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FTC Issues Redress Checks to Victims of the J.K. Publications Credit Card Fraud

The FTC, through its claims administrator, mailed more than 400,000 checks totaling over $12 million on Friday, June 12, 2009, to consumers identified as victims of an illegal credit card billing scam operated by J.K. Publications and other defendants. The defendants made unauthorized charges on consumers’ credit and debit cards for purported Internet services. Information about the case can be found here: http://www.ftc.gov/os/caselist/9823616.shtm.

The redress checks are the result of a lawsuit the FTC filed in 1999. The defendants’ records obtained during litigation contained only credit and debit card numbers. Under instructions from the court, Credit Reporting Agencies and banks provided the FTC with the names and addresses associated with the card numbers as of the date of the charges. The FTC’s claims administrator mailed checks to those consumers last week.

Most of the illegal billing dates back to 1998. Substantial time passed between the court’s judgment and the issuance of these checks because the defendants moved millions of dollars of their ill-gotten funds offshore, and it took significant time and effort to locate and repatriate the fraudulently obtained money.

These consumer redress 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 redress checks issued to them.

(JKPUBLICATIONSFYI.wpd)

FTC Provides Views on Behavioral Advertising to House of Representatives Subcommittees

The Federal Trade Commission today sent a copy of a recent staff report, “Self-Regulatory Principles for Online Behavioral Advertising,” to two subcommittees of the House of Representatives Committee on Energy and Commerce that are holding a joint hearing on behavioral advertising. A letter on behalf of the Commission that accompanied the report states that the FTC “has actively encouraged industry to embrace new measures relating to behavioral advertising to inform and empower consumers and is monitoring developments” so that consumers’ privacy is protected. The letter and report were sent to the Subcommittee on Communications, Technology, and the Internet, and the Subcommittee on Commerce, Trade, and Consumer Protection.

The FTC staff report discusses the privacy concerns surrounding behavioral advertising, including the invisibility of the data collection to consumers and the risk that the information collected – including sensitive information regarding health, finances, or children – could fall into the wrong hands or be used for unanticipated purposes. The report also addresses the potential benefits of behavioral advertising to consumers, including the free online content that advertising generally supports, and personalization that many consumers may value.

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 1,500 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.

(FYI Behavioral Advertising)

FTC Testifies on Efforts to Combat Identity Theft

The Federal Trade Commission today described its comprehensive efforts to combat identity theft before the U.S. House Subcommittee on Information Policy, Census, and National Archives of the Committee on Oversight and Government Reform. The FTC also recommended legislative remedies to enhance the effectiveness of these efforts.

The testimony presented by Betsy Broder, Assistant Director of the FTC’s Division of Privacy and Identity Protection, highlighted the agency’s leadership role in developing a national strategy to combat identity theft as part of the President’s Identity Theft Task Force. The Task Force issued 31 recommendations that promoted an enhanced data security culture in the public and private sectors, launched victim assistance initiatives, and improved law enforcement’s ability to pursue and punish identity thieves.

The FTC’s testimony recommended that, to help prevent identity theft, Congress should establish data security standards across the private sector requiring all organizations that hold sensitive consumer data to take reasonable measures to safeguard it, and to notify consumers when the security of their information has been breached. In addition, the Commission has asked Congress for authority to seek civil penalties in data security cases and for legislation that would help reduce the unnecessary use and display of Social Security numbers.

The FTC testimony described the agency’s efforts to keep sensitive information out of the hands of identity thieves by working to ensure that those who maintain such information adequately protect it. Since 2001, the FTC has brought 26 law enforcement actions against businesses that failed to implement reasonable security measures to protect sensitive consumer data. The Commission believes that these aggressive law enforcement efforts have helped sensitize businesses to the importance of data security and motivated them to devote more attention and resources to protecting consumers’ data. In addition, the agency shares consumer complaints with more than 1,700 law enforcement agencies through the Consumer Sentinel Network to facilitate criminal prosecution of identity thieves. The testimony also discussed the Commission’s direct assistance to ID theft victims, such as online resources at www.ftc.gov/idtheft and a toll-free hotline for victims, 1-877-IDTHEFT, which assisted more than 300,000 victims in 2008 alone. The testimony outlined how these resources guide victims to limit the damage and restore their identities.

