For Consumers:

The FTC Year In Review

Federal Trade Commission

April 2003

R Q WWW.FTC.GOV
Federal Trade Commission

The FTC Year in Review

A Positive Agenda

For Consumers:

The FTC Year In Review

April 2003

Federal Trade Commission

Timothy J. Muris, Chairman

Sheila F. Anthony, Commissioner

Mozelle W. Thompson, Commissioner

Orson Swindle, Commissioner

Thomas B. Leary, Commissioner
Federal Trade Commission

A Positive Agenda for Consumers
Federal Trade Commission

The FTC Year in Review

Contents

Introduction ................................................................................................................................... 1

A. Goals ...................................................................................................................................... 1

B. 2002-2003 Highlights ............................................................................................................. 1

Chapter 1: Competition Law Enforcement .................................................................................. 2

A. Nonmerger Enforcement ........................................................................................................ 3

1. Bringing More Nonmerger Cases .................................................................................................. 3

2. Focusing on Key Sectors of the Economy .................................................................................... 4

3. Clarifying the Scope of Antitrust Coverage ................................................................................... 6

B. Merger Enforcement............................................................................................................... 7

1. Non-HSR Reportable Transactions ............................................................................................... 7

2. Mergers in Key Economic Sectors ................................................................................................ 8

3. Improving Merger Review and Resolution .................................................................................. 10

C. Part 3 Administrative Process ............................................................................................... 11

Chapter 2: Consumer Protection Law Enforcement and Rulemaking.................................... 12

A. Fraud and Deception ............................................................................................................ 12

1. Tools to Identify Fraud and Deception......................................................................................... 12

2. Law Enforcement ........................................................................................................................ 14

B. Consumer Privacy ................................................................................................................ 17

1. Law Enforcement ........................................................................................................................ 17

2. Rulemaking ................................................................................................................................. 19

Chapter 3: Special Policy Instruments for Assisting and Complementing Law Enforcement ... 19

A. Competition Policy ................................................................................................................ 19

1. Hearings, Workshops, Studies, and Reports .............................................................................. 19

2. Advocacy ..................................................................................................................................... 21

3. Competition Policy “Research and Development” ...................................................................... 22

B. Consumer Protection............................................................................................................ 22

1. Workshops and Reports .............................................................................................................. 22

2. Advocacy ..................................................................................................................................... 24

3. Consumer and Business Education and Outreach ..................................................................... 25

Chapter 4: International Activities ............................................................................................. 27

A. Competition ........................................................................................................................... 28

1. Cooperation in Enforcement and Policy Development ............................................................... 28

2. Multilateral Competition Cooperation .......................................................................................... 28

3. Trade/Competition Fora .............................................................................................................. 29

B. Consumer Protection ............................................................................................................ 29

1. Cross-Border Fraud..................................................................................................................... 29

2. Other International Cooperation .................................................................................................. 30

3. Cross-Border Law Enforcement .................................................................................................. 31

C. International Technical Assistance ........................................................................................ 31

Conclusion: Honoring the FTC’s Past and Building Its Future ............................................... 32
Federal Trade Commission

A Positive Agenda for Consumers
Federal Trade Commission

The FTC Year in Review - 1

Introduction

This report offers the competition policy and

consumer protection communities an overview of the

activities of the Federal Trade Commission (FTC) in

the last twelve months. The report summarizes the

agency’s chief initiatives and describes the aims that

motivate the use of its resources. In many areas, the

discussion of matters begun in the past year also

indicates the agenda that the FTC will pursue in the

coming years.

A. Goals

The FTC acts to ensure that markets operate

efficiently to benefit consumers. The FTC’s twin

missions of competition and consumer protection

serve a common aim: to enhance consumer welfare.

The Commission’s competition mission promotes

free and open competitive markets, bringing

consumers lower prices, innovation, and choice

among products and services. The Commission’s

consumer protection mission fosters the exchange of

accurate, non-deceptive information, allowing

consumers to make informed choices in their

purchases. Thus, these missions complement each

other – accurate information in the marketplace

facilitates fair and robust competition – and maximize

benefits for consumers.

Five principles guide the development of the

Commission’s positive agenda for consumers. In

exercising its competition and consumer protection

authority, the FTC should:

• Promote competition and the unfettered

exchange of accurate, non-deceptive information

through strong enforcement and focused

advocacy;

• Stop conduct that most threatens consumer

welfare, such as horizontal agreements and

fraudulent and deceptive practices;

• Employ a systematic approach for identifying and

addressing serious misconduct, with special

attention to harmful behavior in key economic

sectors;

• Apply all elements of the agency’s distinctive

portfolio of policy instruments – prosecuting

cases, conducting studies, performing research,

holding hearings and workshops, engaging in

advocacy before other government bodies, and

educating businesses and consumers – to

address competition and consumer protection

issues; and

• Improve the institutions and processes by which

competition and consumer protection policies are

formulated and applied.

B. 2002-2003 Highlights

In the past year, the FTC used its unique

complement of enforcement and other policy

instruments to address critical consumer concerns in

several areas. Highlights include:

• Health Care: Prescription Drugs. Medical

therapy increasingly relies on new

pharmaceuticals as alternatives to more invasive

treatments, such as surgery. To help ensure that

anticompetitive practices do not injure consumers

by reducing the availability or increasing the price

of drugs, the FTC published a study examining

the frequency of anticompetitive abuses to block

market entry of lower-cost generic drugs;

provided comments to the Food and Drug

Administration (FDA) on the potential for

misusing procedures under the Hatch-Waxman

Amendments governing generic entry; and

brought law enforcement actions against

branded drug companies alleging improper

efforts to delay generic entry. Among other

significant matters, the Commission reached a

settlement with Bristol-Myers Squibb (BMS)

resolving charges that BMS abused the HatchWaxman process to obstruct the entry of generic

competition for two anti-cancer drugs and an

anti-anxiety agent.

• Energy: Gasoline. In an administrative

complaint filed last month, the FTC alleged that

Union Oil Company of California (Unocal)

improperly manipulated the process by which the

California Air Resources Board set regulations
Federal Trade Commission

A Positive Agenda for Consumers - 2

for phase 2 reformulated gasoline. The agency

contended that Unocal’s anticompetitive conduct

potentially could cost California consumers

hundreds of millions of dollars per year in higher

gasoline prices.

• Privacy: “Do Not Call.” During the past year

the Commission promulgated far-reaching

amendments to its Telemarketing Sales Rule.

Among the most important changes, the FTC

launched its National Do Not Call registry,

possibly the most significant consumer protection

initiative in recent years. The registry will be a

central database of telephone numbers of

consumers who choose not to receive

telemarketing calls. The agency will implement

the system by making it operational in specific

geographic areas over several months and

expanding the system until it covers the entire

nation. Once the registry is complete,

telemarketers will be required to pay a fee to gain

access to the registry and then to scrub their

telemarketing lists against the telephone

numbers in the database. This fall, consumers

who have placed their telephone numbers on the

registry will begin to receive fewer unwanted

telemarketing calls.

• Financial Practices: Deceptive Lending. Last

September, the Commission reached a

settlement with Associates First Capital

Corporation and Associates Corporation of North

American to resolve charges that the firms had

engaged in systematic and widespread deceptive

and abuse practices involving subprime lending.

Among other obligations, the companies agreed

to pay consumers $215 million in redress – the

largest consumer protection settlement in FTC

history.

• E-Commerce: A Unified Approach to

Maintaining Efficient Markets. The Internet’s

development has created a bounty of consumer

issues, requiring the FTC to draw on all of its

competition and consumer protection capabilities.

In the past year, the FTC formed an Internet Task

Force to analyze state regulations that may

restrict the entry of new Internet competitors and

to share its findings with bodies whose acts might

affect the development of Internet commerce.

The agency hosted a three-day public workshop

to examine potential anticompetitive barriers to ecommerce in various industries. The

Commission also brought significant law

enforcement actions that continue its historical

role of leading efforts to keep the Internet free

from fraud, deception, and abuse.

The chapters below describe these and other

initiatives more fully. These achievements attest to

the vision and dedication of the agency’s five

Commissioners and its exceptional staff.

Chapter 1

Competition Law Enforcement

The FTC’s competition mission seeks to promote

and protect rivalry in the marketplace to give

consumers the benefit of robust price competition

and the best possible array of product choices and

prices. While some of its work involves responding

to external developments, such as Hart-Scott-Rodino

premerger filings and consumer and business

complaints, the FTC nevertheless sets a positive

competition agenda systematically. In deciding how

to use its competition resources, the FTC considers

several factors, including:

• the type of conduct involved and the danger it

poses to consumer welfare;

• the economic sector involved and its importance

to consumer welfare;

• the selection of the best policy tool to correct

competitive problems; and

• the performance of competition policy research

and development to improve the agency’s

understanding of marketplace phenomena and

their impact on consumers.

Moreover, in carrying out its competition agenda,

the FTC seeks to work as efficiently as possible,
Federal Trade Commission

The FTC Year in Review - 3

both to stretch its resources and to

limit the burden imposed on private

parties.

The FTC’s competition mission

has flourished. In the past year, the

FTC approved 31 antitrust

enforcement actions, including two

Part 3 administrative enforcement

actions, four preliminary injunction

actions, one temporary restraining

order action, and 19 consent

agreements (ten merger cases and

nine nonmerger cases). In an

additional five instances, FTC

investigations led parties to abandon

proposed mergers. The agency also

pursued many non-enforcement

initiatives – studying various markets

and business practices, examining the intersection of

antitrust with other areas of law, giving the bar and

the business community guidance on compliance,

performing competition advocacy before other

government bodies, improving and streamlining FTC

procedures, and cooperating with competition

agencies worldwide.

A. Nonmerger Enforcement

The FTC’s nonmerger program has been

especially active in the past year. During the 1990s,

a tidal wave of mergers forced the FTC to divert

substantial resources from its nonmerger programs

to scrutinize proposed transactions. The decline in

recent years from the historically unprecedented

peaks of merger activity in 1999 and 2000 has

created opportunities for the Commission to reemphasize nonmerger antitrust work.

1. Bringing More Nonmerger Cases

 In 2001, the FTC began restoring balance

between merger and nonmerger matters to its

competition agenda. In 2001, the FTC staff opened

56 new nonmerger investigations, compared to 25 in

2000. In 2002, the staff opened 59 new nonmerger

investigations. (See Figure 1.) Guiding the FTC’s

renewed focus on nonmerger matters is a systematic

approach to case generation. Key areas of concern

have included standard setting, professional

associations, state boards, exceptions to and

immunities from antitrust laws, and health care and

prescription drugs. This approach has yielded a

number of notable cases.

Standard-Setting Cases. Most standard-setting

activities are legitimate and enhance the efficient

operation of markets. On occasion, however, the

standard setters, acting alone or in concert,

manipulate the process to anti-consumer ends.

Some standard setting involves quasi-governmental

entities, and the anticompetitive conduct may

resemble the abuse of governmental process. In the

past year, two standard-setting matters led to

administrative litigation.

• Rambus. Last June, the FTC filed an

administrative complaint charging that Rambus,

a participant in an electronics industry standardsetting organization, failed to disclose – in

violation of the organization’s rules – that it had a

patent and several pending patent applications

on technologies that eventually were adopted as

part of the industry standard. The standard at

issue involved a common form of computer

memory used in personal computers and other

electronic products. According to the complaint,

Relationship Between Merger and Nonmerger Enforcement

0

10

20

30

40

50

60

70

1995 1996 1997 1998 1999 2000 2001 2002

Investigations

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Transactions (In Trillions) 

Nonmerger Investigations

Value of HSR Transactions

Figure 1
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A Positive Agenda for Consumers - 4

the inclusion of Rambus’s patented technology in

the standard allowed it to gain millions of dollars

in royalty fees each year, and potentially more

than a billion dollars over the life of the patents,

all at the expense of consumers in the form of

higher prices.

• Unocal. As mentioned above, the FTC recently

issued an administrative complaint charging that

Unocal subverted the process by which the

California Air Resources Board (CARB) adopted

regulations on phase 2 reformulated gasoline.

The complaint alleges that Unocal made

materially false and misleading statements to

CARB and others, which led CARB unknowingly

to adopt regulations requiring the use of

technology covered by Unocal patents.

Professional Association Cases. The FTC

pursued significant investigations involving the rules

of conduct for various professional associations.

Agreements among professionals that limit

competition among themselves, often under the

guise of professional association by-laws or codes of

conduct, harm consumers much like “smoke-filled

room” conspiracies. The FTC recently accepted two

consent agreements from professional groups. The

American Institute for the Conservation of Historic

and Artistic Works settled charges that its

Commentaries to the Guidelines for Practice

condemn as unprofessional behavior the consistent

undercutting of local or regional market rates. The

National Academy of Arbitrators settled charges that

its Code of Professional Responsibility violated the

law in forbidding virtually all forms of advertising.

