FTC Staff Submits Comments on Establishing Collective Bargaining for Independent Home Care Providers in Ohio

Commission approval of staff comments: At his request, staff of the FTC’s Office of Policy Planning, Bureau of Competition, and Bureau of Economics have submitted comments to Ohio State Senator William J. Seitz regarding Ohio Executive Order 2007 – 23S, issued by Governor Ted Strickland in July 2007 and entitled “Establishing Collective Bargaining for Home Health Care Workers.” The order seeks to establish collective bargaining for independent home health care providers (IHCPs), defined as “those providers of ongoing Medicaid reimbursed direct care services that are paid for through a Medicaid waiver program in the State of Ohio and not employed by a private agency.”

The order stipulates state recognition of “one representative as the exclusive collective bargaining representative for all IHCPs,” and that “the State, acting through the Office of the Governor or his designee, shall engage in collective bargaining with the elected representative of IHCPs regarding reimbursement rates, benefits, and other terms.” In his request for comments, State Senator Seitz asked whether, among other things, the executive order is liable to create competition problems because it confers collective bargaining power on some health care providers and not others, and whether the “unionization of small business owners who contract with the state…under the Medicaid program violates antitrust laws.”

As detailed in the comments, the FTC staff believes the executive order is likely to foster certain anticompetitive conduct that is inconsistent with federal antitrust policy, and that such conduct could work to the detriment of Ohio home health care consumers. This is because the order endorses private anticompetitive conduct, in that it would permit competing providers to agree on the prices they would accept for their services – which amounts to per se price fixing. In addition, although the order addresses bargaining related to Medicaid reimbursement only, the staff expresses concerns that its anti-consumer effects are liable to spill over into other segments of the market for home health care services. Accordingly, it poses the risk of both higher prices and reduced competition, with no assurance of improvements in consumers’ quality of care.

The Commission vote approving issuance of the staff comments was 4-1, with Commissioner Jon Leibowitz voting no and issuing a dissenting statement. They were transmitted to State Senator Seitz on February 14, 2008. Copies of the comments, and Commissioner Leibowitz’s dissenting statement, can be found on the FTC’s Web site and as a link to this press release. (FTC File No. V080001; the staff contact is Daniel J. Gilman, Office of Policy Planning, 202-326-3136.)

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.

FTC Staff Issues Advisory Opinion to Kaiser Foundation Health Plan, Inc., Concerning Non-Profit Institutions Act

Staff advisory opinion concerning Non-Profit Institutions Act: The staff of the Bureau of Competition has advised Kaiser Foundation Health Plan, Inc. that, in the staff’s opinion, Kaiser’s purchase and use of discounted pharmaceuticals in connection with a proposed program to provide health care services to persons covered under health benefits plans offered by self-insured employers falls within the Non-Profit Institutions Act (NPIA) exemption to the Robinson-Patman Act. The NPIA exempts from the Robinson-Patman Act “purchases of . . . supplies for their own use by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit.”

Kaiser is a non-profit California corporation currently providing care to its members as a health maintenance organization (HMO) in California and other states (including the District of Columbia). A federal court previously held that drug purchases by Kaiser for its HMO program qualified under the NPIA. Key to Kaiser’s operation as an HMO is its provision of comprehensive, continuing, and preventive care to its members in exchange for set monthly prepayment. Kaiser members also have access to a pharmaceutical plan, through which, for an extra monthly charge, they can purchase pharmaceuticals at discounted rates at Kaiser hospitals or at non-hospital pharmacies operated by Kaiser affiliates.

To meet what it sees as changing needs in the markets in which it currently offers its HMO program, Kaiser proposes to offer the same set of services it offers to its HMO members to persons covered under self-insured health benefits plans offered by employers. As explained in the staff opinion letter, Kaiser “intends to offer a plan that is as similar as possible in scope, quality, and operation to what it currently offers to members under its traditional HMO program.”

