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Concluding Two-Year Rulemaking, FTC Announces New EnergyGuide Label

The Federal Trade Commission today announced it has concluded a two-year review of the FTC’s Appliance Labeling Rule (16 C.F.R. Part 305) and, after substantial public comment and consumer research, has amended the Rule to improve the design and content of the EnergyGuide label required on most new appliances sold in the United States. The yellow EnergyGuide label, familiar to most appliance shoppers, helps consumers compare the operating costs of competing models and aids them in identifying high-efficiency models that will reduce their energy use.

The New EnergyGuide Label

The new EnergyGuide label (see illustration) has a streamlined look and will display estimated yearly operating costs prominently for most appliance types. This estimated cost information, which will appear on the labels in dollars per year, will provide consumers with a clear context to compare the energy efficiency of different appliance models. It also will help consumers assess trade-offs between the energy costs of their appliances and other expenditures. The new EnergyGuide label design will continue to display energy consumption information (e.g., annual electricity use) as a secondary disclosure for most labeled products.

The Regulatory Review Process

The amendments announced today can be found on the Commission’s Web site as a link to this press release and will appear shortly in a notice published in the Federal Register. As directed by Section 137 of the Energy Policy Act of 2005, the FTC initiated a two-year rulemaking to consider the effectiveness of the consumer products appliance labeling program in assisting consumers with their purchasing decisions and in improving energy efficiency.

Over the course of the proceeding, the Commission held a public workshop, conducted consumer research, and sought comments on proposed amendments to the Rule. As part of this process, the Commission explored a broad range of issues, including the effectiveness of the EnergyGuide label, its design and content, and possible alternative label designs. The amendments announced today contain a new design for the yellow EnergyGuide label and several other changes to existing requirements.

The Commission vote approving the publication of the Federal Register notice was 5-0.

Copies of the Federal Register notice 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 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, 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. 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 Stops Prepaid Stored-Value Card Sellers From Improper Debiting

At the request of the Federal Trade Commission, a federal judge has temporarily halted an operation marketing Visa- and MasterCard-branded stored-value cards from making unauthorized debits from consumers’ bank accounts.

According to a complaint filed by the FTC, the defendants market bank-issued, Visa- and MasterCard-branded stored-value (prepaid) cards under a variety of names through Web sites and pop-up and e-mail advertisements that direct consumers to Web sites for the individual cards. These include Acclaim Visa, Impact Visa, Sterling Visa, VIP Advantage Visa, Vue Visa, Elite Plus MasterCard, Impact MasterCard, Secure Deposit MasterCard, VIP MasterCard, and Vue MasterCard. The defendants also market unrelated short-term loans on Web sites such as www.SuperAutoSource.com, www.SuperCashSource.com, and www.FastCashUSA.com.

The complaint alleges that, through their prepaid card programs, the defendants debited, without authorization, a $159.95 “application and processing” fee from consumers’ bank accounts, including from consumers who either had no contact with the defendants or had applied for an unrelated short-term loan. Consumers who visited the defendants’ prepaid card Web sites were instructed to provide personally identifiable information, including their bank account information, to apply for a card. The defendants allegedly also made deceptive claims on their Web sites, such as “No Annual Fees” and “No Security Deposit,” without disclosing clearly and prominently that they would use the consumers’ personal information to debit the $159.95 fee. Consumers usually discovered the unauthorized debits when they reviewed their bank account statements or when banks notified them of penalty fees or overdraft charges due to insufficient funds.

The defendants are charged with violating federal law by engaging in unauthorized bank account debiting; failing to disclose clearly and conspicuously that consumers’ personal information will be used to debit a fee from their bank accounts, and that the fee will be debited once they apply for a prepaid card; and misrepresenting that consumers are obligated to pay the fee when they did not consent to pay a fee.

