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FTC Returns an Additional $8 Million to Borrowers from First Alliance Mortgage Company Settlement

The Federal Trade Commission has mailed more than $8 million in redress checks to more than 15,000 people who obtained home mortgage loans through subprime lender First Alliance Mortgage Company (FAMCO). In 2002, the FTC had charged FAMCO with violating federal law in making home equity loans. The FTC alleged that the company misled consumers about the existence and amount of origination fees for its loans, and the interest rate and monthly payments of their adjustable rate mortgage loans. FAMCO marketed its loans to the subprime market, which included homeowners with poor credit ratings who might not have been able to qualify for conventional loans. This is the final compensation to be distributed in this matter; the FTC previously distributed more than $66 million to FAMCO customers.

The redress fund was established in 2002 when FAMCO (since liquidated in bankruptcy) and related defendants reached a joint settlement with the FTC, Arizona, California, Florida, Illinois, New York, Massachusetts, AARP, and private plaintiffs. The FTC initially distributed checks to consumers in December 2002. The redress fund received additional money in 2003, and the Commission mailed a second round of refund checks in January 2004. With additional funds collected in 2009 in accordance with the settlement agreement, in May 2009 the agency mailed checks to borrowers who cashed the previous checks. Borrowers who received a $500 lump sum in the first round of the distribution did not receive additional checks because they were part of a prior private settlement in Dunning v. First Alliance.

The FTC maintains a Web site with details about the settlement and redress at www.ftc.gov/famco. For more information, call the FTC’s toll-free hotline at 1-877-862-0886.

(FAMCO)

FTC Officials Promote Recommended Practices to Improve Merger Analysis and Address Unilateral Conduct Issues at International Competition Network Conference

Federal Trade Commission officials worked with officials from more than 80 antitrust agencies worldwide at the eighth annual International Competition Network (ICN) conference in Zurich, Switzerland, to adopt new Recommended Practices for substantive merger analysis. ICN participants also discussed two new reports on the analysis of tying and bundled discounting, and loyalty discounts and rebates under unilateral conduct laws.

The ICN conference, hosted by the Swiss Competition Commission, was held on June 3-5, 2009. More than 450 delegates participated, representing over 80 antitrust agencies from around the world, and competition experts from international organizations and the legal, business, consumer, and academic communities.

In October 2001, the FTC and the U.S. Department of Justice (DOJ) joined with antitrust agencies from 13 other jurisdictions around the world (Australia, Canada, the European Union, France, Germany, Israel, Italy, Japan, Korea, Mexico, South Africa, the United Kingdom and Zambia) to create the ICN. The ICN now includes 107 member agencies from 96 jurisdictions. The goal of the ICN is to provide a forum for antitrust agencies to address antitrust enforcement and policy issues of common interest and formulate proposals for procedural and substantive convergence through a results-oriented agenda and structure.

FTC Commissioner William E. Kovacic, who serves as the ICN Vice Chair for Outreach, and Christine A. Varney, Assistant Attorney General in charge of DOJ’s Antitrust Division were among the U.S. delegates who participated in the conference. The conference showcased the recent work of ICN working groups on mergers, unilateral conduct, cartels, competition advocacy, and competition policy implementation.

“The ICN is making impressive progress toward fulfilling a central aim that motivated its creation: to be a demand-driven institution that promotes acceptance of superior methods, enables agencies to understand more deeply their common interests and differences, and to realize, through collective action, results that elude individual initiative,” Commissioner Kovacic said.

“The ICN plays a central role in promoting collaboration among antitrust authorities from around the world,” Assistant Attorney General Varney said. “The Antitrust Division is committed to participating fully in ICN efforts to promote international convergence in antitrust enforcement and explore ways in which we can pursue our shared enforcement goals.”

