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FTC Seeks Comments on Proposed Rule Prohibiting Petroleum Market Manipulation

The Federal Trade Commission today issued a Notice of Proposed Rulemaking (NPRM) seeking public comments on a proposed rule prohibiting market manipulation in the petroleum industry. The NPRM will assist the Commission in determining whether, and in what ways, it should develop a final rule. The Commission expects to conclude the rulemaking process by the end of the year.

“The Federal Trade Commission is committed to exercising its authority to determine whether crude oil, gasoline, or petroleum distillates price increases at wholesale are a result of illegal market manipulation,” Chairman William E. Kovacic said. “The proposed rule announced today brings us one step closer to defining, identifying, and stopping fraudulent and deceptive conduct in wholesale petroleum markets that may contribute to higher gasoline prices.”

The Proposed Rule

In issuing the proposed rule, the Commission is exercising authority provided by the Energy Independence and Security Act of 2007 (EISA), enacted in December of last year. The rulemaking process began with the publication of an Advance Notice of Proposed Rulemaking (ANPR) announced on May 1, 2008. In response to the ANPR, the Commission received 155 comments, most of which were submitted by consumers, with the rest coming from industry members, trade and bar associations, academics, and other federal and state government agencies.

The NPRM issued today seeks public comments regarding the proposed rule the FTC has developed pursuant to Section 811 of EISA. EISA gives the FTC new authority to promulgate regulations prohibiting “market manipulation” in wholesale petroleum markets. Specifically, Section 811 states that it is against the law for any person, in connection with the wholesale purchase or sale of certain petroleum commodities to use any “manipulative or deceptive device or contrivance, in contravention of such rules and regulations as the Federal Trade Commission may prescribe as necessary or appropriate in the public interest or for the protection of United States citizens.”

The proposed rule focuses on fraudulent or deceptive conduct that threatens the integrity of wholesale petroleum markets. Consistent with the plain language of Section 811, the FTC has modeled its proposed rule on Securities and Exchange Commission (SEC) Rule 10b-5, promulgated by the SEC pursuant to that agency’s long-standing market manipulation authority. The FTC’s proposed rule would make it unlawful for any person, directly or indirectly, in connection with the purchase or sale of crude oil, gasoline, or petroleum distillates at wholesale:

To use or employ any device, scheme, or artifice to defraud,
To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
To engage in any act, practice, or course of business that operates or would operate as a fraud or deceit upon any person.

Thus, fraudulent or deceptive acts, including false reporting to private reporting services or misleading announcements by refineries, pipelines, or investment banks, may be covered by the proposed rule. Similarly, trading practices in physical or futures markets may also be covered. By focusing the proposed rule on fraudulent and deceptive conduct, the Commission seeks to avoid discouraging pro-competitive or otherwise desirable market behavior that benefits consumers.

The proposed rule would not impose affirmative duties or obligations or record-keeping requirements. EISA subjects anyone violating a FTC rule promulgated under Section 811 to civil penalties of up to $1 million per violation per day, in addition to any relief available to the Commission under the FTC Act.

Questions for Commenters

The Commission is seeking public comments on the proposed rule. Such comments must be received no later than September 18, 2008. Without seeking to limit comment on other areas of concern to the public, the agency specifically requests comments addressing the proposed rule’s likely effects on consumers and the industry. A complete list of questions on which the Commission seeks comment can be found in the NPRM. Instructions for submitting comments are found in the Addresses section of the NPRM.

The Commission vote to issue the NPRM was 4-0. It will be available on the FTC’s Web site and likely will be published in the Federal Register on August 19, 2008.

Copies of the Notice of Proposed Rulemaking are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

(FTC File No. P082900)
(NPRM final.wpd)

FTC Seeks Comments on Proposed Rule Prohibiting Petroleum Market Manipulation

The Proposed Rule

To use or employ any device, scheme, or artifice to defraud,
To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
To engage in any act, practice, or course of business that operates or would operate as a fraud or deceit upon any person.

Questions for Commenters

The Commission vote to issue the NPRM was 4-0. It will be available on the FTC’s Web site and likely will be published in the Federal Register on August 19, 2008.

(FTC File No. P082900)
(NPRM final.wpd)

Oregano Supplement Marketers Agree to Pay $2.5 Million to Settle FTC Charges for False Advertising Claims

The marketers of a line of dietary supplements have agreed to pay $2.5 million to settle Federal Trade Commission charges that claims about their oregano oil and capsules were false and unsubstantiated in violation of federal law.

According to the FTC’s complaint, North American Herb & Spice Co., LLC, and its owner, Judy Kay Gray, falsely claimed that Oreganol P73, Super Strength Oreganol P73, and Oregacyn (currently sold as OregaRESP) are scientifically proven to prevent or treat colds and flu. The defendants also claimed that the products boost the immune system and kill a variety of germs and pathogens, including cold and flu viruses, avian bird flu virus, hepatitis C, Staphylococcus aureus, Helicobacter pylori, mold, parasites, and yeasts. Sold at prices ranging from $29.99 to $69.99, the products purportedly contain P73, which is described as wild, handpicked Mediterranean oregano. The products were advertised on Web sites, including www.p-73.com, and in magazines such as Alternative Medicine, H2O, Health Supplement Retailer, and Women’s Health & Fitness.