On July 30, the judge issued a temporary restraining order barring unauthorized debiting and freezing the assets of EdebitPay, LLC, EDP Reporting, LLC, EDP Technologies Corporation, Secure Deposit Card Inc., Dale Paul Cleveland, and William Richard Wilson, all based in California. The judge will hold a hearing to determine whether to extend the injunction pending a trial. The FTC will seek to permanently bar the defendants from further violations and make them forfeit their ill-gotten gains.

By a 5-0 vote, the Commission approved the filing of the complaint in the U.S. District Court for the Central District of California.

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.

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.

Commission Rules that Evanston Northwestern Healthcare Corp.s Acquisition of Highland Park Hospital Was Anticompetitive

In an administrative opinion and order made public today, the Federal Trade Commission ruled that Evanston Northwestern Healthcare Corp.’s (ENH) acquisition of Highland Park Hospital (Highland Park) in 2000 was anticompetitive and violated Section 7 of the Clayton Act. The Commission opinion, authored by Chairman Deborah Platt Majoras, affirmed an October 2005 ruling by Chief Administrative Law Judge (ALJ) Stephen J. McGuire, with some modifications, and ordered an alternate remedy to restore competition in the market.

The Commission’s order, which is available on the FTC’s Web site, requires ENH to establish separate and independent contract negotiating teams – one for Evanston and Glenbrook Hospitals, and another for Highland Park – that will allow managed care organizations (MCOs) to again negotiate separately for the competing hospitals, “thus re-injecting competition between them for the business of MCOs.” The remedy differed from that ordered by ALJ McGuire, who ruled that ENH should be required to divest Highland Park altogether.

The Commission Opinion: In its opinion, the Commission affirmed the ALJ’s decision that the transaction violated Section 7 of the Clayton Act, and that the evidence presented by complaint counsel “demonstrates that the transaction enabled the merged firm to exercise market power and that the resulting anticompetitive effects were not offset by merger-specific efficiencies.” The record, the Commission found, “shows that senior officials at Evanston and Highland Park anticipated that the merger would give them greater leverage to raise prices, that the merged firm did in fact raise its prices immediately and substantially after completion of the transaction, and that the same senior officials attributed the price increases in part to increased bargaining leverage produced by the merger.”

Further, the Commission found that the “econometric analyses performed by both complaint counsel’s and respondent’s economists also strongly supported the conclusion that the merger gave the combined entity the ability to raise prices through the exercise of market power.” The economic analyses, the Commission determined, “established that there were substantial merger-coincident price increases and ruled out the most likely competitive benign explanations for substantial portions of these increases.”

“The record does not support respondent’s position that these increases reflect ENH’s attempts to correct a multi-year failure by Evanston Hospital’s senior officials to charge market rates to many of its customers,” the Commission wrote, “or increased demand for Highland Park’s Services due to post-merger improvements.”

The Commission Order: The opinion and order approved by the Commission upholds the decision of the ALJ and adopts the findings of fact and conclusions of law as those of the Commission, except where they are inconsistent with the Commission’s opinion and order. While the Commission agreed with the ALJ that ENH’s acquisition of Highland Park violated Section 7 of the Clayton Act, it did not agree that a divestiture was warranted as a remedy. “The potentially high costs inherent in the separation of hospitals that have functioned as a merged entity for seven years,” the Commission wrote, “instead warrant a remedy that restores the lost competition through injunctive relief.”

Accordingly, while “structural remedies are preferred for Section 7 violations,” the Commission determined that “this is the highly unusual case in which a conduct remedy, rather than a divestiture, is more appropriate.” The Commission wrote that the long time that has elapsed between the merger’s closing and the conclusion of the litigation, “would make a divestiture much more difficult, with greater risk of unforseen costs and failures.” It therefore imposed an injunctive order, requiring ENH to establish separate and independent negotiating teams – one for Evanston and Glenbrook Hospitals, and another for Highland Park, “to allow MCOs to negotiate separately again for those competing hospitals, thus re-injecting competition between them for the business of MCOs.”