Based on the work of the Merger Working Group, co-chaired by the Antitrust Division and the Irish Competition Authority, ICN members adopted three new Recommended Practices for Merger Analysis. The new Recommended Practices for merger analysis address:

Competitive Effects Analysis in Horizontal Merger Review. Agencies should conduct competitive effects analysis to assess whether a merger is likely to harm competition significantly by creating or enhancing market power. Competitive effects analysis should be clearly grounded in both sound economics and the facts of the particular case.
Unilateral Effects. In analyzing the potential for a merger to result in anticompetitive unilateral effects, agencies should assess whether the merger will create or enhance the merged firm’s ability or incentive to exercise market power independently. Agencies should apply the economic theory or model that best fits the characteristics of the market at issue, and assess the competitive constraints and other factors relevant to the merged firm’s ability to exercise market power.
Coordinated Effects. In analyzing the potential for a merger to result in anticompetitive coordinated effects, agencies should assess whether the merger increases the likelihood that firms in the market will successfully coordinate their behavior or strengthen existing coordination. Agencies should assess whether the conditions that are generally necessary for successful coordination are present, and the extent to which competitive constraints and other factors would likely deter or disrupt effective coordination.

The Merger Working Group also presented a detailed report, presented by the Notification and Procedures subgroup chaired by Cynthia Lewis Lagdameo of the FTC’s Office of International Affairs, on the ways in which agencies address information requirements in the initial notification of a merger. In addition, Assistant Attorney General Varney moderated a Merger Working Group panel discussion on “Merger Analysis in Troubled Times.”

The conference highlighted the work of the Unilateral Conduct Working Group, which was established to promote analytical convergence and sound enforcement of laws governing unilateral conduct by firms with substantial market power. Co-chaired by the FTC and the German Bundeskartellamt, the Working Group presented reports on the analysis of tying and bundled discounting and on the analysis of single-product loyalty discounts and rebates in over 30 jurisdictions.

Randolph W. Tritell, Director of the FTC’s Office of International Affairs and Co-chair of the Working Group, opened the group’s panel on “Distinguishing Pro from Anticompetive Conduct: The Fine Line Between Aggressive Competition and Anticompetitive Foreclosure in Tying and Discounting Cases.” Speaking on behalf of Chairman Leibowitz, Tritell highlighted the FTC’s unique authority under Section 5 of the FTC Act to stop unfair conduct that harms consumers but that may not be reached by other antitrust laws.

“The Unilateral Conduct Working Group is continuing to build a body of knowledge on which enforcers and policy-makers around the world can draw to assist them in implementing their competition laws in this complex area,” said Tritell.

In addition, the ICN conference highlighted the work of the Cartel Working Group, which aims to improve the ability of antitrust agencies to crack cartels through the exchange of effective investigative techniques and the examination of important legal and policy topics. In Zurich, the Cartel Working Group conducted panel discussions on transitioning to criminal sanctions and the use of effective investigative techniques.

“The Antitrust Division is working closely with enforcers abroad to combat international cartels that victimize businesses and consumers around the globe. There is a growing recognition in this effort that the surest way to deter these conspiracies is by imposing stiff criminal sanctions on the individuals who perpetrate these crimes,” said Scott D. Hammond, Deputy Assistant Attorney General for Criminal Enforcement of the Department of Justice’s Antitrust Division. “In many jurisdictions where the punishment for cartel offenses has historically been limited to administrative fines against companies, laws adopting criminal sanctions against individuals for cartel offenses are now being introduced. The ICN provides a valuable forum for agencies to share their experiences and ideas in addressing the challenges of transitioning to a criminal antitrust enforcement regime.”

The Advocacy Working Group presented two reports. One addresses the results of a survey of ICN members on their experience with market studies and the other makes recommendations for future ICN work in the field of competition advocacy. The plenary session also addressed advocacy in an economic downturn, highlighting the need for competition agencies to be an advocate for competition principles.

The Competition Policy Implementation Working Group held a plenary session on agency effectiveness. FTC Counsel for International Antitrust, Maria Coppola Tineo, participated, praising the trend toward increased emphasis on institutional design and implementation, and the growing recognition that institutional arrangements affect substantive policy results. The Group also reported on a January 2009 workshop on agency effectiveness attended by agency leaders from more than 60 jurisdictions. Russell Damtoft, Associate Director of the FTC’s Office of International Affairs, reported on a new initiative to promote online sharing of experiences among ICN members.

The conference host presented a special project on competition law in small economies.

ICN members also elected John Fingleton, Chief Executive Officer of the United Kingdom’s Office of Fair Trading, to a two-year term as Chair of the ICN Steering Group.

