FTC Seeks Public Comments on Petition to Modify 2004 Order Regarding AOL and CompuServe to Allow the Use of Third-Party Verification for Consumer Consent

The Federal Trade Commission is seeking public comment on a petition from America Online, Inc. and CompuServe Interactive Services, Inc. to reopen and modify a January 2004 final FTC Order concerning the two companies. Through the Order, AOL and CompuServe, its subsidiary, settled Commission charges that they unfairly continued to bill AOL Internet service subscribers after they had asked to have their subscriptions canceled, and that the firms were late in delivering $400 rebates to consumers who signed up for CompuServe Internet services.

As detailed in the companies’ petition, which can be found on the FTC’s Web site and as a link to this press release at http://www.ftc.gov/opa/2003/09/aol.shtm, AOL and CompuServe now seek to modify the Order to allow the use of a system of third-party verification (TPV) as an alternative to the Confirmation Notice required by the Order to ensure informed consumer consent to continue paid Internet service. The petition states that TPV involves confirming a telephone-based sales transaction through an independent party and recording consumers’ verification. AOL and CompuServe are seeking the modification so they can continue to comply with the Order’s requirement that they obtain the express informed consent of subscribers who initially intend to cancel their Internet service, but who instead agree to continue their paid accounts.

According to the petition, allowing TPV would provide an additional means of instant cancellation for subscribers, since they have the option to decline the service and have the account cancelled without any additional retention efforts. The petition also states that there are no extra costs associated with a TPV cancellation process and that TPV “has been widely recognized as a successful way of obtaining consumer consent for over a decade in telecommunications and other government-regulated areas.”

The Commission is accepting public comments on the petition for 30 days, beginning today and continuing through June 1, 2009. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. (FTC Docket No. C-4105; the staff contact is Connie M. Vecellio, Bureau of Consumer Protection, 202-326-2966; see press release dated September 23, 2003, at http://www.ftc.gov/opa/2003/09/aol.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 22.2009.wpd)

Commission Submits Comment to FERC on Competitive Assessments of Partial Acquisitions: Careful, Case-by-Case Analysis Encouraged

The Federal Trade Commission has submitted a comment to the Federal Energy Regulatory Commission (FERC) concerning FERC’s competitive assessments of partial acquisitions of electric power providers, including by private equity firms holding investments in competing electric power providers (Docket No. PL09-3-000). FERC is currently reviewing its policy for assessing the competitive effects of partial acquisitions to determine whether a proposed acquisition would adversely affect competition. FERC policy is also relevant in evaluating the eligibility of a public utility to sell wholesale electricity at market-based rates.

In its comment, the FTC encourages FERC to avoid adopting policies that assess competitive effects based solely on control and that fail to examine closely the competitive effects of partial acquisitions that fall short of control.

The review stems from the Electric Power Supply Association’s request that FERC clarify that investments in a publicly held company be deemed not to convey “control” or to result in “affiliation” so long as the investor (1) owns less than 20 percent of the acquired company’s voting securities, and (2) certifies, through a filing with the Securities and Exchange Commission, that the investment is not for the purpose of controlling the company whose shares are acquired.

According the FTC comment, which can be found on the agency’s Web site and as a link to this press release at http://www.ftc.gov/os/2009/05/V090008ferccomment.pdf, the Commission is concerned that, based on the comments FERC has received to date, commenters have placed too much emphasis on the role of control in the competitive analysis, with little discussion of the incentive effects associated with partial acquisitions or of the possible increased risks of coordinated interaction from such investments.

The FTC’s comment describes accepted antitrust analysis of the competitive effects of partial acquisitions, which examines not only whether the acquisition confers control but also whether a transaction could change the competitive incentives of the acquiring and acquired firms, even when the acquirer does not gain control of the acquired party. The comment also points in particular to the increased risk of collusion or of anticompetitive information sharing that can occur in the context of partial acquisitions.

Concluding the comment, the Commission encourages FERC to engage in careful, case-by-case analysis of the potentially significant competitive effects that can stem from partial – but not control-conferring – acquisitions.

The Commission vote authorizing the filing of the comment was 4-0. (FTC File No. V090008; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of General Counsel, 202-326-2702.)