The Commission noted that ENH should be able to implement the required modifications to its contract negotiating procedures in a very short time. “In contrast, divesting Highland Park after seven years of integration would be a complex, lengthy, and expensive process.” The Commission ordered ENH, within 30 calendar days, to submit a detailed proposal to the FTC for implementing the injunctive relief imposed, and laid out specific steps to be taken to ensure the order is implemented correctly. Finally, it ruled that complaint counsel must submit any objections to ENH’s proposal within 30 calendar days after it is submitted, and that ENH must respond to complaint counsel’s filing within 10 calendar days.

Case Background: ENH acquired Highland Park in January 2000. The acquisition combined ENH’s Evanston and Glenbrook Hospitals – located in Cook County, Illinois – with Highland Park, the nearest hospital to the north. The administrative complaint approved and issued by the Commission in February 2004 alleged that following the acquisition, ENH was able to raise its prices charged to health insurers far above price increases of other comparable hospitals as a result of the transaction.

According to the Commission’s complaint, this resulted in higher costs to insurance purchasers and hospital services consumers. The complaint alleged that the merger violated Section 7 of the Clayton Act, based on an analysis conducted under the Horizontal Merger Guidelines and on the actual competitive effects, in the form of higher prices actually charged by ENH after the merger. The complaint contemplated a remedy to restore competition to the benefit of consumers seeking competitively priced health care.

In October 2005, Chief ALJ McGuire issued an initial decision and order, ruling in favor of Commission staff, and ordering ENH to sell Highland Park within 180 days. According to Judge McGuire’s decision, which upheld Count I of the administrative complaint issued by the FTC, ENH’s acquisition of Highland Park resulted in “substantially lessened competition” and higher prices for insurers and healthcare consumers for general acute care inpatient services sold to managed care organizations in the geographic market defined by the ALJ. ENH subsequently appealed the ALJ’s decision to the Commission. Complaint counsel cross-appealed the ALJ’s decision not to make a ruling against the respondent under Count II and also requested that the Commission supplement and revise the ALJ’s divestiture order.

The ALJ dismissed Count II of the complaint as moot. Count III, which alleged anticompetitive conduct by ENH Medical Group, Inc., acting on behalf of its member doctors, was resolved by a consent order barring such conduct that was announced on May 17, 2005.

The Commission Vote: The Commission vote approving issuance of the opinion and order was 5-0, with Commissioners J. Thomas Rosch and Jon Leibowitz issuing separate concurring opinions.

Commissioner Rosch’s opinion described a different theoretical basis for a Section 7 violation. He embraced a two-tiered theory of anticompetitive effects that was “based on the unique competitive dynamics of hospital markets, stemming from the bargaining between hospitals and managed care organizations (MCOs) over inclusion in MCO networks that is described by the Commission opinion.” Commissioner Rosch explained that the elimination of competition between Evanston and Highland Park “enabled ENH to include Highland Park in its system and engage in system (all-or-nothing) supra-competitive pricing.” In Section II of his concurrence, Commissioner Rosch also embraced the proposition that in some cases, including this case, evidence of actual anticompetitive effects can sufficiently identify the contours of the relevant market for purposes of establishing a Section 7 violation.

In his opinion, Commissioner Leibowitz wrote, “I join the opinion of the Commission with respect to its findings of fact, its conclusion that the merger violated the Clayton Act as identified in Count One of the Complaint, and the remedy identified in that opinion. However, I believe that the weight of the evidence clearly supports a finding that the merger violated the Clayton Act in the manner identified in Count II of the Complaint as well. Consequently, I join in Section II of Commissioner Rosch’s concurrence.”

Copies of the Commission’s opinion and order, and the Commissioners’ concurring opinions, 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, DC 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 to Host Town Hall to Examine Privacy Issues and Online Behavioral Advertising

The FTC will host a two-day Town Hall to bring together consumer advocates, industry representatives, technology experts, and academics to address the consumer protection issues raised by the practice of tracking consumers’ activities online to target advertising – or “behavioral advertising.” The Town Hall is a follow-on to a dialogue on behavioral advertising that emerged at a November 2006 FTC forum, “Tech-Ade,” which examined the key technological and business developments that will shape consumers’ core experiences in the coming decade. It will be held November 1-2, 2007 at the FTC Conference Center at 601 New Jersey Avenue, N.W., Washington, DC. It is free and open to the public.

