Subprime Credit Card Marketer to Provide At Least $114 Million in Consumer Redress to Settle FTC Charges of Deceptive Conduct

CompuCredit Corporation, a company marketing Visa and MasterCard credit cards to consumers in the subprime credit market, has agreed to reverse fees charged to eligible consumers’ accounts to settle allegations that it violated federal law. It is estimated that the redress program will result in more than $114 million in credits to consumer accounts. Eligible consumers whose current balances are less than the amount of credits to be applied will receive an estimated $3.7 million in cash refunds.

In a federal court complaint filed in June 2008, the Federal Trade Commission alleged that CompuCredit engaged in deceptive conduct in connection with marketing credit cards. The FTC also alleged that Jefferson Capital Systems, LLC, a debt collection company wholly-owned by CompuCredit, engaged in deceptive conduct in marketing credit cards as part of its debt collection activities and engaged in abusive practices while collecting debts.

“This settlement is a big win for consumers,” said Lydia B. Parnes, Director of the FTC’s Bureau of Consumer Protection. “When signing up for a credit card, consumers have the right to know the truth about the amount of credit they are getting and the cost of that credit up front.”

According to the FTC’s complaint, CompuCredit marketed credit cards, primarily through direct mail solicitations, under various brand names, including Aspire, Aspire A Mas, FreedomCard, Tribute, Imagine, Majestic, Aspen, Emerge and Fingerhut Credit Advantage. These cards generally fit into three categories:

Fee-based credit card with $300 limit. According to the FTC, CompuCredit marketed to consumers with subprime credit ratings a credit card with a purported $300 credit limit, using solicitations that stated certain up-front fees that did not apply. Rather than provide consumers with $300 of available credit, CompuCredit immediately charged consumers as much as $185 in fees that it did not adequately disclose in light of the representations made. These fees left consumers with as little as $115 in available credit.

Credit card with “up to $3,250” limit. As alleged by the FTC, CompuCredit marketed to consumers with slightly higher credit scores its credit card purporting to offer “up to $3,250” in available credit. CompuCredit failed to disclose, or failed to disclose adequately, that half of the available credit would be withheld for the first 90 days. CompuCredit also failed to disclose, or failed to disclose adequately, that for the first 90 days, the company would monitor consumers’ purchases, and might reduce their credit limit based on an undisclosed “behavioral” scoring model.

Debt-transfer credit card program. According to the complaint, CompuCredit and Jefferson Capital marketed a credit card to consumers with charged-off debt. CompuCredit and Jefferson Capital represented that the consumers’ old debt balance would be immediately transferred to the card and reported to consumer reporting agencies as paid in full. Consumers who accepted the offer, however, were immediately enrolled in a debt repayment plan and did not receive a credit card until they paid 25 percent to 50 percent of their charged-off debt.

In addition to requiring the reversal of fees, the orders with CompuCredit and Jefferson Capital:

  • Require that credit card solicitations making representations about credit limits or available credit must disclose – equally clearly and prominently, and on the same page – fees and other restrictions affecting initial available credit.
  • Include a broad prohibition against misrepresentations in the marketing of credit cards, including misrepresentations about the amount of available credit.
  • Prohibit CompuCredit and Jefferson Capital from making any misrepresentation about the relationship between an offer or extension of credit and a debt repayment plan.
  • Prohibit Jefferson Capital from engaging in abusive practices while collecting debts.

The Commission voted 4-0 to authorize staff to file the stipulated final order. The order was filed in the U.S. District Court for the Northern District of Georgia. Separately, the FDIC announced settlement of its parallel administrative action against CompuCredit. As part of its settlement with the FDIC, CompuCredit has also agreed to a civil money penalty of $2.4 million.

