketers are also required to limit their use of automated “predictive” dialers. Such dialers can place calls so rapidly that there are not enough telemarketing representatives to handle the calls when they are answered. When an automated dialer fails to connect a call answered by a person to a live representative of the telemarketer within two seconds, the call is “abandoned.” The FTC’s Telemarketing Sales Rule requires that telemarketers limit the use of these dialers so that they do not abandon more than three percent of the calls that are answered by a person. The Rule also requires that telemarketers connect any calls that are not connected to a live operator to a recording that identifies the caller by name and telephone number.

The FTC’s complaint alleges that JAK violated the Telemarketing Sales Rule by abandoning more than two million calls. The agency also contends that the defendants violated the Telemarketing Sales Rule by making thousands of calls to consumers who had previously asked for their numbers to be placed on the do-not-call list of the charity for which JAK was calling.

The settlements with JAK and Keller prohibit them from violating the Telemarketing Sales Rule and include reporting and monitoring provisions to ensure they comply with the stipulated orders. The order against JAK also imposes a civil penalty of $1.45 million, which has been suspended due to the company’s inability to pay. If it is later found, however, that JAK misrepresented its financial condition, the full amount would immediately become due. The order against Keller requires him to pay a $300,000 civil penalty.

The FTC vote approving the complaint and proposed settlement orders, which took place before Commissioners Ramirez and Brill joined the agency, was 4-0. The complaint and orders were filed by the Department of Justice on the FTC’s behalf on June 29, 2010, in the U.S. District Court for the Northern District of Georgia.

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. Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Stipulated orders have the force of law when signed by the judge.

Copies of the complaint and final orders 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, D.C. 20580. The FTC works for the consumer 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, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related 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. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

(FTC File No. 072-3245; Civ. No. 1-10-cv-2008)
(JAK Productions.final.wpd)

FTC Approves Final Settlement Regarding Agilent Technologies’ Proposed Acquisition of Varian

The Federal Trade Commission has approved a final settlement that resolves competition concerns raised by Agilent Technologies, Inc.’s proposed acquisition of Varian, Inc. and preserves competition in three markets for high-performance scientific measurement instruments. The final order, approved following a public comment period, requires the companies to sell three product lines to settle charges that the transaction would have been anticompetitive.

The FTC vote approving the final settlement order was 5-0. (FTC File No. 091-0135; the staff contact is Richard H. Cunningham, Bureau of Competition, 202-326-2214. See press release dated May 14, 2010 at http://www.ftc.gov/opa/2010/05/agilent.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.

FTC Obtains Court Order Halting International Scheme Responsible For More Than $10 Million In Unauthorized Charges On Consumers’ Credit and Debit Cards

At the request of the Federal Trade Commission, a federal court has halted an elaborate international scheme that used identity theft to place more than $10 million in bogus charges on consumers’ credit and debit cards, pending a trial. More than a million consumers were hit with one-time charges of $10 or less, and their payments were routed through dummy corporations in the United States to bank accounts in Eastern Europe and Central Asia.

The defendants, using phony company names resembling real companies, and information taken from identity theft victims in the United States, opened more than 100 merchant accounts with companies that process charges to consumers’ credit and debit card accounts, according to the FTC complaint. The FTC believes the defendants may have run credit checks on the identity theft victims first, to be sure they were creditworthy. The defendants also cloaked each fake merchant with a virtual office address near a real merchant’s location, a phone number, a home phone number for the “owner,” a Web site pretending to sell products, a toll-free number consumers could call, and a real company’s tax number found on the Internet.

The FTC alleged that with spam e-mail, the defendants recruited at least 14 “money mules” – people in the United States they paid to form 16 dummy corporations, open associated bank accounts to receive the card payments, and transfer the money overseas. The defendants used debit cards linked to these bank accounts to set up telephone service, virtual addresses, and Web sites that helped deceive the card processors, according to the complaint.

