[Senate Hearing 114-631]
[From the U.S. Government Publishing Office]
S. Hrg. 114-631
OVERSIGHT OF
THE FEDERAL TRADE COMMISSION
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HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 27, 2016
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri MARIA CANTWELL, Washington
MARCO RUBIO, Florida CLAIRE McCASKILL, Missouri
KELLY AYOTTE, New Hampshire AMY KLOBUCHAR, Minnesota
TED CRUZ, Texas RICHARD BLUMENTHAL, Connecticut
DEB FISCHER, Nebraska BRIAN SCHATZ, Hawaii
JERRY MORAN, Kansas EDWARD MARKEY, Massachusetts
DAN SULLIVAN, Alaska CORY BOOKER, New Jersey
RON JOHNSON, Wisconsin TOM UDALL, New Mexico
DEAN HELLER, Nevada JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado GARY PETERS, Michigan
STEVE DAINES, Montana
Nick Rossi, Staff Director
Adrian Arnakis, Deputy Staff Director
Jason Van Beek, General Counsel
Kim Lipsky, Democratic Staff Director
Chris Day, Democratic Deputy Staff Director
Clint Odom, Democratic General Counsel and Policy Director
C O N T E N T S
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Page
Hearing held on September 27, 2016............................... 1
Statement of Senator Thune....................................... 1
Statement of Senator Blumenthal.................................. 3
Statement of Senator Heller...................................... 26
Statement of Senator Klobuchar................................... 29
Statement of Senator Schatz...................................... 31
Statement of Senator Moran....................................... 33
Statement of Senator Daines...................................... 35
Statement of Senator Sullivan.................................... 37
Statement of Senator Markey...................................... 39
Statement of Senator Udall....................................... 41
Statement of Senator Ayotte...................................... 42
Statement of Senator Cantwell.................................... 44
Statement of Senator Fischer..................................... 45
Witnesses
Hon. Edith Ramirez, Chairwoman, Federal Trade Commission......... 5
Prepared statement from the Federal Trade Commission......... 6
Hon. Maureen K. Ohlhausen, Commissioner, Federal Trade Commission 19
Hon. Terrell McSweeny, Commissioner, Federal Trade Commission.... 20
Appendix
Letter dated September 26, 2016 to Hon. Jonn Thune and Hon. Bill
Nelson from Marc Rotenberg, Electronic Privacy Information
Center (EPIC) President and Claire Gartland, Director, EPIC
Consumer Privacy Project....................................... 51
Letter dated September 26, 2016 to the Hon. Tom Wheeler,
Chairman, Federal Communications Commission from Dean Garfield,
ITI President and CEO; Mary Bono, Co-Chair, 21st Century
Privacy Coalition; and Jon Leibowitz, Co-Chair, 21st Century
Privacy Coalition.............................................. 55
Letter dated September 28, 2016 to Hon. John Thune and Hon. Bill
Nelson from the Coalition for Patient Vision Care Safety,
AdvaMed, Alcon--a Novartis Company, American Optometric
Association, Bausch+Lomb, CooperVision, Inc., and Johnson &
Johnson Vision Care, Inc....................................... 57
Response to written questions submitted to Hon. Edith Ramirez by:
Hon. John Thune.............................................. 74
Hon. Roy Blunt............................................... 84
Hon. Marco Rubio............................................. 85
Hon. Kelly Ayotte............................................ 88
Hon. Deb Fischer............................................. 90
Hon. Ron Johnson............................................. 91
Hon. Steve Daines............................................ 92
Hon. Bill Nelson............................................. 94
Hon. Maria Cantwell.......................................... 97
Hon. Richard Blumenthal...................................... 97
Hon. Cory Booker............................................. 102
Hon. Gary Peters............................................. 104
Response to written questions submitted to Hon. Maureen K.
Ohlhausen by:
Hon. Marco Rubio............................................. 107
Hon. Bill Nelson............................................. 111
Hon. Richard Blumenthal...................................... 112
Hon. Gary Peters............................................. 114
Response to written questions submitted to Hon. Terrell McSweeney
by:
Hon. John Thune.............................................. 116
Hon. Marco Rubio............................................. 116
Hon. Deb Fischer............................................. 118
Response to written questions submitted to Hon. Terrell McSweeny
by:
Hon. Bill Nelson............................................. 119
Hon. Richard Blumenthal...................................... 119
Hon. Cory Booker............................................. 120
Hon. Gary Peters............................................. 121
OVERSIGHT OF
THE FEDERAL TRADE COMMISSION
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TUESDAY, SEPTEMBER 27, 2016
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m., in room
SR-253, Russell Senate Office Building, Hon. John Thune,
Chairman of the Committee, presiding.
Present: Senators Thune [presiding], Ayotte, Fischer,
Moran, Sullivan, Heller, Daines, Blumenthal, Cantwell,
McCaskill, Klobuchar, Schatz, Markey, and Udall.
OPENING STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
The Chairman. This hearing will come to order. Good morning
and welcome to today's hearing on oversight of the Federal
Trade Commission.
This morning, we'll hear directly from the FTC's three
sitting commissioners, Chairman Ramirez, Commissioner
Ohlhausen, and Commissioner McSweeny.
Let me take this opportunity to welcome you to the
Committee and to thank you all for your service.
I first want to note that Chairman Moran was scheduled to
convene a subcommittee hearing this afternoon. That hearing was
to include a panel of thought leaders who would offer their own
perspectives from outside the Commission. Due to scheduling
conflicts that have arisen, we will, unfortunately, have to
reschedule that hearing until a later date. So, we appreciate
the willingness of those witnesses to testify, and want to
thank them for their understanding.
The FTC was founded in 1914 by Congress, specifically by
this committee. In fact, the FTC is the oldest independent
Federal agency under the jurisdiction of this committee. At the
beginning of this Congress, the agency celebrated its 100th
anniversary, an event that prompted retrospection both from the
Commission and its observers.
As many in the room know, the agency was born of the
concern that more needed to be done to ensure competitive
markets in the United States and to bust the trusts that
threatened that competition. The Commission's focus soon
expanded to include an enforcement mandate against unfair and
deceptive acts and practices that threaten consumer welfare.
A common theme uniting the Commission's dual focus on
competition and consumer protection is ensuring freedom in the
marketplace. Throughout the decades and on balance, the FTC has
been a strong cop on the beat, ensuring that Americans reap the
benefits of a functioning economy free from domination by firms
with unfairly concentrated market power. It has also made it
possible for Americans to be confident in their commercial
transactions and grow the economy with the knowledge that they
are protected from fraudsters and cheats seeking to do them
harm.
Among its many programs, the FTC administers the National
Do Not Call Program, which was created in 2003 and was once
rated as the second most popular Federal initiative in American
history, second only to the Elvis stamp. By 2010, the registry
had topped 200 million numbers.
But, the agency has not been without controversy. In the
late 1970s, for example, the agency drew criticism from none
other than the Washington Post Editorial Board for its
consideration of a regulation that would impose major
restrictions on television advertisements aimed at young
children in order to reduce the amount of sugar that children
eat. This regulatory overreach led the Post to criticize the
Commission as the ``great national nanny'' and led to Congress
adopting heightened procedural safeguards on the Commission's
authority to promulgate rules. It was a recognition that the
proper role of government must be limited.
Despite these measures, the Commission has at times
asserted itself in ways that continue to raise concerns about
overreach. This committee has pressed the Commission, for
instance, on the scope of its Section 5 authority, which
prohibits unfair and deceptive acts in commerce. When Congress
drafted the FTC Act, we took care to ensure the prohibitions of
Section 5 would be evergreen. And this flexibility is one of
the statute's key features.
For example, in the 1930s, in one of the first cases to use
this ``unfair and deceptive'' language, the Commission brought
a paint misbranding case against a manufacturer who allegedly
sold a product branded as high quality white lead paint, when
the paint, in fact, contained no white lead. While not the case
today, at the same--at the time this occurred, lead in paint
was a desirable characteristic. I raise this example to
illustrate that, as market preferences and technologies evolve,
Section 5 adapts.
The Commission is equally comfortable using the same
language in recent years to bring cases against app developers
who deviate from their stated privacy policy or against mobile
phone carriers who cram third-party charges onto customers'
bills.
But, Section 5's flexibility does not mean it's open-ended.
To best serve customers, the business community needs
certainty, guidance, and predictability in order to comply with
the law. American merchants are also entitled to fairness and
due process when it comes to enforcement. When the FTC deviates
from longstanding practice, it creates uncertainty about what
the Commission's interpretation of the law may be, who is
liable, and the extent of that liability.
We've heard concerns, for instance, about the Commission's
application of its unfairness authority to bring cases against
private companies for lax data security practices. We all agree
that consumers should be protected against unreasonable data
security practices that put them at risk of identity theft and
financial harm. But, for some time now, a key element in any
unfairness case has been whether or not a practice causes
substantial--that is, monetary--but not subjective injury to
consumers. In one recent high-profile case, the FTC sought to
enforce against a small business on grounds that it failed to
implement reasonable security measures to protect the sensitive
consumer information on its computer network. The FTC took the
extraordinary step of overturning the decision of its own
administrative law judge, who found, on the basis of the
evidence in the case, no monetary harm to the affected
consumers. We will continue to monitor developments in this
case.
Another area of focus for this committee has been
regulations impacting technological innovation. One of the
first hearings we held this Congress was on the Internet of
Things. In that hearing, we examined the significant economic
and societal impact the connected world might bring. At the
time, I expressed my hope that we, the government, would have
the humility to recognize that the best solutions are often not
government solutions and that we not stifle the Internet of
Things before we and consumers have had a chance to gain an
understanding of its real promise and implications.
The Commission is also focused on the Internet of Things,
both with enforcement activity and guidance to industry. The
Commission issued its Internet of Things Report last year,
which summarized a workshop the FTC held on the topic. The
report provided policy recommendations that some, including
Commissioner Ohlhausen, have criticized for its government-
knows-best approach that could inhibit innovation and growth.
While I appreciate the Commission's willingness to explore new
topics, I would caution the Commission to exercise regulatory
humility, preserve permission-less innovation, and continue to
address actual consumer harms as they arise.
With that, I will close, again, by thanking the
Commissioners for being here today and turn to Senator
Blumenthal for any opening remarks that he would like to make.
Senator Blumenthal.
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thank you, Mr. Chairman. And thank you
for holding this hearing to discuss many of the very pressing
consumer protection issues that are before the FTC and before
this committee.
And, as Senator Thune has said so well, protecting
consumers is not only good for them, but it is also good for
businesses that play by the rules and obey the law; effective,
fair enforcement is critical to job creation and economic
growth by establishing the rules that will also enforce a level
playing field. The good guys should be rewarded for following
the rules and playing by them, and the bad guys should be
prosecuted. A fair and effective law enforcement agency like
the FTC can lead to better consumer conduct, better consumer
protection, and better economic growth and job creation.
We observe more than 100 years of effective enforcement by
the FTC. Obviously, a lot of the markets, products, and types
of businesses have changed radically over those 102 years. I've
been privileged to work with the FTC in stopping false ads for
dietary supplements, sham charities, and securing redress for
consumers with unauthorized cramming charges on their mobile
phones. As Attorney General of the state of Connecticut, the
FTC was a ready and effective partner in those efforts. But,
the advances of technology have also changed the challenges of
protecting consumers under Section 5. Now we face what is, in
my view, the new frontier of consumer protection, which is
privacy.
Today's hearing is extraordinarily timely, because Yahoo
confirmed, just last week, that more than 500 user accounts
have been hacked. Consumers are grappling with yet another data
breach. This committee must consider what to do to make sure
that the FTC can hold businesses accountable for those
breaches. And that means also making sure that consumers are
notified promptly and efficiently when there are any breaches.
There are serious questions as to whether Yahoo effectively
notified consumers as promptly as they should have about those
security breaches.
The FTC has brought numerous enforcement actions over the
years against companies for lax data security practices, but
this piecemeal after-the-fact approach might be better served
if the Commission were able to prescribe rules requiring
security practices. In fact, in my view, they would be, and
that's the reason that Senator Nelson and I introduced the Data
Security and Breach Notification Act. Only stiffer enforcement
and stringent penalties will make sure companies are properly
and promptly notifying consumers when their data has been
compromised.
Protecting consumer privacy also means that children should
be protected, because so much of the data about them is
potentially within the realm of public observation. And so, we
have introduced, and I hope we will pass--Senator Daines and I
have introduced the SAFE KIDS Act. My strong hope is that the
SAFE KIDS Act will be the next piece of legislation we vote out
of committee, because protecting our children can't wait, and
shouldn't wait.
Similarly, in other areas, data, personal facts are at
risk, making the Internet of Things almost the Wild West of
potential breaches of security. That puts identities in danger,
it risks privacy, it creates potential costs, it discourages
innovation and invention, and ultimately deters economic growth
and job creation.
So, I look forward to moving forward, as we have done on a
bipartisan basis, with the Online Ticket Sales Act, as we did
in last week's Executive Session. I hope that legislation and
other measures that we passed will be a template for the
process that we adopt in this committee, and that we will
recognize, in a very bipartisan way, that we all have a stake
in protecting consumers.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Blumenthal.
And we'll proceed now to our witnesses. And again, thank
you for being here.
We'll start on my left, and your right, with Chairman
Ramirez, and then we'll go to Commissioner Ohlhausen and then
Commissioner McSweeny.
So, Madam Chairwoman, if you would please proceed, we'd
love to hear from you.
Thank you.
STATEMENT OF HON. EDITH RAMIREZ, CHAIRWOMAN, FEDERAL TRADE
COMMISSION
Ms. Ramirez. Chairman Thune, Senator Blumenthal, and
members of the Committee, thank you for the opportunity to
testify about the Federal Trade Commission's important role
protecting consumers and promoting competition.
The FTC is an independent, bipartisan agency charged with
enforcing laws that prohibit unfair and deceptive practices and
unfair methods of competition. We operate in a constantly
evolving landscape as business practices, technologies, and our
country's demographics continue to change. We seek to exercise
our authority through targeted law enforcement efforts that
address unlawful conduct without impeding legitimate business
activity or innovation. As a complement to our law enforcement
efforts, we also engage in policy work, research, and consumer
and business education to address current and emerging
challenges.
The hallmark of our consumer protection work is stopping
unfair and deceptive practices and returning money to injured
consumers. One example is the FTC's recent settlement with
Volkswagen to resolve charges that VW violated the FTC Act by
unfairly selling cars with illegal defeat devices to cheat
emissions tests and deceptively advertising that these cars
were clean. As part of a joint effort with the Department of
Justice and the EPA, the FTC settlement required VW to create a
$10 billion fund to compensate affected consumers for the lost
or diminished value of their cars and other harm caused by VW.
This is the largest ever FTC consumer redress program.
Another recent example is the FTC's action against the
multilevel marketing company Herbalife. We alleged that
Herbalife deceived consumers into believing they could earn
substantial money selling diet, nutritional, and personal care
products, and that the company's business structure was unfair
because it rewarded distributors for recruiting others to join
and purchase products rather than in response to actual retail
demand. Our landmark settlement requires Herbalife to
fundamentally restructure its business, stop its deceptive
practices, and return $200 million to consumers.
In addition to these notable cases, we've brought numerous
other actions addressing a wide array of issues, including
financial scams, telemarketing fraud, and unsubstantiated
health claims. And we're endeavoring to reach everyone affected
by unlawful conduct. As part of our Every Community Initiative,
we've expanded our consumer outreach to, among others, the
elderly, low-income consumers, minorities, and military members
and their families.
Another key priority for the Commission is protecting the
privacy and security of consumers' personal information. We
seek to ensure that companies keep the promises they make about
how they handle consumer data, including sensitive health,
financial, and children's information, and that they do not
unfairly reveal private information or otherwise intrude on
consumers' privacy. And, as the number of data breaches
continues to rise, we've sought to address data security issues
on multiple fronts. We've brought approximately 60 actions
against companies that we alleged failed to safeguard
consumers' information with reasonable security measures. We
also devote significant resources to business education. Last
year, for instance, we launched our Start With Security
Campaign to help small and medium-sized businesses implement
effective data security practices.
To help address new challenges and the privacy and security
implications of emerging technologies, we regularly host
workshops and issue reports. Recent topics we've explored
include ransomware, cross-device tracking, big data, and the
Internet of Things.
The FTC also seeks to promote competition, our other core
mission, through vigorous enforcement of our Nation's antitrust
laws. In the last 2 years, the Commission has challenged 44
mergers. In eight of those instances, we sued to stop the
proposed transactions outright. Among other major wins, we
successfully challenged the Sysco/U.S. Foods and Staples Office
Depot mergers, and we've been particularly active in addressing
what we believe to be anticompetitive consolidation in the
healthcare, pharmaceutical, retail, and energy sectors, among
others.
The FTC also maintains a robust program to identify and
stop anticompetitive conduct. We've had significant success in
this area, as well, including three Supreme Court victories on
important subjects that range from pay-for-delay agreements to
exclusive dealing to the state action doctrine.
We also maintain an active competition policy and research
agenda. A focus of our advocacy efforts has been to encourage
policymakers to take into account the impact on competition of
legislative and regulatory frameworks. We also urge that they
not place unnecessary restrictions on new business models that
have the potential to enhance competition and benefit
consumers.
I'm delighted to be here with my colleagues, Commissioners
Maureen Ohlhausen and Terrell McSweeny. And to expand on the
overview that I've provided, Commissioner Ohlhausen will
provide more details on the FTC's efforts to protect consumers
in today's dynamic and global marketplace, and Commissioner
McSweeny on our efforts to address fraud and deception in the
marketplace and the important partners with whom we engage to
protect consumers.
Thank you, again, for the invitation to be here.
[The prepared statement of the Federal Trade Commission
follows:]
Prepared Statement of the Federal Trade Commission
I. Introduction
Chairman Thune, Ranking Member Nelson, and members of the
Committee, the Federal Trade Commission (``FTC'' or ``Commission'') is
pleased to appear before you today to testify about the FTC's work to
protect consumers and promote competition.\1\
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\1\ This written statement presents the views of the Federal Trade
Commission. Our oral statements and responses to questions are our own
and do not necessarily reflect the views of the Commission or of any
other Commissioner.
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The FTC is a highly productive, bipartisan independent agency with
a broad mission. It is the only Federal agency with jurisdiction to
both protect consumers and maintain competition in most sectors of the
economy. The agency enforces laws that prohibit business practices that
are unfair or deceptive to consumers, or anticompetitive, and seeks to
do so without impeding legitimate business activity.\2\ The FTC also
educates consumers and businesses to encourage informed consumer
choices, compliance with the law, and public understanding of the
competitive process. Through its research, advocacy, education, and
policy work, the FTC promotes consumer protection and competitive
markets in the United States.
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\2\ The FTC has broad law enforcement responsibilities under the
Federal Trade Commission Act, 15 U.S.C. Sec. 41 et seq., and enforces a
wide variety of other laws ranging from the Clayton Act to the Fair
Credit Reporting Act. In total, the Commission has enforcement or
administrative responsibilities under more than 70 laws. See http://
www.ftc.gov/ogc/stats.shtm.
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The impact of the FTC's work is significant. During the last Fiscal
Year alone, the agency estimates that it saved consumers over $3.4
billion through its competition enforcement efforts and over $717
million through its consumer protection law enforcement actions.\3\
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\3\ See Summary of Performance and Financial Information Fiscal
Year 2015 (Feb. 2016), available at https://www.ftc.gov/reports/ftc-fy-
2015-summary-performance-financial-information.
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The FTC is committed to addressing the impact of technology and
globalization as part of our law enforcement, rulemaking, and policy
work. But even as commerce and technology continue to evolve, many of
the fundamental problems we see in the marketplace remain the same:
consumer fraud schemes, deceptive advertising, unfair practices causing
substantial consumer harm with little or no benefits to consumers or
competition, as well as mergers and conduct that harm or threaten to
harm competition. The agency tackles these challenges through targeted
law enforcement. Our structure, research capacity, and committed staff
enable the FTC to continue to meet its mandate of protecting consumers
and competition in an ever-changing marketplace.
Our testimony today highlights some of the agency's major recent
activities and initiatives. It also identifies certain challenges that
affect the Commission's ability to protect U.S. consumers and
competition.
II. FTC Accomplishments
A. Consumer Protection
As the Nation's consumer protection agency, the FTC has a broad
mandate to protect consumers from unfair, deceptive, or fraudulent
practices in the marketplace by, among other things, taking law
enforcement actions to stop unlawful practices and educating consumers
and businesses about their rights and responsibilities. The FTC targets
its enforcement and education efforts to achieve maximum impact and
works closely with federal, state, international, and private sector
partners in joint initiatives. The agency also convenes workshops with
various stakeholders to examine emerging consumer protection issues and
releases reports on a variety of consumer protection topics. In
addition, last year we created an Office of Technology Research and
Investigation comprised of technologists and researchers. The office
plays an important role by engaging in research and supporting our work
in, among other areas, privacy, data security, emerging payment
systems, big data, and the Internet of Things.
During Fiscal Years 2013 through 2015, the FTC filed over 160 new
consumer protection complaints in Federal district court and obtained
over 300 permanent injunctions and orders requiring defendants to pay
over $1.6 billion in consumer redress or disgorgement of ill-gotten
gains. In addition, the FTC's consumer protection cases that were
referred to the Department of Justice resulted in over 40 court
judgments for civil penalties totaling almost $43 million. The FTC also
filed 116 new administrative consumer protection actions and obtained
114 administrative orders.
During the same timeframe, the Commission hosted almost 40
workshops, conferences, and roundtables, and issued 18 reports on a
variety of consumer protection topics, released 141 new or revised
consumer and business education publications, and released almost 30
consumer and business education videos.
We recently have brought several high profile cases that illustrate
two important goals: stopping unfair and deceptive practices, and
returning money to consumers who are harmed. For example, earlier this
year the FTC entered into a settlement that requires Volkswagen to
create a $10 billion compensation fund--the largest consumer refund
program in the FTC's history--to resolve allegations that the company
unfairly sold cars with illegal defeat devices that cheated emissions
tests and deceptively advertised these cars with claims that they were
``clean.'' \4\ And in July, the FTC obtained an order requiring multi-
level marketing company Herbalife to fully restructure its U.S.
business operations and pay $200 million in consumer redress to settle
allegations that the company deceived consumers into believing they
could earn substantial money selling diet, nutritional supplements, and
personal care products.\5\
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\4\ FTC v. Volkswagen Group of Am., Inc., No. 3:15-md-02672-CRB
(N.D. Cal. filed June 28, 2016), available at https://www.ftc.gov/
enforcement/cases-proceedings/162-3006/volkswagen-group-america-inc.
\5\ FTC v. Herbalife of Am., Inc., No. 2:16-cv-05217 (C.D. Cal.
filed July 25, 2016), available at https://www.ftc.gov/enforcement/
cases-proceedings/142-3037/herbalife-international-america-inc-et-al.
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In recent years, the FTC's consumer protection initiatives have
focused primarily on addressing trends we see in the marketplace:
protecting consumers on all platforms, protecting consumer privacy and
data security, prosecuting false or deceptive health claims,
safeguarding children in the marketplace, and stopping fraud in every
community. Many of our cases have involved more than one of these
trends. Each initiative is discussed in more detail below.
1. Protecting Consumers on All Platforms
In recent years, we have seen remarkable growth in the use of
smartphones and connected devices, which enable consumers--from any
location--to find information, contact friends, shop and pay for goods
and services, update their social networks, monitor their health and
fitness, and access devices in their cars and homes remotely, among
many other benefits and conveniences. But the growth of technology
provides new mechanisms for engaging in unfair or deceptive practices--
for example, unauthorized payments, false advertising, and basic fraud.
Protecting consumers as they use and benefit from new technologies and
platforms has been a chief FTC priority in recent years.
For example, the FTC has taken action against numerous companies--
including T-Mobile \6\ and AT&T \7\ (with all 50 states and the Federal
Communications Commission)--for allegedly ``cramming'' unauthorized
third-party charges on consumers' mobile phone bills. In addition, the
Commission has settled charges against TracFone,\8\ which was accused
of making misleading claims about ``unlimited data'' Internet service
to subscribers.\9\ Thus far, the agency has obtained hundreds of
millions of dollars for consumers from these cases.
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\6\ FTC v. T-Mobile USA, Inc., No. 2:14-cv-0097-JLR (W.D. Wash.
filed Dec. 19, 2014), available at https://www.ftc.gov/enforcement/
cases-proceedings/132-3231/t-mobile-usa-inc.
\7\ FTC v. AT&T Mobility, Inc., No. 1:14-cv-3227-HLM (N.D. Ga.
filed Oct. 8, 2014), available at https://www.ftc.gov/enforcement/
cases-proceedings/132-3248/att-mobility-llc.
\8\ FTC v. TracFone Wireless, Inc., No. 3:15-cv-00392 (N.D. Cal.
filed Jan. 28, 2015), available at https://www.ftc.gov/enforcement/
cases-proceedings/132-3176/straight-talk-wireless-tracfone-wireless-
inc. See also FTC v. DirecTV, No. 3:15-cv-01129 (N.D. Cal. filed Mar.
11, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/102-3141/directv (alleging company misrepresented costs of
its cable service).
\9\ The Court of Appeals for the Ninth Circuit recently held that
the FTC could not bring a case similar to the TracFone matter against
AT&T because the common carrier exception in Section 5 of the FTC Act
precluded FTC enforcement of the Act against any company with the
status of a common carrier, even if the case involved non-common-
carrier service.
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The Commission has also brought several actions challenging fraud
on new platforms. For example, the FTC challenged the alleged deceptive
tactics of Erik Chevalier, a project creator who raised money from
consumers through a Kickstarter campaign by promising to provide
rewards related to a board game, but instead used most of the funds on
unrelated personal items, such as rent.\10\ The agency also took action
against the operators of Prized, a mobile gaming app that promised it
would be free from malware. We alleged that it instead loaded
consumers' mobile phones with malicious software to mine virtual
currencies.\11\
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\10\ FTC v. Erik Chevalier, Co., No. 3:15-cv-1029-AC (D. Ore. filed
June 11, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/142-3061/erik-chevalier-forking-path.
\11\ FTC v. Equiliv Investments, Matter No. 142-3144 (D.N.J. filed
June 29, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/142-3144/equiliv-investments-prized; see also FTC v. BF
Labs, Inc., No. 4:14-cv-00815-BCW (W.D. Mo. Feb. 18, 2016), available
at https://www.ftc.gov/enforcement/cases-proceedings/142-3058/bf-labs-
inc (settling allegations that the company deceptively marketed
computers designed to produce Bitcoins).
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In addition, the FTC has focused resources to challenge deceptive
endorsements online. For example, the Commission alleged that Warner
Bros. Home Entertainment deceived consumers during a marketing campaign
for a video game by failing to adequately disclose that it paid online
``influencers'' thousands of dollars to post positive gameplay video
review on YouTube and social media.\12\ And in Roca Labs, the
Commission filed a case in Federal court against the marketers of a
line of weight-loss supplements who allegedly made baseless claims for
their products, and then threatened to enforce ``gag clause''
provisions against consumers to stop them from posting negative reviews
and testimonials online.\13\
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\12\ See Warner Bros. Home Entertainment, Inc., Matter No. 1523034
(July 11, 2016) (proposed consent), available at https://www.ftc.gov/
enforcement/cases-proceedings/152-3034/warner-bros-home-entertainment-
inc-matter.
\13\ FTC v. Roca Labs, Inc., No. 8:15-cv-02231-MSS-TBM (M.D. Fla.
Sept. 28, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/142-3255/roca-labs-inc.
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Last year, the Commission issued an Enforcement Policy Statement
and accompanying guidance on native advertising, content that bears a
similarity to the news, feature articles, product reviews,
entertainment, and other material that surrounds it online.\14\ The
policy statement explains how established truth-in-advertising
principles apply to different ad formats, including native ads.
Following the policy statement, the FTC brought its first native
advertising case against national retailer, Lord & Taylor.\15\ The
Commission alleged that the company deceived consumers by paying for
native ads, including a seemingly objective article in the online
publication Nylon, without disclosing the ads were actually paid
promotions for a 2015 clothing launch.
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\14\ See Commission Enforcement Policy Statement on Deceptively
Formatted Advertisements (Dec. 2015), available at https://www.ftc.gov/
public-statements/2015/12/commission-enforcement-policy-statement-
deceptively-formatted; Native Advertising: A Guide for Businesses (Dec.
2015), available at https://www.ftc.gov/tips-advice/business-center/
guidance/native-advertis
ing-guide-businesses.
\15\ Lord & Taylor, LLC, Matter No. 152 3181 (Mar. 15, 2016)
(proposed consent), available at https://www.ftc.gov/enforcement/cases-
proceedings/152-3181/lord-taylor-llc-matter.
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Finally, the Commission has continued its efforts to stop illegal
robocalls, which continue to top our complaint list. For example, the
Commission and ten state attorneys general took action against
Caribbean Cruise Line, and seven other assisting companies, for an
alleged massive telemarketing campaign resulting in billions of
robocalls.\16\ Recognizing the need to spur the marketplace to develop
technical solutions that protect American consumers from illegal
robocalls, the FTC has led four public challenges to help tackle the
unlawful robocalls that plague consumers.\17\ And the FTC has developed
numerous educational materials to deliver the key message to consumers:
if you answer a call and hear an unwanted recorded sales message--hang
up.\18\
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\16\ FTC v. Caribbean Cruise Line, Inc. et al., No. 0:15-cv-60423
(S.D. Fla. Mar. 4, 2015), available at https://www.ftc.gov/enforcement/
cases-proceedings/122-3196/caribbean-cruise-line-inc.
\17\ See, e.g., Robocalls: Humanity Strikes Back Challenge, at
https://www.ftc.gov/news-events/contests/robocalls-humanity-strikes-
back; Detectarobo Challenge, at https://www.ftc.gov/news-events/
contests/detectarobo; Zapping Rachel Challenge, at https://www.ftc.gov/
news-events/contests/zapping-rachel; FTC Robocall Challenge (2012-
2013), at https://www.ftc.gov/news-events/press-releases/2013/04/ftc-
announces-robocall-challenge-winners.
\18\ See, e.g., FTC Robocall Microsite, https://
www.consumer.ftc.gov/features/feature-0025-robo
calls.
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2. Protecting Consumer Privacy and Data Security
The FTC has unparalleled experience in consumer privacy
enforcement. The Commission has used its core enforcement authority--
Section 5 of the FTC Act--to take action against companies engaged in
unfair or deceptive practices involving the privacy and security of
consumers' information.\19\ If a company makes materially misleading
statements or omissions about a product or service, including its
privacy or data security features, and such statements or omissions are
likely to mislead reasonable consumers, such statements or omissions
can be found to be deceptive and in violation of Section 5.\20\
Further, if a company's privacy or data security practices cause or are
likely to cause substantial injury to consumers that is neither
reasonably avoidable by consumers nor outweighed by countervailing
benefits to consumers or to competition, those practices can be found
to be unfair and in violation of Section 5.\21\ The FTC also enforces
sector-specific statutes that protect certain health,\22\ credit,\23\
financial,\24\ and children's information.\25\
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\19\ 15 U.S.C. Sec. 45(a).
\20\ See FTC Policy Statement on Deception, appended to Cliffdale
Assocs., Inc., 103 F.T.C. 110, 174 (1984), available at https://
www.ftc.gov/public-statements/1983/10/ftc-policy-statement-deception.
\21\ See FTC Policy Statement on Unfairness, appended to Int'l
Harvester Co., 104 F.T.C. 949, 1070 (1984), available at https://
www.ftc.gov/public-statements/1980/12/ftc-policy-statement-unfairness;
15 U.S.C. Sec. 45(n).
\22\ 16 C.F.R. Part 318.
\23\ 15 U.S.C. Sec. Sec. 1681-1681x.
\24\ 16 C.F.R. Part 314, implementing 15 U.S.C. Sec. 6801(b).
\25\ 15 U.S.C. Sec. Sec. 6501-6506; see also 16 C.F.R. Part 312.
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The FTC's current privacy enforcement priorities include health
privacy, the Internet of Things, big data, and data security. Over the
past few years, the Commission has brought several cases to stop
illegal practices that compromise health information.\26\ For example,
the FTC alleged that PaymentsMD and its former CEO misled thousands of
consumers who signed up for an online billing portal.\27\ According to
the complaint, the defendants used the registration process for the
billing portal as a way to deceptively seek consumers' consent to
obtain highly-detailed medical information about the consumers from
pharmacies, medical labs, and insurance companies to facilitate the
launch of a separate online medical records service. The Commission
also alleged that Practice Fusion, a company that provides management
services to physicians, deceived hundreds of thousands of consumers by
soliciting reviews about their doctors without adequately disclosing
that the reviews would be posted publicly on the internet.\28\ As
detailed in our complaint, many of the posted reviews included
consumers' full names, medications, health conditions, and treatments
received.
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\26\ See, e.g., Henry Schein Practice Solutions, Inc., No. C-4575
(May 23, 2016), available at https://www.ftc.gov/enforcement/cases-
proceedings/142-3161/henry-schein-practice-solutions-inc-matter; GMR
Transcription Servs., Inc., No. C-4482 (Aug. 21, 2014), available at
https://www.ftc.gov/enforcement/cases-proceedings/122-3095/gmr-
transcription-services-inc-matter.
\27\ PaymentsMD, LLC, No. C-4505 (Jan. 27, 2015), available at
https://www.ftc.gov/enforcement/cases-proceedings/132-3088/paymentsmd-
llc-matter.
\28\ Practice Fusion, Inc., Matter No. 1423039 (June 8, 2016)
(proposed consent), available at https://www.ftc.gov/enforcement/cases-
proceedings/142-3039/practice-fusion-inc-matter.
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The Internet of Things is also an expanding part of the
Commission's privacy work. For example, the FTC announced a settlement
with computer hardware company ASUS for allegedly failing to take
reasonable steps to secure the software on its routers.\29\ According
to the complaint, the company's failures to timely address
vulnerabilities or notify consumers about the availability of security
updates resulted in critical security flaws in its routers that put the
home networks of consumers at risk. The complaint also alleged that the
routers' insecure ``cloud'' services led to the compromise of thousands
of consumers' connected storage devices, exposing their sensitive
personal data on the internet.\30\ Last year, the FTC also issued a
report addressing how longstanding privacy principles can be adapted to
Internet of Things devices and recommending best practices for
companies to follow.\31\
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\29\ ASUSTeK Computer Inc., No. C-4587 (July 28, 2016), available
at https://www.ftc.gov/enforcement/cases-proceedings/142-3156/asustek-
computer-inc-matter.
\30\ See also TRENDnet, Inc., No. C-4426 (Jan. 16, 2014), available
at https://www.ftc.gov/enforcement/cases-proceedings/122-3090/trendnet-
inc-matter.
\31\ FTC Staff Workshop Report, The Internet of Things: Privacy and
Security in a Connected World (Jan. 2015), available at https://
www.ftc.gov/reports/federal-trade-commission-staff-report-november-
2013-workshop-entitled-internet-things.
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Another area of interest is big data, specifically the vast
collection of data about consumers and enhanced capabilities to analyze
data to make inferences and predictions about consumers. In January the
Commission issued a report entitled Big Data: A Tool for Inclusion or
Exclusion? addressing how the categorization of consumers may be both
creating and limiting opportunities for them, with a focus on low-
income and underserved consumers.\32\ A key message in the report is
that there are laws--including the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, and the FTC Act--that address some of the
concerns raised by big data. The report also suggests questions
businesses should ask to maximize the benefits of big data and reduce
the risk of biases or inaccurate results about certain groups of
consumers. The FTC also continues to focus on data brokers \33\ and,
among other things, the role they may play in facilitating fraud.\34\
For example, last year, the Commission brought two cases against data
brokers LeapLab and Sequoia One, alleging that both purchased the
payday loan applications of financially strapped consumers--including
names, addresses, phone numbers, Social Security numbers, and bank
account numbers--and then sold them to scam artists who used the data
to withdraw millions of dollars from consumers' accounts.\35\ The FTC
has also hosted public workshops on big data issues such as the growing
use of online lead generation in various industries \36\ and cross-
device tracking.\37\
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\32\ FTC Report, Big Data: A Tool for Inclusion or Exclusion?
Understanding the Issues, (Jan. 2016), available at https://
www.ftc.gov/reports/big-data-tool-inclusion-or-exclusion-understanding-
issues-ftc-report.
\33\ See, e.g., FTC Report, Data Brokers: A Call For Transparency
and Accountability (May 2014), available at https://www.ftc.gov/
reports/data-brokers-call-transparency-accountability-report-federal-
trade-commission-may-2014.
\34\ See, e.g., FTC v. Bayview Solutions LLC, No. 1:14-cv-01830-RC
(D.D.C. filed Oct. 31, 2014), available at https://www.ftc.gov/
enforcement/cases-proceedings/142-3226-x140062/bayview-solutions-llc;
FTC v. Cornerstone & Co., No. 1:14-cv-01479-RC (D.D.C. filed Aug. 27,
2014), available at https://www.ftc.gov/enforcement/cases-proceedings/
142-3211-x150005/cornerstone-company-llc.
\35\ FTC v. Sitesearch Corp., LLC, No. CV-14-02750-PHX-NVW (D. Az.
Feb 5, 2016), available at https://www.ftc.gov/enforcement/cases-
proceedings/142-3192/sitesearch-corporation-doing-business-leaplab; FTC
v. Sequoia One, LLC, No. 2:15-cv-01512-JCM-CWH (D. Nev. filed Aug. 12,
2015), available at https://www.ftc.gov/enforcement/cases-proceedings/
132-3253/sequoia-one-llc.
\36\ FTC Workshop, Follow the Lead: An FTC Workshop on Lead
Generation (Oct. 30, 2015), available at https://www.ftc.gov/news-
events/events-calendar/2015/10/follow-lead-ftc-workshop-lead-
generation.
\37\ FTC Workshop, Cross Device Tracking (Nov. 16, 2015), available
at https://www.ftc.gov/news-events/events-calendar/2015/11/cross-
device-tracking.
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Finally, data security continues to be a crucial part of the FTC's
privacy work.\38\ To date, the Commission has brought approximately 60
cases alleging that companies failed to implement reasonable safeguards
for the consumer data they maintain.\39\ For example, the Commission
secured its largest data security judgment this year, $100 million,
against LifeLock based on allegations the company violated a 2010
Federal court order by, among other things, failing to establish and
maintain a comprehensive information security program to protect its
customers' sensitive personal information.\40\ And, the Commission
continues to reiterate its longstanding, bipartisan call for Federal
legislation that would (1) strengthen its existing data security
authority and (2) require companies, in appropriate circumstances, to
provide notification to consumers when there is a security breach.\41\
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\38\ See, e.g., FTC v. Wyndham Worldwide Corp., No. 2:13-CV-01887-
ES-JAD (D.N.J. Dec. 11, 2015), available at https://www.ftc.gov/
enforcement/cases-proceedings/1023142-x120032/wynd
ham-worldwide-corporation. In 2015, the Third Circuit affirmed the
Commission's authority under the FTC Act to challenge data security
failures. See FTC v. Wyndham Worldwide Corp., No. 14-3514 (3d Cir. Aug.
24, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/1023142-x120032/wyndham-worldwide-corporation.
\39\ See generally ww.ftc.gov/datasecurity.
\40\ FTC v. Lifelock, No. CV-10-00530-PHX-JJT (D. Az Dec. 17,
2015), available at https://www.ftc.gov/enforcement/cases-proceedings/
072-3069-x100023/lifelock-inc-corporation (Commissioner Ohlhausen
dissenting).
\41\ Legislation in both areas--data security and breach
notification--should give the FTC the ability to seek civil penalties
to help deter unlawful conduct, jurisdiction over non-profits, and
rulemaking authority under the Administrative Procedure Act.
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Additionally, the agency has placed considerable emphasis in this
area on education. Last year, for example, the Commission announced its
Start with Security initiative, which includes a guide for businesses
that summarizes the lessons learned from the FTC's 60 data security
cases,\42\ as well as videos.\43\ As part of this initiative, the FTC
has organized one-day conferences in Austin, San Francisco, Seattle,
and Chicago, bringing business owners and developers together with
industry experts to discuss practical tips and strategies for
implementing effective data security.\44\ The FTC has also launched an
improved version of IdentityTheft.gov \45\ (robodeidentidad.gov in
Spanish \46\), a free, one-stop resource consumers can use to report
and recover from identity theft. As part of the relaunched site,
identity theft victims can use the site to create a personal recovery
plan based on the type of identity theft they face, and get pre-filled
letters and forms to send to credit bureaus, businesses, and debt
collectors.
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\42\ Start with Security: A Guide for Business (June 2015),
available at https://www.ftc.gov/tips-advice/business-center/guidance/
start-security-guide-business.
\43\ Start with Security: Free Resources for Any Business (Feb. 19,
2016), available at https://www.ftc.gov/news-events/audio-video/
business.
\44\ See, e.g., FTC Event, Start with Security--Seattle, Feb. 9,
2016, available at https://www.ftc.gov/news-events/events-calendar/
2016/02/start-security-seattle.
\45\ See https://identitytheft.gov/.
\46\ See https://robodeidentidad.gov/.
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3. Prosecuting False or Deceptive Health Claims
The FTC has a long history of targeting deceptive health claims,
which can result in serious harm to consumers. For example, as part of
a joint law enforcement sweep with the Department of Justice and other
Federal agencies targeting illegal dietary supplement marketing, the
FTC settled allegations that Sunrise Nutraceuticals deceptively claimed
its supplement would alleviate opiate withdrawal symptoms and increase
a user's likelihood of overcoming opiate addiction.\47\ The Commission
is also targeting unsubstantiated health claims in the mobile space.
The FTC charged two app developers with deceptively claiming that their
mobile apps--Mole Detective and MelApp--could detect symptoms of
melanoma, even in the early stages.\48\ The Commission alleged the
companies lacked scientific evidence to support their claims.
Similarly, the Commission sued the marketers of an app called Ultimeyes
for deceptive claims that they had scientific proof the app could
``turn back the clock'' on consumers' vision through a series of visual
exercises available on the app.\49\ The Commission has also taken
action against deceptive cognitive benefits claims. For example, this
January, Lumosity agreed to pay $2 million in redress to settle FTC
charges that Lumosity deceptively claimed its ``brain training''
program could help users perform better at work and in school, and
could stave off memory loss, dementia, and even Alzheimer's
disease.\50\
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\47\ FTC v. Sunrise Nutraceuticals, LLC, No. 9:15-cv-81567 (S.D.
Fla. filed Nov. 17, 2015), available at https://www.ftc.gov/
enforcement/cases-proceedings/152-3208/sunrise-nutraceuti
cals-llc.
\48\ Health Discovery Corp., No. C-4516 (Mar. 13, 2015), available
at https://www.ftc.gov/enforcement/cases-proceedings/132-3211/health-
discovery-corporation-melapp-matter (Commissioner Ohlhausen
dissenting); FTC v. New Consumer Solutions LLC et al., No. 15-C-1614
(N.D. Ill. filed Feb. 23, 2015), available at https://www.ftc.gov/
enforcement/cases-proceedings/132-3210/new-consumer-solutions-llc-mole-
detective (Commissioner Ohlhausen dissenting).
\49\ Carrot Neurotechnology, Inc., No. C-4567 (Feb. 23, 2016),
available at https://www.ftc.gov/enforcement/cases-proceedings/142-
3132/carrot-neurotechnology-inc-matter-ultimeyes (Commissioner
Ohlhausen concurring).
\50\ FTC v. Lumos Labs, Inc. d/b/a Lumosity, No. 3:16-cv-00001
(N.D. Cal. filed Jan. 5, 2016), available at https://www.ftc.gov/
enforcement/cases-proceedings/132-3212/lumos-labs-inc-lumo
sity-mobile-online-cognitive-game.
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Deceptive weight loss claims continue to be an enforcement
priority. In 2015, the Commission brought a number of cases against
companies touting the slimming effects of various products. For
example, the FTC obtained an $11.9 million judgment against affiliate
marketing network LeadClick Media for using fake news sites to convince
consumers that acai berry and colon cleansing weight loss products were
proven effective.\51\ The FTC also obtained a Federal court order
against Lunada Biomedical and its principals settling allegations that
they deceptively advertised that their dietary supplement Amberen
caused substantial weight loss for women over 40, and that the weight
loss was clinically proven.\52\
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\51\ See FTC & Connecticut v. Leanspa, LLC, No. 311-cv-01715 (D.
Conn. Apr. 6, 2015), available at https://www.ftc.gov/enforcement/
cases-proceedings/1123135/leanspa-llc-et-al (Commissioner Ohlhausen
dissenting in part and concurring in part).
\52\ FTC v. Lunada Biomedical, Inc., No. 2:15-cv-03380-MWF (PLAx)
(C.D. Cal. filed May 12, 2015), available at https://www.ftc.gov/
enforcement/cases-proceedings/132-3067/lunada-biomedical-inc.
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4. Safeguarding Children in the Marketplace
The FTC also spends significant resources to safeguard children in
the marketplace. For example, the Commission announced cases against
Apple,\53\ Amazon,\54\ and Google \55\ for allegedly billing parents
without their consent for items kids bought in mobile apps. We alleged
that the companies either failed to require a password for in-app
purchases or failed to alert parents that entering a password opened a
significant window of time where kids could rack up charges. Apple and
Google agreed to change their billing practices and pay at least $32.5
million and $19 million, respectively, as redress to consumers. A
Federal judge granted the FTC's request for summary judgment in the
case against Amazon.\56\
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\53\ Apple, Inc., No. C-4444 (Mar. 25, 2014), available at https://
www.ftc.gov/enforcement/cases-proceedings/112-3108/apple-inc.
\54\ FTC v. Amazon.com, No. 2:14-cv-01038 (W.D. Wash. filed July
10, 2014), available at https://www.ftc.gov/enforcement/cases-
proceedings/122-3238/amazoncom-inc.
\55\ Google, Inc., No. C-4499 (Dec. 2, 2014), available at https://
www.ftc.gov/enforcement/cases-proceedings/122-3237/google-inc.
\56\ FTC v. Amazon.com, No. 2:14-cv-01038 (W.D. Wash. Apr. 27,
2016) (summary judgment decision), available at https://www.ftc.gov/
enforcement/cases-proceedings/122-3238/ama
zoncom-inc.
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The Commission has also focused its resources on deceptive health
claims involving children. The FTC's case against NourishLife
challenged allegedly unsubstantiated claims for a supplement purporting
to treat childhood speech and behavioral disorders, including those
associated with autism.\57\ Similarly, the Commission took action
against the makers of the Jungle Rangers computer game for making false
and unsubstantiated claims that the game permanently improves
children's focus, memory, behavior, and school performance--including
for kids with ADHD.\58\
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\57\ FTC v. NourishLife, LLC, No. 1:15-cv-00093 (N.D. Ill. filed
Jan. 7, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/132-3152/nourishlife-llc; Legacy Learning Systems, Inc.,
No. C-4323 (June 10, 2011), available at https://www.ftc.gov/
enforcement/cases-proceedings/102-3055/legacy-learning-systems-inc-et-
al-matter.
\58\ Focus Education, LLC, No. C-4517 (Apr. 9, 2015), available at
https://www.ftc.gov/enforcement/cases-proceedings/122-3153/focus-
education-llc-matter. See also Learning Rx Franchise Corp., No. 1:16-
cv-01159-RM (D. Colo. May 24, 2016) (alleging the defendants
deceptively claimed that their programs were clinically proven to
permanently improve serious health conditions like ADHD and autism, and
that the training substantially improved school grades and college
admission test scores).
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The Children's Online Privacy Protection Act of 1998 (``COPPA'')
generally requires websites and apps to obtain parental consent before
collecting personal information from children under 13. In 2013, the
FTC updated its regulatory rule that implements COPPA to address new
developments--such as social networking, mobile apps, and the ability
to use geolocation information--that affect children's privacy. Since
2000, the FTC has brought over 20 COPPA cases and collected millions of
dollars in civil penalties. For example, the COPPA cases against app
developers LAI Systems \59\ and Retro Dreamer \60\ alleged that the
companies created a number of apps directed to children that allowed
third-party advertisers to collect personal information from children
in the form of persistent identifiers without obtaining parental
consent. Most recently, mobile advertising company InMobi agreed to pay
$950,000 in civil penalties to settle FTC allegations that it
deceptively tracked the locations of hundreds of millions of
consumers--including children--without their knowledge or consent to
serve them geo-targeted advertising.\61\
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\59\ U.S. v. LAI Systems, LLC, No. 2:15-cv-09691 (C.D. Cal. filed
Dec. 17, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/142-3261/lai-systems-llc.
\60\ U.S. v. Retro Dream et al., No. 5:15-cv-02569 (C.D. Cal. filed
Dec. 17, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/142-3262/retro-dreamer.
\61\ U.S. v. InMobi Pte Ltd., No. 3:16-cv-03474 (N.D. Cal. filed
June 22, 2016), available at https://www.ftc.gov/enforcement/cases-
proceedings/152-3203/inmobi-pte-ltd.
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5. Stopping Fraud in Every Community
Stopping fraud is the FTC's largest consumer protection program,
and for good reason: fraud causes enormous harm to consumers. The
Commission's work has targeted many different forms of fraud--including
sham charities,\62\ illegal robocalling,\63\ phony business
opportunities,\64\ investment schemes,\65\ bogus business coaching and
mentoring,\66\ and imposter scams.\67\
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\62\ See, e.g., FTC v. Cancer Fund of America, Inc. et al., No.
CV15-884 PHX NVW (D. Az. filed May 18, 2015), available at https://
www.ftc.gov/enforcement/cases-proceedings/122-3005/cancer-fund-america-
inc.
\63\ See, e.g., FTC v. Lifewatch Inc., 1:15-cv-05781 (N.D. IL. Jul.
14, 2016), available at https://www.ftc.gov/enforcement/cases-
proceedings/142-3123/lifewatch-inc; FTC v. Life Management Services,
Inc., 6:16-cv-982 (MD. Fla. Jun. 14, 2016), available at https://
www.ftc.gov/enforcement/cases-proceedings/152-3216/life-management; FTC
v. Caribbean Cruise Line, Inc. et al., No. 0:15-cv-60423 (S.D. Fla.
Mar. 4, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/122-3196/caribbean-cruise-line-inc.
\64\ See, e.g., FTC v. Money Now Funding, LLC, No. CV-13-01583 (D.
Ariz., June 3, 2015), available at https://www.ftc.gov/enforcement/
cases-proceedings/122-3216-x130063/money-now-funding-llc; FTC v. The
Online Entrepreneur, Inc., No. 812-cv-2500-T-27MAP (M.D. Fla. July 30,
2014), available at https://www.ftc.gov/enforcement/cases-proceedings/
122-3186/online-entrepreneur-inc-et-al.
\65\ See, e.g., FTC v. Consumer Collection Advocates, Corp., No.
0:14-cv-62491-BB (S.D. Fla. Nov. 3, 2014), available at https://
www.ftc.gov/enforcement/cases-proceedings/142-3082/consumer-collection-
advocates-corp.
\66\ FTC v. Apply Knowledge, LLC, 2:14-cv-00088 (D. UT., Mar. 2,
2016) (final orders), available at https://www.ftc.gov/enforcement/
cases-proceedings/132-3121-x140018/apply-knowledge-llc; FTC v. Top
Shelf Marketing Corp., 1:16-cv-00206 (S.D.N.Y. Jan. 12, 2016),
available at https://www.ftc.gov/enforcement/cases-proceedings/142-
3228/top-shelf-marketing-corp.
\67\ See, e.g., FTC v. Centro Natural Corp., No. 14:23879 (S.D.
Fla. June 30, 2015), available at https://www.ftc.gov/enforcement/
cases-proceedings/142-3159/centro-natural-corp; FTC v. First Time
Credit Solution, Corp., No. CV15-01921-DDP-PJW (C.D. Cal. filed Mar.
16, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/152-3114/first-time-credit-solution-corp-ftc-credit-
solutions.
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Through the agency's Every Community Initiative, the FTC has
conducted outreach and education, developed partnerships with trusted
community advocates, and brought cases to stop fraud targeting certain
groups of consumers like the elderly, low-income consumers, or
minorities. The FTC has hosted over a dozen major conferences to learn
more about consumer protection issues in a wide range of
communities.\68\ FTC regional offices have brought together key players
in consumer protection for what we call ``Common Ground'' conferences
in their communities.\69\ In December, the FTC will bring together
researchers, marketers, community groups, and law enforcement to
examine the changing consumer demographics in this country and how they
will affect the FTC's future work.\70\
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\68\ See, e.g., FTC Workshop, Fraud Affects Every Community, Oct.
