FTC Bars Transitions Optical, Inc. from Using Anticompetitive Tactics to Maintain its Monopoly in Darkening Treatments for Eyeglass Lenses

Transitions Optical, Inc., the nation’s leading manufacturer of photochromic treatments that darken corrective lenses used in eyeglasses, has agreed to stop using allegedly anticompetitive practices to maintain its monopoly and increase prices, under a settlement with the Federal Trade Commission announced today. Photochromic treatments are applied to eyeglass lenses to protect the eyes from harmful ultraviolet (UV) light. Treated lenses darken when exposed to UV light and fade back to clear when the UV light diminishes.

“Transitions crossed the line between aggressive competition and illegal exclusionary conduct. It used its monopoly power to strong-arm key distributors into exclusive agreements and unfairly box out rivals so they could not use these distributors,” said Richard Feinstein, Director of the FTC’s Bureau of Competition. “Its actions prevented others from competing on the merits, and consumers were forced to pay more for these lenses as a result. Such conduct runs afoul of the antitrust laws and is unacceptable.”

In 2008, photochromic lenses constituted 18-20 percent of all corrective lenses purchased by consumers nationwide, with sales totaling approximately $630 million at the wholesale level. Over the past five years, Transitions had more than an 80 percent share of photochromic lens sales in the United States, and its share exceeded 85 percent in 2008.

The FTC charges that the company illegally maintained its monopoly by engaging in exclusive dealing at nearly every level of the photochromic lens distribution chain. First, Transitions refused to deal with manufacturers of corrective lenses, known as “lens casters,” if they sold a competing photochromic lens. Further down the supply chain, Transitions used exclusive and other agreements with optical retail chains and wholesale optical labs that restricted their ability to sell competing lenses.

According to the FTC’s complaint, Transitions’ exclusionary tactics locked out rivals from approximately 85 percent of the lens caster market, and partially or completely locked out rivals from up to 40 percent or more of the retailer and wholesale lab market.

In settling the agency’s charges, Transitions has agreed to a range of restrictions, including an agreement to stop all exclusive dealing practices that pose a threat to competition. These provisions will end its allegedly anticompetitive conduct and make it easier for competitors to enter the market.

The Photochromic Lens Industry. Transitions partners with lens casters to produce its photochromic lenses. Lens casters provide corrective lenses to Transitions, which then uses proprietary methods to apply patented photochromic materials to the lenses. Transitions then sells the now photochromic lenses back to each original lens caster. These lens casters, in turn, sell and distribute the lenses to consumers through wholesale labs and retailers.

Consumers have a number of options to purchase these lenses. They can buy their lenses from independent ophthalmologists, optometrists, and opticians, who obtain their lenses from wholesale labs. Consumers can also buy their lenses from optical retail chains, as well as smaller retailers, which not only sell lenses but also typically provide their own laboratory services. Both wholesale labs and retailers purchase their photochromic lenses from lens casters.

Industry Structure Illustration

The FTC’s Complaint. The complaint charges that Transitions engaged in illegal exclusionary conduct to maintain its monopoly in the market for the development, manufacture, and sale of photochromic treatments for corrective lenses in the United States. As evidence of Transitions’ monopoly power, the FTC cites the company’s high market share, the significant barriers that face any new competitor trying to break into the business, and evidence of Transitions’ ability to control prices and to exclude competitors.

The complaint charges that Transitions aimed its exclusionary tactics at lens casters and also at distributors further down the supply chain. With regard to lens casters, the complaint states that one of Transitions’ main competitors, Corning Inc., introduced a new plastic photochromic lens called SunSensors® in 1999. Transitions responded by terminating its supply relationship with the first lens caster to sell SunSensors®, and then announced a general policy to refuse to deal with any lens caster that did not sell Transitions’ lenses exclusively. In 2005, Transitions allegedly made good on this promise when it terminated a second lens caster, Vision-Ease Lens, that had developed a competing photochromic treatment for use on its own lenses called LifeRx®.