The FTC is pursuing other potentially harmful

restrictions imposed by professional associations,

trade associations, or boards, using means including

sophisticated “spider” software to search the Internet

for restrictions of this kind.

2. Focusing on Key Sectors of the Economy

As part of its proactive approach, the FTC

concentrates resources on anticompetitive conduct

in areas of the economy that have a major impact on

the consumer budget, including health care and

energy.

Health Care. Health-related products and

services account for more than 15 percent of the

U.S.’s gross domestic product, an increase of 25

percent since 1990. Without effective antitrust

enforcement, those figures could grow even higher.

In the 20 years since the Supreme Court affirmed the

FTC’s jurisdiction over health care professionals in

the American Medical Association case, the agency

has worked to remove artificial barriers to the

development of new and more efficient

arrangements for delivering and financing health

care services. The FTC’s major health care cases

have involved physicians and prescription drugs.

Physicians. In the past year, the FTC accepted

settlements with four groups of physicians for

allegedly colluding to raise consumers’ costs. The

number of physicians involved ranged from 41 in one

matter in the Denver area to more than 1,200 in a

case in Dallas-Fort Worth. The FTC’s orders will put

a stop to collusive conduct by these physicians that

harms employers, individual patients, and health

plans by depriving them of the benefits of

competition in the purchase of physician services.

Similar cases are currently under investigation.

Prescription Drugs. The growing cost of

prescription drugs is another significant concern for

consumers, employers, governments, and health

plans. A major focus of the FTC’s nonmerger

enforcement program has been anticompetitive

conduct to forestall generic entry. The agency has

challenged three types of conduct that

pharmaceutical firms allegedly have used to delay

generic competition: (1) agreements between a

brand-name drug manufacturer and a generic firm to

keep the generic off the market for a period of time,

(2) unilateral conduct by branded manufacturers to

delay generic entry, and (3) agreements among

generic drug manufacturers to divide the generic

market.
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The FTC Year in Review - 5

• Bristol-Myers Squibb (BMS). Last month, the

FTC reached a landmark consent agreement

with BMS, mentioned above, to resolve charges

that the company engaged in anticompetitive

acts over the past decade to obstruct the entry of

low-price generic competition for three of BMS’s

widely-used pharmaceutical products: two anticancer drugs, Taxol and Platinol, and the antianxiety agent, BuSpar. The complaint alleged

that, over the course of the past decade, BMS

engaged in various anticompetitive acts across

the three drug products.

According to the complaint, BMS abused

Food and Drug Administration (FDA) regulations

to obstruct generic competitors; misled the FDA

about the scope, validity, and enforceability of

patents to secure listing in the FDA’s Orange

Book; breached its duty of good faith and candor

with the Patent and Trademark Office (PTO)

while pursuing new patents claiming these drugs;

filed baseless patent infringement suits against

generic drug firms that sought FDA approval to

market lower-priced drugs; and paid a would-be

generic rival $72.5 million to abandon its legal

challenge to the validity of a BMS patent and to

stay out of the market until the patent expired.

Alleged to be central to BMS’s strategy was the

abuse of the regulatory scheme arising under

Hatch-Waxman Amendments, which govern the

FDA’s process for approving generics.

The FDA does not review whether patents

listed in the Orange Book actually meet the

statutory criteria. The FTC alleged that BMS

repeatedly violated Orange Book listing criteria to

trigger Hatch-Waxman’s provision for a 30-month

stay on FDA approval of generic drugs,

extending without justification its monopoly

power. The FTC’s proposed consent order

contains strong – and in some respects,

unprecedented – relief. The relief includes a

provision prohibiting BMS from triggering a 30-

month stay based on any patent that BMS lists in

the Orange Book after the filing of an application

to market a generic drug. This provision, by

itself, should protect consumers from the risk that

BMS will engage in many of the abuses set forth

in the Commission’s complaint.

The BMS case is the most recent in a series of

cases alleging anticompetitive conduct to delay the

introduction of lower-cost generic drugs. Others

include:

• Biovail. In October 2002, the Commission

approved a consent order resolving charges that

Biovail Corporation (Biovail) illegally acquired a

license to a patent and improperly listed the

patent in the Orange Book as claiming Biovail’s

high blood pressure drug, Tiazac. Under current

law, that action and the subsequent filing of a

lawsuit by Biovail against a potential generic

entrant triggered an automatic 30-month stay of

FDA approval of the generic competitor to the

branded product.

• Biovail/Elan. The Commission alleged that two

generic competitors, Biovail and Elan

Corporation, entered into an agreement that

provided substantial incentives for the two firms

not to compete in the markets for the 30 mg and

60 mg dosage forms of generic Adalat CC, an

anti-hypertension drug. The Commission

approved a consent order in August 2002

requiring the firms to terminate their agreement

and prohibiting them from entering similar

agreements in the future.

• Schering (Settlement with American Home

Products). An April 2002 settlement resolves

charges that American Home Products entered

into an agreement with Schering-Plough

Corporation to delay introduction of a generic

potassium chloride supplement in exchange for

millions of dollars. This action is related to the

matter involving Schering Plough and UpsherSmith, which remains in administrative litigation.

Energy. Antitrust enforcement helps ensure that

the markets for gasoline and other refined petroleum

products are, and remain, competitive. Although

most FTC energy-related enforcement actions have
Federal Trade Commission

A Positive Agenda for Consumers - 6

involved mergers, the nonmerger side also has been

active. Notably, the FTC’s recent administrative

complaint against Unocal, described above, alleges

that Unocal’s anticompetitive conduct potentially

could cost California consumers hundreds of millions

of dollars per year in higher gasoline prices.

3. Clarifying the Scope of Antitrust Coverage

The state action and Noerr-Pennington doctrines

immunize substantial areas of commerce from

competition’s beneficial discipline. While the core

principles underlying these antitrust doctrines are

valid, some lower court decisions have expanded

their reach well beyond the precepts the Supreme

Court originally articulated. The scope of these

immunities remains ambiguous and controversial in

some respects. Through study and analysis, and by

bringing carefully selected enforcement actions, the

FTC is seeking to clarify the scope of the state action

and Noerr-Pennington immunities.

State Action. The state action doctrine confers

antitrust immunity upon certain private conduct taken

pursuant to state policy. When first articulated in

Parker v. Brown, the doctrine rested on the notion

that Congress did not intend to limit the states’

sovereign regulatory power when it passed the

antitrust laws. Since then, however, some courts

have not considered whether the anticompetitive

conduct in question was intended to be protected by

the state legislature or was necessary to accomplish

the state’s aims. In other instances, courts have

granted broad immunity to quasi-official bodies,

including entities composed of market participants,

with only a tangential connection to the state. The

FTC is pursuing matters that should clarify the two

prongs of the state action defense: a “clear

articulation” of the state’s intent to displace

competition and “active supervision” of

anticompetitive private agreements.

• Indiana Household Movers and

Warehousemen, Inc. In a major attempt to

clarify the requirements for state action immunity,

the FTC last month announced a proposed

settlement with Indiana Household Movers and

Warehousemen, Inc. (IHM&W). The settlement

will bar IHM&W, which represents approximately

70 household goods movers doing business in

Indiana, from filing collective intrastate rate tariffs

with the Indiana’s Department of Revenue.

According to the Commission’s complaint, in

filing tariffs on its members’ behalf, IHM&W

illegally reduced competition for household goods

moving services within Indiana by setting and

maintaining collective rates to the detriment of

consumers. The FTC concluded that, because

Indiana did not actively supervise IHM&W’s price

fixing, the entity did not qualify for immunity. The

proposed settlement and the agency’s Analysis

to Aid Public Comment give the business

community significant guidance concerning the

state action doctrine’s scope and the standards

that must be met to immunize anticompetitive

conduct as an activity of the state.

Noerr. Noerr immunity shields certain efforts by

firms to petition government bodies to suppress

competition. Noerr, however, sometimes is invoked

to shield efforts to exclude rivals through the misuse

of governmental process. Such conduct is

particularly harmful to consumers and beyond

Noerr’s original scope. The FTC is developing cases

that focus on issues such as:

• Material misrepresentations to the

government. Noerr immunity rests on the

assumption that the government knowingly has

granted petitions for action having

anticompetitive effects. Conduct that deceives

the government should lack immunity. The

FTC’s Unocal complaint, mentioned above,

alleges that Unocal defrauded CARB into

adopting a standard for low emissions gasoline

covered by the company’s patents. Only after

passage of the new standard did Unocal disclose

the existence of its patent and demand royalties,

according to the complaint. Similarly, the FTC

complaint in the Bristol-Myers Squibb case

alleged, inter alia, that the firm misled the

government by taking inconsistent positions

before two agencies – obtaining a patent by
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The FTC Year in Review - 7

telling the PTO that its application claimed solely

the use of the metabolite of buspirone and not

the use of buspirone itself, while listing the patent

in the FDA’s Orange Book and affirming to the

FDA that the patent did claim a method of using

buspirone. (See Box 1.)

• Merely triggering ministerial actions. If Noerr

protects petitioning, the immunity is inappropriate

for conduct that merely triggers ministerial

government action, as the party has not truly

sought a discretionary decision. For example, a

pharmaceutical firm’s listing of a patent in the

FDA’s Orange Book, together with an

infringement suit against a generic producer,

would result in an automatic FDA stay on generic

entry under current law. Because the result is

automatic and therefore involves no government

“decision,” Noerr should not give the firm antitrust

immunity.

B. Merger Enforcement

Merger enforcement remains prominent,

although merger activity has fallen and amendments

to the Hart-Scott-Rodino (HSR) Act have lowered the

number of reported mergers. In the past year, the

FTC brought numerous merger enforcement actions,

including actions against firms in the key industries

of health care, energy, and food. The Commission

authorized the staff to seek preliminary injunctions to

block four mergers and authorized the staff to seek a

temporary restraining order to stop a merger in a fifth

case. The Commission also accepted consent

agreements in ten merger cases. FTC investigations

also resulted in the abandonment of five other

mergers.

1. Non-HSR Reportable Transactions

In the past year, the FTC investigated several

nonreportable mergers, including Meade/Tasco. In

addition, the Commission reached a consent

agreement with MSC.Software Corporation (MSC).

• Meade/Tasco. In May 2002, the Commission

authorized the staff to seek a temporary

restraining order and a preliminary injunction in

federal district court to pre-empt any attempt by

Meade Instruments Corporation, the leading

manufacturer of performance telescopes and

Schmidt-Cassegrain telescopes in the United

States, to buy assets of Tasco Holdings, Inc.’s

Celestron International (Celestron), the numbertwo performance telescope provider in the United

States and the only other supplier of SchmidtCassegrain telescopes. According to the

Commission, Meade’s purchase of Celestron

assets would have reduced competition in the

performance telescope market and created a

monopoly in the market for Schmidt-Cassegrain

telescopes. Meade had indicated its strong

interest in acquiring all or some of Celestron’s

assets, an acquisition that might not have been

reportable. The parties subsequently abandoned

the transaction.

• MSC. The FTC finalized a consent order to

resolve competitive concerns at issue in the MSC

case, which the Commission placed in

administrative litigation in 2001. Under the

settlement, MSC must divest at least one clone

copy of its current advanced Nastran software,

including the source code. The divestiture will be

through royalty-free, perpetual, non-exclusive

licenses to one or two acquirers. This case is

notable because it requires MSC to divest not

only the assets acquired but also additional 

assets that were needed to restore the lost

competition.

Pursuing a Pattern

 Acts on the fringe of possible Noerr protection

become more troublesome when taken in

combination. For example, the FTC’s recently settled

case against BMS relied on the alleged combination

of the firm’s inequitable conduct at the PTO, wrongful

Orange Book listings, sham litigation, and payments

for generics not to enter – all undertaken in an

attempt to obtain or maintain monopoly power.

Box 1
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A Positive Agenda for Consumers - 8

2. Mergers in Key Economic Sectors

A number of the FTC’s merger cases involved

economic sectors with major consumer impact.

Health Care. The FTC completed investigations

of several health-related merger cases in the past

year, including:

• Cytyc/Digene. An action challenging Cytyc

Corporation’s (Cytyc) proposed $420 million

purchase of Digene Corporation (Digene), in

which the FTC was prepared to allege that the

merger of these two manufacturers of

complementary cervical cancer screening tests

would allow the combined firm to use its market

power in one market to impede competition in

another market – liquid pap tests. The parties

abandoned the merger before the FTC staff filed

a motion in a federal district court to enjoin the

transaction. (See also Box 2.)

• Amgen/Immunex. A consent agreement

requiring divestiture of assets and licensing of

intellectual property rights in three

biopharmaceutical markets to cure

anticompetitive effects of Amgen Inc.’s $16 billion

acquisition of Immunex Corp.