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 21.2009.wpd)

Commission Submits Comment to FERC on Competitive Assessments of Partial Acquisitions: Careful, Case-by-Case Analysis Encouraged

The Federal Trade Commission has submitted a comment to the Federal Energy Regulatory Commission (FERC) concerning FERC’s competitive assessments of partial acquisitions of electric power providers, including by private equity firms holding investments in competing electric power providers (Docket No. PL09-3-000). FERC is currently reviewing its policy for assessing the competitive effects of partial acquisitions to determine whether a proposed acquisition would adversely affect competition. FERC policy is also relevant in evaluating the eligibility of a public utility to sell wholesale electricity at market-based rates.

In its comment, the FTC encourages FERC to avoid adopting policies that assess competitive effects based solely on control and that fail to examine closely the competitive effects of partial acquisitions that fall short of control.

The review stems from the Electric Power Supply Association’s request that FERC clarify that investments in a publicly held company be deemed not to convey “control” or to result in “affiliation” so long as the investor (1) owns less than 20 percent of the acquired company’s voting securities, and (2) certifies, through a filing with the Securities and Exchange Commission, that the investment is not for the purpose of controlling the company whose shares are acquired.

According the FTC comment, which can be found on the agency’s Web site and as a link to this press release at http://www.ftc.gov/os/2009/05/V090008ferccomment.pdf, the Commission is concerned that, based on the comments FERC has received to date, commenters have placed too much emphasis on the role of control in the competitive analysis, with little discussion of the incentive effects associated with partial acquisitions or of the possible increased risks of coordinated interaction from such investments.

The FTC’s comment describes accepted antitrust analysis of the competitive effects of partial acquisitions, which examines not only whether the acquisition confers control but also whether a transaction could change the competitive incentives of the acquiring and acquired firms, even when the acquirer does not gain control of the acquired party. The comment also points in particular to the increased risk of collusion or of anticompetitive information sharing that can occur in the context of partial acquisitions.

Concluding the comment, the Commission encourages FERC to engage in careful, case-by-case analysis of the potentially significant competitive effects that can stem from partial – but not control-conferring – acquisitions.

The Commission vote authorizing the filing of the comment was 4-0. (FTC File No. V090008; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of General Counsel, 202-326-2702.)

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 21.2009.wpd)

FDA, FTC Warn Public of Fraudulent 2009 H1N1 Influenza Products

The U.S. Food and Drug Administration and the Federal Trade Commission are alerting the public to be wary of Internet sites and other promotions for products that claim to diagnose, prevent, mitigate, treat or cure the 2009 H1N1 influenza virus. The agencies are also advising operators of offending Web sites that they must take prompt action to correct and/or remove promotions of these fraudulent products or face enforcement action.

“Consumers who purchase products to treat the novel 2009 H1N1 virus that are not approved, cleared or authorized by the FDA for the treatment or prevention of influenza risk their health and the health of their families,” said Michael Chappell, acting FDA Associate Commissioner for Regulatory Affairs. “In conjunction with the Federal Trade Commission, the FDA has developed an aggressive strategy to identify, investigate, and take regulatory or criminal action against individuals or businesses that wrongfully promote purported 2009 H1N1 influenza products in an attempt to take advantage of the current flu public health emergency.”

Products that are offered for sale to the public with claims to diagnose, prevent, mitigate, treat, or cure infections caused by the H1N1 influenza virus that have not been proven to be safe and effective for these uses must be carefully evaluated. Many of these deceptive products are being sold over the Internet via illegitimate Web sites. The operators of these Web sites take advantage of the public’s concerns about H1N1 influenza and their desire to protect themselves and their families. These fraudulent products come in all varieties and could include dietary supplements or other food products, or products purporting to be drugs, devices or vaccines. Such fraudulent products will not prevent the transmission of the virus or offer effective treatments against infections caused by the H1N1 influenza virus.

“The last thing any consumer needs right now is to be conned by someone selling fraudulent flu remedies,” said FTC Chairman Jon Leibowitz. “The FTC will act swiftly against companies that resort to deceptive advertising.”

Consumers are urged to contact their health care providers or legitimate medical supply services if they have questions or concerns about medical products or personal protective equipment. Consumers are also urged to visit the FDA and Centers for Disease Control and Prevention Web sites for more information about this emergency, and to determine which products the FDA has approved, cleared or authorized for use to diagnose, treat, prevent, mitigate or cure infections caused by H1N1 influenza virus.