According to the FTC’s complaint, Transitions’ “all or nothing” ultimatum coerced lens casters to sell Transitions’s lenses exclusively because losing the sales generated by Transitions’ lenses could jeopardize up to 40 percent or more of a lens caster’s overall profit. The complaint charges that over 85 percent of all photochromic lens sales in the United States are made by lens casters that sell Transitions’ lenses exclusively.

The complaint also charges that Transitions used exclusionary tactics with retailers and wholesale labs further down the supply chain. For example, to fight the competitive threat posed by Vision-Ease Lens’ introduction of LifeRx®, Transitions entered into long-term, exclusive agreements with more than 50 retailers, including most of the large optical retail chains. Transitions also reached agreements with wholesale labs that required the labs to promote Transitions’ lenses as their “preferred” photochromic lens and to withhold normal sales efforts for competing photochromic lenses.

In addition, Transitions’ agreements with retailers and wholesale labs generally required customers to buy all or almost all of their photochromic lens needs from Transitions as part of a bundle. Because no other supplier of photochromic treatments offers a product line as broad as that offered by Transitions, rivals were hindered from competing for these customers, the FTC’s complaint alleges.

The Proposed Settlement. The proposed settlement is designed to end Transitions’ illegal exclusive dealing and to restore competition by making it easier for new competitors to enter the market. Most of the provisions of the proposed settlement will be in effect for 20 years. Most important, the settlement generally prohibits Transitions from putting any agreements or policies in place that limit customers’ ability to buy or sell a competing photochromic treatment, or that require customers to give Transitions’ products more favorable treatment than a competitor’s products.

The proposed settlement order also bars Transitions from limiting the information that its customers give to consumers about competing photochromic treatments. It also prevents Transitions from imposing exclusivity on individual product brands of eyeglass lenses, ensuring that lens casters and others can sell competing photochromic treatments on the same brands of products that they also sell with Transitions’ treatments.

The proposed settlement order also limits Transitions’ ability to offer certain types of discounts. First, it prevents Transitions from offering market share discounts that are based on what percentage of a customer’s photochromic lens sales are Transitions’ lenses. Second, it prohibits Transitions from offering discounts that are applied retroactively once a customer’s sales reach a specific threshold. For example, Transitions cannot provide discounts on the first 999 units that are contingent on the customer purchasing the one-thousandth unit. Third, the settlement order prohibits Transitions from bundling discounts so that customers purchasing more than one line of photochromic lenses obtain additional discounts. These provisions will expire in 10 years.

Finally, the settlement order prohibits Transitions from retaliating against a customer that buys or sells Transitions’ lenses on a non-exclusive basis.

The FTC vote approving the complaint and proposed consent order was 4-0. The order will be published in the Federal Register shortly, and will be subject to public comment for 30 days, until April 5, 2010, after which the Commission will decide whether to make it final. Comments can be submitted electronically at the following link: https://public.commentworks.com/ftc/transitionsoptical.

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. 091-0062)
(Transitions Optical.final.wpd)

Debt Collectors Will Pay More Than $1 Million to Settle FTC Charges

A nationwide debt collector has agreed to pay a civil fine of more than $1 million to settle Federal Trade Commission charges that it violated federal law by inaccurately reporting credit information and pressing consumers to pay debts they often did not owe.

According to the FTC’s complaint, the company and two of its officers illegally tried to collect invalid debts and reported them to the credit reporting agencies without noting that consumers disputed them. In addition, even after receiving information from consumers that a debt was paid off or did not belong to the consumer, the company continued to assert, no longer with a reasonable basis, that the consumer owed the debt, without trying to confirm or dispute the consumer’s information, in violation of the FTC Act.