Online behavioral advertising involves the collection of information about a consumer’s activities online – including the searches the consumer has conducted, the Web pages visited, and the content the consumer has viewed. The information is then used to target advertising to the consumer that is intended to reflect the consumer’s interests, and thus increase the effectiveness of the advertising. The FTC examined similar issues in 2000, when it held a public workshop and issued two reports on the practice of online profiling. Technology advances and the evolution of business models since that time have raised concerns by consumer advocates, privacy experts, and others about the implications of data collection in online advertising now and in the future. Recently, several consumer privacy advocates, as well as the State of New York, sent letters to the FTC urging it to examine the effects of behavioral advertising on consumer privacy.

Topics at the Town Hall will include:

How does online behavioral advertising work? What types of companies play a role in this market?
What types of data are collected? Is the data personally identifiable or anonymous? Even when the data is anonymous, is it, or could it be, combined with personally identifiable data from other sources?
How is the data used, and by whom? Is it shared or sold? Is the data used for any purposes other than to target advertising?
How has the online advertising market, and specifically behavioral advertising, changed since 2000?
What security protections are companies providing for the consumer data that they collect, use, transfer, or store?
What do consumers understand about the collection of their information online for use in advertising?
Are companies disclosing their online data-collection practices to consumers? Are these disclosures an appropriate and effective way to inform the public about these practices? Are companies offering consumers choices about how data is collected and used?
What standards do, or should, govern practices related to online behavioral advertising? Are companies following the Network Advertising Initiative Principles, originally issued in 2000 for online network advertising companies? Are these principles still relevant, in light of changes in the marketplace? What other legal or self-regulatory standards are applicable to these practices? Are certain practices generally regarded as appropriate or inappropriate in this area?
What changes are anticipated in the online behavioral advertising market over the next five years? Will information be collected through technological means other than cookies? Is behavioral advertising moving beyond the Internet into other technologies?

The Commission invites interested parties to submit requests to be panelists and to recommend other topics for discussion. The requests should be submitted electronically to [email protected] by September 14, 2007. The Commission asks interested parties to include a statement detailing their expertise on the issues to be addressed at the Town Hall and complete contact information. The Commission will select panelists based on expertise and the need to represent a range of views about the issues. Panelists selected to participate will be notified by October 5, 2007.

Any person also may submit written comments on the topics to be addressed at the Town Hall. Comments may be submitted via e-mail to [email protected] or by mail to Secretary, Federal Trade Commission, Room H-135 (Annex N), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Comments must be received by October 19, 2007.

A government-issued photo ID is required for entry to the event. Members of the public and press who wish to participate but who cannot attend can view a live Webcast of the Town Hall on the FTC’s Web site. Pre-registration is not required. For further information, please consult the FTC Web site at http://www.ftc.gov/bcp/workshops/ehavioral/index.shtml.

Refunds for Consumers Who Purchased Xenadrine EFX

From August 6 until September 15, 2007, the Federal Trade Commission will be accepting refund requests from consumers who bought Xenadrine EFX. The FTC alleged that Xenadrine EFX was advertised with false and unsubstantiated weight-loss claims, and the FTC’s settlement with the marketers of Xenadrine EFX included money for consumer refunds. The amount of the refund will depend on the number of consumers who request refunds.

Consumers who bought Xenadrine EFX between February 1, 2002, and May 22, 2006, and were not satisfied with their purchase can request a refund either by downloading a claim form at www.XenadrineEFXsettlement.com or by calling 1-800-560-6435 to receive a claim form by mail.

Consumers must complete and sign the claim form and mail it back to the Claims Administration Center at the address shown on the claim form. The Claims Administration Center must receive all claim forms no later than September 15, 2007.

In addition to this notice, the FTC will run public notices in a variety of newspapers during the month of August.

