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FTC Earns Association of Government Accountants Award for Performance and Accountability Report

The Federal Trade Commission has earned the Association of Government Accountants Certificate of Excellence Accountability Reporting (CEAR) award for its Performance and Accountability Report (PAR) for fiscal year 2007.

“The PAR is more than a compliance document,” FTC chief financial officer Steve Fisher said. “A quality PAR provides a clear and complete picture of an agency, and it can help educate the public about an agency’s programs.”

To help readers understand and assess the Commission’s performance, in addition to the audited financial statements, the FY 2007 PAR included a glossary, dated letters, a staff composition chart, and other items to deliver meaningful information about financial and programmatic performance. It also featured an “FTC-At-A-Glance” section, a regional map, and points of contact for the agency’s Consumer Response Center and the National Do Not Call Registry.

The FTC’s FY 2007 PAR is located at http://www.ftc.gov/opp/gpra/2007parreport.pdf.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov/ftc/complaint.htm. 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.

FTC Permanently Halts Pretexting Scheme; Defendants Barred From Obtaining or Selling Consumers Phone Records to Third Parties

The Federal Trade Commission has put a permanent halt to an operation that allegedly obtained consumers’ confidential phone records without their knowledge or consent and sold them to third parties. The defendants are barred from obtaining consumers’ telephone records without their consent and court orders impose judgments on the defendants totaling more than $600,000 – the estimated amount of their ill-gotten gains.

This is the latest in a series of FTC cases targeting telephone pretexters – individuals who use false pretenses to obtain consumers’ confidential information. Since 2006 the FTC has charged sixteen individuals and their corporations with violating federal law by pretexting to obtain phone records of third parties. All have now been barred from pretexting and all have been ordered to give up the money they made engaging in the illegal practice.

In February 2007, the FTC asked a U.S. district court to order a permanent halt to the operations of a company that sold consumers’ confidential phone records, including information on calls placed and received. The FTC also sued the individuals who had used false pretenses to obtain the records from phone companies and then supplied those records to the company for a fee. The agency alleged these practices were unfair and deceptive in violation of federal law, and could endanger consumers’ safety. The agency also asked the court to order the defendants to give up their ill-gotten gains.

According to the FTC complaint, the Telecommunications Act of 1996 provides that a customer’s phone records may only be disclosed “upon affirmative written request by the customer.” But the agency alleged that since at least 2005 Action Research Group, Inc., and its principals, Joseph and Matthew DePantes, sold confidential customer phone records, including lists of calls made and the dates, times, and duration of the calls, to third parties, without the knowledge or consent of the customers. To get the records, these defendants relied upon the other defendants, Eye in the Sky Investigations, Inc., Cassandra Selvage and Bryan Wagner, who obtained them from phone companies through “pretexting” – using “false pretenses, fraudulent statements, fraudulent or stolen documents or other misrepresentations, including posing as an account holder or as an employee” of a phone company. Selling the records constitutes an invasion of privacy that could endanger the health and safety of consumers, the agency alleged.

The DePantes and ARG agreed to settle the FTC charges. Defendants ESI, Cassandra Selvage, and Bryan Wagner are subject to default judgments entered by the court.

The settlement and default judgments permanently bar the defendants from obtaining, marketing or selling customer phone records or consumers’ personal information derived from those records. They also bar the defendants from pretexting or using others to pretext to obtain consumers’ information. The settlement order entered a judgment in the amount of $67,000 against the DePantes and ARG, the estimated amount of ill-gotten gains the defendants earned from their illegal scheme; the judgment was suspended upon a payment of $3,000 based on the defendants’ inability to pay. In the default judgments, the court ordered Wagner to give up $428,085 in ill-gotten gains and ESI and Selvage to give up $110,762.

The Commission vote to accept the settlements was 5-0. They were filed in U.S. District Court for the middle district of Florida, Orlando division.

NOTE: Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the legal documents can be found at http://www.ftc.gov. 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://www.ftc.gov/bcp/consumer.shtm.

(arg1.settlements)
(FTC File No. X070027)

FTC Issues Statement Regarding Solicitor Generals Amicus Brief Filing in Pacific Bell Telephone Company v. linkLine Communications

Today the Federal Trade Commission announced that it has decided not to join an amicus brief filed by the Department of Justice urging the Supreme Court to grant certiorari in Pacific Bell Telephone Company v. linkLine Communications, No. 07-512 (U.S. Sup. Ct., Oct. 17, 2007). The Commission issued the statement in the interests of transparency. It can be found as a link to this press release on the Commission’s Web site.

The plaintiff in linkLine alleged that defendant violated Section 2 of the Sherman Act when it used its alleged monopoly power in the wholesale market for DSL service to “squeeze” its downstream competitors in the retail DSL market by charging wholesale prices equal to, and at times higher than, its retail prices. The district court and the Ninth Circuit held that “price-squeeze” allegations in this case were sufficient to make out a claim under Section 2.

In the Commission’s statement, the FTC summarizes the case and the recent ruling by the Ninth Circuit, discusses its analysis of the issues presented, and concludes “[i]n sum, we do not believe this case is ripe for review by the Supreme Court. There is no apparent justification, based on only a partial record of the plaintiffs’ pleadings in this case, for turning back 60 years of case law that embraces price-squeeze claims under Section 2 of the Sherman Act.”

In the Commission’s view, the Ninth Circuit’s narrow decision does not conflict with the Court’s antitrust jurisprudence and is consistent with Judge Hand’s decision in United States v. Aluminum Co. of America, 148 F.2d 416 (2nd Cir. 1945) and Justice (then Judge) Breyer’s decision in Town of Concord v. Boston Edison Co., 915 F.2d 17 (1st Cir. 1990). The Commission sees no reason to reject the latter jurisprudence, especially where, as here, the decision of the Ninth Circuit is consistent with those of the other courts of appeals that have addressed price-squeeze allegations, and the Court must credit the allegations of the amended complaint in any review.

The vote not to join the brief was 3-0, with Chairman William E. Kovacic recused.