The FTC charged that the company, Credit Bureau Collection Services, and two of its officers, Larry Ebert and Brian Striker, violated the FTC Act and the Fair Debt Collection Practices Act. The company also is charged with violating the Fair Credit Reporting Act by reporting information to credit agencies that consumers had proved was inaccurate, failing to inform the credit agencies that consumers had disputed the debts, and failing to investigate after receiving a notice of dispute from a credit reporting agency.

In addition to imposing the $1.1 million civil penalty on the company, the settlement order:

  • Bars the defendants from further violations;
  • Prohibits them from making unsupported statements to collect a debt or obtain information about a consumer;
  • Bars them from making claims that a debt is owed or about the amount, without a reasonable basis;
  • Requires the defendants, when a debt is questionable or a consumer questions it, to either close the account and end collection efforts or investigate the dispute. If they cannot show that the consumer owes a debt, they cannot sell the debt or provide it to any business other than the original client; and
  • Bars the company from re-reporting information to credit reporting agencies that it had voluntarily deleted from credit reporting before December 2008.

The Commission vote to authorize staff to refer the complaint and consent decree to the Department of Justice for filing was 4-0. The documents were filed in the U.S. District Court for the Southern District of Ohio, Eastern Division.

The Commission recently released a video for consumers who are facing debt collection. The video is at www.ftc.gov/MoneyMatters, a site that includes information for consumers on managing credit, dealing with debt, and a variety of other financial topics.

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. Consent decrees are for settlement purposes only and do not necessarily constitute an admission by the defendant of a law violation. Consent decrees are subject to court approval and have the 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. 0623226)
(Credit Bureau Collection)

FTC, Partners Launch 12th National Consumer Protection Week

The Federal Trade Commission and other government agencies and national consumer groups are sponsoring the 12th annual National Consumer Protection Week from March 7-13, 2010. The event is a coordinated consumer education campaign that encourages individuals across the country to take full advantage of their consumer rights.

This year’s theme, Dollars & Sense: Rated “A” for All Ages, highlights the importance of using good consumer sense at every stage of life, from grade school to retirement. In keeping with the theme, the consumer education campaign features a Web site with a page for kids and parents, as well as games, videos, and links other Web sites that teach practical lessons about the role of business and government in everyday life. The site, www.consumer.gov/ncpw, provides information that encourages people to take full advantage of their consumer rights, and promotes free resources to help people protect their privacy, manage money and debt, avoid identity theft, understand credit and mortgages, and steer clear of frauds and scams.

For the first time, the site features a blog, www.consumer.gov/ncpw/blog, where visitors can learn about consumer resources in an informal and interactive environment. The blog gives consumers a chance to connect directly with representatives of public and private consumer protection organizations, and find great tips for avoiding frauds and scams. It also gives National Consumer Protection Week partners a platform for sharing outreach ideas.

National organizers of this year’s event include AARP, Better Business Bureau, Consumer Federation of America (CFA), Federal Citizen Information Center (FCIC), Federal Communications Commission (FCC), Federal Deposit Insurance Corporation (FDIC), Federal Reserve System, Federal Trade Commission (FTC), National Association of Attorneys General (NAAG), National Association of Consumer Agency Administrators (NACAA), National Consumers League (NCL), National Futures Association (NFA), NeighborWorks® America, North American Securities Administrators Association, Office of the Comptroller of the Currency (OCC), United States Postal Inspection Service (USPIS), and United States Postal Service (USPS). More than 70 events have been planned around the country.

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.

(NCPW NR.wpd)

FTC Seeks Public Comments on Trustee’s Proposal to Divest Two Stores under Whole Foods Market Inc. Divestiture Order; FTC To Review Three Agency Rules in 2010

FTC Seeks Public Comments on Trustee’s Proposal to Divest Two Stores under Whole Foods Market Inc. Divestiture Order

The Federal Trade Commission is seeking public comments on applications filed by the Divestiture Trustee to divest two stores pursuant to the Commission’s March 5, 2009 order, which was issued to help restore the competition lost by Whole Foods Market Inc.’s 2007 acquisition of Wild Oats Market, Inc. Under that order, the Commission appointed The Food Partners as the Divestiture Trustee to divest certain Wild Oats stores and the intellectual property associated with the Wild Oats brand. The Divestiture Trustee is now requesting FTC approval to sell the former Wild Oats store at 4301 Main Street in Kansas City, Missouri, to Healthy Investments, LLC; and the former Wild Oats store at 1651 Broadway in Boulder, Colorado, to A-M Holdings, LLC. This is the first divestiture application filed by the Trustee.