FTC Asks Court to Order Ab Belt Makers to Return Money to Consumers

The Federal Trade Commission has asked a federal district court to order the marketers of Ab Force to return money to consumers who purchased their belts based on the marketers’s advertising claims. The ads made false and unsubstantiated claims that using their electronic muscle stimulation belt caused weight loss and well-defined abdominal muscles, and was an effective alternative to regular exercise.

In 2002, the marketers advertised “Ab Force” using visual images of well-sculpted, gym-clothed bodies wearing the Ab Force device, with verbal references to other, more expensive ab belts that were sweeping the nation at the time. The FTC alleged that through the product name, text and visual images, and by comparing their product to “those fantastic electronic ab belt infomercials on TV,” the defendants made false and unsubstantiated claims about the product’s abilities.

In 2005, the Commission upheld an administrative law judge’s ruling that the marketers violated federal law by making the deceptive claims, and that they intended to convey those deceptive claims, even though the marketers knew that they did not have substantiation. After the marketers appealed, the Fourth Circuit Court of Appeals upheld the decision on August 7, 2006.

Now, the FTC is seeking money back for consumers who purchased the belts from the marketers: Telebrands Corp., TV Savings, L.L.C., and Ajit Khubani. They sold more than 700,000 Ab Force belts and accessories, earning approximately $16 million. The FTC is also alleging that Ajit Khubani unlawfully transferred assets to his wife, Poonam Khubani. The FTC’s case names her as a relief defendant – someone who is not accused of wrongdoing, but who has allegedly received ill-gotten gains, and does not have a legitimate claim to them. The FTC is seeking full redress for consumers who purchased the ab belts, with money from the companies and Khubani, as well as the funds transferred to Khubani’s wife.

The Commission vote to authorize staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of New Jersey.

FTC, Subprime Mortgage Servicer Agree to Modified Settlement

The Federal Trade Commission today announced that it has reached an agreement with a major subprime mortgage servicer to modify certain terms of a 2003 court settlement, providing substantial benefits to consumers beyond those in the original settlement, including account adjustments and reimbursements or refunds of fees paid in certain circumstances.

In November 2003, Fairbanks Capital Corp. and Fairbanks Capital Holding Corp. agreed to pay $40 million to settle with the FTC and the U.S. Department of Housing and Urban Development (HUD), which charged them with engaging in a number of unfair, deceptive, and illegal practices in the servicing of subprime mortgage loans. The Commission distributed the $40 million as redress to affected consumers. The settlement also imposed a number of specific limitations on Fairbanks’s ability to charge fees and engage in certain practices when servicing mortgage loans. In early 2004, the defendants changed their names to Select Portfolio Servicing, Inc. and SPS Holding Corp.

The FTC conducted a review of Select Portfolio Servicing’s compliance with certain aspects of the 2003 settlement. The FTC and Select Portfolio Servicing negotiated and agreed to several modifications of the settlement. HUD has also agreed to these changes, which include:

A five-year prohibition on marketing optional products, which are products or services that are not required by the consumer’s loan (such as home warranties).
Refunds of optional product fees paid by consumers in certain circumstances.
Revised limitations on charging attorney fees in a foreclosure or bankruptcy to ensure that consumers receive full disclosures, including the actual amount due if they receive an estimated fee. Select Portfolio Servicing also will conduct reconciliations after payoff or foreclosure and reimburse consumers who may have paid for services that were not actually performed.
Refunds for consumers who may have paid foreclosure attorney fees for services that were not actually performed since November 2003.
A permanent requirement that consumers be provided with monthly mortgage statements containing important information about their loans.
A requirement that Select Portfolio Servicing revise its monthly mortgage statements based on consumer testing performed by a qualified, independent third party (which the company has already done).
A requirement that Select Portfolio Servicing continue to use a qualified, independent third party to perform annual audits of its compliance with key settlement provisions until 2013. The results of these audits will be subject to review by the FTC.
Revision of specific provisions to permit Select Portfolio Servicing to engage in certain practices that were prohibited by the original settlement. For example, the modified settlement allows the company to hold or reject a payment that is more than $25 short of the consumer’s monthly principal and interest payment so long as the consumer receives prompt notice of the action. The settlement continues to prohibit the company from applying such payments to fees before principal and interest.