29, 2014, available at https://www.ftc.gov/news-events/events-calendar/
2014/10/fraud-affects-every-community; FTC Roundtable, Debt Collection
& the Latino Community Roundtable, Oct. 23, 2014, available at https://
www.ftc.gov/news-events/events-calendar/2014/10/debt-collection-latino-
community-roundtable; FTC Conference, Working Together to Advance
Protections for Immigrant Consumers, Apr. 21, 2014, available at
https://www.ftc.gov/news-events/events-calendar/2014/04/working-
together-advance-protections-immigrant-consumers.
\69\ See, e.g., Colorado Common Ground Conference: Working Together
to Protect Colorado Consumers, Apr. 24, 2015, available at https://
www.ftc.gov/news-events/events-calendar/2015/04/colorado-common-ground-
conference-working-together-protect (joint event with Colorado Attorney
General's Office); NW Common Ground Conference, Nov. 18-19, 2014,
available at https://www.ftc.gov/news-events/events-calendar/2014/11/
nw-common-ground-conference (joint event with Washington State Attorney
General's Office).
\70\ See FTC Workshop, Changing Consumer Demographics, Dec. 6,
2016, available at https://www.ftc.gov/news-events/events-calendar/
2016/12/changing-consumer-demographics.
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Over the past year, the FTC has also expanded its outreach to older
adults, service members and veterans, and people in African-American,
Native American, immigrant and Latino communities. For example, the FTC
has partnered with the Navajo Human Rights Commission to reach the
Navajo Nation,\71\ and with the NAACP to reach African Americans.\72\
In addition, to encourage more attention to consumer protection issues
in diverse communities, the FTC began a new project to reach ethnic
media outlets by hosting roundtables with them in cities across the
country. These ethnic media events highlight scams, frauds, and illegal
practices affecting the relevant communities. The Bureau of Consumer
Protection and its Regional Offices have participated in over 170
outreach events, including webinars, trainings, presentations,
exhibits, and Twitter chats.
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\71\ FTC Roundtable, Navajo Consumer Credit Seminar and Roundtable,
Apr. 17, 2015, available at https://www.ftc.gov/news-events/events-
calendar/2015/04/navajo-consumer-credit-seminar-roundtable.
\72\ Obstacles to Economic Opportunity: A Joint Conference of the
FTC and the NAACP Examining Frauds that Affect the African American
Community, May 19, 2015, available at https://www.ftc.gov/news-events/
events-calendar/2015/05/obstacles-economic-opportunity-joint-
conference-ftc-naacp.
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And the Commission has used its strongest tool--enforcement--to
protect communities that have been specifically targeted by fraudsters.
Most cases affect a broad cross-section of people, but scams are
increasingly targeting specific groups, aided by the widespread
availability of data profiles and leads on consumers. For example, the
Commission halted the operations of a company that used false
affiliation with the FTC--calling itself ``FTC Credit Solutions''--to
market bogus credit repair services to Spanish-speaking consumers.\73\
Scams targeting the Spanish speaking population are pervasive, and the
FTC has taken action to address many different kinds--involving
pyramids and business opportunities,\74\ unordered merchandise,\75\
fraudulent debt collection,\76\ and bogus health insurance.\77\ The
Commission is also stopping scams that target older consumers,
including two sweepstakes that used personalized letters to seniors to
trick them into paying to claim their prizes and took in more than $28
million in one scam and over $17 million in another.\78\ Other frauds
targeting seniors have involved tech support to fix nonexistent
computer problems,\79\ recovery scams purporting to recoup losses from
other frauds,\80\ and fraudulent health and safety schemes.\81\
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\73\ FTC v. First Time Credit Solution, Corp., No. CV15-01921-DDP-
PJW (C.D. Cal. Aug. 3, 2015), available at https://www.ftc.gov/
enforcement/cases-proceedings/152-3114/first-time-credit-solution-corp-
ftc-credit-solutions.
\74\ See, e.g., FTC v. Oro Marketing, Inc., No. 2:13-CV-08843 (C.D.
Cal. Dec 22, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/132-3047-x140010/oro-marketing-inc-et-al; FTC v. Fortune
Hi-Tech Marketing, Inc., No. 5:13-cv-00123-GFVT-REW (N.D. Ill. May 9,
2014), available at https://www.ftc.gov/enforcement/cases-proceedings/
112-3069/fortune-hi-tech-marketing-inc-et-al.
\75\ See, e.g., FTC v. Herbalife of Am., Inc., No. 2:16-cv-05217
(C.D. Cal. July 25, 2016), available at https://www.ftc.gov/
enforcement/cases-proceedings/142-3037/herbalife-international-america-
inc-et-al; FTC v. Hispanic Global Way Corp., No. 14-22018-CIV-ALTONGA/
O'Sullivan (Feb 26, 2015), available at https://www.ftc.gov/
enforcement/cases-proceedings/132-3113/hispanic-global-way-corporation.
\76\ See, e.g., FTC v. Centro Natural Corp., No. 14:23879-CIV-
ALTONAGA/O'Sullivan (S.D. Fla. June 30, 2015), available at https://
www.ftc.gov/enforcement/cases-proceedings/142-3159/centro-natural-corp.
\77\ FTC v. Partners in Health Care Association, Inc., No. 1:14-CV-
23109 (S.D. Fla., July 21, 2016) (summary judgment), available at
https://www.ftc.gov/enforcement/cases-proceedings/132-3122/partners-
health-care-association-inc.
\78\ FTC v. Mail Tree Inc., No. 0:15-cv-61034-JIC (S.D. Fla. June
12, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/142-3068/mail-tree-inc.; FTC v. Dayton Films, No. 2:97-CV-
00750-PMP (LRL) (D. Nev. January 28, 2013), available at https://
www.ftc.gov/enforcement/cases-proceedings/x970058/dayton-family-
productions-inc-et-al.
\79\ See, e.g., FTC v. Help Desk National, 1:16-cv-06607 (N.D. IL.
Jul. 8, 2016), available at https://www.ftc.gov/enforcement/cases-
proceedings/162-3042-x160045/help-desk-national; FTC v. Boost Software,
Inc., 14-cv-81397 (Feb. 12, 2016) (final orders), available at https://
www.ftc.gov/enforcement/cases-proceedings/132-3283-x150040/boost-
software-inc; FTC v. Inbound Call Experts, LLC, No. 9:14-cv-81395-KAM
(S.D. Fla. Nov. 10, 2014), available at https://www.ftc.gov/
enforcement/cases-proceedings/132-3135/inbound-call-experts-llc.
\80\ See, e.g., FTC v. Consumer Collection Advocates, Corp., No.
0:14-cv-62491-BB (S.D. Fla. Nov. 3, 2014), available at https://
www.ftc.gov/enforcement/cases-proceedings/142-3082/consumer-collection-
advocates-corp.
\81\ See, e.g., FTC v. Sunbright Ventures LLC, No. 8:14-cv-02153-
JDW-EAJ (M.D. Fla. July 22, 2015), available at https://www.ftc.gov/
enforcement/cases-proceedings/132-3217/sun-bright-ventures-llc-gmy-llc;
FTC v. Instant Response Systems LLC,, No. 1:13-cv-00976 (E.D.N.Y. Apr.
14, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/1223041/instant-response-systems-llc-et-al.
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The FTC has also brought actions against companies that target
military service members. For example, for-profit school Ashworth
College recruited service members and their families and accepted their
military benefits as payment.\82\ The FTC alleged Ashworth
misrepresented that students would get the training and credentials
needed to switch careers or get a new job, and that the course credits
they earned would transfer to other schools. In fact, the FTC alleged,
neither claim was true. This fall, the FTC, in cooperation with the
Department of Defense and other organizations, will release a consumer
protection toolkit for servicemembers and their families.
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\82\ FTC v. Professional Career Development Institute, LLC, No.
1:15-cv-01872-WSD (N.D. Ga. June 4, 2015), available at https://
www.ftc.gov/enforcement/cases-proceedings/132-3225/ashworth-college.
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The FTC is also fighting scams that specifically target consumers
already facing financial difficulties. The HOPE Services case--just one
example--involved a sham operation that allegedly told financially
distressed homeowners it would help reduce their mortgages, but instead
effectively stole their mortgage payments, leading some to foreclosure
and bankruptcy.\83\ And the Commission has brought several cases
involving abusive debt collection that victimized consumers already in
debt.\84\
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\83\ See FTC v. Sameer Lakhany, No. 8:12-cv-00337-CJC-JPR (C.D.
Cal. Apr. 29, 2015), available at https://www.ftc.gov/news-events/
press-releases/2015/04/court-halts-mortgage-relief-operation-targeted-
homeowners-facing. See also FTC v. C.C. Enterprises, Inc., No. 8:15-cv-
00585-CJC-JPR (C.D. Cal. Apr. 16, 2015), available at https://
www.ftc.gov/enforcement/cases-proceedings/112-3136-x120014/
householdrelief; FTC v. Wealth Educators Inc., No. cv15-2357 (C.D. Cal.
Apr. 10, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/1523004/wealth-educators-inc.
\84\ See e.g., FTC v. Lanier Law, LLC, No. 3:14-cv-00786-MMH-PDB
(M.D. Fla. Sept. 1, 2016), available at https://www.ftc.gov/
enforcement/cases-proceedings/142-3038-x140039/lanier-law-llc; FTC &
CFPB v. Green Tree Servicing, LLC, No. 0:15-cv-02064 (D. Minn. filed
Apr. 21, 2015), available at https://www.ftc.gov/enforcement/cases-
proceedings/112-3008/green-tree-servicing-llc; FTC v. Asset & Capital
Mgmt. Group, No. CV13-5267 (C.D. Cal. May 19, 2014), available at
https://www.ftc.gov/enforcement/cases-proceedings/122-3031/asset-
capital-management-group-dba-acm-group.
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B. Competition
The Commission seeks to promote competition through vigorous law
enforcement. The FTC enforces U.S. antitrust law in many sectors that
most directly affect consumers and their pocketbooks, such as health
care, consumer products and services, technology, manufacturing, and
energy.\85\ In addition, the FTC undertakes competition policy research
to improve agency decision-making, and engages in competition advocacy
and education initiatives to encourage state, local and foreign
jurisdictions to adopt policies that promote competition and consumer
welfare.
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\85\ For a more detailed discussion of the FTC's recent antitrust
enforcement matters, see Prepared Statement of the Federal Trade
Commission On ``Oversight of the Enforcement of the Antitrust Laws,''
Before the Subcommittee on Antitrust, Competition Policy and Consumer
Rights of the Committee on the Judiciary, United States Senate (Mar. 9,
2016), https://www.ftc.gov/system/files/documents/public_statements/
934563/160309enforcementanti
trustlawstest.pdf.
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One of the agency's principal responsibilities is preventing
mergers that may substantially lessen competition. Over the past two
Fiscal Years, premerger filings under the Hart-Scott-Rodino Act have
increased significantly; they are up approximately 36 percent in FY
2015 as compared to FY 2013 and have more than doubled over the past
five years.\86\ The vast majority of reported transactions,
approximately 95 percent, do not raise competition concerns, and the
Commission clears those transactions expeditiously. However, when the
evidence has shown that the merger could be anticompetitive, the
Commission has intervened. Since the beginning of Fiscal Year 2015, the
Commission has challenged 44 mergers, including eight cases in which
the Commission voted to initiate litigation to block the
transactions.\87\ This includes significant trial victories stopping
both the Sysco/US Foods \88\ and Staples/Office Depot \89\ mergers. The
Commission has been especially vigilant in response to heightened
merger activity in the hospital and pharmaceutical sectors. In the last
two years alone, the Commission has taken action in 13 pharmaceutical
industry mergers, ordering divestitures of more than a hundred branded
and generic drugs used to treat a variety of conditions.\90\
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\86\ In FY 2015, the Agencies received notice of 1,801
transactions, compared with 1,326 in FY 2013 and 716 in FY 2009.
\87\ Complete data on the FTC's competition workload is available
on its website at https://www.ftc.gov/competition-enforcement-database.
\88\ FTC v. Sysco Corp., 113 F. Supp. 3d 1 (D.D.C. 2015).
\89\ FTC v. Staples, Inc.,--F. Supp. 3d--(D.D.C. 2016), available
at https://www.ftc.gov/system/files/documents/cases/
051016staplesopinion.pdf.
\90\ See, e.g., FTC News Release, FTC Requires Teva to Divest Over
75 Generic Drugs to Settle Competition Concerns Related to its
Acquisition of Allergan's Generic Business (Jul. 27, 2016), https://
www.ftc.gov/news-events/press-releases/2016/07/ftc-requires-teva-
divest-over-75-generic-drugs-rival-firms-settle.
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The Commission also maintains a robust program to identify and stop
anticompetitive conduct. For nearly 20 years, the Commission has
prioritized ending anticompetitive reverse-payment patent settlements
in which a brand-name drug firm pays its potential generic rival to
delay entering the market with a lower cost, generic product. Following
the Supreme Court's 2013 decision in FTC v. Actavis, Inc.,\91\ the
Commission is in a much stronger position to protect consumers. Last
June, for example, the FTC obtained a landmark settlement in its
litigation against Cephalon, Inc.\92\ when Cephalon's parent, Teva
Pharmaceuticals, agreed to stop using certain types of anticompetitive
patent settlements and pay up to $1.2 billion in ill-gotten gains to
reimburse drug wholesalers, pharmacies, insurers, and others who
overpaid for the blockbuster sleep disorder drug Provigil.
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\91\ FTC v. Actavis, Inc., 570 U.S. 756 (2013).
\92\ FTC News Release, FTC Settlement of Cephalon Pay for Delay
Case Ensures $1.2 Billion in Ill-Gotten Gains Relinquished; Refunds
Will Go To Purchasers Affected by Anticompetitive Tactics (May 28,
2015), https://www.ftc.gov/news-events/press-releases/2015/05/ftc-
settlement-cephalon-pay-delay-case-ensures-12-billion-ill.
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To complement our enforcement efforts, the FTC pursues a robust
policy and research agenda. The FTC promotes competition principles in
advocacy comments to state lawmakers and regulators as well as our
sister Federal agencies. The FTC also organizes public workshops and
issues reports on cutting-edge topics, including workshops on solar
distributed generation and the so-called ``sharing economy.'' The
Commission's current competition research projects include a remedy
study to evaluate the effectiveness of the Commission's orders in past
merger cases, which builds on a similar effort conducted in the 1990s
that led to important improvements in the Commission's orders.\93\ We
are also in the final stages of a landmark study of patent assertion
entities (PAEs) that will provide unique insights into PAE business
models and activity.\94\
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\93\ FTC News Release, FTC Proposes to Study Merger Remedies (Jan.
9, 2015), https://www.ftc.gov/news-events/press-releases/2015/01/ftc-
proposes-study-merger-remedies.
\94\ FTC News Release, FTC Seeks to Examine Patent Assertion
Entities and Their Impact on Innovation, Competition (Sept. 26, 2013),
available at https://www.ftc.gov/news-events/press-releases/2013/09/
ftc-seeks-examine-patent-assertion-entities-their-impact.
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With the expansion of global trade and the operation of many
companies across national borders, the FTC and the Antitrust Division
of the Department of Justice increasingly engage with foreign antitrust
agencies to ensure close collaboration on cross-border cases and
convergence toward sound competition policies and procedures.\95\ The
FTC effectively coordinates reviews of multijurisdictional mergers and
continues to work with its international counterparts to achieve
consistent outcomes in cases of possible unilateral anticompetitive
conduct. The U.S. antitrust agencies also facilitate dialogue and
promote convergence through multiple channels, including through strong
bilateral relations with foreign competition agencies, and an active
role in multilateral competition organization projects and initiatives.
When appropriate, we also work with other agencies within the U.S.
government to advance consistent competition enforcement policies,
practices, and procedures in other parts of the world.
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\95\ In competition matters, the FTC also seeks to collaborate with
the state attorneys general to obtain the best results and maximize the
use of limited resources in the enforcement of the U.S. antitrust laws.
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III. Challenges Facing the FTC
The FTC has worked to keep pace with the vast changes of the ever-
changing marketplace. We recognize the agency must remain nimble to
anticipate and respond to future marketplace changes and other
challenges. However, two particular challenges are of concern:
jurisdictional limitations over common carriers and nonprofits.
A. The FTC Act's Exception for Communications Common Carriers
The FTC Act exempts common carriers subject to the Communications
Act from the FTC's enforcement of its prohibitions on unfair or
deceptive acts or practices and unfair methods of competition. The FTC
has long called for the repeal of the common carrier exception. This
carve-out originated in an era when telecommunications services were
provided by highly-regulated monopolies. The exception no longer makes
sense in today's deregulated environment where the lines between
telecommunications and other services are increasingly becoming
blurred, such as when telecommunications companies are buying edge
providers and consumers increasingly communicate over online social
networks instead of landlines.
As the telecommunications and Internet industries continue to
converge, the common carrier exception is increasingly likely to
frustrate the FTC's ability to stop deceptive and unfair acts and
practices and unfair methods of competition with respect to a wide
array of activities. That is particularly so if the Ninth Circuit's
recent decision in the AT&T case stands.\96\ As a result of that
decision, the common carrier exception may disable the FTC from
enforcing Section 5 of the FTC Act not only against common carriage
activities, but also against non-common-carriage activities engaged in
by an entity with merely the ``status'' of a common carrier, even if
that is not its principal line of business. For example, the AT&T
decision could prevent the FTC from bringing ``cramming'' cases against
telephone companies and could have other farther-reaching effects as
well on FTC programs ranging from Do Not Call to COPPA. The FCC's
authority over common carriers is limited to the provision of services
for or in connection with common carriage. If common carriers are
providing non-common carrier products or services, one outcome might be
that neither the FCC nor the FTC would have jurisdiction to respond to
practices that harm consumers. And even in cases where the FCC can
respond, it lacks authority to seek consumer redress.
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\96\ See Federal Trade Comm'n v. AT&T Mobility LLC, No. 15-16585
Slip Op. (9th Cir. Aug. 29, 2016).
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This problem is intensified by the FCC's reclassification of
broadband Internet access service as a common carriage service.\97\
Because broadband providers are now deemed common carriers, not only is
their broadband service beyond the reach of FTC enforcement, but other,
non-broadband activities may be as well. Any company that has or
acquires the status of a common carrier will be able to argue that it
is immune from FTC enforcement against any of its lines of business by
virtue of its common carrier status.
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\97\ See In re Protecting and Promoting the Open Internet, FCC 15-
24 (2015) (report and order) (GN Docket No. 14-28).
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Even apart from the effect of the AT&T decision, unless the common
carrier exception is repealed, the Commission will no longer be able to
bring cases like the ``throttling'' actions against AT&T \98\ and
TracFone.\99\ In both cases, we alleged that the companies promised
their customers unlimited data but in reality severely limited data
usage by reducing--or throttling--the data speeds of high-usage
customers to the point that many common mobile phone applications, like
web browsing, GPS navigation, and streaming video, became difficult or
nearly impossible to use.
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\98\ FTC v. AT&T Mobility, Inc., https://www.ftc.gov/enforcement/
cases-proceedings/122-3253/att-mobility-llc-mobile-data-service.
\99\ FTC v. TracFone Wireless, Inc., No. 3:15-cv-00392 (N.D. Cal.
filed Jan. 28, 2015), available at https://www.ftc.gov/enforcement/
cases-proceedings/132-3176/straight-talk-wireless-tracfone-wireless-
inc.
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This type of basic consumer protection issue falls squarely within
the core mission of the FTC. Such matters are emerging with increasing
regularity in the telecommunications industry as major
telecommunications and broadband companies increasingly diversify. Yet
the common carrier exception may prevent the FTC from protecting
consumers from these problems and emerging issues presented by new
technologies and the blurring of industries. And under the AT&T
decision, we could wind up in a situation where the same service or
product (no matter how far afield from telecommunications) sold by two
different companies, one with common carrier ``status'' and one without
it, will be subject to unequal enforcement.
Removing the exception from the FTC Act would enable the FTC to
bring its extensive law enforcement experience to bear in protecting
consumers of common carriage services (and non-common-carriage services
offered by common carriers) against unfair and deceptive practices in
the same way that it can protect against unfair and deceptive practices
for other services. For example, we have a long history of privacy and
data security enforcement against a wide range of entities under our
jurisdiction that operate in the technology and communications
industries--companies like Microsoft, Facebook, Google, HTC, and
Twitter, app providers like Snapchat, Fandango, and Credit Karma, and
cases involving the Internet of Things, mobile payments, retail
tracking, crowdsourcing, and lead generators. Removing the exception is
the simplest, cleanest way to ensure continued consumer protection.
B. Jurisdiction over Nonprofit Entities
Currently, the FTC's jurisdiction over non-profits is limited.\100\
The FTC Act applies to ``persons, partnerships, or corporations,''
\101\ and the Act defines ``corporation'' as an entity that ``is
organized to carry on business for its own profit or that of its
members.'' \102\
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\100\ The Commission has jurisdiction over most non-profits in
several discrete areas, for example, under certain consumer financial
statutes such as the Truth in Lending Act and the Equal Credit
Opportunity Act. The Commission also has jurisdiction over non-profit
entities for purposes of the Clayton Act, most notably Section 7, which
prohibits mergers or acquisitions where ``the effect of such
acquisition may be substantially to lessen competition, or to tend to
create a monopoly.'' 15 U.S.C. Sec. 18.
\101\ 15 U.S.C. Sec. 45(a)(2).
\102\ 15 U.S.C. Sec. 44. Under this framework, the Commission can
reach ``sham'' non-profits, such as shell non-profit corporations that
actually operate for profit; for-profit entities falsely claiming to be
affiliated with charitable organizations who affirmatively misrepresent
that ``donations'' collected will go to charity; and organizations such
as trade associations that engage in activities that provide
substantial economic benefit to their for-profit members, for example,
by providing advice and other arrangements on insurance and business
matters, or engaging in lobbying activities.
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We recommend that our jurisdiction be extended to certain non-
profit entities. In healthcare provider markets, where the Commission
has particular expertise, the agency's inability to reach conduct by
various non-profit entities has prevented the Commission from taking
action against potentially anticompetitive behavior of non-profits
engaged in business.\103\ These concerns also apply to our consumer
protection mission. For example, despite many publicized data breaches
at nonprofit hospitals and universities, the FTC cannot challenge
unfair or deceptive data security or privacy practices of these
entities.\104\ These breaches have exposed the sensitive data of
millions of consumers, yet the Commission cannot act due to the non-
profit status of these entities. Further, while the Commission can use
Section 5 to reach ``sham'' non-profits, such as shell non-profit
corporations that actually operate for profit \105\ and sham
charities,\106\ these investigations require resource-intensive
factfinding to satisfy this standard.
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\103\ For example, the Commission generally cannot challenge
anticompetitive conduct, such as collusive behavior, by non-profit
hospitals. In three past enforcement actions, the Commission alleged
that groups of physicians and hospitals had participated in unlawful
price-fixing arrangements, but was able to sue only the physicians and
a for-profit hospital. See Piedmont Health Alliance, 138 F.T.C. 675
(2004) (consent order), available at https://www.ftc.gov/enforcement/
cases-proceedings/0210119i/piedmont-health-alliance-inc-et-al-matter;
Tenet Healthcare Corp./Frye Regional Medical Center, 137 F.T.C. 219
(2004) (consent order), available at https://www.ftc.gov/enforcement/
cases-proceedings/0210119h/tenet-healthcare-corporation-frye-regional-
medical-center-inc; Maine Health Alliance, 136 F.T.C. 616 (2003)
(consent order), available at https://www.ftc.gov/enforcement/cases-
proceedings/0210017/maine-health-alliance-william-r-diggins-matter.
\104\ A substantial number of reported breaches have involved non-
profit universities and health systems. See Privacy Rights
Clearinghouse Chronology of Data Breaches (listing breaches including
breaches at non-profits, educational institutions, and health
facilities), available at http://www.privacyrights.org/data-breach/new.
\105\ See, e.g., FTC v. Ameridebt, Inc., 343 F. Supp. 2d 451, 460-
62 (D. Md. 2004) (denying motion to dismiss where FTC complaint alleged
that purported credit counseling organization incorporated as a non-
profit entity was a ``de facto for-profit organization''). The history
of the FTC's case is available at https://www.ftc.gov/enforcement/
cases-proceedings/0223171/ameridebt-inc.
\106\ See, e.g., FTC et al., v. Cancer Fund of America, Inc. et
al., No. CV15-884 PHX NVW (D. Az. filed May 19, 2015), available at
https://www.ftc.gov/enforcement/cases-proceedings/122-3005-x150042/
cancer-fund-america-inc.
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IV. Conclusion
Thank you for the opportunity to provide the Commission's views. We
appreciate Congress's confidence in the FTC's ability to protect
consumers and, through our enforcement, education, and policy efforts,
we will ensure that your confidence is well-placed. The FTC remains
committed to finding ways to enhance its effectiveness in protecting
consumers and promoting competition, to anticipate and respond to
changes in the marketplace, and to meet current and future challenges.
We look forward to continuing to work with the Committee and Congress,
and we would be happy to answer any questions that you and other
Members may have about the FTC.
The Chairman. Thank you, Madam Chair.
Commissioner Ohlhausen.
STATEMENT OF HON. MAUREEN K. OHLHAUSEN, COMMISSIONER, FEDERAL
TRADE COMMISSION
Ms. Ohlhausen. Chairman Thune, Senator Blumenthal, and
members of the Committee, thank you for the opportunity to
appear before you today. I'm FTC Commissioner Maureen
Ohlhausen, and I will briefly address the FTC's efforts to
protect consumers and competition in the face of technological
change and increasing globalization.
These two trends offer substantial benefits to American
consumers and businesses through new products, business models,
and competition. Unfortunately, they also provide new avenues
for unfair and deceptive practices. Thus, the FTC is committed
to addressing the impact of new technology and increasing
globalization as part of our law enforcement and policy
efforts. In this work, we strive to ensure our approach remains
flexible and effective in the face of dynamic conditions.
The FTC has been at the forefront of combating deceptive
practices on the platforms that consumers use on a daily basis,
including smartphones and connected devices. Our enforcement
actions have included cases against ISPs and some of the
biggest telecom and Internet companies. For example, T-Mobile
and AT&T recently settled FTC allegations over cramming, which
is the placement of unauthorized third-party charges on
consumers' phone bills. Apple, Amazon, and Google settled FTC
allegations that they billed parents for items kids bought in
mobile apps without the parents' consent. TracFone settled FTC
charges that it made deceptive claims concerning its unlimited
data service. We also continue our aggressive enforcement and
education efforts in the area of Do Not Call, and, in
particular, the fight against automated telephone calls, known
as robocalls.
The FTC is also the primary privacy and data-protection
agency in the U.S. In 2015, in the Wyndham case, the Third
Circuit affirmed the Commission's authority to challenge
unreasonable data security failures. The Wyndham matter also
serves as an important reminder that companies who store
sensitive consumer data should create reasonable data security
measures and keep the promises they make to consumers about
protecting their information.
Another hallmark of our privacy work is protecting children
online. The Children's Online Privacy Protection Act, or COPPA,
requires websites and apps to obtain parental consent before
collecting personal information from children under 13. To
date, the FTC has brought over 20 COPPA cases protecting
children and collecting millions of dollars in penalties. As
children have increasingly used mobile phones and connected
devices, we've brought actions against companies with child-
directed apps that allowed third-party advertisers to collect
kids' personal information and tracked kids' locations without
parental consent.
In addition to enforcement, the Commission regularly
employs other tools. For example, the FTC held a workshop on
the Internet of Things, as you mentioned, Senator, a technology
with the potential to revolutionize many fields, including
manufacturing, logistics, medicine, transportation, and energy.
The ability to collect and use large amounts of information
also raises important consumer privacy and data issues--data
security issues, however. Following the workshop, we published
a staff report addressing how longstanding privacy principles
can be adapted to the Internet of Things, and recommended best
practices. The report also stated that, given the rapid pace of
technological innovation, Internet of Things specific
regulations would be premature.
I would also like to reiterate the Commission's
longstanding bipartisan request for Congress to repeal the
common carrier exemption. Although the FTC has nearly a century
of experience protecting consumers across many industries, the
exemption from our jurisdiction for common carriers frustrates
effective consumer protection with respect to a wide array of
activities, including fraud in billing practices in the
crucially important telecommunications and Internet industries.
This is particularly true in light of the Ninth Circuit's
recent decision in the AT&T case, which held the common carrier
exemption was status-based and thus extended to non-common-
carrier activities of common carriers. This may impact our
ability to prevent cramming, deceptive marketing, COPPA
violations, and unwanted calls affecting millions of consumers.
Along with technological innovation, globalization has also
greatly impacted American consumers and businesses. Thus, the
FTC has worked to build strong relationships with foreign
counterparts and organizations to further cooperation on
enforcement, promote convergence toward sound economic policies
and enhanced due process.
To end on a broader note, I want to emphasize that the
FTC's institutional structures and culture facilitate an open
exchange of ideas among the Commissioners. I believe this
process of finding common ground improves the quality of our
decisions, and thus furthers our mission of protecting
consumers. Occasionally, however, I have respectfully
dissented, particularly where I believed FTC action would not,
on balance, make consumers better off. Yet, I'm confident that
my colleagues share with me the goal of ensuring that our work
provides a net benefit to consumers, even if we don't always
agree on how to reach that goal.
I look forward to working with the Committee and my
colleagues to continue our important work to protect consumers
and preserve competition.
The Chairman. Thank you, Commissioner Ohlhausen.
Commissioner McSweeny.
STATEMENT OF HON. TERRELL McSWEENY, COMMISSIONER, FEDERAL TRADE
COMMISSION
Ms. McSweeny. Thank you very much, Chairman Thune, Senator
Blumenthal, and members of the Committee, for inviting us here
today. I'm Terrell McSweeny, a Federal Trade Commissioner. And,
like my colleagues, I look forward to speaking with the
Committee about our work, our priorities, and how we protect
American consumers from scams and ensure a competitive
marketplace.
The Federal Trade Commission safeguards consumers from
unfair or deceptive acts and practices. Since its founding--and
thank you for acknowledging our long history with this
committee--the FTC has followed American consumers from the
corner store of 1914 to the Internet-connected wearable of
today.
Much of today's discussion will focus on the Internet of
Things, privacy, and data security, but our enforcement actions
in those areas are a seamless part of our overall enforcement
agenda, an agenda that is rooted in the principles that
consumers should be treated fairly and honestly in the
marketplace.
Even as we examine digital technologies, we continue to
police against more analog frauds. For example, in the last
week, we challenged a sweepstakes fraud that targeted senior
citizens with promises of million-dollar prizes, but instead
stole their money; we banned abusive debt collectors and shut
down a phony business directory scam that stole millions from
small businesses.
On the debt-collection front alone, in the first 9 months
of this year we have recovered $94 million for consumers and
banned 30 companies from ever working in debt collection again.
These are the frauds that our attorneys and investigators
fight every single day. These scams prey on people who are
struggling, the elderly, and underserved communities. They are
perpetrated by unscrupulous fraudsters, and ending their
operations is a part of our bipartisan mission.
Policing frauds and scams are just one aspect of our
efforts to protect American consumers. We also work closely
with State and local enforcement partners throughout the
country. Our collaboration with State attorneys general was
integral in shutting down a fraudulent charity, Cancer Fund of
America, which took in millions of dollars and largely served
as a slush fund for its executives.
The Commission also works with partners on the local level.
Each year, we hold multiple Common Ground Conferences around
the country. These events give local law enforcement, social
service organizations, community institutions, and regular old
consumers a better understanding of our consumer protection
work and helps us form the partnerships that both inform our
enforcement and lead to stopping frauds in the marketplace.
Our Every Community Initiative recognizes that fraud
impacts each and every community in our country. This could
mean undertaking efforts to combat Medicare fraud among our
seniors, mortgage modification frauds in distressed
neighborhoods, or ``notario'' fraud in Latino communities. The
initiative works with local partners, distributes materials to
libraries and senior centers and other gathering places, and
works with ethnic media to get specific information to media
outlets that directly serve their communities.
In addition to our Every Community Initiative, last year we
relaunched IdentityTheft.gov, creating an easy-to-use one-stop
shop of information and personalized recovery plans for
consumers experiencing identity theft. Our team is currently
working on streamlining what was once a time-consuming and
difficult process. Unfortunately, however, in this environment,
identity theft remains a top consumer complaint in our sentinel
system year after year.
Educating businesses and entrepreneurs is a major part of
our effort to improve data security. This year, we launched our
Start with Security program to help guide businesses through
the process of developing strong data security procedures.
Through sessions in various cities and the publication of our
Start With Security Guide, the FTC has helped businesses of all
sizes develop plans to safeguard their data.
Finally, we keep pace with developing technologies. Take
for instance FinTech, or financial technology. This is the
emerging technology of payments, banking, and lending. In the
last year, we've brought cases involving the deceptive use of
crowd-funding platforms and stopped a fraudulent bitcoin mining
operation. We're also holding workshops on marketplace lending
and ransomware, crowd funding, and peer-to-peer payments.
Our experience enforcing statutes like the Gramm-Leach-
Bliley Act, the Truth in Lending Act, the Electronic Funds
Transfer Act, and the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, and others, gives the FTC the
expertise and capacity to protect consumers as traditional
banking is disrupted by new technologies and new services while
at the same time facilitating this important innovation, which
has tremendous consumer benefit.
We're a dynamic agency, even though we've been around for
100 years, and one that has always been protecting consumers
wherever they are. The FTC will continue to be a bipartisan
protector of the American consumer and markets.
We look forward to answering your questions. Thank you for
having us here today.
The Chairman. Thank you, Commissioner McSweeny.
Let me just start. I want to ask about data security--it
has been covered in your remarks, and some of ours as well--and
the Commissioner's enforcement authority. The recent news of
yet another massive data breach, this time involving at least
500 million Yahoo accounts, underscores the need to protect
consumers against unreasonable data security practices that put
them at risk of identity theft and financial harm. At the same
time, there are questions that remain about the Commission's
authority in this area. On the one hand, the Third Circuit's
ruling last year would appear to be a major victory
underscoring your authority to enforce against lax data
security practices. On the other hand, as I noted in my opening
remarks, the Commission's own recent administrative ruling
raises serious questions about whether the FTC's actions are
always predicated on substantial injury to consumers.
When weighing whether to bring a case alleging unfair
practices, the Commission must assess whether the practices
causes substantial injury, which has traditionally meant
monetary harm, not emotional impact or other subjective types
of harm. Chairwoman Ramirez, what do you believe it means for
harm to be ``substantial''? And what are the implications for
the FTC's approach to data security cases?
Ms. Ramirez. Thank you for the question, Chairman Thune.
I agree with you that the issue of data security is a very
significant concern, and it's an issue that we've been
addressing for well over a decade. I will note that all of our
cases do comply with the standard for unfairness that is set
out in our statute, which requires that there be substantial
injury. However, I will disagree with you in one respect, and
that is that there is no limitation or requirement that the
harm be economic. Most of our cases do allege harm that is
economic and tangible, but there is no such restriction. And in
a few instances that are appropriate, we do feel that it's
proper for the agency to address serious intangible harms, like
privacy harms. That would include the infringement and
potential revelation of private information, as well as privacy
intrusions.
I'll give you one example, and that's our Aaron's case,
which involves a company that rented out computers. As a method
to attempt to address situations where customers did not either
make rental payments or did not return these rented computers,
they used software that allowed and basically captured, via
camera, what was happening inside a person's home. In that kind
of a situation, I believe that it would be absolutely
appropriate for the agency to take action, and that it is
important for us--when there is a serious intrusion of that
type, for the Commission to take action.
The Chairman. So, substantial harm, in your mind, does not
just constitute simply an economic or monetary----
Ms. Ramirez. Again, in most instances, that is likely to be
the harm at issue, but, in certain cases, and, in particular, I
think, in privacy and data security cases, there may be another
more intangible harm that may be implicated. And I believe that
a privacy intrusion would be one of those instances.
The Chairman. Regarding the FCC's Title II privacy
proceeding, the Chairman, Tom Wheeler, has stated that the FTC
filed good comments, and the FCC's final rule will look a lot
like that. I appreciate Chairman Wheeler's deference to the
FTC's experience regarding consumer privacy protection, but I
also would like to know whether each of you believes that
consumers would benefit from the FTC having an opportunity to
review the text of the FCC's new privacy proposal and publicly
comment on it before the FCC votes. And, if not, could you
explain why?
We'll start with you, Chairwoman Ramirez, and then hear
from each of the Commissioners.
Ms. Ramirez. Mr. Chairman, as you've noted, we have had an
opportunity to publicly comment and provide our suggestions to
the FCC about how they can improve their proposed framework. If
it's appropriate for us to have an opportunity to do that
again--and I'd have to defer to Chairman Wheeler and his
colleagues as to whether it's appropriate for us to be
commenting publicly again, and having another opportunity to do
that--we are certainly happy to do so.
I will say that we do engage in regular conversations with
the Federal Communications Commission, both at the staff level
as well as at more senior levels and my level, to discuss the
approach that we take when it comes to privacy. And I do, as
you already noted--do know that they take our comments very
seriously.
The Chairman. OK. And, before they vote on it and it
becomes more final, do you think it would be useful and helpful
for the FTC to be able to react to the current iteration of
that proposal?
Ms. Ramirez. Again, I have to defer to them on what's
appropriate for their process. I don't want to intrude on that
process. But, at the same time, we're certainly happy to
provide any additional comments and offer our own suggestions.
Certainly.
The Chairman. Commissioner Ohlhausen.
Ms. Ohlhausen. Thank you, Senator.
I was very pleased that the FTC was able to file
bipartisan, unanimous comments approving our staff comments to
the FCC on these important issues. And I continue to try to,
through other means, bring attention to the FTC's time-tested
approach in this area.
Like Chairwoman Ramirez, I would certainly want to be sure
we were, you know, permitted to weigh in, but I think it could
be beneficial, given the years and years of experience the
FTC's brought to consumer privacy, to be able to give some
additional feedback to the FCC.
The Chairman. Chairman McSweeny?
Ms. McSweeny. Like my colleagues, I would reiterate that we
stand ready to work with the Federal Communications Commission.
You know, I want to make sure that I underscore the fact that,
in our initial bipartisan comment to the FCC, we were very
supportive of their proposed rule in this area. We do believe
that, like the FTC, the FCC shares our goals of transparency,
consumer choice, and security, and that they have an important
role to play in protecting consumer privacy as they undertake
this rulemaking. So, if it's--as my colleagues have said--if
it's permissible for us to again comment, I'm sure we'd be
willing to do so if it comported with their rules and
procedures.
The Chairman. Senator Blumenthal.
Senator Blumenthal. Thanks, Mr. Chairman.
Coming back to data breaches, Yahoo and the like--they have
affected Home Depot, Target, Experian, Anthem, a variety of
nonprofits, insurers, hospitals, and literally every major
collector or storer or possessor of data has been subject to
this kind of attack or breach that, in many instances, could
have been prevented by reasonable and appropriate measures to
safeguard consumer data that these very entities collect.
So, my question is, under Section 5 and the report that the
FTC issued--it's called ``Protecting Consumer Privacy in an Era
of Rapid Change''--aren't there changes in the law that could
make the FTC a more effective enforcer of privacy, to require
more robust security practices and more honest disclosure by
these companies and other entities about what they do? I would
like to ask each of the panel members whether they support the
Data Security and Breach Notification Act that Senator Nelson
and I have introduced.
Chairwoman Ramirez?
Ms. Ramirez. Senator, as I noted before, this is an
incredibly important issue. I think, frankly, that data
security is one of the most significant challenges that we face
as a Nation. And I believe that, while we have been able to do
very important work using our Section 5 authority at the
Commission, including not only bringing enforcement actions,
but then also providing guidance to the business community, I
do believe that it is necessary for Congress to take action in
this area. It would be very helpful for there to be Federal
legislation that would give additional authority to the FTC,
including providing for civil penalty authority, and among
other things, also providing and giving us jurisdiction over
nonprofits, which also see significant--have experienced
significant breaches. So, those would be two areas where we
would benefit from additional authority.
So, yes, I am in favor of the proposed legislation and
believe it's something that ought to happen.
Senator Blumenthal. Commissioner Ohlhausen?
Ms. Ohlhausen. I agree with Chairwoman Ramirez that data
security is one of the biggest issues facing businesses and
consumers today, and, therefore, facing the FTC. And I have
been supportive of having Federal data security and breach
notification legislation that would give the agency civil
penalty authority and authority over nonprofits.
Senator Blumenthal. Thank you.
Commissioner McSweeny?
Ms. McSweeny. I believe you're witnessing one of those
areas of bipartisan agreement among the Commissioners, because
I, like my colleagues, support comprehensive data security
legislation, as well.
I'd just like to underscore an important point here that,
as we are on the cusp of this Internet of Things facilitated,
sort of, innovation and revolution connecting all of these
different parts of our daily lives, we have a significant
challenge, which is that something like 84 percent of U.S.
households are deeply concerned about the privacy and security
implications of this technology. So, if we want this innovation
to flourish, we want this marketplace to flourish, which I
believe we do, we need to address their security concerns so
that consumers feel comfortable adopting these technologies.
Senator Blumenthal. I think that point is very, very well
taken. There's no reason for this new frontier of privacy to be
a Wild West. In fact, if it is, it will discourage innovation,
invention and consumers adopting and adapting to this new world
that increasingly confronts them.
Let me come back to an issue that Commissioner McSweeny
raised, the plethora of complaints that are received about the
Do Not Call List. States have them. The Federal Government has
them--Do Not Call Lists. And yet, one of the most common
sources of complaints to me and, I'm sure, my colleagues, is
that they receive unwanted and unsolicited calls. Again, as
technology enables robocalling and other new advances in
outreach to consumers, do we need a different system, new
legislation? What has to be done to make it more effective?
I have advocated, for example, for a ban on robocalls. What
would this panel think about more effective new action in this
area?
Ms. Ramirez. As you noted, Senator Blumenthal, this is an
area that is a frustrating one for us. We do engage in
significant efforts to try to ensure compliance with current
law. But, at the same time, there's no question technology has
enabled malefactors to avoid and bypass the law in this area.
So, what we have done, in addition to continuing active
enforcement, is to, frankly, try to utilize technology as a way
of stopping these illegal robocalls. And so, we have--as
already has been noted, we have had challenges to, basically,
seek assistance from the private sector and ask for the
development of technology that might help in this arena. We're
also consistently engaging in discussions with the Federal
Communications Commission to see if there might be appropriate
action that can be taken at their end to help block these
unwanted calls.
So it's an area that we are certainly very keenly aware of
and understand the concerns, and are working both to develop
technological solutions as well as determine whether it's
appropriate for other form of regulation to assist.
Senator Blumenthal. My time is expired. I don't know
whether the other members of the Commission have views, but I
would welcome them in writing if you do. I don't want to take
more time now. If we have a second round of questions, maybe we
can return to this issue.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Blumenthal.
Senator Heller is up next.
STATEMENT OF HON. DEAN HELLER,
U.S. SENATOR FROM NEVADA
Senator Heller. Mr. Chairman, thank you.
And, to the Commissioners, thank you for taking time and
being here today. I certainly do appreciate it.
I want to talk a little bit about--a little bit about the
state of Nevada and the tourism being the lifeblood of the
economy. I guess I'll just let the statistic speak for itself.
I don't think there's anybody that hosts better than the
state of Nevada. I think the rest of the world knows it,
because nearly $60 billion of travel spending is injected into
Nevada's economy every year, accounting for about 13 percent of
the State's annual GDP. Last year, the Las Vegas--Las Vegas
experienced a record year, so it continues to grow, surpassing
42 million tourists. The Las Vegas Convention and Visitor
Authorities has estimated that our tourism economy generates
more than $50 billion annually and supports over 366,000 jobs
in southern Nevada alone, which is about 40 percent of the
total jobs in that area of the state. I think most of you know
that lodging and gaming industry is a big part of that. So,
when travelers come to Nevada, they expect to stay in some of
the nicest resorts in the world. They expect to be treated like
kings and queens, and pampered with the latest and the greatest
of amenities. It's all part of the Las Vegas and Nevada
experience.
Chairwoman Ramirez, you and I had several discussions on
some of these resort fees, and I'd like to move to that area.
Now, the Commission offered some guidance in 2011. In your
opinion, do you believe that the consumers have benefited from
those 2011 practices coming from the Commission for lodging and
for the industry as a whole?
Ms. Ramirez. Senator, yes. And so, let me just provide a
little bit of background here so that my----
Senator Heller. Don't take up too much of my time.
Ms. Ramirez. I promise I won't.
Senator Heller. All right.
Ms. Ramirez. Back in 2012, we did provide some guidance
with regard to the use of hotel resort fees.
Senator Heller. Yes.
Ms. Ramirez. And we did have a concern that mandatory
resort fees were being separated from room rates, and we were
also concerned that those mandatory resort fees were not being
properly disclosed to consumers. And so, we did provide some
guidance indicating that it would be adequate to promptly--
after advertising a room rate, to promptly thereafter show any
mandatory resort fee.
I will note, however, that, although that guidance that we
provided back in 2012 has improved the conduct of many
companies when it comes to the effective disclosure of resort
fees, I have become increasingly concerned about certain
developments since then that have raised and--raise questions
about whether that is enough when it comes to effective
disclosure.
Senator Heller. So, what brought your concern? What
prompted your concern?
Ms. Ramirez. So, let me note that----
Senator Heller. I guess the question is, How many
complaints have you received?
Ms. Ramirez. Well, I don't have an--a number, but let me
just say that----
Senator Heller. I do.
Ms. Ramirez.--let me just say that it's important for us to
continuously evaluate our positions, given the evolving
marketplace. This is one of those areas where I think it is
appropriate for us to take another look, because--number one,
we've seen a surge in the use of mandatory resort fees being
separated from room rates. Secondly, we've seen an increase in
the use of comparison sites to search for information about
hotels. We've also seen a rise in the use of smartphones that
have very small screens. Additionally, I think we have a more
sophisticated and refined understanding about how consumers
actually process----
Senator Heller. OK, so----
Ms. Ramirez.--information when----
Senator Heller.--the question is----
Ms. Ramirez.--it comes to----
Senator Heller. You're explaining all this. But, how many
complaints have you actually received?
Ms. Ramirez. I can't give you a figure. I can certainly
provide you additional information. What I can tell you is that
this is a concern that we have----
Senator Heller. Well, I can tell you what the number is.
Ms. Ramirez.--heard about breaking up----
Senator Heller. Eight or ten.
Ms. Ramirez.--fees.
Senator Heller. Eight or ten. Eight or ten complaints.
Ms. Ramirez. I'm happy to provide you additional
information to--in terms of the number of complaints. What I
can tell you is that I have received--we have received consumer
complaints. We have received----
Senator Heller. How many----
Ms. Ramirez.--concerns about this area.
Senator Heller.--consumer complaints--how many consumer
complaints do you get on consumer fraud?
Ms. Ramirez. We get hundreds of thousands, if not----
Senator Heller. Millions.
Ms. Ramirez.--millions, of consumer----
Senator Heller. Millions. You get eight or ten on this. And
now you want to enact new regulations.
Ms. Ramirez. No. It's an issue that I think is very
appropriate for us to take a look at. It's a concern----
Senator Heller. Well----
Ms. Ramirez.--of mine. And I think it's something that, as
an agency, as the marketplace evolves, and as consumers use the
online marketplace, I think it's important for us to make sure
that they can be confident in that online marketplace.
Senator Heller. Have you taken any enforcement action
against any hotel or resort operators on resort fees? Any
actions?
Ms. Ramirez. We have sent warning letters, and----
Senator Heller. Right. Right. I understand that. Twenty-
two, I think----
Ms. Ramirez. As of----
Senator Heller.--total.
Ms. Ramirez.--right now, what we're doing is, I'm taking
another look at this issue, because I think it's one that's of
serious concern. And in order to----
Senator Heller. OK.
Ms. Ramirez.--ensure that consumers have confidence in the
marketplace--before I take any--we take any enforcement action,
I have been engaging in discussions with the industry to see if
there might be a voluntary approach that can be taken here to
address some of these concerns.
Senator Heller. This--OK, thank you. Thank you for your
comments.
Ms. Ohlhausen, you've been on the Commission since 2012. In
your experience, does the Commission often spend time
developing new guidance on issues, having received only eight
complaints and zero enforcement actions in 5 years?
Ms. Ohlhausen. Well, I haven't done a study of how many
complaints drive actions that we've taken. I would say that we
do get information from a variety of sources. And particularly
on the resort fees, I've been encouraged by the interactions
we've had with the hotel and gaming industries on ideas they
have for making progress in this area.
Senator Heller. Do you believe that the current disclosures
implemented as a result of the previous guidance in 2011 are
deceptive?
Ms. Ohlhausen. I haven't applied the deception test to it.
I would have to see what consumers--how they react to it. I
certainly believe that you can have a disclosure that is
nondeceptive, but the question is, Can you have one also that
is improved or has technology changed in a way that makes it
not as informative to consumers as previously available.
Senator Heller. So, are you comfortable with the rulemaking
authority on resort fees?
Ms. Ohlhausen. I don't anticipate, just speaking for
myself, that this is where we will make a rule. I'm still in
the phase of gathering information and hearing from the parties
and hearing from our staff, our economists, what information
they have, to determine what the correct next step is.
Senator Heller. Mr. Chairman, my time's run out.
The Chairman. Thank you, Senator Heller.
Senator Klobuchar is up next.
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you very much.
And thank you all for being here today. You do very
important work. I especially wanted to thank you for the work
on Volkswagen at the Commission. I know that was a difficult
issue, and I thank you for that. I understand you, just this
morning, won an important case in the Third Circuit--Is that
right?--on hospitals, which we appreciate. If we have more
time, you can talk about that, as well.
I thought I'd start, before going to the issue that I'm
most focused on with the FTC, which is the prescription drug
prices, by following up on not the same, but a related travel
issue. I'm Chair of the Tourist Subcaucus, and I know Senator
Schatz does a lot of work on that, as well.
Chairwoman Ramirez, in March, when you appeared before the
Judiciary Antitrust Subcommittee, of which I'm the Ranking
Member, we discussed my concern about concentration in the
online travel agency market. Specifically, I asked about the
Expedia Accelerator Program, under which a hotel can pay
Expedia more and obtain a better position in search results. We
discussed the 2013 letters you sent to search, travel, and
retail sites reminding them that they must be clear when their
results are not natural search results. At that hearing, you
committed to looking into whether the program complies with
Section 5 of the Federal Trade Commission Act. What progress
have you made on this matter?
Ms. Ramirez. Senator, again, thank you for the concern that
you raised. Unfortunately, I can't discuss publicly any
specific practices of particular companies. But, I assure you
that we certainly did hear the concerns that you've raised, and
I also can assure that we are committed to rooting out any
anticompetitive conduct.
Senator Klobuchar. Thank you.
Now, on to prescription drugs. As you know, one drug has
made a lot of press lately. And that was the 500-percent
increase to the EpiPen. There have been hearings. There have
been the usual cycle of people complaining. Then there are mea
culpas, then the drug price gets reduced, and then we start the
cycle again with the next drug. What I hope my colleagues are
aware of is that four out of ten of the top-selling drugs in
America have, in fact, gone up over 100 percent in the last few
years. Insulin has gone up three times the amount. This is
getting to be an untenable situation for the American people.
There are a number of bills out there that I think would be
helpful. One of them is the Pay for Delay bill that I have with
Senator Grassley, which CBO estimates would bring in $3 billion
for taxpayers, even more for individuals. Same with the CREATES
Act, which forces brand-name drug companies to give samples so
we can create generics.
But, on the Pay for Delay, obviously you guys did some work
here on the FTC v. Actavis case, which was an important
victory.
Chairman Ramirez and Commissioner McSweeny, do you believe
the bill that I have with Senator Grassley on the CREATES Act
or the Pay for Delay bill--would these be helpful in trying to
get more generics on the market and get more competition?
Ms. Ramirez. Senator, yes. You noted the victory that the
FTC had in the Actavis case. I think that certainly was an
important victory for the agency that allows us to do important
work in the pay-for-delay arena. However, I do believe that
your proposed legislation would buttress our efforts and, by
creating a rebuttable presumption, would further strengthen our
ability to tackle situations where we believe there might be
anticompetitive conduct.
Ms. McSweeny. And I agree.
Senator Klobuchar. OK. Very good.
You want to add anything, Commissioner?
Ms. Ohlhausen. Well, I've been very supportive of the FTC's
Pay for Delay enforcement. And I also generally have concerns
about the ability of a competitor to abuse a government process
to keep competitors out of the market.
Senator Klobuchar. Thank you.