The Commission is accepting public comments on the Divestiture Trustee’s petitions for 30 days, until April 2, 2010. Written comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. Copies of the petitions can be found on the FTC’s Web site and as a link to this press release. (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 To Review Three Agency Rules in 2010

The Federal Trade Commission is planning to review three of the agency’s regulatory rules in 2010: one that affects grocery store advertising, a second that involves merchants who make credit available to customers purchasing their goods or services, and a third that sets labeling requirements for alternative fuels.

  • The Retail Food Store Advertising and Marketing Practices Rule, also known as the Unavailability Rule. Under this rule, it is a violation of federal advertising law for grocery stores to advertise products for sale at a stated price unless they are in stock and available during the effective period of the advertisement – or unless the retailer offers either a “raincheck” for the advertised products, or similar products that are at least comparable in value to the advertised ones.
  • The Preservation of Consumers’ Claims and Defenses Rule, also known as the Holder in Due Course Rule. This rule preserves consumers’ rights to raise claims and defenses against purchasers of consumer credit contracts.
  • The Labeling Requirements for Alternative Fuels and Alternative Fueled Vehicles Rule, also known as the Alternative Fuels and Vehicles Rule. This rule sets labeling requirements for non-liquid alternative fuels, such as hydrogen and electricity, and for some vehicles powered in whole or in part by alternative fuels.

As part of its review, the Commission will request public comments on the economic impact of and continuing need for the rules; possible conflict between the rules and other laws or regulations; and the effect of any technological, economic, or other industry changes on the rules. The FTC will publish a Federal Register notice soon announcing the 2010 rule reviews. It is available now on the FTC’s Web site as a link to this press release. The Federal Register notice includes a revised 10-year schedule for regulatory review of its rules, guides, and regulations.

The Commission vote approving issuance of the Federal Register notice was 4-0. The Retail Food Store Advertising and Marketing Practices Rule is found in 16 C.F.R. part 424; the Preservation of Consumers’ Claims and Defenses Rule is found in 16 C.F.R. part 433; and the Labeling Requirements for Alternative Fuels and Alternative Fueled Vehicles Rule is found in 16 C.F.R. part 309. (FTC File No. P924214; the staff contact is Janice P. Frankle, Bureau of Consumer Protection, 202-326-3022.)

Copies of the documents mentioned in this release 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, DC 20580. Call toll-free: 1-877-FTC-HELP.

FTC Halts Massive Cramming Operation that Illegally Billed Thousands; Alleges Scam Took in $19 Million over Five Years

A U.S. district court judge has ordered a halt to the illegal practices of an Internet services company that crammed unauthorized charges onto the telephone bills of thousands of consumers and small businesses for services they never agreed to buy. At trial the Federal Trade Commission will ask the court to halt the practices permanently and force the defendants to give up their ill-gotten gains.

The FTC charged that Inc21 and its affiliated companies sold Internet services, including Web site design services, Web site hosting, Internet directory listings, search-engine advertising and Internet-based faxing, for charges ranging from $12.95 to $39.95 a month.

The FTC alleged that the defendants hired off-shore telemarketers to call prospective clients.

Sometimes the telemarketers offered a free trial, without explaining that consumers would have to take certain steps to avoid charges. In other cases the telemarketers said they simply were calling to verify their business contact information.