The Commission vote to authorize staff to file the modified stipulated final judgment and order was 5-0. The motion requesting entry of the modified settlement order was filed in the U.S. District Court for the District of Massachusetts.

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

(FTC File No. X04-0005)

FTC Testifies on Fighting Fraudulent and Abusive Telemarketing

The Federal Trade Commission today told the Senate Committee on Commerce, Science, and Transportation Subcommittee on Consumer Affairs, Insurance, and Automotive Safety that targeting fraudulent and abusive telemarketing is a top priority at the agency. Lydia Parnes, Director of the FTC Bureau of Consumer Protection, told the subcommittee, “From 1991 to present, the FTC has brought more than 350 telemarketing cases. The vast majority of these involved fraudulent marketing of investment schemes, business opportunities, sweepstakes pitches, and the sales of various goods and services, including health care products.”

The testimony notes that in addition to halting the deceptive telemarketing, “The Commission has secured orders providing for more than $500 million in consumer restitution,” or where that was not practical, the money was returned to the U.S. Treasury. “During this same time period, the Commission, through cases filed on its behalf by the U.S. Department of Justice, has obtained civil penalty orders totaling nearly $17 million.”

“As an example, just last week the FTC halted the allegedly unlawful telemarketing operations of Suntasia Marketing,” which tricked consumers into divulging their bank account numbers by pretending to be affiliated with the consumers’ banks. They then debited many consumers’ accounts on a recurring basis. The FTC halted the operation working in cooperation the United States Postal Service and state and local law enforcement. “The FTC . . . works with various federal, state, local, and foreign partners to conduct law enforcement ‘sweeps’– multiple simultaneous law enforcement actions – that focus on specific types of telemarketing fraud, and works to promote joint filing of telemarketing actions with the states,” the testimony states.

The testimony notes that the Commission does not have criminal law enforcement authority but recognizes the value of criminal prosecution in deterring criminal activity and maintaining consumer confidence that wrongdoers will be brought to justice. “Accordingly, the Commission routinely refers matters appropriate for criminal prosecution to federal and state prosecutors through its Criminal Liaison Unit. Since October 1, 2002, 214 people have been indicted in criminal cases involving telemarketing fraud that arose from referrals made by CLU, including cases where an FTC attorney was designated a Special Assistant U.S. Attorney to help with the criminal prosecution. Of those 214 charged, 111 were convicted or pleaded guilty. The rest are awaiting trial, in the process of extradition from a foreign country, or are fugitives from justice.”

The testimony notes that list brokers can play a role in facilitating telemarketing fraud, and the FTC has taken law enforcement action targeting list brokers who knew or consciously avoided knowing that they were supplying lists to telemarketers who were violating the law. “The FTC also has challenged other third-party actors, such as payment processors, without whose assistance telemarketers would be able to gain access to consumers’ bank accounts. Generally, the FTC has alleged that these payment processors knew or consciously avoided knowing that they were facilitating fraudulent telemarketing operations . . . .”

In addition to law enforcement initiatives targeting fraudulent telemarketing, the FTC enforces the National Do Not Call Registry, the testimony states. “Consumers have registered more than 146 million telephone numbers since the Registry became operational in June 2003, and the Do Not Call program has been tremendously successful in protecting consumers’ privacy from unwanted telemarketing calls. A Harris Interactive Survey released in January 2006 showed that 94% of American adults have heard of the Registry and 76% have signed up for it . . . Violating Do Not Call subjects telemarketers to civil penalties of up to $11,000 per violation. Twenty-seven of the Commission’s telemarketing cases have alleged Do Not Call violations, resulting in $8.6 million in redress . . .” or return of ill gotten gains to the Treasury.