Consumers should also visit FDA’s Web site for tips about how to protect themselves when buying medicines online: http://www.fda.gov/buyonlineguide/.

The two antiviral drugs approved by the FDA for treatment and prophylaxis of the 2009 H1N1 influenza virus are Tamiflu (oseltamivir phosphate) and Relenza (zanamivir). Tamiflu and Relenza, in addition to their approved labeling, have Emergency Use Authorizations that describe specific authorized uses during this public health emergency.

For more information about FDA-approved antiviral drugs for influenza, see http://www.fda.gov/cder/drug/antivirals/influenza/default.htm.

For more information on CDC recommendations regarding use of antiviral drugs against the current novel 2009 H1N1 influenza strain, see http://www.cdc.gov/swineflu/?s_cid=swineFlu_outbreak_001.

For more information about personal protective equipment see http://www.fda.gov/cdrh/ppe/.

At present, there are no licensed vaccines approved for this new H1N1 influenza virus.

Consumers are urged to report any suspected fraudulent products or criminal activity relating to FDA regulated products associated with H1N1 Flu Virus (Swine Flu), including the names of Web sites that may be offering these products for sale, to the FDA by visiting: http://www.fda.gov/oci/flucontact.html

Consumers who wish to file a complaint against a company that they believe may be deceptively advertising swine flu products are urged to call 1–877–FTC–HELP (1–877–382– 4357) or visit https://www.ftccomplaintassistant.gov/.

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.

(Swine flu.wpd)

FTC Approves Procedure for Submitting Information for Study of the Effect of Credit-Based Insurance Scores on Consumers of Homeowners Insurance

The Federal Trade Commission has approved an alternative procedure for the production of customer information in connection with the FTC study on the effect of credit-based insurance scores on the availability and affordability of homeowners insurance. The FTC is required to conduct the study under Section 215 of the Fair and Accurate Credit Transactions Act (FACTA).

In May 2008 the Commission authorized the use of compulsory process under Section 6(b) of the FTC Act and FACTA to obtain information for the study. Following a public comment period, in December 2008 the Commission issued orders requiring the nine largest private providers of homeowners insurance to produce information for the study, including policyholder data. The orders allowed each insurance company to submit data and documents containing consumers’ personally identifiable information (PII) to a third party or third parties selected by the FTC. The third parties must certify that their data security practices will protect the data they receive.

The Commission approved the alternative procedure on April 17, 2009. The alternative procedure responds to the concerns that some state laws may require insurance companies to remain responsible for the PII of their policyholders. The companies choosing to use the alternative procedure are required to send their data and documents to the FTC with an associated unique identifying number; the data and documents, however, will not include any PII, such as policyholder name, street address, Social Security number, and date of birth.

The Commission vote to approve the alternative procedure for production of PII, as provided in the modified orders, was 4-0.

(FYI Compulsory Process)

FTC Approves Procedure for Submitting Information for Study of the Effect of Credit-Based Insurance Scores on Consumers of Homeowners Insurance

The Federal Trade Commission has approved an alternative procedure for the production of customer information in connection with the FTC study on the effect of credit-based insurance scores on the availability and affordability of homeowners insurance. The FTC is required to conduct the study under Section 215 of the Fair and Accurate Credit Transactions Act (FACTA).

In May 2008 the Commission authorized the use of compulsory process under Section 6(b) of the FTC Act and FACTA to obtain information for the study. Following a public comment period, in December 2008 the Commission issued orders requiring the nine largest private providers of homeowners insurance to produce information for the study, including policyholder data. The orders allowed each insurance company to submit data and documents containing consumers’ personally identifiable information (PII) to a third party or third parties selected by the FTC. The third parties must certify that their data security practices will protect the data they receive.

The Commission approved the alternative procedure on April 17, 2009. The alternative procedure responds to the concerns that some state laws may require insurance companies to remain responsible for the PII of their policyholders. The companies choosing to use the alternative procedure are required to send their data and documents to the FTC with an associated unique identifying number; the data and documents, however, will not include any PII, such as policyholder name, street address, Social Security number, and date of birth.

The Commission vote to approve the alternative procedure for production of PII, as provided in the modified orders, was 4-0.