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.

FTC Charges Home Buying Consulting Business with Credit Repair Violations

A home-buying consulting business that offers credit repair and home-buying consulting services has agreed to settle with the Federal Trade Commission for alleged federal law violations, including illegally charging an advance fee for credit repair and falsely claiming that they can remove negative information from consumers’ credit reports, even if the information is accurate and timely. At the Commission’s request, the U.S. Department of Justice (DOJ) filed the FTC’s complaint and proposed settlement in federal court.

According to the complaint, consumers are led to Home Buyers Consulting Network, Inc. (HBCN), which is based in Raleigh, North Carolina, through its Web sites and by a company that sells lists of foreclosed properties and suggests that its customers call HBCN if they need credit repair or access to zero or low down-payment home financing. In sales pitches for its credit repair services alone, and in conjunction with pitches for its home-buying consulting services, HBCN makes claims such as: “Our program offers the ability to REPAIR, RESTORE, or ESTABLISH your credit so that you may be able to qualify for 100 % home financing, lower interest rates and better quality credit.” HBCN also offers a “money back guarantee . . . to increase your credit score by 50 to 100 points or delete six derogatory items (from a consumer’s credit report).” HBCN also promises consumers help with finding a home to buy, through a referral to its purported network of realtors and lenders, the complaint stated.

Before performing the promised credit repair services, HBCN’s representatives typically require advance payment of at least $99 for those services, and $399 for bundled credit repair and home-buying consulting services. They also require additional advance payments for credit repair services, typically ranging from $19 per week to $49 per month, and promise to refund all but a $99 fee if consumers do not receive the promised results, provided that the consumers work with them for a period ranging from six months to a year.

HBCN, d/b/a Home Buyers Network, Good Credit Company, GoodCredit.com, and 0downhomebuyers.com, and Douglas Andersen Moore a/k/a Douglas A. Moore, HBCN’s president, CEO, and majority shareholder, are charged with violating the Credit Repair Organizations Act (CROA) and the FTC Act by falsely representing that they can obtain permanent removal of derogatory information from consumers’ credit reports, including bankruptcies, even where the information is accurate and not obsolete. They also are charged with violating CROA by requiring advance payment for their credit repair services; not including on their consumer contracts conspicuous statements about the consumer’s right to cancel the contract without penalty or obligation at any time before the third business day after the consumer signed the contract; and not providing, before the contract was signed, the written statement of consumer credit file rights under state and federal law, and the written “Notice of Cancellation,” both required by CROA.

Under the proposed settlement, the defendants are barred from further CROA violations, and from further misrepresentations affecting a consumer’s decision to buy anything from them, including credit repair services. They also are barred from selling, renting, or otherwise disclosing personal information about anyone who was a client before the order is entered, and from using or benefitting from that information.

The settlement contains a $573,000 civil penalty that will be suspended, and, for consumer restitution, a $40,000 monetary judgment that will be suspended upon payment of $10,000. The full civil penalty and judgment amounts will be imposed if the defendants are found to have misrepresented their financial condition. The settlement also contains standard record-keeping provisions to allow the FTC to monitor compliance with its order.

This case was brought with assistance from the North Carolina Department of Justice, Office of the Attorney General, and the Better Business Bureau Serving Eastern North Carolina.

The FTC advises that only time, a conscious effort, and a personal debt repayment plan can improve your credit report. The first step is to learn what information is in your credit report. If you find errors or mistakes, federal law gives you the right to have them corrected – free of charge. Federal law requires that the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – provide you with a free copy of your credit report once every 12 months, if you ask for it. To order your free report, visit annualcreditreport.com, call 1-877-322-8228, or complete and mail the Annual Credit Report Request Form. Other credit repair information is available at http://www.ftc.gov.

The Commission vote to authorize staff to refer the complaint and stipulated final order to the DOJ for filing was 5–0. The complaint and proposed stipulated consent order were filed in the U.S. District Court for the Southern District of New York on May 14, 2008, and are subject to court approval.

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. 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.

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://www.ftc.gov/bcp/consumer.shtm.

(HomeBuyersNetwork)
(FTC File No. 0623231)

Keep Summer Fuel Costs From Burning Your Budget

FTC Provides Tips for Saving Money at the Gas Pump and Cooling Your Home

For Your Information

May 22, 2008

Memorial Day Weekend unofficially marks the start of summer, with hotter days and family road trips following close behind. Because the costs of cooling your home and filling up your car can add up, the Federal Trade Commission is offering tips to save you money.

Saving Starts @ Home: The Insider Story on Conserving Energy, available at www.ftc.gov/energysavings, offers energy conservation tips to help consumers save money in every room of the house. For example, for the attic, the FTC explains the ABCs of insulation. Among other tips for the kitchen, consumers find advice on using the newly redesigned EnergyGuide labels available for all appliances. At www.ftc.gov/savegas, consumers can find tips for improving fuel efficiency from bumper to bumper on a car. For example, in the trunk, the FTC advises that an extra 100 pounds of weight can reduce fuel economy by up to 2 percent. Under the hood, replacing clogged air filters can increase gas mileage up to 10 percent. Both sites are also offered in Spanish, at www.ftc.gov/ahorraenergia and www.ftc.gov/ahorregasolina.

Contact Information

MEDIA CONTACT:

Office of Public Affairs
202-326-2180

FTCs Bureau of Competition Issues FY 2007 Summary of Pharmaceutical Company Settlement Agreements

The Federal Trade Commission’s Bureau of Competition today issued a summary of agreements filed with the agency in fiscal year 2007 (ending September 30, 2007) by generic and branded drug manufacturers.

The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 requires drug companies to file certain agreements with the FTC and the U.S. Department of Justice. The summary provides information regarding the agreements filed with the FTC in FY 2007. It also compares FY 2007 data with data received in FY 2006, FY 2005, and FY 2004. Each annual report is available on the Commission’s Web site at www.ftc.gov.