The “money mules” responded to spam e-mail pretending to seek a U.S. finance manager for an international financial services company. The FTC has not determined how the defendants obtained the stolen identities or consumers’ credit and debit account numbers. Consumers’ payments were sent to bank accounts in Lithuania, Estonia, Latvia, Bulgaria, Cyprus, and Kyrgyzstan.

None of the consumers affected by the scam had contact with any of the defendants. Most consumers either didn’t notice the charges on their bills or didn’t seek chargebacks because of the small amounts – charges ranged from 20 cents to $10. Consumers who called the toll-free numbers that appeared on their bills either found them disconnected or heard recorded messages instructing them to leave a message, but no calls were returned.

The defendants are the 16 sham companies – API Trade LLC, ARA Auto Parts Trading LLC, Bend Transfer Services LLC, B-Texas European LLC, CBTC LLC, CMG Global LLC, Confident Incorporation, HDPL Trade LLC, Hometown Homebuyers LLC, IAS Group LLC, IHC Trade LLC, MZ Services LLC, New World Enterprizes LLC, Parts Imports LLC, SMI Imports LLC, SVT Services LLC – and one or more persons who are unknown to the agency at this time. The FTC charged them with making unauthorized charges to consumers’ credit cards in violation of Section 5 of the FTC Act. The court froze the defendants’ assets and ordered them to stop operating, pending final resolution of the case.

The Commission vote to file the complaint was 4-0. The preliminary injunction order was entered by Judge Ronald A. Guzman in the U.S. District Court for the Northern District of Illinois, Eastern Division.

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.

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. 0923051)
(Adele Services)

FTC Approves SCI’s Application to Sell 23 Funeral Homes and Cemeteries to Foundation Partners

The Federal Trade Commission has approved a proposal by the largest U.S. funeral services provider, Service Corporation International, to sell 23 funeral homes, cemeteries, and combined funeral home-cemeteries in order to resolve competition concerns raised by SCI’s acquisition of Keystone North America, Inc.

Under SCI’s proposal, which was approved by the FTC following a public comment period, the company will sell the properties to Foundation Partners Group, LLC., a new company formed by the private equity firm Sterling Partners and former founders and executives of Keystone. The properties are located in Arizona, California, Colorado, Georgia, Florida, Louisiana, Michigan, North Carolina, New York, South Carolina, Tennessee, Virginia, and Washington State. A complete list of the properties can be found in SCI’s petition to the FTC seeking approval of the sales, which is available on the FTC’s website and as a link to this press release.

The FTC vote approving the sale of the properties was 4-0-1, with Commissioner Edith Ramirez not participating. (FTC File No. 091-0138, Docket No. C-4284; the staff contact is Daniel P. Ducore, Bureau of Competition, 202-326-2526. See press release dated March 26, 2010, at http://www.ftc.gov/opa/2010/03/keystone.shtm.)

(FYI 26.2010.wpd)

Twitter Settles Charges that it Failed to Protect Consumers’ Personal Information; Company Will Establish Independently Audited Information Security Program

Social networking service Twitter has agreed to settle Federal Trade Commission charges that it deceived consumers and put their privacy at risk by failing to safeguard their personal information, marking the agency’s first such case against a social networking service.
The FTC’s complaint against Twitter charges that serious lapses in the company’s data security allowed hackers to obtain unauthorized administrative control of Twitter, including access to non-public user information, tweets that consumers had designated private, and the ability to send out phony tweets from any account including those belonging to then-President-elect Barack Obama and Fox News, among others.

“When a company promises consumers that their personal information is secure, it must live up to that promise,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “Likewise, a company that allows consumers to designate their information as private must use reasonable security to uphold such designations. Consumers who use social networking sites may choose to share some information with others, but they still have a right to expect that their personal information will be kept private and secure.”

According to the FTC complaint, Twitter allows users to send “tweets” – brief messages of 140 characters or fewer – to “followers” who sign up to receive such messages via e-mail or phone text. Twitter offers privacy settings through which a user may choose to designate tweets as nonpublic. For instance, users can send “direct messages” to a specified follower so that only the specific author and recipient can view the message. Twitter users can also click a button labeled “Protect my tweets,” which makes that user’s tweets private so that only approved followers can view them.

