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FTC Approves Merck & Co., Inc.’s Application to Sell Facilities for Manufacturing Heartgard and Heartgard Plus Heartworm Treatments for Dogs to Merial

Following a public comment period, the Federal Trade Commission has approved an application for prior approval from Merck & Co., Inc. to sell its Barcelonata facility to Merial Barceloneta LLC, a subsidiary of Merial Inc. Merck currently contract-manufactures the canine heartworm medications Heartgard and Heartgard Plus at that facility for Merial. No other products are currently manufactured there. Following the proposed sale, Merial will manufacture those products itself.

Under a October 2009 FTC order settling charges that Schering-Plough’s acquisition of Merck was anticompetitive, Merck was required to divest its interest in Merial to Sanofi-Aventis SA, its then-partner in the joint venture, and to seek prior approval from the Commission for the sale of any other assets to Merial.

The Commission vote to approve the sale was 5-0. (FTC File No. 091 0075, Docket No. C-4268; the staff contact is Daniel P. Ducore, Bureau of Competition, 202-326-2526)

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 antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Obtains $9.5 Million Judgment Against Sweepstakes Promoter for Contempt

A sweepstakes operator is permanently banned from direct mail marketing and is liable for a $9.5 million judgment under a settlement with the Federal Trade Commission, which charged her with violating a previous court order by running a sweepstakes scam.

“There’s a price to pay to violating a court order in an FTC case,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “In this case, that’s $9.5 million and a permanent ban on direct mail marketing.”

In April 2007, Crystal Ewing and other defendants were banned from prize promotions to settle FTC charges that they deceptively enticed consumers in the U.S., Canada and the United Kingdom to send money to collect large cash prizes that, in fact, did not exist.

Ewing now admits to violating the 2007 court order through her work with another FTC defendant, Glen Burke, and a prize promotions company, Puzzles Unlimited LLC, that duped consumers with the illusory promise of sweepstakes winnings in exchange for processing fees.

Using direct mail ads, Puzzles Unlimited enticed consumers to enter promotions by using terms like “Notice of Grand Prize Payout” and “Grand Prize Guaranteed,” which led consumers to believe they had already won thousands of dollars and just needed to fill out a form containing a simple puzzle and submit a “processing fee” of $10 to $15.

But the vast majority of consumers received no “Grand Prize Payout” – or any other payout whatsoever. Instead, the consumers who submitted “processing fees” continued to receive additional rounds of puzzles that they were told they must complete correctly in order to claim the prize money. With each round of mailers, consumers were misled with promises of bonus winnings in exchange for additional fees. At each step of the way, consumers were told they were tied for first place in the promotion regardless of whether or not this was true.

In addition to the $9,513,084 judgment, which represents the amount of consumer harm attributable to Ewing’s work with Puzzles Unlimited, and the ban on any direct mail marketing imposed against her, she is prohibited from making material misrepresentations about goods and services, and from profiting from, and failing to properly dispose of, customers’ personal information.

The Commission vote authorizing the staff to file the stipulated final judgment and order was 5-0. The document was filed in the U.S. District Court for the District of Nevada. Judge James Mahan entered the stipulated judgment on February 3, 2015.

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 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Names Two New Defendants in Phony Debt Relief and Credit Repair Scheme

Two new defendants have been named in a Federal Trade Commission case against a phony debt relief and credit repair scheme that allegedly deceived consumers about non-existent federal programs to pay off their bills and fix poor credit.

The case was originally brought in August 2014 against the unnamed operators of the scam, which operated under the names American Bill Pay and American Benefits Foundation. The court granted a temporary restraining order in the case shutting down the scam. Since that time, the FTC’s continuing investigation and discovery in the case led to two individuals, Sereika Savariau and Lawrence Goodison, who the FTC alleges in an amended complaint operated the scam from Jamaica.

The amended complaint was accepted by the court, and the case remains in litigation. The FTC is seeking to have the scam permanently shut down, and obtain refunds for consumers who paid for the scammers’ bogus debt and credit services.

The Commission vote to add the named defendants was 5-0.