In fiscal year 2007, there were 33 final settlements, nearly half of which (14, or 42%) included both compensation to the generic company and a restriction on the generic’s ability to market its product. Of those 14 settlements, seventy-nine percent involved agreements with first-filer generic companies. Unlike FY 2006, however, most of the FY 2007 agreements involving restrictions on generic entry did not include a side deal involving elements not directly related to the resolution of the patent dispute. Instead, the majority involved compensation to the generic firm through an agreement by the branded firm not to sponsor or compete with an authorized generic product for some period of time.

“This report confirms that settlements with potentially anticompetitive arrangements continue to be prevalent,” FTC Chairman William E. Kovacic said. “The Commission remains committed to ensuring that brand and generic companies do not use such settlements as a way to deny consumers the benefits of competition.”

Commissioner Jon Leibowitz added, “As our report today sadly demonstrates, pay-for-delay settlements continue to proliferate. That’s good news for the pharmaceutical industry, which will make windfall profits on these deals. But it’s bad news for consumers, who will be left footing the bill. These agreements inflict special pain on the working poor and the elderly, who need effective drugs at affordable prices.”

In the 14 final settlement agreements received in FY 2007 that involved both a restriction on generic entry and compensation to the generic, the compensation took two forms: 1) In 11 of the final settlements, the branded company agreed not to launch or sponsor an authorized generic drug for some period of time after the entry of the generic drug company’s product; and 2) In three of the final settlements, the compensation flowed to the generic firm in the form of a side deal.

In six of the 14 agreements, both the brand and generic firm received compensation. In three of these six agreements, the branded company received a royalty in exchange for granting the generic firm a license to the patent at issue in three cases. In one case, the brand received a royalty payment on the generic firm’s sales of an authorized generic product. In another case, the brand received a royalty on the generic company’s sales of a particular dosage of the drug at issue in the litigation. And in the final case, the branded company could receive a percentage of the generic company’s sales of the drugs at issue in the litigation, as well as of some unrelated products.

The report also states that 11 of the settlements reported included a restriction on the generic drug’s ability to enter the market, with no compensation to the generic firm. In six of these cases, the generic withdrew its patent challenge, agreeing not to enter the market until the patent expired.

Eight settlements included no explicit restriction on the generic’s ability to market its product. In five of these cases, the generic was already on the market. Six of the eight settlements included no compensation to either firm; the two remaining settlements involved the generic paying the branded company a fixed sum.

In 16 of the 33 final settlements reported, the generic manufacturer was the first-filer with the FDA. Eleven of those agreements resulted in both a restriction on generic entry and compensation to the generic manufacturer. In addition, in FY 2007, nine interim agreements between branded and generic firms were reported. Seven of these involved either: 1) an agreement to stay the litigation and be bound by the results of litigation involving the same patents; 2) an agreement by the generic firm to provide the branded firm with advance notice of an “at risk” generic launch, to provide the branded firm with the opportunity to seek a preliminary injunction; or 3) an agreement by the generic firm not to introduce its generic product until the court ruled on a preliminary injunction motion.

Finally, the report states that in FY 2007, only one agreement was reported between generic drug manufacturers. Under the terms of the agreement, the first filer agreed to give up its 180-day marketing exclusivity period, thereby allowing the subsequent filer to receive FDA approval for its product.

Copies of the Bureau’s summary of agreements filed in FY 2007 are available on the FTC’s Web site at www.ftc.gov. 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.

(Drug Settlements 2008.final.wpd)

FTC Testifies Before U.S. House Subcommittee on Progress of Credit-Based Insurance Score Study

The Federal Trade Commission today provided Congress with an update on the progress of its study on the use of credit-based insurance scores in homeowners insurance.

Insurance companies have increasingly used information about credit history in the form of credit-based insurance scores to decide whether to offer consumers insurance, and if so, at what price. Credit-based insurance scores are numerical summaries of one’s credit history. They typically are calculated using a variety of information, including past delinquencies and information on the public record, such as bankruptcy, how close a consumer is to his or her credit limits, evidence of seeking new credit, the length and age of the credit history, and the use of certain types of credit.

Pursuant to Section 215 of the Fair and Accurate Transactions Act (FACTA), the Commission is directed to study and report on the impact of credit-based insurance scores on consumers of homeowners insurance, among other things. In the FTC’s testimony, Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection, told the U.S. House Financial Services Committee’s Subcommittee on Oversight and Investigations that the FTC has authorized the use in its homeowners insurance study of compulsory process under Section 6(b) of the FTC Act and Section 215 of FACTA. The testimony also stated that the Commission intends to use this authority to issue orders to the nine largest homeowners insurance companies to obtain data for its study.

The testimony explained that, prior to issuing these orders, the FTC is seeking input from all interested parties on the information that a draft model order would require homeowners insurance companies to produce. The Commission has placed on its Web site a draft model order setting forth in detail the information it intends to obtain from homeowners insurance companies pursuant to compulsory process. The FTC will be accepting public comment on the draft model order for 30 days.

In addition to providing an update about the agency’s homeowners insurance study, the testimony conveyed views on proposed legislation that would prohibit the use of credit-based insurance scores to discriminate on the basis of race or ethnicity.

The Commission vote authorizing the presentation of the testimony and its inclusion in the formal record was 4-0. A copy of the testimony can be found on the FTC’s Web site and as a link to this press release.

Copies of the testimony 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. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov/ftc/complaint.shtm. 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.

(Credit-Based Insurance Scores Testimony)
(FTC File No. P064814)

FTC Announces Operation Tele-PHONEY, Agency’s Largest Telemarketing Sweep

“The caller asked for my bank account information. I cannot remember everything he said. I just thought that I needed to confirm my account information in order to avoid losing my Medicare benefits.”

– Juanita Tortella, 77, Amarillo, Texas

The Federal Trade Commission today, in cooperation with more than 30 international, federal, state, and local law enforcement agencies, announced the largest telemarketing fraud sweep ever coordinated by the agency.