The final order imposes a $2.5 million judgment and places restrictions on the defendants’ future conduct. It prohibits them from claiming that their products prevent or treat colds or flu, are clinically tested or scientifically proven to be effective, or have other health or safety benefits, unless the claims are true, not misleading, and based on reliable scientific evidence. In addition, the defendants are banned from misrepresenting the existence, validity, results, or conclusions of any test or study. The order also contains standard record-keeping provisions to allow the FTC to monitor compliance.

The FTC would like to acknowledge the National Advertising Division of the Council of Better Business Bureaus for their referral related to this case.

The Commission vote to authorize staff to file the complaint and stipulated final order was 4-0. The documents were filed in the U.S. District Court for the Northern District of Illinois. The court entered the order on August 4, 2008.

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 defendants have actually violated the law. The stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation.

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.

(North American Herb)
(FTC File No. 0623214)

FTC to Announce Deceptive Marketing Case Against Nationally Known Maker of Natural Health Remedy

WHERE: Federal Trade Commission
600 Pennsylvania Ave., N.W., Room 432
Washington, D.C.

Reporters unable to attend the event can either call in or view the Webcast. (NOTE: A live webcast will be available on the day of the event. Bookmark and visit this link on August 14 to access the webcast.)

Call-in Information: The toll-free phone number (in the U.S. and Canada) is (866) 363-9013. The confirmation number is 60204999.

(Please reference this number when joining the call). The chairperson is Gail Kingsland, and the lines, which are for media only, will open at 10:45 a.m. EST.

FTC to Announce Deceptive Marketing Case Against Nationally Known Maker of Natural Health Remedy

WHERE: Federal Trade Commission
600 Pennsylvania Ave., N.W., Room 432
Washington, D.C.

Call-in Information: The toll-free phone number (in the U.S. and Canada) is (866) 363-9013. The confirmation number is 60204999.

(Please reference this number when joining the call). The chairperson is Gail Kingsland, and the lines, which are for media only, will open at 10:45 a.m. EST.

FTC Approves Modified Final Consent Order in Matter of TALX Corporation

For Your Information

August 8, 2008

Commission approval of modified final consent order – Following a public comment period in the matter of TALX Corporation, the Commission has approved the issuance of a modified final consent order and letters replying to those who submitted public comments. The order modifications include the addition of the name “Corporate Cost Control, Inc.” to Paragraph I.P.I. of the order, the correction of typographical errors, and the addition of language to make Paragraph II.B. of the order applicable to “Relevant Current Persons” whose employment with TALX is terminated involuntarily in the same manner that it is applicable to those whose employment is terminated voluntarily.

The Commission vote approving issuance of the final order was 4-0. (FTC File No. 0610209; the staff contact is Sean D. Hughto, Bureau of Competition, 202-326-2199; see press release dated April 28, 2008.)

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 39.5.2008.wpd)

Contact Information

MEDIA CONTACT:

Office of Public Affairs
202-326-2180

FTC Approves Modified Final Consent Order in Matter of TALX Corporation

For Your Information

August 8, 2008

(FYI 39.5.2008.wpd)

Contact Information

MEDIA CONTACT:

Office of Public Affairs
202-326-2180

Competition Director Jeffrey Schmidt to Leave FTC

Federal Trade Commission Chairman William E. Kovacic announced today that Jeffrey Schmidt, Director of the Bureau of Competition for the past two-and-a-half years, will leave the FTC, and that David P. Wales, currently a Deputy Director, has been named Acting Director.

“Jeff has done superb work for this agency and our nation. He has set the highest standards for the practice of law in promoting the interests of American consumers. The FTC’s place in the front ranks of competition agencies worldwide owes much to his efforts,” Chairman Kovacic said. “We are most fortunate that Dave Wales will become the Bureau’s Acting Director.”

Schmidt joined the Commission in February 2005 as Deputy Director of the Bureau of Competition. As Director, he supervised the Bureau’s merger and non-merger enforcement divisions, played a key role in developing antitrust policy, secured important changes in the Bureau’s infrastructure and merger review processes, and managed Bureau resources during a time when the FTC’s federal court case docket was greatly expanded.

In the merger area, Schmidt directed enforcement efforts against several proposed transactions, including district court challenges in the Whole Foods/Wild Oats, Inova/Prince William Hospital, and Equitable/Dominion matters. He also helped lead the FTC in gaining favorable enforcement results in Allegan/Inamed, Fresenius/Renal Care Group, Boston Scientific/Guidant, Linde/BOC, Compagnie de Saint-Gobain/Owens Corning, Schering Plough/AkzoNobel, Johnson & Johnson/Pfizer, and Carlyle Partners/INEOS Group, Ltd.

In the non-merger area, Schmidt was responsible for supervising challenges in several matters, including Cephalon and Warner-Chilcott in the pharmaceutical industry and MiRealSource and RealComp in the real estate industry.

After leaving the Commission, Schmidt will join the Linklaters law firm as a partner in their New York office.