According to the FTC testimony, the agency’s efforts to educate consumers also include disseminating English- and Spanish-language materials directly to consumers; working with organizations to help inform their members, constituencies, and employees; and creating a
multimedia Web site, OnGuard Online, with tips on safe online computing. For businesses – especially small businesses – the Commission has created a brochure and online tutorial on information security and hosted regional data security workshops.

The Commission also has worked to implement the identity theft provisions of the Fair and Accurate Credit Transactions Act (FACT Act). For example, the FACT Act gave consumers the right to receive free annual credit reports so that they can spot signs of identity theft. The FTC has enforced this right by bringing two actions against companies offering so-called “free” credit reports that were tied to the purchase of a credit monitoring service.

The Commission vote authorizing presentation of the testimony was 4-0.

(ID Theft Testimony)

FTC Approves Final Consent Order Related to James B. Nutter & Company; Commission Extends Business Opportunity Rule Public Comment Period Until June 29

FTC Approves Final Consent Order Related to James B. Nutter & Company

Following a public comment period, the Commission has approved a final consent order in the matter of James B. Nutter & Company. The vote approving the final order was 4-0. (FTC File No. 072-3108; the staff contact is Alain Sheer, Bureau of Consumer Protection, 202-326-2252; see press release dated May 5, 2009, at http://www.ftc.gov/opa/2009/05/peer2peer.shtm.)

Commission Extends Business Opportunity Rule Public Comment Period Until June 29

The FTC has extended until June 29, 2009, the period for submitting workshop comments in the proceeding to amend the Commission’s Business Opportunity Rule, 16 CFR Part 437. The FTC has proposed streamlining and updating the Rule, which is designed to protect consumers from bogus business opportunities without imposing unnecessary or ill-suited compliance obligations on legitimate sellers of such ventures. The Commission held a workshop on the proposed Rule on June 1, 2009 that focused primarily on a proposed one-page disclosure form that had been revised after consumer testing. The comment period, which originally would have ended on June 15, 2009, and is intended to allow the public to provide feedback on the revised form and other topics covered at the workshop.

The vote to extend the public comment period was 4-0. (FTC File No. R511993; the staff contact is Alan W. Hile, Bureau of Consumer Protection, 202-326-3122; see press release dated April 21, 2009, at http://www.ftc.gov/opa/2009/04/bizopp.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.

(FYI 29.2009.wpd)

FTC Obtains $2 Million Judgment Against Canadian Bogus Biller

The FTC has obtained a $2 million summary judgment against the leader of a Canada-based scheme that defrauded U.S. businesses out of millions of dollars by billing for unauthorized listings and advertisements in non-existent business and travel directories, and for unordered and undelivered office supplies and consulting services.

According to the FTC’s complaint filed in October 2006, four defendants in Ontario operated a scheme that targeted businesses and municipalities in the United States, and a related scheme aimed at hotels and resorts in this country and more than 25 others.

The court order requires Michael Robert Petreikis to pay $2 million in redress for victims and bans him from marketing or selling business or travel directories and listings. The order also bars him from misrepresenting that consumers have a preexisting business relationship or that consumers purchased, have agreed to purchase, or owe money for business or travel directory ads or listings, office supplies, or consulting services. In addition, Petreikis is prohibited from collecting payments on any invoices the defendants sent prior to the court order, and from disclosing or benefitting from personal information obtained as a result of activities alleged in the FTC’s complaint. The order also contains record-keeping and reporting provisions to allow the FTC to monitor compliance with the order.

The final judgment and permanent injunction were entered by Judge Robert W. Gettleman of the U.S. District Court for the Northern District of Illinois.

Petreikis, also known as William George Fisk, pleaded guilty to criminal charges in Canada related to his participation in the scheme and received a four-year prison sentence. (http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02557.html)

The FTC investigated this case with the assistance of the Toronto Strategic Partnership, which, in addition to the FTC, includes the Toronto Police Service Fraud Squad, Telemarketing Section; the Ontario Provincial Police, Anti-Rackets Section; the Ontario Ministry of Small Business & Consumer Services; Canada’s Competition Bureau; the Royal Canadian Mounted Police; the U.S. Postal Inspection Service; and the United Kingdom’s Office of Fair Trading.