• Baxter/Wyeth. A settlement in Baxter

International Inc.’s $316 million acquisition of

Wyeth Corporation to preserve competition in

markets for certain general anesthetics,

neuromuscular blocking agents, antiemetics, and

new injectable iron replacement therapies.

• Quest/Unilab. A consent agreement to resolve

concerns that Quest Diagnostics, Inc.’s $827

million acquisition of Unilab Corporation would

harm competition for clinical lab services in

Northern California.

In addition, the FTC in 2002 formed a Merger

Litigation Task Force, whose mission includes

investigating recently consummated hospital

mergers. The antitrust agencies have not fared well

in challenging proposed hospital mergers in recent

Examining Vertical Mergers

Although vertical mergers are less likely to have

anticompetitive effects than mergers between direct

rivals, anticompetitive vertical mergers can occur.

The FTC’s review of the proposed Cytyc/Digene and

Avant!/Synopsys vertical mergers show how different

facts lead to different outcomes.

Cytyc/Digene involved the merger of two

complementary cervical cancer screening tests.

Synopsys/Avant! combined two complementary

integrated circuit design software products. The FTC

voted to block the former and to close the latter

investigation. The theory of competitive harm in both

cases involved the combined firm’s incentive to use

its market power in one product to harm competition

in the complementary product. The method by which

harm would occur, the incentives of the firms to act

anticompetitively, and the potential impact on

competition and consumers differed significantly

between the cases, as did the FTC’s ability to forecast

the likelihood of future events.

The means by which the combined Cytyc firm

could harm rivals were well-defined. The theory was

that Digene would not support rival liquid pap test

suppliers in obtaining FDA approval necessary for use

of the Digene product in combination with the rivals’

products. In contrast, the Synopsys theory was that

the firm would make improvements to its logical

synthesis product that worked better with the Avant!

place-and-route product than with rival products.

Exactly what changes would occur was unclear.

Cytyc/Digene appeared to have strong incentives to

act anticompetitively, while Synopsys/Avant!’s

incentive to limit interoperability with its rivals (and

antagonize customers) was unclear.

Moreover, in Cytyc, TriPath (the other liquid pap

test competitor) and new entrants allegedly would be

substantially impeded without the merged firm’s

cooperation. In contrast, Avant! faced significant

competitors downstream who would not be

substantially impeded from competing. That those

competitors might lose sales to Avant! post-merger

did not show that the transaction would likely be

anticompetitive. Another difference between the

cases involved the timing of the anticompetitive

threat. In Cytyc, the alleged potential harm would

occur in the short term; industry participants

anticipated that TriPath could be severely threatened

immediately. In contrast, the competitive harm in

Synopsys was not anticipated to happen until

sometime in the future, if at all.

Potential efficiencies and customer views also

were important. Synopsys/Avant! had the strong

ability to create an improved, more integrated product.

Box 2
Federal Trade Commission

The FTC Year in Review - 9

years. The Task Force is screening consummated

mergers and, if it finds competitive problems, will

consider recommending enforcement actions. The

Task Force also is analyzing which litigation

strategies worked and which failed in the previous

hospital merger cases. The Task Force will report its

findings regarding consummated mergers that it

does not recommend be challenged.

Energy. In recent years, the FTC has

investigated numerous oil mergers and has analyzed

the competitive effects of these transactions in many

individual product/geographic market combinations.

When necessary, the agency has insisted on

remedial divestitures to cure potential harm to

competition. Matters in the last 12 months include

Conoco/Phillips, a $35 billion merger, for which the

Commission accepted a settlement requiring the

firms to divest two refineries and related marketing

assets, terminal facilities for light petroleum and

propane products, and certain natural gas gathering

assets.

Food. The food sector has immense

significance for American consumers. The FTC has

carefully monitored mergers at all levels of this

industry from production to retail sales.

• Wal-Mart/Supermercados Amigo. In the recent

acquisition of Amigo, the largest supermarket

chain in Puerto Rico, by Wal-Mart, the largest

general merchandiser in the world, the

Commission required the divestiture of four

Amigo stores where direct competition would be

eliminated between Wal-Mart club stores or a

supercenter and Amigo supermarkets. Although

in past cases the FTC has defined the relevant

product market as supermarkets, evidence here

indicated that Puerto Rico consumers use club

stores interchangeably with full-service

supermarkets and supercenters. The FTC

modified its analysis in this case to incorporate

an expanded market definition.

• Kroger/Raley’s. Kroger’s acquisition of 18

Raley’s supermarkets in the Las Vegas, Nevada

area last year also illustrates how the FTC

accounts for facts specific to each transaction.

The Commission authorized its staff to seek a

temporary restraining order. After further

analysis indicated that the merger was unlikely to

harm competition, the FTC closed the

investigation without requiring divestitures.

Although the FTC had taken enforcement action

in a Las Vegas supermarket merger in 1999, it

found that substantial new competition in the

market reduced Raley’s significance as a

competitive force.

• Nestle/Dreyer’s. The Commission last month

authorized the staff to seek a preliminary

injunction to block the $2.8 billion proposed

merger of Nestle’s and Dreyer’s ice cream

businesses. The FTC would allege that Nestle

and Dreyer’s along with Unilever, the marketer of

Ben & Jerry’s ice cream, account for about 98

percent of the sales of superpremium ice cream,

and that acquiring Dreyer’s would give Nestle

alone 60 percent of this market. This matter

highlights the importance of fact-intensive

product market analysis, including the use of

quantitative data, which in this case indicated the

existence of a distinct superpremium ice cream

market. The competitive importance of effective,

not readily duplicatable distribution systems also

was important in the staff’s analysis.

• Vlasic/Claussen. The FTC last fall authorized

the staff to seek a preliminary injunction to stop

the proposed combination of Claussen, the

dominant firm in the market for refrigerated

pickles, with Vlasic, its most significant

competitor in refrigerated pickles and also the

largest national brand of shelf-stable pickles.

The FTC’s complaint alleged that the merger

could reduce competition and raise prices in the

pickle market because Vlasic’s products acted as

price constraints on Claussen. The parties

abandoned the transaction after the

Commission’s action.
Federal Trade Commission

A Positive Agenda for Consumers - 10

Premerger Notification. As part of an overall

movement to make government more accessible

electronically, the FTC, working with the Department

of Justice (DOJ), has accelerated efforts to complete

an electronic system for filing HSR premerger

notifications. E-filing will reduce burdens for both

business and the government and create a valuable

database of information on mergers to inform future

policy deliberations. The FTC also has made

available to the public a searchable database of

thousands of letters memorializing advice from the

agency staff in response to inquiries about

interpretation of the HSR rules.

Streamlined Investigations. In 2002, the

Bureau of Competition held a series of public

workshops around the country on possible

improvements in the merger investigation process.

In December, the Bureau announced a new set of

Guidelines for Merger Investigations, which

incorporate the staff’s learning from those

workshops. The new measures include a host of

reforms – prompt release of investigational hearing

transcripts to testifying witnesses, simplification of

Second Requests responses, more information

about the standards used in evaluating Second

Request compliance, and easier submission of

electronic materials. The Bureau of Economics also

released a statement on best practices for empirical

analyses, encouraging those practices that facilitate

effective incorporation of empirical analyses, while

reducing the burden on parties in complying with

data requests. Further efforts to improve the merger

investigation process continue. Among other

reforms, the staff is completing work on a revised

Model Second Request, including industry-specific

variations.

Transparency of Decision Making. Greater

transparency about the types of conduct likely to be

challenged helps to serve the FTC’s objectives

through greater deterrence: understanding fully what

kinds of transactions or conduct the FTC is likely to

challenge – and why – facilitates antitrust counseling,

and prevents the proposal or implementation of

many anticompetitive mergers. In the past year, the

Other Mergers. Although health care, energy,

and food dominated agency merger investigation

resources during the past year, the FTC also

resolved through consent orders challenges to

proposed mergers in other sectors of the economy.

• Bayer AG/Aventis CropScience Holdings. In

Bayer’s $6.2 billion proposed acquisition of

Aventis CropScience, the Commission required

divestitures in markets for new generation

chemical insecticides, herbicides for spring

wheat, and other products.

• Shell Oil Company/Pennzoil-Quaker State

Company. In this $1.8 billion acquisition, the

FTC obtained a settlement requiring divestitures

to preserve competition in the U.S. and Canadian

market for a paraffinic base oil.

• Solvay/Ausimont. The FTC obtained a

settlement requiring divestitures to modify a

transaction that threatened competition in the

world market for a fluoropolymer used in a wide

variety of applications.

• Dainippon/Bayer. In a proposed merger

between Bayer’s high performance pigment

business and Dainippon Ink and Chemicals, the

Commission required the divestiture of

Dainippon’s perylene business to Ciba Speciality

Chemicals.

Bayer/Aventis and Solvay/Ausimont also raised

concerns in both the U.S. and Europe, and the FTC

worked closely with the European Commission’s

Competition Directorate and the merging parties to

obtain remedies satisfactory to both competition

authorities.

3. Improving Merger Review and Resolution

A major undertaking in the Bureaus of

Competition and Economics has been to streamline

the merger review process to make it faster, less

burdensome, more transparent, and more effective.
Federal Trade Commission

The FTC Year in Review - 11

FTC has sought new ways to expand public

awareness and understanding of its actions in ways

beyond the traditional adjudicative opinions, press

releases, and analyses to aid public comment on

consent agreements. In particular, the FTC has

provided more insight into Commission decisions not

to intervene by issuing statements in matters in

which the agency conducted a significant inquiry but

brought no enforcement action.

Notable examples of the FTC’s increased

commitment to transparency include the

Commission-issued statement in the investigation

into the competing proposed acquisitions of P & O

Princess Cruises, plc, the press release issued in the

Kroger/Raley’s matter, the statements accompanying

the decision not to prosecute in Synopsis/Avant!, and

the detailed responses to comments received in

response to the proposed settlement (now finalized)

in the WalMart/Supermercados Amigo acquisition.

These explanations follow recent FTC statements (in

2001) in the Phillips/Tosco and AmeriSource Health/

Bergen Brunswig merger investigations. (See also

Box 3.)

Remedies. Several of the merger best practices

workshops held last spring focused on issues

involved in fashioning remedies, especially in merger

cases. Topics about which the FTC sought the

public’s views included identifying which assets

should be divested and the terms of a proposed

divestiture; criteria for evaluating proposed buyers;

when “up front” divestiture is necessary or desirable;

use of crown jewels provisions; third-party rights;

pre-divestiture risks to competition; and divestiture

success. The workshops provided further insights

on the crafting of remedies in merger cases, which

are included in a recent paper on merger remedy

best practices.

C. Part 3 Administrative Process

A unique feature of the FTC’s antitrust law

enforcement portfolio is its ability to bring cases

before its administrative law judges. FTC

administrative adjudication offers the opportunity for

extensive analysis of complicated policy questions,

often involving cutting-edge issues, by a body with

specialized expertise in how markets work. The

resulting adjudicative opinions by the Commission,

based on a thorough record and full briefing on the

applicable legal issues, help to improve transparency

in the Commission’s decision-making and can give

considerable guidance to the bar and the business

community on applicable standards and enforcement

policy.

The FTC’s administrative docket expanded in the

past year, and the recent trend toward more

intensive use of this mechanism is expected to

continue. Since last April, the Commission heard

oral arguments in two competition cases, the staff

litigated one merger before an administrative law

judge, and the Commission voted out two new

administrative complaints.

• Schering-Plough. The Commission heard

arguments in Schering-Plough Corporation in

January after FTC complaint counsel appealed

the ALJ’s Initial Decision to dismiss the complaint

after a trial. The complaint alleges that Schering

illegally paid Upsher-Smith Laboratories and

American Home Products millions of dollars to

delay marketing generic versions of K-Dur 20, a

prescription potassium chloride supplement used

Efficiencies in Antitrust Review

In a speech in November 2002, Commissioner

Thomas Leary discussed the treatment of efficiencies

in antitrust law, providing a historical perspective on

how antitrust policy concerning efficiencies has

evolved over the past 25 years based on academic

learning, rather than fluctuating as a result of political

change. Commissioner Leary stated that the most

significant issues in current efficiency analysis are the

problems of quantifying and comparing predictions

about the offsetting effects of higher concentration

and greater efficiencies. He expressed concern that

significant efficiencies may tend to be ignored

because, while significant, they may be hard to

quantify, or even identify. He concluded that there

has been immense, continuing improvement by the

antitrust agencies in efficiencies analysis over the last

25 years and there currently is near-universal

agreement that efficiencies are important.

Box 3
Federal Trade Commission

A Positive Agenda for Consumers - 12

to treat patients with low blood potassium levels.

In the spring of 2002, the Commission settled its

charges against American Home Products.