The testimony states that the committee is in the process of reauthorizing the Do Not Call Implementation Act. “The Commission believes that the bill can be strengthened by statutorily mandating the fees to be charged to telemarketers accessing the National Registry, and specifically mandating such fees in an amount sufficient to enable the Commission to enforce the TSR.”

The Commission vote to authorize the testimony was 5-0.

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 https://www.ftccomplaintassistant.gov/ 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 Charges Puerto Rico Optometrists Group, Two of its Leaders, With Orchestrating Price-Fixing Conspiracy

A group representing all optometrists in Puerto Rico, along with two of its leaders, has agreed to settle Federal Trade Commission charges that they violated the FTC Act by orchestrating and carrying out agreements among the group’s members to refuse, and threaten to refuse, to deal with payors, unless the payors raised the fees paid to the optometrists.
The complaint and consent order announced today settle the FTC’s charges against the following respondents: Colegio de Optometras de Puerto Rico (the Colegio), Edgar Dávila Garcia, O.D. (Dr. Dávila), and Carlos Rivera Alonso, O.D. (Dr. Rivera). The consent order settling the Commission’s charges bars the group and two of its leaders from engaging in such conduct, while allowing them to participate in legal joint arrangements.

The Colegio and its Optometrists

The Colegio is a not-for-profit association of professional optometrists practicing in Puerto Rico. Headquartered in San Juan, the association is incorporated in Puerto Rico and has approximately 500 member optometrists, constituting all of the optometrists licensed to practice in Puerto Rico. When not acting jointly in the manner alleged in the FTC’s complaint, Colegio members compete with each other to provide optometry services on the island.

Dr. Dávila is a licensed optometrist who provides vision-care services to patients. He was the treasurer of the Colegio from 2002-04 and also served as the president of the Colegio’s Health Plans Commission from 2001-04. Dr. Rivera also is a licensed optometrist who provides vision-care services to patients. He served as president-elect of the Colegio in 2004, and then as president from October 2004 to September 2006.

The Commission’s Complaint

According to the Commission’s complaint, the Colegio and Drs. Dávila and Rivera violated the FTC Act by facilitating, negotiating, entering into, and implementing express or implied agreements among the Colegio’s members to refuse, or threaten to refuse, to accept vision and health care contracts except on collectively agreed-upon terms.

Specifically, the FTC alleges the respondents’ conduct targeted Ivision International Inc. (Ivision), which has offered vision-care services and products in Puerto Rico since 1997. Ivision contracts with Puerto Rico health plans to administer vision plans and provide vision-care products and services to covered patients. The health plans pay Ivision per individual member. Ivision then contracts with the island’s optometrists to provide these services. By August 2004, Ivision had almost 130 optometrists – located all over Puerto Rico – in its network, making it very attractive to health plans and to patients covered by those plans.

In June and July 2004, Ivision sent announcements to optometrists about its contracts with several new health plans (many of which previously had contracted only directly with optometrists). Under these new contracts, Ivision offered to pay optometrists the same fees as in its contracts with other health plans. As a result of these new contracts, the optometrists would lose much or all of their lucrative direct business with these plans. Many optometrists, all of whom were member of the Colegio, called Ivision to complain about the new reimbursement structure, threatening that if Ivision did not pay more, they would stop treating patients covered by Ivision. As part of a collective effort to get Ivision to raise its rates, Colegio representatives contacted other optometrists and urged them to stop participating in Ivision’s network.

Later that summer, Ivision met with its providers. During that meeting, the optometrists – led by Dr. Rivera – indicated that if Ivision did not raise its reimbursement rates, the Colegio would ensure that all of its optometrists left Ivision and that Ivision would have no providers left in Puerto Rico. The day after the meeting, Dr. Dávila circulated a letter on Colegio letterhead to the group’s members concerning Ivision’s new health plan contracts, urging the members not to participate in Ivision’s network and informing them that the Colegio was going to develop a strategy to battle Ivision.