NOTE: Stipulated final orders are for settlement purposes only and do 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 Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. X080047)
(CompuCredit Settlement)

Subprime Credit Card Marketer to Provide At Least $114 Million in Consumer Redress to Settle FTC Charges of Deceptive Conduct

CompuCredit Corporation, a company marketing Visa and MasterCard credit cards to consumers in the subprime credit market, has agreed to reverse fees charged to eligible consumers’ accounts to settle allegations that it violated federal law. It is estimated that the redress program will result in more than $114 million in credits to consumer accounts. Eligible consumers whose current balances are less than the amount of credits to be applied will receive an estimated $3.7 million in cash refunds.

In a federal court complaint filed in June 2008, the Federal Trade Commission alleged that CompuCredit engaged in deceptive conduct in connection with marketing credit cards. The FTC also alleged that Jefferson Capital Systems, LLC, a debt collection company wholly-owned by CompuCredit, engaged in deceptive conduct in marketing credit cards as part of its debt collection activities and engaged in abusive practices while collecting debts.

“This settlement is a big win for consumers,” said Lydia B. Parnes, Director of the FTC’s Bureau of Consumer Protection. “When signing up for a credit card, consumers have the right to know the truth about the amount of credit they are getting and the cost of that credit up front.”

According to the FTC’s complaint, CompuCredit marketed credit cards, primarily through direct mail solicitations, under various brand names, including Aspire, Aspire A Mas, FreedomCard, Tribute, Imagine, Majestic, Aspen, Emerge and Fingerhut Credit Advantage. These cards generally fit into three categories:

Fee-based credit card with $300 limit. According to the FTC, CompuCredit marketed to consumers with subprime credit ratings a credit card with a purported $300 credit limit, using solicitations that stated certain up-front fees that did not apply. Rather than provide consumers with $300 of available credit, CompuCredit immediately charged consumers as much as $185 in fees that it did not adequately disclose in light of the representations made. These fees left consumers with as little as $115 in available credit.

Credit card with “up to $3,250” limit. As alleged by the FTC, CompuCredit marketed to consumers with slightly higher credit scores its credit card purporting to offer “up to $3,250” in available credit. CompuCredit failed to disclose, or failed to disclose adequately, that half of the available credit would be withheld for the first 90 days. CompuCredit also failed to disclose, or failed to disclose adequately, that for the first 90 days, the company would monitor consumers’ purchases, and might reduce their credit limit based on an undisclosed “behavioral” scoring model.

Debt-transfer credit card program. According to the complaint, CompuCredit and Jefferson Capital marketed a credit card to consumers with charged-off debt. CompuCredit and Jefferson Capital represented that the consumers’ old debt balance would be immediately transferred to the card and reported to consumer reporting agencies as paid in full. Consumers who accepted the offer, however, were immediately enrolled in a debt repayment plan and did not receive a credit card until they paid 25 percent to 50 percent of their charged-off debt.

In addition to requiring the reversal of fees, the orders with CompuCredit and Jefferson Capital:

  • Require that credit card solicitations making representations about credit limits or available credit must disclose – equally clearly and prominently, and on the same page – fees and other restrictions affecting initial available credit.
  • Include a broad prohibition against misrepresentations in the marketing of credit cards, including misrepresentations about the amount of available credit.
  • Prohibit CompuCredit and Jefferson Capital from making any misrepresentation about the relationship between an offer or extension of credit and a debt repayment plan.
  • Prohibit Jefferson Capital from engaging in abusive practices while collecting debts.

The Commission voted 4-0 to authorize staff to file the stipulated final order. The order was filed in the U.S. District Court for the Northern District of Georgia. Separately, the FDIC announced settlement of its parallel administrative action against CompuCredit. As part of its settlement with the FDIC, CompuCredit has also agreed to a civil money penalty of $2.4 million.

NOTE: Stipulated final orders are for settlement purposes only and do 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 Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. X080047)
(CompuCredit Settlement)

FTC Issues Report on Social Security Numbers and Identity Theft

The Federal Trade Commission issued a report today recommending five measures to help prevent Social Security numbers from being used for identity theft. Principal among the report’s recommendations is that Congress consider taking action to strengthen the procedures that private-sector organizations use to authenticate their customers’ identities.