The proposed program will differ from Kaiser’s traditional HMO program in two ways: 1) Kaiser will be paid on a fee-for-service basis by the employers with which it contracts, and thus will not bear the type of financial risk associated with its HMO program, and 2) certain other Kaiser affiliates will be involved in the administration of the program to ensure compliance with California state law. Kaiser, however, will contractually obligate itself and the self-insured employers to provide comprehensive health benefits on an ongoing basis to persons covered under the program.

The staff opinion letter, signed by Markus H. Meier, Assistant Director of the Health Care Services and Products Division of the Bureau of Competition, concluded that, with certain caveats, Kaiser’s proposed program would fall within the NPIA. Noting that: 1) Kaiser previously had been held to be an “eligible entity” under the NPIA, 2) its drug purchases under the proposed program appear to be for Kaiser’s “own use” in that they will further Kaiser’s intended institutional function, and 3) all the savings earned through the use of the NPIA-discounted pharmaceuticals will accrue only to Kaiser, and not to the self-insuring employers, the staff advised that it believes that Kaiser’s use of NPIA-discounted pharmaceuticals in connection with its proposed program falls within the NPIA. Though the different financial structure and the involvement of other entities in the proposed program potentially raise concerns, the staff advisory opinion concludes that those issues ultimately should not affect the proposed plan’s eligibility for treatment under the NPIA, given the way the proposed program will operate.

NOTE: This letter sets out the views of the staff of the FTC’s Bureau of Competition, as authorized by the Commission’s Rules of Practice. It has not been reviewed or approved by the Commission. As the Commission’s Rules explain, the staff’s advice is rendered “without prejudice to the right of the Commission later to rescind the advice and, where appropriate, to commence an enforcement proceeding.” (The staff contact is Ellen Connelly, 202-326-2532.)

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.

Debt Reduction Companies Settle with FTC

Two debt reduction companies and their principals have agreed to settle Federal Trade Commission charges alleging that they violated federal law by falsely claiming that they could reduce consumers’ credit card interest rates or the amount of their credit card debt. Terms of the settlements, in which the defendants have not admitted liability, are defined in stipulated orders entered by the United States District Court for the District of Colorado on January 31, 2008.
According to a complaint filed by the FTC in March 2007, the defendants sold debt reduction services through Web sites and television and radio advertisements with claims such as “Reduce Debt Now” and “Eliminate Harassing Calls.” When consumers called a toll-free number, the complaint alleged, they were encouraged to enroll in a “debt consolidation program” if their unsecured consumer debt was up to one month overdue, or a “debt settlement program” if overdue longer.

The FTC alleged that the defendants violated the FTC Act by falsely promising to obtain lump-sum settlements, such as “fifty cents on the dollar” or “50 to 60 percent” of consumers’ total unsecured debt, or to negotiate with creditors for lower interest rates. The complaint also alleged that they misrepresented that they would not charge consumers any up-front fees before obtaining the promised debt relief, and that participation in their program would stop creditors from calling or suing them to collect debt.

The settlement orders prohibit the defendants from engaging in the violations alleged in the complaint, and require them, when making representations about specific debt reductions they can achieve, to disclose truthfully key terms of the program: all fees and costs they charge, including when and how such fees and costs will be paid by consumers; the approximate time period before settlements will be achieved; and the fact that consumers’ balances typically will increase before settlements for all accounts are achieved. The defendants also agreed to standard compliance and reporting provisions that enable the FTC to monitor future compliance with the orders.

The settling defendants are Debt-Set, William Riggs, Leo Mangan, Resolve Credit Counseling, Inc., and Michelle Tucker. The settlement orders contain suspended monetary relief of $1 million. Mangan has paid $40,000, and Resolve Credit Counseling and Michelle Tucker have paid $350,000. If any defendant is found by the court to have misrepresented the sworn financial statements provided to the Commission, a $1 million judgment will be imposed, less any payments already made.