Evergreening or product hopping is another type of conduct
that has raised antitrust concerns. For example, Allergen tried
to force patients taking Namenda, which is a drug used to treat
Alzheimer's, to switch to a new version of the drug before the
generic was out and available. Instead of suing after the fact,
the New York Attorney General used the antitrust laws and
obtained a court order blocking the plan until after generic
competition was available. According to one report, that action
averted an estimated $6 billion in increased Medicare drug
spending.
Chairwoman, do you believe product hopping can cause
consumer harm? And could you explain it to my colleagues?
Ms. Ramirez. Senator, yes. This is another area of concern.
I think it's an area that we have to be careful in, because, of
course, we do want companies to continue to make improvements
with new drugs, but, at the same time, if a company makes a
minor improvement in a drug product that ends up having little
or no therapeutic benefit and has anticompetitive consequences,
that could certainly violate the antitrust laws and would be of
significant concern to us.
Senator Klobuchar. And the idea here is that a company will
take a drug and maybe go from a tablet to a capsule or maybe to
a 24-release capsule, and that extends their patent
protections. That's why they call it ``evergreening.'' Then
another competitor or a generic can't come in the market. So,
you can just keep extending and extending, and then we have no
competition at all.
Ms. Ramirez. That's right. What would happen would be that
that would allow the branded drug manufacturer to bypass
automatic generic substitution laws, and thereby prevent or
impede and get in the way of a very effective distribution
method, and that would end up potentially harming consumers.
Senator Klobuchar. And this could be part of the reason
that our drug prices in America are double the average prices
in Canada?
Ms. Ramirez. This would be one of the areas, again, that
causes us concern. And we certainly are, of course, concerned
about significant hikes that we've seen in prices. So, it is
a--it can be a concern.
Senator Klobuchar. OK.
And my last question, just maybe a sentence answer, is that
I've asked the FTC to investigate specifically whether Mylan
Pharmaceuticals used incentives or exclusionary contracts with
insurers, distributors, or pharmacies to deny an alternative
product access to the market. I also asked you to provide any
guidance or policy proposals to make these drugs more
competitive and eliminate the ability of some drug
manufacturers to reap windfall profits at the expense of
consumers.
I know I asked for a response within 90 days, but can you
update me on where the Commission is in answering these
questions?
Ms. Ramirez. Certainly. Again, let me just say that we
share the concerns that you've expressed, Senator Klobuchar,
and we absolutely are committed to making sure that there's
enforcement of the antitrust laws. We are in the process of
preparing a response, and will, in short order, have a response
to you.
Senator Klobuchar. Thank you.
Thank you, to all three of you, for your good work.
The Chairman. Thank you, Senator Klobuchar.
Senator Schatz.
STATEMENT OF HON. BRIAN SCHATZ,
U.S. SENATOR FROM HAWAII
Senator Schatz. Thank you, Mr. Chairman.
Commissioner Ramirez, I wanted to start with credit
reports. The FTC found that 1 in 20 consumers have errors
significant enough to materially hurt their credit scores.
That's about a 5-percent error rate. And that means about 10
million individuals are likely unable to get a loan for a car
or a mortgage and, in some instances, are prevented from
getting the employment that they need as a result of an
erroneous credit score.
The FTC recently followed up on its earlier study and found
that nearly 70 percent of consumers with errors in their credit
score were still unable to resolve those errors 2 years later.
The FTC cited problems with the way the credit reporting
agencies resolve disputes and communicate with consumers.
I guess my question for you is: what is the FTC doing to
resolve this problem? As I hear about the Do Not Call and I
hear about lots of individual consumer issues, resort fees--all
of those important--but, I can't imagine that there is an issue
larger than one that is potentially impacting 10 million
Americans and their ability to, basically, participate in the
economy.
Ms. Ramirez. Senator, thank you for your question.
I completely agree, this is an incredibly important issue.
Unfortunately, I cannot comment on specific companies, but what
I will say is that we take very seriously the role that we play
here in enforcing the Fair Credit Reporting Act and other
applicable law, including Section 5. And so, this is a priority
area for us, and we do, and have, brought a number of actions
relating to this area.
In addition to that, we also cooperate extensively with the
Consumer Financial Protection Bureau, which also has
jurisdiction in this area. And so I can assure you that it's a
priority for us to ensure that consumers have, and are
provided, accurate consumer reports. It is a top priority, and
it's something that we are certainly looking at.
Senator Schatz. Commissioner Ohlhausen?
Ms. Ohlhausen. I agree with Chairwoman Ramirez. The Fair
Credit Reporting Act, I think, is a very, very useful statute,
both for consumers and businesses, but we have to make sure
that it is providing accurate information on which those credit
and employment and other important decisions are made.
Senator Schatz. Commissioner McSweeny.
Ms. McSweeny. I would second what my colleagues have said.
It's a huge priority. As you point out, it's absolutely
essential to consumers who are trying to access credit and
function in the marketplace to have accurate information on
their credit reports. And it's an essential part, also, of
dealing with problems like identity theft.
So, we have to do several things. One is remind people of
their obligations under the Fair Credit Reporting Act, make
sure we're enforcing all through the marketplace, and continue
to work with the credit reporting agencies to make sure that
they have good processes in place to mitigate and address
concerns and inaccuracies in reports.
Senator Schatz. Do you think they have good processes in
place right now?
Ms. McSweeny. I think that we could continue to see some
improvements in that area, especially with regards to including
the speed with which people could correct errors on their
credit reports. I have anecdotally heard the same kinds of
problems with people having to go through really strenuous,
time-consuming processes to get corrections made.
Senator Schatz. I just want to add one thought for you to
consider, which is the potential for disparate impact in
minority communities when it comes to erroneous credit reports,
because I think it just stands to reason that people with
resources--financial, time, access to people who can help them
to navigate these challenges--are going to have a better shot
at untangling an erroneous credit report. And if you are a
shift worker, if you have limited English proficiency, if you
are in any number of circumstances that make it difficult to
unravel this, then I think there's a tremendous potential for
disparate impact.
Chair Ramirez?
Ms. Ramirez. I absolutely concur with you, and I assure you
that, in all of the work that we do, we are also thinking about
how conduct and activities in the marketplace might impact low-
income consumers, minorities, and others who may be
underserved. So absolutely, this is certainly a priority for
us.
Senator Schatz. My final question goes back to this data
security issue. I guess I just wanted to say that we talk a lot
on this committee about breach notification. And I think that's
critically important. But, if we're talking about 900 million
individual records that are breached, plus whatever number ends
up being assigned to the Yahoo breach, it's not any longer
about notification, it's about preventing the breach.
My question for the Commission, and I'll take it for the
record, in the interest of time, is, What's a reasonable data
security requirement? And not just under, sort of, the
interpretation of the statute, but also, are you in a position,
given the current law, to increase your data security
requirements on the basis that they're obviously not working?
Can you use this ``reasonable'' test in a commonsense way? Can
you say, ``It is not reasonable if it is not preventing data
breaches in the hundreds of millions''? I'll take that for the
record.
But, I'd really like for the Commission to get more
aggressive when they consider whether the requirement is
reasonable, or not. Because it seems to me, on a common sense
level, it's just not working.
Thank you.
The Chairman. Thank you, Senator Schatz.
And please get that back on the record, that would be
great.
Senator Moran.
STATEMENT OF HON. JERRY MORAN,
U.S. SENATOR FROM KANSAS
Senator Moran. Mr. Chairman, thank you. Thank you and
Senator Blumenthal for the hearing.
Madam Chairwoman and Commissioners, welcome to our
committee.
I want to talk about the topic--I'll direct my question to
the Chairwoman, although if either of the other Commissioners
have any comments, I would welcome that, as well. The topic I
want to talk about is renewable identification numbers, known
as RINs. This is the enforcement mechanism used by the EPA when
it comes to determining whether the renewable fuel standard is
being complied with. And, in the process of--there are
obligated parties to demonstrate that they are complying with
the EPA requirements of the Renewable Fuel Standard, but RINs
become traded, separate from the actual fuel. And as that
occurs, as that disassociation occurs between the unit of
biofuel and you have an instrument that then is traded, my
question is, Is there FTC oversight over that transaction? And
I assume that the oversight would be in regard to any potential
fraud that may exist in that market. My understanding is that
the Office of Air Quality and Transportation within the EPA is
the entity that's charged with the monitoring of and policing
of RINs. But, I'm curious as to whether or not there's a role
the FTC does play, should play, as buyers and sellers of this
increasingly expensive compliance monitoring tool becomes so
prevalent.
Ms. Ramirez. Chairman Moran, I'm certainly aware of the
concern that you have. And there may be some authority that the
FTC has if there were evidence of manipulation in this
particular market. I'm happy to take a closer look at this
issue and have further discussions with you or with your staff.
But, it's conceivable that there may be a role to play here,
but, again, happy to provide you with additional information.
Senator Moran. Thank you very much. Does that answer
suggest that, to date, there hasn't been any kind of review or
investigation by the FTC?
Ms. Ramirez. Again, I'm limited in what I can say publicly.
All I can say is that I am aware of this issue, we are aware of
this, and we certainly do look very closely at energy markets.
But, it would really, again, depend on the facts. And noting
your concern, I'm certainly happy to take a closer look.
Senator Moran. Well, I'd be glad to have additional
conversation, and I welcome that look.
Any other Commissioners have the need or desire to share
anything with me?
[No response.]
Senator Moran. Thank you very much.
Let me turn to set-top boxes. As you know, we've had a
number of conversations this morning about the Federal
Communications Commission. They're advancing their own rule in
regard to set-top boxes. But, by their own admission, it--
indicated that they don't have jurisdiction over device
manufacturers. Chairman Wheeler told us recently that he has
worked with you, the FTC in writing that rule and has been
advised that the FCC's final rule, quote, ``Requires the
devices warrant to consumers that they are in compliance with
certain sections of the Communications Act and that the FTC
will have the ability to do the necessary enforcement to
protect that privacy.'' Could you confirm that, tell us of the
conversations you've had with the FCC in this regard? And do
you believe data should be treated differently based on what
government entity regulates the company or by the level of
sensitivity that the data has that's being collected?
Ms. Ramirez. Yes. The FTC did submit comments to the
proposed set-top box rulemaking by the Federal Communications
Commission. We did, in our comment, note that third-party
manufacturers of set-top boxes ought to be required to make
consumer-facing statements in which they indicated that they
would comply with the rules that would apply to cable
companies. And, by doing this, it would facilitate the ability
of the FTC to enforce in this arena. And I am aware that
Commissioner Wheeler has indicated an intent to include that in
the rule. And again, that would allow us to take action in
appropriate circumstances.
Senator Moran. And your thought about my second question?
Ms. Ramirez. And I apologize.
Senator Moran. Do you believe that data should be treated
differently based on what government entity regulates the
company or by the level of sensitivity the data has that's
being collected?
Ms. Ramirez. I think it is important for there to be
general harmony in the way that data is treated. And, in
keeping with that and to that end, the FTC has submitted
comments to the privacy rulemaking that the FCC is engaging in.
I will note that we are in an era when a number of different
agencies are having to take a look at issues that relate to
privacy and data security. We certainly have been active in
sharing the extensive expertise that we have in looking at
these issues, given that we've devoted many resources and many
years to this. But, I think, going forward, it will be
appropriate for us to endeavor to harmonize. But, there's no
question that different agencies with different authority will
be examining these issues.
Senator Moran. Chairwoman, thank you very much.
Mr. Chairman, thank you. I would note, in our memo, that it
announces a 1:30 subcommittee hearing, a subcommittee that I
chair, the Subcommittee on Consumer Protection, Product Safety,
Insurance, and Data Security. We have postponed that hearing
until later in the year, due to a 2:15 vote and then a
classified briefing at 3 o'clock for all Senators. So, we
appreciate the chance we will soon have to bring in thought
leaders in regard to the role of the FTC and consumer
protection, as well as some of the industries that are affected
by the FTC.
The Chairman. Thank you, Senator Moran. We do look forward
to getting that hearing in, and adding the perspective that the
various members of that panel were going to add. And so, we'll
try and take that up, if not this week, sometime later in the
year.
And I also am very interested in the RINs discussion that
you began earlier, because that is something that has a pretty
profound impact on most Midwestern states, wherever corn is
raised. And I would love to--whatever the FTC has underway, in
terms of looking into that issue, we would welcome, at some
point, your findings.
Next up is Senator Daines.
STATEMENT OF HON. STEVE DAINES,
U.S. SENATOR FROM MONTANA
Senator Daines. Thank you, Mr. Chairman.
Welcome to the Committee today.
As technology has become more prevalent in our lives, data
has certainly become now a form of currency. I'm a daddy of
four children. I know firsthand how big a role technology
certainly plays in our kids' lives, particularly in our
schools. Protecting the privacy and security of our kids' data,
I believe, is critical in today's world, which is why I
introduced the SAFE KIDS Act with my colleague Senator
Blumenthal. The SAFE KIDS Act provides clarity in what
companies can and cannot do with student data collected in
schools. And I look forward to working with this committee to
advance this important legislation.
I now want to pivot to legislation that we do have on the
books governing student data privacy. We have FERPA, passed in
1974. I think the Carpenters had a number one song called ``On
Top of the World'' that year. John Denver was singing
``Sunshine on My Shoulders,'' and I was in sixth grade. And
that is--doesn't even apply to technology companies. We have
the Children's Online Privacy Protection Act, which was passed
in 1998, and that does not apply to children 13 years and
older.
Commissioner Ohlhausen, is it fair to say that there are
holes in Federal legislation pertaining to student data
privacy? And how can Congress update the law to reflect the
realities of today?
Ms. Ohlhausen. Senator, you bring up some very important
issues about how technology has really changed so greatly
students' lives, children's lives, and we are, you know,
working very carefully to try to keep up with that. So, we have
brought enforcement actions. We updated COPPA. We've done that.
Now, I do think that there is a question--COPPA goes up to
age 13--and are there special--are there protections that would
be appropriate for children between the ages of 13 and 18? And
when we adopted COPPA, the Commission thought about this.
Because teenagers do have different needs and different
capabilities than do young children, and we--that is where we,
and Congress, decided to draw the line.
So, I do think that there are some issues worth considering
at the, you know, 13- to 18-year-old age group, but I would say
they need to be sensitive to the differences between those
older children and children who are currently covered by COPPA.
Senator Daines. As we all know, it's somewhat remarkable,
we all--our technology Help Desks now are typically our
children when we want to get something fixed or corrected or an
app adjusted.
I want to move to this issue of data collection--student
data collection. The software and the apps our students are
using, they know a lot about them--their location, they know
their preferences, they know what school subjects they struggle
with. And data collection is big business in the U.S., so
there's a big incentive to collect user data.
Chairman Ramirez, the Commission's written testimony
mentioned cases the FTC has brought against companies who
collect personal information from children without parental
consent. What do these companies do with the information they
collect? And how could it be harmful to children?
Ms. Ramirez. Senator, there might be a variety of different
uses--commercial uses that these companies might engage in.
From our perspective, however, regardless of the proposed use,
in my view, it's vital that personal information of children be
protected, and that companies not be permitted to use that
information unless there has been permission granted by
parents. That's a mandate that Congress has issued, and we take
our obligations to enforce COPPA very seriously. And, as you
know, we promulgated the COPPA rule and are very active in
enforcing in this area.
Senator Daines. So, certainly, as you mentioned, there are
legitimate uses for student data, like personalized learning.
But, do you think it's appropriate for companies, for example,
to use information about a student, let's say, struggling with
literacy to determine what kind of credit they might be
eligible for?
Ms. Ramirez. Senator, it may be inappropriate to make that
kind of a use, because of the Fair Credit Reporting Act, but I
will say that I certainly am, and would be, concerned about the
use, for instance, for advertising purposes, of certain
information about students. And for that reason, I do think
that there are certain gaps in existing protections relating to
student information, and am supportive of efforts to address
those issues.
Senator Daines. So I need to wrap up here. Five minutes
goes by fast. But, does Congress, do you think, then have a
role here in preventing this type of behavior, potentially?
Ms. Ramirez. I do, yes.
Senator Daines. OK.
Thank you.
The Chairman. Thank you, Senator Daines.
Next up is Senator Sullivan.
STATEMENT OF HON. DAN SULLIVAN,
U.S. SENATOR FROM ALASKA
Senator Sullivan. Thank you, Mr. Chairman. I appreciate you
calling this hearing to have an oversight testimony on an
important Commission, but a Commission that actually has broad
regulatory authority. So, I think that's important. I
appreciate that very much.
Madam Chair, I wanted to follow up. I actually kind of came
in at the end of Senator Blumenthal's questions. But, I want to
go back to this issue of security breaches. And what--and maybe
it has already been answered, so I apologize if it has been--
but, what is the obligation right now, either under FTC
regulations or Federal law, for the kind of episode we had
recently with Yahoo? And I know this is happening a lot. When I
was Attorney General for the state of Alaska, we had an--we had
an incident where a company that was working for the State lost
a lot of data on the state of Alaska employees. And one of the
things we tried to do was get it--make people aware of that as
soon as we could.
So, what is the obligation right now, either under your
regs or Federal law? And do you need more--what do you--how do
you balance that? What--seems sometimes that companies hold
this for a long, long, long time, and it doesn't seem to be
promoting consumer welfare when that happens.
Ms. Ramirez. The obligations of a company, under Section 5
of the FTC Act, are for companies to put in place reasonable
security measures to protect consumer information.
Senator Sullivan. Right. But, what I'm talking about is
notification to consumers once there has been a breach.
Ms. Ramirez. With regard----
Senator Sullivan. What's the obligation to----
Ms. Ramirez. With regard to notification, there are
applicable State laws, and there may be pertinent--just across
the board, I'm speaking generally--there are sectoral laws that
also provide certain notification requirements. I believe that
there is need for Congress to have Federal legislation in this
area. I did have a chance to speak about this earlier in my
testimony. And I believe, number one, that there needs to be a
Federal standard that's put in place for security, a
reasonableness approach along the lines of the approach that we
take at the FTC. And I also believe that it's important for
there to be a Federal requirement when it comes to data breach
notification that also provides--within a reasonable timeframe,
requires companies to notify affected consumers.
Senator Sullivan. And so, what do you think is--I mean,
it's--is it case-by-case? Is ``reasonable'' 2 weeks? Is it 30
days? I mean, what--certainly not a year or 6 months, is it?
Ms. Ramirez. In our view, approximately 30 to 60 days might
be appropriate. I think you want to allow a company to
appropriately evaluate what has transpired so that consumers
also aren't overnotified and have appropriate information about
what has happened. But, at the same time, it is necessary for
consumers to be notified so that they can take appropriate
measures to protect themselves against potential identity theft
or other possible harm that may flow from a data breach.
Senator Sullivan. Let me--I'd like to broaden my line of
questioning, here, to the economy. I know you have an economic
bureau that focuses on economic issues. In terms of
macroeconomic issues, you know, we've had a--essentially,
what's been a lost decade of economic growth. The country's
growth rate, in terms of GDP, has been anemic.
The last two quarters have been barely above 1 percent. I
think President Obama will be the first President, perhaps
ever, since the statistics were kept, that's never hit 3
percent GDP growth, even in 1 year. And, of course, that hurts
everybody. That hurts the whole country. That hurts some of the
most vulnerable people in the country.
Do you think we can do better than that? You know,
sometimes the Obama administration talks about, ``Well, this is
the new normal. We have to accept one and a half, 2 percent GDP
growth.'' The actual average for the country over the last 200
years is about 3.7, almost 4 percent, whether it's Democrat or
Republican administrations.
Should we be satisfied with one and a half percent GDP
growth? Do you believe in the new normal, or can we do better?
Ms. Ramirez. What I can speak to is the role that we can
play.
Senator Sullivan. Yes, I'd be very interested in that. How
do you balance your role as regulating industry, consumer
protection, unfair competition, all of which are very
important, with the broader goal that we all share of creating
the conditions for much more robust economic growth? So, if you
can just, any of you, answer that. Can we do better? Do we have
to live with 2 percent or less----
Ms. Ramirez. Well, let me----
Senator Sullivan.--GDP growth? And if we can, how do you
guys view the broad macroeconomic issues in balancing your
regulatory authority over industries?
Ms. Ramirez. Well, let me just start by saying that we are,
first and foremost, a law enforcement agency, and that really
is how we see ourselves. So, the role that we play when it
comes to promoting competition, I think, is a very important
and vital one to assist in aiding a competitive marketplace and
furthering economic growth.
Let me also add that as part of our role, we also are very
active in engaging in advocacy. And, as part of that, we do
comment and urge policymakers to take a look at regulatory
frameworks and take into account competitive impacts so that we
can ultimately promote competition and not create barriers to
entry that might enhance competition. So----
Senator Sullivan. So, does your economic bureau think that
we can do better than one and a half, 2 percent GDP growth?
Ms. Ramirez. So, the--you're raising macro questions that
are a bit beyond the role that we play, but I can assure you
that, in everything that we do, we get the input of our
economists, who are microeconomists. And again, in terms of the
role that we play, we do what we can to promote competition and
ensure that there's an active and competitive marketplace.
At the same time, let me also note that what we do play,
while an important role, is a limited role. We aren't market
regulators. Nonetheless, we take our role very seriously. And I
think we do well by it.
Senator Sullivan. Any other Commissioners want to comment
on that line of questions?
Ms. Ohlhausen. In a previous life at the FTC, I used to run
our competition advocacy program. And that was focusing on
identifying barriers to competition, barriers to innovation
that the Commission could weigh in upon and help encourage the
free flow of new ideas, new business models into the economy.
So, I think that's a useful and appropriate role that the FTC
has played over a number of years. And I'm proud that I used to
head that up. And I'm glad, as a Commissioner, we've continued
to focus on those areas.
Senator Sullivan. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Sullivan.
Senator Markey.
STATEMENT OF HON. EDWARD MARKEY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Markey. Thank you, Mr. Chairman, very much.
In Massachusetts and communities across the country, we
have an epidemic of heroin and prescription drug overdose that
is absolutely out of control. Buprenorphine is the active
ingredient in suboxone, and has proven to be an effective
treatment for opioid use disorders. However, actions by
Indivior, the producer of suboxone, may have made the crucial
drug less accessible as a treatment to deal with this problem.
Indivior is alleged to have violated antitrust laws by
conspiring to block generic competition, extending its monopoly
over treatments for opioid addiction and driving up drug costs.
Thirty-five states and the District of Columbia have recently
filed a lawsuit against the company. Public documents show that
the Federal Trade Commission has begun an investigation into
Indivior's actions, but the investigation was significantly
impeded by the company's repeated attempts to deny the Federal
Trade Commission access to documents that were critical to its
investigation. And it now appears that the court has recently
ordered Indivior to turn over all remaining non-privileged
documents.
Now, I've sent a letter to the Federal Trade Commission on
this issue to investigate whether or not Indivior has engaged
in unlawful behavior to delay the approval of cheaper generic
competition, which could help deal with this incredible
epidemic of heroin and prescription drug Fentanyl overdoses in
our country.
Do you have enough resources at the Federal Trade
Commission to be able to take that issue on and to get it
completed in a timely fashion? We just see a spike across this
country. We need more help.
Ms. Ramirez. Senator, yes, thank you for your question.
I had an opportunity to talk, a bit earlier, about the
importance of examining and monitoring the pharmaceutical
marketplace, and I can assure you that we're very active. I
can't comment on the specifics of any investigation, but I can
tell you that we are certainly doing everything that we can
with our resources. We could, of course, use--always use
additional resources. And we've made appropriate requests from
Congress with regard to our budget in order to fulfill our dual
mission of protecting consumers and promoting competition. But,
what I can tell you, with our existing resources, we're doing
everything that we can.
Senator Markey. Does that mean that you are right now
aggressively pursuing Indivior and its attempt to control the
market for Buprenorphine?
Ms. Ramirez. All I can say publicly is to let you know that
we certainly are continuing with our investigation. But,
unfortunately, due to confidentiality restrictions, I can't say
more than that.
Senator Markey. OK.
Let me move over to child privacy. Right now, as Congress--
as Senator Daines pointed out, the existing law, which I'm the
author of in 1998, protects children 12 and under and their
privacy. Can you give us your view as to whether or not
children 13 to 15 are entitled to the same kinds of protections
as those that are 12 and under?
Ms. Ramirez. Under current law, as you've noted, it does
apply to those children that are under 13. As I had an
opportunity to discuss earlier, I do think that it would be
appropriate to address issues particularly relating to
education and information about students. And, in that regard,
I think appropriate protection would be beyond the age of 12.
So, I think there are areas where Congress may want to take a
look and see if there--if it's appropriate to have further
protection.
Senator Markey. Do you think that the parents of children
15 and younger should have an eraser button which they're able
to call and have all these companies then erase the information
about their children 15 and under so that that mistake that the
child may have made doesn't track them for the rest of their
life?
Ms. Ramirez. I think one can discuss where one draws the
line appropriately for the protection of children. I am
certainly sympathetic and supportive of efforts to provide
additional protection to children, given, of course, the
indefinite nature of information that can be posted online.
So, yes--I'm generally supportive of efforts to look at
that issue.
Senator Markey. OK, thank you.
And now that the question of whether broadband is a
telecommunications service under Title II was strongly settled
by the D.C. Circuit Court, the Federal Communications
Commission is correctly extending privacy protections to
broadband. It's clear that the Federal Trade Commission and
Federal Communications Commission both have clear roles to play
as privacy cops on the beat. But, now that the broadband
privacy issue is in the basket of common carriage, which the
Federal Trade Commission does not have jurisdiction over, the
Federal Communications Commission must act without delay to put
in place strong broadband privacy rules. Do you agree with that
that they are the principal agency responsible for that issue?
Ms. Ramirez. Yes. In light of the reclassification of
broadband service, the Federal Communications Commission is the
one that has jurisdiction here. I do think it's appropriate for
them to put in place appropriate privacy rules. We have, as
part of their rulemaking process, submitted comments in which
we've opined as to what we believe would be improvements to
what they've proposed.
Senator Markey. OK, thank you and thank all the
Commissioners for your great work.
The Chairman. Thank you, Senator Markey.
Next up is Senator Udall.
STATEMENT OF HON. TOM UDALL,
U.S. SENATOR FROM NEW MEXICO
Senator Udall. Thank you, Mr. Chairman, for this very good
hearing on oversight.
And wonderful to see the Commissioners here today.
Chairwoman Ramirez, this Friday, a sports tradition will
play out across New Mexico and the Nation. High school teams
will take to the gridiron and the soccer pitch, and we
absolutely want to encourage young people to play sports. But,
we want them to do so safely. And parents and coaches have good
reason to be concerned about the dangers of concussions. The
National Academy of Sciences has stated that all concussions
involve some level of injury to the brain.
Earlier this month, the NFL said it will provide $100
million for medical and engineering research on concussion,
chronic traumatic encephalopathy, or CTE, and player health.
This follows the blockbuster movie ``Concussion,'' starring
Will Smith as the doctor who first diagnosed CTE in a
professional football player.
The NFL denied the dangers of CTE and concussion for far
too long. And it has been dangerously slow to act before now.
So, its announcement is significant. We should welcome these
new resources, and encourage more.
But, this isn't just about the million-dollar pros, this is
about our kids. CTE has been found in former high school
athletes. We can't just accept what the NFL-funded research
finds. Medical research must be peer-reviewed and unbiased.
Efforts to find an engineering solution or new technology to
prevent concussion may prove elusive.
We also need agencies like the FTC engaged and ready to
take action. For example, when it comes to sports products that
prevent concussions, it is understandable that parents and
players want to buy such products. But, the National Academy's
report found there is no scientific evidence to support claims
that sports gear such as mouth guards and soccer headbands
reduce the risk of concussion. They've found little evidence
that football helmets can reduce concussions. Unfortunately,
some irresponsible sports equipment-makers falsely claim that
their products protect against head injuries, and that may give
players a false sense of safety and lead them to take risks.
Former University of New Mexico soccer star Alexis Ball
testified in this committee that she felt she could play more
aggressively when wearing so-called anti-concussion headgear.
Concussion experts warn that this is dangerous. It puts kids at
greater risk of injury, including permanent brain damage from
second-impact syndrome.
I'm pleased that this committee approved legislation I
sponsored to crack down on these false claims. I continue to
work with stakeholders to enact it this year, and time's really
running short to get this done.
Chairman Ramirez, here is just one current example of a
dangerous anti-concussion marketing claim. The Shock Doctor is
a leading mouth guard for youth sports. It is the official
mouth guard of USA football, and sponsors its concussion
awareness program Heads Up Football. Approximately 1 million
young athletes are enrolled in Heads Up Football. So, I'm
deeply concerned by Shock Doctors' false claims that its mouth
guards prevent concussions. Shock Doctor mouth guards--and I'm
quoting right here from this product--it promises it will
absorb shock to help protect against brain concussions.
It promises hardcore protection and fearless performance.
Shock Doctor even encourages this false sense of security when
it states that--and this is what it states about its product--
``Many athletes report that they perform better with a properly
fitting mouth guard. Maybe it's because, with extra protection,
you aren't afraid to really throw yourself into the tackle, the
face-off, the draw, or the scrum.''
So, Chairwoman Ramirez, the FTC previously sent warning
letters to sports equipment-makers and retailers about these
types of advertising claims. Do you agree that this type of
anti-concussion marketing constitutes a deceptive practice and
that could put young athletes at real risk of injury?
Ms. Ramirez. Senator, thank you for your question. I
absolutely agree that this is a very serious issue. And, as
you've noted, the agency has sent warning letters to companies
about these types of claims. I'm absolutely concerned about
deceptive claims that lack substantiation. I appreciate you
bringing this particular issue to my attention, and I assure
you that we will take a very close look.
Senator Udall. We really appreciate the earlier letters,
and we want you to stay on guard and stay on top of this. As
you know, earlier this year, the Committee approved my Youth
Sports Concussions Act, which would increase the potential FTC
penalties for such unscrupulous advertising. I'm working with
Senate colleagues to get this important bill signed in this
Congress. And it's past time to put an end to these dangerous
anti-concussion marketing claims for youth sports.
Thank you.
And thank you for your courtesies, Mr. Chairman.
The Chairman. Thank you, Senator Udall.
Senator Ayotte.
STATEMENT OF HON. KELLY AYOTTE,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Ayotte. Thank you, Chairman.
Commissioner Ohlhausen, I wanted to ask about the issue of
healthcare. So, with the Affordable Care Act, we have seen
greater consolidation in the healthcare sector. And one of the
concerns I have is that we are able to foster competition,
including innovation. Yet, that can be countered by healthcare
consolidation, in terms of new innovation and competition.
So, what is--what are some of the challenges that a
disruptive actor in the healthcare industry--so, let's say
you've got a new innovation that wants to come on--and I mean
``disruptive'' in the good sense of a new idea to help serve
consumers--that can be addressed? And how are--how is this
healthcare consolidation and proposed mergers--what is the FTC
view on its role? And what will you be doing to make sure that
there continues to be competition and innovation in the
healthcare sector?
Ms. Ohlhausen. Senator Ayotte, thank you for your question.
The FTC has a very active healthcare enforcement program on
several grounds. Hospital consolidation is an area the FTC has
been paying very close attention to. We want to be sure that
consumers continue to have options for care in their
communities that are cost-effective. So, the FTC continues to
act in this space. Fortunately, we just won an important case
in the Third Circuit about how we would define a healthcare
hospital market. So, I'm pleased. I think that will help us
continue to act in that space.
And then, second, you bring in the important issue of, How
do new innovations--how do new methods of delivering healthcare
to consumers get into the market? So, we recently won a case
before the Supreme Court, called North Carolina Dental, where
we stood for the proposition that if a board is made up of
self-interested actors, they need additional--they need
oversight by the State, and they need authorization by the
State to do anything that might be anticompetitive. So, that
has been a particularly useful statement in the areas of, like,
telehealth, allowing doctors to treat patients remotely, or to
have nurse practitioners there to help in telehealth. So, I
think those are some very important areas where the FTC,
through advancing the law, through bringing enforcement
actions, and through bringing our advocacy expertise to bear,
have tried to ensure that consumers get the benefits of
competition through traditional methods and new and emerging
methods, as well.
Senator Ayotte. Great, thank you.
I wanted to ask the--Chairman Ramirez about an issue that--
having served as Attorney General before coming to serve in the
Senate, you know, I know that it's really important that
consumers--there have to be fair consumer service experiences.
Charter recently completed its transaction with Time Warner
Cable and Brighthouse Networks. This will greatly increase the
combined subscriber base in states like New Hampshire. I also
serve on the Homeland Security Committee, and there was
recently a hearing on billing reports that Senators Johnson and
McCaskill obtained that found that both companies' practices
for identifying and correcting overcharges had been
substandard. And, in light of these findings, many cable TV
providers have stated they're striving to improve their billing
practices.
But, I'm hearing from people in New Hampshire that--
concerns about this transaction. One of my constituents in
Campton, New Hampshire, who's frequently away from home as a
merchant mariner, recently wrote to me explaining that the
promotional rates that kept jumping with every call he made to
the company, and, after they expired and he attempted to adjust
his subscription, the quoted prices skipped around with each
call he made, leaving him exasperated, with no alternative
providers in a rural and mountainous area of our state. This
frustration was compounded by the fact that he returned from
several months overseas and, after repeated calls, was given
quotes not reflected what he was ultimately charged.
Can you comment at all on the FCC's plan and its provisions
to ensure that the Merger serves in the public interest to
provide fair and transparent services to consumers in affected
states like mine, especially in areas where you end up with one
provider?
Ms. Ramirez. I can certainly talk about what falls under
FTC jurisdiction, but I have to defer to the FCC to address how
they might address issues that are within their domain.
Senator Ayotte. But, do you have any jurisdiction when it
comes to looking at the merger, itself, in terms of the lack of
competition and----
Ms. Ramirez. So, what these----
Senator Ayotte.--and also the consumer practices that can
be deceptive or problematic?
Ms. Ramirez. We did not look at that particular merger.
This is something that was examined by the Department of
Justice and the Federal Communications Commission. What I can
tell you is that if it falls outside of common carriage
activity, we would have jurisdiction over deceptive practices.
And we, I think, are very vigilant when it comes to ensuring
that those parts of the economy that are subject to our
jurisdiction, that we tackle deceptive practices. So, if it
falls within our jurisdiction, we would certainly play a role--
and I believe that we're active in the marketplace--but this is
one that I'd have to defer to the FCC on.
Senator Ayotte. OK. Even on the billing practice piece?
Ms. Ramirez. Yes.
Senator Ayotte. OK.
Thanks.
The Chairman. Thank you, Senator Ayotte.
Senator Cantwell.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Mr. Chairman.
And it's good to see the members here of the FTC.
I wanted to talk about the BOTS Act, which is the Better
Online Ticket Sales Act that was passed out of the Committee
and has had similar action in the House. It will make it
illegal to use computer software to scoop up large chunks of
tickets, making them more expensive before consumers can get to
them. This is about empowering consumers through your
organization and through attorneys general. So, can any of you
comment on what aggressive measures--if this legislation
becomes law--the FTC will take to prosecute these companies and
organizations?
Ms. Ramirez. We are certainly aware of the concern that you
have, Senator. It's also a concern that has been expressed by
others. I can certainly tell you that we would absolutely--any
jurisdiction that Congress would give us in this respect, we
would absolutely enforce in the area. We have taken certain
actions using our existing authority under the FTC Act, but are
aware that it continues to be an issue. And again, we're happy
to continue looking at this area and then, if we're given
additional authority, to utilize that.
Senator Cantwell. Anybody else want to comment on that?
Ms. Ohlhausen. When we get a new authority, one of the
important adjunct things we can do is also to bring business
education materials into the marketplace to educate businesses
about what their new obligations may be. So, I would say, in
addition to any enforcement, I would certainly support that we
tell businesses what--where the rules of the road are.
Senator Cantwell. Yes. I guess I'm looking for something a
little more aggressive. And I know you haven't gotten the
authority. But, this is clearly a problem for consumers. While
I expect people like our Attorney General will be very
aggressive on it, I think that we pass laws giving the FTC this
simultaneous authority because we expect the FTC to be
aggressive on it. So we'll be looking to you to what avenues
that you will be taking to aggressively pursue this from a
Federal level. I think it's very important that we protect
consumers and that we're going to use the power of the Federal
Government to help on these cases. So, thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Cantwell.
Senator Blumenthal has a couple more questions. We'll give
Senator Fischer a chance to get set up here.
Senator Blumenthal.
Senator Blumenthal. Mr. Chairman, I'd be happy to yield to
Senator Fischer if she wants to go now, or I can go ahead,
whichever she would prefer.
The Chairman. Senator----
Senator Fischer. Thank you, Senator.
The Chairman.--Fischer, are you ready to roll?
STATEMENT OF HON. DEB FISCHER,
U.S. SENATOR FROM NEBRASKA
Senator Fischer. Thank you, Mr. Chairman.
The Chairman. All right.
Senator Fischer. And thank you, Senator Blumenthal, for
your kindness. I appreciate that.
Commissioner Ohlhausen, earlier this year, the FTC filed
comments in the FCC's privacy proceeding. You wrote a separate
statement warning that the FCC's approach may not best serve
consumer interests and that some of its proposals would prevent
consumers from willingly sharing their data to obtain benefits,
such as price discounts. I believe that consumers should be
able to choose when and how to share that data. This option can
be particularly beneficial for low-income consumers who could
opt to receive a benefit in the form of lower prices or access
to innovative services. Could you elaborate on your concern
that customers could be negatively impacted by the FCC's
proposed discounts policy for me, please?
Ms. Ohlhausen. Thank you, Senator.
I do think it's important to keep in mind that consumers,
if they have--if they're informed about what the deal is,
should have the right to make that deal, and that, in lots of
areas of life, we share information to get discounts. For
example, I use a discount, you know, Giant card to get
discounts at the grocery store. And that if consumers have
choices in the marketplace, and they have information, I think
they should be permitted to make that choice to decide to share
some of their data to reduce costs or prices.
Particular surveys have indicated that one of the main
reasons consumers are not adopting broadband is because of cost
concerns. So, this could help alleviate those kinds of
challenges that some consumers face.
Senator Fischer. And how important is that access to
broadband?
Ms. Ohlhausen. I think access----
Senator Fischer. Do you have an opinion on that?
Ms. Ohlhausen. I'm sorry. I think access to broadband is
very important, and I think that's something that the FTC, the
FCC, and really anyone who's looked at this issue has
considered it, sort of, as the road to the future for
consumers.
Senator Fischer. I'm glad you used the terminology
``road,'' because broadband, in my opinion, is infrastructure,
as are highways and bridges and ports, and it's important that
we move forward on that.
Chairwoman, if I could ask you, I understand that there are
over 48 million pages of FTC documents that may be used as
guidance or that otherwise help companies understand how the
FTC interprets its broad statutory authority. That number is
large, and it's daunting. In addition, stakeholders have raised
concerns that the FTC could treat these materials as
enforceable, even though they are not the result of legislation
and they're not the result of rulemaking. So, I worry that the
FTC could use an FAQ document or materials professed to be just
guidance as evidence that a company's business practices are
illegal, creating regulatory uncertainty that will hurt
economic growth.
So, just to be clear, could guidance documents be used as
the basis for a complaint or for a consent order?
Ms. Ramirez. The guidance that we issue does not have the
force of law, but we do think that it's beneficial for us to
explain to the business community and to practitioners and
other relevant stakeholders how it is that we apply our law.
And so, we think it is useful guidance, but it does not have
the force of law. So, ultimately, any enforcement action would
have to reflect a considered decision by the Commission that we
have a reasonable belief that the law--applicable law, whether
it's the FTC Act or other statutes that we enforce has been
violated.
Senator Fischer. OK. And also, as I understand it, the FTC
lost its jurisdiction over Internet Service Providers in the
area of data security and privacy after the FCC reclassified
retail broadband as a common carrier service. Recently, the
U.S. Court of Appeals for the Ninth Circuit reaffirmed that the
FTC is categorically barred from taking action against common
carriers.
So, I'm curious to know whether the FCC coordinated with
you prior to taking action that effectively took away your
agency's jurisdiction over Internet Service Providers. Did the
FTC caution them against the consequences of reclassification?
Ms. Ramirez. We certainly communicated the impact that this
would have. At the end of the day, the FCC, of course, had to
make a decision about what they felt was appropriate when it
came to addressing the issue of net neutrality. That has had a
consequence for us. But, at the same time, the FTC, on a
unanimous and bipartisan basis, has long argued that the common
carrier exception to our jurisdiction is something that really
no longer ought to apply. It's absolutely outdated.
This recent decision that you referred to, the Ninth
Circuit decision, in our view, has significant implications,
because the court disagreed with the position that we
articulated, which is that the common carrier exception is
activities-based and not status-based. Unfortunately, the court
took a different view, and that has significant ramifications
for our jurisdiction. I will note that we're going to be
seeking a rehearing in that matter, so we're hopeful that we
shall have an opportunity to voice our concerns about this.
But, in any event, reclassification has had an impact on
our jurisdiction, yes.
Senator Fischer. And was that a unanimous concern by your
board?
Ms. Ramirez. It's simply a consequence of reclassification.
You'd have to, you know, ask the FCC Commissioners as to what
factors most influenced them. Again, at the end of the day, I
think they made a decision based on what they felt was
appropriate for the public interest, when it came to net
neutrality.
Senator Fischer. OK. Thank you.
Thank you, Mr. Chairman. And thank you, Senator Blumenthal.
The Chairman. Thank you, Senator Fischer.
Senator Blumenthal.
Senator Blumenthal. Thanks, Mr. Chairman.
Just a few questions to tie up some loose ends.
I am assuming that if a rehearing is denied, as is
customary in most courts of appeals, there will be an appeal in
the Ninth Circuit ruling, which I regard as unfortunate and
erroneous, and I think you agree.
Ms. Ramirez. I do, Senator. I can assure you that we're
going to explore all options that we have available to us, in
terms of appeal.
Senator Blumenthal. Let me ask you about drug pricing.
Mylan's pricing of EpiPens was simply another strawbreaking the
backs of consumers. They are running out of the tolerance and
endurance that are attributed to camels when the straw breaks
the camel's back. This is profiteering at the expense of
countless consumers, many of them children who can't afford
$600 or more, the astronomic price increases. I know that you
have committed to get back to us within a specific amount of
time, but can't your response be expedited?
Ms. Ramirez. Again, I am limited in what I can say, because
I'm restricted from conveying any information about specific
investigations. But, I can assure you that these are issues, of
course, that we've seen before. This is not the first time that
we've seen a significant spike in drug prices. It's an issue
that does concern us. And I can assure you that when that
happens, we will look very closely to see if the reasons for
those price hikes might be due to anticompetitive activity.
Senator Blumenthal. And----
Ms. Ramirez. This is an area that we care very deeply about
and are very active in.
Senator Blumenthal. And I think that's really the point,
because deterrence of abuses in this area really depends on
effective and prompt enforcement. For example, in recent
testimony given to Congress, just in the past week, Mylan has
seemingly obfuscated and misrepresented profit margins,
according to stories as recently as this morning's Wall Street
Journal, which pointed out how it has engaged in potentially
deceptive and misleading practices relating to pricing. These
new reports are even more disturbing, are they not?
Ms. Ramirez. Absolutely. And again, I can't get into
details, but what I also want to note--and I'm not commenting
at all on Mylan's conduct, but I will also just simply note
that in prior examinations of price hikes, we have also
observed that sometimes they happen without there being what we
believe to be a violation of the antitrust laws. So, this is an
area where we play an important role, but it is limited. And,
unfortunately, sometimes companies that have appropriately
obtained market power end up exercising that in a way that is
detrimental to consumers. So, it may be appropriate for there
to be other actions that are taken.
I just want to convey that, while we have an important
role, we can't address all of the problems that exist when it
comes to drug prices.
Senator Blumenthal. Not all of the problems, but many of
them, because your agency is uniquely located at the
intersection of deceptive and misleading pricing and other
abusive practices and the antitrust responsibility. That you
have both of them seemingly involved in Mylan's power to raise
prices in the--and now offer a generic version, at $300, that
may, in fact, forestall other competition. So----
Ms. Ramirez. Where there's anticompetitive activity, I
assure you that we will absolutely take action.
Senator Blumenthal. It really is of a piece with other
drugs that may have been involved in the same kinds of
practices--Narcan, Daraprim. There are other instances. And I
think they cry out for action. I would just urge you to take
prompt and effective action.
Let me also join with Senator Udall in expressing very
grave concern about the marketing of sports equipment. I have
been very vocal about the NHL's practices in this area, as well
as the NFL's, because of the power that they have over players
at the younger league levels, whether it's in high school or
college. As models, they can set better practices. I welcome
the National Football League devoting money to research. I've
urged the NHL to do the same. But, sports equipment, in a
sense, illustrates the real importance of being vigilant and
vigorous, not only as to specific products, but also as to the
governing standards. I would welcome your scrutiny and
involvement in this area.
And let me just finish. I've written to you already about
my concern regarding the public safety implications of the
FTC's recent proposed settlement with used car dealers. Under
the proposed settlement, used car dealers will continue to be
allowed to advertise that they have rigorously inspected their
vehicles for safety, including that they're certified--in
quotes, ``certified''--even if the vehicle has unrepaired
safety recalls. NHTSA has repeatedly said that all recalls
address an unreasonable risk to safety and should not be
ignored. I've introduced legislation, with Senator Markey, the
Used Car Safety Recall Repair Act, that would require used car
dealers to fix recalls before selling or leasing a vehicle.
Despite the proposed settlement, or maybe because of it,
I'd like to ask each of you, Do you support this legislation?
Ms. Ramirez. Senator, I do.
Ms. Ohlhausen. Senator, I certainly support the goals of
the legislation, but I would need to review the details.
Senator Blumenthal. I'd ask you to review it and get back
to me, if you would, please Commissioner----
Ms. Ohlhausen. Certainly.
Ms. McSweeny. I would support the legislation.
Senator Blumenthal. Thank you.
I want to thank all of you for being here today. I have
other questions that I'll submit for the record.
I want to thank Commissioner McSweeny for her reference to
the nonprofit area, where I'd like to follow up with some
questions. I don't want to keep the Committee going now.
But, thank you all for being here and for your excellent
work.
Thank you.
The Chairman. Thank you, Senator Blumenthal.
And again, thank you, to all three of you, for being here
and for responding to these questions. And there are some, I'm
sure, that will be submitted for the record. We will keep the
hearing record open for 2 weeks, during which time Senators are
asked to submit any questions. And, upon receipt of those
questions, we would ask you to respond as promptly and quickly
as possible.
So, thank you so much for being here.
This hearing is adjourned.
[Whereupon, at 11:56 a.m., the hearing was adjourned.]
A P P E N D I X
Electronic Privacy Information Center
September 26, 2016
Hon. John Thune, Chairman,
Hon. Bill Nelson, Ranking Member,
U.S. Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
RE: Hearing on ``Oversight of the Federal Trade Commission''
Dear Chairman Thune and Ranking Member Nelson:
We write to you regarding the upcoming hearing on ``Oversight of
the Federal Trade Commission.'' Simply put, the Federal Trade
Commission (``FTC'') is not doing enough to protect the personal data
of American consumers. Identity theft, data breaches, and financial
fraud are increasing. The damage to American consumers and families is
escalating. Rather than curtailing the Commission's enforcement
efforts, you must determine why the agency is not doing more. The FTC's
continued failure to act against the growing threats to consumer
privacy and security could be catastrophic.
The Electronic Privacy Information Center (``EPIC'') is a public
interest research center established more than 20 years ago to focus
public attention on emerging privacy and civil liberties issues. EPIC
has a particular interest in protecting consumer privacy, and has
played a leading role in developing the authority of the FTC to address
emerging privacy issues and to safeguard the privacy rights of
consumers.\1\ EPIC is involved in a wide range of activities involving
the FTC, from consumer privacy and antitrust to rulemaking, enforcement
of consent orders, and participation in public workshops.\2\ Most
recently, EPIC and the Center for Digital Democracy (``CDD'') filed a
complaint with the FTC over WhatsApp's decision to transfer user data
to Facebook in violation of commitments both companies previously made
to subscribers.\3\ At the time Facebook acquired WhatsApp, the FTC
stated clearly that the companies must honor their privacy promises to
users.\4\
---------------------------------------------------------------------------
\1\ See, e.g., Letter from EPIC Exec. Dir. Marc Rotenberg to FTC
Comm'r Christine Varney (Dec. 14, 1995) (urging the FTC to investigate
the misuse of personal information by the direct marketing industry),
http://epic.org/privacy/internet/ftc/ftc_letter.html; DoubleClick,
Inc., FTC File No. 071-0170 (2000) (Complaint and Request for
Injunction, Request for Investigation and for Other Relief), http://
epic.org/privacy/internet/ftc/DCLK_complaint.pdf; Microsoft
Corporation, FTC File No. 012 3240 (2002) (Complaint and Request for
Injunction, Request for Investigation and for Other Relief), http://
epic.org/privacy/consumer/MS_complaint.pdf; Press Release, Federal
Trade Comm'n, FTC Charges Deceptive Privacy Practices in Google's
Rollout of Its Buzz Social Network (Mar. 30, 2011), http://ftc.gov/opa/
2011/03/google.shtm (``Google's data practices in connection with its
launch of Google Buzz were the subject of a complaint filed with the
FTC by the Electronic Privacy Information Center shortly after the
service was launched.''); In the Matter of Facebook, Inc., (2009) (EPIC
Complaint, Request for Investigation, Injunction, and Other Relief),
https://epic.org/privacy/inrefacebook/EPIC-FacebookComplaint
.pdf; In the Matter of Facebook, Inc., (2010) (EPIC Complaint, Request
for Investigation, Injunction, and Other Relief), https://epic.org/
privacy/facebook/EPIC_FTC_FB_Complaint.pdf.
\2\ See EPIC, Federal Trade Commission, https://epic.org/privacy/
internet/ftc/.
\3\ In the Matter of WhatsApp, Inc., (Aug. 29, 2016) (EPIC, CDD
Complaint, Request for Investigation, Injunction, and Other Relief),
https://epic.org/privacy/ftc/whatsapp/EPIC-CDDFTC-WhatsApp-Complaint-
2016.pdf.
\4\ Letter from Jessica Rich, Director of FTC Bureau of Consumer
Protection, to WhatsApp and Facebook (Apr. 10, 2014) https://
www.ftc.gov/system/files/documents/public_statements/2977
01/140410facebookwhatappltr.pdf.
---------------------------------------------------------------------------
American Consumers Face Unprecedented Privacy and Security Challenges
The unregulated collection of personal data has led to staggering
increases in identity theft, security breaches, and financial fraud in
the United States.\5\ The recent Yahoo! data breach that exposed the
personal information of at least half-a-billion users \6\ is the latest
in a growing number of high-profile hacks that threaten the privacy,
security, and financial stability of American consumers. Far too many
organizations collect, use, and disclose detailed personal information
with too little regard for the consequences.
---------------------------------------------------------------------------
\5\ See, e.g., Fed. Trade Comm'n, Consumer Sentinel Network Data
Book (Feb. 2016), https://www.ftc.gov/system/files/documents/reports/
consumer-sentinel-network-data-book-january-dec
ember-2015/160229csn-2015databook.pdf.
\6\ Yahoo!, An Important Message to Yahoo Users on Security (Sept.
22, 2016), https://investor.yahoo.net/
releasedetail.cfm?ReleaseID=990570.
---------------------------------------------------------------------------
Not surprisingly, the privacy concerns of Americans are increasing
at a rapid rate. Industry expert Mary Meeker's most recent Internet
Trend report said simply, ``[a]s data explodes . . . data security
trends explode.'' According to Meeker, 45 percent of users ``are more
worried about their online privacy than one year ago'' and 74 percent
have limited their online activity in the last year due to privacy
concerns.'' \7\ Public opinion polls show that 91 percent of Americans
believe they have lost control of how companies collect and use their
personal information.\8\ And a recent government study found that
nearly half of American internet users refrain from online activities
due to privacy and security concerns.\9\
---------------------------------------------------------------------------
\7\ Mary Meeker, Internet Trends 2016--Code Conference, KPCB (June
1, 2016), http://www
.kpcb.com/internet-trends.
\8\ Lee Rainie, The State of Privacy in Post-Snowden America, Pew
Research Center (Sept. 21, 2016), http://www.pewresearch.org/fact-tank/
2016/01/20/the-state-of-privacy-in-america.
\9\ Rafi Goldberg, Lack of Trust in Internet Privacy and Security
May Deter Economic and Other Online Activities, Nat'l Telecomm. and
Info. Admin. (May 13, 2016), https://www.ntia
.doc.gov/blog/2016/lack-trust-internet-privacy-and-security-may-deter-
economic-and-other-online-activities.
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The threats to consumer privacy and security are growing as new
challenges emerge. Protecting consumer privacy will become increasingly
difficult as the Internet of Things becomes more prevalent.\10\ The
ubiquity of connected devices enables collection of data about
sensitive behavior patterns, which could be used in unauthorized ways
or by unauthorized individuals. Another significant risk to consumers
in the Internet of Things is security, of both the users' data and
their physical person.