“Identity theft continues to be a major problem in this country, with victims numbering in the millions each year and out-of-pocket losses (primarily to businesses) in the billions of dollars,” the report states.

The FTC report states that adopting nationwide standards for how businesses and other organizations verify the identity of new and existing customers would make it harder for identity thieves to use SSNs and other stolen information to consummate their fraud.

“The first step in minimizing the role of SSNs in identity theft is to limit the demand for SSNs by making it more difficult for thieves to use them to open new accounts, access existing accounts, or obtain other benefits or services,” the FTC states in the report. Currently, the only private-sector organizations subject to nationwide authentication standards are financial institutions regulated by the federal banking agencies. The FTC’s report recommends that Congress consider establishing similar standards to cover all private-sector entities that maintain consumer accounts. Such standards would require organizations to adopt reasonable procedures for authenticating customers, but also would allow them to adopt a program that is compatible with their size and the nature of their business, the report states.

The FTC report also recommends that steps be taken to reduce the unnecessary display and transmission of SSNs, but noted that such restrictions must be approached carefully. A number of important functions in the U.S. economy depend on use of and access to SSNs, and the report concluded that overly restrictive attempts to limit the availability of SSNs could unintentionally curtail those functions. Finally, the report recommends steps to improve data security, increase outreach to consumers and businesses on the protection of SSNs, and enhance coordination and information-sharing among organizations that routinely use SSNs.

The Commission vote to issue the report was 4-0. The report was developed pursuant to a recommendation of the President’s Identity Theft Task Force, which was established in May 2006 to develop a coordinated plan to prevent identity theft, prosecute identity thieves, and help victims recover from the crime.

The report is based on extensive fact-finding by the FTC and other federal agencies, including public comments and a workshop the FTC conducted on December 10-11, 2007. The workshop provided a forum for public-sector, private-sector, and consumer representatives to discuss 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 report issued by the FTC today focuses on the use of SSNs in the private sector. The Task Force agencies have undertaken a series of measures to curtail the use of SSNs by federal agencies as well. Information on those efforts can be found in the President’s Identity Theft Task Force Report, http://www.ftc.gov/reports/presidents-identity-theft-task-force-report, issued in September 2008, which summarizes the steps taken to implement the Task Force recommendations.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. P07-5414)
(SSN Report.wpd)

FTC Issues Report on Social Security Numbers and Identity Theft

The Federal Trade Commission issued a report today recommending five measures to help prevent Social Security numbers from being used for identity theft. Principal among the report’s recommendations is that Congress consider taking action to strengthen the procedures that private-sector organizations use to authenticate their customers’ identities.

“Identity theft continues to be a major problem in this country, with victims numbering in the millions each year and out-of-pocket losses (primarily to businesses) in the billions of dollars,” the report states.

The FTC report states that adopting nationwide standards for how businesses and other organizations verify the identity of new and existing customers would make it harder for identity thieves to use SSNs and other stolen information to consummate their fraud.

“The first step in minimizing the role of SSNs in identity theft is to limit the demand for SSNs by making it more difficult for thieves to use them to open new accounts, access existing accounts, or obtain other benefits or services,” the FTC states in the report. Currently, the only private-sector organizations subject to nationwide authentication standards are financial institutions regulated by the federal banking agencies. The FTC’s report recommends that Congress consider establishing similar standards to cover all private-sector entities that maintain consumer accounts. Such standards would require organizations to adopt reasonable procedures for authenticating customers, but also would allow them to adopt a program that is compatible with their size and the nature of their business, the report states.

The FTC report also recommends that steps be taken to reduce the unnecessary display and transmission of SSNs, but noted that such restrictions must be approached carefully. A number of important functions in the U.S. economy depend on use of and access to SSNs, and the report concluded that overly restrictive attempts to limit the availability of SSNs could unintentionally curtail those functions. Finally, the report recommends steps to improve data security, increase outreach to consumers and businesses on the protection of SSNs, and enhance coordination and information-sharing among organizations that routinely use SSNs.