Wales joined the FTC from Cadwalader, Wickersham & Taft LLP, where he was a partner in the firm’s antitrust group, focusing his practice on litigation, mergers and acquisitions, joint ventures, distribution arrangements, and grand jury investigations. Before joining Cadwalader, he was a partner in the antitrust practice group at Shearman & Sterling LLP. From 2001 to 2003, he served as Counsel to the Assistant Attorney General in the Antitrust Division of the U.S. Department of Justice, handling the full range of policy, investigative, and enforcement matters before the Division. Wales has served as a deputy director of the Bureau of Competition since April 2006.

Wales earned his law degree, magna cum laude, from Syracuse University College of Law, where he was a member of the Syracuse Law Review and Order of the Coif. He received his undergraduate degree from The Pennsylvania State University. He holds a leadership position in the Antitrust Section of the American Bar Association and is a member of the bars of the District of Columbia and New York State.

(BC Changes)

FTC Cautions Consumers About Voter Registration Scams

Have you received an unsolicited e-mail or phone call from someone who claims to represent your local election board or civic group and asks for your Social Security or credit card number to confirm your eligibility or registration to vote?

According to the Federal Trade Commission, the nation’s consumer protection agency, scammers may send messages asking for your Social Security number or financial information supposedly to register you to vote – or to confirm your registration – when they really want to commit identity theft.

As a rule, federal officials say, organizations conducting legitimate voter registration drives either contact you in person or give you a voter registration form that you fill out yourself. They will never ask you to provide your financial information.

If you get an unsolicited phone call or e-mail from someone who claims to need your Social Security number or other personal or financial information to register you to vote, report it to the FTC online at www.ftc.gov, or by phone at 1-877-FTC-HELP. If you already have shared your personal information with someone you don’t know, you may be the victim of a scam. File your complaint with the FTC, then visit www.ftc.gov/idtheft.

To register to vote – and to find out whether your state requires your Social Security number for registration – contact your local election office, or check the U.S. Election Assistance Commission’s National Voter Registration Form at www.eac.gov/voter. Most states accept this form. Many states and localities have their own rules about how far before an election you must register to be able to vote, and whether a Social Security number is required .

Radio reporters wishing to download an audio file summarizing this release can find it here: www.ftc.gov/opa/index.shtml. Click on the news release, then look under Related Items/Audio Feed on the right-hand side of the page.

(FYI Voter)

Debt Meltdown Program Marketers Settle with FTC; Charged with Failing to Deliver Promised Debt Reduction Services

Four companies and their principals, Robert and Miriam Lovinger, have agreed to settle Federal Trade Commission charges that they deceptively marketed a “debt settlement” program that failed to provide services they claimed would reduce consumers’ debt.

In October 2007, the FTC charged Edge Solutions, Inc. of Delaware, Edge Solutions, Inc. of New York, and Money Cares, Inc., all a/k/a The Debt Settlement Company and a/k/a The Debt Elimination Center; Pay Help, Inc.; and the Lovingers with violating the FTC Act. According to the FTC’s complaint, the defendants sold their services through the Web sites idebthelp.com, moneycares.com, edgesolutions.com, and ontrackmpower.com, offering a “Debt Meltdown Program” described as “an aggressive method of helping consumers out of the debt trap and away from the bankruptcy path.”

The proposed settlement prohibits the defendants from:

Misrepresenting that users of their services will be able to pay off, for a substantially reduced amount, all debts referred to the defendants’ program; that the defendants will contact all creditors referred into the program to negotiate settlements and will begin paying them within several weeks after consumers join the program; and that they will provide personalized one-on-one financial consulting;
Misrepresenting any fact material to a consumer’s decision to purchase any debt negotiation or debt settlement service or program; and
Failing to disclose the following terms, clearly, prominently, and contemporaneously, whenever any defendant represents (1) that consumers will obtain any specific percentage, range of percentages, or words to the equivalent effect, of a specific percentage of how much the consumer’s debt will be reduced; or (2) that they will begin negotiating with and/or start paying creditors, within a specific time period: all fees and costs, including when and how consumers will pay them; the approximate time period before settlements will be achieved, based on the experience of the average consumer who enrolls in the defendants’ service or program; and that consumers’ balances will typically increase during this time period until settlements for all accounts are achieved.

The proposed order imposes a $7 million suspended judgment that may be imposed in full if the defendants are found to have misrepresented their financial condition. The order also requires the defendants to release their claims to assets frozen by the court in 2007 and requires the Lovingers to transfer the proceeds from the sale of their Florida property to be used for possible restitution to injured consumers. Also under the order, the Lovingers may not offer a debt negotiation or debt settlement service or program to consumers in the future without first obtaining a $1 million performance bond. In addition, the defendants cannot sell, rent, or otherwise disclose personal information about anyone who paid them money before the order was entered. The settlement also contains record-keeping provisions to allow the FTC to monitor compliance with the order.

The Commission vote to authorize staff to file the proposed stipulated final order was
4-0. The order was filed in the U.S. District Court for the Eastern District of New York on August 1, 2008.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

(Edge Solutions)
(FTC File No. X080001)
(Civ. No. Cv-07-4087)

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