• Three Tenors. The Commission heard oral

argument in November 2002 in Polygram

Holding, Inc. (The Three Tenors), which involves

allegations that music distribution companies

entered into an illegal agreement not to advertise

or discount earlier albums and video recordings

of concerts featuring the Three Tenors in an

effort to promote the the recording of their most

recent concert. The ALJ upheld the FTC’s

charges and ordered the respondents to cease

and desist from entering into any agreement on

price with wholesale producers or sellers of audio

or video products. The Commission settled

these charges with Warner Communications in

July 2001.

• Chicago Bridge. During the past year, the FTC

staff litigated this case, which involves a

consummated merger, before an ALJ. This case

involves the combination of two firms that

construct field-erected specialty industrial storage

tanks. A decision is expected later this year.

• Rambus. Last June, the FTC issued an

administrative complaint charging that Rambus,

a participant in an electronics industry standardssetting organization, failed to disclose – in

violation of the organization’s rules – that it had a

patent and several pending patent applications

for technologies that eventually were adopted as

part of the industry standard. The hearing is

expected to begin this spring.

• Unocal. Last month, the FTC issued an

administrative complaint charging that Unocal

subverted the process under which the California

Air Resources Board (CARB) adopted

regulations on phase 2 reformulated gasoline.

Chapter 2

Consumer Protection Law

Enforcement and Rulemaking

The FTC’s consumer protection mission

promotes the agency’s positive agenda by protecting

consumers against fraud, deception, and unfair

practices in the marketplace. The agency addresses

current issues of importance to consumers, including

identity theft, telemarketing fraud, Internet fraud, and

credit reporting. The FTC uses targeted law

enforcement and consumer and business education

to ensure that consumers have accurate information

for their purchasing decisions. More and more, the

FTC is acting to safeguard consumer privacy.

The FTC uses various policy tools to set priorities

for its consumer protection mission. The

Commission’s rich complaint databases inform the

agency about consumer experiences in the

marketplace; Internet surfs help single out the most

serious online fraud and deception; and workshops,

hearings, and conferences advance the public policy

debate. As the FTC tracks trends using state-of-theart technology, its fundamental mission remains the

same: to identify the most egregious fraud and

deception; to enforce the law acting alone and with

other government authorities; and to educate the

agency about emerging issues, industry about

complying with the law, and consumers about

protecting themselves against fraud and deception.

A. Fraud and Deception

1. Tools to Identify Fraud and Deception

Over the past year, the agency continued to

improve its methods for identifying fraud and

deception, thereby enhancing the implementation of

its positive agenda for consumers. The FTC added

thousands of consumer complaints to its internal

databases, reached more groups of consumers, and

recruited more law enforcement partners at home

and abroad. The agency continued to use electronic

tools extensively to ferret out fraud, especially in the

cyberworld. For example, the FTC teamed up with

law enforcement authorities nationwide to conduct
Federal Trade Commission

The FTC Year in Review - 13

Internet “surfs” to find the latest frauds that afflict

consumers.

Consumer Response Center (CRC). The CRC

responds to complaints and inquiries submitted by

consumers using the FTC’s toll-free number (1-877-

FTC-HELP), filing complaints online, and sending

letters. In fiscal year 2002, the CRC added 680,000

complaints and inquiries to the FTC’s database,

raising the total number of entries to 2.3 million.

Consumer Sentinel. Created by the FTC in

1997, Consumer Sentinel has grown to contain over

one million fraud complaints. It is now available

online to over 650 enforcement

agencies across the United States,

Canada, and Australia. Consumer

Sentinel is the richest source of

consumer fraud data available to law

enforcement agencies. (See Box 4.)

Consumers also can access publicly

available sections of this Web site and

find a wealth of statistics about fraud.

This past year, Consumer Sentinel

was one of 25 finalists to receive the

Excellence.Gov award, which

recognizes government programs that

demonstrate excellence in EGovernment innovation.

Identity Theft Tools. The FTC’s

toll-free number (1-877-ID-THEFT) is

the central clearinghouse for ID theft complaints and

provides a valuable source of consumer complaint

data. Calls to the FTC have increased, from more

than 100,000 calls in fiscal year 2001 to more than

185,000 in fiscal year 2002. The ID theft database

now holds more than 430,000 entries. Building on its

experience with Consumer Sentinel, the FTC began

making the data available to law enforcement

partners through an online database, and now more

than 540 law enforcement agencies access the data.

Working with the Secret Service, FTC investigators

develop preliminary investigative reports that are

referred to regional Financial Crimes Task Forces for

possible prosecution.

Spam Database. “Spam,” the popular name for

unsolicited commercial e-mail, is a growing problem

for consumers and businesses alike. Since 1998,

the FTC has maintained an electronic mailbox to

which Internet customers are encouraged to forward

spam (uce@ftc.gov). This database currently

receives an average of 100,000 new pieces of spam

daily. The total number of spam has grown from

700,000 in the first year to more than 30 million

today. (See Figure 2.) The database is searchable,

allowing the FTC staff to track trends and identify law

enforcement targets.

Top 10 Consumer Fraud Complaints

Calendar Year 2002

1. Identity Theft - 43%

2. Internet Auctions - 13%

3. Internet Services & Computer Complaints - 6%

4. Advance-Fee Loans & Credit Protection - 5%

5. Shop-at-Home/Catalog Sales - 5%

6. Foreign Money Offers - 4%

7. Prizes, Sweepstakes & Lotteries - 4%

8. Business Opportunity & Work-at-Home Plans - 3%

9. Telephone Services - 2%

10. Health Care - 2%

Box 4

Unsolicited Commercial E-mail Forwarded to Spam Database

0.7 1.3 1.7

17.4

35.1

4.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

1998 1999 2000 2001 2002 2003*

Calendar Year

In Millions

*Projected: Based on 6.2 million for January 1 to March 5, 2003.

Figure 2
Federal Trade Commission

A Positive Agenda for Consumers - 14

Military Sentinel. In September 2002, the FTC

and the Department of Defense (DOD) launched

Military Sentinel, the first online consumer complaint

database specifically tailored to the military

community’s unique needs. The system offers

members of the military and their families a way to

file complaints and gain immediate access to the

FTC’s large collection of educational materials and

information. It also gives DOD and law enforcement

officers secure access to the complaints entered.

Cross-Border Fraud Web Site. In September

2002, the FTC launched its redesigned

“econsumer.gov” Web site. The complaints filed

through econsumer.gov are accessible to the 17

member countries, which use this information to

decide whether to take further action. This past

January, the FTC unveiled a new Web site,

www.ftc.gov/crossborder, to help consumers spot,

stop, and avoid cross-border fraud. New features on

both Web sites make it easier for consumers to

navigate the site and file their complaints.

Internet Surfs. The law enforcement Internet

surf continues to be an essential tool for the FTC

and other agencies to identify online scams. In the

typical surf, the FTC first identifies a type of

deceptive practice that warrants investigation. The

FTC then recruits partners to search the Web for a

specified time using a protocol tailored to the surf’s

subject matter. Surfs achieve two goals: they

provide a window into online practices, and an

opportunity to alert new Web site providers – some

of whom are new entrepreneurs unaware of existing

laws – if their sites appear to violate the law. In the

last year, the agency conducted five surfs, focusing

on claims about unsubscribing from spam, e-tailer

holiday shopping, medical test kits, energy saving

products, and on the harvesting of e-mail addresses

for the purpose of sending spam to those addresses.

2. Law Enforcement

Drawing heavily on data obtained from Consumer

Sentinel and Internet surfs, the FTC promotes its

positive agenda for consumers by filing enforcement

actions in federal court to stop fraud and deception.

While numbers tell only part of the story, they are

impressive. Since April 2002, the FTC has brought

120 cases targeting fraud and deception. Of these,

66 cases resulted from eight sweeps conducted with

over 100 law enforcement partners. The eight

sweeps targeted Internet scams, telemarketing

fraud, work-at-home opportunities, deceptive weight

loss products, and advance-fee credit-related fraud.

In the past year, the FTC obtained more than 55

judgments ordering more than $650 million in

consumer redress. In addition, the FTC is awaiting

court approval of its settlement with The Associates

First Capital Corporation and its successor,

Citigroup, Inc., which requires the defendant to pay

$215 million to consumers to resolve allegations of

deceptive lending practices and other law violations.

(See Figure 3.) Key areas of consumer protection

litigation have included:

Deceptive Billing Practices. In FTC v. Access

Resource Services, the Commission charged

promoters of “Miss Cleo” psychic services with

deceptive advertising, billing, and collection

practices. The defendants stipulated to a court order

stopping all collection efforts on accounts or claims

from consumers who purchased or purportedly

purchased their pay-per-call or audiotext services

and forgiving an estimated $500 million in

outstanding consumer charges.

Netforce Regional Sweeps. Last year, the FTC

created a series of regional “Netforces” composed of

law enforcement agencies that participated in the

agency’s Internet Fraud Investigations Training

Program. This year, the FTC announced two

regional Netforce sweeps. In the Midwest sweep,

announced in July 2002, the FTC, the Federal

Bureau of Investigation (FBI), the U.S. Postal

Inspection Service (USPIS), the Securities and

Exchange Commission (SEC), and the Commodity

Futures Trading Commission (CFTC) joined ten state

attorneys general and 11 other state and local law

enforcement agencies to target scams on the

Internet. Together, these agencies brought 19 civil

and criminal law enforcement actions against

cyberscammers who have bilked tens of thousands
Federal Trade Commission

The FTC Year in Review - 15

of consumers out of millions of

dollars. The Northeast Netforce,

announced in November 2002, also

targeted various Internet frauds and

deceptive spamming practices. The

sweep’s lead case marked the first

time the FTC has attacked the

practice of deceptively gathering

sensitive financial information from

consumers via spam.

International Drivers Permit

Sweep. Operation License for

Trouble is a nationwide law

enforcement sweep targeting

spammers and Web site operators

who deceptively market fake

international driving permits (IDPs).

Authentic IDPs, which cost about $10, are intended

simply to help ease language barriers for those who

have a license and who want to drive while traveling

abroad. The sellers of fake IDPs falsely represent

that their alternative (which cost between $65 and

$375) can be used to drive legally in the United

States; to avoid sanctions for traffic violations; and as

an identification document. The FTC filed six federal

court actions against sellers of fake IDPs and

obtained preliminary injunctions in all six matters.

Deceptive Lending Practices. Some

unscrupulous lenders deceive consumers about loan

terms, rates, or fees. The results can be severe,

including the loss of a home. The FTC initiates

cases to root out deception and other unlawful

practices by lenders, especially in the subprime

market (i.e., borrowers whose credit ratings do not

qualify them for prime loans). Last year, the FTC

obtained settlements for nearly $300 million in

consumer redress for deceptive lending practices

and other law violations.

• The Associates/Citigroup. As noted above, the

FTC last September announced a settlement of

its litigation with The Associates and its

successor, Citigroup, Inc. The FTC’s complaint

charged that The Associates had deceptively

packed credit insurance into its loans,

misrepresented loan terms, and engaged in

violations of the Truth in Lending and fair credit

statutes. The settlement, which requires court

approval, compels the defendants to return

approximately $215 million to injured consumers.

• First Alliance Mortgage. The FTC finalized its

settlement with First Alliance Mortgage Co.

(FAMCO) and its principal, Brian Chisick, for the

defendants’ alleged deception in representing

loan terms and origination fees. The settlement

provides for injunctive relief as well as

approximately $60 million in consumer redress,

$20 million of which is to be contributed by the

principals.

• Mercantile Mortgage. The FTC entered into a

settlement with Mercantile Mortgage Co. for

allegedly deceiving consumers about loan terms,

including the existence of balloon payments. In

addition to requiring $250,000 in consumer

redress, the settlement gives hundreds of

consumers the opportunity to refinance loans at

low or no cost. This case marks the first time the

FTC has held a lender responsible for a

mortgage broker’s misconduct.

Significant Redress Orders

April 2002 - March 2003

Miss Cleo

(12/02) $505m

The 

Associates/Citigroup 

(9/02) $215m*

Other Matters

$65m 

FAMCO

(9/02) $60m

Skybiz.com

(1/03) $20m 

*pending court approval

Figure 3

$865 million
Federal Trade Commission

A Positive Agenda for Consumers - 16

Health and Safety Claims. Truthful and

substantiated health benefit claims in advertising can

be an important source of information for consumers.

For that reason, combating deceptive health claims,

both online and off, continues to be a major focus of

the FTC’s positive agenda. In the past year, the

agency sued in federal court marketers of dietary

supplements, cosmetics, devices, and services, all of

which purportedly improve the health or appearance

of consumers. Highlights include:

• Project ABsurd. In May 2002, the FTC filed

actions in federal court (still pending) to

challenge advertising claims for three popular

electronic abdominal (“abs”) exercise belts. In

three of the most frequently aired infomercials of

early 2002, the abs belt promoters allegedly

promised that users would get “six-pack” or

“washboard abs” without exercise. The

complaints allege false advertising for a variety of

claims, including that the belts were safe for all

users, could cause fat or weight loss, and could

eliminate cellulite.