Through “Operation Tele-PHONEY,” the FTC has filed federal district court complaints against 13 allegedly deceptive telemarketing operations. Combined with the actions brought by other enforcement agencies, the sweep encompasses more than 180 cases that include both civil and criminal actions in the U.S. and Canada. In many of the FTC actions announced today, federal courts have temporarily frozen defendants’ assets and suspended defendants’ operations.

Operation Tele-PHONEY includes the new FTC cases announced today, developments in several other FTC telemarketing cases, more than 80 state law enforcement actions, criminal actions against more than 90 defendants, and eight cross-border telemarketing fraud actions brought by Canada’s Competition Bureau and the British Columbia Business Practices and Consumer Protection Authority. According to the FTC, in the 13 actions it is announcing today, more than 500,000 consumers were defrauded by unscrupulous telemarketers, resulting in losses of more than $100 million. The Commission estimates that as a result of the law enforcement actions consumers will save approximately $30 million over the next year.

“The sheer breadth of ‘Operation Tele-PHONEY’ is a testament to the ability of law enforcement agencies at all levels to work together effectively to help protect consumers both in the United States and abroad,” FTC Chairman William E. Kovacic said. “I’d like to personally thank all of our partners in this sweep for helping to eradicate the scourge of telemarketing fraud.”

The Chairman was joined in announcing the sweep in Washington, DC, by Rod J. Rosenstein, United States Attorney for the District of Maryland, Andrea Rosen of Canada’s Competition Bureau, and Idaho Attorney General and President of the National Association of Attorneys General Lawrence Wadsen. Also joining him were Robert DeMuro, Inspector in Charge, Financial Crimes Group, U.S. Postal Inspection Service, and other law enforcement partners.

Today the FTC also unveiled the “Who’s Calling?” consumer education campaign, which encourages consumers to: 1) Recognize the signs of telemarketing fraud; 2) Report fraud to the FTC and state attorneys general; and 3) Register phone numbers on the National Do Not Call (DNC) Registry if they want to receive fewer telemarketing calls. The campaign features a new Web site – in both English and Spanish – and two short videos located at ftc.gov/phonefraud and YouTube.com/ftcvideos.

FTC Enforcement Actions

The 13 FTC cases include actions against a variety of telemarketers, ranging from companies that allegedly sent unordered household goods to consumers, to those that offered phony tax rebates or prescription drug plans. In other cases, the callers allegedly deceived consumers through the use of fraudulent sweepstakes pitches or offers of free gifts or promised that for an advance fee, consumers would be “guaranteed” to receive loans or credit cards that never materialized or were useless. Other defendants allegedly used consumers’ bank account information to bill them without their authorization, harassed them to pay for unordered goods, and violated the rules of the DNC Registry. A brief summary of each case is provided below. Each federal district court complaint can be found on the FTC’s Web site.

Med Provisions – Based in Montreal, the defendants allegedly call consumers in the United States claiming they can save consumers 30 to 50 percent on their prescription drug costs. The defendants claim to operate an online pharmacy and offer a 30-day money-back “guarantee” on their “membership package,” which costs $389. Some consumers also are told they will lose their Medicare benefits if they do not sign up for the package. Many consumers who do order the package receive nothing from the defendants, and those who receive something get a worthless card from an organization that supposedly can provide Canadian drugs to U.S. consumers. According to the FTC, all of the claims are false, and many consumers could not get a refund. Canada’s Competition Bureau provided substantial investigative assistance in this case, and is pursuing its own ongoing investigation of these telemarketers.

Union Consumer Benefits – Also based in Montreal, the defendants allegedly telemarket worthless medical discount packages to elderly consumers throughout the United States. The FTC charges that the defendants use deceptive means to persuade consumers to reveal their bank account information, often pretending they are calling from the Social Security Administration, Medicare or the consumers’ bank. In some cases, they offer “free” benefits or claim to offer a medical discount plan that will save the consumer money on medical care and prescriptions, for a one-time fee. The company then debits $399 from the consumers’ bankaccounts and sends them a package containing a prescription discount card that does not work. The FTC also alleges that the defendants have violated the law by calling many consumers whose telephone numbers are listed on the DNC Registry.

Steven Breitling/ICS Financial Firm – In this alleged financial fraud, consumers first receive a direct mailing from ICS Financial “guaranteeing” them a loan of between $2,000 and $5,000. According to the FTC, the company’s telemarketers then contact consumers who have returned the application form, telling them that to get their loan they must first pay a $75 “consulting/collective” fee and sign a contract. After paying the fee, many consumers never hear from the company again. Those who do hear from the company are referred to another lender, whose application states that they are not guaranteed for approval and requires them to pay an additional fee. Many consumers who complete the loan application and pay the fee simply receive a notice that their loan application has been denied.

American Financial Card, Inc. – Running an advance-fee telemarketing scheme, the defendants allegedly defrauded thousands of consumers in the United States by falsely promising to deliver a credit card for an up-front payment of $200. The defendants claimed that the cards carried a $2,000 credit limit, cash advances up to $1,000, and a fixed interest rate. After paying the advance fee, consumers did not receive the promised card. Instead, most of them received a card that could be used only to buy items from the defendants’ catalog.

Integrity Financial Enterprises – In another alleged advance-fee scam, the defendants allegedly offer to provide consumers a general-purpose credit card with a credit limit of between $2,500 and $7,500 for an up-front fee ranging from $200 to $300. The defendants tell consumers that they will get vouchers equal to the amount of the advance fee, which they can apply to future card balances. Some consumers receive nothing at all, while others get a catalog card that they can use only to purchase merchandise from the defendants’ catalog or online store. Those who complain are told they cannot get a refund of the advance fee they paid.

Financial Advisors & Associates – Doing business as Freedom Financial and MyUnsecuredCreditCard.com, the FTC alleges the company and its principals allegedly deceptively tell consumers that they will provide them with a major credit card such as a Visa or MasterCard, but instead have provided only limited-use, advance-fee catalog cards. After paying 10 percent of the promised “credit line” up-front, consumers find the card they receive can only be used to buy goods from the defendants’ catalog or Web site. Those who try to get a refund of the money they paid up-front were routinely turned down.