The FTC alleges that Inc21 used third-party billing aggregators, to place charges on the phone bills of thousands of consumers and businesses that either:

  • were never contacted at all;
  • were told they were contacted only to verify business information;
  • declined Inc21′ s offer of Internet services; or
  • were told they would receive a free trial offer, but not informed that they would be charged if they did not cancel.

In papers filed with the court, the FTC charged that Inc21 and its agents supposedly made tape recordings to demonstrate that its charges were authorized. But the FTC alleged that in many cases, the recordings were doctored to misrepresent the call and the consumers’ responses. In other cases, the voices on the tapes are not those of the consumers who were supposedly on the calls.

The FTC charged the defendants with unfair and deceptive acts, in violation of the FTC Act and the Telemarketing Sales Rule.

District Court Judge William Alsup issued a Temporary Restraining Order, and then a Preliminary Injunction to halt the unlawful conduct, pending trial. In his Order, Judge Alsup wrote, “It was Inc21 who orchestrated this overall scheme and set in motion an army of telemarketers who committed fraud. Even if Inc21 did not approve of the fraud (and it seems likely that it did approve), the fact remains that Inc21 is responsible for organizing this engine of fraud and reaping its profits. As such, Inc21 may certainly be held accountable and the engine of fraud may be shut down by court order.”

The defendants named in this matter are Inc21.com Inc., doing business as Inc21, Inc21.net, Inc21 Communications, Global YP, NetOpus, Metro YP, JumPage Solutions, GoFaxer.com and Fax Faster.com, Jumpage Solutions, Inc., GST U.S.A., Inc., Roy Yu Lin and John Yu Lin officers and directors of Inc21. The FTC complaint also names Sheng Lin, the father of Roy and John Lin, as a “relief defendant” because he allegedly received funds that can be traced to the deceptive and unfair practices, and has no legitimate claim to those funds.

The FTC received invaluable assistance in this matter from the U.S. Postal Inspection Service and IRS-Criminal Investigations Division.

The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Northern District of California in San Francisco.

NOTE: The Commission 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 defendant has actually violated the law. The case will be decided by the court.

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 File Number X100019)

Payment Processing CEO Banned from the Business; Company Illegally Debited Millions from Consumers Bank Accounts

The chief executive officer of a payment processing company will be banned from the business as part of a settlement resolving Federal Trade Commission charges that the company illegally debited millions of dollars in bogus charges from consumers’ bank accounts.

In 2007, the FTC charged the executive, Tarzenea Dixon, her company, and others with processing unauthorized debits on behalf of deceptive telemarketers and Internet-based schemes they knew, or deliberately avoided knowing, were violating the FTC’s Telemarketing Sales Rule. In addition, the attorneys general of Illinois, Iowa, Nevada, North Carolina, North Dakota, Ohio, and Vermont charged the defendants with violating various state laws.

According to the FTC complaint, the company played a critical role in helping many of its clients carry out these illegal schemes by providing access to the banking system and the means to extract money from consumers’ bank accounts. Between June 23, 2004, and March 31, 2006, the defendants processed more than $200 million in debits and attempted debits. More than $69 million of the attempted debits were returned or rejected by consumers or their banks for various reasons, an indication that in many cases consumers had never authorized the charges. In many instances, the merchants either failed to deliver the promised products or services or sent consumers relatively worthless items.

The settling defendant is Tarzenea Dixon. Her co-defendants are Your Money Access, LLC d/b/a Netchex Corp., Universal Payment Solutions, Check Recovery Systems, Nterglobal Payment Solutions, and Subscription Services, Ltd.; YMA Company, LLC; and Derrelle Janey. In addition to permanently banning Dixon from any payment processing, the settlement order bans her from substantially aiding any marketer when she knows, or consciously avoids knowing, that it is violating the Telemarketing Sales Rule. The order imposes a $22 million judgment that is stayed based on her inability to pay. The full judgment will become due immediately if she is found to have misrepresented her financial condition.