• Rexall Sundown. In March 2003, Rexall

Sundown, which manufactures and markets a

variety of nutritional supplements and consumer

health products, agreed to pay up to $12 million

to resolve charges that it made unsubstantiated

claims about “Cellasene,” a purported cellulite

treatment product. The settlement also prohibits

unsubstantiated claims regarding cellulite, body

fat, or weight loss for drugs or dietary

supplements.

• Blue Stuff. In November 2002, the FTC

announced a $3 million settlement with Blue

Stuff, Inc. The FTC alleged that, through

nationally-televised infomercials and on the

Internet, the defendants made unsubstantiated

severe pain relief claims for two topical creams,

Blue Stuff and Super Blue Stuff. The settlement

also bars the defendants from making

unsubstantiated health claims about dietary

supplements and related products.

• Mark Nutritionals. In December 2002, a federal

court entered a preliminary injunction against

Mark Nutritionals, Inc. to enjoin its allegedly

deceptive ads for Body Solutions Evening Weight

Loss Formula and to prohibit unsubstantiated use

of the term “weight loss” in the product name.

The FTC’s complaint alleged that the defendants

falsely claimed that Evening Formula would

result in consumers losing as much as 20 to 40

pounds without the need to diet or exercise. The

injunctions also freeze the defendants’ assets to

preserve them for potential refunds for

consumers.

• FTC v. Dr. Clark Research Association. In

January of this year, the FTC filed a federal

complaint against a Switzerland-based company

and its U.S. counterpart, alleging that the

defendants made unsubstantiated efficacy claims

for various dietary supplements and devices

marketed on the Internet for the treatment and

cure of advanced and terminal cancers, AIDS,

and other serious diseases. The ad also said the

defendants’ products rendered surgery and

chemotherapy unnecessary for patients with

advanced cancer.

International Pyramid Scheme. In January

2002, the FTC obtained a permanent injunction in

FTC v. SkyBiz against an alleged massive

international pyramid scheme. The final settlement

includes $20 million in consumer redress which will

be distributed to both domestic and foreign victims.

The settlement also bars the principal individual

defendants for several years from multi-level

marketing.

Advance-Fee Credit Scheme. In FTC v. Assail,

the FTC alleged that the defendants operated an

advance-fee credit card scam through a network of

dozens of telemarketing boiler rooms, Canadian

front men, and outsourced fulfillment and customer

service centers. In this action filed in January 2003,

the FTC has identified and shut down the hub of this

fraudulent empire, which generated at least $100

million in fraudulent revenues.
Federal Trade Commission

The FTC Year in Review - 17

Deceptive Charitable Telemarketing. Two

months ago, the FTC announced settlements with

five individual defendants in FTC v. Mitchell Gold.

The FTC alleged that these defendants engaged in

deceptive telephone solicitations for nonprofit

organizations purporting to support police, fire

fighters, veterans, and sick children. According to

the FTC’s complaint, between 1995 and 1999 the

defendants raised more than $27 million, but

provided less than three percent of it to the

nonprofits. The settlement bans further fundraising

and further telemarketing

(while still allowing one

defendant to telemarket

only upon posting a bond).

Defendant Gold has

agreed to a $10 million

judgment. He was

indicted, pled guilty, and

sentenced to 96 months in

prison for his involvement

in this and another

fraudulent telemarketing

scheme.

Project Scofflaw.

The FTC created Project Scofflaw in 1996 to target

individuals who flout Commission orders and

continue to prey upon consumers. Since its

inception, Project Scofflaw has resulted in 33 civil

and/or criminal contempt actions; 54 years of

incarceration or home detention for 14 defendants;

and a total of $58 million in penalties, fines, and

redress. Individuals who have been sentenced this

past twelve months include:

• Robert Ferrara. Sentenced last October to 125

months in prison for criminal contempt and

ordered to pay over $100,000 in restitution to the

victims.

• Dennis W. Vaughan. Sentenced last August to

84 months in jail for criminal contempt of the final

order in FTC v. Parade of Toys, conspiracy to

commit wire fraud, and money laundering, and

ordered to pay over $13 million to the victims of

these criminal activities.

• Robert Febre. Sentenced last May to 14 months

for criminal contempt of the final order in FTC v.

Robert Febre for operating a new identity credit

repair scam in direct violation of the order.

B. Consumer Privacy

Consumer privacy is a key focus of the FTC’s

positive consumer protection agenda. As mentioned

above, the FTC just

launched its most farreaching privacy initiative

ever, the National Do Not

Call Registry. (See Box

5.) The registry and other

amendments to the

Telemarketing Sales Rule

will redefine the nature of

telemarketing for both

consumers and

businesses. These

amendments will protect

consumers’ privacy in

their homes by putting

them in charge of the number of telemarketing calls

they receive. The amendments also will give the

agency new tools in the fight against fraudulent and

deceptive telemarketing.

1. Law Enforcement

In the last year, the FTC continued its aggressive

enforcement of existing laws to protect consumer

privacy. Law enforcement actions ranged from a

settlement with Microsoft addressing the privacy and

security of its Passport single sign-on service, to

cases attacking deceptive spam, to the largest civil

penalties obtained in Children’s Online Privacy

cases.

Personal Information. In the past year, the FTC

completed two matters involving the protection of

personal information.

From the White House

“The President commends the Federal Trade

Commission for voting to create a national “Do Not

Call” registry to allow consumers the option to stop

unwanted telephone solicitations. Time with family is a

precious commodity, and families should be given the

tools they need to help prevent unwanted calls from

telemarketers. Today’s action by the FTC to approve

the creation of a national “Do Not Call” registry will

make it easier for consumers to stop getting the sales

calls they do not want.”

White House Press Secretary, December 18, 2002

Box 5
Federal Trade Commission

A Positive Agenda for Consumers - 18

• Microsoft. In December 2002, the FTC finalized

a consent agreement with Microsoft Corporation

resolving charges about the privacy of personal

information collected from consumers through its

Passport web services. The complaint alleged

that Microsoft misrepresented the security of

consumers’ personal information collected

through the Passport services, the amount of

information collected by the Passport system,

and the control that the Kids Passport program

provided parents over what information

participating Web sites could collect from their

children. The consent order bars any

misrepresentation of information practices in

connection with Passport and other similar

services and requires Microsoft to implement a

comprehensive information security program.

Microsoft also must have its security program

certified as meeting or exceeding the standards

in the consent order by an independent

professional every two years.

• Eli Lilly. In May 2002, the Commission accepted

a final consent order resolving charges that Eli

Lilly and Company unintentionally disclosed the

e-mail addresses of users of its Prozac.com and

Lilly.com Web sites by failing to take appropriate

steps to protect the confidentiality and security of

that information. The consent order requires Lilly

to establish a security program to protect

consumers’ personal information against

reasonably anticipated threats to its security,

confidentiality, or integrity.

Spam. The FTC has brought 47 law

enforcement actions targeting deceptive spam, half

of them since February 2002. The following matters

indicate the range of the Commission’s spam-related

enforcement measures. In BTV Industries, the FTC

took action against a promoter of spam that claimed

consumers had won a free Sony PlayStation 2 but

“hijacked” them when they responded to an adult

Internet site via a 900-number modem connection

that charged up to $3.99 a minute. Other spam

cases challenge senders of spam for deceptively

collecting sensitive financial information. In Global

Mortgage Funding, the FTC alleged that the

defendants used the logos of well-known financial

institutions (Radian Bank, Prudential, Fannie Mae) to

induce victims to disclose sensitive financial

information, such as income, mortgage balances,

rates, and type. This was the first spam case

challenging e-mail “spoofing” (forging the “from” or

“reply-to” lines in email to disguise the email’s origin),

deceptive “remove me” promises, and alleged

pretexting in violation of the Gramm-Leach-Bliley Act.

In 30 Minute Mortgage Inc., the FTC alleged similar

deceptive practices. Because the company

represented itself as a national mortgage broker, the

FTC also alleged another first – that the company

had violated the Gramm-Leach-Bliley Privacy Rule.

Children’s Privacy. Since April 2001, the FTC

has brought eight cases to enforce the Children’s

Online Privacy Rule, which requires Web sites to

obtain parental consent before collecting, using, or

disclosing personal information from children under

13. The companies under order agreed to pay civil

penalties totaling $360,000. Most recently, Mrs.

Fields Cookies and Hershey Foods Corporation

agreed to settle charges that their Web sites violated

the COPPA Rule by collecting personal information

from children without first obtaining parental consent.

Mrs. Fields will pay civil penalties of $100,000, and

Hershey Foods will pay civil penalties of $85,000.

The separate settlements, announced in February

2003, bar the companies from violating the Rule in

the future and represent the biggest COPPA

penalties awarded to date.

Students’ Privacy. Since October 2002, the

FTC has announced settlements with three

companies that allegedly collected extensive

personal information from millions of high school

students and then sold that information to

commercial marketers, despite promising that the

information would be shared only with colleges,

universities, and other education-related service

providers. The consent agreements bar these

companies from using student information for noneducation-related marketing purposes and prohibit

any further deceptive statements. Moreover, the
Federal Trade Commission

The FTC Year in Review - 19

consent agreements will require these companies to

disclose how the information will be used if they wish

to employ it for non-education-related marketing

purposes.

Credit Reporting and Debt Collection

Practices. The FTC brought two important privacyrelated credit cases last year. In D.C. Credit

Services, the company and its co-owner, David

Cohen, agreed to pay a $300,000 civil penalty as

part of a settlement of charges that they violated the

Fair Credit Reporting Act (FCRA) and the Fair Debt

Collection Practices Act (FDCPA). The consent

decree permanently bans defendant David Cohen

from engaging in debt collection activity. In Quicken

Loans, the FTC acted against a Michigan mortgage

lender for allegedly failing to comply with FCRA

provisions that require credit grantors who take

adverse action to notify the consumer when the

action is based wholly or partly on the consumer’s

credit report. The proposed consent agreement

would require Quicken to provide consumers with the

adverse action notices, as required by FCRA.

2. Rulemaking

Congress has directed the FTC to issue rules to

implement a number of statutes that are critical to

protecting the privacy of consumers. In the past

year, the FTC exercised this authority in two

particularly noteworthy instances.

Telemarketing Sales Rule. In addition to

creating the National Do Not Call Registry, the

Commission adopted other significant changes to the

TSR that give consumers added protection against

deceptive telemarketing and unwanted intrusions.

The Rule requires telemarketers to transmit

information to consumers’ caller ID systems to

increase accountability in telemarketing and assist in

law enforcement. It also will greatly reduce

abandoned calls that result in dead air. This change

will help alleviate the obvious concerns that arise

when a consumer picks up the phone and no one is

there. The TSR now will apply to for-profit

telemarketers who solicit contributions for charitable

organizations. These telemarketers will have to

disclose promptly the identity of the charity for which

they are calling and also state that they are soliciting

a contribution, providing consumers with the

information they need to determine whether to

continue with the call.

Gramm-Leach-Bliley Safeguards Rule. In

August 2002, the FTC finalized the Safeguards Rule

to implement the GLB’s security provisions and

establish standards for financial institutions to

maintain the security of customers’ financial

information. In October, the FTC issued a new

publication, Financial Institutions and Customer

Data: Complying with the Safeguards Rule, to help

businesses understand and comply with the Rule.

Chapter 3

Special Policy Instruments for

Assisting and Complementing Law

Enforcement

Congress has given the FTC a distinctive mix of

litigation and non-litigation policy instruments to

exercise its competition and consumer protection

responsibilities. Consequently, the Commission

performs numerous roles in addition to its law

enforcement activities. (See Figure 4.) In the past

year, the FTC has been especially active in holding

hearings and workshops to study specific sectors,

issuing reports of its findings, and providing

advocacy comments on competition issues. The

agency’s consumer protection work has featured

many business and consumer education projects.

A. Competition Policy

1. Hearings, Workshops, Studies, and

Reports

Although the Commission has a rich tradition of

performing research and preparing studies, the past

decade has witnessed a true renaissance of the

FTC’s role in building the foundation of knowledge

that supports the formulation of competition policy.

The past year has continued and extended recent

efforts along these lines.
Federal Trade Commission

A Positive Agenda for Consumers - 20

• Health Care. Last September, the FTC held a

workshop on competition law and policy in health

care, featuring presentations by academics,

providers, insurers, employers, patient groups,

and representatives of the FTC, DOJ, and state

attorneys general. The workshop, featuring five

panels and more than a dozen speakers, focused

on clinical integration, payor/provider issues,

group purchasing organizations, generics and

branded pharmaceuticals, and direct-toconsumer advertising of pharmaceuticals.