---------------------------------------------------------------------------
\10\ See, e.g., EPIC, Comments on the Benefits, Challenges, and
Potential Roles for the Government in Fostering the Advancement of the
Internet of Things, NTIA Docket No. 160331306-6306-01 (June 2, 2016),
https://epic.org/apa/comments/EPIC-NTIA-on-IOT.pdf.
---------------------------------------------------------------------------
The increased use of drones for commercial purposes also raises
unique privacy issues for American consumers. Drones are designed to
undertake constant, persistent surveillance to a degree that former
methods of video surveillance were unable to achieve. The FTC recently
held a workshop that explored privacy issues related to the commercial
uses of drones, but more must be done to protect consumers from this
invasive technology.
The American Public Supports and Deserves Baseline Consumer Privacy
Legislation
The United States has been slow to update its privacy laws, and
companies have been reluctant to implement Privacy Enhancing
Technologies. Thus, neither an appropriate legal nor technical
framework has been implemented to consistently safeguard individual
privacy in the United States. Many of the current laws are no longer
suited to protect the privacy of American consumers in the digital age.
It is critical that privacy protections for consumers keep pace with
advances in technology.
The American public supports updating U.S. privacy safeguards.
According to a recent study by the Pew Research Center, ``68% of
internet users believe current laws are not good enough in protecting
people's privacy online; and 64% believe the government should do more
to regulate advertisers.'' \11\ 91 percent of Americans believe they
have lost control of how companies collect and use their personal
information.\12\ The overwhelming majority want that control, with 74
percent of Americans saying it is ``very important'' to control who
gets their information and 65 percent saying it is ``very important''
to control what information gets collected.\13\ Americans also
consistently express a lack of confidence in the privacy and security
of their online communications.\14\ Pew also found that ``young adults
are more focused than elders when it comes to online privacy,'' and
many have tried to protect their privacy, removed their names from
tagged photos, and taken steps to mask their identity.
---------------------------------------------------------------------------
\11\ Lee Rainie, The State of Privacy in Post-Snowden America, PEW
RESEARCH CENTER (Sept. 21, 2016), http://www.pewresearch.org/fact-tank/
2016/01/20/the-state-of-privacy-in-america.
\12\ Id.
\13\ Id.
\14\ Id.
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The consequences of inadequate data protection in the U.S.
implicate the interests of U.S. consumers and businesses.\15\ The
competitiveness of American technology companies in the global market
also requires strong U.S. legal protections for communications
privacy.\16\ Officials in Europe are reviewing the ``ePrivacy
Directive'' as internet users in Europe face challenges similar to
those faced by American consumers.\17\ A framework for baseline
consumer privacy protections may provide a good starting point to build
a common approach to online privacy and to avoid the dramatic
divergence that has arisen.\18\
---------------------------------------------------------------------------
\15\ See Marc Rotenberg, Testimony before the U.S. House of
Representatives Energy & Commerce Subcommittees on Commerce,
Manufacturing, and Trade and Communications and Technology, Examining
the EU Safe Harbor Decision and Impacts for Transatlantic Data Flows
(Nov. 3, 2015), https://epic.org/privacy/intl/schrems/EPIC-EU-SH-
Testimony-HCEC-11-3-final.pdf.
\16\ See Aarti Shahani, A Year After Snowden, U.S. Tech Losing
Trust Overseas, NPR (June 5, 2014), http://www.npr.org/sections/
alltechconsidered/2014/06/05/318770896/a-year-after-snowden-u-s-tech-
losing-trust- overseas; Claire Caine Miller, Revelations of N.S.A.
Spying Cost U.S. Tech Companies, NY Times (Mar. 21, 2014), http://
www.nytimes.com/2014/03/22/business/fallout-from-snowden-hurting-
bottom-line-of-tech-companies.html.
\17\ ePrivacy Directive: assessment of transposition, effectiveness
and compatibility with proposed Data Protection Regulation, European
Commission (June 10, 2015), https://ec.europa.eu/digital-agenda/en/
news/eprivacy-directive- assessment-transposition-effectiveness-and-
compatibility-proposed-data.
\18\ EPIC, Examining the EU Safe Harbor Decision and Impacts for
Transatlantic Data Flows, EPIC (Nov. 3, 2015) https://epic.org/privacy/
intl/schrems/EPIC-EU-SH-Testimony-HCEC-11-3-final.pdf.
---------------------------------------------------------------------------
The common refrain that greater privacy protections are contrary to
innovation is simply wrong. According to a recent report by the World
Economic Forum, three of the top five countries that benefit most from
technology innovation are members of the European Union: Finland,
Sweden, and Norway.\19\ The United States ranked fifth in this report.
These European
---------------------------------------------------------------------------
\19\ World Economic Forum, Global Information Technology Report
2016, http://reports.weforum.org/global-information-technology-report-
2016/report-highlights/.
---------------------------------------------------------------------------
countries are subject to robust EU data protection laws, yet foster
greater technology innovation than that of the United States. Privacy
and innovation are not mutually exclusive.
Moreover, strong privacy protections are also a necessary and
pragmatic part of risk mitigation in the age of the ubiquitous
cybersecurity breach. Failure to protect user privacy frequently stems
from failure to adequately protect user data, which can result in
enormous liability for companies.\20\ The more data a company stores,
the more valuable a target its database is for hackers; and the more
stored data, the greater the company's losses in the event of a
breach.\21\
---------------------------------------------------------------------------
\20\ 2016 Cost of Data Breach Study: United States, Ponemon Inst.,
1 (June 2016).
\21\ Bruce Schneier, Data Is A Toxic Asset, Schneier on Security,
(March 4, 2016), https://www.schneier.com/blog/archives/2016/03/
data_is_a_toxic.html (``saving [data] is dangerous because failing to
secure it is damaging. It will reduce a company's profits, reduce its
market share, hurt its stock price, cause it public embarrassment,
and--in some cases--result in expensive lawsuits and occasionally,
criminal charges. All this makes data a toxic asset, and it continues
to be toxic as long as it sits in a company's computers and
networks.'').
---------------------------------------------------------------------------
The FTC's Current Approach is Insufficient to Protect Consumer Privacy
and Security
EPIC has fought for privacy rights for internet users at the FTC
for more than two decades. We filed landmark complaints about privacy
violations by Microsoft, Facebook, and Google.\22\ While we respect the
efforts of the Commission to protect consumers, the reality is that the
FTC lacks the statutory authority, the resources, and the political
will to adequately protect the online privacy of American consumers.
---------------------------------------------------------------------------
\22\ See Complaint and Request for Injunction, Request for
Investigation and for Other Relief, In the Matter of Microsoft
Corporation, (July 26, 2001), https://www.epic.org/privacy/consumer/
MS_complaint.pdf. See also Complaint, Request for Investigation,
Injunction, and Other Relief, In the Matter of Facebook, Inc, (Dec. 17,
2009), https://epic.org/privacy/inrefacebook/EPIC-
FacebookComplaint.pdf; Complaint, Request for Investigation,
Injunction, and Other Relief, In the Matter of Google, Inc, (Feb. 16,
2010), https://epic.org/privacy/ftc/googlebuzz/
GoogleBuzz_Complaint.pdf.
---------------------------------------------------------------------------
The FTC's privacy framework--based largely on ``notice and
choice''--is simply not working. Research shows that consumers rarely
read privacy policies; when they do, these complex legal documents are
difficult to understand. Moreover, emphasizing notice or disclosure
favors the interests of businesses over consumers and fails to
establish meaningful privacy safeguards. Nor can industry self-
regulatory programs provide realistic privacy protections when they are
not supported by enforceable legal standards.
Even when the FTC reaches a consent agreement with a privacy-
violating company, the Commission rarely enforces the Consent Order
terms.\23\ American consumers whose privacy has been violated by unfair
or deceptive trade practices do not have a private right of action to
obtain redress. Only enforceable privacy protections create meaningful
safeguards, and the lack of FTC enforcement has left consumers with
little recourse.
---------------------------------------------------------------------------
\23\ See EPIC v. FTC, No. 12-206 (D.C. Cir. Feb. 8, 2012).
---------------------------------------------------------------------------
This is illustrated by the FTC's decision to permit Google to
consolidate users' personal information across more than 60 Google
services, including search, email, browsing, and YouTube, into single,
comprehensive user profiles.\24\ Google's plan to consolidate user data
without consent was a clear violation of the FTC's 2011 consent order
with the company, which bars Google from misrepresenting its privacy
practices and sharing user information without affirmative consent.\25\
EPIC filed suit seeking to compel the FTC to enforce the terms of its
consent order with Google, but the agency succeeded in dismissing the
suit and took no action to protect the privacy interests of Google
users.\26\ As a result of the FTC's inaction, virtually all internet
activity now comes under the purview of one company.
---------------------------------------------------------------------------
\24\ See EPIC, EPIC v. FTC (Enforcement of the Google Consent
Order), https://epic.org/privacy/ftc/google/consent-order.html.
\25\ The FTC's 2011 consent order with Google arose from a
complaint filed by EPIC in 2010 over the company's introduction of the
Google Buzz social network, which automatically enrolled Gmail users
and published their contact lists without first notifying users or
obtaining their consent. See EPIC, In re Google Buzz, https://epic.org/
privacy/ftc/googlebuzz/.
\26\ See EPIC, supra note 18.
---------------------------------------------------------------------------
The FTC also consistently fails to modify proposed settlement
agreements in response to public comments. EPIC has submitted comments
to the Commission on numerous proposed orders that implicate the
privacy interests of consumers. However, to date the Commission has
adopted these consent orders without any modification.\27\ The FTC's
failure to make any changes to proposed settlements based on comments
it has explicitly requested is: (1) contrary to the explicit purpose of
the statutory provision that allows the Commission to request comments
from the public;\28\ (2) contrary to the broader purpose of the
Commission to police unfair and deceptive trade practices;\29\ and (3)
contrary to the interests of American consumers.
---------------------------------------------------------------------------
\27\ Comments of the Elec. Privacy Info. Ctr., FTC Docket No. 102
3058 (Jun. 8, 2012), https://epic.org/privacy/socialnet/EPIC-Myspace-
comments-FINAL.pdf; Comments of the Elec. Privacy Info. Ctr., FTC
Docket No. 092 3184 (Dec. 17, 2011), https://epic.org/privacy/facebook/
Facebook-FTCSettlement-Comments-FINAL.pdf; Comments of the Elec.
Privacy Info. Ctr., FTC Docket No. 102 3136 (May 2, 2011), https://
epic.org/privacy/ftc/googlebuzz/EPIC_Comments
_to_FTC_Google_Buzz.pdf.
\28\ Commission Rules of Practice, 16 C.F.R. Sec. 2.34 (C) (2014).
\29\ Federal Trade Commission Act, 15 U.S.C. Sec. 46 (2006).
---------------------------------------------------------------------------
The Commission has never required compliance with the Consumer
Privacy Bill of Rights (``CPBR''),\30\ a basic set of privacy
requirements, under its Consent Orders even when companies are found to
violate Section 5 of the FTC Act.\31\ By requiring compliance with the
CPBR, the Commission could ensure that the personal data of consumers
is protected throughout the data lifecycle. More importantly, the
Commission would be able to put in place the baseline privacy standards
that are widely recognized around the world and necessary to protect
the interests of consumers.
---------------------------------------------------------------------------
\30\ White House, Consumer Data Privacy in a Networked World: A
Framework for Protecting Privacy and Promoting Innovation in the Global
Economy, Feb. 23, 2012, http://www
.whitehouse.gov/sites/default/files/privacy-final.pdf; see also EPIC,
White House Sets Out Consumer Privacy Bill of Rights, https://epic.org/
privacy/white_house_consumer_privacy_.html.
\31\ EPIC has recommended compliance with the CPBR in numerous
settlement proceeding where the FTC has asked for public comment. See,
e.g., EPIC Comments, FTC Project No P114506 (Jul. 11, 2012), https://
epic.org/privacy/ftc/FTC-In-Short-Cmts-7-11-12-FINAL.pdf; EPIC
Comments, FTC Docket No. 102 3058 (Jun. 8, 2012), https://epic.org/
privacy/socialnet/EPIC-Myspace-comments-FINAL.pdf; EPIC Comments, FTC
Project No P114506 (May 11, 2012), https://epic.org/privacy/ftc/EPIC-
FTCAd-Disclosures-FINAL.pdf; EPIC Comments, FTC Docket No. 092 3184
(Dec. 17, 2011), https://epic.org/privacy/facebook/Facebook-FTC-
Settlement-Comments-FINAL.pdf; EPIC Comments, FTC Docket No. 102 3136
(May 2, 2011), https://epic.org/privacy/ftc/googlebuzz/
EPIC_Comments_to_FTC_Google_Buzz.pdf.
---------------------------------------------------------------------------
Fundamentally, the FTC is not a data protection agency. Without
regulatory authority, the FTC is limited to reactive, after-the-fact
enforcement actions that largely focus on whether companies honored
their own privacy promises. Because the United States currently lacks
comprehensive privacy legislation or an agency dedicated to privacy
protection, there are very few legal constraints on business practices
that impact the privacy of American consumers.
EPIC's Recommendations
Maintaining the status quo imposes enormous costs on American
consumers and businesses. Consumers face unprecedented threats of
identity theft, financial fraud, and security breach.\32\ Privacy
protections based on industry self-regulation and burdensome ``notice
and choice'' policies do not provide meaningful safeguards for
consumers. The FTC must issue effective guidance and use its Section 5
enforcement authority to ensure adequate protection of consumer privacy
in the digital age.
---------------------------------------------------------------------------
\32\ See, e.g., Fed. Trade Comm'n, Consumer Sentinel Network Data
Book (Feb. 2016), https://www.ftc.gov/system/files/documents/reports/
consumer-sentinel-network-data-book-januarydec
ember-2015/160229csn-2015databook.pdf.
---------------------------------------------------------------------------
Moreover, the FTC must promptly investigate business practices,
pursue complaints, enforce existing Consent Orders, and modify proposed
settlements to reflect public comments. The Commission's ongoing
failure to fulfill these obligations is (1) contrary to the explicit
purpose of the statutory provision that allows the Commission to
request comments from the public;\33\ (2) contrary to the broader
purpose of the Commission to police unfair and deceptive trade
practices;\34\ and (3) contrary to the interests of American consumers.
---------------------------------------------------------------------------
\33\ Commission Rules of Practice, 16 C.F.R. Sec. 2.34 (C) (2014).
\34\ Federal Trade Commission Act, 15 U.S.C.. Sec. 46 (2006).
---------------------------------------------------------------------------
We urge Congress to consider the Commission's use of Section 5
authority in the context of the greater American legal landscape.
Because the U.S. lacks a comprehensive privacy law or an agency
dedicated to privacy protection, there are very few legal constraints
on business practices that impact the privacy of Americans. The FTC's
already modest Section 5 authority helps to deter and penalize the
abuse of data. Any effort to limit the Commission's authority--coupled
with Congress' failure to update America's privacy laws--is a
disservice to the vast majority of Americans who are increasingly
concerned about their loss of privacy and want their government to do
more to protect this important democratic value.
We look forward to working with you to improve the FTC's authority
in this field and to develop rules to provide meaningful and much-
needed protections for consumer privacy.
Sincerely,
Marc Rotenberg,
President,
EPIC.
Claire Gartland,
Director,
EPIC Consumer Privacy Project.
cc: The Honorable Jerry Moran, Chairman, U.S. Senate Subcommittee on
Consumer Protection, Product Safety, Insurance & Data Security
The Honorable Richard Blumenthal, Ranking Member, U.S. Senate
Subcommittee on Consumer Protection, Product Safety, Insurance & Data
Security
______
September 26, 2016
Hon. Tom Wheeler,
Chairman,
Federal Communications Commission,
Washington, DC.
Dear Chairman Wheeler:
The Information Technology Industry Council (``ITI'') and the 21st
Century Privacy Coalition (``Coalition'') share the Federal
Communications Commission's (``FCC'') interest in protecting the
privacy and security of consumers' online information. Privacy and data
security exist at the core of the trust relationship that all entities
in the Internet ecosystem must establish with consumers. However, we
continue to have concerns about the FCC's broadband privacy
proposal.\1\ We therefore urge the FCC to modify the proposal so that
it provides Americans with appropriate privacy protections while at the
same time enabling consumers to fully benefit from the products and
services our member companies are proud to provide.
---------------------------------------------------------------------------
\1\ Protecting the Privacy of Customers of Broadband and Other
Telecommunications Services, WC Docket No. 16-106, Notice of Proposed
Rulemaking, FCC 15-138 (April1, 2016) (``NPRM'').
---------------------------------------------------------------------------
Fundamentally, the FCC has proposed a series of burdensome privacy
and data security requirements that are inconsistent with established
law, policy, and practice in this area. These requirements do not
reflect what is best for consumers. There is no evidence to indicate
that consumers have been ill served under the traditional privacy
framework currently administered by the Federal Trade Commission
(``FTC'').
Consumers have embraced today's thriving internet, fueled by
responsible data practices, and they have come to expect a seamless
online experience across multiple applications, services, and devices
that delivers convenience while also protecting their privacy. The
current online ecosystem supports online offerings that consumers
value, promotes innovation, and contributes substantially to U.S.
economic growth. As currently drafted, the NPRM could disrupt this
healthy ecosystem.
Rather than adopting a regime aligned with the FTC's well-
established, sensitivity-based approach to online privacy, the privacy
regime proposed by the FCC in the NPRM departs from the FTC framework
in significant and material respects. We are concerned that the
prescriptive nature of the proposed regulatory approach could have
precedential effects that would negatively impact the entire Internet
ecosystem. We believe the FCC's primary objective should be to closely
harmonize its rules with the existing FTC framework that has both
protected consumers and enabled the Internet to flourish.
Our additional concerns with the NPRM include its (1) overly broad
definition of personally identifiable information;(2) unnecessary
restrictions on first-party marketing that would deprive consumers of
discounts and new product offerings that can save consumers money; (3)
inflexible, strict-liability data security and breach notification
requirements; and (4) an impractically short breach notification
timeframe.
Consistent with the FTC's enforcement framework, the FCC should
modify its consent requirements to take into consideration whether the
information is sensitive, rather than focusing on the use of such
information and the entity engaged in such use. In addition, Internet
protocol addresses or other unique identifiers necessary for the
functioning of connected Internet devices, application usage data, and
persistent online identifiers (cookies)--data that is highly unlikely
to contribute to a risk of concrete harm such as identity theft--should
not be subject to onerous consent requirements.
The FCC's data breach proposal does not afford organizations
adequate time to remediate any discovered vulnerabilities or to conduct
thorough investigations to ascertain the nature and scope of any breach
before notifying customers or government agencies of a breach of data.
It also fails to include a risk analysis, and therefore will contribute
to notice fatigue at best, or incite unnecessary panic at worst. If
over-notification becomes commonplace, consumers will have difficulty
distinguishing between notices and determining which ones warrant them
to take action. Notification should be made to consumers if an
organization has determined there is a significant risk of identity
theft or financial harm.
We support the goal of ensuring that consumers' online activities
are subject to privacy and data security protections that comport with
consumer expectations and long-standing policies that have protected
consumers from harm while allowing the Internet to flourish. We hope
that the FCC will modify its privacy proposal to ensure that this goal
will be achieved.
Sincerely,
Dean Garfield
ITI President and CEO
Mary Bono
Co-Chair
21st Century Privacy Coalition
Jon Leibowitz
Co-Chair
21st Century Privacy
Coalition
cc: The Honorable Mignon Clyburn; The Honorable Michael O'Rielly;
The Honorable Ajit Pai; The Honorable Jessica Rosenworcel
______
Coalition for Patient Vision Care Safety
September 28, 2016
Hon. John Thune,
Chairman,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Hon. Bill Nelson,
Ranking Member,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Dear Mr. Chairman and Ranking Member Nelson:
On behalf of the Coalition for Patient Vision Care Safety (the
Coalition), we thank you for the opportunity to submit this letter as a
part of the formal record accompanying yesterday's hearing ``Oversight
of the Federal Trade Commission.'' Given that the Federal Trade
Commission (FTC) is primarily charged with promoting consumer
protection and ensuring competition in the marketplace, the Coalition
writes today to encourage enhanced consumer protection and continued
robust competition specifically in the eye contact lens marketplace.
The Coalition was formed to ensure that the health and safety of
the contact lens patient is promoted, preserved, and protected as the
FTC undergoes its regular review of the Contact Lens Rule (Rule) and
the underlying Fairness to Contact Lens Consumers Act (FCLCA) passed by
Congress in 2003. While there have been significant technological and
medical advances over the past 13 years, loopholes in the law, and
noncompliance, have allowed some online retailers to use deceptive
marketing practices that discourage regular eye care checkups.
One important example involves online sellers that often circumvent
the intent of the law and jeopardize patient protections by encouraging
sales of contact lenses in quantities that would permit use well beyond
the length of the prescription, in some cases for several additional
years. Put another way, online sellers ignore or intentionally extend
the practical length of a prescription far beyond the legal expiration
date and outside the time-frame envisioned by the FCLCA. We would ask
that the FTC end the sales of lenses in quantities that go well beyond
a prescription's expiration date. This would help to ensure that
patients are seeing their eye care professionals at frequencies
recommended by such agencies as the Centers for Disease Control (CDC).
Additionally, the proliferation of robocalling, the practice of
contacting prescribers through recorded voice messages, denies the
prescriber access to a live conversation and often makes impossible any
capacity for confirming or even asking questions about the
prescription. For these reasons, we believe that eliminating the use of
robocalls will better ensure eye patient safety by ensuring that eye
care providers have all appropriate information to accurately validate
a prescription.
Finally, the Coalition fully supports the authority of the FTC to
enforce the FCLCA in a way that protects patients and allows for a
robust and competitive marketplace. The Coalition recommends that the
FTC promote ways to make eye patient and provider complaints about
contact lenses more easily articulated to the FTC; it also encourages
the FTC to investigate more rigorously instances of deceptive and
fraudulent practices by some sellers.
The Coalition submitted comments to the FTC in October 2015, during
the FTC's review of the 2004 Rule. These comments are attached for the
Committee's review. We respectfully request that the FTC use its
authority over the contact lens marketplace to ensure that the patient-
provider relationship is safeguarded and we stand ready to assist you,
the other Senators on the Committee, and the FTC in this endeavor.
Thank you for your continued leadership on all issues related to the
FTC.
Sincerely,
The Coalition for Patient Vision Care Safety
AdvaMed
Alcon--a Novartis Company
American Optometric Association
Bausch+Lomb
CooperVision, Inc.
Johnson & Johnson Vision Care, Inc.
a member of Johnson & Johnson's Family of Companies
______
The Coalition for Patient Vision Care Safety
Comments Regarding the FTC's Regular Review of the Contact Lens Rule
October 26, 2015
Table of Contents
1. Introduction
2. Enforcement
a. Noncompliance of the Act: Selling Lenses Without a
Prescription
b. The Manner in Which the Market Works Misleads Patients
c. Brand Substitution d. Enforcement Recommendations
3. Quantity and Length of Prescriptions
a. Competition and Convenience Can Lead to Compromising Patient
Safety
b. Limits on Quantity Can Preserve Competition and Promote
Patient Safety
c. Lack of Quantity Limits Can Stifle Competition and Patient
Choice
4. Passive Verification
a. Deceptive Practices from Sellers Regarding Prescription
Verification
b. Should Robocalling be a Valid Method of Communication?
c. Possible Changes to Passive Verification and Other Options
to Improve Patient Health Safeguards
5. Conclusion
6. Appendix--FTC Questions
______
Coalition for Patient Vision Care Safety
October 26, 2015
Federal Trade Commission,
Office of the Secretary,
Washington, DC.
RE: Contact Lens Rule, 16 CFR 315, Project No. R5119955
Dear Secretary Clark:
The Coalition for Patient Vision Care Safety (the ``Coalition'') is
pleased to submit comments on the Federal Trade Commission's (the
``FTC'' or ``Commission'') review of its 2004 Final Rule (the ``Contact
Lens Rule'' or ``Rule'') implementing the Fairness to Contact Lens
Consumers Act (the ``Act''). Our Coalition, composed of manufacturers,
eye care doctors, and medical device trade associations, seeks to
ensure that the patient-doctor relationship is preserved and protected
as the Commission undertakes this important review.\1\ Our aim is to
improve the existing Rule to maintain pro-competitive intentions of the
Act and Contact Lens Rule without allowing anticompetitive practices to
undermine patient health and safety.
---------------------------------------------------------------------------
\1\ The Coalition consists of the following members: The American
Optometric Association (AOA); Vision Care--a Johnson and Johnson
Company; Bausch + Lomb; CooperVision, Inc.; Alcon--a Novartis Company;
AdvaMed, and The Contact Lens Institute.
---------------------------------------------------------------------------
Introduction
The Coalition believes firmly that there is a continuing need for
the Rule, and would be strongly opposed to significant changes that
weaken the Rule or the statute. Since enactment, and the FTC's
subsequent implementation, the market for contact lenses has become
extremely competitive and is now one of the most heated markets in the
country. This competition has led to increased investment in research
and development, and a proliferation of innovation that has served to
benefit the nearly 44 million Americans who use contact lenses every
day. Today, the U.S. contact lens consumer has numerous choices as to
how to procure and where to purchase their contact lenses, as well as
competitive choices among manufacturers of these medical devices. Be it
an online seller, a traditional retail store, or a doctor of optometry
or ophthalmologist, patients do not lack for choices in their
purchasing options. Because of the strength of the market and the
accessibility of these medical devices to patients, the FTC should view
its authority over the marketplace as a safeguard for patients seeking
to fill their prescription for their contact lenses, which are
regulated medical devices.
While most FTC rules and related statutes are primarily concerned
with prices and innovation for consumers, the Contact Lens Rule has a
significant impact on the competition to supply contact lenses in a
manner that enhances patient safety and the patient-doctor
relationship, as well as the regulation of contact lenses, which are
Class II and Class III medical devices as approved by the Food and Drug
Administration (FDA). As such, any examination of the rules and their
effectiveness should be viewed, at least in part, with an eye toward
patient health and safety, and whether anticompetitive conduct fails to
preserve and protect confidence in the patient-doctor relationship. As
an FTC staff report from 2004 importantly noted:
``The primary health care concern with contact lenses appears
to be ensuring that contact lens wearers return to their
doctors regularly for eye examinations. . .Some individuals may
develop eye problems even if they follow the doctor's advice;
their eyes may develop problems simply in response to wearing
lenses. Contact lens wearers incur health risks if they forego
regular eye exams that would allow the optometrist or
ophthalmologist to spot emerging health problems in their early
stages. Consumers may thus endanger the health of their eyes if
they obtain and wear replacement contact lenses without a valid
prescription.'' \2\
---------------------------------------------------------------------------
\2\ Possible Anticompetitive Barriers to E-Commerce: Contact
Lenses. A Report from the Staff of the Federal Trade Commission; March
2004. pp. 8-9 (emphasis added).
In the spirit of protecting patients' eye health, we would ask the
---------------------------------------------------------------------------
Commission to implement improvements in three areas of the Rule:
1. The FTC should strengthen enforcement of provisions of the
statute and Contact Lens Rule, and simplify the process where
patient and prescriber complaints are filed with the
Commission.
2. The FTC should impose reasonable limits with respect to
prescription expiration and to the quantity of contact lenses
permitted to be prescribed and sold so as to ensure patients:
Receive appropriate professional supervision when using
these regulated medical devices;
Receive contact lenses that are appropriate for the
patient's ocular health and needs;
Receive contact lenses that match the lens brand and type
delineated on a valid prescription, regardless of where the
contact lenses are purchased; and
Receive regular attention to their ocular health care
issues.
3. The FTC should enhance the verification process, to protect
against unverified sales of contact lenses and ensure that
patients receive the contact lenses prescribed by their doctor
of optometry or ophthalmologist.
We believe that without undermining the Act, the Commission can
make specific changes to its Rule to better protect the ocular health
of the nearly 44 million Americans wearing contact lenses today, and to
ensure that the desire for profits is not placed above the need to
protect the eye health of patients.
Enforcement
The Coalition believes the Commission should increase significantly
the enforcement of the Act. The FTC has asked about the effects of the
Rule on the flow of truthful and deceptive information to consumers.
The Coalition believes noncompliance with and loopholes within the law
have resulted in a deceptive flow of information to contact lens
patients, and have the potential to compromise seriously the vision
health of patients.
The FTC, the FDA, and the Department of Justice (DOJ) all possess
varying degrees of jurisdiction over the enforcement of legislation
governing the contact lens marketplace; however, Congress gave the FTC
explicit marketplace enforcement jurisdiction over the Act. The FTC has
specific authority, under all appropriate enforcement provisions of the
Federal Trade Commission Act, to issue complaints or bring actions
against contact lens sellers who violate the Act. The Coalition
understands that the FTC's jurisdiction is primarily related to
enforcement against companies that make misleading claims about their
products or services. Moreover, under its unfairness jurisdiction, the
Commission can regulate marketing practices that cause or are likely to
cause substantial consumer injury, are not reasonably avoidable by
consumers, and are not outweighed by countervailing benefits to
consumers or to competition.
The Act's mandate is clear. As is the Rule, which states that any
``person that engages in the manufacture, processing, assembly, sale,
offering for sale, or distribution of contact lenses may not represent,
by advertisement, sales presentation, or otherwise, there is evidence
that contact lenses may be obtained without a prescription.'' \3\ In
today's marketplace; however, contact lenses are often obtained either
without an accurate and valid prescription or without any prescription
at all. The opportunities for violating the prescription requirements
in the Act are much greater than when the Act passed in 2003. These
opportunities exist largely because the use of the Internet has
increased exponentially in the last 11 years and overall product
purchasing (and, in particular contact lenses product purchasing) is
simpler than it once was. As a result, the Coalition members have all
encountered increasing examples of noncompliance and exploitation in
numerous areas.
---------------------------------------------------------------------------
\3\ Federal Register 40504; July 2, 2004.
---------------------------------------------------------------------------
Noncompliance of the Act: Selling Lenses Without a Prescription
Technological advances since the passage of the Act have made
online contact lens purchases easier. But these advances have also
occasioned competition-quashing and deceptive contact lens marketing
from sellers. Increased website access and social media (through such
sites as Facebook, eBay, Amazon, and others) offer illegal online
traders and resellers a massive and often unsuspecting customer
audience. Social media and the Internet have also helped foreign
companies that promote the fact that they do not verify prescriptions
easily reach thousands of consumers. The example below,
NextDayLenses.com, is a U.K. company shipping contact lenses globally,
``including the U.S.A.''
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Note that while this company does tell patients that ``it is
important to ensure your prescription is kept up to date . . .'' they
lead with ``As long as you are happy that your current prescription is
correct, you can buy contact lenses online without a prescription . .
.'' \4\
---------------------------------------------------------------------------
\4\ http://www.nextdaylenses.com/buy-contact-lenses-online-without-
a-prescription-last accessed on 10/24/2015
---------------------------------------------------------------------------
It is telling that a now seven-year-old Journal of Optometry study
on the Act, and on online contact lens marketplaces, found poor eye
care practices among patients who purchased contact lenses online and
predicted additional unhealthy practices. The report concluded, in
2008, that online contact lens purchasers ``are less likely to
regularly visit their doctor and [are] at greater risk for unhealthy
eye care practices.'' \5\ The significant increase in online lens sales
growth has only exacerbated this risky behavior. Fast forward to 2015,
and it is apparent to the Coalition that the 2008 predictions have come
true. According to a 2015 APCO Insight Survey of contact lens wearers
who purchase online, numerous consumers admit to ordering contact
lenses with expired or close-to-expired prescriptions and online
retailers are encouraging this practice.\6\ One-in-three (32 percent)
purchasers admit to ordering contacts using an already expired
prescription.\7\ The same survey found that, of those who believe a
prescriber should be contacted directly by a lens retailer to fill a
prescription, only 35 percent report that the retailer contacted their
doctor directly to get the prescription.\8\
---------------------------------------------------------------------------
\5\ Journal of Optometry 2008 Report, p. 34 ``Contact lenses
purchased over the Internet place individuals potentially at risk for
harmful eye care practices.'' Joshua Fogel, PhD., and Chaya Zidile.
\6\ From September 24 to October 2, 2015 APCO Insight conducted an
online quantitative survey among U.S. consumers who purchased contact
lenses online. APCO surveyed 500 contact lens wearers over 18 who had
purchased online in the previous six months.
\7\ Id.
\8\ Id.
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The American Optometric Association (AOA) also recently reported to
the Coalition that it has identified several online contact lens
retailers who, in the Coalition's view, inappropriately allow consumers
to purchase contact lenses without a prescription, contravening either
the intent or the Act itself. For example, during the order process
AAlens.com does not request any prescriber information to verify a
prescription and AAlens.com does not appear to request a copy of the
patient's prescription. Rather, the retailer indicates, ``Our terms and
conditions are simple: All customers who order replacement contact
lenses must have a valid prescription which must be less than 24 months
old. Your order must be for the same contact lenses that you are
already successfully wearing. We accept no responsibility for our
customers' lack of suitability to wear contact lenses.'' \9\ Similarly,
Saveonlens.com does not request prescriber information to initiate the
verification process and does not require the patient to provide a copy
of a prescription to complete an order.\10\ There are also several
retailers who sell cosmetic lenses seemingly without following the
requirements of the Act.\11\ Therefore, it appears that there is a
practice by some online retailers to either sell without a prescription
or to avoid contacting a prescriber directly to obtain or confirm
information required by the Act. We believe that these violations are
going largely unchecked.
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\9\ http://www.aalens.com/faq.html
\10\ http://www.saveonlens.com/contact_lenses_no_prescription.html
\11\ https://www.honeycolor.com; www.pinkyparadise.com; http://
thedolleye.com
---------------------------------------------------------------------------
The Manner in Which the Market Works Misleads Patients
According to the 2015 APCO Insight Survey, and from numerous
anecdotal accounts provided to the Coalition, lens patients are
ordering, and are being encouraged to order, large quantities of
contact lenses, particularly just prior to a prescription's expiration
in order to circumvent Federal prescription mandates. There are even
online blogs offering advice as to how to do so, as detailed below:\12\
---------------------------------------------------------------------------
\12\ https://answers.yahoo.com/question/
index?qid=20130627093112AAEu68o
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Six-in-ten online purchasers (62 percent) say they have ordered
contacts using a prescription less than a month from its expiration
date.\13\ While not an outright violation of the Act, it is troubling
that online contact lens sellers encourage and market the ``stocking
up'' of contact lenses just prior to a prescription's expiration. While
the Act does not limit the number of contact lenses that can be sold,
it does require that, absent an outright prescription, the quantity of
contact lenses be included in the verification request that is sent to
the prescriber. In 2004, the FTC thought that providing such
information would prevent the patient from receiving more contact
lenses than are available through the remainder of the prescription. In
the Rule, the FTC declared that ``the verification process itself . . .
generally allows prescribers to prevent patients from ordering
excessive contact lenses.'' \14\
---------------------------------------------------------------------------
\13\ APCO Insight Survey.
\14\ Federal Register 40488; July 2, 2004.
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In practice; however, patients are regularly ``ordering excessive
contact lenses.'' \15\ This is despite the purported quantity reporting
safeguard that the FTC believed would limit excessive ordering. Just
because the quantity is required to be reported, does not mean that a
consumer has to limit the number of contact lenses ordered.
---------------------------------------------------------------------------
\15\ Id.
---------------------------------------------------------------------------
Furthermore, if a patient provides a copy of a contact lens
prescription to a retailer, that prescription is not required by the
Rule to include any quantity information. Additionally, when a complete
copy of a contact lens prescription is provided to a retailer, the
verification process is not triggered. So, while the FTC previously
believed that the verification system provided a safeguard against the
purchase of excessive contact lenses, the FTC did not seem to account
for retailers seeking to obtain a complete copy of the contact lens
prescription to circumvent verification. Clearly, more needs to be done
to ensure that retailers do not encourage the purchase of large numbers
of contact lenses that might no longer meet the eye care needs of the
patient and may allow threats to a patient's vision to fester.
There are obvious examples of these practices. For example,
Lens.com allows consumers to purchase up to 50 boxes of a 90-day pack
of daily disposable contact lenses for each eye, which provides 4,500
contact lenses per eye. This is more than a 12-year supply of contact
lenses, well over a one year's supply, which if purchased virtually
eliminates the doctor-patient relationship in its entirety.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Additionally, 1-800-CONTACTS allows a patient to purchase eight
boxes of 90-day packs for each eye, which provides 720 contact lenses
per eye, which is about a 2-year supply, stocking most patients with
contact lenses well beyond their prescription's expiration date. With
1-800-CONTACTS dominating the online market (the company itself asserts
that is holds 75 percent of the online market),\16\ it is not
surprising that patients are uneducated as to the need for regular
visits to their eye doctor or the importance of maintaining an updated
prescription.
---------------------------------------------------------------------------
\16\ http://www.judiciary.senate.gov/hearings/
watch?hearingid=12e98234-5056-a032-52ea-90f98e940d9b
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Coalition believes that the selling of excessive amounts of
contact lenses unfairly disadvantages competition, discourages patients
from seeking regular visits with their eye doctor and is not in the
best interest of patient health. Regular visits allow doctors not only
to determine changes in a patient's vision, but also serve as a forum
to inform patients how dangerous some eye health habits can be, and
assess whether their patients are engaging in such risky behavior.
According to a recent report published by the Centers for Disease
Control and Prevention (CDC), more than 99 percent of survey
respondents reported engaging in at least one risky behavior with
regard to contact lens habits.\17\ The CDC's research found that some
of these riskier behaviors include:
---------------------------------------------------------------------------
\17\ http://www.cdc.gov/mmwr/preview/mmwrhtml/
mm6432a2.htm?s_cid=mm6432a2_w
Patients keeping contact lens cases for longer than
---------------------------------------------------------------------------
recommended (82.3 percent);
Adding new solution to the existing solution instead of
emptying the case out fully before adding new solution (55.1
percent); or
Patients wearing their contact lenses while sleeping (50.2
percent).
As this survey data demonstrates, the importance of annual eye
exams and the preservation of the patient-doctor relationship is
critical not only to determine the patient's prescription needs, but
also to examine their overall eye health habits, ensuring their safety
when using contact lenses.
Brand Substitution
An additional area of concern related to patient safety involves
significant incidences of contact lens brand substitution, which is
prohibited under the Act. Again, according to the 2015 APCO Insight
Survey, consumers do not want brand substitutions, yet many say they
have received a substitution without advance notice or that their
online retailer has advised them to substitute when out of stock.\18\
One-in-four (24 percent) online purchasers reported having received--
without warning--a different brand of contact lenses than those which
were ordered.\19\ Another three-in-ten (31 percent) reported having
experienced supply issues with their online retailer and being advised
to get another brand of contact lenses as a solution.\20\ While the Act
allows for substitution of contact lenses by the same manufacturer if
such contact lenses are the same but sold under a different label,
substitutions from one manufacturer to another are prohibited and, yet,
are routinely practiced by online sellers.\21\ This is potentially
quite dangerous for the contact lens patient. A 2015 Ohio State
University report showed clearly how the ocular response to each
contact lens is significantly different and leads to a variety of
physiological reactions, even when fitting the same patient with
various contact lenses.\22\ Thus, maintaining and enforcing the current
requirement that prescribers must include the specific brand and
product name on patient prescriptions and prohibiting substitution is
absolutely necessary to minimize the risk of potentially sight-
threatening complications.
---------------------------------------------------------------------------
\18\ APCO Insight Survey.
\19\ Id.
\20\ Id.
\21\ 15 U.S.C. 7603; Sec. 4(f).
\22\ Ohio State University 2015 Report. ``Are Contact Lenses
Interchangeable?'' Jeffrey J. Walline, OD PhD.
---------------------------------------------------------------------------
The Coalition understands and supports the spirit of increased
competition, small business opportunity, and patient convenience
envisioned by the Act. But we strongly believe that some online contact
lens sellers have sought to reduce competition among retail and medical
eye care providers and manufacturers through noncompliance or outright
violation of the Act. This can be prevented with stronger enforcement.
Enforcement Recommendations
Operation Double Vision, a short-term program run primarily by U.S.
Immigration and Customs Enforcement (ICE), seized 20,000 illegal pairs
of contact lenses in 2014.\23\ And, yet, there is currently no
dedicated office, online category, or phone number at the FTC assigned
to Contact Lens Rule complaints. The FTC, in fact, routes eye contact
complaints about non-compliance to its general complaint lines. These
include complaints regarding:
---------------------------------------------------------------------------
\23\ U.S. Immigration Customs & Enforcement Press Release; 10-12-
2015.
Sale or advertising of contact lenses without a
---------------------------------------------------------------------------
prescription;
Fake prescriptions;
Filling of expired prescriptions;
Supplying inappropriate and exorbitant quantities of contact
lenses;
Ignoring the eight-hour passive verification period by
prescribers;
Substituting contact lenses without the consent of
prescriber;
Unintelligible recorded robocall messages; and
Failure to provide reasonable access to any actual contact
person to verify the prescription.
We believe the general routing of complaints both discourages
reporting of complaints and does not provide the FTC with adequate and
accessible information to enforce the Rule. We believe that dedicated
personnel paired with, a dedicated website or phone number within the
FTC, and/or a dedicated office, would go a long way toward protecting
the contact lens patient. We also recommend:
An analysis be conducted and made available by the FTC that
provides compliance and enforcement details about the Act--
including, but not limited to, how many complaints the FTC
receives about the Act annually, the nature of those
complaints, how often the FTC processes complaints, and how
many investigations, complaints, and enforcement proceedings
and fines the FTC has completed to date;
Significantly increased enforcement of the Act;
A requirement that a live person be available for doctors to
verify or reject a prescription or information about a
prescription, with a phone number to such person clearly
identified, as part of the verification process; and
A determination that robocalling is not a ``completed''
communication for the purposes of the verification process.
There is overwhelming evidence of continued deceptive and
misleading practices by some in the online contact lens marketplace,
and we urge the Commission to hold these entities accountable. We,
therefore, urge the Commission to pursue our requested enforcement-
related recommendations.
Quantity and Length of Prescriptions
The Act preempted state laws that specified prescription expiration
dates ``less than one year after the issue date of the prescription.''
\24\ The Act permits prescriptions longer than one year to the extent
the laws of the state in which the prescription was written permit
longer terms.\25\ And the Act otherwise requires that prescriptions
shall expire ``not less than one year after the issue date of the
prescription.'' \26\ The exception in the statute pertaining to ocular
health is not pertinent to these comments.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 7604; Sec. 5(a)(2).
\25\ 15 U.S.C. 7604; Sec. 5(a)(1).
\26\ 15 U.S.C. 7604; Sec. 5(a)(2).
---------------------------------------------------------------------------
The Commission in its Contact Lens Rule essentially codified the
above referenced statutory language, except for some added clarity with
respect to prescriptions shorter than one year. The Coalition urges the
Commission to retain the prescription limits imposed in the Rule and
also strengthen the Rule to provide increased protections for patient
eye safety and health.
The reasoning behind the prescription limits in the Rule was, as
the Commission noted in its publication of the Contact Lens Rule, to
``prevent prescribers from selecting a short expiration date for a
prescription that unduly limits the ability of consumers to purchase
contact lenses from other sellers[.]'' \27\ The Coalition agrees that
expiration dates should not be unduly restrictive; however, we do not
believe that prescribers would have selected short expiration dates so
as to limit consumer choice. The one-year rule now serves a separate
yet equally important purpose which is not fully realized.
---------------------------------------------------------------------------
\27\ Federal Register 40504; July 2, 2004.
---------------------------------------------------------------------------
Competition and Convenience Can Lead to Compromising Patient Safety
To be specific, the one-year limit serves to make it more likely
that patients requiring renewals of their prescriptions will undergo
regular and annual eye exams. Any alteration to the Rule toward
lengthening the time frame would undermine this vital health benefit.
The competitive benefits behind the Rule have been mostly achieved but
the health benefits that the Rule encourages need to be protected and,
to some degree, have yet to be realized. As discussed earlier, some
patients do not prioritize regular eye exams with their doctor, and
retailers regularly encourage this behavior with misleading information
about the importance of regular eye care. This is concerning as 87
percent of contact lens patients had an eye exam last year, and of
those, 94 percent reported a change in their prescription since their
last visit.\28\
---------------------------------------------------------------------------
\28\ APCO Insight Survey.
---------------------------------------------------------------------------
As the above numbers suggest, around 13 percent of contact lens
patients did not see a licensed practitioner for an exam last year. Put
another way, around five million contact lens patients did not receive
the care they need. Why is this? The Coalition believes there are two
predominant factors: first, when the Commission crafted Rule
Sec. 315.6, it did not, and perhaps could not, take into account the
proliferation of sellers that deliberately or inadvertently ignore
verification requirements and sell large supplies of contact lenses to
patients after or close to the expiration of their prescription.
Second, the Commission could not anticipate that many consumers would
flock to such sellers, and that sellers would be willing to disseminate
misleading information regarding the need for regular eye exams and
valid, updated prescriptions with little concern about the health
benefits the patient may be foregoing.
Limits on Quantity Can Preserve Competition and Promote Patient Safety
Fortunately, the solution is quite simple. The Coalition urges the
FTC to strengthen the Rule as implemented by adding quantity limits--
along with the enhanced verification standards we recommend below, to
better protect patient safety and health.
The Act gives the Commission the authority to impose quantity
limits. In fact, 15 U.S.C. Sec. 7607 gives the FTC broad rulemaking
authority ``to carry out this Act.'' Putting reasonable limits on
prescriptions does not contravene the statute and is consistent with
the goals of protecting consumers and competition. The Act contemplates
quantity limits in its requirement that sellers include the specific
quantity of contact lenses ordered in their verification requests.\29\
---------------------------------------------------------------------------
\29\ 15 U.S.C. 7603 Sec. 4(c)(3).
---------------------------------------------------------------------------
Consistent with the recommendations of the Contact Lens Rule, the
majority of states have prescription expiration standards of one year.
However, as cited above, sellers will often contact patients toward the
end of their prescription and urge them to buy more, and in some cases,
several years' supply of contact lenses. Also, consumers will often
seek to buy contact lenses without a new prescription thinking they do
not need a visit to their eye doctor. In both cases, the patients
forego regular eye care, fail to receive a valid new prescription, and
miss an important opportunity to be evaluated for other health
conditions. For example, doctors of optometry and ophthalmologists are
often the first health care practitioners to examine persons with
undiagnosed diabetes mellitus or ocular manifestations of diabetes.\30\
These providers also identify other chronic conditions such as multiple
sclerosis, Crohn's disease, and juvenile rheumatoid arthritis.
---------------------------------------------------------------------------
\30\ http://aoa.uberflip.com/i/374890-evidence-based-clinical-
practice-guideline-diabetes-mellitus
---------------------------------------------------------------------------
The Coalition urges the FTC to adopt several complementary quantity
limits to address these interrelated problems. In light of the fact
that most prescriptions are one-year in length, the Coalition urges the
FTC to forbid retailers to sell in a single transaction a quantity of
contact lenses that exceeds a single year's supply. An alternative
approach could be for the FTC to require that sellers only provide a
supply equal to the length of the underlying prescription. During the
initial comment period after the Act was passed, commenters expressed
concern that patients lose or damage their contact lenses and therefore
argued against such limits. In such circumstances; however, patients
can always buy more contact lenses, so long as their prescription is
still valid. However, to avoid the practice of sellers and/or consumers
attempting to get a year or more of contact lenses toward the end of
their prescription, the Coalition recommends the Commission prohibit
the sale of a quantity of contact lenses that exceeds the length of
time before the prescription will expire.
In the 11 years since the publication of the Rule, a significant
number of patients have ordered and received contact lenses that were
never verified and never in fact even prescribed. Oftentimes, sellers,
in sending these contact lenses, are not technically violating the
rules in the sense that they are sending the new supply while the
original prescription is still valid (usually in the final month of the
prescription). But they are violating the spirit of the rules in the
sense that they are sending quantities well beyond the amount left on
the original prescription. Given that 94 percent of patients require a
change in their prescription when they actually have an eye exam; this
practice seems to do a disservice to the patient.
Lack of Quantity Limits Can Stifle Competition and Patient Choice
With respect to competition, an area the FTC is charged with
protecting and promoting, there is a subtle, anticompetitive effect at
play, particularly in the online market for contact lenses. That effect
would be mitigated should the Commission adopt the rule changes urged
in these comments. In the online market, one player, 1-800-CONTACTS,
dominates the playing field, by its own estimates, controlling 75
percent of online sales.\31\ When any merchant sends patients a year or
more supply of contact lenses toward the end of their year's
prescription, they are in essence locking up that patient for the
foreseeable future, and forestalling competition for that patient's
loyalty. Instead, as the data shows, a large percentage of patients
that do receive regular eye exams actually learn of changes with their
eyes, changes that result in changes to their prescriptions, and
changes that should lead to competition for their purchasing dollar.
Instead, when 1-800-CONTACTS simply sends a two years' supply to a
patient, that practice ``unduly limits the ability of patients to
purchase contact lenses from other sellers[.]'' \32\
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\31\ http://www.judiciary.senate.gov/hearings/
watch?hearingid=12e98234-5056-a032-52ea-90f98e940d9b
\32\ Federal Register 40504; July 2, 2004.
---------------------------------------------------------------------------
In its explanation of the Contact Lens Rule in 2004, the FTC opined
that ``[t]he verification process itself thus generally allows
prescribers to prevent patients from ordering excessive contact
lenses.'' \33\ In reaching this conclusion, the Commission deduced that
because verification requests were required to include the quantity of
contact lenses ordered, prescribers would have ample opportunity to
``treat a request for verification of a prescription as `inaccurate.'
'' \34\ But as these comments and the data in the field demonstrates,
it is possible that a significant number of Americans are getting large
quantities of contact lenses beyond the length of their initial
prescription, without getting a new prescription, despite the fact that
their initial prescription would most likely change had they in fact
gone for an eye exam.
---------------------------------------------------------------------------
\33\ Federal Register 40488; July 2, 2004.
\34\ Id.
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The FTC should impose reasonable limits with respect to the
quantity of contact lenses permitted to be prescribed as well as sold.
The Coalition makes the following recommendations to the Commission
regarding quantity limits:
Require the inclusion of quantity limits on the patient's
prescription to ensure patients receive appropriate and regular
medical supervision when using these regulated medical devices;
Permit retailers to provide a quantity of contact lenses
equal to a single year's supply in a single transaction;
Prohibit the sale of a quantity of contact lenses that
exceeds the amount reasonably necessary for use before the
prescription will expire; and restrict the sale of contact
lenses on a prescription that is nine months after issuance or
older to up to 25 percent of the prescription's course; and
Prohibit sellers from acting as outright agents of patients
in terms of filling a prescription thereby requiring patients
to take a more active and ongoing role in their eye care
health.
Passive Verification
When the Act was originally considered by the Congress, some
versions of the draft legislation did not adopt a specific approach to
prescription verification, recognizing benefits to both passive and
active verification processes. Former FTC Consumer Protection Director
Howard J. Beales testified before the House Energy and Commerce
Committee in 2003 during a Committee hearing on the bill, and noted--
``Proponents of passive verification favor this approach because it
allows the seller to presume verification if the eye care practitioner
does not take affirmative action to correct any errors in the
prescription . . . By contrast, proponents of active verification
systems express concern that passive verification may allow sellers to
ship contact lenses even if the customer has an invalid or incorrect
prescription . . . [C]ustomers may face serious health risks if they
obtain and wear contact lenses based on such a prescription.'' \35\
---------------------------------------------------------------------------
\35\ Fairness to Contact Lens Consumers Act: hearing before the
Subcommittee on Commerce, Trade, and Consumer Protection of the
Committee on Energy and Commerce, House of Representatives, One Hundred
Eighth Congress, first session, on H.R. 2221, September 12, 2003.
---------------------------------------------------------------------------
As passed by Congress, the Act adopted a passive verification
mechanism--which may help the contact lens consumer, but adversely
affect the contact lens patient. Subsequently, the FTC's intent in
designing the verification process in the Rule was to provide
flexibility and choice to consumers in purchasing contact lenses, but
also put in place a critical safeguard that patients receive the
correct contact lenses as prescribed by their eye care professional.
Importantly, the FTC also sought to ensure that individuals are not
able to circumvent the prescription expiration requirements.
