Source: http://traderegulation.blogspot.com/2011/04/
Timestamp: 2019-04-26 08:08:09+00:00

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Whether a “franchise” agreement existed between a concrete artisan and a dealer under the Connecticut Franchises Act was irrelevant to the issue of whether the dealer was an “employee” of the artisan under the Connecticut Unemployment Compensation Act, according to a Connecticut appellate court.
A trial court decision—upholding a ruling by the Connecticut Employment Security Board of Review that the dealer had been the artisan’s employee—was affirmed.
The dispute began when the artisan terminated its agreement with the dealer and the dealer filed a claim for benefits under the Unemployment Compensation Act. The sole question before the Board of Review was whether the dealer was an employee for unemployment compensation purposes.
(C) The individuals are customarily engaged in an independent established trade, occupation, profession, or business of the same nature as that involved in the services performed.
In this case, the Board determined that the artisan failed to satisfy all three prongs.
The artisan argued on appeal that, had the Board applied the franchise statute to the facts, it would have found that (1) a franchise agreement existed between the parties and (2) the ABC test would have been inapplicable.
Specifically, the artisan contended that a finding that a franchise agreement existed between the parties exempted the relationship from the purview of the Unemployment Compensation Act.
The artisan neither cited, not did the court’s research reveal, any legal support for this argument, the court observed. There was nothing in the Act that elucidated the question of whether the existence of a franchise agreement precluded the application of the ABC test.
The Unemployment Compensation Act made no express exemption for franchises, and no such exemption could be implied, particularly when the legislature created numerous exemptions from coverage, the court decided. If the legislature had intended to create an exemption, it would have done so expressly.
The decision is Jason Robert’s, Inc. v. Administrator, Unemployment Compensation Act, CCH Business Franchise Guide ¶14,577.
In a dispute over a consumer contract with an arbitration clause that included a class action waiver, the Federal Arbitration Act preempted a California rule of law that barred the waiver as unconscionable, the U.S. Supreme Court held today in a 5-4 decision.
The court reversed and remanded a decision of the U.S. Court of Appeals in San Francisco (CCH Advertising Law Guide ¶64,059) declining to compel individual arbitration of a consumer’s claim for $30.22 in a dispute over a wireless telephone service provider's practice of charging sales tax on cell phones advertised as “free.” The appeals court had held that the class action waiver in the wireless service agreement was unconscionable under the law of California.
In Discover Bank v. Superior Court, the California Supreme Court held that the doctrine of unconscionability barred the enforcement of class action waivers in arbitration clauses when the contracting party with superior bargaining power is alleged to have deliberately cheated large numbers of consumers out of individually small sums of money.
While acknowledging that unconscionability is a generally applicable doctrine of contract law, Justice Scalia, writing for the majority, concluded that Section 2 of the Federal Arbitration Act preempted California’s Discover Bank rule.
A switch from individual to class arbitration would make the process slower, more costly, less informal, and greatly increase the risks to defendants, according to the Court. When damages allegedly owed to tens of thousands of potential claimants are aggregated and decided at once, the risk of an error will often become unacceptable, the Court announced.
The arbitration agreement provided that the wireless provider would pay claimants a minimum of $7,500, and twice their attorney’s fees, if they obtained an arbitration award greater than the provider’s last settlement offer, the Court added.
Justice Breyer, in a dissent joined by Justices Ginsburg, Sotomayor, and Kagan, questioned whether a rational lawyer would have signed on to represent a client for the possibility of fees stemming from a $30.22 claim. The Federal Arbitration Act’s basic objective was to assure that courts treat arbitration agreements like all other contracts. Recognition of the federalist ideal, embodied in specific language in the statute, should lead the Court to uphold California’s law, not to strike it down, according to the dissent.
The April 27 decision in AT&T Mobility LLC v. Concepcion will be reported in CCH Advertising Law Guide.
A group consisting of professional and prospective professional football players alleging that the National Football League and its 32 separately-owned teams engaged in a concerted refusal to deal in violation of Sec. 1 of the Sherman Act by imposing a "lockout" was entitled to preliminary injunctive relief lifting that lockout, the federal district court in St. Paul, Minnesota ruled yesterday.