Participants presented a broad range of views to

the several hundred attendees. The workshop

made clear there is a range of views on the role

of enforcement agencies in improving the

delivery of health care services. The workshop

demonstrated the value of more extensive

examination of these complex and

interdependent issues, and the FTC and DOJ

have undertaken an extended set of health care

hearings. The hearings, which began in

February and will run through the fall of 2003, will

examine the state of the health care marketplace

and the role of antitrust and consumer protection

in satisfying the preferences of Americans for

high-quality, cost-effective health care.

• Intellectual Property. In November 2002, the

FTC and DOJ concluded 24 days of hearings

over nine months on Competition and Intellectual

Property Law and Policy in the Knowledge-Based

Economy. The hearings responded to the growth

of the knowledge-based economy, the increasing

role of dynamic, innovation-based considerations

in antitrust policy, and the importance of

managing the intersection of intellectual property

and competition law to realize their common goal

of promoting innovation. Later this year, the FTC

and DOJ will issue a report that incorporates the

insights of business persons, consumer

advocates, inventors, practitioners, and

academics who participated in the hearings, as

well as other research.

• E-Commerce. The Internet boom, heralded as

the next industrial revolution, has great potential

as an engine for commerce and offers

consumers enormous freedom. Contrary to the

perception of the Internet as an almost unfettered

free market, the extension of new or existing

state regulations to the Internet may limit cost

savings and convenience severely without

providing offsetting benefits. The FTC’s Internet

Task Force has been analyzing state regulations

that may have pro-consumer or pro-competition

rationales, but that nevertheless may

restrict the entry of new Internet

competitors. It also is examining

barriers that arise when private parties

employ potentially anticompetitive

tactics, such as when suppliers or

dealers apply collective pressure to

limit online sales. This work has

resulted in several investigations into

possible anticompetitive curbs on ecommerce, and the Task Force has

taken the lead in drafting FTC staff

comments on several state

regulations that affect electronic

commerce. In October, the FTC

hosted a three-day public workshop

examining potential barriers to ecommerce in ten different industries.

Significance of Non-Enforcement Competition Activities

Advocacy

Public

Education

Coordination with other 

Authorities

Continuing Learning

(conferences, hearings, 

research projects, etc.)

Process

Improvements

Policy makers more 

informed about market 

principles

Understanding law and 

policy facilitates more 

compliance

More Effective 

Enforcement

More Efficient 

Enforcement

Reduced Burden

on the Public

More Competitive 

Economy / Improved 

Consumer Welfare

ACTIVITY INTERMEDIATE RESULT ULTIMATE OUTCOME

Figure 4
Federal Trade Commission

The FTC Year in Review - 21

• Prescription Drugs. In July 2002, the FTC

released a report, Generic Drug Entry Prior to

Patent Expiration, focusing on certain aspects of

generic drug competition under the HatchWaxman Amendments. The study examined

whether drug firm conduct that the FTC has

challenged in several enforcement actions

represents a typical pattern of behavior or only a

few isolated instances. The study also examined

more broadly how the process that HatchWaxman established to permit generic entry

before the expiration of a brand-name drug

product’s patents has worked between 1992 and

2000. The report suggested certain changes to

Hatch-Waxman’s attempt to balance competition

and intellectual property law, including permitting

only one automatic 30-day stay per drug product

for each Abbreviated New Drug Application

(ANDA) to resolve infringement disputes over

patents listed in the Orange Book prior to the

filing date of the generic applicant’s ANDA.

President Bush cited the FTC report last October

when he announced regulatory measures to

foster competition in the pharmaceutical industry.

(See Box 6.)

• Energy. The FTC is pursuing a number of

projects involving the petroleum industry. First, in

light of increased public concern about the level

and volatility of gasoline prices, the agency is

studying the main factors that may affect the

level and volatility of prices of refined petroleum

products and soon will publish findings from two

public conferences. Second, a major revision of

the 1982 and 1989 FTC Bureau of Economics

staff reports on oil mergers is underway, as is an

empirical study of the effects of various oil

mergers of the past decade. Third, the agency

continues to monitor wholesale and retail prices

of gasoline, by far, the largest single refinery

product. The Bureau of Economics staff inspects

wholesale gasoline prices for 20 cities and retail

gasoline prices for 360 cities across the country

and seeks explanations of any pricing anomalies.

2. Advocacy

When the FTC cannot use its enforcement

authority to challenge competitive restraints, it seeks

to persuade policymakers of the benefits of

competition. Major advocacy efforts include:

• Professions. In many licensed professions,

regulatory bodies and groups of practitioners

regularly attempt to restrict advertising and

prevent competition from those outside the

profession. These restrictions often result in

higher prices, less information, and fewer choices

for consumers. The FTC and DOJ recently

submitted a joint letter to the American Bar

Association urging it to narrow substantially or

reject a proposed model definition of the practice

of law, which likely would reduce or eliminate

competition from non-lawyers in providing certain

services. Previously, the FTC submitted a joint

letter with the Antitrust Division urging the North

Carolina State Bar to approve a proposed opinion

that explicitly would permit non-lawyers to

compete in real estate and mortgage closing

services, and in January, the North Carolina State

Bar adopted an opinion permitting non-lawyers to

obtain signatures on closing documents and

receive and disburse funds for real estate

transactions. The FTC and DOJ also recently

FTC Generic Drug Study

Has Prominent Role

“For more than a year, the Federal Trade

Commission has investigated delays and abuses in

the process of bringing generic drugs to the market. I

have reviewed the FTC findings and I am taking

immediate action to ensure that lower cost, effective

generic drugs become available to Americans without

any improper delays.

By this action, we will reduce the cost of

prescription drugs in America by billions of dollars and

ease a financial burden for many citizens, especially

our seniors ...”

– Remarks by President George W. Bush in the

White House Rose Garden, Monday, October 21,

2002

Box 6
Federal Trade Commission

A Positive Agenda for Consumers - 22

provided comments to the Georgia State Bar

Association addressing concerns similar to those

raised in the North Carolina proceeding. Other

advocacy work involving professions during the

past year included comments to the Alabama

Supreme Court urging care in fashioning attorney

advertising rules only to prevent unfair or

deceptive acts or practices and an amicus brief in

a private case seeking to overturn an Oklahoma

law that permits only funeral directors to sell

caskets.

• Energy. The FTC undertook three noteworthy

advocacy initiatives involving energy. First, the

Commission authorized its staff to provide

comments to the Environmental Protection

Agency in connection with its study of the impact

of different environmental regulations on product

distribution and, ultimately, on supply and price of

products in various markets. Second, at the

invitation of state officials, the FTC staff

submitted comments on Hawaii’s law establishing

gasoline price controls and on proposed New

York legislation that would have prohibited “below

cost” gasoline pricing and would have banned

construction of new company-operated gas

stations within a certain distance of existing

stations operated by franchised dealers. Third,

the FTC staff addressed competition issues

raised by the deregulation of electricity in four

separate comments filed with the Federal Energy

Regulatory Commission.

• Connecticut Board of Examiners for

Opticians. In March 2002, the FTC filed a staff

comment before the Connecticut Board of

Examiners for Opticians, which currently is

considering whether to require stand-alone

sellers of replacement contacts to obtain

Connecticut optician and optical establishment

licenses. Working with the Connecticut Attorney

General’s Office, the FTC staff comment argued

that such a requirement “would likely increase

consumer costs while producing no offsetting

health benefits,” and that such a requirement in

fact “could harm public health by raising the cost

of replacement contact lenses, inducing

consumers to replace the lenses less frequently

than doctors recommend.” In June 2002, the

FTC staff testified before the Board to discuss its

comment.

3. Competition Policy “Research and

Development”

As the Supreme Court noted in the 1997 Khan

case, Congress intended the antitrust laws to be

evolutionary, “adapting to changed circumstances

and the lessons of accumulated experience.” The

rapid changes in many markets require competition

policymakers to conduct competition policy “research

and development” to analyze these trends and derive

new competitive strategies. Many activities

described above, such as the generic drug study, are

important examples of the FTC’s investment in

competition policy R&D. These initiatives are part of

a larger set of R&D projects the FTC has undertaken

to inform its decision making on antitrust issues. For

example, to assess the efficacy of merger

enforcement, the FTC is analyzing the effects of past

enforcement actions, including non-enforcement

decisions, and industry and firm-specific conditions

relating to the potential for both procompetitive and

anticompetitive effects.

In December, the Bureau of Economics held a

Roundtable discussion assembling experts on

mergers from economics departments, business

schools, M&A consulting firms, antitrust law, and

business. The goals included a better understanding

of the M&A process in its entirety and obtaining a

broader perspective on factors that make mergers

succeed or fail. BE economists also published

papers on topics such as the use of econometric

evidence in merger investigations and the

development of various policy issues under the

Merger Guidelines.

B. Consumer Protection

1. Workshops and Reports

In addition to using electronic databases and

Web sites to track consumer fraud, the FTC holds

hearings and workshops to study marketplace

developments and to learn from the experiences of
Federal Trade Commission

The FTC Year in Review - 23

consumers, business persons, representatives from

other government agencies, academics, and a host

of other experts in various fields. The agency also

conducts numerous studies of marketplace issues

affecting consumers and publishes its findings in

reports.

• Weight-Loss Advertising Report and

Workshop. Last September, the FTC released

its staff report, Weight-Loss Advertising: An

Analysis of Current Trends, which analyzed 300

weight-loss ads that ran in 2001. The report

concluded that the use of false or misleading

claims is rampant in weight-loss product

advertising. To prepare the report, the FTC

worked with the Partnership for Healthy Weight

Management, a coalition of representatives from

science, academia, the health care profession,

government, commercial enterprises, and other

organizations whose mission is to promote sound

guidance for achieving and maintaining a healthy

weight. To follow up, the FTC held a workshop in

November 2002 in which participants – scientific

and medical experts, industry members, and

representatives of media organizations and

outlets – discussed the current science of weight

loss, deceptive weight-loss advertising, and

possible ways for the media to screen weightloss ads more effectively. (See Box 7.)

• Cross-Border Fraud Workshop. In February

2003, the FTC held a public workshop on Public/

Private Partnerships to Combat Cross-Border

Fraud. Participants from Australia, Canada,

Germany, the United Kingdom, the Organization

for Economic Cooperation and Development

(OECD), and the International Consumer

Protection and Enforcement Network (ICPEN)

joined American law enforcement officials,

business representatives, and consumer

advocates to discuss how the private and public

sectors can cooperate to choke the growth of

cross-border fraud. The workshop generated

several proposals for the private and public

sectors to work together to identify, stop, and

bring effective enforcement actions against

cross-border fraud operators and produced ideas

for other measures that the private sector can

take to help FTC combat cross-border fraud.

• Advertising Nutrition & Health: Evidence

from Food Advertising 1977-1997. The Bureau

of Economics staff produced a report that

reviews data on the types of nutrition and health

claims made in over 11,000 advertisements taken

from a sample of eight leading magazines

between 1977 and 1997. The study documents

an increased focus on diet and health advertising

in the late 1980s and reviews how nutritionrelated claims in advertising changed before and

after the passage of the Nutrition, Labeling and

Education Act of 1990 (NLEA). The results for

heart disease and serum cholesterol claims are

illustrative. At their peak in 1989, heart disease

and serum cholesterol claims were made in 8.2

percent of advertisements, before dropping

substantially in the early 1990s following the

NLEA’s passage. By 1997, heart disease and

serum cholesterol claims had again risen

somewhat, but still well below one-half of 1989

levels. (See Figure 5.) Together with other

research on consumer food choices, this study

should contribute to more informed policy

choices on advertising and labeling policy.

The Need for a

Broad-Based Approach

The FTC is continuing to discuss diet-ad issues

with media representatives, and others, and plans to

release another staff report and guidance to assist

publishers and advertisers in avoiding false weight

loss claims. Commissioner Sheila Anthony has been

a leader on this issue, and has actively encouraged

the media to screen deceptive weight loss ads. In an

opinion piece in Advertising Age, Commissioner

Anthony commented that the Commission cannot

solve this problem alone and made clear that the

industry and the media have a significant role to play.

Sheila Anthony, “Let’s clean up the diet-ad mess,”

Advertising Age, Feb. 3, 2003, at 18.

Box 7
Federal Trade Commission

A Positive Agenda for Consumers - 24

• Information Security Workshop. In May 2002,

the FTC held a two-day workshop to explore the

myriad issues raised by information security. The

workshop discussion highlighted one very

important and timely point: that good information

security is everyone’s responsibility –

government, industry, and individual consumers.

Workshop participants emphasized the

importance of the FTC playing its traditional role

to educate consumers and businesses and help

create a “culture of security.”

• Marketing Violent Entertainment to Children.

In June 2002, the FTC released its third follow-up

report to its September 2000 report, Marketing

Violent Entertainment to Children: A Review of

Self-Regulation and Industry Practices in the

Motion Picture, Music Recording & Electronic

Game Industries. The June report found that the

movie and electronic game industries were

routinely including rating information in

advertising, and that the music industry was now

including a parental advisory in many of its ads.