The Commission vote to authorize staff to file the proposed stipulated final orders was 5-0. The documents were filed in the U.S. District Court for the District of Colorado.

NOTE: These stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of law violations. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

Copies of the orders 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.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 Sues Cephalon, Inc. for Unlawfully Blocking Sale of Lower-Cost Generic Versions of Branded Drug Until 2012

The Federal Trade Commission today filed a complaint in federal district court against Cephalon, Inc., a pharmaceutical company based in Frazer, Pennsylvania, for a course of anticompetitive conduct that is preventing competition to its branded drug Provigil. The conduct includes paying four firms to refrain from selling generic versions of Provigil until 2012. Cephalon’s anticompetitive scheme, the FTC states, denies patients access to lower-cost, generic versions of Provigil and forces consumers and other purchasers to pay hundreds of millions of dollars a year more for Provigil.

According to the Commission’s complaint, filed in the U.S. District Court for the District of Columbia, Cephalon entered into agreements with four generic drug manufacturers that each planned to sell a generic version of Provigil. Each of these companies had challenged the only remaining patent covering Provigil, one relating to the size of particles used in the product. The complaint charges that Cephalon was able to induce each of the generic companies to abandon its patent challenge and agree to refrain from selling a generic version of Provigil until 2012 by agreeing to pay the companies a total amount in excess of $200 million. In so doing, Cephalon achieved a result that assertion of its patent rights alone could not.

“Today’s suit against Cephalon seeks to undo a course of anticompetitive conduct that is harming American consumers by depriving them of access to lower-cost generic alternatives to an important branded drug,” said FTC Bureau of Competition Director Jeffrey Schmidt. “Cephalon prevented competition to Provigil by agreeing to share its future monopoly profits with generic drug makers poised to enter the market, in exchange for delayed generic entry. Such conduct is at the core of what the antitrust laws proscribe.”

The FTC’s Complaint

The court action filed today concerns conduct by Cepahlon to prevent lower-cost generic competition to one of its key products, the branded prescription drug Provigil. Provigil is approved to treat excessive sleepiness in patients with sleep apnea, narcolepsy, and shift-work sleep disorder. With U.S. sales of Provigil totaling over $800 million in 2007, and accounting for more than 40 percent of Cephalon’s total sales, the prospect of generic competition was a major financial threat to the company, the complaint states. Generic entry can significantly reduce the sales of existing branded drugs, and Cephalon knew that it would profit by keeping lower-cost generic alternatives to Provigil off the market, the agency contends.

According to the Commission, by late 2005, generic competition to Provigil appeared imminent. Several years earlier, on the first day permitted by regulation, four companies – Teva Pharmaceuticals USA, Inc. (Teva), Ranbaxy Pharmaceuticals, Inc. (Ranbaxy), Mylan Pharmaceuticals Inc. (Mylan), and Barr Laboratories, Inc. (Barr) – submitted applications with the U.S. Food and Drug Administration (FDA) to market their own generic versions of Provigil. Each company had either designed around, or challenged the validity of, the only remaining patent on Provigil – a narrow formulation patent related to the size of the particles used in the product. Cephalon filed patent litigation against each of the generic companies. By late 2005, however, the patent litigation was still pending and Cephalon, the generic firms, and Wall Street analysts all expected generic Provigil entry in the near term.

Facing the prospect of billions of dollars in lost revenue, Cephalon entered into agreements through which it compensated each of the four generic companies to settle the patent litigation and agree to forgo generic entry until April 2012, the FTC alleges. These agreements contained payments to the generic companies totaling more than $200 million.

No other generic company could compete with branded Provigil, unless and until all four “first filers” either relinquished their marketing exclusivity or 180 days after one of them entered the market. Cephalon therefore was able to erect a barrier that protected it from other companies that have also sought approval to sell generic Provigil.

According to the Commission’s complaint, Cephalon’s conduct in entering into patent-litigation settlements that included compensation designed to prevent generic competition was, and continues to be, anticompetitive, an abuse of monopoly power, and unlawful under Section 5(a) of the FTC Act.