Statement by FTC Chairwoman Edith Ramirez on Appellate Ruling in the St. Luke’s Hospital Matter

Federal Trade Commission Chairwoman Edith Ramirez issued the following statement in response to a ruling today by the U.S. Court of Appeals for the Ninth Circuit, regarding the FTC’s case challenging Idaho-based St. Luke’s Health System’s acquisition of Saltzer Medical Group:

“Today’s decision by the Ninth Circuit is a win for consumers and healthcare competition in the Nampa, Idaho area. If left unchallenged, St. Luke’s acquisition of Saltzer would have created a dominant provider of physician services for adults seeking primary care in Nampa, leading to higher costs for consumers and employers there. The acquisition would have delivered no benefit to consumers that could not be achieved in ways other than the anticompetitive merger.”

Today’s decision affirms the decision by the U.S. District Court in the District of Idaho, which held that the acquisition violated Section 7 of the Clayton Act and the Idaho Competition Act, and ordered St. Luke’s to fully divest itself of Saltzer’s physicians and assets.

In 2013, the FTC, together with the Idaho Attorney General, filed a complaint in federal district court seeking to block the acquisition.

FTC Continues to Protect Consumers from Abusive, Fraudulent Debt Collectors

Over the past year, the Federal Trade Commission has continued its vigorous work on behalf of U.S. consumers suffering from unlawful debt collection practices, including bringing law enforcement actions against abusive and fraudulent operations, conducting education and public outreach initiatives, and implementing research and policy programs.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau (CFPB) is required to submit annual reports to Congress on the Fair Debt Collection Practices Act (FDCPA). Since the CFPB and FTC jointly enforce the Act, the FTC’s summary of its own recent work on debt collection issues assists the CFPB in preparing the report to Congress. In 2014, the Commission:

filed 10 new debt collection cases against 56 new defendants, more cases than the FTC has ever filed before in a given year;

banned 47 companies and individuals that engaged in serious and repeated law violations from ever working in debt collection again;

filed two joint amicus briefs with the CFPB on key debt collection issues; and

According to the summary, the FTC’s work over the past year has focused on: 1)

egregious debt collection practices, including “phantom debt collection”; 2) security of consumer data in the buying and selling of debts; and 3) protection of limited-English-proficiency consumers from illegal debt collection practices.

The FTC also has worked to educate consumers and businesses about their rights and responsibilities under the FDCPA and the FTC Act. In 2014, the agency distributed 14.8 million printed publications about debt collection to consumers nationwide and worked to educate industry by delivering speeches, blogging, participating in industry conferences, and providing education materials, among other things.

The Commission vote approving the letter was 5-0.

FTC Approves Final Orders In PaymentsMD Privacy Case

After a public comment period, the Federal Trade Commission has approved final orders resolving complaints that PaymentsMD, LLC and its former CEO, Michael C. Hughes, violated consumers’ privacy by collecting personal medical information without their consent.

The settlements were first announced in December, 2014. In its complaints, the FTC alleged that Payments MD and Hughes altered the signup process for a consumer health billing site to include permission to collect consumers’ sensitive health information for an electronic health record portal site. According to the complaint, the company contacted health insurance companies, pharmacies, medical offices and labs seeking consumers’ health information, without adequately informing consumers that the company would be seeking such information.

Under the terms of the settlements, PaymentsMD and Hughes must destroy any information collected related to the Patient Health Report service. In addition, the respondents are banned from deceiving consumers about the way they collect and use information, including how information they collect might be shared with or collected from a third party, and they must obtain consumers’ affirmative express consent before collecting health information about a consumer from a third party.

The Commission votes to approve the final orders were 5-0.

Administrative Law Judge Issues Initial Decision in the ECM Biofilms, Inc. Case

In an Initial Decision announced today, the Federal Trade Commission’s Chief Administrative Law Judge (ALJ), D. Michael Chappell, ruled that plastics additive manufacturer ECM Biofilms, Inc. violated the FTC Act by deceptively claiming, and providing others with the means to claim, that plastics treated with ECM additives (ECM Plastics) would completely biodegrade in a landfill within nine months to five years, and that tests proved this claim.