The Commission vote approving the consent in settlement of the court action against Dixon was 4-0. The FTC filed the documents in the U.S. District Court for the Eastern District of Pennsylvania on December 22, 2009, and court entered the order on January 11, 2010.
Litigation against Janey continues. On October 28, 2008, the court entered a default judgment against the corporate defendants, Your Money Access, LLC and YMA Company, LLC, barring them from payment processing for any client whose business practices are deceptive, unfair, or abusive within the meaning of the FTC Act, the Telemarketing Sales Rule, and the state consumer protection laws. The case was part of the FTC’s “Operation Tele-PHONEY” telemarketing fraud law enforcement sweep announced in May 2008.

Wachovia Bank Redress Program

In December 2008, the FTC announced a settlement between the Office of the Comptroller of the Currency and Wachovia Bank, N.A. to issue more than $150 million in redress checks to victims of telemarketing fraud. The checks reimbursed consumers for funds deducted from their accounts by three payment processors that maintained accounts with Wachovia, including Your Money Access.

NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Consent judgments have the 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. X080025; Civ. No. 07-5147)
(YMA Dixon)

FTC Seeks Public Comments on Proposed Amendments to the Fuel Rating Rule; FTC Approves SCI Corporation International Petition to Divest Cemetery and Related Funeral Home to Legacy Funeral Holdings

FTC Seeks Public Comments on Proposed Amendments to the Fuel Rating Rule

The Federal Trade Commission is seeking public comments on proposed changes to its Rule for Automotive Fuel Ratings, Certification, and Posting, commonly known as the Fuel Rating Rule. The rule requires fuel sellers to provide accurate information about gasoline octane, or about the components that make up alternative fuels such as those containing ethanol. The changes now being proposed are based on comments received in response to a March 2009 FTC notice issued as part of a broader review of agency rules and guides.

The most significant proposed change would explicitly add gasoline-ethanol blends containing between 10 and 70 percent ethanol to the list of fuels that must be rated, certified, and labeled. The notice further proposes new labeling requirements for all mixtures of gasoline and more than 10 percent ethanol, including E-85 (an 85% ethanol and 15% gasoline blend). The notice also proposes allowing an alternate method for determining gasoline octane ratings. The Federal Register notice proposing the Fuel Rating Rule changes and detailing how to submit public comments can be found on the FTC’s Web site and as a link to this press release. Comments must be received by May 21, 2010.

The FTC vote approving publication of the Federal Register notice was 4-0. (FTC File No. R811005; the staff contact is Matthew Wilshire, Bureau of Consumer Protection, 202-326-2976; see related press release dated February 24, 2009, at http://www.ftc.gov/opa/2009/02/fyi0224.shtm.)

FTC Approves SCI Corporation International Petition to Divest Cemetery and Related Funeral Home to Legacy Funeral Holdings

The Federal Trade Commission has approved a petition by SCI Corporation International to divest the Davis Memorial Park cemetery and a related funeral home in Las Vegas, Nevada, to Legacy Funeral Holdings of Nevada, LLC. Under the terms of an FTC consent order announced in November 2009, SCI must divest these businesses to an FTC-approved buyer to remedy the competition lost because of SCI’s acquisition of Palm Mortuary, Inc., which was completed on December 3, 2009.

The FTC vote approving the petition was 4-0. (FTC Docket No. C-4275; the staff contact is Daniel P. Ducore, Bureau of Competition, 202-326-2526; see press release dated November 25, 2009, at: http://www.ftc.gov/opa/2009/11/sci.shtm.)

Copies of the documents mentioned in this release 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, DC 20580. Call toll-free: 1-877-FTC-HELP.

FTC Puts Conditions on PepsiCo’s $7.8 Billion Acquisition of Two Largest Bottlers and Distributors

The Federal Trade Commission today announced that it will require carbonated soft drink company PepsiCo, Inc. to restrict its access to confidential business competitive information of rival Dr Pepper Snapple Group as a condition for proceeding with PepsiCo’s proposed $7.8 billion acquisition of its two largest bottlers and distributors, which also distribute Dr Pepper Snapple Group carbonated soft drinks.