The privacy policy posted on Twitter’s website stated that “Twitter is very concerned about safeguarding the confidentiality of your personally identifiable information. We employ administrative, physical, and electronic measures designed to protect your information from unauthorized access.”

The FTC’s complaint alleged that between January and May of 2009, hackers were able to gain administrative control of Twitter on two occasions. In January 2009, a hacker used an automated password-guessing tool to gain administrative control of Twitter, after submitting thousands of guesses into Twitter’s login webpage. The administrative password was a weak, lowercase, common dictionary word. Using the password, the hacker reset several passwords, and posted some of them on a website, where other people could access them. Using these fraudulently reset passwords, other intruders sent phony tweets from approximately nine user accounts. One tweet was sent from the account of then-President-elect Barack Obama, offering his more than 150,000 followers a chance to win $500 in free gasoline. At least one phony tweet was sent from the account of Fox News.

During a second security breach, in April 2009, a hacker was able to guess the administrative password of a Twitter empoyee after compromising the employee’s personal email account where two similar passwords were stored in plain text. The hacker reset at least one Twitter user’s password, and could access nonpublic user information and tweets for any Twitter users.

According to the FTC’s complaint, Twitter was vulnerable to these attacks because it failed to prevent unauthorized administrative control of its system, including reasonable steps to:

require employees to use hard-to-guess administrative passwords that they did not use for other programs, websites, or networks;
prohibit employees from storing administrative passwords in plain text within their personal e-mail accounts;
suspend or disable administrative passwords after a reasonable number of unsuccessful login attempts;
provide an administrative login webpage that is made known only to authorized persons and is separate from the login page for users;
enforce periodic changes of administrative passwords, for example, by setting them to expire every 90 days;
restrict access to administrative controls to employees whose jobs required it; and
impose other reasonable restrictions on administrative access, such as by restricting access to specified IP addresses.

Under the terms of the settlement, Twitter will be barred for 20 years from misleading consumers about the extent to which it protects the security, privacy, and confidentiality of nonpublic consumer information, including the measures it takes to prevent unauthorized access to nonpublic information and honor the privacy choices made by consumers. The company also must establish and maintain a comprehensive information security program, which will be assessed by an independent auditor every other year for 10 years.

The Commission vote approving the complaint and settlement was 5-0. The FTC will publish an announcement regarding the consent agreement in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until July 26, 2010, after which the Commission will decide whether to make it final. To file a public comment, please click on the following hyperlink https://public.commentworks.com/ftc/twitter and follow the instructions at that site.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the respondent has actually violated the law.

The consent agreement is for settlement purposes only and does not constitute admission by the respondent 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 Web site provides free information on a variety of consumer topics.

(FTC File No. 0923093)
(Twitter NR.wpd)

Coming in 2011: New Labels for Light Bulb Packaging

Starting in mid-2011, the Federal Trade Commission announced today, consumers shopping for light bulbs will notice new labeling on packaging designed to help them choose among the different types of bulbs on the market – traditional incandescent bulbs, and newer high-efficiency compact fluorescent (CFL) and light-emitting diode (LED) bulbs. The new labels will enable consumers to save money by selecting the most efficient bulbs that best fit their lighting needs.

Under direction from Congress to re-examine the current labels, the FTC is announcing a final rule that will require the new labels on light bulb packages. For the first time, the label on the front of the package will emphasize the bulbs’ brightness as measured in lumens, rather than a measurement of watts. The new front-of-package labels also will include the estimated yearly energy cost for the particular type of bulb.

While watt measurements are familiar to consumers and have been featured on the front of light bulb packages for decades, watts are a measurement of energy use, not brightness. As a result, reliance on watt measurements alone make it difficult for consumers to compare traditional incandescent bulbs to more efficient bulbs, such as compact fluorescents. A compact fluorescent bulb may be able to produce the same amount of brightness as a traditional incandescent bulb, while using significantly less energy, or watts. New energy standards mandated by Congress will effectively phase out traditional low-efficiency incandescent bulbs from the U.S. market over the next few years. The new labels that focus on brightness in lumens will help consumers make purchasing decisions as they transition to more energy-efficient types of bulbs.