The Coalition does not believe that these safeguards have been
achieved and, therefore urges the FTC to reexamine the passive
verification system to ensure that patients are receiving contact
lenses that are tied to an accurate and valid prescription. There are
several areas of particular concern for the Coalition, over which we
believe the Commission has the authority to act, including taking steps
to:
1. Ensure, through enforcement, that online sellers are not able to
advertise or communicate that they sell contact lenses without
a valid prescription, or advertise reorders of prescription
contact lens prescription after the prescription has expired;
2. Examine the various methods of communication between a seller and
provider, including robocalling, and in particular look at
whether existing methods actually constitute ``direct
communication''; and
3. Study how the current passive verification system could be
modified to better protect patients' health.
Deceptive Practices from Sellers Regarding Prescription Verification
After 11 years of the Rule, it has become clear that the passive
verification process can vary substantially in practice. The Coalition
has heard reports from patients and prescribers of instances in which
consumers have received contact lenses based on expired prescriptions;
stockpiled contact lenses that last well beyond the prescription
expiration; or duplicate orders of contact lenses. Not only do these
examples raise concerns around patient health and safety, but they also
suggest that the safeguards that Congress and the FTC created aren't
protecting patients as intended.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Coalition is aware of multiple online sellers that advertise
their ability to provide contact lenses without a valid prescription.
These sellers include DaySoft.com, a contact lens company that markets
to patients in the United States. DaySoft's business practices are in
violation of the Act because it does not require a verified
prescription. Instead, the company directs patients to enter in the
brand of contact lenses they were previously prescribed and then
DaySoft replaces them with what they deem to be an adequately
equivalent lens.\36\ We are aware of individuals who were personally
able to purchase contact lenses through this site, and also received
contact lenses that were other than those that were prescribed by their
eye care professional. The homepage of their website includes a
testimonial from a patient in New York;\37\ these sites are clearly
reaching patients in the United States.
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\36\ https://www.daysoftcontactlenses.com/US/Buy.aspx#.Vh-qrdKrSM8
\37\ http://www.daysoftcontactlenses.com/US/
CountryHomepage.aspx#ThisMonth
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The Coalition urges the FTC to examine these deceptive practices,
and consider enforcement actions against these online sellers who are
endangering the eye health of many Americans who purchase their contact
lenses online. According to the Rule, ``The Commission emphasizes that
the sale of contact lenses based on a verification request which does
not contain all of the required information constitutes a Rule
violation.'' \38\ The FTC has the authority and the responsibility to
act against these bad actors.
---------------------------------------------------------------------------
\38\ Federal Register 40496; July 2, 2004.
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Should Robocalling be a Valid Method of Communication?
Another area of increasing concern to the Coalition is the growth
of robocalling by retailers is leading to more and more prescriptions
being verified passively. According to the Rule, once the eye care
professional receives the request to verify the prescription, they have
eight business hours to verify the information. If the eye care
professional fails to verify the prescription within eight business
hours, the patients' prescription is automatically filled.\39\
---------------------------------------------------------------------------
\39\ Federal Register 40483; July 2, 2004.
---------------------------------------------------------------------------
The Rule allows for a variety of methods of communication for
sellers to verify prescriptions, ranging from outdated communication
via fax to seller-initiated robocallers leaving voice messages on
prescriber's office phone lines, often after hours and without a return
number or seller contact. As a result, prescribers are often unable to
provide the proper verification of the patient's prescription
information within eight business hours.
With regard to the definition of ``direct communication,'' the
Commission ultimately decided in the Rule that an automated phone call
would qualify as a completed communication to verify a prescription,
even though the Commission received a ``substantial'' \40\ number of
comments opposed to the use of automated telephone systems. That
decision should be revisited. There is an important amount of critical
patient information that must be communicated by the seller and
verified by the prescriber, and that is very difficult to communicate
in a robocall.\41\ In fact, the AOA has received numerous complaints
from doctors of optometry that robocalls from online sellers, such as
1-800-CONTACTS, are difficult to understand or do not include all of
the legally required patient information to verify the prescription. As
a result, patients may receive contact lenses that are based on
outdated or incorrect prescription information. The Coalition believes
that the FTC and the FDA share the responsibility for the health and
safety of contact lens patients. The fact that patients are receiving
contact lenses based on incorrect, outdated, or unverified prescription
information runs counter to the FDA's medical device safety standards,
and can also lead to serious vision issues.
---------------------------------------------------------------------------
\40\ Federal Register 40489; July 2, 2004.
\41\ ``(1) The patient's full name and address; (2) The contact
lens power, manufacturer, base curve or appropriate designation, and
diameter when appropriate; (3) The quantity of lenses ordered; (4) The
date of patient request; (5) The date and time of verification request;
(6) The name of a contact person at the seller's company, including
facsimile and telephone numbers; and (7) If the seller opts to include
the prescriber's regular business hours on Saturdays as ``business
hours'' for purposes of paragraph (c)(3) of this section, a clear
statement of the prescriber's regular Saturday business hours.''
Federal Register 40496; July 2, 2004.
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Additionally, in the FTC's 2004 publication, The Contact Lens Rule:
A Guide for Prescribers and Sellers, the FTC states that ``direct
communication by telephone requires reaching and speaking to the
intended recipient, or leaving a voice message on the telephone
answering machine of the intended recipient.'' \42\ This definition
runs counter to the inclusion of automated phone calls (which do not
allow for human feedback) as a valid method of verification. For
example, a voice mail box may have a time limit within which to leave a
message, and yet an autodialed message cannot by its very nature adapt
to time constraints, and may therefore be cut off before conveying in
entirety the patient's information. As such, prescribers often get
calls without information, or without a return phone number; this
invariably leads to sales when in fact the prescription has never been
fully received or verified.
---------------------------------------------------------------------------
\42\ The Contact Lens Rule: A Guide for Prescribers and Sellers.
Federal Trade Commission, Bureau of Consumer Protection, Office of
Consumer and Business Education. October 2004. pp. 3-4. (emphasis
added).
---------------------------------------------------------------------------
The FTC wrote in the Rule that ``the Commission will continue to
monitor whether full, valid requests for verification of a prescription
are being made through the use of automated telephone systems. If
evidence demonstrates that sellers are not making valid verification
requests but are providing consumers with contact lenses despite
deficient requests, the Commission may revisit this issue.'' \43\ The
Coalition requests that the FTC publish its findings, if any, in this
regard. The Coalition believes that the FTC will find that there is
substantial evidence that sellers' attempts to verify vital patient
information are deficient, and the Commission should ban the use of
automated phone systems.
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\43\ Federal Register 40489; July 2, 2004.
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Possible Changes to Passive Verification and Other Options to Improve
Patient Health Safeguards
Given that Congress permitted a passive verification system in the
Act, we recognize that the Commission is unlikely to alter
significantly this portion of the rule without Congressional action.
While the Coalition supports the elimination of passive verification,
we believe that modifications to the passive verification standards
under the FTC jurisdiction could be made to provide a better baseline
for patient safety standards. In a 2004 staff report, the FTC
recommended that ``prescription release requirements and prescription
verification requirements ensure that both consumers' health and
consumers' economic interests are protected, especially given that
consumers are more likely to adhere to recommended replacement
schedules if contact lenses are less expensive and/or more conveniently
available.'' \44\ To meet this standard while ensuring that patients
are receiving optimum vision care, we support the following
modifications:
---------------------------------------------------------------------------
\44\ Possible Anticompetitive Barriers to E-Commerce: Contact
Lenses. A Report from the Staff of the Federal Trade Commission; March
2004. Page 31.
Completion of the study on how the passive verification
---------------------------------------------------------------------------
system affects patients' eye health;
Modification of the eight-hour period of communication when
the initial communication begins prior to a holiday or on a
weekend when a doctor is not conducting normal office hours;
and
Rejection of any weakening of the current prescription
verification standards.
Conclusion
On behalf of the Coalition, we have suggested in this submission
ways for the Commission to both maintain certain protections and make
needed changes to the Contact Lens Rule in order to accommodate
appropriately all the technological and medical advances that have
occurred over the last 11 years. To summarize, our suggestions are as
follows:
1. The FTC should strengthen the enforcement of provisions of the
statute and Contact Lens Rule. To accomplish this, the
Coalition recommends the following actions:
Simplify the process whereby patient and prescriber
complaints are filed with the Commission, including
dedicated personnel tasked with receiving and reviewing
these complaints;
Conduct and publish an analysis providing compliance and
enforcement details about the Act--including, but not
limited to the annual totals of complaints the FTC receives
regarding violations of the Act, the nature of the
complaints, how often the FTC processes complaints, and how
many investigations, enforcement proceedings and fines the
FTC has completed to date; and
Increase enforcement penalties to deter retailers from
advertising that they are able to sell contact lenses
without an accurate and valid prescription.
2. The FTC should impose reasonable limits with respect to the
quantity of contact lenses permitted to be prescribed as well
as sold. The Coalition makes the following recommendations to
the Commission regarding quantity limits:
Require the inclusion of quantity limits on the patient's
prescription to ensure patients receive appropriate and
regular medical supervision when using these regulated
medical devices;
Permit retailers to provide a quantity of contact lenses
equal to a single year's supply in a single transaction, or
the length of the underlying prescription; and
Prohibit the sale of a quantity of contact lenses that
exceeds the amount reasonably necessary for use before the
prescription will expire.
3. The FTC should enhance the verification process, to protect
against unverified sales of contact lenses and ensure that
patients receive the contact lenses prescribed by their doctor
of optometry or ophthalmologist. The Coalition makes the
following recommendations regarding the communication between
retailers and doctors:
Examine the various methods of communication between a
seller and provider to determine whether existing methods
actually constitute ``direct communication'';
Issue a determination that robocalling is not considered a
``completed'' communication for the purposes of the
verification process;
Study how the current passive verification system could be
modified to better protect patients' health; and
Reject any weakening of current prescription verification
standards.
We are hopeful that the Commission will adopt our suggested
modifications with regard to enforcement, length and quantity of
prescriptions; and passive verification; we believe these modifications
comport with the underlying Act and will create an environment for
contact lens patients that will promote truthful interactions with
sellers and providers. It is our ultimate goal to promote better eye
health and safety with regard to the prescription and dispensing of
contact lenses, while retaining a robust market for patients. We
believe that the changes we suggest will also create a more level and
competitive playing field for all those involved in the contact lens
business--whether those involved be medical professionals,
manufacturers, online retailers or small and large bricks and mortar
retailers.
We stand ready to provide additional comments or any other material
the Commission deems necessary to inform the best policies to protect
patients and consumers of contact lenses.
______
Appendix--FTC Questions
1. Is there a continuing need for the Rule? Why or why not?
According to the Fairness to Contact Lens Consumers Act (P.L. 108-
164), the FTC is tasked with prescribing rules under its jurisdiction
to carry out the Act. The Coalition believes firmly that there is a
continuing need for the Rule, and would be strongly opposed to
significant changes that weaken the Rule or the statute. In the years
prior to the enactment of the Act, significant advances in medical
technology were achieved that made the wearing of contact lenses more
appealing and available to patients. In the years since the Contact
Lens Rule was finalized, even more technological advances have occurred
both in the contact lens medical device industry as well as in the
contact lens marketplace. Because of the strength in the market and the
accessibility of these medical devices to patients, the Coalition urges
the Commission to view its authority over the marketplace as a
safeguard for the contact lens patient, rather than the contact lens
consumer.
2. What benefits has the Rule provided to consumers? What evidence
supports the asserted benefits?
The Coalition believes that the Act led to numerous choices for
patients regarding how and from whom they purchase their contact
lenses. The nearly 44 million Americans that wear contact lenses have a
robust marketplace that includes online sellers, traditional retail
stores, or a doctor of optometry or ophthalmologist. However, this is
only beneficial to patients when their ocular health is also protected
within the marketplace. Because of the growth in the market and the
accessibility of these medical devices to patients, the FTC must now
view its authority over the marketplace as a safeguard from unfair
business practices for patients seeking access to necessary regulated
medical devices from entities that might care more about sales than
safety.
3. What modifications, if any, should be made to the Rule to
increase its benefits to consumers?
a. What evidence supports the proposed modifications?
b. How would these modifications affect the costs the Rule imposes
on businesses, including small businesses?
c. How would these modifications affect the benefits to consumers?
As referenced in our comments, the Coalition believes that the FTC
should approach the review of the Act with an eye toward patient
safety, and examine whether the sanctity of the prescriber-patient
relationship is being preserved to ensure patients are truly
benefitting from the protections of the Act. To that end, we have
identified three improvements to the rule that would be beneficial to
patients in this marketplace.
First, the FTC must enforce the statute and Contact Lens Rule and
ease the process whereby patient complaints could be filed with the
Commission, thereby enhancing enforcement on the front end. This will
allow patients to better inform the Commission when their eye health
has potentially been compromised.
Second, the FTC should include reasonable quantity limits of
contact lenses to be dispensed on a single prescription. This
enhancement will ensure patients are receiving the quality of eye
health care that they expect and deserve, and will reduce the burden on
the patient to know if they are receiving the most recent version of
this complex medical device.
Finally, the Commission should improve the prescription
verification process. This modification would protect patients from
unverified sales of contact lenses and ensure the accuracy of the
prescriptions provided to them.
4. What impact has the Rule had on the flow of truthful information
to consumers and on the flow of deceptive information to consumers?
The Act has effectively expanded the marketplace to retailers that
do not have face to face interactions with the patient seeking to
obtain these medical devices. This allows for deceptive information to
flood the market regarding the need for a prescription to obtain
contact lenses, the importance of adherence to the prescription,
including the brand, and diminishes the importance of the doctor-
patient relationship. As our comments reflect, the Coalition believes
that the Act contains within it the authority granted to the FTC, the
ability to reprimand and penalize those that disseminate this
misinformation. We urge the Commission to consider enhancing its
enforcement in an effort to reduce the incidences of deception we
outline in our comments.
5. What significant costs, if any, has the Rule imposed on
consumers? What evidence supports the asserted costs?
The improper use of contact lenses can lead to several serious
conditions which require intensive treatment by doctors, adding not
only additional monetary costs to the patient, but also impose serious
health costs as well. The CDC estimates that, in 2014, costs associated
with emergency room visits for keratitis alone, an impairment
associated with the improper wearing of contact lenses added more than
$175 million to the overall health care system.\45\ In addition to the
medical costs incurred by the patient, there are additional costs
related to loss of productivity as well as long term health
consequences.
---------------------------------------------------------------------------
\45\ http://www.cdc.gov/media/releases/2014/p1113-eye-
infections.html
6. What modifications, if any, should be made to the Rule to reduce
---------------------------------------------------------------------------
any costs imposed on consumers?
a. What evidence supports the proposed modifications?
b. How would these modifications affect the benefits provided by
the Rule?
As the FTC reviews and modifies the Act, the Coalition strongly
opposes significant changes that would weaken the Rule or the statute.
Since enactment, and the FTC's subsequent implementation, the market
for contact lenses remains extremely competitive. Today, the U.S.
contact lens consumer has numerous choices as to how to procure and
where to purchase their contact lenses, as well as competitive choices
among manufacturers of these medical devices. Be it an online seller, a
traditional retail store, or a doctor of optometry or ophthalmologist,
patients do not lack for choices in their purchasing options. While
most FTC statutes and rules are primarily concerned with prices, the
Contact Lens Rule has a significant impact on competition for patient
safety and the patient-doctor relationship, as well as the regulation
of contact lenses, which are Class II and Class III medical devices. As
such, any examination of the rules and their effectiveness should be
viewed in part with an emphasis on patient health and safety, and
whether the sanctity of the patient-doctor relationship is being
preserved and protected adequately.
7. What benefits, if any, has the Rule provided to businesses,
including small businesses? What evidence supports the asserted
benefits?
The Act and the Contact Lens Rule were established to increase
access by patients to medical devices. Since its implementation, the
online retail market for contact lenses has grown exponentially,
however, by its own admission, 1-800-CONTACTS maintains 75 percent
market share of the online retail market.\46\ Therefore there is little
additional room for small businesses or other online retailers to reach
these patients.
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\46\ http://www.judiciary.senate.gov/hearings/
watch?hearingid=12e98234-5056-a032-52ea-90f98e940d9b
8. What modifications, if any, should be made to the Rule to
---------------------------------------------------------------------------
increase its benefits to businesses, including small businesses?
a. What evidence supports the proposed modifications?
b. How would these modifications affect the costs the Rule imposes
on businesses, including small businesses?
c. How would these modifications affect the benefits to consumers?
As we outline in our comments, the Coalition believes that there
are several modifications that can be made to the Rule that will
increase its benefits to patients as well as small businesses such as
independent practices owned by a doctor of optometry or
ophthalmologist. We believe that streamlining the process by which
doctors, which are often also small business owners, communicate with
these large online retailers by requiring a dedicated channel of
communication and eliminating ``robocalling'' would ease the burdens on
small eye care practices. We also believe that simplifying the process
by which patients and eye care professionals are able to report
potentially dangerous and misleading activities by large online
retailers would serve the dual purpose of increasing patient safety and
benefit these small practices.
9. What significant costs, if any, including costs of compliance,
has the Rule imposed on businesses, including small businesses? What
evidence supports the asserted costs?
Many of the practices discussed in our comments reflect costs to
small practices that are focused on serving and treating patients. When
any doctor substitutes time they should focus on patient care with time
spent unsuccessfully attempting to reach a retailer in order to correct
an incorrect or false prescription or report potentially dangerous
activity to the FTC, that time results in costs to that business,
whether large or small.
10. What modifications, if any, should be made to the Rule to
reduce the costs imposed on businesses, including small businesses?
a. What evidence supports the proposed modifications?
b. How would these modifications affect the benefits provided by
the Rule?
As we address in our comments, the Coalition believes that the
overall review of the Contact Lens Rule should focus on patient safety
and maintaining the relationship between the patient and their doctors,
which are often also small business owners. The resulting savings in
cost to a small business should only be a byproduct of policies that
protect patient's vision health.
11. What evidence is available concerning the degree of industry
compliance with the Rule?
The Act was intended to allow sufficient patient access to their
prescribed contact lenses. The Act specifically preempted state laws
with respect to prescription expiration dates of fewer than one year
after the issue date, and allows for states to permit prescriptions
longer than one year. However, it is clear that some, if not many
retailers are misleading patients as to the need for a prescription at
all, or are encouraging patients to purchase large amounts of contact
lenses beyond what is reasonably necessary for the duration of a
prescription. The Coalition urges the FTC to strengthen the Act by
adding reasonable quantity limits to the prescription to correct this
practice and protect the patients served by this FTC regulated
industry. The Coalition urges the FTC to consider enforcement
mechanisms that provide meaningful deterrents to bad actors in the
system that will greatly decrease the number of improper dispensing of
contact lenses and the associated ocular health conditions. As laid out
in our comments, the Coalition believes that the FTC should utilize its
enforcement authority to protect patients by increasing the
investigations and associated penalties assessed to violators of the
Act.
12. What modifications, if any, should be made to the Rule to
account for changes in relevant technology or economic conditions? What
evidence supports the proposed modifications?
The Coalition urges the FTC to redesign the passive verification
process to ensure that retailers are not able to readily circumvent the
prescription expiration requirements. Our comments reflect our belief
that the passive verification system could be ``modernized'' to reflect
the changes in the contact lens marketplace. We believe the FTC should
exercise its authority to define the ``communication'' between a seller
and a provider to not include the practice of robocalling. The
Coalition also believes that providing doctors and patients with a more
streamlined, dedicated complaint process will enable them to alert the
FTC to potentially dangerous practices before the harm, and cost, is
inflicted.
13. Does the Rule overlap or conflict with other federal, state, or
local laws or regulations? If so, how?
a. What evidence supports the asserted conflicts?
b. With reference to the asserted conflicts, should the Rule be
modified? If so, why, and how? If not, why not?
The Coalition believes that the FTC and the FDA share the
responsibility for the health and safety of contact lenses and contact
lens wearers. Evidence of this overlap exists in the FDA's website. In
its Contact Lens section, it states: ``If you find a Website you think
is illegally selling contact lenses over the Web, you should report it
to FDA.'' The FDA allows for the reporting of unlawful sales of medical
products on the Internet.
The FDA evaluates these medical devices for safety and efficacy
assuming that the contact lenses will be marketed as a prescription
medical device. The FDA can only make reliable determinations about the
utilization of these devices with certainty that the FTC is utilizing
its jurisdiction to ensure that contact lenses are not misbranded by
online retailers as an over-the-counter device dispensed without a
valid prescription.
Currently, the FTC requests all complaints regarding contact lenses
be submitted through a ``generic'' Complaint Assistant online form. To
file report related to contact lenses, individuals must first know to
select ``other'' and then ``health and fitness.'' Should they
appropriately make these selections, the FTC asks if the individual has
a concern with telemarketing practices as it relates to the National Do
Not Call registry. It is only after navigating the gauntlet of these
selections and questions that the patient or doctor is asked about the
retailer specifically. This can be a confusing and onerous process for
confused patients as well as busy doctors. The Commission should work
with the FDA to design a more streamlined complaint system.
______
Response to Written Questions Submitted by Hon. John Thune to
Hon. Edith Ramirez
Question 1. Before the Committee, you testified that ``substantial
injury'' is not limited to actual or likely economic harm, and that
while most of the Commission's unfairness cases assert tangible
economic harm, there are instances where intangible harms, including
privacy harms, would constitute substantial harm. The Commission had
previously assured this Committee that, in its unfairness analysis, it
would recognize substantial injury in cases in which economic, health
and safety harms exist.\1\ It also has stated that, in ``extreme
cases,'' broader forms of harm such as emotional effects, could be
considered as a basis for a finding of unfairness, but only where
``tangible injury could clearly be demonstrated.'' \2\
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\1\ Letter from Hon. Michael Pertschuk, Chairman, Fed. Trade Comm'n
(FTC), et al., to Hon. Wendell Ford, Chairman, & Hon. John Danforth,
Ranking Member, Consumer Subcomm., S. Comm. on Commerce, Sci. &
Transp., Commission Statement of Policy on the Scope of Consumer
Unfairness Jurisdiction (Dec. 17, 1980), reprinted in International
Harvester Co., 104 F.T.C. 949, 1070, 1073 (1984) (``UNFAIRNESS POLICY
STATEMENT'') (``the injury must be substantial . . . not . . . trivial
or merely speculative;'' that ``[i]n most cases a substantial injury
involves monetary harm . . . [but that] unwarranted health and safety
risks may also support a finding of unfairness;'' and that
``[e]motional impact and other more subjective types of harm . . . will
not ordinarily make a practice unfair''); Letter from FTC to Hon. Bob
Packwood & Hon. Bob Kasten, S. Comm. on Commerce, Sci. & Transp.,
reprinted in 42 FTC ANTITRUST & TRADE REG. REP. (BNA) 1055 (1982), at
568-570 (stating that ``[a]s a general proposition, substantial injury
involves economic or monetary harm and does not cover subjective
examples of harm such as emotional distress of offenses to taste or
social belief'').
\2\ UNFAIRNESS POLICY STATEMENT at n.16 (``[i]n an extreme case,
however, where tangible injury could be clearly demonstrated, emotional
effects might possibly be considered as the basis for a finding of
unfairness'') (emphasis added)
---------------------------------------------------------------------------
A. Does your position represent a departure from the long-standing
unfairness policy that does not include intangible harm?
Answer. The FTC's position is not a departure from Section 5(n) of
the FTC Act or the Unfairness Policy Statement. Neither forecloses the
possibility that intangible harms such as privacy harms may constitute
substantial injury. The FTC stated in the Unfairness Policy Statement
that emotional effects would support a finding of unfairness in an
extreme case where tangible injury could be clearly demonstrated,
citing as an example harassing latenight phone calls by debt
collectors. UNFAIRNESS POLICY STATEMENT at n.16. But a privacy harm
such as the disclosure of sensitive health or medical information,
though intangible, is not merely an emotional effect or impact. To the
contrary, such a disclosure is inherently and objectively harmful. This
harm has been broadly recognized under Federal and state statutes and
tort law, e.g., Fair Credit Reporting Act, 15 U.S.C. Sec. Sec. 1681
a(i), 1681b(g)(1) (prohibiting inclusion of medical information in
credit reports); Ga. Code Ann. Sec. 31-33-2(d) (prohibiting medical
records' release without patient's authorization); acknowledged by
Federal and state courts, e.g., Maracich v. Spears, 133 S. Ct. 2191,
2202 (2013) (noting sensitivity of ``medical and disability history'');
and recognized in a number of FTC cases, e.g., Compl. 13, 21-22, GMR
Transcription Servs., Inc., Docket No. C-4482, 2014 WL 4252393, at *3-4
(Aug. 14, 2014).
B. If economic harm is not required, is there a predictable
limiting factor on the types of harm that will result in FTC
enforcement actions?
Answer. Yes. As required by the first prong of Section 5(n) of the
FTC Act and noted in the Unfairness Policy Statement, the harm in
question must constitute a substantial injury. Trivial, speculative, or
certain subjective harms, such as those that offend the tastes or
social beliefs of particular consumers do not meet the first prong of
Section 5(n). Unfairness Statement, 1984 FTC Lexis 2, at *307. As an
example, the disclosure of the most sensitive health and medical
information of the type at issue in the GMR case, including medical
information about psychiatric disorders, alcohol use, drug abuse, and
pregnancy loss, is the type of widely-recognized, substantial injury
that Section 5(n) was designed to address. In addition, for there to be
a violation, the other prongs of Section 5(n) must also be satisfied,
i.e., the harm must not be reasonably avoidable by consumers or
outweighed by countervailing benefits to consumers or competition.
C. In support of your argument that there is no economic harm
requirement for unfairness cases, you referenced the FTC's enforcement
action In the Matter of Aaron's, Inc. In that case, however, the
Commission alleged the defendant's practices were unfair, in part,
because they placed consumers' financial accounts at risk of
exposure.\3\
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\3\ Complaint 16, In the Matter of Aaron's, Inc., F.T.C. No. 122-
3264 (Mar. 11, 2014).
---------------------------------------------------------------------------
Can you provide an example of an FTC unfairness case that does not
include such a tangible economic harm nexus?
Answer. The FTC has alleged that a company's practices were unfair
without a nexus to economic harm in a number of cases:
Making material retroactive changes to privacy policies
without consent. Facebook, Inc., FTC File No. 0923184 (Aug. 10,
2012), available at https://www.ftc.gov/sites/default/files/
documents/cases/2012/08/120810facebookcmpt.pdf; Gateway
Learning Corp., Docket No. C-4120 (Sept. 17, 2004), available
at https://www.ftc.gov/sites/default/files/documents/cases/
2004/09/040917comp0423047.pdf;
Exposing images from home cameras. Trendnet, FTC File No.
122 3090 (Feb. 7, 2014), https://www.ftc.gov/enforcement/cases-
proceedings/122-3090/trendnet
-incmatter;
Publicly disclosing health information. GMR Transcription
Services, FTC File No. 122 3095 (Aug. 21, 2014), https://
www.ftc.gov/enforcement/casesprocee
dings/122-3095/gmr-transcription-services-inc-matter; and
Posting intimate, sexually-explicit photographs and personal
information of individuals online without their consent. Craig
Brittain, FTC File No. 132 3120 (Jan. 8, 2016), available at
https://www.ftc.gov/system/files/documents/cases/
160108craigbrittaincmpt.pdf.
D. In establishing the substantial harm requirement of Section 5(n)
of the Federal Trade Commission Act, 15 U.S.C. Sec. Sec. 41-58, as
amended, Congress sought to limit the Commission's authority over
unfair acts or practices by codifying the principles of the FTC's
policy statement on unfairness.\4\ In doing so, this Committee intended
to ``enable the FTC to proceed in its development of the law of
unfairness with a firm grounding in the precedents decided under this
authority and consistent with the approach of the FTC and the courts in
the past.'' \5\
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\4\ S. REP. NO. 103-130, at 12 (1993) (``SENATE REPORT'')
(explaining that Section 5(n) ``amends section 5 of the FTC Act to add
a new subsection limiting the FTC's authorizing over `unfair acts or
practices' '' and that it ``is intended to codify, as a statutory
limitation on unfair and deceptive acts or practices, the principles of
the . . . policy statement on unfairness'') (emphasis added).
\5\ SENATE REPORT at 12-13 (emphasis added).
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Please provide examples of prior precedent supporting your view
that intangible harm alone may constitute substantial injury.
Answer. In addition to the text of the Unfairness Policy Statement
and the cases described above, below is a list of Federal court
decisions that support the proposition that intangible harms can
constitute substantial injury under Section 5(n):
FTC v. Accusearch, Inc., No. 06-CV-105-D, 2007 WL 4356786,
at *8 (D. Wyo. Sept. 28, 2007), aff'd, 570 F.3d 1187 (10th Cir.
2009) (finding that the loss of privacy caused by defendant
resulted in a ``host of emotional harms that are substantial
and real and cannot fairly be classified as either trivial or
speculative'');
Orkin Exterminating Co. v. FTC, 849 F.2d 1354, 1364-65 (11th
Cir. 1988) (affirming Commission grant of summary judgment
where injury included in part ``intangible loss'' relating to
loss of the certainty of contract terms); and
Am. Fin. Servs. Ass'n v. FTC, 767 F.2d 957, 975 (D.C. Cir.
(1985) (affirming FTC's adoption of Credit Practices Rule,
which considered substantial emotional and subjective harms as
part of analysis of substantial injury, 49 Fed. Reg. 7740, 7744
(Mar. 1, 1984)).
Question 2. One issue that the Committee is currently examining
involves student privacy. In particular, the Safeguarding American
Families from Exposure by Keeping Information and Data Secure (SAFE
KIDS) Act, S. 1788, would extend additional privacy protections to pre-
K through 12th grade students with respect to educational applications
and software they may use, even outside the classroom. Two harms that
this legislation seeks to prohibit are (1) the sale of student data to
third parties and (2) the use of student data for the purposes of
targeted advertising.
A. Please provide the number of complaints the Commission has
received to its Consumer Sentinel network, in the past five years, as
well as case summaries, regarding the following practices:
i. the sale of student data, collected through educational online
services or applications, to third parties; and
ii. the use of such student data for the purposes of targeted
advertising.
B. Of these complaints, how many involve websites or online
services currently subject to the Children's Online Privacy Protection
Rule?
Answer. The FTC Consumer Sentinel database does not contain readily
extractable data on these categories of complaints. However, over
decades of enforcement experience, we have found that our Consumer
Sentinel database is often an imperfect tool for measuring consumer
concerns. This is especially so in an area like privacy where neither
parents nor students may be aware that student data is being sold to
third parties or used for targeted advertising. For this reason, the
consumer complaints we receive are often only one factor in our
analysis of potential consumer concerns.
We know from other data that the privacy of student information is
a significant concern. For example, in a 2014 survey conducted by
Common Sense Media, 90 percent of respondents said they were concerned
about how private companies with non-educational interests are able to
access and use the personal information of students. Seventy-seven
percent of respondents were in favor of making it illegal for schools
and education technology companies to sell students' private
information to advertisers, and 74 percent were in favor of restricting
companies from engaging in targeted advertising to students. See Common
Sense Media Student Privacy Survey, available at https://
www.commonsensemedia.org/sites/default/files/uploads/about
_us/student_privacy_survey.pdf.
Concerns about how private companies may be using children's
personal information led the Commission to significantly revise the
FTC's Children's Online Privacy Protection Rule (``COPPA Rule'') in
2012. The revised Rule requires companies to give parents notice of,
and control over, among other things, marketers' use of persistent
identifiers to track their children for purposes of targeting
advertising or compiling a profile. The FTC has brought several cases
against companies who allegedly have collected personal information
from children for behavioral advertising without obtaining parental
consent. In settlements in December 2015 with LAI Systems, LLC and
Retro Dreamer, for example, the Commission alleged that in violation of
the COPPA Rule the companies allowed third-party advertisers to collect
persistent identifiers from children under 13 and use it to serve
targeted advertising, without parental consent. In a settlement in
January 2016 with InMobi PTE, Ltd., the Commission alleged that an ad
network unlawfully collected geolocation information from children's
apps for behavioral targeting, without obtaining parental consent.
Question 3. The FTC is an agency with broad investigative and
enforcement powers. Commission investigations can involve considerable
discovery requests, and enforcement actions frequently result in
settlements through consent decrees. While there are often legitimate
reasons for settlements, this reliance on the administrative process
has resulted in a lack of judicial review of agency enforcement
decisions. This lack of case law means there may be fewer bright lines
to guide the Commission, companies, and courts with respect to
enforcement. Does this absence of clear guidance concern you? Please
explain.
Answer. When the Commission determines that (1) it has reason to
believe that an entity has engaged in unfair or deceptive acts or
practices in violation of the FTC Act or violated another statute
enforced by the Commission and (2) that an enforcement action against
that entity is in the public interest, the Commission issues an
administrative complaint or authorizes staff to file a complaint in
Federal district court. The Commission determines to issue a complaint
and place an entity under order only after a rigorous vetting process
to ensure the evidence is strong and the case is appropriate under this
standard. If a party chooses to settle prior to the Commission issuing
the complaint, the Commission will issue the complaint along with the
settlement and place both documents on the court docket and on the
Commission's website. Accordingly, whether a case is litigated fully
before a trier of fact or settled pre- or post-complaint, I believe the
Commission provides ample guidance about what conduct it has found
reason to believe violated a statute it enforces. Moreover, the
majority of the Commission's consumer protection cases are filed in
Federal court, and any settlement is subject to approval by a Federal
court judge. Additionally, many of our cases do not settle, and there
is a robust body of case law analyzing the specific facts of a case and
evaluating whether and how the defendant's conduct violates the FTC Act
or other statutes the Commission enforces.
In order to prevent deceptive or unfair acts before they cause, or
are likely to cause, harm, the Commission provides a host of materials
that explain the Commission's positions on a myriad of legal issues.
For example, the Commission provides detailed advice in formal
guidance. Currently, the agency has published and updated thirteen
Guides in areas ranging from Environmental Marketing Claims to
Endorsements and Testimonials. See 16 CFR Subchapter B. The Commission
also publishes a library of business education materials on its
website. These materials address advertising and marketing generally,
credit and finance, privacy and security, and issues within a number of
select industries. See https://www.ftc.gov/tips-advice/businesscenter.
The agency currently has 120 of these plain-language business guidance
publications available to businesses. Additionally, over the last year
alone, FTC staff have published 185 blog posts, providing advice on
compliance with the FTC Act as well as other statutes and rules for
which the Commission is responsible. Finally, the Commissioners and
staff make dozens of annual appearances before industry groups to
explain the law and the Commission's interpretation of it.
Question 4. You indicated recently that you ``believe that it's
appropriate to require opt-in consent when you have . . . sensitive
information like financial information, geo-location, children's
information, health information, content, but in areas outside of that,
we think opt-out choice would suffice.'' The comments filed by the FTC
staff to the Federal Communications Commission (FCC) recommended that
the FCC take this approach as well in adopting its broadband privacy
rules. Why do you think this is the best approach?
Answer. The FTC's general approach to consumer choice has focused
on whether the collection and use of information is consistent with the
context of a consumer's interaction with a company and the consumer's
reasonable expectations. For practices that are inconsistent with
consumer expectations, the FTC has advocated that companies provide
meaningful choices to consumers, with the level of choice being tied to
consumer expectations. The FTC has supported the approach of using opt-
in for the collection, use, and sharing of sensitive information
because the more sensitive the data, the more consumers expect it to be
protected and the less they expect it to be used and shared without
their consent.
Question 5. Before the Committee, you testified that you would
welcome the opportunity to review the latest version of the FCC's new
privacy proposal and publicly comment on it before the FCC votes on it.
Commissioner Ohlhausen testified that further comment on this proposal
would be beneficial to consumers. Commissioner McSweeny testified that
the FTC ``stand[s] ready to work with the FCC'' on this matter.
A. Has FCC requested additional comment from FTC, or have you
requested that the FTC have an opportunity to review the latest version
of this proposal and provide additional public comment before the FCC
votes on it?
B. If not, does the FTC intend to make such a request? If so, when?
Answer. The FCC did not request additional comment from the FTC,
nor did the FTC request to provide additional public comment. The FTC's
staff comment filed with the FCC on May 27, 2016 responded in detail to
specific questions from the FCC and offered suggestions regarding the
regulatory text based on the FTC's decades of experience protecting the
privacy and security of consumers' data. I am pleased that the FCC
adopted many of our recommendations in its final rule. We look forward
to continuing to work with the FCC to protect consumers' privacy across
the Internet.
Question 6. In June 2016, the FTC held a workshop entitled
Something New Under the Sun: Competition & Consumer Protection Issues
in Solar Energy, to address competition and consumer protection issues
related to solar distributed generation. Around the same time, the
White House issued a report entitled Incorporating Renewables into the
Electric Grid that focused on expanding opportunities for smart markets
and energy storage, including variable energy resources.
A. Why did the FTC choose to focus its workshop on solar projects,
rather than to examine the broader smart energy market, that includes
other competing resources and technologies?
Answer. Our solar workshop grew out of the FTC's longstanding
general interest in electricity markets and our competition advocacy
work in this important area.\6\ The FTC focused this workshop on solar
distributed generation (DG), rather than the broader smart energy
market, for two main reasons. First, the competition and consumer
protection issues that arise when consumers install solar panels and
generate electric power at their homes are a particularly good fit for
the FTC's competition and consumer protection mandate and expertise.
For example, solar DG and the changing regulatory environment
surrounding electricity pricing present significant questions of
consumer protection, such as whether solar firms are making truthful
and non-deceptive claims about their products and electricity pricing.
While the broader smart energy marketplace raises important and
interesting policy issues, the FTC's expertise is not in energy policy
more generally. Second, given that a one-day workshop was planned, we
believed a narrower focus on solar DG would yield the most useful, in-
depth discussion.
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\6\ In the early 2000s, the FTC issued two staff reports discussing
competition and consumer protection issues in the broad electric power
industry. FTC Staff Report, Competition and Consumer Protection
Perspectives on Electric Power Regulatory Reform: Focus on Retail
Competition (Sept. 2001); FTC Staff Report, Competition and Consumer
Protection Perspectives on Electric Power Regulatory Reform (July
2000). More recently, states have been exploring ways to reform
electricity markets at the distribution and retail levels of the supply
chain. The FTC has submitted comments in connection with a number of
these state efforts and regulatory reviews, including multiple comments
to the New York State Public Service Commission. See FTC Staff Reply
Comment Before the State of New York Public Service Commission in the
Reforming Energy Vision Proceeding, Responding to ThirdParty Comments
on the NY PSC Benefit-Cost Analysis (Sept. 10, 2015), https://
www.ftc.gov/policy/policyactions/advocacy-filings/2015/09/ftc-staff-
reply-comment-state-new-york-public-service; FTC Staff Reply Comment to
the New York State Public Service Commission on ``Reforming the Energy
Vision'' Project (Oct. 23, 2014), https://www.ftc.gov/policy/policy-
actions/advocacy-filings/2014/10/federal-trade-commission-staff-
replycomment-new-york; FTC Staff Comment Before the Massachusetts
Department of Public Utilities Regarding its Investigation of Time-
Varying Retail Rates for Electric Power (Mar. 10, 2014), https://
www.ftc.gov/policy/policyactions/advocacy-filings/2014/03/ftc-staff-
comment-massachusetts-department-public; FTC Staff Reply Comment Before
the District of Columbia Public Service Commission Concerning a
Proposed Program for Dynamic (Variable) Pricing of Electricity for
Residential Customers (Jan. 13, 2014), https://www.ftc.gov/policy/
policyactions/advocacy-filings/2014/01/ftc-staff-reply-comment-
district-columbia-public.
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We will continue to monitor the energy industry, including the
smart energy marketplace, to identify potential competition and
consumer protection issues that may fall within the FTC's core areas of
expertise.
B. Now that the comment period for this workshop has closed, what
next steps does the FTC intend to take with respect to these issues,
including consumer protection concerns? When can we expect these next
steps to take place?
Answer. We are continuing to examine the workshop record, including
more than 200 filed public comments, and evaluate potential next policy
steps. For example, we may look for additional opportunities to file
advocacy comments relating to the regulation of the electric power
industry. We may also prepare a policy paper addressing some of the
main pricing and competition issues discussed during the workshop. No
specific decision has been made at this time.
With regard to consumer protection concerns, the FTC remains
vigilant and will take action against any unfair or deceptive business
practices that occur in the solar DG industry. The FTC will also
continue education efforts in this area, such as the guidance we have
provided to consumers.\7\
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\7\ Federal Trade Commission, Solar Power for Your Home, https://
www.consumer.ftc.gov/articles/0532-solar-poweryour-home.
Question 7. I would like to ask you some questions about
competition in the market for prescription eyewear. In particular, I
wish to know how the FTC plans to encourage greater competition and
consumer choice in this market.
A. Now that the public comment period for the Eyeglass Rule has
ended, when do you anticipate the FTC will move forward with any
modifications?
Answer. As you know, the Commission published an advance notice of
proposed rulemaking in September 2015 soliciting comments on whether
the Commission should modify the Eyeglass Rule, a rule promulgated in
1978 using the Commission's Magnuson-Moss rulemaking authority. The
Commission received 831 comments prior to the comment period closing on
October 26, 2015. Should the Commission determine that any modification
to the Rule is justified, the Commission would then issue a notice of
proposed rulemaking (NPRM), which, pursuant to 15 U.S.C.
Sec. 57a(b)(2)(C), the relevant congressional committees would receive
at least 30 days prior to its publication in the Federal Register.
While I cannot comment in detail on a pending rule review, the
Commission currently anticipates making a decision on whether to
recommend a modification to the Rule in early 2017. Any NPRM would
again solicit public comment.\8\ If the Commission decides to issue an
NPRM, the Commission would also provide an opportunity for public
hearings.\9\
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\8\ 15 U.S.C. Sec. 57a(b)(1)(B).
\9\ 15 U.S.C. Sec. 57a(b)(1)(C), (c).
B. The Contact Lens Rule requires prescribers to verify the
accuracy of prescriptions within eight hours when asked by a provider
to do so. The Eyeglass Rule, however, has no such requirement.
Does the FTC believe that this disparity between the Eyeglass Rule
and the Contact Lens Rule should be remedied, and that the Eyeglass
Rule should require prescribers to verify prescriptions within a short
period of time?
Answer. The Contact Lens Rule contains a verification process
whereby an authorized seller can sell contact lenses eight business
hours after providing a prescriber with a complete verification
request, if the seller has not heard from the prescriber.\10\ We
believe this provision has served its purpose in spurring competition
among sellers of contact lenses and enabling comparison shopping by
consumers, leading to both price and non-price benefits for consumers.
As you note, the Eyeglass Rule has no analogous verification provision.
The Commission specifically asked for public comment concerning whether
the Eyeglass Rule should contain a similar verification provision, and
some of the comments we received did address this issue.\11\ Under the
Magnuson-Moss rulemaking process that governs the Eyeglass Rule, the
Commission would need to meet certain statutory requirements before it
could propose to modify the rule by adding a verification framework.
Notably, the Commission would need to have reason to believe that the
unfair or deceptive acts or practices that are the subject of the
proposed rulemaking are prevalent. By contrast, the Commission
promulgated the Contact Lens Rule pursuant to a statute, the Fairness
to Contact Lens Consumers Act (``FCLCA''), which specifically set forth
many details of the verification framework.\12\ These different
procedural contexts could lead to a different outcome with respect to
whether the Commission determines that the Eyeglass Rule should include
a verification provision and, if so, how it should operate. We expect
that this issue will be addressed in any forthcoming NPRM as part of
the rule review process for the Eyeglass Rule.
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\10\ See 16 C.F.R. Sec. 315.5.
\11\ Ophthalmic Practice Rules (``Eyeglass Rule''); Request for
comment, 80 Fed. Reg. 53,274, 53,276 (Sept. 3, 2015).
\12\ 15 U.S.C. Sec. Sec. 7601-7610.
C. Eyewear providers require certain information in order to fill a
prescription accurately. The Contact Lens Rule requires that all
prescriptions ``contain sufficient information for the complete and
accurate filling of a prescription.'' The Eyeglass Rule has no such
requirement, and prescribers often do not include all necessary
information to allow a consumer to purchase eyeglasses elsewhere,
including, for example, the measurement for ``Pupillary Distance.''
Answer. Does the FTC believe that this disparity between the
Eyeglass Rule and the Contact Lens Rule should be remedied, and that
the Eyeglass Rule should require prescribers to provide consumers with
``sufficient information for the complete and accurate filling of a
prescription''?
The Eyeglass Rule defines a prescription as the written
specifications for lenses for eyeglasses, which are derived from an eye
examination, including all of the information specified by state law,
if any, necessary to obtain lenses for eyeglasses. In its current
review of the Eyeglass Rule, the Commission specifically asked for
comment concerning whether the Eyeglass Rule should require that the
definition of prescription be modified to explicitly include pupillary
distance.\13\ A number of the comments we received addressed this
issue. The Commission must consider the evidence proffered on this
point in the context of the standards of prevalence and unfairness.
Specifically, as part of the unfairness inquiry, the Commission must
balance the costs and benefits the requirement would have on
prescribers, consumers, and competition.\14\ Because the Commission
promulgated the Contact Lens Rule pursuant to the FCLCA, which
specifically set forth the requirement that all prescriptions contain
sufficient information for the complete and accurate filling of a
prescription,\15\ the Commission could arrive at a different outcome
with respect to its determination whether the Eyeglass Rule should
require that a prescription include information such as pupillary
distance. As the Eyeglass Rule review process continues, we anticipate
that any forthcoming NPRM will examine this issue.
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\13\ Ophthalmic Practice Rules (``Eyeglass Rule''); Request for
comment, 80 Fed. Reg. 53,274, 53,276 (Sept. 3, 2015).
\14\ An act or practice is unfair if it causes or is likely to
cause substantial consumer injury which is not reasonably avoidable by
consumers themselves and which is not outweighed by countervailing
benefits to consumers or competition. 15 U.S.C. Sec. 45(n); FTC,
Commission Statement on the Scope of the Consumer Unfairness
Jurisdiction (Dec. 17, 1980) (appended to Int'l Harvester Co., 104
F.T.C. 949, 1070 (1984).
\15\ 15 U.S.C. Sec. 7610.
D. Today some states allow short-term prescriptions, requiring
consumers to go back to their eye care provider to get another
prescription whenever they want to get new eyeglasses, even when their
vision has not changed at all. Does the Commission believe that the
Eyeglass Rule and the Contact Lens Rule should be modified to address
the issue of prescription duration?
Answer. As your question recognizes, state law provides for the
length of contact lens and eyeglass prescriptions. Under the FCLCA and
the Contact Lens Rule, contact lens prescriptions cannot expire in less
than one year unless, based on medical judgment, a prescriber specifies
a different date and documents the reasoning for the shorter
prescription length.\16\ In contrast, the Eyeglass Rule currently is
silent on prescription length. Commenters in both rule review
proceedings have raised issues about the length of prescriptions. We
are considering these comments, as well as the evidence proffered in
support of any proposed modifications to the rules. In the Contact Lens
Rule review, the Commission is examining how any proposed modifications
would fit within the framework set forth by the FCLCA and its goal of
promoting competition among contact lens sellers and facilitating
consumers' ability to comparison shop for contact lenses. In the
Eyeglass Rule review, as described above, the Commission must consider
whether there is a widespread pattern of unfair or deceptive practices
involving short-term prescriptions that impacts consumers' ability to
comparison shop for eyeglasses.
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\16\ 15 U.S.C. Sec. 7604; 16 C.F.R. Sec. 315.6(a)(1).
Question 8. The annual independent evaluations of the effectiveness
of Commission information security programs under the Federal
Information Security Modernization Act show that the FTC has taken
robust steps to protect Federal information and systems. Yet, it must
increase its governance and oversight efforts to institutionalize and
mature its security program. Will you commit to implement information
security-related recommendations from the FTC Office of Inspector
General (OIG) and independent auditors fully and in a timely manner?
Answer. The Commission is committed to robustly protecting its
information systems and has worked collaboratively with the OIG to
identify opportunities to enhance the Commission's security and
governance practices. We welcome this collaboration with the OIG and
intend to continue it. The Commission evaluates all information-
security related recommendations within the framework of the
Commission's IT strategic plan to assess the long-term impact to the
Commission's IT program, services, budget and process. The goal is to
ensure implementation plans enhance security and provide sustained
improvement. This approach is reflected in the Commission's response to
the OIG and independent auditors' recommendations and milestones for
implementation of the recommendations.
Question 9. The FTC OIG has recommended improvements to the
Commission's information technology governance processes for the past
several years. Most recently, the OIG's review of the FTC's information
technology governance practices found that the Commission failed to
follow the Federal Acquisition Regulation, resulting in increased costs
and diminished performance for the e-Discovery Support System and
mobile device Messaging Infrastructure Modernization project.
A. What steps has the Commission taken to increase accountability
and oversight over its information technology investments?
Answer. The FTC's review revealed opportunities for improving the
deployment and stability of our IT tools, as well as some discrepancies
in following the internal Office of the Chief Information Officer
(OCIO) Acquisition Strategy Plan. To improve our controls over future
IT deployments, the Commission established the Risk and Policy
Management (RPM) and Vendor and Program Management (VPM) divisions
within OCIO to focus on process improvements with IT investments. The
RPM division focuses on the areas of risk management, policy,
procedure, and governance. The VPM division works closely with the
Financial Management Office (FMO) and serves as the central review and
coordination point for all IT acquisitions and related contract
management processes and practices.
B. What is the status of agency's implementation of the
recommendations from the OIG evaluation of the Office of the Chief
Information Officer from December 2015? Are they closed? If so, please
provide specific dates.
Answer. The Commission has taken significant steps to implement the
OIG's December 2015 recommendations, including:
Extending voting rights to the Chief Information Officer on
the FTC IT Governance board and the IT Business Council
(recommendation 1);
Reorganizing the Office of the Chief Information Officer
(recommendation 4);
Establishing two new OCIO divisions--Strategic Planning and
Vendor Program Management--and recruiting additional IT program
managers to lead these divisions (recommendation 4);
Developing and distributing new positions descriptions to
all OCIO employees (recommendation 5);
Publishing an IT Strategy and Transition Plan;
Reprioritizing the IT budget to support the Commission's
strategic IT objectives; and
Making acquisitions and contract management process
improvements to streamline procurement of IT services and
ensure contract services provide value.
Based on actions taken by the Commission, including some of those
listed above, the OIG closed recommendations 1, 4, and 5 on February
11, 2016, September 8, 2016, and September 29, 2016, respectively. In
September 2016, OCIO submitted documentation to the OIG to support
closure of the five remaining recommendations.
C. How often do you meet personally with the FTC's Chief
Information Officer (CIO)? What specific steps have you taken to ensure
that the CIO has the adequate level of support?
Answer. I have monthly meetings with the CIO and will sometimes
meet more often with him, as needed. I work closely with the CIO to
evaluate IT security, IT strategy, risk management, and related issues.
Additionally, the Chief Privacy Officer (CPO) and Chief of Staff, both
members of my office staff, are active participants in the IT
Governance Board's work to ensure decisions regarding IT projects
address risks or other impediments to meeting the agency's strategic
objectives. In FY 2016, the Commission approved the reprioritization of
IT funding to focus on improving e-discovery services and development
of the IT modernization strategy. In September, we launched an IT
modernization project, which will improve the performance of the FTC's
network, security, and services.
Question 10. The OIG has also identified areas for improvement of
the agency's controlled unclassified information program. Given the
fact that the FTC obtains a large amount of sensitive information,
including propriety business information, law enforcement sensitive
information, and consumer personal information, what steps are you
taking to safeguard this information pursuant to new guidance from the
National Archives and Records Administration and the National Institute
of Standards and Technology?
Answer. The Commission has long placed great importance on its
mandate to protect controlled unclassified information (CUI) from
insider and other threats and strives to regularly update and adjust
its practices to ensure the security of all non-public data in its
control. Under the FTC Act, FTC employees who disclose non-public
information without authorization are subject to possible criminal
prosecution. Moreover, the FTC has adopted an extensive framework of
protections for sensitive, but unclassified, information held by the
Commission. This framework includes documented internal policies,
procedures, and staff and contractor training concerning safeguarding
sensitive personally identifiable information and business confidential
information. As part of this ongoing effort to protect the non-public
information in its possession, the FTC is reviewing the rule recently
issued by the National Archives and Records Administration regarding
the handling of CUI. See Final Rule, Controlled Unclassified
Information, 81 Fed. Reg. 63324 (Sept. 14, 2016).