(FYI Compulsory Process)

FTC Will Grant Three-Month Delay of Enforcement of Red Flags Rule Requiring Creditors and Financial Institutions to Adopt Identity Theft Prevention Programs

The Federal Trade Commission will delay enforcement of the new “Red Flags Rule” until August 1, 2009, to give creditors and financial institutions more time to develop and implement written identity theft prevention programs. For entities that have a low risk of identity theft, such as businesses that know their customers personally, the Commission will soon release a template to help them comply with the law. Today’s announcement does not affect other federal agencies’ enforcement of the original November 1, 2008 compliance deadline for institutions subject to their oversight.

“Given the ongoing debate about whether Congress wrote this provision too broadly, delaying enforcement of the Red Flags Rule will allow industries and associations to share guidance with their members, provide low-risk entities an opportunity to use the template in developing their programs, and give Congress time to consider the issue further,” FTC Chairman Jon Leibowitz said.

The Fair and Accurate Credit Transactions Act of 2003 (FACTA) directed financial regulatory agencies, including the FTC, to promulgate rules requiring “creditors” and “financial institutions” with covered accounts to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. FACTA’s definition of “creditor” applies to any entity that regularly extends or renews credit – or arranges for others to do so – and includes all entities that regularly permit deferred payments for goods or services. Accepting credit cards as a form of payment does not, by itself, make an entity a creditor. Some examples of creditors are finance companies; automobile dealers that provide or arrange financing; mortgage brokers; utility companies; telecommunications companies; non-profit and government entities that defer payment for goods or services; and businesses that provide services and bill later, including many lawyers, doctors, and other professionals. “Financial institutions” include entities that offer accounts that enable consumers to write checks or make payments to third parties through other means, such as other negotiable instruments or telephone transfers.

During outreach efforts last year, the FTC staff learned that some industries and
entities within the agency’s jurisdiction were uncertain about their coverage under the Red Flags Rule. During this time, FTC staff developed and published materials to help explain what types of entities are covered, and how they might develop their identity theft prevention programs. Among these materials were an alert on the Rule’s requirements, www.ftc.gov/bcp/edu/pubs/business/alerts/alt050.shtm, and a Web site with more resources to help covered entities design and implement identity theft prevention programs, www.ftc.gov/redflagsrule. The compliance template will be available on this Web site.

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.

(Red Flags Deadline Extension)

FTC Will Grant Three-Month Delay of Enforcement of Red Flags Rule Requiring Creditors and Financial Institutions to Adopt Identity Theft Prevention Programs

The Federal Trade Commission will delay enforcement of the new “Red Flags Rule” until August 1, 2009, to give creditors and financial institutions more time to develop and implement written identity theft prevention programs. For entities that have a low risk of identity theft, such as businesses that know their customers personally, the Commission will soon release a template to help them comply with the law. Today’s announcement does not affect other federal agencies’ enforcement of the original November 1, 2008 compliance deadline for institutions subject to their oversight.

“Given the ongoing debate about whether Congress wrote this provision too broadly, delaying enforcement of the Red Flags Rule will allow industries and associations to share guidance with their members, provide low-risk entities an opportunity to use the template in developing their programs, and give Congress time to consider the issue further,” FTC Chairman Jon Leibowitz said.

The Fair and Accurate Credit Transactions Act of 2003 (FACTA) directed financial regulatory agencies, including the FTC, to promulgate rules requiring “creditors” and “financial institutions” with covered accounts to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. FACTA’s definition of “creditor” applies to any entity that regularly extends or renews credit – or arranges for others to do so – and includes all entities that regularly permit deferred payments for goods or services. Accepting credit cards as a form of payment does not, by itself, make an entity a creditor. Some examples of creditors are finance companies; automobile dealers that provide or arrange financing; mortgage brokers; utility companies; telecommunications companies; non-profit and government entities that defer payment for goods or services; and businesses that provide services and bill later, including many lawyers, doctors, and other professionals. “Financial institutions” include entities that offer accounts that enable consumers to write checks or make payments to third parties through other means, such as other negotiable instruments or telephone transfers.

During outreach efforts last year, the FTC staff learned that some industries and
entities within the agency’s jurisdiction were uncertain about their coverage under the Red Flags Rule. During this time, FTC staff developed and published materials to help explain what types of entities are covered, and how they might develop their identity theft prevention programs. Among these materials were an alert on the Rule’s requirements, www.ftc.gov/bcp/edu/pubs/business/alerts/alt050.shtm, and a Web site with more resources to help covered entities design and implement identity theft prevention programs, www.ftc.gov/redflagsrule. The compliance template will be available on this Web site.