The FTC contends that Cephalon’s conduct to thwart generic entry denied, and continues to deny, consumers access to lower-cost generic versions of Provigil. It estimates that by entering into the agreements, Cephalon forced patients and other consumers to pay hundreds of millions of dollars more a year than they otherwise would have.

Relief Sought

In filing its complaint, the FTC is seeking a permanent injunction against Cephalon that would allow generic Provigil entry before 2012. Further, it is seeking a final court judgment against Cephalon declaring that its course of conduct, including its agreements with Teva, Ranbaxy, Mylan, and Barr, violates Section 5(a) of the FTC Act and barring Cephalon from engaging in similar or related conduct in the future.

The Commission vote approving the complaint was 5-0, with Commissioner Jon Leibowitz issuing a separate statement concurring in part and dissenting in part, which can be found as a link to this press release and on the FTC’s Web site. Commissioner Leibowitz voted to join the Commission’s decision to bring an action against Cephalon, noting that pay-for-delay settlements cost consumers and the federal government billions of dollars in excess charges. He wrote that, “I also would have named as a defendant any generic company that took these pay-offs and now refuses to relinquish their 180-day exclusivity, thus blocking generic entry into the Provigil market that otherwise could occur in 2008.”

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.

Copies of the Commission’s complaint are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. 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 Releases List of Top Consumer Fraud Complaints in 2007

The FTC today released the list of top consumer fraud complaints received by the agency in 2007. The list, contained in the publication “Consumer Fraud and Identity Theft Complaint Data January-December 2007,” showed that for the eighth year in a row, identity theft is the number one consumer complaint category. Of 813,899 total complaints received in 2007, 258,427, or 32 percent, were related to identity theft.

The report breaks out complaint data on a state-by-state basis and also contains data about the 50 metropolitan areas reporting the highest per capita incidence of fraud and the 50 metropolitan areas reporting the highest incidence of identity theft.

The report states that credit card fraud was the most common form of reported identity theft at 23 percent, followed by utilities fraud at 18 percent, employment fraud at 14 percent, and bank fraud at 13 percent.

Consumers reported fraud losses totaling more than $1.2 billion; the median monetary loss per person was $349, the report states.

The top 20 complaint categories were:

Rank

Category

Complaints

%

1 Identity Theft 258,427 32
2 Shop-at-Home/Catalog Sales 62,811 8
3 Internet Services 42,266 5
4 Foreign Money Offers 32,868 4
5 Prizes/Sweepstakes and Lotteries 32,162 4
6 Computer Equipment and Software 27,036 3
7 Internet Auctions 24,376 3
8 Health Care Claims 16,097 2
9 Travel, Vacations, and Timeshares 14,903 2
10 Advance-Fee Loans and Credit Protection/Repair 14,342 2
11 Investments 13,705 2
12 Magazines and Buyers Clubs 12,970 2
13 Business Opportunities and Work-at-Home Plans 11,362 1
14 Real Estate (Not Timeshares) 9,475 1
15 Office Supplies and Services 9,211 1
16 Telephone Services 8,155 1
17 Employ. Agencies/Job Counsel/Overseas Work 5,932 1
18 Debt Management/Credit Counseling 3,442
19 Multi-Level Mktg./Pyramids/Chain Letters 3,092
20 Charitable Solicitations 1,843

The FTC collects consumer fraud complaints from more than 125 other organizations and makes them available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad via Consumer Sentinel, a secure, online database. In 2007, the FTC received almost 140,000 more consumer fraud complaints than in 2006. These additional complaints came from numerous data contributors, primarily the Better Business Bureaus.

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. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

FTC Testifies on Efforts to Stop Mortgage Foreclosure Rescue Fraud

The Federal Trade Commission today told the U.S. Senate Special Committee on Aging that the Commission, partnering with other federal agencies and state and local governments, is working to prevent mortgage foreclosure “rescue” fraud through law enforcement and consumer outreach.