Under a settlement with the FTC, PepsiCo will set up a “firewall” to ensure that its ownership of the bottling companies does not give certain PepsiCo employees access to commercially sensitive confidential Dr Pepper Snapple marketing and brand plans. In a complaint filed with the settlement, the FTC charged that access to this information would have harmed competition in the U.S. market for carbonated soft drinks.

PepsiCo agreed on August 3, 2009, to acquire Pepsi Bottling Group and PepsiAmericas, Inc., its two largest independent bottlers and distributors, for approximately $7.8 billion. When the agreement was announced, PepsiCo already owned about 40 percent of Pepsi Bottling Group and about 43 percent of PepsiAmericas, which together account for about three-quarters of all U.S. sales of PepsiCo carbonated soft drinks, as well as 20 percent of all U.S. bottler-distributed sales of Dr Pepper Snapple carbonated soft drinks.

In a related deal, on December 7, 2009, PepsiCo agreed to continue bottling and distributing three Dr Pepper Snapple carbonated soft drink brands, Dr Pepper, Crush, and Schweppes, in the territories of the two bottlers. Under the exclusive licensing agreement, PepsiCo will pay Dr Pepper Snapple $900 million for a license to distribute and sell these brands for the next 20 years.

According to the FTC’s complaint, PepsiCo and Dr Pepper Snapple are direct competitors in the highly concentrated and difficult-to-enter markets for branded soft drink concentrate and branded and direct-store-delivered carbonated soft drinks. 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 carbonated soft drinks sold by retailers are about $70 billion.

Dr Pepper Snapple provides commercially sensitive information about its marketing plans to Pepsi Bottling Group and PepsiAmericas to help them bottle and distribute its beverages, the FTC’s complaint states. Dr Pepper Snapple will continue to provide the same sensitive information to PepsiCo after the acquisitions to continue having its beverages distributed by PepsiCo, according to the complaint. The FTC is concerned that PepsiCo’s access to this information could hurt Dr Pepper Snapple’s ability to compete, and ultimately could harm consumers by eliminating competition between PepsiCo and Dr Pepper Snapple and/or facilitating coordinated interaction in the industry.

The FTC’s proposed consent order is designed to remedy these potential problems by requiring PepsiCo to set up a “firewall” so that the sensitive information cannot be accessed by anyone at PepsiCo who may be in an position to use the information against Dr Pepper Snapple. The order, like the Dr Pepper Snapple-Pepsi license agreement, will expire in 20 years.

The FTC vote approving the complaint and proposed consent order was 4-0. The order will be published in the Federal Register shortly, and will be subject to public comment for 30 days, until March 26, 2010, after which the Commission will decide whether to make it final. Comments can be submitted electronically at the following link: https://public.commentworks.com/ftc/pepsico.

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. 091-0133)
(Pepsi.final.wpd)

Online Privacy and Security Certification Service Settles FTC Charges

ControlScan, a company that consumers have relied on to certify the privacy and security of online retailers and other Web sites, has agreed to settle Federal Trade Commission charges that it misled consumers about how often it monitored the sites and the steps it took to verify their privacy and security practices. The settlements will bar future misrepresentations. The founder and former Chief Executive Officer has entered into a separate settlement that requires him to give up $102,000 in ill-gotten gains.

Third-party privacy and security certification programs like ControlScan are used by Web sites to assure visitors and customers that the site is secure and consumers can feel confident about providing personal and financial information. Certification companies provide privacy and security “seals” to convey that an independent party is auditing the practices of the site regularly to be sure its data is not vulnerable.