Handicapped & Disabled Workshops, Inc. – The FTC alleges that the defendants target elderly consumers in telemarketing various household products at exorbitant prices. The defendants aggressively solicit these consumers, often calling several times a day, in an attempt to convince consumers to make a purchase. The defendants call seeking “support” or “donations,” prompting many consumers to believe their purchases will help handicapped or disabled workers employed by the defendants. The FTC also alleges that the defendants mail consumers products they did not order, and debit consumers’ credit and debit card accounts forthese unordered products without the consumers’ consent. The defendants also violate the DNC Registry rules by calling consumers after they have asked not to be called.

Helping Hands of Hope – In a similar scam targeting elderly consumers, the FTC alleges that the defendants telemarket various household products, promising that the proceeds of the sale will either help employ the disabled or will go to a charitable cause. The complaint charges that the defendants’ telemarketers harass consumers who say they don’t want to buy these products until they agree to make a purchase. In some instances, the defendants send consumers products the consumers never ordered and then claim the orders were placed. The defendants also ignore the DNC Registry and consumers’ request to not be called again.

U.S. Magazine Services – In telemarketing calls to sell magazine subscriptions, the defendants allegedly misled consumers about the monthly charges for the subscriptions. While the actual price is sometimes disclosed in a later call after billing information is provided, some consumers only learned what they were charged (or that they were charged at all) after checking their credit card bill or debit account balance. Consumers who tried to cancel the subscriptions after providing billing information and then learning about the monthly charges were told that no cancellations were allowed.

Publishers Business Services – Telemarketing magazine subscriptions, these defendants allegedly disguise their sales pitch as a survey, at the end of which they offer “free” or low-cost magazine subscriptions. They send a bill weeks later, stating that consumers agreed to pay several hundred dollars for the subscriptions. When consumers complain or attempt to cancel, the defendants tell them that they are obligated to pay the bill and may not cancel because they entered into a “verbal contract” during the survey call and the defendants have already paid the magazine publishers for the subscriptions. The defendants then attempt to extort payment by harassing the consumers at work, threatening to initiate collection actions, or threatening to submit derogatory information about them to the major credit bureaus.

NHS Systems, Inc. – The FTC alleges that the defendants call consumers and make a number of misrepresentations, often saying that they are affiliated with U.S. government agencies such as the Social Security Administration, IRS, or Medicare. To deceive consumers into providing bank account information, they often promise grants, tax refunds, tax rebates, or health benefits. Consumers are charged $29.95, $299.95, or both, and find themselves enrolled in a “discount health care program” to which they never agreed.

City West Advantage, Inc. dba Unified Services – The defendants call consumers and tell them that they have won a $1,000 shopping spree or other free gift. According to the FTC, however, the defendants’ real objective is to persuade consumers to provide their bank account information. The defendants’ telemarketers state that the consumer will be charged $1.95 for shipping and handling. If the consumer is reluctant to provide this information, the telemarketers allegedly call back repeatedly and harass the consumer, even after the consumer asked them to stop calling. Consumers who provide their banking information find that they have been charged approximately $149. In most instances, the “gift” that consumers receive is worthless – typically an “Internet shopping spree” certificate that can be used only at one Web site.

Direct Connection Consulting, Inc./Suretouch LLP – The defendants allegedly contact consumers with promises of free gift cards, gas cards, or free resort vacations. In many cases, consumers are told that they are being called by major retailers and will be rewarded if they will take a short survey. Other consumers are told that they will receive free products if they listen to a telemarketing pitch and answer “yes” when prompted. The telemarketers often read their pitch so fast that consumers don’t understand or don’t realize they are agreeing to pay for products or services. Consumers who understand the pitch are told that they will not be billed, as they have not provided their billing information. However, the defendants have access to consumers’ billing information and charge consumers’ credit cards or debit their bank accounts. Consumers who are charged do not receive the free goods or the services promised. The Kentucky Attorney General’s office joined the FTC as co-plaintiff in this case.

Other Recent Commission Actions

In addition to the 13 complaints announced today, the FTC recently announced new developments in six other telemarketing cases. Each of these cases is described below, with a link to the corresponding press release on the FTC’s Web site. Several cases involved the participation of Canadian law enforcers.

Pacific Liberty – At the FTC’s request, this month, the U.S. District Court for the Northern District of Illinois entered a final order and default judgment against a group of individual and corporate defendants based in Ontario, Canada, for their role in a cross-border telemarketing scheme that cost U.S. consumers millions of dollars. Under the terms of the final order, the defendants – collectively known as Pacific Liberty – are barred from violating the FTC Act and the Telemarketing Sales Rule. They also are liable for $5 million dollars, the total net sales made through the cross-border scheme. (http://www.ftc.gov/opa/2008/05/pacliberty.shtm)

Express Consolidation, Inc. – The FTC announced this month that Florida attorney Randall L. Leshin, his debt management services company, Express Consolidation, Inc., and telemarketer Consumer Credit Consolidation, Inc. have agreed to settle charges that they used abusive and deceptive telemarketing practices to sell debt management services to consumers nationwide. Two court orders entered in the FTC’s lawsuit bar, among other things, false representations to sell debt management services and future violations of the DNC Registry. The defendants also must collectively pay more than $2 million. (http://www.ftc.gov/opa/2008/05/express.shtm)

Universal Premium Services, Inc. – In April 2008, the FTC announced several court orders obtained against a nationwide telemarketing scheme that the media has dubbed the “Wal-Mart Shopping Spree” scam. Consumers were falsely promised free gifts and wrongfully paid monthly fees for “program memberships” such as discount buyers’ and travel clubs. The court banned Brian K. MacGregor, the architect of the scheme, from engaging in any aspect oftelemarketing or the selling of program memberships. He and Membership Services Direct, Inc., also known as Continuity Partners, Inc. and Universal Premium Services, Inc., were ordered to pay $28.2 million. (http://www.ftc.gov/opa/2008/04/walmartscam.shtm)