Noting an estimated 75 percent increase in foreclosure filings from 2006 to 2007, Peggy Twohig, Associate Director of the FTC’s Division of Financial Practices, told the committee about the Commission’s enforcement efforts and its work to educate consumers about scams in which borrowers typically pay thousands of dollars but end up losing their homes and the money.

Recent Enforcement Responses

The testimony described title transfer scams, where consumers transfer ownership of their house, based on misleading representations that they are refinancing, or that they will be able to re-purchase their home from the “rescue” company after a short time period. The testimony also described mortgage negotiation scams, where companies promise to negotiate with the loan servicer, but rarely stop the foreclosure.

According to the testimony, the FTC is working with federal, state, and local partners, and has a number of ongoing, nonpublic investigations of these scams. FTC staff are participating in task forces in seven geographic areas, sharing information about trends in consumer complaints and working to identify solutions, the testimony stated.

Consumer Education and Outreach

The testimony explained that the Commission works to empower consumers to avoid harm by educating them about their options when facing foreclosure and other credit problems. In the wake of reports of rising mortgage foreclosures, the agency published an alert with guidance on steps borrowers can take to avoid foreclosure, including a warning about scams. In public meetings in several cities, FTC staff have provided consumers with information and resources, including scam warnings and advice for contacting loan servicers to learn about available options. During these meetings, agency staff have received valuable information from consumers about the conduct of specific realtors, brokers, lenders, servicers, and foreclosure rescue operators.

The testimony noted that the Commission is planning a stepped-up consumer outreach initiative in cities hardest hit by mortgage foreclosures, including radio public service announcements and classified advertisements in free publications.

The Commission vote authorizing the presentation of the testimony and its inclusion in
the formal record was 5-0.

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.

Tips on Helping Tornado Victims

FTC Tells Consumers Ways to Give Wisely

For Your Information

As many people generously open their hearts and wallets to help those affected by the recent tornadoes in the Southeast, the Federal Trade Commission is urging consumers to be cautious of potential charity scams. Scam artists may take advantage of the tragedy by creating bogus fundraising operations. The FTC offers these tips to help you make the most of your charitable donations:

  • Donate to recognized charities with a history. Charities that spring up overnight in connection with a natural disaster or news story may disappear just as quickly with your donation. Even if the charity is well-meaning, it may lack the infrastructure to provide much assistance. Be wary of charities with names that sound like familiar organizations. Some phony charities use names that sound or look like those of respected, legitimate groups.
  • If you can, give directly to the charity, not to paid solicitors who contact you on the charity’s behalf. Some charities hire professional fundraisers who then keep a portion of the money they collect. That leaves less money for charitable work.
  • Do not give out personal or financial information – including your Social Security number – to anyone who solicits from you. Scam artists use this information to commit fraud against you.
  • Check out charities before you donate. Contact the Better Business Bureaus’s Wise Giving Alliance at www.give.org.
  • Do not give or send cash. For security and tax-record purposes, contribute by check or credit card. Write the official name of the charity on your check.
  • Ask for identification if you are approached in person. Many states require paid fundraisers to identify themselves as such and to name the charity for which they are soliciting.

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.

Contact Information

MEDIA CONTACT:
Office of Public Affairs
202-326-2180

FTC Staff Extends Comment Period for Proposed Online Behavioral Advertising Principles; Commission Approves Final Consent Orders in Matters of Milliman, Inc. and Ingenix, Inc.

Extension of public comment period: Following the FTC’s “Ehavioral Advertising” Town Hall on December 22, 2007, Commission staff released a set of proposed online behavioral advertising principles. The staff requested that all interested parties submit comments on the principles and related issues by February 22, 2008. The staff has now extended the comment period through April 11, 2008.