According to the players, the lockout at issue was an anticompetitive agreement aimed at shutting down the entire free agent marketplace and boycotting both rookies and players currently under contract.
A lockout occurs when an employer lays off or locks out its unionized employees during a labor dispute to bring economic pressure in support of the employer's collective bargaining position, the court noted.
In the present dispute, the league and teams declared the lockout after negotiations for a new collective bargaining agreement with the players' union broke down on March 11. The players voted to decertify and reorganize as a trade association that prohibited its members from engaging in collective bargaining with the league, its teams, or their agents—a necessary step to enabling antitrust action against the league, as such suits had been barred under the terms of a negotiated settlement in a previous labor dispute among the same parties.
As a preliminary matter, the court rejected the NFL's arguments that the Norris-LaGuardia Act—which restricts the authority of federal courts to issue injunctive relief in labor disputes—precluded any injunctive relief. Regardless of whether the provisions of the Norris-LaGuardia Act should be extended or interpreted to protect the NFL (a matter of which the court was not convinced), the Act did not apply because the players' union had effectively renounced its status as the players' negotiating agent.
Any assertion that the Act continued to apply in the post-collective-bargaining, post-union world of employment law would "seem to run headlong into the rights of employees, seemingly without exception or limitation, to choose not to organize into a union, or having been once represented by a union, to decertify that organization or otherwise disclaim its function as their negotiating agent," in the court's view.
The court also rejected the defendants' contention that it should have deferred the matter, or at least a portion of it, to the National Labor Relations Board under the doctrine of primary jurisdiction. There was no issue in the case within the NLRB's exclusive statutory jurisdiction.
Furthermore, the action was not governed by the preemption doctrine espoused in the U.S. Supreme Court's decision in San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959), which addressed whether a state court could enjoin a union from picketing and award damages for losses sustained. Moreover, any benefit that might be derived from seeking the NLRB's expertise was clearly outweighed by the delay involved, especially since the players were incurring ongoing irreparable harm.
The union's disclaimer of any further role as the players' agent in collective bargaining was unequivocal and effective, according to the court. The disclaimer presented an entirely separate issue than a labor law negotiating impasse, the court added. There was no issue of "impasse occurring within an ongoing, or likely to continue, process of collective bargaining," the court held. Rather, the parties had moved beyond "mere impasse," as they had "moved beyond collective bargaining entirely."
Even on the preliminary record, the complaining players demonstrated not only that they "likely would suffer" irreparable harm absent the requested preliminary injunction, but also that they "are in fact suffering such harm" already, the court said. According to the players, because they faced constant pressure to prove their physical and economic worth, the loss of an entire year in a short professional athletic career could not be recaptured and, therefore, could not be adequately compensated by damages.
Moreover, they alleged, the diminishment of skills resulting from time spent off the playing and practice fields could shorten or end the careers of some players.
Evidence presented by the players regarding the short duration of NFL players' careers and the difficulty in determining the salary and benefits each player might have earned in a competitive marketplace –compounded by the players' unique abilities and circumstances—showed that damages could not fully compensate the players, the court found. This evidence sufficed to establish that the players would suffer irreparable harm by the perpetuation of the lockout, according to the court.
Rejected was an implied contention by the league and teams that, as a byproduct of the lockout, players would avoid suffering any harm from career-ending injury or physical wear-and-tear. Aside from the threat of harm in the form of lost playing time and its performance consequences, a lockout deprived the plaintiffs of their abilities to negotiate and market their services as free agents or even as entering players. This irreparable harm to the players outweighed any harm an injunction would cause the NFL, the court added.
Additional factors supporting the injunction were that the public interest did not favor a lockout and that the players established a fair chance of success on the merits of their injunction request. The public interest favored the enforcement of the antitrust laws and their underlying pro-competition policy, particularly given that the countervailing labor-law policy favoring collective bargaining was no longer implicated, the court concluded.
Regarding the players' chances of success, the merits of the players' claims that various restrictions imposed by the league and teams violated the Sherman Act were not the issue, the court clarified. The players' motion was confined to a very precise and narrow matter as to only one of the antitrust claims: whether the NFL could lawfully lock the players out after the union disclaimed its role as their collective bargaining agent.