Datacom Marketing, Inc. – The FTC charged Datacom Marketing, Inc., Datacom Direct, Inc., Bernard Fromstein, Judy Provencher, Paul Barnard, Judy Neinstein, Stanley Fromstein, and Charles Farrugia with running a cross-border fraud operation. In April 2008 Farrugia settled charges for his role in scamming American businesses into paying for business directories and listings they didn’t order. The settlement included a $7,603,094 judgment. This month a federal judge ordered Fromstein and Provenchar to pay $49 million for their part in the scheme. (http://www.ftc.gov/opa/2008/04/xborder.shtm and http://www.ftc.gov/opa/2008/05/datacom.shtm)

Ira Rubin – In January 2008, at the FTC’s request, the U.S. District Court for the Middle District of Florida issued an order finding defendant Ira N. Rubin in contempt for multiple violations of a previously issued temporary restraining order and preliminary injunction order against his payment-processing scheme. (http://www.ftc.gov/opa/2008/02/rubin.shtm)

YMA – In December 2007, the FTC and seven state attorneys general charged this payment processor with debiting, or attempting to debit, consumers’ bank accounts on behalf of numerous fraudulent telemarketers and Internet-based merchants. The defendants were charged with offering payment-processing services to a variety of merchants, many of which were engaged in deceptive telemarketing or Internet-based schemes designed to extract money from consumer bank accounts by inducing consumers to provide them with their personal bank account information. The merchants then transmitted the bank account information to the defendants, who processed debits to the consumers’ bank accounts. (http://www.ftc.gov/opa/2007/12/yma.shtm)

Consumer Education

The “Who’s Calling?” consumer education campaign unveiled today also provides tips for consumers on how to identify, prevent, and report fraud over the phone. To recognize and avoid telemarketing fraud, the FTC recommends consumers ask:

Who’s calling – and why? Telemarketers must tell you it’s a sales call, the name of the seller, and what they’re selling before they make their pitch. If they don’t give you the required information, say “no thanks,” and get off the phone.
What’s their hurry? Fast talkers who use high pressure tactics could be hiding something. Take your time. Most legitimate businesses will give you time and written information about an offer before asking you to commit to a purchase.
If it’s free, why are they asking me to pay? Question charges you need to pay to redeem a prize or gift. Free is free. If you have to pay, it’s a purchase – not a prize or a gift.
Why am I “confirming” my account information – or giving it out at all? Some callers have your billing information before they call you. They’re trying to get you to say “okay” so they can claim you approved the charge. Or, they’re trying to learn your account number. Don’t give it out unless you know who you are talking to and what you are buying.
What time is it? The law allows telemarketers to call only between 8 a.m. and 9 p.m. A seller calling earlier or later is flouting the law.
Isn’t there a National DNC Registry? Yes, and putting your number on the Registry will stop most telemarketing calls – but not all. You still will get calls from businesses with which you do business, unless you tell them to stop calling you, too. But calls from sales people from unfamiliar businesses may be the sign of a scam.

Phone fraud and DNC violations can be reported Online at FTC.gov or by phone at 1-877-FTC-HELP. DNC violations can be reported at DoNotCall.gov or by phone at 1-888-382-1222. For a DNC report, you’ll need the phone number or name of the company that called, and the date of the call.

Law Enforcement Coordination

Law enforcement organizations at the international, federal, state, and local levels provided valuable investigative assistance in bringing the actions announced today. At the international level, the FTC would like to acknowledge the Competition Bureau in Canada, the British Columbia Business Practices and Consumer Protection Authority, as well as the ongoing contributions of Project COLT and the Toronto Strategic Partnership.

The Centre of Operations Linked to Telemarketing (COLT) fraud was created in 1998 to fight telemarketing-related crime and is made up of members of the Royal Canadian Mounted Police (RCMP), Sureté du Québec, Service de Police de la Ville de Montréal, Canada Border Services Agency, Competition Bureau of Canada, U.S. Homeland Security (Immigration and Customs Enforcement), the U.S. Postal Inspection Service, the FTC, and Federal Bureau of Investigation. Since its inception, the COLT has recovered $22 million for victims of telemarketing fraud. The Toronto Strategic Partnership consists of the FTC, Competition Bureau Canada, the Toronto Police Service – Fraud Squad, the U.S. Postal Inspection Service (USPIS), the Ontario Ministry of Government Services, the Ontario Provincial Police – Anti-Rackets, the Royal Canadian Mounted Police, and the United Kingdom’s Office of Fair Trading.

At the federal level, the FTC acknowledges the assistance of the U.S. Department of Justice, specifically the Fraud Section and the Office of Consumer Litigation, and the U.S. Attorney’s offices for the Central District of California, District of Nevada; Eastern District of North Carolina, Southern District of Florida, Southern District of Illinois, District of Arizona, Eastern District of Pennsylvania, and Southern District of Ohio. In addition, the Commission appreciates the help of the Social Security Administration’s Office of Investigations in the Office of the Inspector General and the U.S. Treasury Department’s Office of the Inspector General for Tax Administration.

The FTC also appreciates the contribution by state attorney general offices and other state and local partners as part of this sweep. State enforcement actions were announced by the offices
of the attorneys general in Arizona, Florida, Idaho, Illinois, Iowa, Kentucky, Minnesota, Missouri, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Texas, Vermont, and Wisconsin, and by the District Attorney’s offices of San Diego, California, the Florida Department of Agriculture and Consumer Services, the Wisconsin Department of Agriculture, Trade and Consumer Protection, the Wisconsin Department of Justice, and the Eau Claire County District Attorney’s Office.

The FTC also acknowledges the District of Columbia, New York, Montana, and Tennessee Attorneys General, as well as the Office of Financial Regulation for the State of Florida, the Bureau of Charitable Organizations at the Pennsylvania Department of State; the North Dakota Attorney General’s Office, Bureau of Consumer Protection; the Georgia Governor’s Office of Consumer Affairs; the Georgia Department of Labor; the Oklahoma Department of Consumer Credit; and the Montana Department of Justice’s Office of Consumer Protection.