Lighting Facts Per Bulb Under the new rule, the back of each package of light bulbs will have a “Lighting Facts” label modeled after the “Nutrition Facts” label that is currently on food packages. The Lighting Facts label will provide information about:

brightness;
energy cost;
the bulb’s life expectancy;
light appearance (for example, if the bulb provides “warm” or “cool” light);
wattage (the amount of energy the bulb uses); and
whether the bulb contains mercury.

The bulb’s brightness, measured in lumens, and a disclosure for bulbs containing mercury, also will be printed on each bulb.

New Back Label for Bulbs Containing Mercury

The new labeling requirements become effective one year from the date they are issued. The FTC also is seeking public comments on several issues that might be relevant to future changes to light bulb labeling requirements, such as whether new labeling requirements should be applied to candelabra bulbs.

Information on how to submit public comments can be found in a Federal Register notice that will be issued by the FTC and is available at: http://www.ftc.gov/sites/default/files/documents/federal_register_notices/appliance-labeling-rule-final-rule-and-opportunity-comment/100719noticeofrulemaking.pdf. The vote approving the Federal Register notice was 5-0. The FTC will have more detailed information and consumer education available about the new labels early next year.

Copies of the Federal Register notice are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer 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, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related 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. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

(FTC File No. P084206)

FTC Presents Criminal Liaison Award to Assistant United States Attorney Ellyn Lindsay

The Federal Trade Commission has honored Assistant United States Attorney Ellyn Lindsay with its fourth Annual Criminal Liaison Award for her work to combat consumer fraud. With assistance from the FTC, other U.S. law enforcement agencies, and Canadian authorities, Lindsay successfully prosecuted telemarketers operating from abroad who prey on older Americans.

At an awards ceremony held in Los Angeles on May 27, 2010 with United States Attorney André Birotte, FTC Commissioner Edith Ramirez said, “This award formally recognizes the hard work and dedication of prosecutors like Ellyn Lindsay who advance the core purpose of the FTC’s criminal liaison program – coordination and successful prosecution of the worst-of-the-worst fraud artists who prey upon American consumers.”

A California native, Lindsay has been an Assistant U.S. Attorney for more than two decades. She began her career prosecuting drug cases, and later made fraud her specialty.

The FTC often refers cases to criminal prosecutors. The agency created its Criminal Liaison Unit in 2002 to coordinate criminal referrals for FTC cases, which are brought under civil authority. These cases include repeat offenders, egregious behavior, or other evidence that criminal conduct is involved. Since its inception, the FTC’s Criminal Liaison Unit has contributed to hundreds of prosecutions of fraudulent telemarketers, sellers of bogus cancer cures, sweepstakes scammers, and others.

The Federal Trade Commission works for the consumer 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, click http://www.ftccomplaintassistant.gov or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related 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. For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.

FTC Approves Whole Foods Markets Divestiture of Three Stores and Wild Oats Intellectual Property, Denies Sale of Wild Oats Intellectual Property to Topco Associates; FTC Comments on Information Privacy and Innovation in the Internet Economy in Response

FTC Approves Whole Foods Market’s Divestiture of Three Stores and Wild Oats Intellectual Property, Denies Sale of Wild Oats Intellectual Property to Topco Associates

The Federal Trade Commission has acted upon several applications filed by the Whole Foods Divestiture Trustee to sell assets under a March 5, 2009 consent order designed to help restore the competition lost by Whole Foods Market Inc.’s 2007 acquisition of Wild Oats Market, Inc. The Trustee’s applications proposed to sell three former Whole Foods stores, as well as the Wild Oats and Alfalfa’s brand names. Alfalfa’s is a chain that Wild Oats previously bought but did not re-brand under its own name.