The Order accompanying the Initial Decision would bar ECM from representing that any product or package will completely biodegrade within any time period – or that tests prove such a representation – unless: 1) the representation is true and not misleading, and 2) at the time it is made, ECM possesses and relies upon competent and reliable scientific evidence that substantiates the representation. The Order also would bar ECM and related entities from providing others with the means and instrumentalities to make such deceptive claims.

However, Judge Chappell rejected several other portions of the order proposed by Complaint Counsel. Specifically, he found that while ECM had claimed that ECM Plastics are “biodegradable” – including when disposed of in a “landfill” – Complaint Counsel failed to prove that ECM’s biodegradability claims conveyed the further implied claim that ECM Plastics would “completely break down into elements found in nature in a landfill within one year” (the ‘Implied One Year Claim’).

The judge therefore found that Complaint Counsel were not entitled to an order provision that would require ECM to possess substantiation — establishing that a given item “will completely decompose into elements found in nature within one year after customary disposal” – before making unqualified biodegradability claims about the item.

According to the 2013 administrative complaint, ECM, which markets additives under the trade name MasterBatch Pellets, claims that its additives can make plastic products biodegradable. The complaint states that ECM advertises its additives on its website and through marketing materials, such as fliers and brochures that are available to distributors and manufacturers that incorporate ECM additives into their products. The complaint also states that ECM issues its own “Certificates of Biodegradability of Plastic Products,” which it allegedly uses to convince its customers that its additives make plastic products biodegradable.

The complaint charges that ECM’s coated plastics do not biodegrade within a reasonably short period of time after disposal in a landfill, and that ECM had no substantiation to support its claims that its additives make plastic products biodegradable.

In issuing his Initial Decision, Judge Chappell found that:

Complaint Counsel have proven: 1) that ECM claimed that ECM Plastics would completely biodegrade in a landfill in a time period ranging from nine months to five years, and that tests proved such claims; and 2) that these claims were deceptive, in violation of Section 5 of the FTC Act.

Complaint Counsel have proven that ECM provided the means and instrumentalities for deceptive marketing claims to be conveyed to others in the ECM supply chain.

Among other things, however, Judge Chappell also found that:

Complaint Counsel failed to prove that ECM’s claims that ECM Plastics are “biodegradable” conveyed the implied claim that ECM Plastics will completely biodegrade into elements found in nature, in a landfill, within one year; and

The tests upon which ECM relies constitute competent and reliable evidence demonstrating that ECM Plastics are biodegradable, including in a landfill, and Complaint Counsel have not met their burden of proving that these claims are false or unsubstantiated.

Based on these findings, the Order accompanying the ALJ’s ruling states that ECM and its officers, agents, representatives, and employees, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any product, package, or service, “shall not represent, in any manner . . . that any product or package will completely biodegrade within any time period, or that tests prove such claims,” unless any such representation is true and not misleading, and at the time it is made, ECM “possesses and relies upon competent and reliable scientific evidence that substantiates the representation.”

The Order also states that ECM and the associated entities listed above shall not provide others with the means and instrumentalities with which to make any false, unsubstantiated, or otherwise misleading representation – including through the use of endorsements or trade names – that any product or package will completely biodegrade within any particular time period, or that tests prove this representation.

The Order also contains compliance and reporting provisions and states that it will expire in 20 years, with certain exceptions.

The Appeals Process. The Judge’s Initial Decision is subject to review by the full Federal Trade Commission on its own motion, or at the request of any party. The Initial Decision will become the final decision of the Commission 30 days after it is served upon the parties, unless a party files a timely notice of appeal or the Commission places the case on its own docket for review.

Mortgage Relief Pitchmen Settle FTC Charges That They Deceived Consumers

A group of Utah-based defendants claiming to be legal experts in loan modifications have settled Federal Trade Commission charges that they broke the law by conning consumers into paying hefty fees for worthless mortgage relief services. The five proposed orders settling the FTC’s charges ban the defendants, led by Philip J. Danielson and his company, Danielson Law Group, from offering mortgage assistance relief services and from participating in the debt relief industry.