In addition, the Commission thanks the Pinellas County, Florida, Sheriff’s Office; the Pinellas County Office of Consumer Affairs; the Pinellas County Office of Consumer Protection; Pinellas County Justice and Consumer Services; the Roswell, Georgia, Police Department; the Largo, Florida, Police Department; the Phoenix, Arizona, Police Department; the Glendale, Arizona, Police Department; the U.S. Marshals Service, District of Arizona; and the Shelby County, Alabama, Sheriff’s Department. The FTC received additional assistance from the Better Business Bureau (BBB) of Southern Nevada; the BBB of West Florida; the BBB Serving Metro Atlanta, Athens, and Northeast Georgia; the BBB of Upstate New York; the BBB Serving Eastern Washington State, Northern Idaho, and Montana; Phonebusters; the BBB of Southwest Missouri; the BBB of Southeast Florida and the Caribbean; and the BBC of Central/Northern Arizona.

Case Filings

The Commission vote authorizing the filing of each of the 13 complaints was 4-0. They were filed in: 1) The U.S. District Court for the Middle District of Florida (Integrity Financial Enterprises); 2) The U.S. District Court for the Middle District of Florida, Tampa Division (Financial Advisors & Associates and American Financial Card, Inc.); 3) The U.S. District Court for the Western District of Oklahoma (Steven Breitling/ICS Financial Firm); 4) The U.S. District Court for the District of Arizona (Helping Hands of Hope and Handicapped & Disabled Workshops, Inc.); 5) The U.S. District Court for the District of Montana, Missoula Division (U.S. Magazine Services); 6) The U.S. District Court for the District of Nevada (Publishers Business Services, Unified Services); 7) The U.S. District Court for the Eastern District of Pennsylvania (NHS Systems, Inc.); 8) The U.S. District Court for the Northern District of Georgia, Atlanta Division (Direct Consulting, Inc./Suretouch LLP); 9) The U.S. District Court for the Northern District of Illinois (Union Consumer Benefits); and 10) The U.S. District Court for the Northern District of Ohio (Med Provisions).

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law.

NOTE: The court has issued temporary restraining orders (TRO) in 11 of the cases announced today. Before the TRO expires, the judge may schedule a hearing to determine whether to extend the order’s provisions pending a full trial. The FTC will seek to permanently bar the defendants from further violations of federal law.

Copies of the Commission’s complaints 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. 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://www.ftc.gov/bcp/consumer.shtm.

Michael Milgrom,
FTC East Central Region, Cleveland
216-263-2419
(Med Provisions)

Guy G. Ward,
FTC Mid-West Region, Chicago
312-960-5612
(Union Consumer Benefits)

Emily B. Robinson,
FTC Southwest Region, Dallas
214-979-9386
(Steven Breitling/ICS Financial Firm)

Gideon E. Sinasohn,
FTC Southeast Region, Atlanta
404-656-1366 (
American Financial Card, Inc.)

Ann F. Weintraub,
FTC Northeast Region, New York
212-607-2815
(Integrity Financial Enterprises)

Stephen L. Cohen,
FTC Bureau of Consumer Protection
202-326-3222
(Financial Advisors & Associates)

Kathleen Benway,
FTC Bureau of Consumer Protection
202-326-2024
(Handicapped & Disabled Workshops, Inc.)

John D. Jacobs,
FTC Western Region, Los Angeles
310-824-4360
(Helping Hands of Hope)

Mary Benfield,
FTC Northwest Region, Seattle
206-220-4472
(U.S. Magazine Services)

Faye Chen Barnouw,
FTC Western Region, Los Angeles
310-824-4316
(Publishers Business Services)
-or-
Raymond E. McKown,
FTC Western Region, Los Angeles
310-824-4325

Harris Senturia,
FTC East Central Region, Cleveland
216-263-3420
(NHS Systems, Inc.)

Kenneth H Abbe,
FTC Western Region, San Francisco
415-848-5182
(Unified Services)

Valerie M. Verduce,
FTC Southeast Region, Atlanta
404-656-1355
(Direct Connection Consulting, Inc./Suretouch)

(FTC File Nos.: 082-3098, 082-3118; 082-3101; 072-3010; 082-3120; 082-3040; 082-3128; 082-3126; 082-3084; 082-0055; 082-3117; 082-3064; 082-3075)

(Civ. Nos.: 1:08CV1051; 08 C 2309; 8:08 cv 914-T27; 8:08-cv-00899-T-17-MAP; 8:08 cv 914-T27; 8:08-CV-0097-T-26-TBM; CV-08-0908PHX DGC; CV-08 0909-PHX-JAT; CV 08-64-M-DWM; CV-00620-PMP-PAL; 08-2215; CV-00609-BES-GWF; 08-cv-1739-Batten)
(Tele-PHONEY.final.wpd)

FTC Seeks Public Comments on a Model Order to Obtain Data for Study of the Effect of Credit-Based Insurance Scores on Consumers of Homeowners Insurance

The Federal Trade Commission has approved a resolution authorizing the use of compulsory process pursuant to Section 6(b) of the FTC Act and Section 215 of the Fair and Accurate Credit Transactions Act (FACTA). The Commission will use this resolution to issue orders that will require certain insurance companies to produce information for a study on the use and effect of credit-based insurance scores on consumers of homeowners insurance. Following a public comment period, the Commission intends to serve orders on the nine largest private providers of homeowners insurance.

The FTC vote approving the resolution was 4-0. Copies of the resolution can be found as a link to this press release on the Commission’s Web site.

Request for Public Comment on Model Section 6(b) Order

In connection with the FTC’s ongoing study of the use of credit-based insurance scores in the homeowners insurance industry, the agency is soliciting public comments on a draft model order that would be issued to selected firms that sell homeowners insurance. The Commission asks that any interested parties access the proposed order at the link appearing on this press release, and submit comments according to the instructions provided below. The FTC will consider these comments before serving compulsory process orders.