(FTC File No. X070003)
(IITD Petreikis)

FTC Testifies on “Competition Issues and Follow-on Biologic Drugs”

Testifying today on behalf of the Federal Trade Commission before the Subcommittee on Health of the U.S. House of Representatives Energy and Commerce Committee, Commissioner Pamela Jones Harbour presented the findings and recommendations of the FTC’s new Report, “Follow-on Biologic Drug Competition.” The Report examines whether and how the price of biologic drugs – products manufactured using living tissues and microorganisms – could be reduced by competition from so-called follow-on biologics (FOBs). Biologics are increasingly used to treat arthritis, cancer, diabetes, and other diseases. Lower-priced FOBs are like generic drugs, but with significant differences.

“As an expert competition agency charged with protecting American consumers, the Commission is uniquely well-suited to examine how competition is likely to evolve in biologics markets. This consumer-focused competition perspective is a critically important element of the FOB debate,” said Commissioner Harbour. “The Commission’s Report highlights fundamental aspects of FOB competition, as well as implications for the design of an abbreviated regulatory pathway that will bring life-saving therapies to the American public at competitive prices. I hope and expect that it will serve as a valuable reference, especially for legislators.”

The Commission’s Report draws a number of conclusions about the likely impact of possible incentives to promote FOB competition:

legislation creating an abbreviated FDA approval process of FOBs is likely to be an efficient way to bring them to market, because of the time and cost savings it would provide;
patent protection and market-based pricing will promote competition by FOBs, as well as spur biologic innovation;
a 12- to 14-year regulatory exclusivity period for pioneer biologics is too long to promote innovation by these firms, particularly since they likely will retain substantial market share after FOB entry;
special procedures to resolve patent issues between pioneer and FOB manufacturers before FDA approval are not needed and could undermine patent incentives and harm consumers; and
FOB manufacturers are unlikely to need additional incentives – such as a 180-day marketing exclusivity period – to develop interchangeable FOB products.

Copies of the Report can be found on the Commission’s Web site at: http://www.ftc.gov/os/2009/06/P083901biologicsreport.pdf and as a link to the press release announcing it at: http://www.ftc.gov/opa/2009/06/biologics.shtm.

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/bc/edu/pubs/consumer/general/zgen1.shtm.

(Biologics Statement.final.wpd)

Agencies Issue Frequently Asked Questions on Identity Theft Rules

Six federal agencies issued a set of frequently asked questions (FAQs) today to help financial institutions, creditors, users of consumer reports, and issuers of credit cards and debit cards comply with federal regulations on identity theft and discrepancies in changes of address. The “Red Flags and Address Discrepancy Rules,” which implement sections of the Fair and Accurate Credit Transactions Act of 2003, were issued jointly on November 9, 2007, by the Board of Governors of the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), and Federal Trade Commission (FTC).

The rules require financial institutions and creditors to develop and implement written Identity Theft Prevention Programs and require issuers of credit cards and debit cards to assess the validity of notifications of changes of address. The rules also provide guidance for users of consumer reports regarding reasonable policies and procedures to employ when consumer reporting agencies send them notices of address discrepancy.

The agencies developed answers to these FAQs to provide guidance on numerous aspects of the rules, including which types of entities and accounts are covered, establishment and administration of an Identity Theft Prevention Program, address validation requirements applicable to card issuers, and the obligations of users of consumer reports upon receiving a notice of address discrepancy. The FTC also has developed a Web site, www.ftc.gov/redflagsrule, with additional resources and guidance for creditors and financial institutions that are within its jurisdiction.

FTC Releases Report on Follow-on Biologic Drug Competition

The Federal Trade Commission today released a report entitled “Follow-on Biologic Drug Competition”which examines whether the price of biologic drugs – products manufactured using living tissues and microorganisms – could be reduced by competition from so-called “follow-on biologics” (FOBs). FOBs are like generic drugs, but with significant differences. Biologics are increasingly used to treat arthritis, cancer, diabetes, and other diseases. No pathway currently exists for such FOBs to enter the market and compete with their pioneer counterparts. The FTC’s Report concludes that providing the U.S. Food and Drug Administration (FDA) with the authority to approve such FOBs would be an efficient way to bring these lower-priced drugs to market.