As the NFL's defense to the legality of the lockout was confined to the argument that the non-statutory labor exemption continued to protect them from antitrust liability, and the court had repudiated this argument, the league had identified no current defense against the claim. That the policies and decisions of the individual teams constituted concerted action seemed plain. Accordingly, the players had shown at least the requisite "fair chance" of success on their claim that the lockout constituted a violation of Sec. 1 of the Sherman Act.
The April 25 decision in Brady v. National Football League, Civil No. 11-639 (SRN/JJG), will appear in CCH Trade Regulation Reporter.
The Commission has filed an administrative complaint, alleging that Phoebe Putney Health System, Inc.’s proposed acquisition of rival Palmyra Park Hospital, Inc. from HCA will reduce competition and raise prices for general acute-care hospital services.
The FTC said in its April 20 announcement that its staff and the Attorney General of the State of Georgia intended to file a separate complaint in the federal district court in Albany, seeking an order to halt the proposed transaction pending the administrative adjudication.
“By eliminating vigorous competition between Phoebe and Palmyra, this merger to monopoly will cause consumers and employers in the Albany region to pay dramatically higher rates for vital health care services, and will likely reduce the quality and choice of services available in the community as well,” said FTC Bureau of Competition Director Richard Feinstein.
Phoebe operates a 443-bed hospital in Albany, which offers a full range of general acute care hospital services, as well as emergency care services, tertiary care services, and outpatient services.
Palmyra is a 248-bed acute care hospital in Albany that is owned by HCA—a for-profit health system that owns or operates 164 hospitals in 20 states and Great Britain. Palmyra provides general acute care services, including services in general surgery, non-invasive cardiology, gastroenterology, gynecology, oncology, pulmonary care, and urology.
The agency contends that the relevant market in which to analyze the effects of the transaction is the market for inpatient general acute-care hospital services sold to commercial health plans. The alleged relevant geographic market is no broader than the six-county region consisting of Dougherty, Terrell, Lee, Worth, Baker, and Mitchell Counties in Georgia.
Hospitals outside the six-county area do not regard themselves are not meaningful competitors of Phoebe Putney or Palmyra for inpatient general acute care services, according to the FTC.
The FTC also alleges that Phoebe structured the deal in a way that uses the Hospital Authority of Albany-Dougherty County, also a respondent, in an attempt to shield the anticompetitive acquisition from federal antitrust scrutiny under the “state action” doctrine.
According to the FTC’s complaint, rather than acting in the state’s interests, the hospital authority served only as a “strawman” in an attempt to shield an overtly anticompetitive transaction from antitrust scrutiny. The FTC contends that the hospital authority played no meaningful role in the transaction and that the state action doctrine cannot be used as a defense to Phoebe’s proposed acquisition of Palmyra.
The administrative complaint, In the Matter of Phoebe Putney Health System, Inc., Dkt. 9348, was released by the FTC on April 22. It will appear at CCH Trade Regulation Reporter ¶16,588.
Guacamole purchasers could bring California consumer protection law claims against a manufacturer of guacamole and bean dip products that allegedly mislabeled its product to deceive purchasers into buying its products, according to a federal district court in Los Angeles.
Allegedly deceived into purchasing the manufacturer’s guacamole and spicy bean dip products by deceptive labeling, the purchasers filed the consumer protection claims. The products allegedly misled consumers as to the nutritional content of the products, which allegedly contained substantial and dangerous levels of transfats.
The purchasers had standing to pursue California Unfair Competition Law(UCL) and False Advertising Law (FAL) claims, the court held. To establish standing, the purchasers needed to show an injury in fact and lost money or property as a result of unfair competition and actual reliance on the deceptive labeling when deciding to purchase the products.
In cases concerning product labels, purchasers have standing if they can show that they were deceived by the label into purchasing a product they would not have otherwise purchased. Although the manufacturer argued the alleged injury was de minimis and trivial, similar injuries have been held to be sufficient for standing. Thus, the purchasers’ alleged loss was sufficient to meet the injury requirement for standing in the UCL and FAL claims.
The purchasers also presented sufficient evidence that they read and relied on the misleading label statements concerning the nutrition and contents of the product, and would have purchased a cheaper product had they not relied on those statements.
The purchasers could pursue injunctive relief under the UCL and FAL, according to the court. To have standing to seek injunctive relief, the purchasers needed to show the threat of future injury.