The Commission vote to issue the report was 4-0. The report was developed pursuant to a recommendation of the President’s Identity Theft Task Force, which was established in May 2006 to develop a coordinated plan to prevent identity theft, prosecute identity thieves, and help victims recover from the crime.

The report is based on extensive fact-finding by the FTC and other federal agencies, including public comments and a workshop the FTC conducted on December 10-11, 2007. The workshop provided a forum for public-sector, private-sector, and consumer representatives to discuss 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 report issued by the FTC today focuses on the use of SSNs in the private sector. The Task Force agencies have undertaken a series of measures to curtail the use of SSNs by federal agencies as well. Information on those efforts can be found in the President’s Identity Theft Task Force Report, http://www.ftc.gov/reports/presidents-identity-theft-task-force-report, issued in September 2008, which summarizes the steps taken to implement the Task Force recommendations.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. P07-5414)
(SSN Report.wpd)

Commission Approves Final Consent Order in Matter of Premier Capital Lending, Inc.

Following a public comment period, the Commission has approved a final consent order in the matter of Premier Capital Lending, Inc. The vote approving the final order was 4-0. (FTC File No. 072-3004; the staff contact is Jessica Rich, Bureau of Consumer Protection, 202-326-2148; see press release dated November 6, 2008, at http://www.ftc.gov/opa/2008/11/pcl.shtm).

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

(FYI 61.2008.wpd)

FTC Sues Ovation Pharmaceuticals for Illegally Acquiring Drug Used to Treat Premature Babies with Life-Threatening Heart Condition

The Federal Trade Commission today filed a complaint in federal district court challenging Ovation Pharmaceuticals, Inc.’s January 2006 acquisition of the drug NeoProfen, which eliminated its only competitor for the treatment of a serious and potentially deadly congenital heart defect affecting more than 30,000 babies born prematurely each year in the United States. When it acquired NeoProfen, Ovation already held the rights to Indocin I.V., the only other drug used to treat this serious condition. After ensuring that it would not face competition from NeoProfen, Ovation promptly raised the price of Indocin nearly 1,300 percent, from $36 to nearly $500 a vial. When it launched NeoProfen in July 2006, Ovation set a similarly inflated price.

“By acquiring its only competitor in the treatment of a serious heart condition affecting premature babies, Ovation has been able to charge dramatically higher prices for its drugs,” said Acting FTC Bureau of Competition Director David P. Wales. “While Ovation is profiting from its illegal acquisition, hospitals and ultimately consumers and American taxpayers are forced to pay millions of dollars a year more for these life-saving medications. The action taken today is intended to restore the lost competition and require Ovation to give up its unlawful profits.”

The FTC filed its complaint in the U.S. District Court for the District of Minnesota.
Indocin and NeoProfen are the only two pharmaceutical treatments sold in the U.S. for a condition known as patent ductus arteriosus, a disorder that primarily affects very low birth- weight premature infants. In babies with this condition, the blood vessel connecting two major arteries of the heart fails to close on its own soon after birth. Patent ductus arteriosus can be fatal if not treated. The only treatment other than drug therapy is surgery, which carries the risk of serious complications and costs far more than treatment with either Indocin or NeoProfen.

Ovation, a privately owned corporation based in Deerfield, Illinois, sells pharmaceuticals in more than 85 countries, including the United States. In August 2005, Ovation purchased the rights to Indocin from Merck. At that time, NeoProfen was awaiting regulatory approval by the Food and Drug Administration. According to the FTC’s complaint, Ovation expected that NeoProfen, once approved, would take a substantial portion of sales from Indocin. To eliminate the threat that NeoProfen posed, the Commission charges, Ovation acquired the U.S. rights to NeoProfen from Abbott Laboratories in January 2006. The NeoProfen transaction fell below the regulatory threshold for reporting acquisitions to the federal antitrust authorities.