“If Congress creates an efficient pathway to follow-on biologic drugs and, at least as important, ends ‘pay-for-delay’ pharmaceutical settlements that delay entry of traditional generic drugs, it will be taking a major step forward for both health care reform and affordable drugs for all Americans,” said FTC Chairman Jon Leibowitz.

Biologic drugs are quite expensive – even more than branded versions of most traditional “small-molecule” drugs. For example, the annual treatment with the biologic drug Herceptin (a breast cancer treatment) can cost $48,000. FOBs, if brought to market, could reduce the estimated $40.3 billion a year consumers spend on biologic drugs. The FTC’s Report examines how this might occur.

The Commission’s Report summarizes the findings of a public roundtable the agency held in November 2008 to examine how FOBs could enter the market, and what competition between FOBs and pioneer biologic drugs likely would look like. The FTC also solicited two rounds of public comments on the issue of biologic drug competition and accepted additional expert analysis in reaching its findings and developing forward-looking recommendations.

In large part, the Report compares potential entry and competition by FOBs with entry
and competition by small-molecule pharmaceuticals. In 1984, to encourage generic competition in the small-molecule drug market, Congress passed the Hatch-Waxman Act. The Act, among other things, gives the first-filing generic drug manufacturer a 180-day marketing exclusivity period after it introduces its product. The goal was to encourage innovation and generic drug entry by providing a period in which the first-filer would have no competition from other generic firms. As the price of generic drugs is often significantly less than their branded counterparts, generic entry can significantly reduce health care costs for consumers. In fact, after several generic competitors enter the market, prices for a particular drug can be reduced by up to 80 percent.

In recent years, “pay-for-delay” patent settlements, in which manufacturers of brand-name drugs pay potential generic competitors to stay out of the market, have delayed consumer access to lower-cost generic drugs. Last week, U.S. House Energy and Commerce Committee’s Commerce, Trade, and Consumer Protection Subcommittee passed the Protecting Consumer Access to Generic Drugs Act of 2009 (H.R. 1706), which would prohibit such anticompetitive settlements and, ultimately, could significantly lower prescription drug costs.

The Commission’s Report states that competition by FOBs is unlikely to be similar to branded-generic drug competition because:

The substantial costs to obtain FDA approval, plus the substantial costs to develop manufacturing capacity, will limit the number of FOB competitors;
The lack of automatic substitution between an FOB drug and a pioneer biologic drug will slow the rate at which FOBs can acquire market share;
An FOB drug also may have difficulty gaining market share due to concerns about safety and efficacy differences with the pioneer biologic drug;
Biologic drugs currently are not reimbursed according to strategies that insurers often use to encourage the use of lower-priced drugs;
As a result of these factors, FOB entry, although important, will be less-dramatic than generic drug competition. FOB entry is likely in biologic drug markets larger than $250 million in annual sales. Only two or three FOB manufacturers are likely to attempt entry for a given pioneer drug product. These entrants are unlikely to introduce their drugs at discounts any larger than between 10 and 30 percent of the pioneer product’s price;
The effect on pioneer manufacturers also will be different. They are expected to respond and offer competitive discounts to maintain market share and are likely to retain 70 to 90 percent of their market share and will continue to reap substantial profits, even after FOB entry.

Based on these findings, the Report concludes that patent protection and market-based pricing will promote competition by FOBs, as well as spur biologic innovation. It states that legislation to put a process in place for the abbreviated FDA approval of FOBs is likely to be an efficient way to bring FOBs to market, because of the time and cost savings it would provide.

In addition, the Report states that the 12- to 14-year regulatory exclusivity period is too long to promote innovation by these firms, particularly since they likely will retain substantial market share after FOB entry. The Report concludes that special procedures to resolve patent issues between pioneer and FOB manufacturers before FDA approval, which are not needed,
could undermine patent incentives and harm consumers. Finally, the Report states that FOB manufacturers are unlikely to need additional incentives – such as a 180-day marketing exclusivity period – to develop interchangeable FOB products.

The Commission vote approving issuance of the Report was 4-0. It can be found on the agency’s Web site at http://www.ftc.gov/os/2009/06/P083901biologicsreport.pdf.