In 2003, Congress enacted Section 215 of FACTA, 15 U.S.C. § 1681 note (2003), which mandates that the Commission study the use and effect of credit-based insurance scores on the availability and affordability of automobile and homeowners insurance. In July 2007, the Commission issued a report describing its automobile insurance industry study (available at http://www.ftc.gov/opa/2007/07/facta.shtm).

The Commission now plans to obtain information for the homeowners insurance study using orders issued pursuant to Section 6(b) of the FTC Act and FACTA. The FTC plans to serve such orders on nine firms that represent roughly 60 percent of the homeowners insurance market. The proposed orders would require the production of data, documents, and some narrative responses on a variety of topics, including: (1) policyholder data; (2) premium data; (3) basic policy coverage data (e.g., coverage type, limits, deductibles); (4) policy endorsements and additional coverage data; (5) data and information on the use of credit-based insurance scores and credit history; (6) risk data, (7) claims data, (8) application and quote data; and (9) rating manuals and underwriting guidelines. The Commission intends to protect the privacy and security of the information collected in response to the 6(b) orders to the extent permitted by law.

The Commission is seeking public comment on this draft model order for a number of reasons. First, the FTC would benefit from the expertise and views of interested parties, particularly given the complexity of, and public interest in, the subject matter of the material requested. Second, the agency seeks information as to how to craft its orders in a manner that will maximize its research capability while minimizing any unnecessary burden on insurance firms participating in the study. Finally, Section 215 of FACTA directs the Commission to seek input on the study from the public and interested consumer, community, civil rights, and housing organizations.

Filing a Comment

The deadline for filing comments is June 18, 2008. Comments should be captioned “Credit-based Insurance Score – Homeowners Insurance – P044804” and should be submitted according to the instructions below.

To File Comments or Original Papers Electronically

Follow the instructions and fill out the form at https://secure.commentworks.com/ftc-homeownersinsurance

To File Comments or Original Papers in Paper Form

Include “Credit-based Insurance Score – Homeowners Insurance – P044804,” both in the text and on the envelope, and mail or deliver to the following address: Federal Trade Commission/Office of the Secretary, Room H-135 (Annex C), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Because postal mail in the Washington area and at the Commission is subject to delay, please consider submitting your comments in electronic form, as prescribed above. The FTC asks that any comment filed in paper form be sent by courier or overnight service, if possible.

To Request Confidential Treatment

You must file in paper form and clearly label the first page of the document “Confidential” and comply with FTC Rule of Practice 4.9(c), 16 C.F.R. § 4.9(c).

FTC’s Privacy Policy

The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. All timely and responsive public comments, whether filed in paper or electronic form, will be considered by the Commission and will be available to the public on the FTC website, to the extent practicable, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC website. More information, including routine uses permitted by the Privacy Act, may be found in the FTC’s privacy policy, at http://www.ftc.gov/ftc/privacy.shtm.

U.S. Court of Appeals Affirms FTC Decision That Texas Doctors Group Engaged in Illegal, Anticompetitive Price-Fixing

In a unanimous opinion issued on May 14, the U.S. Court of Appeals for the Fifth Circuit affirmed a 2005 Federal Trade Commission decision that found certain activities of North Texas Specialty Physicians (NTSP) violated Section 5 of the FTC Act. In particular, NTSP, a group of independent competing physicians based in Forth Worth, was found to have participated in horizontal price-fixing that was not related to any procompetitive efficiencies. The appellate court’s decision fully endorsed the analytical framework applied by the Commission in its decision, which found NTSP’s conduct to be “inherently suspect,” with no procompetitive justification.

In the appellate opinion, which can be found on the FTC’s Web site as a link to this press release, the Court concluded that the Commission properly condemned certain NTSP practices, as the anticompetitive effects of those practices were obvious, and stated that NTSP’s justifications for its conduct did not bear up under scrutiny. The Court concluded that, based on the case record, the Commission properly condemned the conduct without the need for a “fullblown market analysis.” The Court did, however, find the FTC’s remedial order overly broad in one narrow respect and remanded it to the Commission for modification regarding that one provision.

Case History

In September 2003, the FTC issued an administrative complaint charging NTSP with unlawfully restraining competition, resulting in increased health care costs for consumers in the Fort Worth area. The Commission charge the group with violating federal law by negotiating agreements among its participating physicians on price and other terms, refusing to deal with payors except on collectively agreed-upon terms, and refusing to submit payor offers to participating doctors unless the offers’ terms complied with NTSP’s minimum-fee standards. The Commission also charged NTSP with illegally polling its participating physicians to determine the minimum fee they would accept for medical services provided under a group payor agreement, reducing competition among participating doctors. Finally, the Commission charged the group with discouraging payors and participating physicians from negotiating directly with one another and that the arrangements resulted in no increase in clinical integration.

In an initial decision filed on November 8, 2004, Administrative Law Judge (ALJ) D. Michael Chappell upheld the Commission’s complaint, finding that NTSP restrained trade by conspiring to fix prices in certain contracts its doctors entered into to provide medical services to health plan patients in Fort Worth. Chappell wrote in the decision that, “The government has proved its case . . .,” and that, “the appropriate remedy [is] an order to cease and desist.” NTSP subsequently appealed the decision to the full Commission, which issued its decision and order in December 2005.

The Commission’s decision, issued in favor of complaint counsel, was authored by Commissioner Thomas B. Leary and announced on December 1, 2005. In it, the FTC confirmed the ALJ’s initial decision that NTSP had illegally fixed prices in its negotiations with payors, including insurance companies and health plans. “This is not really a close case,” the Commission wrote in its opinion. “NTSP’s conduct is similar to conduct that has been found per se unlawful and summarily condemned in other contexts…” In issuing its accompanying order, the FTC required NTSP to cease and desist from engaging in the anticompetitive price-fixing conduct alleged in the complaint. The defendants appealed the Commission’s decision to the Fifth Circuit, leading to the decision and order announced today.

The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: [email protected]; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No.: 021-0075; Docket No. 9312)
(NTSP Appeal.final.wpd)

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