As part of this process, the Commission will address the OIG's
recommendation to consider expanding the scope of the agency's insider
threat program (ITP) beyond the protection of classified materials to
all sensitive holdings, and how the Commission might leverage its ITP
to protect CUI. The ITP allows the FTC to gather, share, integrate,
identify, and report relevant insider threat information from offices
across the agency, including security, information security, and human
resources. The FTC has already established a multi-office working
group, chaired by the Records and Filings Office (RFO) and that
includes the Chief Privacy Officer (CPO), the Chief Information
Security Officer, representatives from Physical and Personnel Security,
the Office of General Counsel and others, to develop plans to implement
the requirements of the final CUI rule and consider how these changes
may be incorporated into the ITP. The CPO works with the ITP to ensure
a balance between a robust and effective ITP, using NIST's risk
management framework analysis, and the privacy rights of FTC employees
under the Privacy Act and other Federal laws. Additionally, our Office
of the CIO (OCIO) is reviewing the agency's FISMA and Risk Management
and Governance policies to ensure that the control requirements of the
CUI program, as identified in NIST security special publications, are
taken into consideration when planning for systems and selecting
information safeguards. OCIO will review capabilities for CUI marking
and metadata analysis, and verify and validate that potential
technology acquisitions, when feasible, address these requirements.
Question 11. According to the OIG's top management challenges, the
Commission continues to face challenges with contract management. Given
that the FTC obligated approximately one-third of its operating budget
on contracts for goods and services in Fiscal Year 2014, how do you
plan to update agency processes and policies to increase oversight over
contracts in order to improve stewardship of taxpayer dollars?
Answer. The Commission is committed to effectively managing our
contracts to ensure that the FTC obtains the quality goods and services
we need on schedule, within contracted prices, and consistent with
expected quality performance. To this end, we are taking the following
steps to improve our contract oversight and management:
COR Education
Contracting Officer Representative (COR) education continues to be
a priority for the Commission, with primary oversight by the Financial
Management Office (FMO) management and the Chief Acquisitions Officer
(CAO). In FY 2016, FMO planned to hold quarterly COR training, but
expanding it from quarterly to bi-monthly in February 2016 to address
not only COR core competencies but also specific, tailored training.
These efforts will mature and expand the capacity of the FTC's CORs to
work effectively with contracting officers to procure and manage
vendors and manage internal controls. To complement its in person
training, the Acquisitions Division has posted a wide variety of COR
resources online for easy access, including templates, sample
documents, and Procurement Action Lead Time requirements for the most
common acquisitions, including new task orders, open market contracts,
sole source contracts, and supplies/services contracts through GSA.
The Records and Filings Office and FMO have also published
additional tools to help CORs understand and meet relevant
recordkeeping requirements. The tools include a new contract records
tip sheet, an updated model performance standard, an updated COR
appointment letter, a new receiving report form for contractor invoice
payment that allows for electronic signatures and submissions, and
policy revisions.
Customer Outreach and Support
The Acquisitions Division is also working to improve the quality of
agency acquisitions by improving customer communications via targeted
customer meetings and by obtaining acquisition liaison support for
certain customers. The CAO customer meetings, first initiated in FY
2015, ensure standard topics are discussed, and new requirements are
being addressed in an agreed-upon priority order. This process better
supports the Acquisitions Division and the program offices to engage in
integrated acquisition planning.
Additionally, the Acquisitions Division has contracted for three
acquisition liaisons who will assist assigned program offices beginning
in early FY 2017, by providing hands on guidance on the acquisition
process; assisting customers with initiating contract actions; ensuring
the adequacy of acquisition packages; and ensuring that both the
Acquisitions Division and the customer maintain visibility and
confidence throughout the entire process. The liaisons will also assess
the current state of services received, so that they can structure
subsequent acquisitions to improve the quality of contractor services.
The liaisons' goal will be to provide acquisition assistance that
ensures the customer-based performance management measures are built
into the acquisitions package at the requirements definition phase. FMO
anticipates that the liaison support will improve the quality of the
acquisition packages, which will lead to better management of
contractor performance and the delivery of improved services to the
Commission.
Revised Policies and Procedures
Finally, the CAO has continued to review all acquisition-related
policies and procedures to ensure consistency with the latest Federal
regulations. The first phase of this effort includes a review and
revision of acquisition policies. For example, review and revision of
the policy on Market Research and Acquisition Planning will be
completed in the second quarter of FY 2017. The Acquisitions Division
will continue to identify areas of concern that need established policy
and procedures in FY 2017 and beyond. Through this continuous
assessment process, the Acquisitions Division will have legally
compliant and standardized policies and procedures that will govern
contracting actions and provide consistency and efficiency in operation
and output of the Acquisitions Division, as well as clear guidance for
the program offices. Establishment of policies and procedures is an
ongoing effort of continuous review, revision, and tested compliance,
as the Federal Acquisition Regulation and industry standards are
constantly changing in the acquisitions environment.
Question 12. The American Medical Association (AMA) recently
adopted a resolution supporting a ``requirement that attorney
advertising, which may cause patients to discontinue medically
necessary medications have appropriate and conspicuous warnings that
patients should not discontinue medications without seeking the advice
of their physician.'' \17\ The AMA's resolution notes that
``[t]elevision commercials that seek plaintiffs regarding new
medications are rampant on late-night television,'' that ``[o]ften
potential complications are spoken about in an alarming way,'' and that
``[a]s a result of these ads, some patients have endangered themselves
by stopping prescribed medications without speaking to a physician.''
\18\ The AMA resolution concludes that advertisements ``are
`fearmongering' and dangerous to the public at-large because they do
not present a clear picture regarding the product.''
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\17\ AM. MED. ASS'N, Res. 208 (Apr. 25, 2016).
\18\ Id.
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A. How would the Commission address whether such advertisements
constitute unfair acts or practices under Section 5 of the FTC Act?
Answer. Section 5 of the FTC Act prohibits ``unfair or deceptive
acts or practices in or affecting commerce.'' 15 U.S.C. Sec. 45(a).
Pursuant to Section 5(n) of the Act, an act or practice may be deemed
unfair if (1) it ``causes or is likely to cause substantial injury to
consumers''; (2) the injury ``is not reasonably avoidable by consumers
themselves''; and (3) the injury is ``not outweighed by countervailing
benefits to consumers or competition.'' 15 U.S.C. Sec. 45(n). Whether
an advertisement seeking plaintiffs who might have been injured by
medication that fails to disclose that patients should not discontinue
their medication without seeking the advice of their physician would
constitute an unfair act or practice under this standard is a factual
question that can only be answered on a case-by-case basis.
The first element of unfairness is that the act causes or is likely
to cause substantial injury to consumers. Accordingly, an inquiry would
consider how likely is it that a particular ad would cause consumers to
discontinue their medication and what consequences would likely follow
if that happened, in order to obtain an overall understanding of the
level of risk and harm to which consumers are exposed in a particular
case. These factors would likely vary depending on the particular
claims made in the ad, as well as the type of medication at issue.
The next element asks whether the injury would be reasonably
avoidable by consumers themselves. Again, the answer to this question
would likely depend on the claims made in the advertising, the
medication involved, and the condition at issue. It is conceivable that
in some cases the risk of stopping medication without consulting with a
physician would be apparent to the patients themselves.
The final element is whether the consumer injury is outweighed by
countervailing benefits to consumers or competition. Attorney
advertising advising consumers who might have suffered injury to seek
legal consultation can serve an important public purpose. Moreover,
required disclosures impose at least some cost on advertisers. However,
when there is a substantial injury to health, or the likelihood of such
injury, that is not reasonably avoidable by consumers, a cost-benefit
analysis will generally favor disclosure if such disclosure will
mitigate the injury.
Question 13. In issuing invitations to witnesses to testify before
the Committee, it is our practice to request that they submit written
testimony two business days prior to the hearing and to allow each
witness five minutes at the hearing to present his or her oral remarks.
Prior to this hearing, I sent an invitation to you, individually, as
well as to Commissioners Ohlhausen and McSweeny, requesting such
testimony on, among other things, you views on regulatory reform,
efforts to promote innovation, and consumer protection. The Committee
received a single document representing a consensus view of the
Commission rather than individual testimony. Prior to the hearing, the
Commission also informed the Committee that, rather than deliver
individual oral testimony, the Commissioners had coordinated their
testimony rather than provide individual views.
A. What is the Commission's policy with respect to complying with
Committee requests for testimony?
Answer. When invited to testify, the Commission's longstanding
practice has been to submit written testimony that is approved and
voted on by all of the Commissioners. As a bipartisan independent
agency operating in a political environment in which partisanship can
sometimes overwhelm substance, I believe that the FTC's ability to
engage in meaningful internal deliberations, and operate by consensus
wherever possible, distinguishes the agency in a positive way. In
addition, I note that we coordinated with respect to the subject matter
of our individual oral testimony in order to avoid duplication.
______
Response to Written Questions Submitted by Hon. Roy Blunt to
Hon. Edith Ramirez
Before I proceed, I want to clarify that my questions should not be
viewed as speaking favorably or negatively about any potential merger
under consideration by the Federal Trade Commission (FTC).
Question 1. Can you describe how the FTC evaluates the impact of
mergers on Federal programs such as the 340B Drug Pricing Program?
Answer. Section 7 of the Clayton Act prohibits mergers and
acquisitions when the effect ``may be substantially to lessen
competition, or to tend to create a monopoly.'' A key question the FTC
asks is whether the proposed merger is likely to create or enhance
market power or facilitate its exercise. When the FTC evaluates any
merger, we consider what aspects of competition may be impacted by the
merger. This process includes defining a relevant product and
geographic market and evaluating the likely anticompetitive effects of
the proposed transaction. Depending on the type of commerce involved in
the merger, a Federal agency or program may be impacted by the merger,
for example as a customer in the relevant market. The FTC would
evaluate the impact on such Federal agencies or programs.
Question 2. What safeguards does the FTC look for in mergers to
ensure the equities and financial integrity of Federal programs like
the 340B Drug Pricing Program are protected?
Answer. The goal of the FTC's merger enforcement program is to
preserve the competition that would otherwise be lost as a result of a
merger, either by engaging in litigation to block the merger or
ordering the merging parties to divest assets to an appropriate buyer
to restore the competition that would be lost with the merger. The 2010
Horizontal Merger Guidelines issued by the Department of Justice and
FTC set out the agencies' analytical framework for reviewing a proposed
merger pursuant to Section 7 of the Clayton Act and determining whether
a merger is likely to substantially lessen competition. While a Section
7 analysis would not include the equities and financial integrity of
Federal programs as direct factors in a decision to prohibit a merger,
to the extent that Federal agencies or programs would likely be harmed
by a reduction in competition, the FTC typically would take that
information into account in its enforcement decisions and when
designing merger remedies.
For example, in 2008, the Commission challenged an exclusive
agreement between Fresenius, the Nation's largest provider of dialysis
services, and the manufacturer of an intravenous (IV) iron drug used in
dialysis clinics to treat patients with end-stage renal disease. The
Commission was concerned that this exclusive agreement would allow
Fresenius to inflate the price it paid itself for using the IV iron
drug, and that Fresenius would report these inflated prices to the
Center for Medicare & Medicaid Services (CMS). If that happened, the
inflated prices would drive up the Average Selling Price calculated by
CMS and paid by CMS to reimburse Medicare when the drug was used to
treat dialysis patients covered by Medicare. In order to mitigate the
risk that the exclusive agreement would lead to higher Medicare
reimbursement costs, the Commission barred Fresenius from reporting
higher prices to CMS until CMS adopted new rules to address intra-
company transfer prices.\19\
---------------------------------------------------------------------------
\19\ FTC Press Release, FTC Challenges Vertical Agreement between
Fresenius and Daiichi Sankyo (Sept. 15, 2008), https://www.ftc.gov/
news-events/press-releases/2008/09/ftc-challenges-vertical-agreement-
between-fresenius-anddaiichi.
Question 3. Many community hospitals, clinics, and other entities
are beneficiaries of the 340B Drug Pricing Program due to their role in
providing needed care to poor and disadvantaged populations. Does the
FTC consider whether pharmacy mergers might result in increased costs
for local safety-net providers who meet the needs of poor and
disadvantaged populations?
Answer. While I cannot discuss the details of any non-public
investigation, the Commission is aware of the 340B Drug Pricing Program
and its importance to the many community hospitals, clinics, and other
entities that provide care to the poor and disadvantaged populations.
In the past, the FTC has considered whether a merger of pharmacy chains
was likely to substantially lessen competition by leading to higher
prices and lower quality service. For example, in 2007, the FTC
challenged Rite Aid's proposed acquisition of Brooks and Eckerd
pharmacies, alleging that the acquisition would harm competition in 23
local markets in the northeast United States. To resolve these concerns
and restore competition that would otherwise be lost, the FTC ordered
Rite Aid to divest stores to Commission-approved buyers.\20\ The order
ensured that consumers would continue to have a choice in where they
shopped for prescription drugs.
---------------------------------------------------------------------------
\20\ FTC Press Release, FTC Challenges Rite Aid's Proposed $3.5
Billion Acquisition of Brooks and Eckerd Pharmacies from Canadas Jean
Coutu Group, Inc. (Jun. 4, 2007), https://www.ftc.gov/news-events/
pressreleases/2007/06/ftc-challenges-rite-aids-proposed-35-billion-
acquisition-brooks.
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Similarly, in 2012, the Commission took action to block a merger of
the two largest long-term care pharmacies, Omnicare and PharMerica,
over concerns that the merged firm could demand higher reimbursement
rates for Medicare Part D prescription drugs administered in skilled
nursing facilities supplied by the merged firm. If allowed to proceed,
the combined firm would have become a ``must have'' for Medicare Part D
drug plans, which are responsible for providing subsidized prescription
drug benefit coverage for most residents of skilled nursing facilities
and other Medicare beneficiaries.\21\ After the FTC filed a complaint
alleging the merger violated the antitrust laws, the companies
abandoned their merger plans.
---------------------------------------------------------------------------
\21\ FTC Press Release, FTC Sues to Block Omnicare's Bid to Buy
Rival Pharmacy Provider PharMerica (Jan. 27, 2012), https://
www.ftc.gov/news-events/press-releases/2012/01/ftc-sues-block-
omnicares-bid-buy-rival-pharmacyprovider.
Question 4. Do you anticipate the FTC may examine whether continued
market consolidation in the pharmacy sector will adversely impact
patients who benefit from the 340B Drug Pricing Program?
Answer. I can assure you that in determining whether under Section
7 of the Clayton Act a merger may substantially lessen competition or
tend to create a monopoly, the FTC considers all aspects of competition
in a market. The FTC strives to protect consumers from mergers whose
effect may be substantially to lessen competition. In a merger review,
the FTC would consider the impact of competition on Federal programs
and customers, if applicable in that industry.
______
Response to Written Questions Submitted by Hon. Marco Rubio to
Hon. Edith Ramirez
Question 1. According to the most recent statistics, there are
currently 728 travel related cases and 147 non-travel related cases of
Zika in my home state of Florida. With the increase in cases, and the
threat of mosquitos spreading around the Miami Beach area and to other
parts of the United States and our territories, many are concerned with
contracting the virus. Feeding into consumer concerns, many companies
are marketing products that say they provide protection from the Zika
virus.
A. Please speak to the FTC's efforts to seek out these fraudulent
companies that are capitalizing off of consumer concerns about Zika,
and hold them accountable.
Answer. The Commission is very concerned about the health risks
posed by Zika virus and other vector-borne diseases, and about the
deceptive marketing of some products advertised to prevent them. The
Commission's prior experience in similar situations (e.g., the H1N1
virus) has been that after the news media report a significant public
health concern, questionable products claiming to address that concern
appear on the market. We were therefore concerned that reports about
the serious potential health implications of Zika virus would give rise
to advertising claims for products purporting to repel the mosquitoes
that carry Zika, or otherwise to prevent consumers from contracting
Zika. Accordingly, we conducted Internet surfs for online marketers
making Zika protection claims early last summer, which culminated in
the issuance on August 4, 2016 of warning letters to ten online
marketers of wearable products (such as wristbands and stickers) for
which such claims were being made.\22\
---------------------------------------------------------------------------
\22\ See https://www.ftc.gov/news-events/press-releases/2016/08/
ftc-sends-warning-letters-online-sellers-makingzika-virus.
---------------------------------------------------------------------------
The warning letters reminded the marketers in question that their
claims must be supported by competent and reliable scientific evidence
in the form of well-controlled human clinical testing. The letters
further explained that the testing must use the mosquito species that
carry the virus and demonstrate that the repellent effects last as
advertised. The FTC urged the marketers to review their claims and
immediately delete or change them if the claims were not substantiated
by scientific evidence. In an effort to notify other marketers who were
or might be considering making Zika protection claims (or similar
claims), we also issued a business blog post discussing the content of
the warning letters and explaining what evidence marketers should have
to substantiate their health claims.\23\
---------------------------------------------------------------------------
\23\ See https://www.ftc.gov/news-events/blogs/business-blog/2016/
08/ftc-staff-sends-warning-letters-about-anti-zikaclaims.
B. What can we do to educate my constituents back home in Florida,
and across our nation, about what to look for to ensure they are not
buying into falsely advertised products, and make sure they are
protected as consumers?
Answer. The Commission agrees that consumer education is of utmost
importance in helping consumers identify products that will be
effective in helping to repel mosquitoes that might carry Zika virus
and, at the same time, avoid wasting money on ineffective insect
repellent products. The Commission advises consumers to seek
information from knowledgeable and reputable sources, including
government agencies, rather than just rely on claims made by marketers.
To that end, the Commission released a consumer education blog in both
English and Spanish discussing the warning letters and informing
consumers about what they could do to protect themselves and their
families from Zika virus and other insect-borne diseases.\24\ The blog
links to the websites of the Environmental Protection Agency and the
Centers for Disease Control, both of which have published materials
designed to educate the American public about how to protect
themselves. In particular, the EPA has registered as safe and effective
certain skinapplied insect repellent ingredients (DEET, Picaridin,
IR3535, Oil of Lemon Eucalyptus, and 2-undecanone), and both the EPA
and the CDC recommend using skin-applied products containing those
ingredients. The EPA also has found clothing treated with the
insecticide permethrin to be effective. The FTC's consumer blog also
links to advice from EPA on how to use insect repellents safely and
effectively; tips from the CDC on protecting oneself and family
members; and what to consider when you are in a location where Zika has
been found. The Commission hopes that centralizing this information
will make it easier for consumers to make educated decisions about how
to protect themselves and their families from Zika.
---------------------------------------------------------------------------
\24\ See https://www.consumer.ftc.gov/blog/will-those-insect-
repellents-protect-you-zika.
Question 2. The Federal Communication Commission (FCC) is scheduled
to vote on its proposed broadband consumer privacy rule on October 27.
A. Will you speak to the FTC's comments on the proposed rule
related to transparency, consumer choice and data security?
Answer. The FTC's comment commended the FCC's focus on the core
privacy values of transparency, consumer choice, and data security,
which mirror the FTC's privacy priorities. The FTC's many privacy
initiatives have consistently emphasized the core principles of
transparency and consumer choice. In addition, to promote strong data
security practices, the FTC has brought approximately sixty enforcement
actions, and launched numerous business education initiatives.
On transparency, the FTC generally supported the FCC's NPRM
requirement that ISPs provide clear and conspicuous notice of their
privacy policies. On choice, the FCC would have required opt out for
marketing of communications-related services, and opt in for all other
uses. The FTC suggested that opt in consent is important before (1)
collecting sensitive information, (2) making material retroactive
changes to privacy policies, or (3) collecting content of consumers'
communications, through technologies such as deep packet inspection.
For other categories, the FTC suggested that opt out would be
sufficient. The FCC's final rule generally adopted this approach.
Finally, on security, we generally supported the approach articulated
in the NPRM, which was to require ISPs to maintain reasonable security.
The FTC also generally supported the inclusion of a breach notification
requirement for ISPs.
B. Prior to this ruling, how has the FTC regulated data privacy?
Answer. The FTC has protected privacy, and will continue to protect
privacy, using a three-pronged approach. The first is enforcement,
which is the linchpin of the FTC's approach to privacy protection. The
FTC enforces a wide range of laws to protect the privacy and security
of consumer data. The FTC also enforces sector-specific statutes that
protect certain health, credit, financial, and children's information,
and has issued regulations implementing each of these statutes. To
date, the FTC has brought over 500 cases protecting the privacy and
security of consumer information. The FTC's ongoing enforcement actions
send an important message to companies about the need to protect
consumers' privacy and data security.
Second, the FTC has pursued numerous policy initiatives designed to
enhance consumer privacy. For example, the FTC has hosted workshops and
issued reports to improve privacy disclosures in the mobile ecosystem,
maximize the benefits of big data while mitigating the risks, and
highlight the privacy and security implications of facial recognition,
and the Internet of Things.
Finally, the FTC has engaged in consumer and business education to
increase the impact of its enforcement and policy initiatives. The FTC
uses a variety of tools--brochures, online resources, workshops, and
social media--to distribute educational materials on a wide range of
topics including mobile apps, children's privacy, and data security.
Most recently, on the business education front, the FTC released ``Data
Breach Response: A Guide for Businesses'' providing advice on
implementing a plan to protect consumers' personal information, to
prevent breaches and unauthorized access. For consumer education, the
FTC recently announced the rollout of its enhanced IdentityTheft.gov
website, a free, one-stop resource consumers can use to report and
begin the process of recovery from identity theft.
C. In your opinion, is the FTC better equipped to regulate data
privacy than the FCC?
Answer. While the FCC has important expertise in crafting and
enforcing rules applicable to certain information held by common
carriers, the FTC has expertise in enforcing privacy protections across
online and offline ecosystems. Consumers would further benefit from FTC
enforcement because the FTC Act provides for consumer redress. Whereas
the FCC traditionally has exercised its authority to fine companies for
noncompliance, the FTC focuses on putting money back in the pockets of
consumers. It is important that both agencies have the tools to protect
consumer privacy, so that there are no gaps in consumer protection. To
that end, the FTC has long called for the repeal of the common carrier
exception. This carve-out no longer makes sense in today's deregulated
environment where the lines between telecommunications and other
services are increasingly becoming blurred. Removing the exception from
the FTC Act would enable the FTC to bring its extensive law enforcement
experience to bear in protecting consumers of common carriage services
against unfair and deceptive practices in the same way that it can
protect against unfair and deceptive practices for other services. If
the exemption were repealed, we would work alongside the FCC to protect
consumers in the common carrier space, as we do in other areas.
Question 3. As a top travel destination in the nation, and the
world, Florida is home to thousands of hotels. As technology continues
to move forward in the 21st Century, booking travel arrangements
through third-party hotel booking sites offers enormous conveniences
and potential cost savings to consumers. However, there have been
allegations that certain companies or their affiliates are engaging in
travel booking practices that mislead and harm consumers booking hotel
rooms online. In June 2015, I joined Senator Nelson in sending a letter
to the FTC urging investigation into allegations of fraudulent online
hotel bookings through third-parties. The entire Florida House
delegation sent a similar letter.
A. How many consumer complaints on this issue have been filed with
the FTC?
Answer. The Commission's Consumer Sentinel complaint database
includes complaints received directly by the FTC as well as complaints
contributed by the Better Business Bureau and other agencies. It
contains approximately 60 complaints since 2012 indicating that
consumers had booked a hotel through a third-party site when they
thought they were booking directly with a hotel. As noted in response
to Sen. Thune, consumer complaints we receive are often only one factor
in our analysis of potential consumer concerns.
B. Can you all speak to the efforts FTC has made to investigate
these fraudulent bookings, and how the FTC is working to protect
consumers from this fraud?
Answer. The Commission has a strong interest in protecting consumer
confidence in the online marketplace for travel and other services. In
July 2015, the FTC issued consumer education cautioning consumers about
third-party websites that may deceptively mimic hotel websites.\25\ We
have also met with members of Congress to discuss the issue of
deceptive travel sites and have proposed technical assistance and
comments on proposed legislation. Although the existence and details of
investigations are non-public, I can assure you that the FTC staff will
carefully monitor the marketplace and take enforcement action if
appropriate.
---------------------------------------------------------------------------
\25\ See https://www.consumer.ftc.gov/blog/did-you-book-night-
hotels-site and https://www.ftc
.gov/newsevents/blogs/business-blog/2015/07/business-travelers-check-
it-out-you-check.
Question 4. Florida is a top travel destination in both the United
States and the world, and is home to hundreds of hotels and resorts.
Orlando, Miami, the Florida Keys, and Fort Lauderdale are some of the
most popular destinations with hotels charging resort fees for
additional amenities. It has come to my attention that the FTC is
looking to alter previous guidance, released in 2012, related to the
mandatory disclosure of hotel resort fees. The 2012 guidance requires
hotels to fully disclose all resort fees so that consumers know
throughout the booking process exactly how much they are paying and
which amenities they are receiving. Please speak to what has prompted
the FTC to discuss reversing the 2012 guidance and moving towards
``total price'' guidance.
A. How many consumer complaints has the FTC received on resort fee
disclosures since it issued its guidance on this issue in 2012?
Answer. The Federal Trade Commission received 401 complaints on
resort fee disclosures between November 29, 2012, when staff issued its
warning letters, and the beginning of July 2016. As noted in response
to Sen. Thune, consumer complaints we receive are often only one factor
in our analysis of potential consumer concerns.
Is there any empirical or legal evidence of actual consumer
confusion or harm that demonstrates that the 2012 guidance needs to be
altered? If so, please describe.
Answer. Partitioned pricing and drip pricing research has
highlighted the need for companies to add resort fees into advertised
room rates.\26\ Partitioned pricing harms consumers because they are
likely to ignore mandatory fees altogether or to underestimate the
total price they must pay for their hotel stays. For example, the
seminal study on partitioned pricing found that consumers shown a
partitioned price recalled a significantly lower price than those shown
an all-inclusive price. Some consumers ignored the surcharge. See Vicki
G. Morwitz et al., Divide and Prosper: Consumers' Reactions to
Partitioned Prices, 35 J. Marketing Research 453, 458 (1998); see also
Eric A. Greenleaf et al., The Price Does Not Include Additional Taxes,
Fees and Surcharges: A Review of Research on Partitioned Pricing, 26 J.
Consumer Psychol. 105 (2015). Drip pricing causes consumers to search
less, as the initial disclosure of only part of the price has an
enduring effect on their purchase decisions. Consumers behave as if the
price is lower than it is, even if they later learn about the
additional fees and see the total price before finalizing the
transaction. Steffen Huck & Brian Wallace, The Impact of Price Frames
on Consumer Decision Making, in Advertising of Price Market Study
Report, Office of Fair Trading, Dec. 2010. Because they search less,
consumers may miss offers that are more suitable to them.
---------------------------------------------------------------------------
\26\ Partitioned pricing entails dividing a price into multiple
components without disclosing the total sum of the components. Drip
pricing is the practice of advertising only part of a product's price
upfront and revealing additional charges later as consumers go through
the buying process.
---------------------------------------------------------------------------
In addition, consumers today increasingly use online travel agents,
metasearch, and mobile platforms to comparison shop for hotels. These
platforms allow consumers, at the start of the booking process, to sort
hotel rooms by price. Sorting results are distorted if they are based
on room rates that exclude resort fees. Consumers are then forced to
click through multiple pages in the booking process for individual
hotels to learn the true total cost for their hotel stays, and then go
back and compare the various total rates.
B. Further, do any of those studies look at consumer understanding
of current disclosures, specifically?
Answer. I am not aware of any research that has specifically
examined consumer understanding of current resort fee disclosures.
Question 5. In November 2012, the FTC issued 22 warning letters to
hotel operators on resort fee disclosures. The 2012 guidance was
largely embraced by the industry. In 2013, the FTC issued additional
warning letters. However, it is my understanding that the FTC has not
taken enforcement action against hotel or resort operators since
sending these warning letters. Why didn't the FTC take enforcement
action?
Answer. The FTC has worked with the travel industry since November
2012 to improve hotel price transparency for consumers. Nevertheless,
the research and marketplace developments described in response to
Question 4 have called into question the effectiveness of the resort
fee disclosures currently used by numerous industry players in various
travel destinations. At this time, law enforcement actions against a
small subset of players are unlikely to achieve the necessary industry-
wide adoption of displays that quote room rates that include resort
fees. For this reason, I have met with a diverse group of industry
stakeholders, urging them to come up with a solution that best protects
consumers and promotes competition.
______
Response to Written Question Submitted by Hon. Kelly Ayotte to
Hon. Edith Ramirez
Question. Competitive marketplaces form the foundation of a
thriving economy:
A. What is the Commission doing to ensure that the digital economy
market remains open and competitive?
B. How is the Commission approaching issues concerning platform
technology companies?
Answer. The Commission seeks to promote an open and competitive
digital economy market through vigorous law enforcement, competition
policy research, competition advocacy, and consumer and business
education. Antitrust enforcement supports robust competition, which in
turn promotes innovation. Unreasonable restraints of trade and other
anticompetitive conduct can threaten market forces, leading to higher
prices, lower quality products and services, and less innovation. The
Commission's mission is to stop anticompetitive conduct. The Commission
also takes enforcement against transactions that may substantially
lessen competition and lead to higher prices, lower quality, or reduced
innovation. The antitrust laws are flexible and apply across industries
and market settings, including ``high tech'' industries and markets.
Applying a balanced, fact-based approach to law enforcement is key to
the Commission's mission to preserve and promote competition in this
vital market.
For example, the Commission acted to preserve competition in the
emerging market for syndicated cross-platform audience measurement
services in its review of the merger of Nielsen and Arbitron.\27\
Before the merger, each company was developing a new product which
would allow media companies and advertisers to measure audiences across
multiple platforms, such as TV and online. At the time, Nielsen was the
leading provider of TV audience measurement services while Arbitron
provided similar measurements for radio audiences. Based on our review,
we determined Nielsen and Arbitron were best positioned to develop
cross-platform measurement service because they were the only two
companies that operated large and demographically representative panels
that are capable of reporting television programming viewership. We had
reason to believe that the elimination of future competition between
Nielsen and Arbitron would likely cause advertisers, ad agencies, and
programmers to pay more for national syndicated cross-platform audience
measurement services. To preserve competition, the Commission required
Nielsen to sell and license, for at least eight years, certain assets
related to Arbitron's cross-platform audience measurement services to
the FTC-approved buyer, comScore.
---------------------------------------------------------------------------
\27\ FTC Press Release, ``FTC Puts Conditions on Nielsen's Proposed
$1.26 billion Acquisition of Arbitron,'' (Sept. 20, 2013), https://
www.ftc.gov/news-events/press-releases/2013/09/ftc-puts-conditions-
nielsens-proposed-126billion-acquisition.
---------------------------------------------------------------------------
The Commission has long been at the forefront of competition policy
research on the application of the antitrust laws to high tech
industries. In the 1990s, back when ecommerce was in its infancy,
former Chairman Pitofsky held a series of workshops that carefully
assessed the applicability of antitrust principles to new industries.
The Commission's current research agenda continues to place a high
priority on understanding how high tech markets work, as well as the
competition and consumer protection issues that arise as technology-
enabled industries evolve.
For example, last year, the FTC held a workshop to explore issues
relating to emerging Internet peer-to-peer platforms and the economic
activity these platforms facilitate--often referred to as the
``sharing'' economy.\28\ We are seeing a dramatic growth in products
and services that are built on peer-to-peer platforms, such as ride-
sharing and property rentals, as more entrepreneurs harness the power
of technology to reach more consumers. These innovative business models
have great potential to benefit our economy, market participants, and
all consumers, not only by stimulating economic growth, encouraging
entrepreneurship, and promoting more productive and efficient use of
assets, but also by incentivizing suppliers of traditional economy
services to improve quality in response to new forms of competition.
However, the rapid expansion of commercial activity involving smaller
suppliers on these platforms may tax the abilities and resources of
regulators, who are confronted with the challenge of applying
regulations that were written with conventional suppliers in mind. Last
week, the FTC issued a report summarizing and synthesizing what we
learned from the workshop and the related public comments we received.
We believe the report will advance the understanding of these virtual
marketplaces and provide insights on the competition, consumer
protection, and regulatory issues that they raise.
---------------------------------------------------------------------------
\28\ FTC Press Release, ``FTC to Examine Competition, Consumer
Protection, and Economic Issues Raised by the Sharing Economy at June
Workshop'' (Apr. 17, 2015), https://www.ftc.gov/news-events/press-
releases/2015/04/ftcexamine-competition-consumer-protection-economic-
issues. All of the materials from the workshop are available on the
workshop webpage: The ``Sharing'' Economy: Issues Facing Platforms,
Participants, and Regulators, Fed. Trade Comm'n (Jun. 9, 2015), https:/
/www.ftc.gov/news-events/events-calendar/2015/06/sharing-economy-
issuesfacing-platforms-participants-regulators.
---------------------------------------------------------------------------
The Commission also engages in advocacy to promote and protect
competition in the digital economy and in platform technology markets.
We encourage policymakers to adopt policies that do not unnecessarily
inhibit competition, dampen entry, or foreclose innovative companies or
business models. For example, in June, the FTC and the DOJ Antitrust
Division submitted a joint comment, in response to a request from North
Carolina State Senator Bill Cook, on the impact on competition and
consumers of interactive websites for generating legal forms.\29\
Proposed legislation would exclude from the statutory definition of the
practice of law the operation of websites that generate legal documents
based on consumer responses to questions presented by interactive
software, provided certain conditions are satisfied. The joint comment
encouraged the North Carolina General Assembly to consider the benefits
of interactive websites for consumers and competition, while
recognizing that such products may raise legitimate consumer protection
issues.
---------------------------------------------------------------------------
\29\ Letter from FTC Staff to the Honorable Bill Cook, North
Carolina Senate, regarding North Carolina HB 436 (Jun. 10, 2016),
https://www.ftc.gov/policy/policy-actions/advocacy-filings/2016/06/
joint-comment-federal-tradecommission-staff.
---------------------------------------------------------------------------
As another example, in August, the FTC submitted letters to two
state boards in Delaware concerning regulations governing telemedicine.
The FTC's comment to the Delaware Board of Occupational Therapy
Practice related to a proposed regulation that would allow licensed
occupational therapists (OTs) to determine whether telehealth is an
appropriate level of care for a patient, and allow OTs to determine the
level of supervision required for the provision of telehealth services
by OT assistants. The FTC wrote that by not imposing rigid and
unwarranted in-person care and supervision requirements, the proposed
telehealth regulation would likely benefit Delaware consumers.\30\ In a
second letter to the Delaware Board of Dietetics/Nutrition, the FTC
commented on a proposed telehealth regulation that would require in-
person initial evaluations of patients, and then allow licensed
dietitians and nutritionists to determine whether to use telehealth
thereafter. The FTC noted that by allowing licensed dietitians/
nutritionists to determine whether telehealth is an appropriate level
of care for a patient, the proposed regulation could promote the use of
telehealth, potentially enhancing competition in the provision of
nutrition services, as well as reducing patient travel costs.\31\
However, because the proposed regulation would also require that all
initial evaluations be conducted in person, it may unnecessarily
discourage the use of telehealth and restrict consumer choice.
---------------------------------------------------------------------------
\30\ Letter from FTC Staff to the Delaware Board of Occupational
Therapy Practice (Aug. 3, 2016), https://www.ftc.gov/system/files/
documents/advocacy_documents/ftc-staff-comment-del
aware-board-occupationaltherapy-concerning-its-proposed-telehealth-
regulation/v160014_delaware_ot_proposed_advocacy.pdf.
\31\ Letter from FTC Staff to LaTonya Brown, Administrator of the
Delaware Board of Dietetics/Nutrition (Aug. 16, 2016), https://
www.ftc.gov/system/files/documents/advocacy_documents/ftc-staff-
comment-delaware-boarddietetics/nutrition-regarding-its-proposed-
telehealthregulation/staff_comment_delaware_diet_telehealth_signed.pdf.
---------------------------------------------------------------------------
______
Response to Written Questions Submitted by Hon. Deb Fischer to
Hon. Edith Ramirez
Question 1. I have heard from constituents in Nebraska who raised
concerns about card networks potentially circumventing the routing
rights of merchants at the point of sale by implementing new prompt
screens. Merchants and smaller PIN debit networks assert that some
consumers are confused by the new prompt screens, which direct
consumers to choose how to route a debit transaction (for example, to
choose ``Visa Debit'' or ``US Debit''), and that consumers often pick
the name they recognize because terms like ``US Debit'' are unclear to
them. As you are aware, Regulation II, which the FTC enforces, intended
to bring competition to the debit marketplace by allowing multiple
network routing options for the merchant at the point of sale.
Regulation II specifically prohibits all issuers and networks from
inhibiting a merchant's ability to direct the routing of a debit
transaction over any network that the issuer has enabled to process it.
Do you believe that deployment of these new prompt screens could
constitute a violation of Regulation II by shifting the routing
decision at the point of sale from the merchant to the consumer? Is
this something that the FTC plans to look into?
Answer. The FTC's primary responsibility under the Durbin Amendment
and Regulation II is to monitor compliance of the payment card networks
with rules designed to eliminate network exclusivity and give merchants
routing choice for processing electronic debit card payments. We track
developments in this industry to ensure that the networks do not
inhibit merchant routing choice. We are aware of concerns raised about
the effect of the new prompt screens on merchant routing choice. The
FTC this week closed its investigation of Visa following changes to the
company's debit routing rules.\32\ A number of statutory prohibitions
and Commission Rules prevent me from disclosing the existence or
details of nonpublic Commission investigations. I can assure you,
however, that the Commission is dedicated to protecting competition and
consumers and will take appropriate action against acts or practices in
the marketplace that violate the statutes we enforce.
---------------------------------------------------------------------------
\32\ Letter from FTC Bureau of Competition Staff to Julie B.
Rottenberg, Esq. SVP, Deputy General Counsel, Chief Counsel, North
America, Risk and Merchant Solutions, Visa Inc. (November 22, 2016)
https://www.ftc.gov/system/files/documents/closing_letters/nid/
closing_letter_from_james_frost_to_visa_-_11-2216.pdf
Question 2. I understand that competition authorities in some
foreign countries are proposing to impose antitrust enforcement
conditions on U.S. companies that could have the effect of regulating
patents issued domestically. I am concerned that this could be a means
for these countries to try and undermine the strong intellectual
property protections that we have here in the U.S., so they might
acquire our innovations more cheaply or put U.S. companies at a
disadvantage when competing abroad. Does the FTC share these concerns?
Should there be limits on the power of competition authorities to
mandate remedies for the licensing of IP rights of other countries?
Answer. The FTC has heard concerns that some foreign jurisdictions
may use competition enforcement and remedies as a means of advancing
other policy goals. We share the concern that it is inappropriate to
use competition enforcement to further industrial policy goals or to
advantage domestic competitors, including with respect to IP licensing.
We have advocated and will continue to advocate internationally that
competition law should be used to maximize consumer welfare and should
be applied in a non-discriminatory manner. Consumers are best served
when competition enforcement is based solely on sound economic analysis
of competitive effects. We recognize that many high-technology markets,
particularly in the information and communications technology sector,
are global and are often built upon global licensing arrangements
between their participants. The strategies firms employ in these
negotiations can affect competition and innovation across
jurisdictions. Recognizing the international scope of this conduct, the
FTC has taken a number of steps to promote coordination and cooperation
with our foreign counterparts in a variety of contexts, including
ongoing investigations, comments on proposed rules and guidelines,
workshops, and technical assistance. Nevertheless, we believe it is
appropriate for competition agencies to engage in antitrust enforcement
only when there is a sufficient connection between the anticompetitive
conduct and the jurisdiction in which the antitrust laws are to be
applied. The FTC operates within these parameters when challenging
global or extraterritorial anticompetitive conduct. We believe that
foreign counterparts should likewise limit their enforcement to conduct
that harms competition and consumers within that country's
jurisdiction. Moreover, if a foreign agency were to find harm to
competition and consumers within that country's jurisdiction stemming
from global IP licensing conduct, we believe that any remedy should be
tailored to address those harms, and should not be expanded to address
other policy goals or to advantage domestic competitors.
______
Response to Written Question Submitted by Hon. Ron Johnson to
Hon. Edith Ramirez
Question. The FTC has made a tremendous effort to weigh in against
proposed state regulations that are anticompetitive or create
unjustified barriers to entry, including in the health care and
technology industries. Led by the staff of the Office of Policy
Planning, the FTC staff has written over 40 letters in the last two
years on issues ranging from taxi and ride-sharing rules to telehealth
to direct-to-consumer vehicle sales. These letters make clear that
innovators can offer tremendous benefits to consumers, but entrenched
incumbents often try to use the regulatory process to keep the
innovators out of the marketplace. Can the FTC commit to this Committee
that it will continue to make reducing anticompetitive behavior by
states a priority through letters to state lawmakers and regulators?
Answer. We fully intend to continue our competition policy and
advocacy efforts, which serve as an important complement to our
enforcement work. The FTC will continue to promote competition
principles and analysis in comments to state lawmakers, regulators, and
regulatory boards.
______
Response to Written Questions Submitted by Hon. Steve Daines to
Hon. Edith Ramirez
Question 1. Are there any Federal laws on the books today that
apply to technology companies and specifically prevents them from using
the data they collect about students through educational technologies
for commercial purposes?
Answer. The Children's Online Privacy Protection Act (``COPPA'')
prohibits operators of websites or online services directed to
children, and any operator that has actual knowledge that it is
collecting or maintaining personal information from a child, from
collecting personal information from children under the age of 13
without first obtaining verifiable parental consent. COPPA does not
apply to the collection of personal information from students thirteen
and older. Additionally, it applies only to information collected from
children, and not to personal information collected about them, such as
from a teacher or school administrator.
Section 5 of the FTC Act, which prohibits unfair and deceptive
trade practices, also applies to technology and other companies' use of
student data. For example, in a 2003 settlement with The National
Research Center for College and University Admissions, Inc., the
Commission alleged that the company engaged in a deceptive practice
because it collected extensive personal information from high school
students, claiming the information would only be shared with third
parties providing education-related services. The Commission charged
that, contrary to this representation, the company sold the information
to commercial marketers. Generally, however, if a technology company's
practices are truthful and non-misleading, Section 5 does not prevent
the company from using data for non-educational purposes unless the
Commission can demonstrate that the conduct is unfair. Unfair conduct
is conduct that causes or is likely to cause substantial injury that is
not outweighed by countervailing benefits to consumers or competition
and that could not reasonably have been avoided.
Question 2. In your opinion, is it appropriate for technology
companies to collect student data, or to use information in students'
education records, to target advertising to them? For example, to use
information about whether a student has a learning disability to target
ads for soda, or video games, or other non-educational products to the
student?
Answer. One of the significant revisions the Commission made to the
COPPA Rule in 2012 was to give parents notice of, and control over,
marketers' use of persistent identifiers to track their children for
purposes of targeting advertising or compiling a profile. In the
educational sphere, many school districts contract with third-party
companies to offer online educational programs for their students. The
Commission has long recognized the authority of schools to consent, as
an agent or intermediary of the parent, to the collection of personal
information from students under 13, provided the information is used
for educational purposes. In other words, schools can partner with and
share students' personal information with technology companies for
educational uses, but those companies cannot then turn around and use
information about students under the age 13 for commercial purposes,
such as for behavioral advertising. While the protections COPPA
provides are important, as noted above, COPPA's protections apply only
to children under 13, and only to information collected from children,
and not about children. I believe it is vital to protect the privacy of
students in the educational setting. I therefore support the goal of
the SAFE KIDS Act, which would extend important protections to
teenagers, as well as prohibit targeted advertising based on
information collected about children, rather than only information
collected from them.
Question 3. Over 300 companies have signed the student privacy
pledge which safeguards student privacy by setting parameters for the
collection, maintenance, and use of student personal information. Is
the privacy pledge enforceable by the FTC? Can a company who signs the
privacy pledge revoke at any time?
Answer. To the extent a company signs on to the pledge and fails to
live up to its promises, this may constitute a deceptive practice that
would violate Section 5 of the FTC Act. However, companies that sign on
to the pledge can revoke their pledge at any time. They would
nonetheless need to abide by the pledge with respect to any information
they collected during the time they were subject to the pledge, unless
they obtained affirmative express consent from consumers to do
otherwise.
Question 4. Most of the headlines we see surrounding data breaches
are focused on the harm to adults when their data security is
compromised. What unique harms do children face when they are victims
of a data breach?
Answer. Children who are victims of a data breach, and who may
therefore become victims of identity theft, face unique challenges.
Children may experience greater harm because their identities may be
more useful to identity thieves. Most significantly, a child's identity
can often be used for many years before a parent or affected child
becomes aware of the identity theft. They may not learn of the identity
theft until the first time they apply for credit, which may be years
after the identity theft occurred, making it all the more difficult to
unwind. The Commission discussed these issues in a workshop addressing
identity theft issues affecting children. See https://www.ftc.gov/news-
events/events-calendar/2011/07/stolen-futures-forum-child-
identitytheft. The FTC has also provided information to consumers about
child identity theft. See https://www.consumer.ftc.gov/articles/0040-
child-identity-theft.
Also, while the Commission considers location data to be sensitive
generally, parents may be concerned that their children's location
might be available to child predators and others. Children's location
information is specifically protected under COPPA. Earlier this year in
the InMobi case, the Commission challenged a mobile ad network's use of
information from smartphones to derive users' locations, including for
users of child-directed apps, as a violation of COPPA. (See https://
www.ftc.gov/news-events/press-releases/2016/06/mobile-
advertisingnetwork-inmobi-settles-ftc-charges-it-tracked.) We alleged
that InMobi's software tracked location in thousands of child-directed
apps with hundreds of millions of users without obtaining parental
consent as required by COPPA.
Question 5. There are concerns that antitrust enforcement actions
by foreign governments may be used to undermine U.S. companies abroad
and effectively regulate U.S. issued patents. The FTC already
collaborates with competition and consumer protection agencies around
the world. In your view, what steps can or should the FTC take to limit
the extraterritorial application of a nation's competition law when
those actions may impact U.S. intellectual property?
Answer. The FTC has a robust program of international engagement
with foreign counterpart agencies. Through senior level dialogues and
staff level interactions, we stress with our counterparts the
importance of pursuing consumer welfare--and the problems associated
with pursuing other goals, such as industrial policies and the
protection of domestic competitors--through competition law
enforcement. We advocate for these principles through speeches,\33\
directly with our foreign agency counterparts, through our active
technical assistance program, and in multilateral bodies such as the
International Competition Network and the OECD. The FTC has engaged,
and will continue to engage, with our counterparts in a number of
jurisdictions on these specific issues, in an effort to build consensus
on policies that will benefit competition and consumers globally and
prevent undermining the incentives for innovation that intellectual
property systems are designed to provide. As appropriate, the FTC also
works with other U.S. government agencies, including the U.S. Patent
and Trademark Office, on these important policy issues at the
intersection of antitrust and IP law. In short, we believe that the FTC
is taking the appropriate steps to engage on these issues, and we
intend to continue to do so.
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\33\ See, e.g., Edith Ramirez, Chairwoman, Fed. Trade Comm'n, Core
Competition Agency Principles: Lessons Learned from the FTC, Keynote
Address at the Antitrust in Asia Conference, Beijing, China (May 22,
2014), available at https://www.ftc.gov/system/files/documents/
public_statements/314151/140522abachinakeynote.pdf; Edith Ramirez,
Chairwoman, Fed. Trade Comm'n, Keynote Address, Seventh Annual Global
Antitrust Enforcement Symposium (Sept. 25, 2013), available at https://
www.ftc.gov/sites/default/files/documents/public_statements/7th
annual-global-antitrust-enforcement-symposium/
130925georgetownantitrustspeech.pdf.
Question 6. In your recent remarks to the Global Antitrust
Enforcement Symposium, you stated that competition leads to lower
prices, higher quality, and innovation. You stated, ``at the FTC we
must keep a watchful eye on markets to ensure fair competition that
enhances consumer welfare . . . our job is to enforce the rules that
safeguard vigorous competition if we see them being broken.'' With
those sentiments in mind, Congress in 2003 enacted the Fairness to
Contact Lens Consumers Act to promote competition in the sale of
contact lenses--a law whose implementing regulation is currently under
review at the Commission. Despite the law's requirement that consumers
receive copies of their prescriptions, there is evidence of wide-spread
non-compliance. Specifically, a recent survey conducted on behalf of a
national retailer found that only 35 percent of consumers automatically
receive their prescription, and 36 percent left the office without a
copy.
In reviewing the Rule, will you place focus on this law's goal of
promoting competition, and take action to assure consumers are
receiving their prescriptions as required by law?
Answer. While I cannot comment in detail on a pending rule review,
I can confirm that promoting competition and examining the
effectiveness of the prescription release requirement are two key areas
of interest during our ongoing review of the Contact Lens Rule (CLR),
the regulation that implements the Fairness to Contact Lens Consumers
Act. Both the Act and the CLR promote competition in retail sales of
contact lenses by fostering consumers' ability to comparison shop. The
prescription release requirement is central, because consumers cannot
buy lenses without a prescription. Consumers are not likely to
comparison shop if they cannot purchase lenses from competing vendors.
Likewise, sellers of contact lenses are not likely to compete on price
or other aspects of sales and service if consumers cannot or do not
comparison shop among them.
When the Commission requested public comments on the CLR,\34\ we
noted at the outset that the CLR ``is intended to facilitate the
ability of consumers to comparison shop for contact lenses,'' and that
the CLR ``requires that eye care prescribers provide a copy of a
prescription to the consumer upon completion of a contact lens
fitting.'' \35\ We asked, in particular, for evidence on the degree of
industry compliance with the CLR \36\ and have been reviewing the
available evidence. We recently issued a Notice of Proposed
Rulemaking,\37\ which proposes amending the Contact Lens Rule to
require that after providing a copy of the prescription, prescribers
request patients sign an acknowledgment form indicating receipt of the
prescription. The Commission believes that implementation of signed
acknowledgments would best serve several important objectives:
reminding prescribers to release prescriptions, informing patients of
their rights, and improving the Commission's verification and
enforcement ability.
---------------------------------------------------------------------------
\34\ Contact Lens Rule, Request for Comment, 80 FR 53272 (Sep. 3,
2015).
\35\ Id. at 53773.
\36\ Id. at 53774.
\37\ 16 CFR Part 315: Contact Lens Rule; Notice of Proposed
Rulemaking; Request for Public Comment (Nov. 10, 2016), https://
www.ftc.gov/policy/federal-register-notices/16-cfr-part-315-contact-
lens-rule-notice-proposedrulemaking-request.
---------------------------------------------------------------------------
In addition, the Commission has taken some recent steps to achieve
better compliance with the CLR. For example, in April 2016, the
Commission sent warning letters to 45 contact lens prescribers after
receiving consumer complaints alleging that the prescribers had
violated the Rule, often by failing to provide patients with their
prescriptions automatically.\38\
---------------------------------------------------------------------------
\38\ Press Release, Fed. Tr. Comm'n, FTC Issues Warning Letters
Regarding the Agency's Contact Lens Rule (Apr. 7, 2016), https://
www.ftc.gov/news-events/press-releases/2016/04/ftc-issues-warning-
letters-regarding-agencyscontact-lens-rule.
---------------------------------------------------------------------------
______
Response to Written Questions Submitted by Hon. Bill Nelson to
Hon. Edith Ramirez
Question 1. Chairwoman Ramirez, can you bring us up to date on the
Commission's work on card networks under Regulation II? Specifically, I
am interested in how merchants are able to route debit transactions and
their implications on consumers, business competition, and data
security.
Answer. The FTC's primary responsibility under the Durbin Amendment
and Regulation II is to monitor compliance of the payment card networks
with rules designed to eliminate network exclusivity and give merchants
routing choice for processing electronic debit card payments. We track
developments in this industry to ensure that the networks do not
inhibit merchant routing choice. We are aware of concerns raised about
the effect of the new prompt screens on merchant routing choice. The
FTC this week closed its investigation of Visa following changes to the
company's debit routing rules.\1\ A number of statutory prohibitions
and Commission Rules prevent me from disclosing the existence or
details of nonpublic Commission investigations. I can assure you,
however, that the Commission is dedicated to protecting competition and
consumers and will take appropriate action against acts or practices in
the marketplace that violate the statutes we enforce.
---------------------------------------------------------------------------
\1\ Letter from FTC Bureau of Competition Staff to Julie B.
Rottenberg, Esq. SVP, Deputy General Counsel, Chief Counsel, North
America, Risk and Merchant Solutions, Visa Inc. (November 22, 2016)
https://www.ftc.gov/system/files/documents/closing_letters/nid/
closing_letter_from_james_frost_to_visa_-_11-22-16.pdf
Question 2. As you know, I represent a state with a large
population of older Americans. Since 2005, the FTC has brought more
than 30 cases against scam artists who have gone after older consumers.
Chairwoman Ramirez, could you talk about the type of frauds you see
that specifically target seniors and discuss the consumer outreach--in
addition to bringing law enforcement cases--the Commission engages in
to educate consumers about how to avoid becoming victims?
Answer. As the population of older Americans continues to grow, the
FTC's efforts to identify illegal marketing impacting seniors and to
bring aggressive law enforcement action, as well as provide useful
advice to seniors, become increasingly vital.