The review of advertising placements showed

that, unlike the movie and electronic games

industries, the music industry had not

substantially altered its marketing practices since

the first FTC report. The

Commission plans to release a

fourth follow-up report.

• Mortgage Roundtable. Last

October, the Bureau of Economics

hosted a research roundtable,

Economic Perspectives on the

Home Mortgage Market, with

some of the nation’s leading

consumer mortgage experts.

Discussion focused on the likely

sources of problems in this

market, the strength of the

empirical support for key theories,

and various regulatory and

enforcement options for improving

market performance.

2. Advocacy

Advocacy also was an important part of the

FTC’s consumer protection mission during 2002.

The agency lends its expertise to other government

agencies and intervenes in court proceedings when

important issues affecting consumers are at stake.

Class Actions. Since January 2002, the FTC

has intervened or appeared as an amicus curiae in

three private class actions where the agency

concluded that a proposed settlement was flawed –

for example, when consumers would receive relief of

little or no value or when class counsel would receive

unreasonable fees. In Erikson v. Ameritech, the

FTC, several state attorneys general, and other

objecting parties convinced the judge to reject a

settlement that would have provided relief of little or

no value to consumers (and potentially harmful to

many consumers) but would have provided class

counsel with fees of about $1 million. In Carter v.

ICR Services, the FTC succeeded in getting the

court to improve the claims process, but the court

affirmed the attorneys’ fees over the agency’s

objection. In First Databank Antitrust Litigation,

which followed an existing FTC enforcement action,

the court cut class counsel’s fee in half in response

to the agency’s brief.

Heart and Serum Cholesterol Ad Claims in Food Advertising

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97

Calendar Year

Percentage of Food Ads

Figure 5
Federal Trade Commission

The FTC Year in Review - 25

FDA Regulation and the First Amendment.

Complementing the agency’s own efforts to ensure

that consumers have access to truthful information,

the FTC staff responded to the Food and Drug

Administration’s request for comment on whether its

regulations and practices continue to comply with the

First Amendment in light of recent judicial decisions.

The comment sets out the FTC’s enforcement

approach as a model that reflects the principles

embodied in the First Amendment’s commercial

speech doctrine. The comment also discussed

empirical research findings, which suggested that

enforcement approaches that seek to maximize the

free flow of truthful commercial speech promote

consumer welfare as well as survive constitutional

challenge.

FDA Trans Fat Labeling. The FTC staff

continued efforts to ensure that consumers get

accurate and useful health information by filing a

comment on the FDA’s proposed rule to govern trans

fatty acid (trans fat) information in food labeling. In

2000, the FDA proposed to amend the Nutrition

Facts panel on food labels to include trans fat

information, and the FTC staff comment supported

that change, noting that truthful information is an

important factor for consumers seeking preventive

health care. In 2002, the FDA reopened the

comment period to allow feedback on a new

proposal to require an asterisk on the label

information on trans fat directing consumers to a

footnote on the Nutrition Facts panel saying “Intake

of trans fat should be as low as possible.” The FTC

staff comment again supported the FDA’s efforts to

allow more truthful information about fats in food

labeling but also expressed concern that the footnote

may suggest to consumers that there is a significant

qualitative difference between saturated fats and

trans fats, a suggestion that appears inconsistent

with current dietary advice. Accordingly, the staff

recommended that FDA conduct consumer research

on the proposed footnote.

HUD Mortgage Disclosure Rules. In October

2002, the FTC staff filed a comment on a proposed

rule of the Department of Housing and Urban

Development (HUD) to simplify the process of

obtaining home mortgages and reduce settlement

costs for consumers. The comment noted that HUD’s

general approach in these proposed changes is to

require brokers and lenders to give consumers more

information about the mortgage process or to

provide information in a revised format. The FTC

staff urged HUD to consider carefully whether the

information disclosed would be useful to consumers

and whether it would be disclosed in an easily

understood way.

3. Consumer and Business Education and

Outreach

Consumer and business education continued to

be a significant part of the FTC’s positive agenda.

Through publications, Web sites, media outreach,

partnerships, and exhibits, the agency reached

millions of consumers and business people. From

April 2002 through February 2003, the FTC

distributed more than 6.2 million publications in

English and more than 126,000 in Spanish. The

FTC logged more than 11.8 million accesses to the

English-language publications on its Web sites and

more than 207,000 accesses to the Spanishlanguage publications on its sites. The FTC

distributed articles that were featured in literally

thousands of community newspapers and reached

more than 236 million readers in fiscal year 2002.

The national media featured stories about consumer

fraud and identity theft on a daily basis, citing the

FTC’s plain language, practical tips, as well as its

Helpline numbers (1-877-FTC-HELP and 1-877-IDTHEFT) and Web site addresses.

Highlights of the past year include:

Identity Theft. Continuing a program initiated in

March 2002, the FTC, the U.S. Secret Service, and

DOJ conducted a series of training seminars for local

and state law enforcement officers. To date, the FTC

and its partners have conducted six regional training

sessions for more than 600 law enforcement officers.

The FTC also has conducted outreach to the

business community on identity theft. In April 2002,

the FTC held a roundtable discussion with

representatives from universities, health care
Federal Trade Commission

A Positive Agenda for Consumers - 26

providers, creditors, and banks to discuss the steps

they could take to reduce the likelihood of ID theft in

their institutions, and steps that can be taken

following a compromise of personally identifying

information to mitigate the victim’s loss and

inconvenience. The second phase of this effort will

include a forthcoming business guide on ID theft. To

date, the FTC has distributed more than 1,665 CDs

of the booklet Identity Theft: When Bad Things

Happen to Your Good Name to public and private

sector organizations. The agency produced a video

news release on ID Theft, which was broadcast more

than 113 times on 60 stations, representing an

audience of more than 5.3 million; updated the ID

Theft and Military Sentinel Web sites to provide

customized information to 530,000 TriWest

customers whose personal information was stolen in

December 2002; and co-produced Identity Theft:

Reduce Your Risk with American Express. (See also

Figure 6.)

Information Security. In September 2002, the

Commission launched a consumer and business

education initiative for information security, featuring

Dewie, the e-turtle, and the FTC’s consumer and

business publications (in English and Spanish) on

security, e-commerce, spam, online privacy,

children’s online privacy, and identity theft. A

dedicated Web site, www.ftc.gov/infosecurity, links to

FTC press releases on security and other

security-related Web sites,

and includes a section

for children.

The site has

registered

100,000 hits

through the end

of 2002, placing it

in the top 15 FTC pages

visited.

Green Lights & Red Flags: FTC Rules of the

Road for Advertisers. Offering businesses practical

guidance on FTC policies is an important priority.

One key initiative, begun in 2001, is on federal truthin-advertising standards. The agency has sponsored

seminars in the San Francisco area, Cleveland, New

York, and Chicago. Additional seminars have been

conducted in New York, in conjunction with the Better

Business Bureau of Metropolitan New York and the

Association of the Bar of the City of New York, and in

Chicago, in cooperation with the Electronic Retailing

Association, the Promotion Marketing Association,

and the Better Business Bureau of Chicago and

Northern Illinois.

National Consumer Protection

Week. This year, the FTC

coordinated the fifth annual event, this

year on the theme of information

security, with a consortium of public

and private-sector organizations.

(See Box 8.) A dedicated Web site

allowed consumers and businesses to

access an Outreach Toolkit (readymade press releases, public service

messages, a letter to the editor, fullcolor Dewie poster, and banner ads

and buttons.) The site logged more

than 14,000 accesses at the end of

NCPW, making it among the most

popular sites on www.consumer.gov

that month.

Complaints Entered Into the Identity Theft Data Clearinghouse

1999 2000 2001 2002

Cumulative Complaints:

280,580

Total: 31,117

Total: 86,197

Total: 161,886

Total: 1,380

Since February 2001, complaint data also have been provided to the Clearinghouse by the Social Security Administration-Office of Inspector General. 

Figure 6
Federal Trade Commission

The FTC Year in Review - 27

Spam Harvest. The FTC released a new

publication to educate consumers and businesses on

how e-mail addresses are harvested and how to

reduce the amount of spam received.

Gramm-Leach-Bliley. The FTC released four

publications for businesses to help them understand

and comply with their obligations under GrammLeach-Bliley: How to Comply with the Privacy of

Consumer Financial Information Rule of the GrammLeach-Bliley Act; In Brief: The Financial Privacy

Requirements of the Gramm-Leach-Bliley Act;

Financial Institutions and Customer Data: Complying

with the Safeguards Rule; Getting Noticed: Writing

Effective Financial Privacy Notices.

COPPA. To assist the operators of children’s

Web sites in drafting COPPA-compliant privacy

policies, the FTC issued a new publication, You, Your

Privacy Policy and COPPA, in April 2002. The

agency also announced the results of an April 2001

COPPA compliance survey reviewing information

collection practices on 144 children’s Web sites. The

2001 survey follows up on an earlier 1998 survey

and indicates that much progress has been made

since the COPPA Rule has gone into effect.

Hispanic Outreach. Last October, the FTC

posted a Consumer Complaint form in Spanish on its

Web site, which already has yielded more than 2,000

complaints from Spanish-speaking consumers, and

translated some 42 publications so far. The FTC

also is managing an aggressive media outreach

campaign that has resulted in staff interviews in

major national dailies, major market dailies, and

magazines, national radio and television, and local

TV and radio stations.

Do Not Call/Telemarketing Sales Rule. The

FTC created a new website at www.ftc.gov/donotcall,

which logged a record 127,689 hits in December

(over 71,000 in its first day), and created several

brochures for consumers and businesses about the

provisions of the amended Rule.

Cross-Border Fraud. The FTC created a micro

Web site – www.ftc.gov/crossborder – featuring

information on the recent workshop that dealt with

public/private partnerships to fight cross-border

fraud.

Alaska Native Art. The FTC has published and

distributed over 120,000 copies of a brochure,

Alaskan Native Art, in cooperation with the Alaska

State Council on the Arts, U.S. Department of

Interior’s Indian Arts and Crafts Board, and the

Alaska Attorney General’s Office to help consumers

identify genuine Alaskan native art. The FTC also

produced and distributed over 100,000 informational

postcards featuring Alaskan Native art and consumer

tips.

Chapter 4

International Activities

The FTC has became increasingly involved with

international activities. Since 1990, the international

focus has expanded with participation in a growing

number of bilateral and multinational cooperation

initiatives and with efforts – which continue today – to

assist new democracies in developing competition

and consumer protection agencies in new marketA Culture of Security

A major forum for the development of government

policy concerning information security is Organization

for Economic Cooperation and Development. In

December 2001, Commissioner Orson Swindle

became head of the U.S. delegation to the OECD

Experts Group for Review of the 1992 OECD

Guidelines for the Security of Information Systems.

This Expert Group drafted and negotiated a revised

set of OECD Security Guidelines in a matter of

months, and the OECD issued the revised guidelines

in July 2002. Commissioner Swindle also has

addressed privacy and security issues at the OECD in

Paris, the Global Business Dialogue on Electronic

Commerce in Brussels, and the International

Conference of Data Protection Commissioners in

Cardiff. He also delivered a keynote address at the

OECD-APEC Forum on the Digital Economy in

Honolulu held in January 2003.

Box 8
Federal Trade Commission

A Positive Agenda for Consumers - 28

based economies. The growth of communications

media and electronic commerce present new

challenges – fraud and deception now know no

borders. The FTC works more and more with other

nations to protect American consumers who can be

harmed by both anticompetitive conduct and frauds

that are perpetrated beyond the water’s edge.

A. Competition

1. Cooperation in Enforcement and Policy

Development

Cooperation with competition agencies of other

jurisdictions is a key component of an effective

enforcement program. The FTC has broadened and

deepened its cooperation with agencies around the

world on individual cases and on policy issues. The

FTC’s relationships with counterparts in Brussels,

Ottawa, and other capitals remain active as the

agencies’ staffs continue to work closely on

investigations of mutual interest. For example:

• Bayer/Aventis CropScience. As noted above,

the FTC, aided by the parties’ confidentiality

waivers, worked with the staffs of the European

Commission (EC) and Canadian Competition

Bureau to analyze the likely effects of the merger

on a number of crop protection markets and to

effect remedies tailored to the concerns in each

jurisdiction to avoid subjecting the parties to

conflicting demands.

• P & O Princess Cruises. In the cruise line

cases, the FTC worked closely with the EC on

Carnival’s bid for P&O Princess lines and

simultaneously with the United Kingdom’s Office

of Fair Trading and Competition Commission

regarding Royal Caribbean’s competing bid.

Officials from these agencies later met to analyze

the handling of the cases with a view toward

further improving coordination.

The EC and the U.S. agencies also are generally

working to streamline cooperation in merger cases.