Comments on the proposed principles can be sent to: Office of the Secretary, Federal Trade Commission, Room H-135 (Annex N), 600 Pennsylvania Avenue, N.W., Washington, DC 20580 or [email protected]. (The staff contact is Peder Magee, Bureau of Consumer Protection, 202-326-3538; see press release dated December 20, 2007.)

Commission approval of final consent orders: Following a public comment period, the Commission has approved the issuance of a final consent order in the matter concerning Milliman, Inc., as well a letter to the commenter of record. The Commission vote approving the issuance of the final order and letter was 5-0. (FTC File No. 062-3189; the staff contact is Katherine Armstrong, Bureau of Consumer Protection, 202-326-2252; see press release dated September 17, 2007.)

Following a public comment period, the Commission has approved the issuance of a final consent order in the matter concerning Ingenix, Inc., as well a letter to the commenter of record. The Commission vote approving the issuance of the final order and letter was 5-0. (FTC File No. 062-3190; the staff contact is Katherine Armstrong, Bureau of Consumer Protection, 202-326-2252; see press release dated September 17, 2007.)

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.

FTC Sues Sellers of Weight-Loss Pills for False Advertising

The Federal Trade Commission has charged a business operation with violating federal law by falsely claiming that its weight-loss pills cause users to lose weight without dieting or exercise.

According to the FTC’s complaint, since 2005 the defendants have marketed their product throughout the nation under the names Zyladex Plus, Questral AC, Questral AC Fat Killer Plus, Rapid Loss 245, and Rapid Loss Rx. Their advertising, which has included statements such as “Lose up to 15 pounds a week,” “Not Even Total Starvation Can Slim You Down and Firm You Up This Fast – This Safe!,” and “No Dieting, No Exercise,” has appeared in Sunday newspaper supplements, including SmartSource by News America Marketing FSI, Inc.

The defendants, Medlab, Inc., Pinnacle Holdings, Inc., Metabolic Research Associates, Inc., U.S.A. Health, Inc., and their principal, L. Scott Holmes, located in California, are charged with violating Sections 5 and 12 of the FTC Act by making false and unsubstantiated claims that their product causes users to lose substantial amounts of weight rapidly, including as much as 15 to 18 pounds per week and as much as 50 percent of all excess weight in just 14 days, without dieting or exercise; that clinical studies prove those claims; and that their product causes permanent or long-term weight loss.

The FTC ultimately seeks to permanently bar the defendants from further violations and to obtain redress for affected consumers.

Through its “Red Flag” education campaign, announced in December 2003, the Commission encourages media outlets not to run ads for weight-loss products that contain false claims. As part of this effort, the FTC may notify media outlets when ads making bogus weight-loss claims appear in their publications. More information about the “Red Flag” campaign is available at http://www.ftc.gov/redflag/

The Commission vote to authorize the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of California, San Francisco 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.

Copies of the complaint are available from 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, 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 To Host Public Workshop on Unilateral Effects Analysis and Litigation

The Federal Trade Commission will hold a workshop on Tuesday, February 12, 2008, at 9 a.m. EST to examine “Unilateral Effects Analysis and Litigation.” The event, which was announced by Chairman Majoras in her keynote address at the ABA Antitrust Law Section’s Fall Forum, will be held at the Commission’s satellite building conference center from 9:00 a.m. to 5:00 p.m. The workshop will bring together recognized legal and economic experts to discuss how unilateral effects theories are applied to mergers of firms selling competing but differentiated products, and judicial perspectives on such theories. It is free and open to the public. A government-issued photo ID is required to enter the facility.

WHO: FTC staff and recognized legal and economic experts
WHEN: Tuesday, February 12, 2008, 9:00 a.m. to 5:00 p.m.
WHERE: Federal Trade Commission, Satellite Building
601 New Jersey Ave., N.W., Washington, DC
Conference Center
PRESS CONTACT: FTC Office of Public Affairs
202-326-2180

Webcast Information

Reporters interested in this event but who are unable to attend, can view a live Webcast of the workshop by connecting to a link that will be made available on Monday