ICN documents are available at www.internationalcompetitionnetwork.org.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(ICN.2009.final)

Teach Your Dad About Phishing this Fathers Day

The Federal Trade Commission’s Father’s Day e-card is the perfect gift for the man who already has enough ties. But even more important, it can save your dad a whole lot of headaches. Available from the FTC in English and Spanish at http://www.ftc.gov/dad and http://www.ftc.gov/padre, the cards offer dads advice on keeping their personal information secure. To see the You Tube video version of this card, go to http://www.youtube.com/ftcvideos.

Help your dad figure out how to spot fraud on the Internet. When Internet scam artists go “phishing,” they send spam e-mails or pop-up messages asking for personal information, Social Security numbers, and/or passwords. To gain the trust of those they wish to con, these hustlers often pose as representatives of a bank or credit union, an e-commerce site, or a government agency.

Send your dad this card, and keep him from getting hooked by Internet con artists.

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 FD Phishing 09)

FTC Approves Final Consent Order Related to Reed Elsevier NV and ChoicePoint Inc.

For Your Information

June 5, 2009

Following a public comment period, the Commission has approved a final consent order in the matter of Reed Elsevier NV and ChoicePoint Inc. and authorized the staff to send letters to the commenters of record. The vote approving the final order was 4-0. (FTC File No. 081-0133; the staff contact is Brendan McNamara, Bureau of Competition, 202-326-3703; see press release dated September 16, 2008, at http://www.ftc.gov/opa/2008/09/choicepoint.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 27.2009.wpd)

Contact Information

Media Contact:

Office of Public Affairs
202-326-2180

Sears Settles FTC Charges Regarding Tracking Software

Sears Holdings Management Corporation – owned by Sears, Roebuck and Company and Kmart Management Corporation – has agreed to settle Federal Trade Commission charges that it failed to disclose adequately the scope of consumers’ personal information it collected via a downloadable software application. According to the FTC’s administrative complaint, Sears represented to consumers that the software would track their “online browsing.” The FTC charges that the software would also monitor consumers’ online secure sessions – including sessions on third parties’ Web sites – and collect information transmitted in those sessions, such as the contents of shopping carts, online bank statements, drug prescription records, video rental records, library borrowing histories, and the sender, recipient, subject, and size for web-based e-mails. The software would also track some computer activities that were not related to the Internet. The proposed settlement calls for Sears to stop collecting data from the consumers who downloaded the software and to destroy all data it had previously collected.

According to the FTC’s complaint, Sears invited certain consumers visiting the sears.com and kmart.com Web sites to become members of the “My SHC Community.” Sears solicited these consumers to “participate in exciting, engaging, and on-going interactions – always on your terms and always by your choice.” Sears paid consumers $10 to participate. As part of this process, Sears asked consumers to download “research” software that it said would confidentially track their “online browsing.” Only in a lengthy user license agreement, available to consumers at the end of a multi-step registration process, did Sears disclose the full extent of the information the software tracked, according to the complaint. The complaint charges that Sears’ failure to adequately disclose the scope of the tracking software’s data collection was
deceptive and violates the FTC Act.

Under the proposed settlement, in addition to destroying information previously collected, if Sears advertises or disseminates any tracking software in the future, it must clearly and prominently disclose the types of data the software will monitor, record, or transmit. This disclosure must be made prior to installation and separate from any user license agreement. Sears must also disclose whether any of the data will be used by a third party.

The Commission vote to approve the administrative complaint and proposed settlement agreement was 4-0. The settlement contains standard reporting and record-keeping provisions to allow the agency to monitor compliance. 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 6, 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/2009/06/0823099publiccomment.pdf and follow the instructions at that site.

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

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 settlement 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. 0823099)

FTC Settles Price-Fixing Charges Against San Francisco Bay Area Doctors Group

Alta Bates Medical Group, Inc. (Alta Bates), a 600-physician independent practice association serving the Berkeley and Oakland, California, area, has agreed to settle Federal Trade Commission charges that it violated federal antitrust law by fixing prices charged to health care insurers. A proposed consent order would prohibit Alta Bates from collectively negotiating fee-for-service reimbursements and engaging in related anticompetitive conduct.