“It’s troubling when anyone takes advantage of homeowners in financial distress,” said Jessica Rich, Director of the Bureau of Consumer Protection. “This scam is particularly offensive because it used an attorney’s legal credentials to create a facade of authenticity.”

The FTC filed its complaint in July 2014, as part of a multi-agency federal and state law enforcement sweep targeting operations that fraudulently pitched loan modifications to consumers. At the FTC’s request, a U.S. district court temporarily halted the operation, which promised legal help to consumers to avoid foreclosure or get relief from unaffordable mortgages but then did little or nothing to help. The court order froze the defendants’ corporate and personal assets pending litigation of the case.

According to the Commission, the defendants lured consumers into paying $500 to $3,900 by falsely promising that attorneys would negotiate loan modifications that would substantially reduce the consumers’ mortgage payments. The defendants touted a success rate that exceeded 90 percent purportedly based on their legal expertise and a pre-qualification process that identified clients that they knew they could help. The complaint also alleged that the defendants used the name Danielson Law Group and other attorney or law firm names to look like they had lawyers all over the country, even though many consumers never met or spoke to an attorney.

The FTC charged the defendants with violating the FTC Act and the Mortgage Assistance Relief Services (MARS) Rule, now known as Regulation O. The Rule bans mortgage foreclosure rescue and loan modification service providers from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.

Under the proposed settlements announced today, the defendants are banned from participating in the mortgage relief and debt relief industries, and are prohibited from misrepresenting various features of any product or service or making advertising claims that are unsupported by competent and reliable evidence.

The proposed settlements also impose a $28.6 million judgment against all the defendants, reflecting the total amount of fees taken in by the scheme. The proposed judgment will be suspended as to the individual defendants provided they surrender certain of their assets, including a $200,000 house in Utah as required by the settlement orders. If it is later determined that any defendant provided false financial information to the FTC, the full amount of the judgment against them will become due. The proposed settlement also requires relief defendant April Norton to turn over unearned ill-gotten gains that she received from the scheme. The full judgment remains in effect against the corporate defendants.

Today’s settlements also resolves a contempt action the FTC concurrently filed against two individuals named in this case – Philip J. Danielson and Tony D. Norton — and four companies they controlled, Philip Danielson, LLC; Foundation Business Solutions, LLC; Direct Results Solutions, LLC; and Strata G Solutions, LLC, for violating a 2010 court order in a phony work-at-home scheme that falsely claimed ties to Google Inc.

After a court shut down that scam and prohibited the defendants from making deceptive claims, Danielson and Norton turned their sights to preying on vulnerable homeowners in violation of that order, alleged the FTC. The settlement subjects the contempt defendants to a complete ban from telemarketing activities.

For consumer information about avoiding mortgage and foreclosure rescue scams, see Home Loans.

The Commission vote approving each of the five proposed stipulated final orders was 5-0. They were filed in the U.S. Court for the District of Nevada.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.

FTC Staff Warns Marketers and Sellers of Dog Waste Bags That Their Biodegradable and Compostable Claims May Be Deceptive

Staff of the Federal Trade Commission has sent letters warning 20 manufacturers and marketers of dog waste bags that their “biodegradable,” “compostable,” and other environmental claims may be deceptive.

The letters, which the staff sent after examining the companies’ environmental, or “green,” claims on their websites and in other media, provide examples of potentially deceptive statements regarding the bags’ biodegradability or compostability. The letters also provide information on how to comply with truth-in-advertising principles when making environmental claims.

“Consumers looking to buy environmentally friendly products should not have to guess whether the claims made are accurate,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “It is therefore critical for the FTC to ensure that these claims are not misleading, to protect both consumers and honest competitors.”

The staff notified 20 marketers that they may be deceiving consumers with the use of their unqualified “biodegradable” claim. Based on the FTC’s Guides for the Use of Environmental Marketing Claims (the Green Guides), such a claim without any qualification generally means to consumers that the product will completely break down into its natural components within one year after customary disposal. Most waste bags, however, end up in landfills where no plastic biodegrades in anywhere close to one year, if it biodegrades at all.