The respondents’ efforts on behalf of the Colegio’s members eventually succeeded. By mid-October 2004, almost 40 Colegio members had left the Ivision network and refused to provide their services to patients. In November 2004, in an effort to retain the remaining optometrists, Ivision significantly increased its reimbursement rates.

Drs. Dávila and Rivera also orchestrated collective negotiations with other plans, according to the FTC, and on several occasions, Colegio officers approached other health plans to negotiate higher reimbursement levels for Colegio members. These, as well as the activities related to Ivision, harmed competition in violation of the FTC Act. Additional details of the conduct that led to the Commission’s complaint can be found in the analysis to aid public comment for this matter.

The Consent Order

The Commission’s consent order is designed to end the illegal conduct alleged in the complaint. It prohibits the Colegio and Drs. Dávila and Rivera from entering into or facilitating agreements for the provision of optometry services: 1) on behalf of any optometrist with any payor; 2) refusing to deal or threatening to refuse to deal with any payor; 3) designating the terms upon which any optometrist deals, or is willing to deal, with any payor, including price terms; 4) refusing to deal individually with any payor, or refusing to deal with any payor through any arrangement other than one involving the Colegio.

The consent order permits the Colegio to undertake certain kinds of joint contracting arrangements – “qualified risk-sharing joint arrangements” and “qualified clinically integrated joint arrangements” – terms that are defined in the order. These are arrangements in which physician participants engage in joint activities to control costs and improve quality by managing the provision of services. Any agreement concerning reimbursement or other terms must be reasonably necessary to obtain significant efficiencies through the joint arrangement.

Other provisions of the order reinforce these general provisions by prohibiting the respondents from exchanging information among optometrists concerning their willingness to deal with a payor, or the terms – including price terms – on which they are willing to deal. In addition, the order bars the respondents from encouraging anyone into engaging in any action that it prohibits. It also requires the respondents – for three years from the date the order becomes final – to notify the FTC in writing before conducting any joint negotiating activities that could be considered anticompetitive under its terms. The order must be translated into Spanish and distributed to all Colegio members, as well as payors. It will expire in 20 years.

The Commission vote to place the consent order on the public record for comment and publish a copy in the Federal Register was 5-0. The Commission is accepting comments on the order for 30 days, until August 28, 2007, after which it will decide whether to make it final. Comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. The FTC was joined in its investigation by the Office of Monopolistic Affairs of the Commonwealth of Puerto Rico’s Department of Justice.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

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 ofPolicy 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 Seeks Comments on the Uses of Social Security Numbers in the Private SectorGoal to Reduce ID Theft

The Federal Trade Commission is seeking comments on the uses of Social Security numbers in the private sector to reduce the overall incidence of ID theft, which often relies on SSNs. The FTC also plans to host one or more public forums on the issue in the coming months.

In issuing its strategic plan to address identity theft, the President’s Identity Theft Task Force, led by Attorney General Alberto Gonzales and FTC Chairman Deborah Platt Majoras, recommended that Task Force agencies develop a comprehensive record on the uses of the SSN in the private sector and evaluate the necessity of those uses. The Task Force report, www.idtheft.gov/reports/StrategicPlan.pdf, recognized that a thorough examination would help policymakers and the private sector find ways to limit the unnecessary uses of SSNs, which frequently are used to commit identity theft. The Task Force recommended gathering information from stakeholders – including the financial services industry, law enforcement agencies, consumer reporting companies, academics, and consumer advocates – in making this assessment.

The Commission invites interested parties to comment on the various uses of SSNs by the private sector, the necessity of those uses, alternatives available, the challenges faced by the private sector in moving away from using SSNs, and how SSNs are obtained and used by identity thieves. The FTC asks that comments be as specific as possible, and include items such as studies, surveys, research, and cost estimates. Comments must be received on or before September 5, 2007. For more detailed information on how to submit comments and the specific questions and topics the FTC would like addressed in the comments, please see: http://www.ftc.gov/opa/2007/07/ssncomments.shtm.

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