By acquiring NeoProfen, the complaint alleges, Ovation preserved its U.S. monopoly in drugs used to treat patent ductus arteriosus in premature babies. Following the acquisition, Ovation promptly raised the price of Indocin to nearly $500 per vial, and when it introduced NeoProfen, set the price at virtually the same level. Merck supplied Indocin to Ovation for a small fraction of the price Ovation charges. Nearly three years later, Ovation continues to charge artificially high prices for both Indocin and NeoProfen. The FDA approved a generic version of Indocin in July 2008, but to date it has not entered the market.

Because there are no other drugs available to treat patent ductus arteriosus, hospitals treating babies with this critical condition have no choice but to pay Ovation’s monopoly price. And ultimately, the artificially high prices paid by hospitals are passed on to families, government programs such as Medicaid, and other public and private purchasers.

The Commission’s complaint charges that Ovation’s acquisition of NeoProfen substantially reduced competition in violation of Section 7 of the Clayton Act, and illegally maintained the company’s monopoly of drug treatments for patent ductus arteriosus in violation of Section 5(a) of the FTC Act. The Commission is seeking equitable relief, including divestiture and disgorgement of unlawfully obtained profits from Ovation’s sales of Indocin and NeoProfen.

The Commission vote approving the complaint was 4-0, with Commissioners Jon Leibowitz and J. Thomas Rosch issuing separate concurring statements. In his statement Commissioner Leibowitz wrote, “Ovation’s profiteering on the backs of critically ill premature babies is not only immoral, it is illegal. Ovation’s behavior is a stark reminder of why America desperately needs health care reform and why vigorous antitrust enforcement is as relevant today as it was when the agency was created almost one hundred years ago in 1914.”

Commissioner Rosch’s concurring statement explains that like Commissioner Leibowitz, he would have also voted to challenge Ovation’s earlier acquisition of Indocin. Commissioner Rosch wrote “. . . there is reason to believe that Merck’s sale of Indocin to Ovation had the effect of enabling Ovation to exercise monopoly power in its pricing of Indocin . . . [and] had the effect of substituting Ovation, a firm that had an incentive to protect its ability to engage in monopoly pricing, for Merck, which lacked the same incentive.” Commissioner Rosch added, “. . . it is hard to imagine a more compelling case for application of this legal theory.”

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 will be available soon 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 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No. 081-0156)
(Ovation.final.wpd)

FTC Sues Ovation Pharmaceuticals for Illegally Acquiring Drug Used to Treat Premature Babies with Life-Threatening Heart Condition

The Federal Trade Commission today filed a complaint in federal district court challenging Ovation Pharmaceuticals, Inc.’s January 2006 acquisition of the drug NeoProfen, which eliminated its only competitor for the treatment of a serious and potentially deadly congenital heart defect affecting more than 30,000 babies born prematurely each year in the United States. When it acquired NeoProfen, Ovation already held the rights to Indocin I.V., the only other drug used to treat this serious condition. After ensuring that it would not face competition from NeoProfen, Ovation promptly raised the price of Indocin nearly 1,300 percent, from $36 to nearly $500 a vial. When it launched NeoProfen in July 2006, Ovation set a similarly inflated price.

“By acquiring its only competitor in the treatment of a serious heart condition affecting premature babies, Ovation has been able to charge dramatically higher prices for its drugs,” said Acting FTC Bureau of Competition Director David P. Wales. “While Ovation is profiting from its illegal acquisition, hospitals and ultimately consumers and American taxpayers are forced to pay millions of dollars a year more for these life-saving medications. The action taken today is intended to restore the lost competition and require Ovation to give up its unlawful profits.”

The FTC filed its complaint in the U.S. District Court for the District of Minnesota.
Indocin and NeoProfen are the only two pharmaceutical treatments sold in the U.S. for a condition known as patent ductus arteriosus, a disorder that primarily affects very low birth- weight premature infants. In babies with this condition, the blood vessel connecting two major arteries of the heart fails to close on its own soon after birth. Patent ductus arteriosus can be fatal if not treated. The only treatment other than drug therapy is surgery, which carries the risk of serious complications and costs far more than treatment with either Indocin or NeoProfen.