The manufacturer argued that there was no threat of a future injury because the purchasers were aware of the labeling issues and will not purchase the product again. While purchasers involved in the suit may not purchase the guacamole at issue again, the advertising remains on the products and the purchaser could pursue injunctive relief on behalf of other consumers.
However, the purchasers could not pursue disgorgement under the FAL, according to the court. The purchasers sought disgorgement via an order requiring the manufacturer to disgorge all monies, revenues, and profits obtained by means of any wrongful act or practices. The request was overly broad and constituted nonrestitutionary disgorgement, a remedy that is not available under the FAL.
Several statements made by the manufacturer in its advertising and labeling were not actionable under the California’s consumer protection laws because they were mere puffery, while others were actionable deceptive statements. Statements are actionable only if they are likely to deceive a reasonable consumer.
A claim that the guacamole was made in “the authentic tradition” was stricken from the purchasers’ claims because it was neither specific nor measurable. The statement that the guacamole contained garden vegetables was true and therefore not actionable. However, the “all natural” description was deceptive, and the labeling of the product as “guacamole” was false. Thus, the consumer protection claims based on those two statements survived the motion to dismiss.
The Nutrition Labeling and Education Act of 1990 (NELA) preempted the California consumer protection claims concerning advertising statements made by the guacamole manufacturer about the nutritional content of its guacamole. The NELA prohibits states from directly or indirectly establishing requirements made on the label or labeling of food. Thus, the statements made on the label that the guacamole contained “0 g transfats” and “0 g cholesterol” were not actionable under the consumer protection statutes.
The April 11 decision in Henderson v. Gruma Corp. appears at CCH State Unfair Trade Practices Law ¶ 32,234.
Further information regarding CCH State Unfair Trade Practices Law appears here.
Labels: "all natural", California False Advertising Law, California Unfair Competition Law, deceptive labeling, guacamole, Henderson v. Gruma Corp.
A civil RICO claim alleging that tax lien bidders had conspired to violate a county’s “single simultaneous bidder rule” (SSBR), in an effort to win a greater share of the tax liens that the county sold at its annual tax auction, should not have been summarily dismissed on the ground that competing bidders could not prove proximate cause, the U.S. Court of Appeals in Chicago has ruled.
The district court’s grant of summary judgment to competing bidders (CCH RICO Business Disputes Guide ¶11,932) was therefore reversed.
The plaintiffs alleged that they suffered RICO damages from the defendants’ scheme to violate the SSBR, which was created to insure fair tax-lien auctions in Cook County, Illinois. The rule prohibited tax lien buyers from having more than one bidding agent at the auctions.
Because property tax liens were awarded to the lowest bidder (i.e., the person who agreed to impose the lowest penalty on a property owner who redeemed the encumbered property by paying the overdue taxes in full), as many as 85 percent of the auctions ended with multiple identical winning bids of “zero percent” of the unpaid taxes.
Without the SSBR, tax lien buyers could unfairly increase their likelihood of winning an inordinate amount of the tax liens by packing the auction room with multiple agents.
Although the defendants in this case had allegedly conspired, over a six-year period, to send multiple bidding agents to the county's tax auctions, the district court found that the plaintiffs (two bidders who did not have multiple agents at the auctions) failed to produce any evidence to show that the defendants' scheme had proximately caused the plaintiffs’ loss of any tax lien sale.
This finding was in error, the court of appeals explained, because the district court had improperly required the plaintiffs to prove that “potential” superseding causes did not actually exist. Because the burden of proof regarding superseding causes was properly placed on the defendant, the district court should have required the defendants to submit evidence in support of their conjectures concerning potential superseding causes.
A plaintiff has done enough to withstand summary judgment for lack of causation when the plaintiff has proffered evidence in support of an injury that would be expected to result from the defendant's wrongful conduct.
Moreover, the causal relationship between a defendant's alleged act and a plaintiff's alleged injury need only be probable, the appellate court noted. If a trier of fact found proximate cause under a standard that placed the burden of establishing the existence of a superseding cause on the defendant, and did so while requiring only a probability of harm attributable to the defendant's wrongful acts, the only remaining issue would be the amount of damages to award the plaintiff.