The FTC’s complaint focuses on Alta Bates’s contracts with health plans to provide fee-for-service medical care. Under these arrangements, the payor compensates physicians for services pursuant to agreed-upon fee schedules. According to the complaint, since at least 2001, Alta Bates has orchestrated collective negotiations for fee-for-service contracts. Alta Bates proposed, rejected, and countered offers to insurers without consulting with its individual physician members regarding the prices each independently would accept and transmitted the insurers’ offers to its individual physician members only after the group had approved the negotiated prices.

In addition to price-fixing of fee-for-service reimbursements, the FTC’s complaint alleges an unlawful concerted refusal to deal. The complaint alleges that this conduct constituted an attempt to limit Kaiser’s product offerings to consumers. Although Alta Bates’s refusal to deal was ultimately unsuccessful, the sole purpose of this action was to impede competition in the provision of physician services in and around Berkeley and Oakland.

The FTC’s complaint charges that Alta Bates did not engage in any activity that might justify collective agreements on the prices its members would accept for their services from insurers under fee-for-service arrangements. For example, the physicians in Alta Bates have not clinically or financially integrated their practices to create efficiencies sufficient to justify the complained of conduct. As a consequence, Alta Bates’s actions have restrained price and other forms of competition among physicians in the Berkeley and Oakland, California area and harmed consumers by increasing the prices for physician services, according to the FTC’s complaint.

Alta Bates also has negotiated group contracts with insurers under which it receives a flat monthly fee for each enrollee (“capitated” payments), which shift the risk of patient illness to Alta Bates and its physicians. The complaint does not challenge Alta Bates’s activities concerning these contracts.

The proposed consent order is designed to prevent the continuance and recurrence of the illegal conduct alleged in the complaint while allowing Alta Bates to engage in legitimate joint conduct. The proposed order, which would not affect Alta Bates’s activities in contracting with insurers on a capitated basis, otherwise would prohibit Alta Bates from entering into or facilitating any price-fixing or concerted refusals to deal.

As in other Commission orders addressing health care providers’ collective bargaining with health care insurers, certain kinds of agreements are excluded from the general bar on joint negotiations. Notably, the proposed order would not preclude Alta Bates from engaging in conduct reasonably necessary to form or participate in legitimate “qualified risk-sharing” or “qualified clinically-integrated” joint arrangements, as defined in the proposed order.

In addition, the proposed order would require Alta Bates to notify the Commission before it initiates certain contacts with insurers, to distribute copies of the complaint and consent order to its physician members, its management and staff, and certain insurers, and to terminate, without penalty, certain pre-existing payor contracts to eliminate the effects of Alta Bates’s illegal collective behavior.

The Commission vote to place the proposed consent order on the public record for comment and publish a copy in the Federal Register was 4-0. The Commission is accepting comments on the proposed order for 30 days, until July 6, 2009, after which it will decide whether to make them final. Comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. To file a public comment electronically, please click on: http://www.ftc.gov/os/2009/06/0510260publiccomment.pdf and follow the instructions at that site.

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 actually have violated the law.

Copies of the proposed consent order are available now on the FTC’s Web site and as a link to this press release. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No. 051-0260)
(Alta Bates.final.wpd)

FTC Shuts Down Notorious Rogue Internet Service Provider, 3FN Service Specializes in Hosting Spam-Spewing Botnets, Phishing Web sites, Child Pornography, and Other Illegal, Malicious Web Content

A rogue Internet Service Provider that recruits, knowingly hosts, and actively participates in the distribution of spam, child pornography, and other harmful electronic content has been shut down by a district court judge at the request of the Federal Trade Commission. The ISP’s upstream providers and data centers have disconnected its servers from the Internet.

According to the FTC, the defendant, Pricewert LLC, which does business under a variety of names including 3FN and APS Telecom, actively recruits and colludes with criminals seeking to distribute illegal, malicious, and harmful electronic content including child pornography, spyware, viruses, trojan horses, phishing, botnet command and control servers, and pornography featuring violence, bestiality, and incest. The FTC alleges that the defendant advertised its services in the darkest corners of the Internet, including a forum established to facilitate communication between criminals.

The complaint alleges that Pricewert actively shielded its criminal clientele by either ignoring take-down requests issued by the online security community, or shifting its criminal elements to other Internet protocol addresses it controlled to evade detection.