Ovation, a privately owned corporation based in Deerfield, Illinois, sells pharmaceuticals in more than 85 countries, including the United States. In August 2005, Ovation purchased the rights to Indocin from Merck. At that time, NeoProfen was awaiting regulatory approval by the Food and Drug Administration. According to the FTC’s complaint, Ovation expected that NeoProfen, once approved, would take a substantial portion of sales from Indocin. To eliminate the threat that NeoProfen posed, the Commission charges, Ovation acquired the U.S. rights to NeoProfen from Abbott Laboratories in January 2006. The NeoProfen transaction fell below the regulatory threshold for reporting acquisitions to the federal antitrust authorities.

By acquiring NeoProfen, the complaint alleges, Ovation preserved its U.S. monopoly in drugs used to treat patent ductus arteriosus in premature babies. Following the acquisition, Ovation promptly raised the price of Indocin to nearly $500 per vial, and when it introduced NeoProfen, set the price at virtually the same level. Merck supplied Indocin to Ovation for a small fraction of the price Ovation charges. Nearly three years later, Ovation continues to charge artificially high prices for both Indocin and NeoProfen. The FDA approved a generic version of Indocin in July 2008, but to date it has not entered the market.

Because there are no other drugs available to treat patent ductus arteriosus, hospitals treating babies with this critical condition have no choice but to pay Ovation’s monopoly price. And ultimately, the artificially high prices paid by hospitals are passed on to families, government programs such as Medicaid, and other public and private purchasers.

The Commission’s complaint charges that Ovation’s acquisition of NeoProfen substantially reduced competition in violation of Section 7 of the Clayton Act, and illegally maintained the company’s monopoly of drug treatments for patent ductus arteriosus in violation of Section 5(a) of the FTC Act. The Commission is seeking equitable relief, including divestiture and disgorgement of unlawfully obtained profits from Ovation’s sales of Indocin and NeoProfen.

The Commission vote approving the complaint was 4-0, with Commissioners Jon Leibowitz and J. Thomas Rosch issuing separate concurring statements. In his statement Commissioner Leibowitz wrote, “Ovation’s profiteering on the backs of critically ill premature babies is not only immoral, it is illegal. Ovation’s behavior is a stark reminder of why America desperately needs health care reform and why vigorous antitrust enforcement is as relevant today as it was when the agency was created almost one hundred years ago in 1914.”

Commissioner Rosch’s concurring statement explains that like Commissioner Leibowitz, he would have also voted to challenge Ovation’s earlier acquisition of Indocin. Commissioner Rosch wrote “. . . there is reason to believe that Merck’s sale of Indocin to Ovation had the effect of enabling Ovation to exercise monopoly power in its pricing of Indocin . . . [and] had the effect of substituting Ovation, a firm that had an incentive to protect its ability to engage in monopoly pricing, for Merck, which lacked the same incentive.” Commissioner Rosch added, “. . . it is hard to imagine a more compelling case for application of this legal theory.”

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 will be available soon 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 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No. 081-0156)
(Ovation.final.wpd)

Policy Planning Director Maureen Ohlhausen To Leave FTC; James Cooper Named Acting Director

Federal Trade Commission Chairman William E. Kovacic announced today that Maureen Ohlhausen, Director of the agency’s Office of Policy Planning for the past four years, will leave the agency, and that James Cooper, currently the Deputy Director, has been named Acting Director.

“For over a decade, Maureen has served this agency brilliantly,” Chairman Kovacic said. “Under her leadership, the Office of Policy Planning has helped to bring clarity and understanding to significant competition issues affecting a wide range of leading industries.” Ohlhausen, who began her career with the Commission in 1997, will become the Technology Policy Counsel at the Business Software Alliance, a nonprofit trade association that promotes innovation, growth, and a competitive marketplace for commercial software and related technologies.