The defendants argued—and the district court appears to have been persuaded—that a trier of fact could not confidently conclude that the plaintiffs would have obtained a proportionately equal share of the auctioned tax liens (absent a system of awarding liens on a strict rotational basis when identical bids were submitted) had the defendants not packed the auction room. This reasoning, however, reflected a misunderstanding of statistical theory, in the appellate court’s view.
In a large sample, selections based on random choice would produce, with a high degree of confidence (high enough, certainly, for a damages award in a fraud case), the same results, proportionally, as selections based on a strict rotation.
The March 24 decision in BCS Services, Inc. v. Heartwood 88, LLC, appears at CCH RICO Business Disputes Guide ¶12,024.
Further information about CCH RICO Business Disputes Guideis available here.
In a class action complaint, consumers stated claims under the New Jersey Consumer Fraud Act (CFA) by alleging that labels for Campbell’s 25% Less Sodium Tomato Soup and 30% Less Sodium Healthy Request Soup were misleading and caused the consumers to buy the higher-priced less sodium soups even though the sodium content of those soups was equal or nearly equal to that of Campbell’s regular tomato soup, the federal district court in Camden, New Jersey has ruled.
Campbell’s contention that the labels were accurate comparisons to the old formulation of regular tomato soup relied on facts outside the scope of a motion to dismiss, the court noted. In addition, even if the labels were literally true, this did not mean they could not be misleading to the average consumer, the court added.
Campbell also contended unsuccessfully that using a misrepresentation to cause a consumer to purchase a product does not cause an ascertainable loss under the CFA.
The New Jersey Supreme Court had repeatedly and explicitly endorsed a benefit-of-the-bargain theory under the CFA that required nothing more than that the consumer was misled into buying a product that was ultimately worth less to the consumer than the product promised.
A reasonable reading of the complaint was that the soup paid for was identical, for the consumers’ purposes, to soup that allegedly was 20 to 80 cents cheaper, according to the court. A reasonable fact-finder could therefore conclude that the reasonably calculated value to consumers of the item actually received was 20 to 80 cents less than the value of the item promised. That was a sufficient allegation of ascertainable loss under New Jersey law, the court held.
The federal Food, Drug, and Cosmetic Act (FDCA) did not preempt the CFA claims. The FDCA, as amended by the Nutrition Labeling and Education Act, provided that a state may not impose any requirement respecting any claims of nutritional content on labels “that is not identical to the requirement” imposed by the Act.
The state law claims that the labels were misleading were not preempted because they mirrored the federal requirements. However, claims that the labels omitted material information regarding sodium were preempted by the FDCA because the consumers sought to impose a labeling requirement for the nutrient content that was inconsistent with the Food and Drug Administration’s nutritional labeling regulations, the court determined.
The opinion in Smajlaj v. Cambpell Soup. Co. is reported at CCH Advertising Law Guide ¶64,238.
Manufacturers of containerboard, the principal raw material used to make linerboard and corrugated boxes, could have engaged in price fixing in violation of Sec. 1 of the Sherman Act by allegedly undertaking a course of conduct that included contemporaneous supply restrictions and price increases, the federal district court in Chicago has ruled. A motion to dismiss the claims was denied.
The complaining putative consumer class provided specific allegations of more than “mere modest capacity reductions,” the court found.
While there may have been some variation in the amount and timing of reduction, that variation was not substantial enough to overcome the otherwise strong suggestion of conscious parallelism.
Likewise, the plaintiffs’ allegations of consistent parallel price increases were enough to make a threshold showing of conscious parallelism, in the court’s view.
Additional contextual factors offered by the plaintiffs further supported a plausible inference of an unlawful agreement among the defending manufacturers, the court added.
(3) The susceptibility of the containerboard industry to collusion, owing to its consolidated nature, barriers to entry, inelasticity of demand, cost structures, and commodity-like products.
The April 8 decision is Kleen Products, LLC v. Packaging Corp. of America, 2011-1 Trade Cases ¶ 77,414.
Putative class action claims brought by consumers against Korean Airlines and Asiana Airlines for conspiring to fix prices in violation of the California Business and Professions Code and unfair competition laws, as well as similar laws of 19 other states and the District of Columbia, were preempted by the Airline Deregulation Act of 1978, the U.S. Court of Appeals in San Francisco has ruled. Thus, dismissal of the state law claims was upheld.