According to the Green Guides, consumers generally think that unqualified “compostable claims” mean that a product will safely break down at the same rate as natural products, like leaves and grass clippings, in their home compost pile. If marketers disclose that a product will only compost in commercial or municipal facilities, consumers think that those facilities are generally available in their area. However, dog waste is generally not safe to compost at home, and very few facilities accept this waste. Therefore, compostable claims for these products are generally untrue.

The FTC advised the companies that they should review their marketing materials and contact agency staff to tell them how they intend to revise or remove the claims, or explain why they won’t.

The staff notes that marketers who did not receive a letter should not assume that their claims are fine. Staff is not disclosing the recipients of the letters at this time.

Two Defendants in Cross-Border Telemarketing Scheme Settle FTC Charges

Two defendants who participated in an alleged multi-million dollar telemarketing fraud that targeted U.S. seniors and withdrew money from their accounts without authorization have agreed to settle Federal Trade Commission charges. The settlement orders bar them from using remotely created checks drawn on consumers’ bank accounts, require them to obtain consumers’ consent before debiting their accounts, and prohibit them from misrepresenting any goods or services.

The individuals Marc Ferry and Robert Barczai, also will turn over the proceeds of the scheme from their personal and corporate accounts. The FTC has filed for default judgments against the corporate defendants, and summary judgment against the leading individual defendant in the scheme, which took in nearly $11 million between 2010 and March 2014.

“Scammers thought they could cover their tracks by operating across borders, but law enforcement caught up with them,” said Jessica Rich, Director of the Bureau of Consumer Protection. “We’ve shut down their scheme of lying to older people and stealing their money.”

According to the FTC’s March 2014 complaint, defendant Ari Tietolman and his associates established a network of U.S. and Canadian entities to carry out their scam. The defendants used a telemarketing boiler room in Canada, where Tietolman lives, to cold-call seniors claiming to sell fraud protection, legal protection, and pharmaceutical benefit services for $187 to $397.

In some instances, the telemarketers convinced consumers they were affiliated with banks or government entities, leading consumers to disclose their bank account information. The defendants then used that information to create checks drawn on the consumers’ bank accounts. They deposited these “remotely created checks” into corporate accounts set up by defendants Ferry and Barczai in the United States. The U.S.-based defendants then transferred the money to accounts in Canada, the FTC alleged.

The FTC charged the corporate and individual defendants with violating the FTC Act and the agency’s Telemarketing Sales Rule. A U.S. district court temporarily shut down the operation in late March 2014, pending the resolution of the FTC’s action.

Two defendants in the case, Ferry and Barczai, have now agreed to stipulated orders settling the FTC’s charges against them. The order against Ferry bans him from using remotely creating checks and payment orders, requires him to get consumers’ authorization before charging their financial accounts, and prohibits him from making misrepresentations regarding any goods or services. It imposes a judgment of $9,655,638 against him, which will be partially suspended after he pays the FTC $21,367.

The order against Barczai contains the same conduct provisions as the order against Ferry, and imposes a judgment of $325,449, which will be partially suspended after he pays the FTC $68,412.

The Commission vote approving the two proposed stipulated final orders was 5-0. They were filed in the U.S. District Court for the Eastern District of Pennsylvania.

The FTC subsequently filed a memorandum seeking default judgments against the following corporate defendants on January 13: First Consumers LLC; PowerPlay Industries LLC; Standard American Marketing, Inc.; 1166519075 Quebec Inc., doing business as (d/b/a) Landshark Holdings Inc; and 1164047236 Quebec, Inc. d/b/a Madicom, Inc.

Finally, on January 13, the FTC filed a memorandum seeking summary judgment against Tietolman, who ran the operation and collected money funneled into Canada. The FTC alleges that Tietolman controlled the deceptive scheme, and therefore is seeking to permanently bar him from the conduct alleged in the complaint and hold him liable for the $10.7 million in harm he caused defrauded consumers.

The FTC received valuable help throughout this case from the U.S. Postal Inspection Service and the Royal Canadian Mounted Police.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.

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