Under the 2009 consent order, the FTC appointed The Food Partners as the Divestiture Trustee to divest certain Wild Oats stores and the intellectual property associated with the Wild Oats brand, including the use of the Wild Oats and Alfalfa’s names. The Divestiture Trustee requested FTC approval to sell the former Wild Oats stores in Kansas City, Missouri, to Healthy Investments, LLC; in Boulder, in Colorado, to A-M Holdings, LLC; and in Portland, Maine to Trader Joe’s East. The FTC has now approved the sale of each store to the respective acquirer.

The Divestiture Trustee also requested approval to sell the Wild Oats’ intellectual property to Topco Associates LLC or Luberski, Inc., and to sell the Alfalfa’s Markets’ intellectual property to A-M or Topco. The FTC has now approved the sale of the Wild Oats’ intellectual property to Luberski, Inc., and the Alfalfa’s Markets’ intellectual property to A-M Holdings, and denied the sale of the Wild Oats and Alfalfa’s intellectual property to Topco.

The FTC vote approving each proposed divestiture and denying the sale of the Wild Oats and Alfalfa’s intellectual property to Topco was 3-0-2, with Commissioner Edith Ramirez not participating and Commissioner Julie Brill not participating. (FTC Docket No. 9324; the staff contact is Daniel P. Ducore, Bureau of Competition, 202-326-2526; see press release dated March 6, 2009, at: http://www.ftc.gov/opa/2009/03/wholefoods.shtm.)

FTC Comments on Information Privacy and Innovation in the Internet Economy in Response to Department of Commerce Inquiry

The Federal Trade Commission submitted a written comment on information privacy and innovation in the Internet economy in a comment submitted to the Department of Commerce, which has requested public comment as part of an inquiry on the subject.

The FTC comment emphasizes that online privacy has been one of the agency’s highest consumer protection priorities for more than a decade, and that failure to adequately protect personal data on the Internet could undermine the benefits the Internet has to offer by decreasing consumer confidence in online services. The comment highlights the different components of the FTC’s privacy program – including almost 30 law enforcement cases challenging business practices that allegedly failed to adequately secure consumers’ personal information, efforts to educate consumers and businesses about privacy and online security, policy initiatives such as promoting self-regulation in online behavioral advertising, and the FTC’s participation in international privacy initiatives.

The comment also describes a series of privacy roundtables hosted by the FTC and outlines some of the major themes that emerged from the roundtable discussions. As part of the FTC’s ongoing effort to re-examine approaches to privacy, the agency plans to publish privacy proposals later this year for public comment.

The Commission vote approving the comment was 5-0.

(FYI 25.2.2010.wpd)

Minnesota Health Care Provider Group Settles FTC Price Fixing Charges

A group of doctors and hospitals in southwestern Minnesota has agreed to a settlement with the Federal Trade Commission that prohibits anticompetitive tactics the group allegedly used to increase health insurance reimbursement rates.

Under a proposed settlement order, the Minnesota Rural Health Cooperative, or MRHC, will be prohibited from using coercion in its negotiations with health insurers.

The MRHC is made up of approximately 25 hospitals and 70 doctors, representing most of the hospitals and half of the primary care physicians in southwestern Minnesota. According to the FTC’s complaint, when members join the MRHC, they agree that the group’s board of directors will negotiate and contract with health insurers on their behalf and that they will abide by the MRHC contracts.

The FTC’s complaint charges that the MRHC eliminated competition between its individual doctors and hospitals by orchestrating illegal agreements to fix the prices at which they contract with health insurance plans. The complaint also alleges that the MRHC refused to deal with health plans that did not go along with its inflated reimbursement rates. Price-fixing agreements among competing sellers are illegal under U.S. antitrust laws.

The FTC complaint also alleges that the MRHC used coercive tactics during negotiations. In particular, the complaint alleges that the MRHC threatened to terminate contracts with health insurance plans in order to pressure them into increasing payments for physician and hospital services. In one case, for example, MRHC allegedly coerced a health plan into paying MRHC members 27 percent more than it was paying non-MRHC providers. The complaint states that the group told health plans that it “expected our group to be accepted or rejected as a group,” and informed plans that they could not negotiate individual deals with members of the group.