The FTC also alleges that the defendant engaged in the deployment and operation of botnets – large networks of computers that have been compromised and enslaved by the originator of the botnet, known as a “bot herder.” Botnets can be used for a variety of illicit purposes, including sending spam and launching denial of service attacks. According to the FTC, the defendant recruited bot herders and hosted the command-and-control servers – the computers that relay commands from the bot herders to the compromised computers known as “zombie drones.” Transcripts of instant-message logs filed with the district court show the defendants’ senior employees discussing the configuration of botnets with bot herders. And, in filings with the district court, the FTC alleges that more than 4,500 malicious software programs are controlled by command-and-control servers hosted by 3FN. This malware includes programs capable of keystroke logging, password stealing, and data stealing, programs with hidden backdoor remote control activity, and programs involved in spam distribution.

The FTC charged that the defendants’ distribution of illegal, malicious, and harmful content and deployment of botnets that compromised thousands of computers caused substantial consumer injury and was an unfair practice, in violation of federal law.

The court issued a temporary restraining order to prohibit Pricewert’s illegal activities and require its upstream Internet providers and data centers to cease providing services to Pricewert. The order also freezes Pricewert’s assets. The court will hold a preliminary injunction hearing on June 15, 2009.

This case was brought with the invaluable assistance of NASA’s Office of Inspector General, Computer Crime Division; Gary Warner, Director of Research in Computer Forensics, University of Alabama at Birmingham; The National Center for Missing and Exploited Children; The Shadowserver Foundation; Symantec Corporation; and The Spamhaus Project.

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, San Jose Division.

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.

(3fn)

FTC Testifies in Support of Bill Banning Pay-for-Delay Settlements Between Brand and Generic Drug Companies

Testifying today on behalf of the Federal Trade Commission before the U.S. House Judiciary Committee’s Subcommittee on Courts and Competition Policy, Bureau of Competition Director Richard A. Feinstein said that anticompetitive patent settlements in the U.S. pharmaceutical industry delay consumer access to lower-cost generic drugs, and impose “enormous costs” on consumers; employers; federal, state and local governments; and our nation’s health care system. The testimony stated that congressional action to prohibit these “pay-for-delay” settlements between brand-name drug manufacturers and their generic competitors is “both appropriate and timely,” and would help contain spiraling health care costs.

The FTC testimony stated that the Commission strongly supports the Protecting Consumer Access to Generic Drugs Act of 2009, H.R. 1706, which would prohibit these anticompetitive settlements. Such legislation can provide a comprehensive solution to a problem that is prevalent, extremely costly, and subverts the goals of the Hatch-Waxman Act, which was designed to prevent weak patents from obstructing lower-cost generic drug competition.

The Commission has sought to use antitrust enforcement to stop so-called “pay-for-delay” agreements, settlements of patent litigation in which a brand-name drug manufacturer pays its potential generic competitor to abandon a patent challenge and delay entry to the market. “[S]ince 2005, court decisions have taken a lenient approach to such agreements in drug patent settlements,” according to the testimony. As a result, it has become increasingly difficult to bring antitrust cases to stop pay-for-delay tactics, and such agreements have become a common industry strategy.

The implications are troubling, the testimony continued, “because the increased costs resulting from anticompetitive agreements that delay generic competition harm all those who pay for prescription drugs: individual consumers, the federal government, state governments trying to provide access to health care with limited public funds, and American businesses striving to compete in a global economy.”

The testimony noted that the FTC is encouraged that the list of those speaking out against pay-for-delay settlements is growing. “President Obama’s budget proposal expresses the Administration’s opposition to these anticompetitive deals, and Assistant Attorney General Christine Varney has testified that she supports stopping them.”

Because this is such an important issue for consumers, the FTC continues to use its enforcement authority to challenge pay-for-delay settlements, the testimony continued, detailing the agency’s work bringing two new cases in the past 16 months. Despite the Commission’s ongoing antitrust enforcement efforts, however, the appellate court decisions upholding the legality of pay-for-delay settlements “have prompted a resurgence in settlements in which parties settle with a payment to the generic company and an agreement by the generic company not to market its product,” the testimony stated.