The agencies published merger process best

practices to institutionalize and make more

transparent the means by which the agencies, along

with the parties, can review more efficiently the

merger cases subject to review on both sides of the

Atlantic.

So long as policy differences remain, there is

potential for conflicting outcomes in cases reviewed

by two or more jurisdictions. Given differences in

laws, cultures, and priorities, it is unrealistic to expect

complete convergence in the foreseeable future.

However, areas of agreement far exceed those of

divergence, and instances in which differences result

in conflicting outcomes are likely to remain rare. The

FTC and DOJ and their bilateral partners remain

committed to addressing and minimizing policy

divergences. The U.S. agencies and the EC, for

example, have established several working groups

that have contributed to a greater understanding and

convergence in areas including competitive effects in

conglomerate mergers, efficiencies, and remedies.

Similarly, the U.S. agencies are working with the

Canadian Competition Bureau on a number of policy

and procedure initiatives.

2. Multilateral Competition Cooperation

The FTC participates actively in various

multilateral competition fora that further international

cooperation and convergence.

• ICN. The International Competition Network

(ICN) provides a venue for antitrust officials

worldwide to achieve consensus on proposals for

procedural and substantive convergence on best

practices in antitrust enforcement and policy.

The FTC and DOJ were among the 16 agencies

that founded the ICN in 2001; its membership

since has grown to 77 agencies from 67

jurisdictions. (See Figure 7.) In September

2002, the ICN hosted its inaugural annual

conference to showcase its work on multijurisdictional merger control and the role of

competition advocacy. Based on

recommendations of the Merger Working

Group’s Subgroup on Notification and

Procedures, which the FTC chairs, the members

adopted a set of guiding principles for merger

notification and review and endorsed three

detailed recommended practices on merger
Federal Trade Commission

The FTC Year in Review - 29

notification concerning

jurisdictional nexus, clear and

objective notification thresholds,

and notification timing.

In November 2002, the U.S.

antitrust agencies hosted a twoday ICN conference on merger

investigative techniques. In

preparation for the ICN’s June

2003 annual conference, the

Merger Working Group is

preparing new recommended

practices on the timing of review,

initial information requirements,

transparency, and periodic review

of the merger regime, a paper and

template on merger guidelines,

and a manual on recommended

practices in investigative techniques. The

Competition Advocacy Working group is

developing an online information and resource

center, preparing a compilation of advocacy

provisions, conducting sectoral studies of

advocacy, and assembling a “tool kit” of

competition advocacy mechanisms. The new

working group on Capacity Building and

Competition Policy Implementation is preparing a

report on the challenges developing countries

face in implementing competition policies and

establishing credible enforcement agencies.

• OECD. The OECD is an important forum for

competition officials from developed countries to

share experiences and promote best practices.

During the past year, the FTC has participated

actively in the OECD’s continuing work on, inter

alia, merger process convergence, regulatory

reform, and examining the issues at the trade

and competition intersection.

3. Trade/Competition Fora

Trade agreements increasingly involve

competition issues. In the World Trade Organization

(WTO), the FTC and DOJ participate in the Working

Group on the Interaction between Trade and

Competition Policy, which is examining the issues

specified in the Doha Ministerial Declaration relating

to the possible negotiation of a competition chapter

to the WTO Agreement. The FTC, along with DOJ,

has been working with the other nations in the

Western Hemisphere to develop competition

provisions for a Free Trade Agreement of the

Americas. The U.S. antitrust agencies have

completed negotiating competition chapters of

proposed bilateral Free Trade Agreements with Chile

and Singapore.

B. Consumer Protection

1. Cross-Border Fraud

The globalization of the marketplace poses new

and difficult challenges for consumer protection law

enforcement. Developments in trade and technology

have created unprecedented access to new

products, information, and markets, providing

consumers and businesses with considerable

benefits. But fraud operators also have exploited

these developments to deceive large numbers of

consumers in numerous jurisdictions. Pyramid and

lottery schemes, travel and credit-related ploys, and

high-tech scams, such as modem and page

hijacking, are examples of the types of frauds

perpetrated across national borders that victimize

consumers, harm legitimate businesses, and reduce

consumer confidence in the global marketplace.

Albania

Andean Community

Argentina

Armenia

Australia

Austria

Barbados

Belgium

Brazil

Canada

Chile

Costa Rica

Croatia

Cyprus

Czech Republic

Denmark

EFTA

Estonia

European Union

Finland

France

Germany

Greece

Hungary

Iceland

Indonesia

Ireland

Israel

Italy

Jamaica

Japan

Kenya

Korea

Latvia

International Competition Network Members Lithuania

Macedonia

Malta

Mexico

Netherlands

New Zealand

Norway

Pakistan

Panama

Peru

Philippines

Poland

Portugal

Romania

Russia

Slovak Republic

Slovenia

South Africa

Spain

Sri Lanka

Sweden

Switzerland

Taiwan

Thailand

Tunisia

Turkey

Ukraine

United Kingdom

United States 

Uzbekistan

Venezuela

Yugoslavia

Zambia

Figure 7
Federal Trade Commission

A Positive Agenda for Consumers - 30

Consumer Sentinel statistics released by the FTC in

February show total cross-border fraud complaints

from U.S. consumers increased from 13,905 in 2001

to 24,213 in 2002. Total cross-border complaints

have risen from 12 to 14 percent of all non-identity

theft-related fraud complaints.

• Five-Point Plan. On October 31, 2002,

Chairman Muris presented the FTC’s Five-Point

Plan for attacking cross-border fraud. Speaking

before the Fordham Corporate Law Institute’s

29th Annual Conference on International Antitrust

Law and Policy in New York, Chairman Muris

outlined that, under the Five-Point Plan, the FTC

will:

1. advocate adoption of an OECD

Recommendation on Cross-Border Fraud;

2. seek legislative changes to improve the

FTC’s ability to fight cross-border fraud;

3. hold a workshop on public/private sector

cooperation to combat cross-border fraud;

4. enter into new multilateral and bilateral

agreements, and strengthen existing

arrangements, to combat cross-border fraud

through cooperation and coordinated

enforcement activities; and

5. provide targeted technical assistance to

developing countries.

Implementation of the Plan is underway.

• Workshop on Public-Private Sector

Cooperation to Combat Cross-Border Fraud.

As discussed above, in February 2003, the FTC

held a workshop to explore Public-Private Sector

Cooperation to Combat Cross-Border Fraud.

2. Other International Cooperation

Other cooperative activities of the FTC’s

consumer protection mission include:

• econsumer.gov. As mentioned above, the FTC

continues to work with its international partners to

develop the econsumer.gov project.

• Bilateral Activities. The FTC continues to

strengthen its bilateral ties with consumer

protection agencies in other countries. The FTC

staff and the Competition Bureau of Industry

Canada held a bilateral meeting at which the two

organizations agreed on a work plan for future

cooperation, a protocol for information-sharing,

and a consumer education brochure. The FTC

staff and the United Kingdom Office of Fair

Trading and the United Kingdom Department of

Trade and Industry held a bilateral meeting at

which the agencies agreed on a work plan for

future cooperation, a joint statement of principles

for fighting cross-border fraud, and a protocol for

information sharing.

• Cross-Border Health Fraud. The FTC

participated in an international health claims surf

day sponsored by ICPEN in spring 2002. The

FTC’s participation focused on Web sites

specifically marketing products and therapies for

arthritis, cancer, and HIV/AIDS, while other

ICPEN surfing partners searched sites promoting

weight loss and other products. The international

surf identified over 1,400 questionable sites.

Countries participating in the international surf

included Australia, Austria, Belgium, Canada,

Denmark, Ireland, Finland, France, Hungary,

Japan, Korea, New Zealand, Norway, Poland,

Portugal, Switzerland, Sweden, the United

Kingdom, and the United States.

The FTC also has been active in the MexicoU.S.-Canada Health (MUCH) health fraud task force,

and has worked on developing an action plan to

move forward in combating cross-border health care

fraud in North America. One example of what

cooperation on this front can produce is FTC v.

CSCT. The FTC, in coordination with Canadian and

Mexican officials, filed this case in February of 2003,

charging a Canadian company offering treatments at

clinics in Mexico with making false claims that it can

treat cancer by using an electromagnetic device to

kill cancer cells.
Federal Trade Commission

The FTC Year in Review - 31

3. Cross-Border Law Enforcement

The FTC has brought numerous enforcement

actions over the past year in which it has received

assistance from its counterparts abroad. For

example, the FTC received substantial assistance

from the Toronto Strategic Partnership, a group of

U.S. and Canadian law enforcement partners, in FTC

v. STF Group (credit-card loss protection); FTC v.

Pacific First Benefit (advance-fee credit cards); and

FTC v. Efficient Telesales (advance-fee credit cards).

The FTC received substantial assistance from its

British Columbia partners in FTC v. D&C National

Services (lottery) and FTC v. Royal Flush (lottery);

from the U.K. Office of Fair Trading in FTC v. TLD

Networks (sale of bogus domain names) and FTC v.

BTV Industries (prize scheme); and from numerous

foreign consumer protection agencies in FTC v.

Skybiz International (pyramid scheme). (See Box 9.)

C. International Technical Assistance

For over a decade, the FTC has assisted

transition economies that have made the

commitment to market and commercial law reforms.

With funding principally from the U.S. Agency for

International Development (USAID), and in

partnership with DOJ, about 30 nations have

received technical assistance with the development

of their competition laws. In this past year, the

technical assistance program was active in Asia,

South and Central America, South Africa, and

Southeastern Europe. The FTC began a new

resident advisor program in Indonesia and, with

DOJ, continued its resident advisor program in South

Africa. The Commission’s short-term programs have

emphasized the development of investigative skills.

These programs rely on a combination of resident

advisors, regional workshops, and targeted shortterm missions. The agency schedules these

technical assistance activities to enable career FTC

staff to share their expertise with their counterparts in

the newer competition agencies of the world. In the

past year, the FTC received funding to begin a new

program of short-term assistance in North Africa and

Eurasia and funding to continue ongoing programs in

Southeastern Europe and the Andean Community.

To broaden international cooperation on

consumer protection and ensure that no country

becomes a haven for fraud, the FTC is conducting

USAID-funded training missions in Eastern Europe.

Last year, FTC staff conducted consumer protection

training missions in Budapest, Hungary in April and

in Ljubljana, Slovenia in November. These sessions

trained more than 100 government officials from

Albania, Bosnia and Herzegovina, Bulgaria, Croatia,

Estonia, Hungary, Latvia, Macedonia, Poland,

Romania, the Slovak Republic, and Slovenia,

covering such issues as basic consumer protections,

consumer credit, advertising principles,

advertisement interpretation, and advertising

substantiation.

International Consumer

Protection Cooperation

Recent years have featured the development of

stronger international programs for cooperation on

consumer protection issues. Commissioner Mozelle

Thompson has played a highly active and visible role

in representing the FTC in these international

endeavors. Since March 2002, he has chaired the

OECD’s Committee on Consumer Policy. Under his

leadership, the Committee has issued numerous

documents on consumer protection issues, including

a report on protections for payment card holders, a

report on alternative dispute resolution for online

consumer transactions, and an educational

instrument for consumers considering the use of

alternative dispute resolution. The Committee

currently is drafting a Recommendation Concerning

Guidelines on the Protection of Consumers From

Fraudulent and Deceptive Commercial Practices

Across Borders. Commissioner Thompson also

heads the U.S. delegation to ICPEN.

Box 9
Federal Trade Commission

A Positive Agenda for Consumers - 32

Conclusion

Honoring the FTC’s Past and

Building Its Future

Recent years have provided a number of

occasions to reflect upon the Commission’s rich

history. In September 2001, the Commission

celebrated the 25th anniversary of the enactment of

the Hart-Scott-Rodino Antitrust Improvements Act of

1976. In 2001, the Commission inaugurated the

Miles W. Kirkpatrick Award for distinguished service

to the agency. Chairman Timothy Muris presented

the inaugural Kirkpatrick Award to Basil Mezines in

2001 and bestowed the honor upon the second

recipient, Robert Pitofsky, in 2002. Former FTC

Chairman Caspar Weinberger assisted in the first

presentation, and Ira Millstein, a prominent member

of the private bar, assisted in the second. Most

recently, in February 2003, the FTC recognized the

100th anniversary of the creation of the Bureau of

Corporations, which Congress incorporated into the

FTC upon the passage of the FTC Act in 1914.

These events provide opportunities not only to

honor the Commission’s past but also to consider its

future. Many of the measures summarized above

demonstrate an awareness that future improvements

in competition and consumer protection policy

depend upon the agency’s continuing investment in

activities that strengthen the institution over the long

term. The good case announced today typically is

the result of efforts undertaken months or years

before. The program described in this report seeks

to make the best use of past investments and to

ensure that future reports have equally impressive

results to summarize.
For Consumers:

The FTC Year In Review

Federal Trade Commission

April 2003

R Q WWW.FTC.GOV