Based on research conducted by the FTC, older Americans are not
necessarily defrauded at higher rates than younger consumers. However,
certain types of scams are more likely to impact older Americans, such
as prize promotion and lottery or sweepstakes schemes, technical
support scams, and certain telemarketing schemes. In the past two
years, the FTC has brought 15 actions involving conduct that
significantly affected older adults. Seven of the matters involved
alleged scams such as an investment opportunity fraud, sweepstakes and
lottery scams, technical support scams, and robocalls pitching interest
rate reduction schemes and medical alert systems. Eight of the matters
alleged unsubstantiated advertising in the sale of brain training
programs and products that made anti-aging claims, or otherwise aimed
their advertising at seniors.
The Commission's education and outreach programs reach tens of
millions of people a year through our website, the media, and partner
organizations that disseminate FTC consumer information to their
communities. The FTC delivers actionable, practical, plain language
materials on dozens of issues, and updates its consumer education
whenever it has new information to share. The Commission's library of
articles in English and Spanish includes numerous pieces of particular
relevance to seniors, including those specifically describing
grandparent scams, prize and lottery fraud, medical alert scams,
Medicare scams, technical support scams, veterans' benefits scams, and
government imposter fraud.
In 2014, the FTC launched its Pass It On campaign, an innovative
education effort aimed at active, older adults. This campaign seeks to
arm older people with information that they can ``pass on'' to family
and friends who might need it. The materials and videos available at
www.ftc.gov/PassItOn are direct and to the point, with a friendly and
respectful tone informed by research about the target community's
preferences. The materials cover topics such as imposter and health
care scams, charity fraud, and identity theft, all of which are
available in print in both English and Spanish. In 2016, the FTC added
new materials on specific imposter scams: IRS, tech support,
grandparent and romance scams.
Question 3. The FTC is one of the crown jewels of this Committee's
jurisdiction. It's the premier consumer protection agency in the
Nation. The FTC is tasked with protecting average Americans from scams
and frauds that steal their hard-earned money. However, I have always
felt that the FTC has been chronically underfunded and understaffed
given its vast mission.
Chairwoman Ramirez, do you have the resources you need to go after
all of the crooks out there that are ripping people off? How much do
you have to pick-and-choose when it comes to your enforcement actions
given the FTC's limited resources?
Answer. Like other government agencies, the Commission seeks ways
to do more with less. Resource constraints, despite a growing workload,
remain a constant challenge. The FTC will continue to leverage its
resources through careful case selection and by partnering with law
enforcement and other partners on enforcement and educational efforts.
We focus on having efficient internal processes to expedite our work,
and improving our own IT infrastructure to allow our staff to work more
effectively.
Question 4. What can we do in Congress to better help the
Commission fulfill its mission, fight fraud, and protect consumers?
Answer. One area in which the FTC could use additional authority is
data security, which is a crucial part of the FTC's work. To date, the
Commission has brought approximately 60 cases alleging that companies
failed to implement reasonable safeguards for the consumer data they
maintain. We reiterate our longstanding, bipartisan call for Federal
legislation that would (1) strengthen our existing data security
authority and (2) require companies, in appropriate circumstances, to
provide notification to consumers when there is a security breach.
Legislation in both areas--data security and breach notification--
should give the FTC the ability to seek civil penalties to help deter
unlawful conduct, jurisdiction over non-profits, and rulemaking
authority under the Administrative Procedure Act. We would be happy to
work with your staff on such an initiative.
In addition, while the FTC has worked to keep pace with the ever-
changing marketplace, two particular challenges are of concern:
jurisdictional limitations over common carriers and non-profits.
The FTC has long called for the repeal of the common carrier
exception. This carve-out no longer makes sense in today's deregulated
environment where the lines between telecommunications and other
services are increasingly becoming blurred. Removing the exception from
the FTC Act would enable the FTC to bring its extensive law enforcement
experience to bear in protecting consumers of common carriage services
against unfair and deceptive practices in the same way that it can
protect against unfair and deceptive practices for other services.
We also recommend that our jurisdiction be extended to non-profit
entities. In healthcare provider markets, where the Commission has
particular expertise, the agency's inability to reach conduct by
various non-profit entities has prevented the Commission from taking
action against potentially anticompetitive behavior of non-profits
engaged in commercial activities. These concerns also apply to our
consumer protection mission. For example, despite many publicized data
breaches at non-profit hospitals and universities, the FTC cannot
challenge unfair or deceptive data security or privacy practices of
these entities. These breaches have exposed the sensitive data of
millions of consumers, yet the Commission cannot act due to the non-
profit status of these entities.
Question 5. I am a firm believer that two cops on the beat are
better than one. In that regard, I see no reason to pit one agency
against another. In this Committee, we have had a debate as to whether
the FCC or FTC should protect consumer privacy. I think this debate
misses the point. There is no reason why both the FTC and FCC can't
play prominent roles.
To all of the Commissioners, the FTC has overlapping jurisdiction
with numerous agencies, such as the Department of Justice and the Food
and Drug Administration. Your relationships with these agencies and
overlapping jurisdictions have never been a problem. Don't you think
you can have a similar cooperative relationship with the FCC? Shouldn't
there be two cops on the beat?
Answer. Given the breadth of its jurisdiction, the FTC has
cooperated frequently with a number of other agencies on areas of
mutual concern. For example, the FTC has worked with the Department of
Health and Human Services on health privacy and competition issues and
with the Department of Education on student privacy issues. The
Commission's goal in working with other agencies is to use its
complementary authority to protect consumers as effectively and
efficiently as possible, to avoid duplication, and to promote
consistency.
The Commission also has a long history of successful cooperation
with the FCC on consumer protection issues, including issues related to
privacy and data security. In 2015, the agencies affirmed and
formalized this collaboration by entering into a Memorandum of
Understanding agreeing to coordinate on our respective consumer
protection efforts.\2\
---------------------------------------------------------------------------
\2\ Memorandum of Understanding on Consumer Protection Between the
Federal Trade Commission and the Federal Communications Commission
(Nov. 2015), available at https://www.ftc.gov/policy/cooperation-
agreements/memorandum-understanding-consumer-protection-between-
federal-trade.
---------------------------------------------------------------------------
One example of our privacy collaboration is the Federal Do Not Call
registry, created in 2003. The FTC and FCC Do Not Call teams hold
regular conference calls to discuss enforcement issues, targeting,
litigation, and complaint trends. The teams share data when
investigations overlap. And the FCC has participated in the FTC's
various robocall initiatives, including the FTC's Robocall Summit and
the FTC's Robocall Challenges.
In addition, in the FTC case against T-Mobile,\3\ the FCC and state
authorities played an important role in negotiating a major settlement
providing for injunctive relief and at least $90 million in consumer
redress for allegedly unauthorized third party charges on mobile
phones, a practice known as mobile cramming. This settlement
demonstrates how the FTC and FCC use complementary tools to remedy
harms and deter future non-compliance. While the FTC's focus is
typically to put money back in the pockets of consumers, the FCC
traditionally has exercised its authority to fine companies for
noncompliance.
---------------------------------------------------------------------------
\3\ FTC v. T-Mobile USA, Inc., No. 2:14-cv-0097-JLR (W.D. Wash.
filed Dec. 19, 2014), available at https://www.ftc.gov/enforcement/
cases-proceedings/132-3231/t-mobile-usa-inc.
---------------------------------------------------------------------------
Earlier this year, the FTC and FCC announced separate but
coordinated studies of security in the mobile ecosystem.\4\ The FTC is
seeking information from mobile device manufacturers and operating
systems about how they provide security updates to address
vulnerabilities in smartphones, tablets, and other mobile devices. At
the same time, the FCC is examining common carriers' policies regarding
mobile device security updates. Given the complexity of the mobile
ecosystem and the number of entities involved in developing and
deploying security patches, it is difficult to discern how carriers,
operating systems, and handset manufacturers determine when any
specific device model receives a security update and on what timeline.
The responses to the studies should provide important information about
who is responsible for providing mobile security patches to consumers.
---------------------------------------------------------------------------
\4\ FTC To Study Mobile Device Industry's Security Update
Practices, May 9, 2016, available at https://www.ftc.gov/news-events/
press-releases/2016/05/ftc-study-mobile-device-industrys-security-
update-practices.
---------------------------------------------------------------------------
Finally, in response to the FCC's request for comment on its
proposed rules governing the privacy of consumer information collected
by broadband Internet access services providers, the FTC filed a
comment recommending certain changes including with respect to how
personally identifiable information is defined, the structure of
privacy notices, the role of consumer notice and choice in various
business practices, and the proposed regulations on data security and
breach notification. Based on our decades of experience and leadership
on consumer privacy issues, we believe the Commission can provide
unique insights to the FCC.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Hon. Edith Ramirez
Question 1. The era of autonomous cars is upon us. Self-driving
cars and other vehicle technologies that have some degree of automation
have entered the marketplace and their use is only going to become more
widespread in the years to come. Right now, Google is testing its self-
driving cars in Kirkland and some have even suggested dedicating a
portion of I-5 from Seattle to Vancouver simply for self-driving cars.
Last week, the National Highway Traffic Safety Administration
issued proposed guidance on the regulation of autonomous vehicles.
While the guidance focused on the vehicles themselves, it's also
important that manufactures of autonomous vehicles accurately relay
information on these machines to consumers. As recent as July of this
year, Mercedes-Benz had to pull advertising for its autonomous
technology after Consumer Reports filed a complaint with the Federal
Trade Commission.
Question 1a. How many complaints have been brought against auto
manufactures for advertising claims for self-driving cars?
Answer. The FTC is aware of one complaint filed with the agency by
a consumer advocacy group regarding advertising claims for self-driving
cars. We have not received any consumer complaints regarding this
issue.
Question 1b. Has the FTC made any enforcement actions?
Answer. The FTC has not taken an enforcement action regarding
deceptive advertising for self-driving vehicles.
Question 1c. Will the FTC be issuing guidance for the advertisement
of self-driving cars?
Answer. We do not believe separate guidance for the advertising of
self-driving cars is warranted at this time. The FTC recognizes that
the technology required to develop and manufacture self-driving
vehicles in the future is rapidly evolving and may provide useful
benefits to the consumer. We also recognize that consumer perceptions
about the capabilities of self-driving cars may vary. For these
reasons, I believe applying the FTC's traditional deception analysis on
a case-by-case basis is the best approach in this area.
______
Response to Written Questions Submitted by Hon. Richard Blumenthal to
Hon. Edith Ramirez
Question 1. In the last fiscal year alone, the Federal Trade
Commission (FTC) estimates that it saved consumers over $3.4 billion
through its competition enforcement efforts and over $717 million
through its consumer protection law enforcement actions.
Chairwoman Ramirez, can you explain to me how the recent Ninth
Circuit decision on FTC v. AT&T could affect the FTC's ability to take
actions that protect consumers and save their money? How could this
decision create uncertainty for businesses, who rely on the
Commission's oversight to maintain a level playing field for
competition and entrepreneurship, and to stop invitations to collude?
Answer. The Ninth Circuit's recent decision in FTC v. AT&T calls
into question the FTC's ability to enforce Section 5 of the FTC Act
against any unlawful activities engaged in by an entity with the mere
``status'' of a common carrier.\5\ The decision would bar the FTC from
bringing cramming cases against wireless telephone carriers. Over the
past 10 years, the FTC has brought 23 such cases and has provided or
will be providing $161 million in refunds directly to consumers.
---------------------------------------------------------------------------
\5\ See Federal Trade Comm'n v. AT&T Mobility LLC, No. 15-16585
Slip Op. (9th Cir. Aug. 29, 2016).
---------------------------------------------------------------------------
Furthermore, many companies provide both common-carrier and non-
common-carrier services, and companies that are not common carriers
today may gain that status by offering new services or through
corporate acquisitions. Under the AT&T decision, any company that has
or acquires the ``status'' of a common carrier can use the decision to
argue that it is immune from FTC enforcement against any of its lines
of business by virtue of its common carrier status.
Telecommunications and technology companies hold enormous amounts
of personal data that can inflict substantial harm if not properly
safeguarded. If the FTC can no longer enforce the FTC Act against these
companies' non-common carrier activities, consumers may be unprotected
from breach or misuse of their personal information. In addition,
millions of consumers would lose protection against garden-variety
deception, such as false advertising or improper billing. The AT&T
decision also threatens the FTC's ability to enforce other important
consumer protection statutes including the Children's Online Privacy
Protection Act, the Telemarketing and Consumer Fraud and Abuse Act, and
several others in which the FTC's enforcement authority is tied to
Section 5 of the FTC Act.
We are concerned that no other Federal agency can fill this gap.
The authority of the FCC, the CFPB, and other agencies is limited. For
example, the FCC lacks authority to provide redress for consumer
harm.\6\ The FTC is the only Federal agency with consumer protection
authority throughout the economy that can obtain monetary redress for
consumers as well as behavioral relief.
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\6\ See 47 U.S.C. Sec. 504.
---------------------------------------------------------------------------
The AT&T decision can disrupt the level playing field by making the
same service subject to different enforcement mechanisms depending on
whether or not it is provided by a company that has the ``status'' of a
common carrier. Take two e-mail providers, one owned by a telephone
company and the other freestanding. Under the Ninth Circuit's approach,
the freestanding one would be subject to the FTC's data security
requirements and restrictions on deceptive practices, but the
telephone-company-owned one would not. That could cause economic
distortion by itself. It also provides an incentive for businesses to
become part of a common carrier operation whether or not doing so is
economically desirable.
On the antitrust side, the AT&T decision means that the Department
of Justice would have to handle any cases involving companies with
common carrier status. Not only would shifting the workload burden
DOJ's resources, but enforcement could suffer if the FTC is unable to
bring antitrust enforcement cases in areas in which it has developed
substantial expertise over many years, including, for example, matters
involving pipelines. Additionally, there would be an enforcement gap
involving invitations to collude because the Department of Justice
cannot bring cases involving invitations to collude, nor can third
parties.
Question 2. As I have written to the FTC already, I am very
concerned about the public safety implications of the FTC's recent
proposed settlement with used car dealers regarding their advertising
of vehicles that have been ``certified'' even if the vehicle has
unrepaired safety recalls.
Chairwoman Ramirez, doesn't the FTC have authority under Section 5
of the FTC Act to prohibit a dealer from falsely advertising a vehicle
with an unrepaired recalled dealer as ``safe,'' ``repaired for
safety,'' or having passed a ``rigorous inspection''?
One of the triggers for a motor vehicle recall is the vehicle's
failure to comply with a Federal Motor Vehicle Safety Standard. Is it
your position that dealers should be allowed to advertise that an
unrepaired recalled car is ``safe'' and ``repaired for safety,'' passed
a ``rigorous inspection,'' and qualified to be sold as ``certified,''
when it fails to comply with a Federal Motor Vehicle Safety Standard?
Answer. Under Section 5 of the FTC Act, the Commission has
authority to bring actions to combat deceptive acts or practices and
obtain orders prohibiting deceptive conduct. The Commission's proposed
complaints against General Motors Company, Jim Koons Management
Company, and Lithia Motors, Inc. allege that these companies made
general advertising claims promoting the rigorousness of their
inspections of large categories of used cars, but failed to disclose
that some of the cars were subject to open safety recalls. It is well-
established under the FTC Act that a deceptive omission occurs ``where
a seller fails to disclose qualifying information necessary to prevent
one of his affirmative statements from creating a misleading
impression.'' See In re International Harvester Co., 104 F.T.C. 949,
1057 (1984). In these complaints, we allege that, while the companies
may have been inspecting these vehicles, absent additional information
in those advertisements, reasonable consumers would likely believe that
the inspections included repairing open recalls. We allege that the
failure to disclose adequately that some cars were subject to open
recalls, in light of the identified advertising representations, was a
deceptive act or practice in violation of Section 5 of the FTC Act.
The proposed orders in these three matters address the allegedly
deceptive omissions identified in the complaints and also impose
additional requirements to prevent respondents from engaging in other
deceptive conduct. Among other things, the proposed orders would
prohibit the respondents from representing that their used motor
vehicles are safe, have been repaired for safety issues, or have been
subject to an inspection for safety issues unless the vehicles are
recall-free or, alternatively, the respondents clearly and
conspicuously, in close proximity to the representation, disclose at
least two key facts to consumers: first, that the vehicles may be
subject to open recalls and, second, how consumers can determine
whether an individual car is subject to an open recall. Those
requirements would apply regardless of whether recalls arise from a
defect or a failure to meet a vehicle safety standard. Accordingly,
under the proposed orders, consumers would receive important
information about open recalls whenever respondents make these kinds of
claims, including when consumers see advertisements prior to visiting a
dealership. At the same time, by allowing the respondents to promote
their inspection programs with clear and conspicuous disclosures
regarding recalls, the proposed orders would allow them to provide
truthful information that is material to consumers, rather than scaling
back or potentially stopping inspection programs altogether to the
detriment of consumers. We are continuing to review the comments we
received to our proposed complaint and order, and expect to make a
final determination in these matters in the coming weeks.
Let me emphasize that I share your concerns regarding the safety
issues raised by recalls in the used automobile marketplace. I also
agree that all recalls pose safety risks to consumers, and that open
recalls should be repaired. While Federal law does not prohibit car
dealers from selling used cars subject to open recalls, I support
efforts by Congress to enact such a ban. In the meantime, the
Commission will continue to enforce the FTC Act to curb deceptive
conduct regarding recalls.
Question 3. It has recently been brought to my attention that
manufacturers of pet medications can, and do offer inducements to
veterinary clinics to prescribe and sell their medications. For
example, the MERIAL Rewards Program Website offers Visa debit cards
loaded with cash to veterinarians who prescribe and sell their pet
medications.
Chairwoman Ramirez, do you consider this a kickback? How prevalent
is this practice of drug manufacturers offering inducements to
veterinarians? What evidence do you have that manufacturers may protect
veterinarians who prescribe and sell their products from price
competition by refusing to market their medications to anyone who is
not a veterinarian? How does this practice affect consumer prices?
Answer. FTC staff is aware that most manufacturers have a policy of
only selling pet medications through the veterinary channel. The FTC
does not have data regarding the impact of these exclusive distribution
practices on consumer prices, and has not taken a formal position on
these practices. The FTC has, however, compiled substantial information
regarding these practices, as discussed in detail in FTC staff's report
on the pet medications industry.\7\ Some non-veterinary retailers have
suggested that they could offer lower prices to consumers with portable
prescriptions if they could obtain products directly from
manufacturers, rather than through secondary distribution. Although
exclusive distribution practices may dampen competition and could have
adverse effects, they may also benefit consumers in some situations,
and pet medications manufacturers claim to have legitimate business
reasons for engaging in these practices. Under most circumstances, it
is not illegal for manufacturers to unilaterally limit to whom they
sell their products. As a general matter, if we become aware of
distribution-related conduct that might constitute an antitrust
violation, the FTC would take appropriate action.
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\7\ Competition in the Pet Medications Industry (May 2015),
available at https://www.ftc.gov/system/files/documents/reports/
competition-pet-medications-industry-prescription-portability-
distribution-practices/150526-pet-meds-report.pdf
Question 4. In addition, it has come to my attention that there are
examples of veterinarians requiring clients sign a waiver or pay an
additional fee as a prerequisite to receiving a copy of the
prescription. Would you consider these practices to be violations of
Section 5 of the FTC Act?
Answer. The FTC has not taken a position on the legality of
liability waivers or prescription fees for veterinary prescriptions.
We are aware that some veterinarians require clients to sign a
waiver of liability before providing them with a portable prescription.
The waivers typically state that the prescribing veterinarian is
released from any potential liability stemming from the purchase and
administration of medications from alternative retail sources, as well
as any complications that may arise from the use of these medications.
Often, these waivers also describe alleged safety concerns that could
be associated with purchasing pet medications from retail sources other
than the prescribing veterinarian.
Some veterinarians have expressed concerns about possible liability
when pet medications are dispensed by retail pharmacists. For example,
they worry that a veterinarian might be held responsible (or, at least,
face litigation costs) if a pharmacist were to dispense an incorrect,
counterfeit, or otherwise adulterated pet medication. FTC research has
not uncovered situations where a veterinarian has been held liable for
a pharmacist's dispensing error. Some pharmacy boards have expressly
indicated that pharmacists, not veterinarians, are responsible for any
prescription misfills. As long as an animal is properly examined and
diagnosed, and a prescription is written properly, it is unlikely that
liability would attach to a veterinarian in the event a retail
pharmacist incorrectly dispensed a medication. Moreover, the practice
of veterinarians asking for liability waivers may unnecessarily chill
consumers' willingness to ask for and use portable prescriptions.
With respect to prescription fees, the FTC report on the pet
medications industry acknowledges that veterinarians might face some
administrative burden and cost (even if minimal) associated with
greater prescription portability, including automatic prescription
release. Prescription fees might be economically justified if they
represent reasonable compensation for the actual cost of providing
portable prescriptions (which might include, for example, reviewing
patients' medical files, verifying prescriptions, and answering
pharmacists' questions). But given the difficulty in determining a
reasonable fee, some stakeholders have suggested that the
procompetitive goals of prescription portability would be better
served--and clients would face fewer real or perceived barriers to
receiving portable prescriptions--if veterinarians simply charged
clients a single professional services fee that encompassed all
administrative activities, including providing prescriptions. This
approach would, however, shift costs to clients who are not obtaining a
prescription drug or who purchase medications directly from the
veterinarian.
Question 5. In the Dodd-Frank Act of 2010, Congress gave the FTC
extensive authority over the sale, servicing, and leasing of
automobile--charging it to protect consumers from abusive auto lending
practices and granting it exclusive authority to draft rules governing
unfair or deceptive acts or practices by automobile dealers.
Chairwoman Ramirez, how does the Commission plan to use the
rulemaking authority it was granted in the Dodd-Frank Act, to rein in
unfair or deceptive acts or practices by automobile dealers?
Answer. The Commission considers various approaches as part of its
ongoing efforts to address unfair or deceptive acts or practices by
automobile dealers, consistent with its authority under the FTC Act and
the Dodd-Frank Act. This includes enforcement activities, policy
initiatives, consumer and business education, and rulemaking. On the
enforcement front, since 2012, the FTC has brought 29 cases against
auto dealers to address allegedly unlawful practices in connection with
auto transactions. Enforcement actions include the Operation Ruse
Control sweep, announced in 2015, which included six FTC cases among
252 cases overall brought in the United States and Canada, as well as a
recent Federal court action against the Sage Auto group of dealerships,
alleging unlawful ``yo-yo'' financing and add-on practices in addition
to deceptive advertising and marketing claims. The FTC also announced
the Operation Steer Clear sweep in 2014, which included 10 FTC cases
against dealers alleging deceptive and unlawful advertising claims.
On the policy front, the FTC has held three roundtables bringing
together consumer advocates, industry representatives, and other
stakeholders to discuss key consumer protection issues in auto
transactions, and it recently published a second Federal Register
Notice proposing to conduct a qualitative study to learn about consumer
experiences in buying and financing automobiles at dealerships. The
Commission also continues to engage in business and consumer education,
including the July 2016 release of four new short videos, in English
and Spanish, to help consumers shopping for cars. Finally, the FTC has
not made a determination at this point whether to issue any new rules.
As a general matter, the type of evidence leading to an FTC rulemaking
can vary. We look at a number of factors, and we continue to evaluate
the marketplace. The FTC will continue to consider what additional
steps may be appropriate in the auto area.
Question 6. Earlier this year, the FTC finally successfully cracked
down on four sham charities that had bilked more than $187 million from
donors. According to the FTC complaint, their misappropriation of
consumer donations dated back to at least 2008. Chairwoman Ramirez,
Commissioner McSweeny, and Commissioner Ohlhausen: How were these sham
charities able to rob donors of so much money and for so long?
Answer. As you note, in March 2016, the FTC, all 50 states and the
District of Columbia resolved litigation against the remaining
defendants in Cancer Fund of America, resulting in, among other things,
a dissolution of the sham charities and a ban on the president's
ability to profit from any charity fundraising in the future.\8\ The
four sham outfits were quite adept at masking their charade. For
example, in our complaint, we charged that the sham cancer charities
hid their wrongdoing by manipulating their financial reporting and
using deceptive and invalid accounting techniques to claim huge
donations of gifts-in-kind. We alleged that this allowed them to
inflate their reported revenue and program spending by $223 million and
had the effect of making the organizations appear to be both larger and
more efficient with donors' money than they really were. As charged in
the complaint, it was not obvious from their public financial reports
to the IRS or the states that less than 3 percent of donated cash was
being spent on any program services (collectively).
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\8\ See https://www.ftc.gov/news-events/press-releases/2016/03/ftc-
states-settle-claims-against-two-entities-claiming-be-cancer.
---------------------------------------------------------------------------
The challenge is that charity fraud is easy to miss and
underreported. For example, the average donation to the sham cancer
charities was less than $30, and the vast majority of those donations
were made in response to telephone solicitations. Consumers who gave in
response to the promise that their donation would help cancer patients
never knew that, as we alleged in the complaint, their donation did not
go to that cause. That is why consumers did not complain. Further,
based on our experience, we believe that few donors take the time to
research a $20 to $30 donation before giving, and in this case, the
sham charities' allegedly false reporting would have hidden the red
flags from even the most diligent consumers.
Question 7. In what way has the nonprofit exemption in the FTC Act
hamstrung the Commission's ability to act swiftly to protect consumers?
Answer. We recommend that our jurisdiction be extended to non-
profit entities to further protect consumers. For example, despite many
publicized data breaches at non-profit hospitals and universities, the
FTC cannot challenge unfair or deceptive data security or privacy
practices of these entities. These breaches have exposed the sensitive
data of millions of consumers, yet the Commission cannot act due to the
FTC Act's non-profit exemption. Further, while the Commission can use
Section 5 to reach ``sham'' non-profits, such as shell non-profit
corporations that actually operate for profit and sham charities, these
investigations require resource-intensive fact finding to satisfy this
standard. For example, proving that a charity is a sham requires
significant probing into the internal operations of the organization,
including reviewing bank records, board meeting minutes, employment
practices and other things. Typically, we cannot discover the
information without contacting the charity and obtaining documents from
it. After getting the documents, a detailed financial analysis is
necessary. Only with an understanding of how the money is spent and how
the charity operates can we allege that it is a sham. Developing this
kind of threshold evidence is time consuming and limits our ability to
act swiftly to protect consumers in this area.
The non-profit exemption also prevents the Commission from taking
action against potentially anticompetitive conduct of non-profits in
the healthcare sector. The Commission actively promotes competition in
health care markets, but it cannot reach the conduct of non-profits
engaged in the business of health care, including non-profit health
maintenance organizations (HMOs), health plans, and standard-setting
organizations. For instance, the Commission generally cannot challenge
price-fixing, boycotts, and other anticompetitive conduct by non-profit
hospitals, even if we charge other parties to the illegal agreements.
See Piedmont Health Alliance, 138 F.T.C. 675 (2004); Tenet Healthcare
Corp./Frye Regional Medical Center, Inc., 137 F.T.C. 219 (2004); Maine
Health Alliance, 136 F.T.C. 616 (2003) (enforcement actions involving
unlawful price-fixing arrangements brought against physicians and a
for-profit hospital but not non-profit hospitals).
This has been especially limiting in our review of hospital mergers
involving non-profit hospitals. Although the FTC has jurisdiction under
the Clayton Act to challenge non-profit hospitals' merger plans, the
FTC does not have jurisdiction under the FTC Act to challenge those
hospitals' anticompetitive conduct. Such a case would have to be
initiated by the Department of Justice, even if the Commission reviewed
the merger.
Question 8. Last year, FTC staff released a comprehensive report on
``Competition in the Ped Medications Industry.'' In the report, the
Commission found that ``some veterinarians refuse to provide portable
prescriptions to their clients or engage in behaviors intended to
discourage clients from requesting portable prescriptions and filling
them elsewhere.'' The report also noted that spending by families on
their pets has doubled over the last decade, with Americans spending
$7.6 billion on prescription and over-the-counter pet medications in
2013, and projected to spend $10.2 billion by 2018. It has been
estimated that pet owners who can get a copy of their pet's
prescription and shop around, could save 20 to 30 percent on branded
medications and 50 percent when they purchase generics--suggesting that
prescription portability can save pet owners billions of dollars every
year. In May of last year, I introduced the Fairness to Pet Owners Act,
which would ensure consumers have the freedom to choose where they buy
prescription pet medication.
Chairwoman Ramirez, Commissioner McSweeny, and Commissioner
Ohlhausen: Given the findings of the Commission's report, do you
support the Fairness to Pet Owners Act? Do you believe that providing
pet owners with the right to their pets' prescriptions will help ensure
consumers have access to pet medications at the most affordable prices?
Answer. The FTC has not taken a formal position on the Fairness to
Pet Owners Act. However, we believe prescription portability likely
benefits consumers by empowering them to make informed choices about
where to purchase their pet medications. For this reason, we generally
support policies that would increase both consumer awareness and
veterinarian release of prescriptions for pet medications.
As discussed extensively in the FTC staff report \9\, it appears
that some consumers do not always receive portable prescriptions from
their veterinarians or are uncomfortable requesting one. Likewise, it
appears that at least some consumers are not aware that they have this
option. Federal legislation requiring automatic prescription release
would go further than current state laws and regulations that require
prescription release only upon request, which could benefit consumers.
Automatic prescription release is arguably a more effective way to
raise consumer awareness about the option to obtain portable
prescriptions from their veterinarians and comparison shop when
purchasing pet medications. In addition, automatic prescription release
likely would help to address situations where veterinarians are
reluctant to provide portable prescriptions or try to discourage
clients from requesting one, or where consumers are uncomfortable
requesting one.
---------------------------------------------------------------------------
\9\ Competition in the Pet Medications Industry (May 2015),
available at https://www.ftc.gov/system/files/documents/reports/
competition-pet-medications-industry-prescription-portability-
distribution-practices/150526-pet-meds-report.pdf
---------------------------------------------------------------------------
Federal legislation requiring automatic prescription release also
could impact manufacturer distribution policies to a greater degree
than the current patchwork of state laws. If greater prescription
portability were to increase consumer demand for purchasing pet
medications from non-veterinary retail pharmacists, the potential for
increased sales opportunities might incentivize manufacturers to change
their distribution policies in ways that would promote competition
among different distribution channels and be more responsive to
consumer choice.
______
Response to Written Questions Submitted by Hon. Cory Booker to
Hon. Edith Ramirez
Question 1. Changes in technology seem to be making it ever easier
to deceive and defraud consumers with phone calls. Many New Jerseyans
have told me that the number of fraudulent calls they receive is
increasing, particularly on their cell phones. Last Congress, I joined
with Ranking Member Nelson on legislation to help curb the use of so-
called ``spoofing'' technology. This technology is used to trick
recipients into answering the call by scrambling the phone number on
the recipient's caller identification display, but spoofing is just one
of numerous practices used to defraud and harass recipients. This trend
is especially concerning because my constituents frequently receive
overtures from callers fraudulently claiming to represent government
entities including the Internal Revenue Service (IRS) and the Federal
Bureau of Investigation (FBI).
Question 1a. What steps is the Federal Trade Commission (FTC)
taking to protect consumers from fraudulent calls?
Answer. The FTC uses every tool at its disposal to combat
fraudulent and deceptive calls to consumers, including aggressive law
enforcement, regulatory action, robust consumer education and outreach,
and initiatives to spur technological solutions. We have brought more
than 126 law enforcement actions shutting down operations responsible
for billions of illegal calls, as well as numerous enforcement actions
targeting fraudulent ``impostors.'' The FTC also amended the
Telemarketing Sales Rule to ban payment methods favored by many
robocallers and telemarketing scammers, such as remotely created checks
and payment orders, ``cash-to-cash'' money transfers, and certain cash
reload mechanisms for prepaid cards.
We also arm consumers with the tools and information they need to
protect themselves against fraudulent calls. The FTC provides consumer
information in English and Spanish in many forms including print and
online articles, fact sheets, blog posts, brochures and videos with
tips for avoiding scams and unwanted calls. One of our most popular
features is a ``Scam Alert'' page that is frequently updated with blog
posts about new scams.\10\ More than 192,000 people subscribe to the
FTC blogs, including scam alerts.
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\10\ See https://www.consumer.ftc.gov/scam-alerts.
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The exponential growth in unwanted and all too often fraudulent
calls is the result of technological advances in telecommunications.
Just as these changes have lowered costs and improved services to the
benefit of consumers, they have also lowered costs and barriers to
entry for scammers. Widespread use of caller ID spoofing by fraudsters
to lend credibility to the caller is just one of the outgrowths of
these technological advances. Recognizing that technology is at the
heart of this issue, the FTC has led four public challenges to spur
industry initiatives to develop solutions to help both consumers and
law enforcement combat illegal and unwanted robocalls.
The FTC's first challenge called upon innovators to develop a
consumer-facing solution that blocks illegal robocalls, applies to
landlines and mobile phones, and operates on proprietary and non-
proprietary platforms.\11\ In response, we received nearly 800
submissions and partnered with experts in the field to judge the
entries. One of the winners, ``Nomorobo,'' was on the market and
available to consumers by October 2013--just 6 months after being named
one of the winners. To date, Nomorobo reports blocking over 150 million
calls and is currently rolling out a mobile platform.\12\
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\11\ For more information on the first FTC Robocall challenge, see
https://www.ftc.gov/news-events/press-releases/2013/04/ftc-announces-
robocall-challenge-winners.
\12\ See http://www.nomorobo.com/(last visited October 21, 2016).
---------------------------------------------------------------------------
The FTC launched a second challenge--Zapping Rachel--which called
upon information security experts to help create a robust robocall
honeypot.\13\ A robocall honeypot is an information system designed to
attract robocallers and help investigators and academics understand and
combat illegal calls. Sixty teams and individuals registered to
participate and FTC staff obtained new insights that improved current
robocall honeypot designs and connected new partners and stakeholders.
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\13\ For more information on the Zapping Rachel challenge, see
https://www.ftc.gov/news-events/contests/zapping-rachel.
---------------------------------------------------------------------------
In 2015, the FTC sponsored two more challenges, DectectaRobo \14\
and Robocalls: Humanity Strikes Back.\15\ The DetectaRobo challenge
called upon the public to analyze call data to create algorithms that
could predict which calls were likely robocalls. Finally, in our most
recent challenge, contestants built tools consumers could use to block
and forward robocalls automatically to a honeypot. The winning mobile
app, RoboKiller, allows users to block and forward unwanted robocalls
to a crowd-sourced honeypot.
---------------------------------------------------------------------------
\14\ For more information on the DetectaRobo challenge, see https:/
/www.ftc.gov/news-events/contests/detectarobo.
\15\ For more information on the Robocalls: Humanity Strikes Back
challenge, see https://www.ftc.gov/news-events/contests/robocalls-
humanity-strikes-back.
---------------------------------------------------------------------------
The FTC also engages with technical experts, academics, and others
through industry groups, such as the Messaging, Malware and Mobile
Anti-Abuse Working Group (``M\3\AAWG'') and the Voice and Telephony
Abuse Special Interest Group (``VTA SIG''). The FTC serves in a
leadership role in VTA SIG, which currently works to support various
initiatives that tackle voice spam, including anti-spoofing
authentication efforts.
Question 1b. How can Congress help to address this issue?
Answer. We believe that Federal and international partnerships and
technological initiatives, coupled with our ongoing law enforcement
efforts, are critical to reducing the volume of illegal telemarketing
calls that consumers receive. We recommend advising constituents to
visit our consumer education website, where they can find more helpful
information about the problem of unwanted calls.\16\
---------------------------------------------------------------------------
\16\ See https://www.consumer.ftc.gov/topics/limiting-unwanted-
calls-e-mails.
Question 1c. What information should consumers have to better
protect themselves from these practices?
Answer. There are several key messages that we convey to consumers
facing unwanted and illegal calls. The first message is that consumers
cannot trust the information contained in their caller ID display
because, as you mentioned, fraudsters often ``spoof'' their number to
make it appear that it is from a trustworthy source. In addition, when
a consumer picks up and hears an unwanted call or robocall they should
hang up; consumers should not press one or provide or confirm any
information. We also try to highlight for consumers the call blocking
options that are available to them to reduce the number of unwanted
calls they receive.\17\ Finally, in addition to providing frequent
updates about new scams for consumers to be on the lookout for, we
emphasize the critical role consumers have in stopping future fraud by
passing on their experiences or near-misses to others and reporting
potential fraud to the FTC and our state and Federal partners.
---------------------------------------------------------------------------
\17\ See https://www.consumer.ftc.gov/articles/0548-blocking-
unwanted-calls.
Question 1d. Is the FTC working in partnership with other Federal
agencies to help educate the public and to protect them from giving
away sensitive personal or financial information?
Answer. The FTC works with many Federal agencies to help educate
the public and to protect them from giving away sensitive personal or
financial information, including DOJ, the U.S. Postal Inspection
Service, the IRS, U.S. Treasury Inspector General for Tax (TIGTA), the
FCC, and DHS. The FTC also works closely with state and international
partners. In June of 2016, the FTC led a multinational robocall sweep
that took action against operations estimated to be responsible for
billions of illegal robocalls. The sweep included 39 actions taken by
the FTC, the Canadian Radio-television and Telecommunications
Commission, the United Kingdom's Information Commissioner's Office, as
well as DOJ, the FCC and Attorneys General or consumer protection
offices from Colorado, Florida, Indiana, Kansas, Mississippi, Missouri,
North Carolina, Ohio, Washington, and Tennessee.\18\
---------------------------------------------------------------------------
\18\ https://www.ftc.gov/news-events/press-releases/2016/06/ftc-
florida-attorney-general-take-action-against-illegal-robocall
---------------------------------------------------------------------------
The FTC has broadened its efforts to focus on international
partnerships, which are particularly valuable as a growing number of
fraudulent calls originate overseas. For example, many of the tech-
support and imposter-related cases, including the IRS scams, have been
traced to India. Because the calls, malware and pop-up ads that promote
these scams come from India, we have recognized the need to find
partners there, on the ground, to discourage, disrupt and disable these
frauds. Indian law enforcement has pledged its support to joint
enforcement action, and has already shut down call center operations
linked to IRS scam calls. These operations are tremendously profitable,
so we will continue to strengthen our efforts across borders.
To combat scams from India targeting Americans, we have worked with
the Indian Business Process Outsourcing (``BPO'') industry over the
last three years, bringing together leaders in the call center,
technology, financial, and law enforcement sectors in three roundtable
events to develop a road map for identifying and shutting down the
rogue call centers. The first two meetings were in New Delhi, and the
most recent event, held here in Washington, D.C. in May, attracted
about 70 participants, including U.S. law enforcement from DOJ, FBI,
CFPB, and state Attorneys General's offices; India's Cyber Coordinator;
representatives from NASSCOM (the trade association that represents the
BPO industry); the Embassy of India; Indian businesses; U.S. industry,
including Microsoft, Google, Yahoo, Facebook, and Apple; and consumer
advocacy groups.
Question 1e. Is more cross-agency collaboration needed to serve the
public when it comes to identifying, exposing, and preventing
telemarketing fraud?
Answer. The FTC has had great success working with its federal,
state, local and international partners in this area and regards
collaboration as a vital component to tackling telemarketing fraud.
______
Response to Written Questions Submitted by Hon. Gary Peters to
Hon. Edith Ramirez
Question 1. The Federal Trade Commission (FTC), Food and Drug
Administration (FDA), and Department of Justice each possess a portion
of jurisdiction over the contact lens marketplace. The FTC has the
authority, under the Federal Trade Commission Act, to bring enforcement
actions against sellers of contact lenses whose practices violate the
law. My office has been made aware of the fact that there are online
retailers who advertise that they dispense contact lenses, which are a
FDA-regulated medical device, without verifying a patient's
prescription.
Question 1a. What process does the FTC have in place for
individuals to submit complaints regarding prescriber practices and how
many complaints has the FTC received?
Answer. The FTC encourages consumers, as well as prescribers and
retailers, to report suspected violations of the Contact Lens Rule. The
primary avenue for reporting complaints is the FTC Complaint Assistant,
ftc.gov/complaint, a link to which is featured prominently on the
ftc.gov homepage. Consumers also may file a complaint by calling 1-877-
FTC-HELP (382-4357). We also receives e-mail messages reporting
suspected instances of prescribers and retailers not complying with the
Rule. The FTC receives a few hundred complaints a year about prescriber
and retailer practices: these complaints describe a wide variety of
alleged conduct, some of which is outside the purview of the Contact
Lens Rule (for example, complaints about billing practices or insurance
issues).
Question 1b. Has the FTC brought enforcement action against any
retailers due to their prescribing practices? How many enforcement
actions have been brought?
Answer. In April 2016, the Commission issued warning letters to ten
contact lens retailers that potentially violated the Rule by dispensing
contact lenses without a valid prescription, and 45 eye care
prescribers that potentially violated the Rule by failing to comply
with automatic prescription release requirements, thus impeding
consumers' ability to comparison shop.\19\ These letters reminded
prescribers and sellers of their obligations under the Rule and warned
them that violations of the Rule may result in legal action, including
civil penalties of up to $16,000 per violation.\20\ In tandem with the
warning letters, the FTC initiated an outreach campaign designed to
increase prescriber, seller, and consumer awareness of the Contact Lens
Rule, which included newly-revised consumer educational guidance,
Prescription Glasses and Contact Lenses, and social media outreach to
prescribers and sellers.\21\ The FTC is also working with state law
enforcement agencies and consumer advocacy groups to improve industry
compliance and increase public awareness regarding the Rule.
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\19\ FTC Issues Warning Letters Regarding the Agency's Contact Lens
Rule, FTC News Release (Apr. 7, 2016), available at: https://
www.ftc.gov/news-events/press-releases/2016/04/ftc-issues-warning-
letters-regarding-agencys-contact-lens-rule.
\20\ As of August 1, 2016, the maximum civil penalty amount
increased to $40,000 per violation. See FTC Raises Civil Penalty
Maximums to Adjust for Inflation, FTC News Release (June 29, 2016),
available at: https://www.ftc.gov/news-events/press-releases/2016/06/
ftc-raises-civil-penalty-maximums-adjust-inflation.
\21\ Prescription Glasses and Contact Lenses (Apr. 2016), available
at: https://www.con
sumer.ftc.gov/articles/0116-prescription-glasses-and-contact-lenses.
See also Buying contacts? You should see a prescription first (Apr. 7,
2016), available at: https://www.consumer.ftc.gov/blog/buying-contacts-
you-should-see-prescription-first and An Rx for compliance with the
Contact Lens Rule (Apr. 7, 2016) available at: https://www.ftc.gov/
news-events/blogs/business-blog/2016/04/rx-compliance-contact-lens-
rule.
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The FTC has also taken law enforcement action against ten contact
lens sellers for allegedly selling cosmetic contact lenses without
obtaining consumers' contact lens prescriptions and failing to maintain
records of consumers' prescriptions.\22\ Our settlement orders have
imposed civil penalties and provided injunctive relief that, among
other things: prohibited the defendants from selling contact lenses
without obtaining a prescription from a consumer; selling contact
lenses without verifying prescriptions by communicating directly with
the prescriber; and from failing to maintain records of prescriptions
and verifications. We will continue to monitor the marketplace and will
take action against violations of the Contact Lens Rule as appropriate.
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\22\ See United States v. Gene Kim, No. 1:11-cv-05723 (E.D.N.Y. Feb
7, 2012) (consent); United States v. Royal Tronics, Inc., No. 0:11-cv-
62491 (S.D. Fla. Jan. 27, 2012) (consent); United States v. Thy Xuan
Ho, No. 1:11-cv-03419 (D. Minn. Dec. 27, 2011) (consent); United States
v. Gothic Lens, LLC, No. 1:11-cv-00159 (N.D. Ga. Feb. 3, 2011)
(consent); United States v. Jokeshop USA, LLC, No. 1:11-cv-11221 (D.
Mass. Nov. 28, 2011) (consent); United States v. Contact Lens Heaven,
Inc., No. 0:08-cv-61713 (S.D. Fla. Dec. 3, 2008) (consent); United
States v. Chapin N. Wright, II, No. 1:08-cv-11793 (D. Mass. Oct. 31,
2008) (consent); United States v. BeWild, Inc., No. 2:07-cv-04896
(E.D.N.Y. Dec. 3, 2007) (consent); United States v. Pretty Eyes, LLC,
No. 1:07-cv-02462 (D. Colo. Nov. 28, 2007) (consent); United States v.
Walsh Optical, Inc., No. 2:06-cv-03591 (D.N.J. Aug. 30, 2006)
(consent).
Question 2. Under current law, most states require that patients
get updated contact lens prescriptions every year in order to buy more
lenses. Yet, some online retailers are selling multiple years' worth of
contact lenses.
In conducting the 10-year review of the Contact Lens Rule, has the
FTC taken into account the safety implications of prescribers that sell
multiple years' worth of contact lenses? Has the FTC found any safety
concerns associated with this practice and could you list them if so?
Answer. As you mention in your question, the Commission is
currently conducting a review of the Contact Lens Rule. As part of this
process, the Commission solicited public comments regarding the Rule
and, among other topics, the effect of any technological, economic, or
other industry changes on the Rule since it was promulgated.\23\ A
number of the 660 comments we received addressed the issue you raise:
the quantity of contact lenses that some online retailers may be
selling to consumers. We are examining this issue, as well as others,
as part of our ongoing rule review process to ensure that the Contact
Lens Rule operates as intended to promote competition in the contact
lens industry and does so consistent with patient health and safety.
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\23\ Contact Lens Rule; Request for comment, 80 Fed. Reg. 53,272,
53,273 (Sept. 3, 2015).
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On November 10, 2016, we issued a Notice of Proposed Rulemaking
(``NPRM'')\24\, setting forth our preliminary findings and
recommendations for the Contact Lens Rule and requesting additional
public comment. Among other things, the NPRM discusses quantities of
contact lenses obtained by patients. After reviewing the comments and
evidence produced by interested stakeholders, we determined not to
propose to amend the Rule to adopt any of the contact lens quantity
proposals put forth by commenters. First, the Commission does not
believe that there is sufficient evidence in the rulemaking record to
support amending the Rule to impose the quantity limit proposals
suggested by commenters. Although some commenters conducted and
submitted data from online surveys for the proposition that consumers
are purchasing contact lenses as their prescriptions are about to
expire, this data does not show the quantity of lenses that consumers
are actually purchasing. Second, regardless of the evidence, or lack
thereof, in the record to support the quantity limit proposals, the
Commission believes that it would be difficult to administer the
proposed limits, and that rather than increasing patient eye health and
safety, such proposals could have the opposite effect. For example, if
a consumer is running out of contact lenses and does not have time to
see a prescriber promptly, there is a significant chance that the
consumer will not adhere to the recommended contact lens replacement
schedule and will instead try to ``stretch out'' their lenses by re-
wearing them until they can visit a prescriber. The failure to replace
lenses is a well-documented cause of many contact-lens-related health
issues. Absent empirical evidence that a substantial number of
consumers are obtaining excessive amounts of contact lenses, or are not
returning to their prescribers for eye examinations, we believe that
the risk of not replacing lenses outweighs the harm of consumers
obtaining more lenses than strictly anticipated by the length of a
contact lens prescription.
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\24\ 16 CFR Part 315: Contact Lens Rule; Notice of Proposed
Rulemaking; Request for Public Comment (Nov. 10, 2016), https://
www.ftc.gov/policy/federal-register-notices/16-cfr-part-315-contact-
lens-rule-notice-proposed-rulemaking-request
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Nevertheless, we are concerned about anecdotal reports that sellers
are contacting patients and encouraging them to stockpile contact
lenses prior to the expiration of their prescriptions in order to avoid
visiting their eye care professionals. Such practices run counter to
the spirit of the Act, and we will look closely at these alleged
practices.
Question 3. Current law requires a seller to verify a patients'
contact lens prescription. One of the allowable forms of communication
are automated and non-live calls--commonly referred to as
``robocalling.'' I have heard from optometrists in Michigan that
understanding and/or verifying required information from robocalling is
nearly impossible.
Question 3a. Has the FTC heard similar concerns about the use of
robocalling to verify a patient's contact lens prescription?
Answer. In the course of our rule review, the FTC has received some
comments from prescribers highlighting concerns about the use of
automated telephone systems to verify contact lens prescriptions.\25\
Some prescribers have stated that automated telephone calls are
difficult to understand, while other prescribers have voiced issues
with the length or timing of automated calls. We are examining these
issues and considering how best to ensure that the Rule's verification
system operates as intended by the Fairness to Contact Lens Consumers
Act, 15 U.S.C. Sec. Sec. 7601-7610. As mentioned above, we recently
issued a NPRM for the Contact Lens Rule. In that NPRM, we discuss
automated telephone calls for prescription verification and request
comment on modifications to automated telephone calls that the
Commission should consider to address the concerns raised by
prescribers.
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\25\ Contact lens seller verification calls are not sales calls
covered by the Telemarketing Sales Rule (``TSR''), 16 C.F.R. Part 310,
which prohibits certain robocalls. In addition, the TSR does not apply
to most business-to-business communications. 16 C.F.R.
Sec. 310.6(b)(7).
Question 3b. In its review of the Contact Lens Rule has the FTC
examined the safety implications of allowing robocalling for
verification purposes? If so, what did the FTC find?
Answer. The FTC is examining all concerns raised about the current
operation of the Rule, including the safety implications of automated
telephone systems and the evidence proffered by commenters in support
of their proposed Rule amendments. In the recent NPRM, we discuss the
safety concerns raised by some commenters about the use of automated
calls: namely, that if the prescription is not properly verified,
patients may be receiving contact lenses based on outdated or incorrect
prescription information. However, commenters did not provide any
empirical data regarding the frequency of these various practices,
average or aggregate costs associated with automated calls in
particular, or the number of illegal or otherwise deficient contact
lens sales that result from such calls. Furthermore, we did not receive
evidence indicating whether these problems occur with automated calls
generally or are chiefly associated with only one or a small group of
sellers. In the NPRM, we request additional comment on modifications to
automated telephone calls that the Commission should consider.
The FTC encourages consumers, as well as prescribers and retailers,
to report suspected violations of the Contact Lens Rule. The primary
avenue for reporting complaints is the FTC Complaint Assistant,
ftc.gov/complaint, a link to which is featured prominently on the
ftc.gov homepage. Consumers also may file a complaint by calling 1-877-
FTC-HELP (382-4357). We also receives e-mail messages reporting
suspected instances of prescribers and retailers not complying with the
Rule. The FTC receives a few hundred complaints a year about prescriber
and retailer practices: these complaints describe a wide variety of
alleged conduct, some of which is outside the purview of the Contact
Lens Rule (for example, complaints about billing practices or insurance
issues).
Question 3d. Has the FTC considered allowing other forms of
electronic communication that might improve or complement robocalling?
If so, what are they?
Answer. The Fairness to Contact Lens Consumers Act specifies that a
seller must provide the prescriber with a verification request through
``direct communication.'' 15 U.S.C. Sec. 7603(a)(2). The Act defines
direct communication as including ``telephone, facsimile, or electronic
mail.'' 15 U.S.C. Sec. 7603(g). The Contact Lens Rule, promulgated
pursuant to the Act, contains the same language. 16 C.F.R. Sec. 315.2.
Accordingly, for purposes of verifying contact lens prescriptions,
sellers may communicate with prescribers via telephone, facsimile, or
electronic mail. In addition, in the course of the rule review
described above, the FTC is considering the impact and use of other
evolving technology as it relates to the Rule, including the
verification framework set forth by the Act.
______
Response to Written Questions Submitted by Hon. Marco Rubio to
Hon. Maureen K. Ohlhausen
Question 1. According to the most recent statistics, there are
currently 728 travel related cases and 147 non-travel related cases of
Zika in my home state of Florida. With the increase in cases, and the
threat mosquitos spreading around the Miami Beach area and to other
parts of the United States and our territories, many are concerned with
contracting the virus. Feeding into consumer concerns, many companies
are marketing products that say they provide protection from the Zika
virus.
A. Please speak to the FTC's efforts to seek out these fraudulent
companies that are capitalizing off of consumer concerns about Zika,
and hold them accountable.
Answer. The Commission has been diligent in seeking out and holding
accountable fraudulent companies that are exploiting consumer concerns
about Zika. Shortly after the Zika outbreak, the Commission issued 10
warning letters to online marketers selling products that purportedly
provide protection from the Zika virus. The letters warned the
marketers that any false or misleading claims may violate the FTC Act
and subject the companies to legal action. In addition, the letters
urged the marketers to review the claims that they and their affiliates
and distributors are making for their products, and delete or change
the claims immediately if they cannot be substantiated by scientific
evidence. The warning letters also required each company to report back
to the Commission detailing the specific actions they have taken to
remove or change potentially false, misleading, or unsupported claims.