The FTC testimony explained that the increased availability of generic pharmaceuticals as a result of patent challenges has helped U.S. consumers save money on the important drugs they use, and stated that pay-for-delay settlements also impose enormous costs on the nation’s health care system. For example, generic competition following successful patent challenges involving just four brand-name drugs – Prozac, Zantac, Taxol, and Platinol – is estimated to have saved consumers more than $9 billion. When branded firms are allowed to pay generic firms to abandon such challenges, consumers must continue to pay higher prices as does the federal government, which in 2008 accounted for almost one-third of all money spent on prescription drugs.

Settlements with payments to the generic patent challenger had essentially stopped in the wake of antitrust enforcement between 2000 and 2004. But the recent appellate court decisions have triggered “a disturbing new trend.” An analysis of settlements filed during the fiscal year ending in December 2007 found that almost half of all the final patent settlements involved compensation to the generic challenger and agreement by the generic not to launch its product for some period of time. In addition, findings concerning settlements with generic first filers found that since 2005, 69 percent involved such pay-for-delay tactics. According to the Commission, the profitability of delaying generic entry means that these agreements will become more prevalent – with consumers paying higher prices as a result.

Legislation is likely to be swifter and more comprehensive than litigation in preventing anticompetitive settlements. The testimony also explained how, according to the FTC, the arguments made by some supporters of pay-for-delay settlements are “contradicted by experience in the market.” In detailing the provisions of H.R. 1706, the testimony stated, the bill “offers a straightforward means to quickly combat anticompetitive conduct that is pervasive and costly to consumers, while also providing flexibility to protect procompetitive arrangements.”

The Commission vote authorizing the presentation of the testimony and its inclusion in the formal record was 4-0.

(FTC File No. P859910)
(Reverse Payments.final.wpd)

FTC Chairman Praises House Subcommittee for Approving Protecting Consumer Access to Generic Drugs Act of 2009

Federal Trade Commission Chairman Jon Leibowitz praised the U.S. House Energy and Commerce Committee’s Commerce, Trade, and Consumer Protection Subcommittee for its vote today in favor of the Protecting Consumer Access to Generic Drugs Act of 2009 (H.R. 1706), which would prohibit “pay-for-delay” patent settlements in which manufacturers of brand-name drugs pay potential generic competitors to stay out of the market.

“Escalating health care costs are a pressing concern for American consumers, employers, and local, state and federal governments,” Leibowitz said. “Stopping pharmaceutical companies from colluding with each other to delay entry of generic drugs, which sometimes cost 80 to 90 percent less than their brand name versions, is a simple and surefire way to control costs. Today, Members of the Subcommittee acknowledged this by approving H.R. 1706.”

“Special thanks go to Chairmen Henry Waxman and Bobby L. Rush and Representative Jan Schakowsky for their leadership in recognizing that preventing these harmful ‘exclusion payment’ agreements will save American consumers and their government billions of dollars every year,” Leibowitz added.

“We urge Congress to pass this legislation to restore the full benefits of generic competition so that consumers will benefit from earlier access to generic drugs, which are substantially less expensive than branded drugs,” Leibowitz said. “We’re seeing a lot of momentum in the new Administration and in Congress.”

Chairman Leibowitz also thanked the Subcommittee for passing two other important consumer protection measures: H.R. 2309, the Consumer Credit and Debt Protection Act; and H.R. 2221, the Data Accountability and Trust Act.

Commission Approves Amended Complaint in Robocall Case

The FTC has amended the complaint in the action currently pending against Voice Touch, Inc., adding Voice Foundations, LLC as a defendant. The original complaint, filed in May 2009, charged the defendants with operating a massive telemarketing scheme that used random, pre-recorded phone calls to deceive consumers into thinking that their vehicle’s warranty is about to expire.

The Commission vote authorizing the staff to file the amended complaint was 4-0. (FTC File No. X090046; the staff contacts are Steven Baker and Todd Kossow, FTC Midwest Region, Chicago, 312-960-5634; see press releases dated May 14, 2009, at http://www.ftc.gov/opa/2009/05/robocalls.shtm and May 15, 2009 at http://www.ftc.gov/opa/2009/05/robocalls2.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 26.2009.wpd)

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