The proposed settlement order bars the MRHC from using coercive tactics to extract favorable contract terms from health plans. In addition, the order requires the MRHC to offer to renegotiate all current contracts with health plans and to submit any revised contracts for state approval.

During the FTC’s investigation, the Minnesota legislature enacted legislation under which state officials review and approve contracts negotiated by health care provider cooperatives. If approved, jointly negotiated contracts may be beyond the reach of the antitrust laws. The FTC settlement does not prohibit the MRHC from negotiating contracts on behalf of its members.

The FTC vote approving the complaint and proposed settlement order was 5-0. The order will be subject to public comment for 30 days, until July 19, 2010, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. To submit a comment electronically, please click on: https://public.commentworks.com/ftc/mnhealth.

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 agreement 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 in public comment can be found on 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, DC 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. 051-0199)
(MN Rural Health.final.wpd)

Federal Trade Commission Complaint Charges Conspiracy to Thwart Competition in Teeth-Whitening Services

The Federal Trade Commission today initiated an action against the state dental board in North Carolina, alleging that it is harming competition by blocking non-dentists from providing teeth-whitening services in the state. The FTC charged that the North Carolina Board of Dental Examiners (the “Dental Board”) has impermissibly ordered non-dentists to stop providing teeth-whitening services, which has made it harder to obtain these services and more expensive for North Carolina consumers.

According to the FTC’s administrative complaint, teeth-whitening services are much less expensive when performed by non-dentists than when performed by dentists. A non-dentist typically charges between $100 and $150 per whitening session, while a dentist typically charges between $300 and $700, with some dental procedures costing as much as $1,000.

Whitening services provided by non-dentists are often available at salons, retail stores and mall kiosks. Dentists in North Carolina offer whitening services in their offices, and also provide take-home kits.

The Dental Board is a state agency created to regulate the practice of dentistry in North Carolina. It consists of eight members, including six licensed dentists, who collectively control the operation of the Dental Board. Any person who wants to practice dentistry in the state must be licensed by the Dental Board. The Dental Board also may ask a state court to deem a particular conduct an unauthorized practice of dentistry and issue an injunction.

Instead of seeking court orders to block non-dentists from providing teeth-whitening services, which the Dental Board believes constitute unauthorized practice of dentistry under North Carolina law, the Dental Board has unilaterally ordered non-dentists to stop providing whitening services. The Dental Board’s actions, according to the FTC, are improper and harm competition.

“Without active supervision by a disinterested state authority, a regulatory board whose members have a financial interest in the industry it is charged with regulating cannot exclude its competitors from the marketplace,” said Richard Feinstein, Director of the FTC’s Bureau of Competition. “The North Carolina Dental Board does not have authority to decide on its own to limit the whitening services available to North Carolina residents, and its actions have decreased competition and harmed consumers.”

According to the FTC’s complaint, the Dental Board sent 42 letters instructing teeth-whitening providers that they were practicing dentistry illegally and ordering them to stop. In at least six cases, the Dental Board threatened or discouraged non-dentists who were considering opening teeth-whitening businesses. The Dental Board also sent at least 11 letters to third parties – mall owners and property management companies – stating that teeth-whitening services offered in malls are illegal.

The FTC’s complaint alleges that as a result of the Dental Board’s actions, the availability of teeth-whitening service in North Carolina has been significantly diminished. The complaint charges that the Dental Board’s conduct is an anticompetitive conspiracy among the dentist members of the Dental Board in violation of federal law. The FTC seeks to stop the Dental Board’s illegal conduct so that North Carolina consumers can benefit from competition between dentists and non-dentists for teeth-whitening services.

The Commission vote approving the administrative complaint was 4-0-1, with Commissioner Julie Brill recused. It was issued today, and a public version will be available shortly on the FTC’s website and as a link to this press release.

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.

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. 081-0137)
(NC Dental.final)

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