B. I understand the FTC has reached out to some of these online
marketers and requested reports back on actions they have taken to
remove or change false advertising claims. What is the status of these
reports?
Answer. The Zika warning letter recipients promptly responded to
the letters, and FTC staff continues to monitor their sites. Although I
am not able to comment on whether the FTC has ongoing investigations in
this area, the FTC remains vigilant and will take swift legal action
against companies who make false promises about products they claim
protect consumers from the Zika virus.
C. What can we do to educate my constituents back home in Florida,
and across our nation, about what to look for to ensure they are not
buying into falsely advertised products, and make sure they are
protected as consumers?
Answer. In addition to our enforcement efforts, the Commission also
developed helpful consumer education materials on its website. These
materials discuss the Commission's efforts to combat false or
misleading Zika-related claims and inform consumers about how they can
protect themselves to ensure they are not buying into falsely-
advertised Zika-related products. https://www.consumer.ftc.gov/blog/
will-those-insect-repellents-protect-you-zika. The website tells
consumers to look for insect repellents registered with the EPA and to
take extra precautions when considering all-natural repellants that are
not registered with the EPA. The website also refers consumers to
additional tips from the Centers for Disease Control on protecting
themselves from Zita-related viruses. We encourage those with
constituents potentially impacted or concerned about Zika to link to
this website.
Question 2. The Federal Communication Commission (FCC) is scheduled
to vote on its proposed broadband consumer privacy rule on October 27.
A. Will you speak to the FTC's comments on the proposed rule
related to transparency, consumer choice and data security?
Answer. The FTC's bipartisan, unanimous comments on the FCC's
original privacy rule proposal was supportive of the FCC's goals of
protecting consumer privacy but offered several strong criticisms of
the FCC's approach. On transparency, the FTC generally supported the
goal but recommended developing model notices. On data security, the
FTC suggested clarifying the rule to preclude interpreting it as
imposing strict liability for a breach. We also recommended requiring a
written security program, exploring the idea of a safe harbor, and
revising the breach notification proposal to make it more useful for
consumers.
Most importantly, the FTC fundamentally disagreed with the FCC's
approach to consumer choice. Specifically, the FTC criticized the FCC's
failure to distinguish between sensitive and non-sensitive data in
applying opt in and opt out choice. The FCC's proposed rules would in
some cases have allowed ISPs to use highly sensitive information
without express permission. At the same time, the rules would hinder
ISPs' use of non-sensitive data, even though other companies like
Google and Facebook can use that same data to offer innovative--and
often free--services.
The FCC has since issued final rules that nominally distinguish
between sensitive and nonsensitive data. Yet, the new rules still
differ from the FTC's approach in important ways. Most obviously, the
rules define an overly broad swath of data as ``sensitive,'' without
justification and in a manner that is inconsistent with the FTC's
approach. For instance, the FCC's new rules treat all web browsing and
application usage history data as sensitive, while the FTC does not.
The differences between the FCC's and FTC's approaches will have
significant unintended consequences. For instance, the FCC's broader
definition of sensitive information could lead to an uneven playing
field for competitors because it would restrict ISPs' ability to
collect information that edge providers and others have collected for
years. The FCC's approach also is unlikely to reflect average consumer
preferences and may confuse consumers who will not be able to easily
assess which rules apply as they act online.
B. Prior to this ruling, how has the FTC regulated data privacy?
Answer. The FTC protects consumer privacy and information using a
broad array of statutes, including Section 5 of the FTC Act, Gramm-
Leach-Bliley, the Children's Online Privacy Protection Act (COPPA), and
the Fair Credit Reporting Act (FCRA). The FTC has brought approximately
60 data security cases, 50 general privacy cases, more than 20 COPPA
cases, and over 100 FCRA cases.
The FTC's approach to privacy recognizes that the use of data about
consumers is extremely valuable--both to companies and to consumers. It
also recognizes that consumers have a strong interest in controlling
access to sensitive data about them. Thus, the FTC seeks to maximize
effective consumer choice in a manner that is least intrusive into
consumer and businesses transactions. This approach respects the
autonomy of all consumers, including those with privacy preferences
that differ from those of the regulator. As such, we seek to enable
consumers to efficiently match their privacy preferences with a
company's privacy practices. In pursuit of this goal, the FTC protects
privacy with a two-pronged approach, seeking to prevent both deception
and unfairness.
For types of data and uses where consumers have widely varying
privacy preferences--such as advertising--we use our deception
authority to promote marketplace competition to satisfy this wide range
of consumer preferences. A functioning market requires companies to
keep their promises. Under our deception authority, we bring a case
when a company makes privacy promises to consumers that materially
affect consumers' actions, but the company does not keep those
promises. This deception-based approach encourages companies to develop
privacy practices that accommodate widely varying consumer privacy
preferences.
Under our unfairness authority, we have found certain privacy
practices to be unfair, even if a company has made no promises to a
consumer. Specifically, our unfairness authority prohibits practices
that cause substantial harm that is unavoidable by consumers and which
is not outweighed by benefits to consumers or competition. Practices
that the FTC has found unfair consistently match practices that most
consumers generally reject. For example, we brought an unfairness case
against a data broker that sold sensitive financial information to
individuals whom the data broker knew or should have known were
identity thieves. Other privacy violations with substantial harm
involve accessing medical information, real time location data, and
information about children without consumers' express consent.
Thus, unfairness establishes a baseline prohibition on practices
that the overwhelming majority of consumers would never knowingly
approve. Above that baseline, consumers are free to find providers that
match their preferences, and our deception authority governs those
arrangements.
C. In your opinion, is the FTC better equipped to regulate data
privacy than the FCC?
Answer. Yes. The FTC's long experience applying our Section 5 and
other statutory authorities to individualized cases has built
institutional practices and topical knowledge that make the FTC
uniquely capable. First, our emphasis on a case-by-case application of
general principles requires far less speculation about the future and
encourages a focus on addressing real consumer injury. Second, in
addition to our enforcement expertise, the FTC actively immerses itself
in new technologies and business models through workshops and public
comments. Using these tools the FTC gathers and synthesizes information
into reports and consumer and business education that summarizes the
issues at hand and formulates the appropriate FTC response. A prime
example of this kind of careful investigation is the 2012 Privacy
Report, which was the result of more than two years of research,
multiple rounds of public comment (including comments on a public
preliminary draft), and many meetings with stakeholders. Third and
finally, the FTC's institutional structure provide strong advantages.
For example, the Bureau of Economics is an independent voice within the
agency that advises on whether and how proposed consumer protection
actions, including privacy-related actions, will benefit consumers. The
FTC's experience on the topic of privacy and our legal and
institutional structures provide us with significant capabilities in
overseeing data privacy.
Question 3. As a top travel destination in the nation, and the
world, Florida is home to thousands of hotels. As technology continues
to move forward in the 21st Century, booking travel arrangements
through third-party hotel booking sites offers enormous conveniences
and potential cost savings to consumers. However, there have been
allegations that certain companies or their affiliates are engaging in
travel booking practices that mislead and harm consumers booking hotel
rooms online. In June 2015, I joined Senator Nelson in sending a letter
to the FTC urging investigation into allegations of fraudulent online
hotel bookings through third-parties. The entire Florida House
delegation sent a similar letter.
A. How many consumer complaints on this issue have been filed with
the FTC?
Answer. The Commission's Consumer Sentinel complaint database
includes complaints received directly by the FTC as well as complaints
contributed by the Better Business Bureau and other agencies. It
contains approximately 60 complaints since 2012 indicating that
consumers had booked a hotel through a third-party site when they
thought they were booking directly with a hotel.
B. Can you all speak to the efforts FTC has made to investigate
these fraudulent bookings, and how the FTC is working to protect
consumers from this fraud?
Answer. The FTC has a strong interest in protecting consumer
confidence in the online hotel-booking marketplace. For example, in
July 2015, the FTC issued consumer education cautioning consumers about
third-party websites that may deceptively mimic hotel websites. FTC
staff has also met with members of Congress to discuss the issue of
deceptive travel sites and has provided technical assistance and
comments on the proposed legislation. Although I cannot comment on the
existence of any non-public investigations, I can assure you that the
FTC takes consumer deception in this marketplace very seriously. We
will apprise you of any other public developments.
Question 4. Florida is a top travel destination in both the United
States and the world, and is home to hundreds of hotels and resorts.
Orlando, Miami, the Florida Keys, and Fort Lauderdale are some of the
most popular destinations with hotels charging resort fees for
additional amenities. It has come to my attention that the FTC is
looking to alter previous guidance, released in 2012, related to the
mandatory disclosure of hotel resort fees. The 2012 guidance requires
hotels to fully disclose all resort fees so that consumers know
throughout the booking process exactly how much they are paying and
which amenities they are receiving. Please speak to what has prompted
the FTC to discuss reversing the 2012 guidance and moving towards
``total price'' guidance.
A. How many consumer complaints has the FTC received on resort fee
disclosures since it issued its guidance on this issue in 2012? Is
there any empirical or legal evidence of actual consumer confusion or
harm that demonstrates that the 2012 guidance needs to be altered? If
so, please describe.
Answer. The FTC has received approximately 400 complaints on resort
fee disclosures since it issued its 2012 guidance. There is some
empirical research that has found that separating mandatory fees from
baseline prices can be harmful to consumers. Eric A. Greenleaf et al.,
The Price Does Not Include Additional Taxes, Fees and Surcharges: A
Review of Research on Partitioned Pricing, 26 J. Consumer Psychol. 105
(2015). Another consumer preference study about resort fees found that
67 percent of consumers preferred a bundled room rate versus
partitioned pricing. Tom Repetti et al., Pricing Strategies for Resort
Fees: Consumer Preferences Favor Simplicity, 27 Int'l J. Contemporary
Hosp., 790, 800, 804 (2014) (``As resort fees become more common,
customers still prefer them bundled into the room rate than paying them
separately.'').
B. Further, do any of those studies look at consumer understanding
of current disclosures, specifically?
Answer. I am unaware of any specific studies examining current
resort fee disclosures.
Question 5. In November 2012, the FTC issued 22 warning letters to
hotel operators on resort fee disclosures. The 2012 guidance was
largely embraced by the industry. In 2013, the FTC issued additional
warning letters. However, it is my understanding that the FTC has not
taken enforcement action against hotel or resort operators since
sending these warning letters. Why didn't the FTC take enforcement
action?
Answer. The FTC has a strong interest in protecting consumer
confidence in the online marketplace, including the robust online
market for hotel and travel services. Many hotels and other members of
the travel industry have improved their disclosures of resort fees in
response to Staff's earlier warning letters. Despite these
improvements, the FTC wants to ensure that newer technological
platforms, such as mobile applications on smaller screens and OTA and
metasearch websites allowing for comparison shopping, continue to
provide accurate and complete information at the time of booking.
Although I am not able to comment on whether the FTC has any ongoing
investigations, we continue to work with industry and other
stakeholders to promote accurate disclosure of resort fees at the time
of initial booking.
Question 6. If the Federal Communication Commission (FCC) adopts
its proposed rules on Internet Service Providers (ISPs) on October 27,
do you think consumers will understand that edge providers will still
be subject to a different regime?
A. Will the FCC's rules confuse consumers about their control over
their personal information?
Answer. I am concerned that the rules as proposed may confuse
consumers. Many consumers do not distinguish between ISPs, ISP-owned
companies, and other companies in the Internet ecosystem. Consumers
should not need to know the intricacies of corporate structure, network
topologies, and business arrangements to understand how data about them
may be used. Subjecting different parts of the Internet to different
default rules, particularly without any evidence that consumers see
ISPs as different from other companies on the internet, is likely to
create consumer confusion.
Question 7. In regard to the FTC potentially moving forward to
alter the 2012 mandatory disclosure of hotel resort fee guidance:
A. Do you believe current disclosures are deceptive?
Answer. I believe many hotel and online travel sites prominently
disclose resort fees early in the booking process and have added the
resort fee to the ``total'' price shown for the stay. This practice,
however, may not be consistent throughout the entire travel industry.
B. What level of evidence do you think is appropriate when
determining advertising standards? Has the FTC produced this evidence
with respect to its new position on resort fees?
Answer. The Commission acts in the interest in consumers to prevent
deceptive or unfair act or practices, pursuant to the FTC Act, 15
U.S.C. Sec. 45. An act or practice is deceptive if it is likely to
mislead consumers acting reasonably under the circumstances, and if it
is material, meaning, likely to affect a consumer's purchasing
decision. An act or practice is unfair if it causes or is likely to
cause substantial injury that consumers cannot reasonably avoid, and
that is not outweighed by the benefits to consumers or to competition.
The FTC has not yet articulated any new official position on resort
fees but all Commission guidance is founded on these guiding and time-
tested principles.
C. Do you support the practice of the FTC releasing guidance that
is, in effect, a regulation that has not been subject to a formal
notice and comment period?
Answer. I have long encouraged the FTC to focus on identifying and
addressing real consumer harm that the market and private arrangements
cannot address on their own. I support transparency in government
regulation and enforcement, including providing the opportunity for
notice and comment on formal guidelines, by which interested
stakeholders can provide input formally or informally to the Commission
and Commissioners on matters, guidance, or any emerging issues.
D. Do you think the benefits of the FTC's proposed resort fee
standards outweigh the costs? Do you think that Commission guidance
should take into account benefits and costs?
Answer. I believe that any Commission guidance should take into
account benefits and costs.
E. If you disagree with Chairwoman Ramirez's final proposal, will
you inform this Committee and the public of your position and how it
differs with the action the Commission takes?
Answer. Yes.
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Response to Written Question Submitted by Hon. Bill Nelson to
Hon. Maureen K. Ohlhausen
Question. I am a firm believer that two cops on the beat are better
than one. In that regard, I see no reason to pit one agency against
another. In this Committee, we have had a debate as to whether the FCC
or FTC should protect consumer privacy. I think this debate misses the
point. There is no reason why both the FTC and FCC can't play prominent
roles.
To all of the Commissioners, the FTC has overlapping jurisdiction
with numerous agencies, such as the Department of Justice and the Food
and Drug Administration. Your relationships with these agencies and
overlapping jurisdictions have never been a problem. Don't you think
you can have a similar cooperative relationship with the FCC? Shouldn't
there be two cops on the beat?
Answer. Given the breadth of its jurisdiction, the FTC has
cooperated frequently with other agencies on areas of mutual concern,
including many areas of cooperation with the FCC. The Commission's goal
in working with other agencies is to use its complementary authority to
protect consumers as effectively and efficiently as possible, to avoid
duplication, and to promote consistency.
Having ``two cops on a beat'' can be beneficial, but only if two
conditions are satisfied. First, the dual efforts must be complementary
rather than conflicting--the cops' rulebooks must be the same or at
least complement each other. Second, the dual efforts ought to reflect
each agency's respective expertise, else risk unnecessarily diverting
an agency's attention away from its areas of comparative advantage.
Many areas of FTC/FCC overlap meet both of these conditions, and
thus the agencies have often been able to cooperate successfully. For
example, the FCC and FTC coordinate on Do Not Call matters, robocall
research, enforcement matters, and research such as our separate but
complementary studies of security in the mobile ecosystem. Last year,
the agencies affirmed and formalized certain collaborations by entering
into a Memorandum of Understanding agreeing to coordinate on their
respective consumer protection efforts.
However, the FCC's recently adopted privacy rules appear to
establish a framework that does not meet either test for successful
``two cops on the beat.'' First, the rulebooks are different and
incompatible. The FCC's new privacy rules conflict with the FTC's
longstanding approach. Specifically, the FCC's rules treat web browsing
history and app usage data as sensitive and require an opt-in from
consumers. The FTC has not typically treated such data as sensitive,
and has allowed an opt-out approach to collecting such data. (Web
history or app usage that itself consists of sensitive data, such as
health information, financial information, etc., is already treated by
the FTC as sensitive.) In adopting this different approach, the FCC
offered no evidence that the FTC's approach--which had previously
governed ISPs--was failing to protect ISP consumers.
The differences between the FCC's and FTC's approaches will have
significant unintended consequences. For instance, the FCC's broader
definition of sensitive information could lead to an uneven playing
field for competitors because it would restrict ISPs' ability to
collect information that edge providers and others have collected for
years. It also is unlikely to reflect average consumer preferences, and
it may confuse consumers who will not be able to easily assess which
rulebook applies.
Second, the duplicative efforts on consumer privacy do not
capitalize on each agency's relative strengths. The FCC cannot match
the FTC's long experience in case-by-case enforcement in the privacy
area, our expert economic analysis of existing and likely consumer
harm, and our focus on redress of consumer harm. The FCC's expertise
lies in many other areas, such as spectrum policy and technical rules.
However, despite this new challenge, the FTC will continue to
pursue productive cooperation with the FCC in order to protect
consumers as effectively and efficiently as possible.
______
Response to Written Questions Submitted by Hon. Richard Blumenthal to
Hon. Maureen K. Ohlhausen
Question 1. Earlier this year, the FTC finally successfully cracked
down on four sham charities that had bilked more than $187 million from
donors. According to the FTC complaint, their misappropriation of
consumer donations dated back to at least 2008. Chairwoman Ramirez,
Commissioner McSweeny, and Commissioner Ohlhausen: How were these sham
charities able to rob donors of so much money and for so long?
Answer. As you note, in March 2016, the FTC, all 50 states and the
District of Columbia resolved litigation against the remaining
defendants in Cancer Fund of America, resulting in, among other things,
a dissolution of the sham charities and a ban on the president's
ability to profit from any charity fundraising in the future. The four
sham outfits were quite adept at masking their charade. For example,
the complaint charges that the sham cancer charities hid their
wrongdoing by manipulating their financial reporting and using
deceptive and invalid accounting techniques to claim huge donations of
gifts-in-kind. This allegedly allowed them to inflate their reported
revenue and program spending by $223 million and had the effect of
making the organizations appear to be both larger and more efficient
with donors' money than they were. As charged in the complaint, it was
not obvious from their public financial reports to the IRS or the
states that in reality less than 3 percent of donated cash went towards
program services (collectively).
In addition, charity fraud is easy to miss and is underreported.
The average donation to the sham cancer charities was less than $30,
the vast majority in response to telephone solicitations. Consumers who
gave in response to the promise that their donation would help cancer
patients never knew that--as alleged in the complaint--it did not go to
that cause. For this reason, consumers did not complain. Further, based
on our experience, we believe that few donors take the time to research
a $20 to $30 donation before giving, and in this case, the sham
charities' allegedly false reporting would have hidden the red flags
from even the most diligent consumers.
To help educate consumers, the FTC has issued consumer education
materials to inform consumers how they can protect themselves against
sham charities, including by, researching the charity before donating
and tips on signs of a charity scam.\1\
---------------------------------------------------------------------------
\1\ FTC Charity Scams, FTC Consumer Information, https://
www.consumer.ftc.gov/features/feature-0011-charity-scams; FTC and
States Wrap Up Largest Charity Enforcement Action Ever, FTC Consumer
Information (Mar. 30, 2016), https://www.consumer.ftc.gov/blog/ftc-and-
states-wrap-largest-charity-enforcement-action-ever.
Question 2. In what way has the nonprofit exemption in the FTC Act
hamstrung the Commission's ability to act swiftly to protect consumers?
Answer. The Commission has long advocated that our jurisdiction be
extended to non-profit entities to further protect consumers and
preserve competition. For example, despite many publicized data
breaches at non-profit hospitals and universities, the FTC cannot
challenge unfair or deceptive data security or privacy practices of
these entities. These breaches have exposed the sensitive data of
millions of consumers, yet the Commission cannot act due to the non-
profit status of these entities. Further, while the Commission can use
Section 5 to reach ``sham'' non-profits, such as shell non-profit
corporations that actually operate for profit and sham charities, these
investigations require resource-intensive fact finding to satisfy this
standard. For example, proving that a charity is a sham requires
significant probing into the internal operations of the organization,
including reviewing bank records, board meeting minutes, employment
practices and other things. Typically, we cannot discover the
information without contacting the charity and obtaining documents from
it. After getting the documents, a detailed financial analysis is
necessary. Only with an understanding of how the money is spent and how
the charity operates can we allege that it is a sham. Developing this
kind of threshold evidence is time consuming and limits our ability to
act swiftly to protect consumers in this area.
The non-profit exemption also prevents the Commission from taking
action against potentially anticompetitive conduct of non-profits in
the healthcare sector. The Commission actively promotes competition in
health care markets, but, aside from mergers or other transactions
covered by the Section 7 of the Clayton Act, 15 U.S.C. Sec. 17, it
cannot reach the conduct of non-profits engaged in the business of
health care, including non-profit health maintenance organizations
(HMOs), health plans, and standard-setting organizations. For instance,
the Commission generally cannot challenge price-fixing, boycotts, and
other anticompetitive conduct by non-profit hospitals, even if we
charge other parties to the illegal agreements. See Piedmont Health
Alliance, 138 F.T.C. 675 (2004); Tenet Healthcare Corp./Frye Regional
Medical Center, Inc., 137 F.T.C. 219 (2004); Maine Health Alliance, 136
F.T.C. 616 (2003) (enforcement actions involving unlawful price-fixing
arrangements brought against physicians and a for-profit hospital but
not non-profit hospitals).
This has been especially limiting in our review of hospital mergers
involving non-profit hospitals. Further, although the FTC has
jurisdiction under the Clayton Act to challenge non-profit hospitals'
merger plans, the FTC does not have jurisdiction under the FTC Act to
challenge those hospitals' anticompetitive conduct. Such a case would
have to be initiated by the Department of Justice, even if the
Commission reviewed the merger.
Question 3. Last year, FTC staff released a comprehensive report on
``Competition in the Ped Medications Industry.'' In the report, the
Commission found that ``some veterinarians refuse to provide portable
prescriptions to their clients or engage in behaviors intended to
discourage clients from requesting portable prescriptions and filling
them elsewhere.'' The report also noted that spending by families on
their pets has doubled over the last decade, with Americans spending
$7.6 billion on prescription and over-the-counter pet medications in
2013, and projected to spend $10.2 billion by 2018. It has been
estimated that pet owners who can get a copy of their pet's
prescription and shop around, could save 20 to 30 percent on branded
medications and 50 percent when they purchase generics--suggesting that
prescription portability can save pet owners billions of dollars every
year. In May of last year, I introduced the Fairness to Pet Owners Act,
which would ensure consumers have the freedom to choose where they buy
prescription pet medication.
Chairwoman Ramirez, Commissioner McSweeny, and Commissioner
Ohlhausen: Given the findings of the Commission's report, do you
support the Fairness to Pet Owners Act? Do you believe that providing
pet owners with the right to their pets' prescriptions will help ensure
consumers have access to pet medications at the most affordable prices?
Answer. While the FTC has not taken a formal position on the
Fairness to Pet Owners Act, I believe prescription portability likely
benefits consumers by empowering them to make informed choices about
where to purchase their pet medications. For this reason, I generally
support policies that would require veterinarian release of pet
medication prescriptions and increase consumer awareness.
As discussed extensively in the FTC staff report, it appears that
some consumers do not always receive portable prescriptions from their
veterinarians, are uncomfortable requesting the prescription, or are
not aware that they have this option. Federal legislation requiring
automatic prescription release would go further than current state laws
and regulations that require prescription release only upon request,
which could benefit consumers. Automatic prescription release is
arguably a more effective way to raise consumer awareness about the
option to obtain portable prescriptions from their veterinarians and
comparison shop when purchasing pet medications. In addition, automatic
prescription release likely would help to address situations where
veterinarians are reluctant to provide, or discourage clients from
requesting, portable prescriptions, or when consumers are uncomfortable
requesting portable prescriptions for pets.
Federal legislation requiring automatic prescription release also
has the potential to positively impact manufacturer distribution
policies. If greater prescription portability were to increase consumer
demand for purchasing pet medications from non-veterinary retail
pharmacists, the potential for increased sales opportunities might
incentivize manufacturers to change their distribution policies in ways
that would promote competition among different distribution channels
and be more responsive to consumer choice.
______
Response to Written Questions Submitted by Hon. Gary Peters to
Hon. Maureen K. Ohlhausen
Question 1. The Federal Trade Commission (FTC), Food and Drug
Administration (FDA), and Department of Justice each possess a portion
of jurisdiction over the contact lens marketplace. The FTC has the
authority, under the Federal Trade Commission Act, to bring enforcement
actions against sellers of contact lenses whose practices violate the
law. My office has been made aware of the fact that there are online
retailers who advertise that they dispense contact lenses, which are a
FDA-regulated medical device, without verifying a patient's
prescription.
Question 1a. What process does the FTC have in place for
individuals to submit complaints regarding prescriber practices and how
many complaints has the FTC received?
Answer. The FTC encourages consumers, as well as prescribers and
retailers, to report suspected violations of the Contact Lens Rule. The
primary avenue for reporting complaints is the FTC Complaint Assistant,
ftc.gov/complaint, featured prominently on the ftc.gov homepage.
Consumers also may file a complaint by calling 1-877-FTC-HELP (382-
4357). FTC staff also receives e-mail messages reporting suspected
instances of prescribers and retailers not complying with the Rule.
The FTC receives a few hundred complaints a year about a variety of
prescriber and retailer practices, some outside the scope of the
Contact Lens Rule, such as billing practices and insurance issues.
Question 1b. Has the FTC brought enforcement action against any
retailers due to their prescribing practices? How many enforcement
actions have been brought?
Answer. The FTC has taken a multi-faceted approach to ensure
retailers and consumers are cognizant of their obligations and rights
under the Contact Lens Rule.
For example, we have taken law enforcement action against ten
contact lens sellers for allegedly selling cosmetic contact lenses
without obtaining consumers' contact lens prescriptions and failing to
maintain records of consumers' prescriptions. Our settlement orders
have imposed civil penalties and provided injunctive relief that, among
other things, prohibited the defendants from: (1) selling contact
lenses without obtaining a prescription from a consumer, (2) selling
contact lenses without verifying prescriptions by communicating
directly with the prescriber; and (3) failing to maintain records of
prescriptions and verifications.
In addition, in April, 2016, FTC staff sent 45 warning letters \2\
to contact lens prescribers and 10 to contact lens sellers warning them
of potential violations of the agency's Contact Lens Rule, which is
intended to facilitate the ability of consumers to comparison shop for
contact lenses while ensuring that sales occur only in accordance with
a valid prescription. These letters reminded prescribers and sellers of
their legal obligations and warned them that violations of the Contact
Lens Rule may result in legal action, including civil penalties of up
to $16,000 per violation. Since we sent those letters, the civil
penalty amount has increased up to $40,000 per violation.
---------------------------------------------------------------------------
\2\ FTC Issues Warning Letters Regarding the Agency's Contact Lens
Rule, FTC News Release (Apr. 7, 2016), available at: https://
www.ftc.gov/news-events/press-releases/2016/04/ftc-issues-warning-
letters-regarding-agencys-contact-lens-rule.
---------------------------------------------------------------------------
The agency has also increased its efforts to work with industry and
educate the public concerning their rights and responsibilities. For
example, FTC staff initiated an outreach campaign designed to increase
prescriber, seller, and consumer awareness of the Contact Lens Rule,
which included newly-revised consumer educational guidance,
Prescription Glasses and Contact Lenses, and social media outreach to
prescribers and sellers.\3\ Additionally, the FTC is working with other
Federal agencies, state law enforcement agencies and consumer advocacy
groups to improve industry compliance and increase public awareness
regarding the Rule.
---------------------------------------------------------------------------
\3\ Prescription Glasses and Contact Lenses (Apr. 2016), available
at: https://www.con
sumer.ftc.gov/articles/0116-prescription-glasses-and-contact-lenses.
See also Buying contacts? You should see a prescription first (Apr. 7,
2016), available at: https://www.consumer.ftc.gov/blog/buying-contacts-
you-should-see-prescription-first; and An Rx for compliance with the
Contact Lens Rule (Apr. 7, 2016), available at: https://www.ftc.gov/
news-events/blogs/business-blog/2016/04/rx-compliance-contact-lens-
rule.
---------------------------------------------------------------------------
We will continue to monitor the marketplace and will take action
against violations of the Contact Lens Rule as appropriate.
Question 2. Under current law, most states require that patients
get updated contact lens prescriptions every year in order to buy more
lenses. Yet, some online retailers are selling multiple years' worth of
contact lenses.
In conducting the 10-year review of the Contact Lens Rule, has the
FTC taken into account the safety implications of prescribers that sell
multiple years' worth of contact lenses? Has the FTC found any safety
concerns associated with this practice and could you list them if so?
Answer. The Contact Lens Rule mandates that sellers dispense
contact lenses only in accordance with a valid prescription that is
either presented to the seller or verified by direct communication with
the prescriber.\4\ The Rule sets out the information that must be
included in a seller's verification request, and directs that a
prescription is only verified under the Rule if: (1) a prescriber
confirms the prescription is accurate; (2) a prescriber informs the
seller that the prescription is inaccurate and provides an accurate
prescription in its stead; or (3) the prescriber fails to communicate
with the seller within eight business hours after receiving a compliant
verification request.\5\ The Rule states that if the prescriber informs
the seller within eight business hours of receiving the verification
request that the prescription is inaccurate, expired, or invalid, the
seller shall not fill the prescription. The Rule requires that the
prescriber specify the basis for the inaccuracy or invalidity of the
prescription, and if the prescription is inaccurate, the prescriber
must correct it.\6\
---------------------------------------------------------------------------
\4\ 16 CFR 315.5(a).
\5\ 16 CFR 315.5(b)-(c).
\6\ 16 CFR 315.5(d).
---------------------------------------------------------------------------
As part of its rule review process, the Commission received
comments addressing the quantity of contact lenses that some online
retailers may be selling to consumers, however, the comments varied
widely on approach to address this issue. Based on a thorough review of
the comments, the FTC made the initial determination that there was
insufficient evidence in the rulemaking record to support amending the
Rule to impose a quantity limitation but is seeking additional public
comment concerning this initial determination.
Question 3. Current law requires a seller to verify a patients'
contact lens prescription. One of the allowable forms of communication
are automated and non-live calls--commonly referred to as
``robocalling.'' I have heard from optometrists in Michigan that
understanding and/or verifying required information from robocalling is
nearly impossible.
Question 3a. Has the FTC heard similar concerns about the use of
robocalling to verify a patient's contact lens prescription?
Answer. In the course of our rule review, the FTC received various
comments from prescribers. Some prescribers have stated that automated
telephone calls are difficult to understand, while other prescribers
voiced issues with the length or timing of automated calls. However,
commenters did not provide any empirical data regarding the frequency
of these various practices, average or aggregate costs associated with
automated calls in particular, or the number of illegal or otherwise
deficient contact lens sales that result from such calls. We are
examining these issues and considering how best to ensure that the
Rule's verification system operates as intended by the Fairness to
Contact Lens Consumers Act, 15 U.S.C. Sec. Sec. 7601-7610. We recently
issued a NPRM for the Contact Lens Rule where we discuss automated
telephone calls for prescription verification and request comment on
modifications to automated telephone calls that the FTC should consider
to address the concerns raised by prescribers.
Question 3b. In its review of the Contact Lens Rule has the FTC
examined the safety implications of allowing robocalling for
verification purposes? If so, what did the FTC find?
Answer. The FTC is examining all concerns raised about the current
operation of the Rule, including the safety implications of automated
telephone systems and the evidence proffered by commenters in support
of their proposed Rule amendments. In the recent NPRM, we discuss the
safety concerns raised by some commenters about the use of automated
calls: namely, that if the prescription is not properly verified,
patients may be receiving contact lenses based on outdated or incorrect
prescription information. However, commenters did not provide any
empirical data regarding the frequency of these various practices,
average or aggregate costs associated with automated calls in
particular, or the number of illegal or otherwise deficient contact
lens sales that result from such calls. Furthermore, we did not receive
evidence indicating whether these problems occur with automated calls
generally or are chiefly associated with only one or a small group of
sellers. In the NPRM, we request additional comment on modifications to
automated telephone calls that the FTC should consider.
Question 3c. Has the FTC examined robocalling to determine whether
or not it effectively allows vendors to verify a patient's
prescription? If so, what did the FTC find?
Answer. As described above, the FTC is currently in the process of
conducting the Rule review. This process involves both reviewing
comments received from all interested stakeholders as well as examining
the empirical evidence produced by such parties in support of their
positions. Incomplete or incoherent verification requests are not valid
verification requests. As discussed in the recently issued NPRM, at
this time, we have not seen convincing evidence that these practices
frequently result in illegal sales of contact lenses. If the FTC
receives evidence of a compelling widespread problem, it may revisit
its position on the use of automated verification requests.
Question 3d. Has the FTC considered allowing other forms of
electronic communication that might improve or compliment robocalling?
If so, what are they?
Answer. The FTC is considering the impact and use of other evolving
technologies as they relate to the Rule, including the verification
framework set forth by the Fairness to Contact Lens Consumers Act. The
FTC is seeking further public comment on this issue.\7\
---------------------------------------------------------------------------
\7\ See FTC Press Release, FTC Seeks Comment on Proposed Changes to
Contact Lens Rule (Nov. 10, 2016), https://www.ftc.gov/news-events/
press-releases/2016/11/ftc-seeks-comment-proposed-changes-contact-lens-
rule.
---------------------------------------------------------------------------
______
Response to Written Question Submitted by Hon. John Thune to
Hon. Terrell McSweeney
Question. The FTC is an agency with broad investigative and
enforcement powers. Commission investigations can involve considerable
discovery requests, and enforcement actions frequently result in
settlements through consent decrees. While there are often legitimate
reasons for settlements, this reliance on the administrative process
has resulted in a lack of judicial review of agency enforcement
decisions. This lack of case law means there may be fewer bright lines
to guide the Commission, companies, and courts with respect to
enforcement. Does this absence of clear guidance concern you? Please
explain.
Answer. All of our enforcement actions are grounded in Section 5 of
the FTC Act which gives the Commission the mandate to police ``unfair
or deceptive acts or practices in or affecting commerce.'' Congress
created this broad instruction out of a realization that the FTC needed
broad authority to protect consumers in a dynamic marketplace. Over the
years, the FTC has used its authority to pursue a range of harmful
practices from diploma mills to lax data security to deceptive privacy
policies. Section 5 has allowed the FTC to keep pace with changes in
the American marketplace and protect consumers where they are--from the
corner store to a handheld smart phone. I am sensitive to the need to
make sure businesses know how we use our authorities and what it means
for them. That's why when we resolve a case through a consent decree
settlement we publish it along with a detailed complaint. The FTC also
issues press releases and blog posts, and engages with industry through
a variety of workshops and forums. I believe it is important for the
FTC to continue to provide guidance--especially through initiatives run
by its Division of Business and Consumer Education. For example, the
``Start with Security'' initiative, synthesizes best practices from the
Commission's data security cases and explains our approach to assessing
reasonable security practices. This guidance should continue to be
regularly updated.
______
Response to Written Questions Submitted by Hon. Marco Rubio to
Hon. Terrell McSweeney
Question 1. According to the most recent statistics, there are
currently 728 travel related cases and 147 non-travel related cases of
Zika in my home state of Florida. With the increase in cases, and the
threat mosquitos spreading around the Miami Beach area and to other
parts of the United States and our territories, many are concerned with
contracting the virus. Feeding into consumer concerns, many companies
are marketing products that say they provide protection from the Zika
virus.
A. Please speak to the FTC's efforts to seek out these fraudulent
companies that are capitalizing off of consumer concerns about Zika,
and hold them accountable.
Answer. Like my colleagues, I am concerned about the risks of the
Zika virus. Unfortunately, when public health crises arise, they are
usually followed by scammers who try to take advantage of public
concern by peddling products of dubious value. As Chairwoman Ramirez
informed you, when Commission staff was made aware of these problematic
Zika-related products, they investigated and contacted the companies
marketing the products. These communications informed the companies of
their obligations and reminded them of the law. We also informed the
public of these letters on one of our blogs and explained the evidence
that is needed to make claims that products provide protection from
infection. We are continuing to monitor the situation carefully.
B. I understand the FTC has reached out to some of these online
marketers and requested reports back on actions they have taken to
remove or change false advertising claims. What is the status of these
reports?
Answer. I believe that Chairwoman Ramirez provided an answer to
this question. I have nothing to add substantively. I believe the quick
action by FTC staff is emblematic of the quality of the Commission's
work and the level of seriousness our staff bring to their job of
protecting the American consumer and American marketplace.
C. What can we do to educate my constituents back home in Florida,
and across our nation, about what to look for to ensure they are not
buying into falsely advertised products, and make sure they are
protected as consumers?
Answer. The Commission posted a blog in English and Spanish about
our warning letters to the companies and informing consumers about what
they could do to protect themselves and their families from Zika. The
blog included links to the EPA and the CDC that are quite informative
about the steps consumers can take to protect themselves and their
families. The FTC's consumer blog also links to advice from EPA on how
to use insect repellents safely and effectively, and to tips from the
CDC on protecting oneself and family members, and what to consider when
you are in a location where Zika has been found. We want to centralize
this information so we can make it easier for consumers to make
educated decisions about how to protect themselves and their families
from Zika.
Question 2. The Federal Communication Commission (FCC) is scheduled
to vote on its proposed broadband consumer privacy rule on October 27.
A. Will you speak to the FTC's comments on the proposed rule
related to transparency, consumer choice and data security?
Answer. The FTC staff comment commended the FCC's focus on the core
privacy values of transparency, consumer choice, and data security. The
FTC's privacy program has long focused on transparency and consumer
choice.
The FTC staff generally supported the NPRM's requirement that ISPs
provide clear and conspicuous choices and notices of privacy policies
to their consumers. On choice, the FCC would have required opt out for
use for use of consumer information for marketing of communications-
related services, and opt in for all other uses of customer's private
information. The FTC's comment suggested that opt in consent is
important before (1) collecting sensitive information, (2) making
material retroactive changes to privacy policies, or (3) collecting
content of consumers' communications through technologies such as deep
packet inspection. For other categories, the FTC staff suggested that
opt out would be sufficient. The FCC's final rule adopted this
approach. Regarding security, the FTC staff agreed with the approach
that ISPs have reasonable security in place. The staff comment favored
a breach notification requirement for ISPs.
B. Prior to this ruling, how has the FTC regulated data privacy?
Answer. I believe that Chairwoman Ramirez's statement captures the
scope of how the FTC approaches privacy. Our approach is grounded in
the FTC's authority to protect consumers from ``unfair and deceptive
acts and practices.'' As the Nation's chief privacy enforcer we have
brought hundreds of cases concerning the protection of consumer
privacy. Our enforcement based approach has enabled the FTC to keep
pace with technology while giving American innovators plenty of room to
do what they do best-providing innovative products and services to
consumers around the globe.
Through our workshops and business education program we engage with
cutting edge issues, particularly around consumer privacy.
C. In your opinion, is the FTC better equipped to regulate data
privacy than the FCC?
Answer. I want to echo the Chairwoman's words about the FTC's long
history of enforcement and the institutional knowledge housed within
the Commission. I agree that the outdated common carrier exemption
should be repealed. It is important to note, however, that the Federal
Communications Commission also has a real role to play because it has
expertise in areas like Deep Packet Inspection and network
architecture,that are necessary to properly protecting consumer privacy
in our hyperconnected world.
Question 3. As a top travel destination in the nation, and the
world, Florida is home to thousands of hotels. As technology continues
to move forward in the 21st Century, booking travel arrangements
through third-party hotel booking sites offers enormous conveniences
and potential cost savings to consumers. However, there have been
allegations that certain companies or their affiliates are engaging in
travel booking practices that mislead and harm consumers booking hotel
rooms online. In June 2015, I joined Senator Nelson in sending a letter
to the FTC urging investigation into allegations of fraudulent online
hotel bookings through third-parties. The entire Florida House
delegation sent a similar letter.
A. How many consumer complaints on this issue have been filed with
the FTC?
Answer. I have nothing to add to the information provided by
Chairwoman Ramirez.
B. Can you all speak to the efforts FTC has made to investigate
these fraudulent bookings, and how the FTC is working to protect
consumers from this fraud?
Answer. Protecting consumers wherever they are is our mandate. Last
year, our staff issued consumer focused materials to educate the public
about the problems with these websites. FTC staff also met with members
of Congress to discuss this issue. Although any investigations are non-
public, I can assure you that the FTC staff will carefully consider
whether enforcement or other action is appropriate.
Question 4. Florida is a top travel destination in both the United
States and the world, and is home to hundreds of hotels and resorts.
Orlando, Miami, the Florida Keys, and Fort Lauderdale are some of the
most popular destinations with hotels charging resort fees for
additional amenities. It has come to my attention that the FTC is
looking to alter previous guidance, released in 2012, related to the
mandatory disclosure of hotel resort fees. The 2012 guidance requires
hotels to fully disclose all resort fees so that consumers know
throughout the booking process exactly how much they are paying and
which amenities they are receiving. Please speak to what has prompted
the FTC to discuss reversing the 2012 guidance and moving towards
``total price'' guidance.
A. How many consumer complaints has the FTC received on resort fee
disclosures since it issued its guidance on this issue in 2012?
Answer. I have nothing to add to the Chairwoman's answer on the
number of complaints received by the FTC on resort fees.
Is there any empirical or legal evidence of actual consumer
confusion or harm that demonstrates that the 2012 guidance needs to be
altered? If so, please describe.
Answer. I have nothing to add to the response from the Chairwoman.
B. Further, do any of those studies look at consumer understanding
of current disclosures, specifically?
Answer. I am not aware of any research that has specifically
examined consumer understanding of current resort fee disclosures.
Question 5. In November 2012, the FTC issued 22 warning letters to
hotel operators on resort fee disclosures. The 2012 guidance was
largely embraced by the industry. In 2013, the FTC issued additional
warning letters. However, it is my understanding that the FTC has not
taken enforcement action against hotel or resort operators since
sending these warning letters. Why didn't the FTC take enforcement
action?
Answer. I was not a Commissioner when the guidance was communicated
and have no comment beyond what has been submitted by the Chairwoman.
______
Response to Written Question Submitted by Hon. Deb Fischer to
Hon. Terrell McSweeney
Question. The FTC has long used an unfair and deceptive practices
standard for data security and considers whether practices are
reasonable in light of a business's size and complexity. By doing so,
the FTC recognizes that the data security standards that a large
company can employ may be unreasonable for a small company with only a
handful of employees and limited resources. From your perspective, does
the FCC's proposed data security standard properly reflect the varying
capabilities of companies of different sizes?
Answer. The most recent proposal from the Federal Communications
Commission reflects the standards used by the Federal Trade Commission
in assessing the reasonableness of an organization's cybersecurity
practices.
______
Response to Written Question Submitted by Hon. Bill Nelson to
Hon. Terrell McSweeny
Question. I am a firm believer that two cops on the beat are better
than one. In that regard, I see no reason to pit one agency against
another. In this Committee, we have had a debate as to whether the FCC
or FTC should protect consumer privacy. I think this debate misses the
point. There is no reason why both the FTC and FCC can't play prominent
roles.
To all of the Commissioners, the FTC has overlapping jurisdiction
with numerous agencies, such as the Department of Justice and the Food
and Drug Administration. Your relationships with these agencies and
overlapping jurisdictions have never been a problem. Don't you think
you can have a similar cooperative relationship with the FCC? Shouldn't
there be two cops on the beat?
Answer. Yes. I think the American public is better off with as many
effective cops on the consumer protection beat as possible--this is
particularly true in areas like privacy and security where our
increasing connectivity is raising new consumer protection issues for
expert regulators. For example, the FTC has issued supportive comments
to NHTSA regarding privacy and security considerations associated with
automatous vehicles and to the FCC in setting the rules to govern
common carriers' privacy obligations. Given that the FTC is the premier
consumer protection agency in the Federal government we collaborate
with many agencies from the Department of Education on for-profit
education and diploma mills, to the Consumer Financial Protection
Bureau and our work with various financial frauds, to our work with the
IRS and tax identity frauds. All of these issues are better policed
because of the dedication from multiple agencies. It is no different
with the FCC. In an age where so many companies have business lines
that cross traditional regulatory jurisdictions it is important that
the FTC continue to have an excellent working relationship with other
government agencies. Consumer protection issues like privacy and
security will become more important as the lines between industries
continue to evolve and blur thanks to our growing connectivity.
______
Response to Written Questions Submitted by Hon. Richard Blumenthal to
Hon. Terrell McSweeny
Question 1. Earlier this year, the FTC finally successfully cracked
down on four sham charities that had bilked more than $187 million from
donors. According to the FTC complaint, their misappropriation of
consumer donations dated back to at least 2008. Chairwoman Ramirez,
Commissioner McSweeny, and Commissioner Ohlhausen: How were these sham
charities able to rob donors of so much money and for so long?
Answer. I believe Chairwoman Ramirez provides an accurate narrative
of how and why these charities were able to perpetuate their fraud for
so long. I would like to add that the example offered by the Cancer
Fund for America cases is a reason--along with privacy and data
security--that the FTC should have our jurisdiction extended to non-
profits.
Question 2. In what way has the nonprofit exemption in the FTC Act
hamstrung the Commission's ability to act swiftly to protect consumers?
Answer. On both the competition and consumer protection side, the
non-profit exemption has hurt consumers. In the last few years,
universities have been one of the biggest targets for data breaches but
the FTC cannot challenge unfair or deceptive data security or privacy
practices of these entities. It also creates challenges when we
investigate sham non-profits like Cancer Fund for America.
The Commission also actively promotes competition in health care
markets, but it cannot reach the conduct of non-profits engaged in the
business of health care, including non-profit health maintenance
organizations (HMOs), health plans, and standard-setting organizations.
The exemption has been limiting in our review of hospital mergers
involving non-profit hospitals. Although the FTC has jurisdiction under
the Clayton Act to challenge non-profit hospitals' merger plans, the
FTC does not have jurisdiction under the FTC Act to challenge those
hospitals' anticompetitive conduct.
Question 3. Last year, FTC staff released a comprehensive report on
``Competition in the Ped Medications Industry.'' In the report, the
Commission found that ``some veterinarians refuse to provide portable
prescriptions to their clients or engage in behaviors intended to
discourage clients from requesting portable prescriptions and filling
them elsewhere.'' The report also noted that spending by families on
their pets has doubled over the last decade, with Americans spending
$7.6 billion on prescription and over-the-counter pet medications in
2013, and projected to spend $10.2 billion by 2018. It has been
estimated that pet owners who can get a copy of their pet's
prescription and shop around, could save 20 to 30 percent on branded
medications and 50 percent when they purchase generics--suggesting that
prescription portability can save pet owners billions of dollars every
year. In May of last year, I introduced the Fairness to Pet Owners Act,
which would ensure consumers have the freedom to choose where they buy
prescription pet medication.
Chairwoman Ramirez, Commissioner McSweeny, and Commissioner
Ohlhausen: Given the findings of the Commission's report, do you
support the Fairness to Pet Owners Act? Do you believe that providing
pet owners with the right to their pets' prescriptions will help ensure
consumers have access to pet medications at the most affordable prices?
Answer. Like the Chairwoman, I generally support policies that
would encourage prescription portability, introduce competition, and
empower consumers to make informed choices about where to purchase pet
medications.
______
Response to Written Questions Submitted by Hon. Cory Booker to
Hon. Terrell McSweeny
Question 1. Changes in technology seem to be making it ever easier
to deceive and defraud consumers with phone calls. Many New Jerseyans
have told me that the number of fraudulent calls they receive is
increasing, particularly on their cell phones. Last Congress, I joined
with Ranking Member Nelson on legislation to help curb the use of so-
called ``spoofing'' technology. This technology is used to trick
recipients into answering the call by scrambling the phone number on
the recipient's caller identification display, but spoofing is just one
of numerous practices used to defraud and harass recipients. This trend
is especially concerning because my constituents frequently receive
overtures from callers fraudulently claiming to represent government
entities including the Internal Revenue Service (IRS) and the Federal
Bureau of Investigation (FBI).
Question 1a. What steps is the Federal Trade Commission (FTC)
taking to protect consumers from fraudulent calls?
Answer. We employ every tool we have to combat fraudulent and
deceptive calls to consumers including: aggressive law enforcement,
regulatory action, robust consumer education and outreach, and even
using grants authorized by the America COMPETES Act to develop
solutions for consumers. As the Chairwoman stated, we have brought 126
enforcement actions against these scammers.
New technologies have made it easier for scammers to get around the
consumer protections we have in place. Just as these changes have
lowered costs and improved services to the benefit of consumers, they
have also lowered costs and barriers to entry for fraud. Widespread use
of caller ID spoofing by scammers is a product of these advances.
I have personally met with technologists and researchers to
encourage them on to create technological solutions for this problem.
Question 1b. How can Congress help to address this issue?
Answer. I would like to see Congress continue to support the FTC in
our law enforcement and education mission as well as the authority to
run competitions through challenge grants.
Question 1c. What information should consumers have to better
protect themselves from these practices?
Answer. The steps outlined by the Chairwoman are a good checklist
of appropriate measures consumers should take.
Question 1d. Is the FTC working in partnership with other Federal
agencies to help educate the public and to protect them from giving
away sensitive personal or financial information?
Answer. We have great working relationships with many agencies to
help educate consumers such as DOJ, the U.S. Postal Inspection Service,
the IRS, U.S. Treasury Inspector General for Tax (TIGTA), the FCC, and
DHS. We are also working to implement President Obama's Executive Order
that directed Federal agencies that guard consumer data to work
together to enhance protections and educate the public on identity
theft. As part of that initiative, we redesigned and enhanced
IdentityTheft.gov to make it a one stop resource for consumers looking
for help when a breach or hack compromises their personal data. The FTC
also works closely with state Attorneys General and international
consumer protection authorities. As Chairwoman Ramirez described, we
led a multinational robocall sweep that took action against operations
responsible for billions of illegal robocalls.
Question 1e. Is more cross-agency collaboration needed to serve the
public when it comes to identifying, exposing, and preventing
telemarketing fraud?
Answer. I agree with Chairwoman Ramirez's statement on this
subject.
______
Response to Written Questions Submitted by Hon. Gary Peters to
Hon. Terrell McSweeny
Question 1. The Federal Trade Commission (FTC), Food and Drug
Administration (FDA), and Department of Justice each possess a portion
of jurisdiction over the contact lens marketplace. The FTC has the
authority, under the Federal Trade Commission Act, to bring enforcement
actions against sellers of contact lenses whose practices violate the
law. My office has been made aware of the fact that there are online
retailers who advertise that they dispense contact lenses, which are a
FDA-regulated medical device, without verifying a patient's
prescription.
Question 1a. What process does the FTC have in place for
individuals to submit complaints regarding prescriber practices and how
many complaints has the FTC received?
Answer. I have nothing to add to the answer provided by Chairwoman
Ramirez.
Question 1b. Has the FTC brought enforcement action against any
retailers due to their prescribing practices? How many enforcement
actions have been brought?
Answer. I have nothing to add to Chairwoman Ramirez's statement.
Question 2. Under current law, most states require that patients
get updated contact lens prescriptions every year in order to buy more
lenses. Yet, some online retailers are selling multiple years' worth of
contact lenses.
In conducting the 10-year review of the Contact Lens Rule, has the
FTC taken into account the safety implications of prescribers that sell
multiple years' worth of contact lenses? Has the FTC found any safety
concerns associated with this practice and could you list them if so?
Answer. The FTC staff is examining this issue, as well as others,
as part of our review process to ensure that the Contact Lens Rule
operates as intended to promote competition and affordable prices in
the contact lens industry consistent with patient health and safety.
Question 3. Current law requires a seller to verify a patients'
contact lens prescription. One of the allowable forms of communication
are automated and non-live calls--commonly referred to as
``robocalling''. I have heard from optometrists in Michigan that
understanding and/or verifying required information from robocalling is
nearly impossible.
Question 3a. Has the FTC heard similar concerns about the use of
robocalling to verify a patient's contact lens prescription?
Answer. As the Chairwoman said, we are examining this issue and
will take this, and other issues, into account as we do more work on
the Contact Lens Rule.
Question 3b. In its review of the Contact Lens Rule has the FTC
examined the safety implications of allowing robocalling for
verification purposes? If so, what did the FTC find?
Answer. Our staff is examining all aspects of the Rule.
Question 3c. Has the FTC examined robocalling to determine whether
or not if effectively allows vendors to verify a patient's
prescription? If so, what did the FTC find?
Answer. As described above, the FTC staff is currently in the
process of conducting a review of the rule. This will involve both
reviewing comments received from all interested stakeholders as well as
examining the empirical evidence produced by such parties in support of
their positions.
Question 3d. Has the FTC considered allowing other forms of
electronic communication that might improve or compliment robocalling?
If so, what are they?
Answer. I have nothing to add to Chairwoman Ramirez's statement on
this matter.
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