Ohlhausen became the Director of the Office of Policy Planning in 2004, having served previously as its Deputy Director. At Chairman Kovacic’s request, in recent months she has led the agency self-assessment project, “FTC at 100: Into our Second Century.”

As head of the Commission’s Internet Access Task Force, Ohlhausen managed the FTC staff’s inquiry into net neutrality and oversaw a 2007 staff report, “Broadband Connectivity Competition Policy,” as well as a 2006 report, “Municipal Provision of Wireless Internet.” Other significant reports authored under her leadership include the joint FTC/Department of Justice report on “Competition in the Real Estate Brokerage Industry,” “Enforcement Perspectives on the Noerr-Pennington Doctrine,” “Accounting for Laws that Apply Differently to the U.S. Postal Service,” and “The Strength of Competition in the Sale of Rx Contact Lenses.” During her leadership, the Office also issued numerous state and federal advocacy filings.

From 1998 to 2001, Ohlhausen served as an attorney advisor for former FTC Commissioner Orson Swindle, advising him on competition and consumer protection matters. Before joining the agency’s General Counsel’s Office in 1997, she spent five years at the U.S. Court of Appeals for the D.C. Circuit, serving as a law clerk for Judge David B. Sentelle. Ohlhausen previously clerked for Judge Robert Yock of the U.S. Court of Federal Claims from 1991 to 1992.

Ohlhausen was graduated with distinction from George Mason University School of Law in 1991, having graduated with honors from the University of Virginia in 1984. She is a Senior Editor of the Antitrust Law Journal and a member of the ABA Task Force on Competition and Public Policy.

Kovacic also announced that James Cooper will serve as Acting Director of the Office of Policy Planning. Cooper joined the FTC in 2003, having worked at the Washington, D.C. law firm Crowell & Moring, where he practiced in the antitrust group. He graduated magna cum laude from George Mason University School of Law and was a member of the George Mason Law Review. Cooper also holds a Ph.D. in economics from Emory University. He has published articles on topics such as price discrimination, antitrust treatment of vertical relationships among firms, competition in the contact lens industry, and the theory of competition advocacy. Cooper also teaches a course on law and economics at the Johns Hopkins University’s graduate program in applied economics in Washington, D.C.

(OPP Changes)

Policy Planning Director Maureen Ohlhausen To Leave FTC; James Cooper Named Acting Director

Federal Trade Commission Chairman William E. Kovacic announced today that Maureen Ohlhausen, Director of the agency’s Office of Policy Planning for the past four years, will leave the agency, and that James Cooper, currently the Deputy Director, has been named Acting Director.

“For over a decade, Maureen has served this agency brilliantly,” Chairman Kovacic said. “Under her leadership, the Office of Policy Planning has helped to bring clarity and understanding to significant competition issues affecting a wide range of leading industries.” Ohlhausen, who began her career with the Commission in 1997, will become the Technology Policy Counsel at the Business Software Alliance, a nonprofit trade association that promotes innovation, growth, and a competitive marketplace for commercial software and related technologies.

Ohlhausen became the Director of the Office of Policy Planning in 2004, having served previously as its Deputy Director. At Chairman Kovacic’s request, in recent months she has led the agency self-assessment project, “FTC at 100: Into our Second Century.”

As head of the Commission’s Internet Access Task Force, Ohlhausen managed the FTC staff’s inquiry into net neutrality and oversaw a 2007 staff report, “Broadband Connectivity Competition Policy,” as well as a 2006 report, “Municipal Provision of Wireless Internet.” Other significant reports authored under her leadership include the joint FTC/Department of Justice report on “Competition in the Real Estate Brokerage Industry,” “Enforcement Perspectives on the Noerr-Pennington Doctrine,” “Accounting for Laws that Apply Differently to the U.S. Postal Service,” and “The Strength of Competition in the Sale of Rx Contact Lenses.” During her leadership, the Office also issued numerous state and federal advocacy filings.