However, the appellate court vacated the lower court’s decision to deny the consumers leave to amend their complaint to assert federal antitrust claims.
The indirect purchaser plaintiffs unsuccessfully argued that the provision did not apply to foreign air carriers. They pointed to the provision’s use of the term “air carrier” as opposed to “foreign air carrier.” They contended that Congress intended the terms “air carrier” and “foreign air carrier” to refer to different entities and that it consistently employed those terms for distinct uses.
The appellate court held that Congress intended that the preemption provision apply to all air carriers and not only to domestic ones. Congress’s use of the term “air carrier” throughout the Act did not always correspond with that term’s statutory definition and that “air carrier” is sometimes used to refer generally to both domestic and foreign airlines, the court explained.
The legislative history behind the ADA also demonstrated that Congress intended to preserve its authority to regulate the airline industry by prohibiting states from regulating all air carriers, both domestic and foreign. Moreover, because the indirect purchaser plaintiffs alleged a price fixing conspiracy, their claims were plainly related to a price of an air carrier and consequently were preempted.
The complaining consumers in this appeal were not direct purchasers from the defending airlines. They bought their airline tickets from travel agents and consolidators. Separate claims were brought on behalf of the plaintiffs who purchased directly from Korean Air and Asiana.
Although the indirect purchasers sought to assert both federal and state antitrust law claims, the district court decided that the indirect purchaser plaintiffs could only represent those claims arising under state law. The court assigned responsibility for litigating federal antitrust claims to the direct purchaser plaintiffs in the multi-district litigation (MDL).
The appellate court concluded that the district court erred in denying the indirect purchaser plaintiffs leave to amend based on its determination that other counsel would pursue the federal antitrust claims. The lower court applied an incorrect legal standard in denying the indirect purchaser plaintiffs’ motion to amend their complaint.
“Although a district court overseeing MDL proceedings has the authority to decide which law firm should serve as lead counsel for the purposes of pretrial proceedings, MDL proceedings do not expand the grounds for disposing of individual cases,” according to the appellate court.
Details of April 18, 2011, decision in In re: Korean Air Lines Co., Ltd. Antitrust Litigation, No. 08-56385, will appear in CCH Trade Regulation Reporter.
The largest multiple listing service (MLS) in Michigan, whose members included almost half of all realtors in the state, violated Sec. 5 of the FTC Act by adopting anticompetitive policies that restricted the ability of low-cost, limited service brokerages to get their listings included on heavily-used public websites, the U.S. Court of Appeals in Cincinnati has ruled.
The association’s petition for review of a 2009 Commission opinion (2009-2 Trade Cases ¶76,784) was therefore denied.
(3) The association’s proffered procompetitive justifications were insufficient to overcome a prima facie case of adverse impact.
These findings established that the association’s website policy unreasonably restrained competition in the market for the provision of residential real-estate-brokerage services in southeastern Michigan and the rest of the area served by the MLS.
Following the ruling, FTC Chairman Jon Leibowitz said the decision "ensures that home buyers will receive the benefits of competition in making one of the most financially significant decisions of their lives. Eliminating restrictions on discount listings published over the Internet will force real estate brokers to compete on the costs and quality of their services, which is good."
The decision is Realcomp II, Ltd. v. Federal Trade Commission, 2011-1 Trade Cases ¶77,409.
A new comprehensive regulatory framework to protect consumers’ personal information would be established by a Senate Bill unveiled by Senators John Kerry (D-Mass.) and John McCain (R-Ariz.) on April 12. If enacted, the proposed “Commercial Privacy Bill of Rights Act of 2011” (S. 799) would regulate the collection, use, and dissemination of covered information.
The measure would cover personally identifiable information (PII)—including name, postal address, e-mail address, phone number, Social Security, credit card number, and biometric data—as well as any information that is used, collected, or stored in connection with PII in a manner that may reasonably be used to identify a specific individual—such as a birth date or an IP address.
The law would apply to any person who collects, uses, or transfers covered information concerning more than 5,000 individuals during a 12-month period, and over whom the Federal Trade Commission has authority pursuant to Sec. 5(a) (2) of the FTC Act. The law also would apply to common carriers under the Communications Act of 1934 and to nonprofit organizations.