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/bc/edu/pubs/consumer/general/zgen1.shtm.

(FTC File No. P083901)
(Biologics.final.wpd)

FTC Charges Foreclosure Prevention and Loan Modification Marketers with Contempt

The Federal Trade Commission has filed a civil contempt action charging a deceptive mortgage foreclosure rescue and loan modification operation with violating a 2001 court order. Many homeowners paid the defendants up to $5,500 in advance and ultimately lost their homes to foreclosure. The FTC has asked the court to halt the unlawful practices, freeze the defendants’ assets, and seek compensation for victims.

According to papers the FTC filed with the court, the defendants told consumers that they would stop foreclosures. They claimed they were “100% successful and had never lost a customer’s home to foreclosure” and advised consumers to pay them instead of making mortgage payments. They also claimed that they would negotiate modified mortgages with lower interest rates, monthly payments, and principal balances. The FTC charged that, in fact, they obtained few, if any, loan modifications for customers.

The defendants also claimed that their selectivity in choosing customers helped them succeed, but they took on nearly every consumer willing to pay, according to the FTC. In addition, the defendants falsely claimed that they would provide experienced real estate attorneys who would represent customers nationwide, and would review consumers’ loan documents to look for fraud and other lending violations.

According to the FTC, Bryan D’Antonio and three companies he controls, The Rodis Law Group Inc., America’s Law Group Inc., and The Financial Group Inc., doing business as Tax Relief ASAP, violated a 2001 order that banned D’Antonio from telemarketing and misrepresenting material facts about goods or services. The FTC obtained the order against D’Antonio and his former company, Data Medical Capital Inc., for operating a work-at-home medical billing opportunity scheme. D’Antonio pleaded guilty to mail fraud for his involvement in the scam and served almost three years in prison.

The FTC also has asked the court to permanently ban D’Antonio from selling mortgage products or services, including foreclosure prevention and loan modification services, and to renew the 2001 order’s provisions banning D’Antonio from selling business ventures, employment opportunities or work-at-home opportunities, and from telemarketing.

For more information about this matter and to learn how you can get free loan assistance from counselors certified by the government, call toll-free at 1-888-308-0934.

(FTC File No. X000001)
(Data Medical)

Constellation Brands Settles FTC Charges That Ads for ‘Wide Eye’ Caffeinated Alcohol Beverage Were Deceptive

A major U.S. alcohol supplier has agreed to settle Federal Trade Commission charges that its advertising for the caffeinated alcohol drink Wide Eye was deceptive, unsubstantiated, and in violation of federal law. The proposed settlement bars Constellation Brands, Inc. – which claimed in its ads that consumers who drink Wide Eye will remain alert when consuming alcohol – from making the deceptive claims.

“Constellation Brands fueled the misperception that mixing alcohol and caffeine helps people stay alert,” said Eileen Harrington, Acting Director of the FTC’s Bureau of Consumer Protection. “The truth is that alcohol and caffeine could be a dangerous mix, and a claim like that can have very serious consequences.”

Constellation Brands has promoted Wide Eye in Web videos and other Internet advertising, as well as in print ads. According to the FTC’s complaint, there is no credible scientific evidence to support the claim that consumers who drink Wide Eye will remain alert.

Constellation Brands agrees under the proposed settlement not to make the following claims in advertising and marketing unless they are truthful and substantiated: that consumers will remain alert when they drink Wide Eye or any beverage containing alcohol and caffeine or other stimulants; and that any alcohol product, or ingredient in such a product, will counteract the effects of consuming alcohol. The settlement contains standard record-keeping provisions to allow the agency to monitor compliance.

The Commission vote to approve the administrative complaint and proposed consent agreement was 4-0. The FTC will publish an announcement regarding the agreement in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through July 10, 2009, after which the Commission will decide whether to make it final. To file a public comment, please click on the following hyperlink: http://www.ftc.gov/os/2009/06/0923035publiccomment.pdf and follow the instructions at that site.

NOTE: 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 $16,000.

Copies of the complaint, the proposed consent agreement, and an analysis of the agreement to aid in 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 1,500 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. 0923035)
(Constellation.wpd)

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