From 1998 to 2001, Ohlhausen served as an attorney advisor for former FTC Commissioner Orson Swindle, advising him on competition and consumer protection matters. Before joining the agency’s General Counsel’s Office in 1997, she spent five years at the U.S. Court of Appeals for the D.C. Circuit, serving as a law clerk for Judge David B. Sentelle. Ohlhausen previously clerked for Judge Robert Yock of the U.S. Court of Federal Claims from 1991 to 1992.

Ohlhausen was graduated with distinction from George Mason University School of Law in 1991, having graduated with honors from the University of Virginia in 1984. She is a Senior Editor of the Antitrust Law Journal and a member of the ABA Task Force on Competition and Public Policy.

Kovacic also announced that James Cooper will serve as Acting Director of the Office of Policy Planning. Cooper joined the FTC in 2003, having worked at the Washington, D.C. law firm Crowell & Moring, where he practiced in the antitrust group. He graduated magna cum laude from George Mason University School of Law and was a member of the George Mason Law Review. Cooper also holds a Ph.D. in economics from Emory University. He has published articles on topics such as price discrimination, antitrust treatment of vertical relationships among firms, competition in the contact lens industry, and the theory of competition advocacy. Cooper also teaches a course on law and economics at the Johns Hopkins University’s graduate program in applied economics in Washington, D.C.

(OPP Changes)

Mortgage Lender Agrees to Settle FTC Charges That It Charged African-Americans and Hispanics Higher Prices for Loans

A home mortgage lender has agreed to settle Federal Trade Commission allegations that it violated federal law by charging African-American and Hispanic consumers higher prices for mortgage loans than non-Hispanic white consumers – price disparities that cannot be explained by the applicants’ credit characteristics or underwriting risk.

According to the FTC’s complaint, Gateway Funding Diversified Mortgage Services, L.P., and its general partner, Gateway Funding Inc., based in Horsham Pennsylvania, violated the Equal Credit Opportunity Act (ECOA) in pricing both prime and subprime mortgage loans. The defendants gave loan officers nearly complete discretion to charge, in addition to the risk-based price, “overages” that included higher interest rates and higher up-front charges. The Commission alleges that Gateway paid loan officers a percentage of these overages and failed to monitor whether African-American and Hispanic consumers were paying higher overages than non-Hispanic white borrowers.

As stated in the complaint, Gateway’s policy and practice of allowing loan officers to charge discretionary overages resulted in African-Americans and Hispanics being charged higher prices because of their race or ethnicity – price disparities that are “substantial, statistically significant, and cannot be explained by factors related to underwriting risk or credit characteristics of the applicants.”

“Unlawful discrimination in the pricing of mortgages is intolerable,” FTC Chairman William E. Kovacic said. “Discretionary pricing policies must be crafted and monitored carefully so that all applicants are treated fairly.”

The ECOA and its implementing Regulation B bar creditors from discriminating against applicants for credit on the basis of race, color, religion, national origin, sex, marital status, age, or the fact that an applicant’s income is derived from public assistance.

The proposed settlement bars the defendants from discriminatory lending practices and requires them to implement a fair lending training program, a comprehensive data integrity lending program designed to ensure accuracy and completeness of loan data, and a fair lending monitoring program that includes a system for performing periodic analyses to monitor for disparities in loan prices. The settlement imposes a judgment of $2.9 million, all but $200,000 of which is suspended based on the defendants’ inability to pay. The full judgment will be imposed if they are found to have misrepresented their financial condition. The Commission did not seek civil penalties because of the defendants’ financial condition.

More information about consumers’ rights under the ECOA is available at http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea08.shtm.

The Commission vote to authorize staff to file the complaint and proposed stipulated final order was 4-0. The documents were filed in the U.S. District Court for the Eastern District of Pennsylvania.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants 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 Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.