ControlScan offered a variety of privacy and security seals for display on Web sites. Consumers could click on the seals to discover exactly what assurances each seal conveyed. For example, the company’s Business Background Reviewed, Registered Member, and Privacy Protected seals conveyed that ControlScan had verified a Web site’s information-security practices. However, the FTC alleges that ControlScan provided these seals to a Web sites with “little or no verification” of their security protections. Similarly, the FTC alleges that the company provided its Privacy Protected and Privacy Reviewed seals to a Web sites with “little or no verification” of their privacy protections.

The FTC also charged that although ControlScan’s seals displayed a current date stamp, the company did not review any of the seal sites on a daily basis. In some instances, Web sites were reviewed only weekly, and in other instances, ControlScan did no ongoing review of a company’s fitness to continue displaying seals. The FTC charged that the defendants’ deceptive acts violated federal law.

The consent agreement settling the case with Richard Stanton, the founder and former CEO of ControlScan, bars him from misrepresenting the steps that are taken to verify a site’s privacy and security protections. He also is barred from misrepresenting the frequency of verification. The settlement requires that he give up $102,000 in ill-gotten gains.

The settlement with ControlScan bars the same misrepresentations and requires it to notify the Web sites that have displayed the seals of the Commission action and require them to take down the seals. Finally, a judgment of $750,000 is suspended, based on ControlScan’s inability to pay. Should the court find that the company misrepresented its financial condition, the entire amount will be payable immediately, less any amounts paid by Stanton.

The Commission vote to approve the settlements was 4-0. The FTC will publish an announcement regarding the agreement with Stanton in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through March 29, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, Room H-135, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments also can be filed by clicking on the following hyperlink: https://public.commentworks.com/ftc/richardjstanton and following the instructions at that site.

The court settlement with ControlScan was filed in U. S. District Court for the District of Georgia.

NOTE: Consent agreements and stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Stipulated final orders have the force of law when signed by the judge. 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, the proposed consent agreement, and an analysis of the agreement to aid public comment are available from both the FTC’s Web site at http//www.ftc.gov and the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. 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 1,700 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. 0723165)
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FTC Issues Report of 2009 Top Consumer Complaints

The Federal Trade Commission today released a report listing top complaints consumers filed with the agency in 2009. It shows that while identity theft remains the top complaint category, identity theft complaints declined 5 percentage points from 2008.

The FTC is releasing a new animated video showing how people can file a complaint, and offers examples of what complaints the FTC handles. To watch the video, visit http://ftc.gov/multimedia/video/scam-watch/file-a-complaint.shtm (also available in Spanish at http://ftc.gov/multimedia/video/scam-watch/file-a-complaint_es.shtm).

The report breaks out complaint data on a state-by-state basis and also contains data about the 50 metropolitan areas reporting the highest per capita incidence of fraud and other complaints. In addition, the 50 metropolitan areas reporting the highest incidence of identity theft are noted.

The top complaints were:

Rank Category No. of Complaints Percentages

1

Identity Theft 278,078 21%

2

Third Party and Creditor Debt Collection 119,549 9%

3

Internet Services 83,067 6%

4

Shop-at-Home and Catalog Sales 74,581 6%

5

Foreign Money Offers and Counterfeit Check Scams 61,736 5%

6

Internet Auction 57,821 4%

7

Credit Cards 45,203 3%

8

Prizes, Sweepstakes and Lotteries 41,763 3%

9

Advance-Fee Loans and Credit Protection/Repair 41,448 3%

10

Banks and Lenders 32,443 2%

11

Credit Bureaus, Information Furnishers and Report Users 31,629 2%

12

Television and Electronic Media 26,568 2%

13

Health Care 25,414 2%

14

Business Opportunities, Employment Agencies and Work-at-Home Plans 22,896 2%

15

Computer Equipment and Software 22,621 2%

A complete list of complaints can be found at: http://www.ftc.gov/sentinel/reports/sentinel-annual-reports/sentinel-cy2009.pdf.

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 1,700 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.

(2009 fraud)