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.

(Red Flags Deadline Extension)

FTC Issues Final Rules Amending Parts 3 and 4 of the Agency’s Rules of Practice

The Federal Trade Commission today adopted as final the interim rules amending Parts 3 and 4 of the agency’s Rules of Practice that were announced last December, and also further amended several rules and eliminated one. The amendments are designed to streamline and improve the agency’s “Part 3” adjudicative proceedings. They expedite the prehearing, hearing, and appeal phases; streamline discovery and motion practice; and ensure that the FTC can apply its substantive expertise, as appropriate, earlier in the process.

Today’s action is part of the FTC’s broad and systematic internal review of its adjudicative proceedings process. While the current rulemaking is now completed, the FTC will review the rules on a bi-annual basis and consider additional changes if warranted.

Through the Federal Register notice announced today, the Commission has made changes to several areas of the rules. First, the amendments eliminate Rule 3.11A (Fast Track Proceedings). The Fast Track Proceedings are unnecessary because of the expedited deadlines in the new Part 3 rules.

Second, changes in Rule 3.25 clarify the procedures for the Commission to consider possible settlements while a matter is in administrative litigation.

Third, Rule 3.31(g) has been amended to be consistent with a new federal rule of evidence regarding how parties must deal with documents subject to privilege that another party claims were inadvertently produced.

Finally, amended Rule 4.2 requires a party to file a redacted public version of a petition for certain types of Commission action (such as a petition to quash a subpoena) in non-Part 3 matters if it requests confidential treatment for the petition. The rule also makes other changes that will facilitate the development of a new Commission electronic filing system for adjudicative proceedings.

The interim rules adopted as final today remain in effect and continue to apply to all Commission adjudicatory proceedings that were commenced after January 13, 2009. The further revisions to rules and the elimination of Rule 3.11A will govern all proceedings that are initiated on or after the date the notice is published in the Federal Register.

The Commission vote to amend certain rules, eliminate one rule, and otherwise adopt the interim rules as final was 4-0. The notice containing these revisions is available on the FTC’s Web site at , and will be published in the Federal Register shortly.

Copies of the Federal Register notice detailing the final rules 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.

(FTC File No. P072104)

FTC Issues Final Rules Amending Parts 3 and 4 of the Agency’s Rules of Practice

The Federal Trade Commission today adopted as final the interim rules amending Parts 3 and 4 of the agency’s Rules of Practice that were announced last December, and also further amended several rules and eliminated one. The amendments are designed to streamline and improve the agency’s “Part 3” adjudicative proceedings. They expedite the prehearing, hearing, and appeal phases; streamline discovery and motion practice; and ensure that the FTC can apply its substantive expertise, as appropriate, earlier in the process.

Today’s action is part of the FTC’s broad and systematic internal review of its adjudicative proceedings process. While the current rulemaking is now completed, the FTC will review the rules on a bi-annual basis and consider additional changes if warranted.

Through the Federal Register notice announced today, the Commission has made changes to several areas of the rules. First, the amendments eliminate Rule 3.11A (Fast Track Proceedings). The Fast Track Proceedings are unnecessary because of the expedited deadlines in the new Part 3 rules.

Second, changes in Rule 3.25 clarify the procedures for the Commission to consider possible settlements while a matter is in administrative litigation.

Third, Rule 3.31(g) has been amended to be consistent with a new federal rule of evidence regarding how parties must deal with documents subject to privilege that another party claims were inadvertently produced.

Finally, amended Rule 4.2 requires a party to file a redacted public version of a petition for certain types of Commission action (such as a petition to quash a subpoena) in non-Part 3 matters if it requests confidential treatment for the petition. The rule also makes other changes that will facilitate the development of a new Commission electronic filing system for adjudicative proceedings.

The interim rules adopted as final today remain in effect and continue to apply to all Commission adjudicatory proceedings that were commenced after January 13, 2009. The further revisions to rules and the elimination of Rule 3.11A will govern all proceedings that are initiated on or after the date the notice is published in the Federal Register.

The Commission vote to amend certain rules, eliminate one rule, and otherwise adopt the interim rules as final was 4-0. The notice containing these revisions is available on the FTC’s Web site at , and will be published in the Federal Register shortly.

Copies of the Federal Register notice detailing the final rules 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.

(FTC File No. P072104)