The bill would call on the FTC to create rules requiring covered entities to carry out security measures to protect covered information.
Taking a “privacy by design” approach to data protection, the bill would require covered entities to implement a comprehensive information privacy program by incorporating development processes and practices throughout the product life cycle that are designed to safeguard PII based on the subject individuals’ reasonable expectations and any relevant threats.
Covered entities also would be required to maintain appropriate management processes and practices throughout the data life cycle.
Collectors of information would be required to provide clear notice to individuals on their collection practices and the purpose for such collection. Additionally, individuals would have to have the ability to opt out of any information collection that would otherwise be unauthorized by the law, as well as the ability to opt out of having their information used by third parties for behavioral marketing or advertising.
Affirmative consent (opt-in) would be required for the collection of sensitive personally identifiable information, including information related to a medical condition or religious affiliation.
Individuals would be given the right to access and correct their information, or to request cessation of its use and distribution.
Collectors of information would be permitted to collect only as much information as necessary to process or enforce a transaction, to deliver a service, to prevent or detect fraud, to investigate a possible crime, to engage in advertising or marketing, for research and development, or for certain internal operations.
Information could be retained only as long as it takes to provide or deliver goods or services to the subject individual or as long as the information is necessary for research and development purposes.
Collectors would have to contractually bind third parties to which they transfer information, to ensure that the third parties comply with the law’s requirements. The bill would require the collector to attempt to establish and maintain reasonable procedures to ensure that PII collected and maintained is accurate, if that PII could be used to deny consumers benefits or could cause significant harm.
A knowing or repetitive violation of the law would be treated as an unfair or deceptive act or practice in violation of the FTC Act. The FTC would be charged with enforcing the measure. State attorneys general also would have enforcement powers, unless the FTC takes action first. Violations would be subject to civil penalties.
The bill provides that it may not be construed to provide any private right of action.
The measure would supersede state laws relating to the collection, use, or disclosure of covered information. It would not preempt state laws (1) addressing health or financial information, (2) addressing notification requirements in the event of a data breach, or (3) relating to acts of fraud.
The bill would direct the FTC to create requirements for the establishment and administration of voluntary safe harbor programs to be overseen by nongovernmental organizations. Safe harbor programs would have to achieve protections at least as rigorous as those enumerated in the bill.
As incentive for enrolling in a safe harbor program, participants would be permitted to design or customize procedures for compliance and would be exempt from some requirements of the bill.
Further information, including the text of the bill, is available here on Senator Kerry’s website.
Google is a step closer to completing its proposed $700 million acquisition of travel search provider ITA Software, Inc. The Department of Justice has announced that it would approve the merger, provided that Google met certain conditions designed to alleviate competition concerns.
On April 8, the Department of Justice Antitrust Division filed both a complaint to block the merger and a proposed final judgment settling the suit in the federal district court in Washington, D.C. At the conclusion of a 60-day public comment period, the court may approve the proposed settlement, if it deems the settlement to be in the public interest.
Massachusetts-based ITA Software is a leading producer of airfare pricing and shopping systems in the United States. ITA’s QPX software conducts searches for air travel fares, schedules, and availability. QPX is used by travel companies like Bing Travel, Travelocity, Kayak, and Orbitz, as well as multiple airlines, to search for air travel fares, schedules, and ticket availability.
Soon after Google announced its plan to acquire ITA last July, a dozen online travel websites formed a coalition called FairSearch to block the deal. Google responded by launching its Facts about Google’s acquisition of ITA Software website to tout the benefits of the merger and to address antitrust concerns.
• Establish internal firewalls to prevent unauthorized use of competitively sensitive information and data gathered from ITA’s customers. The proposed settlement restricts Google’s use of such data.
The proposed five-year settlement, along with the Justice Department’s competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to James J. Tierney, Chief, Networks and Technology Enforcement Section, 450 Fifth Street, N.W., Suite 7100, Washington, D.C. 20530.
In an April 8 post on the company’s official blog, Google Senior Vice President Jeff Huber stated: “We’re excited that the U.S. Department of Justice today approved our acquisition."
He added that Google would honor ITA’s current contracts, and both existing and new customers will be able to license ITA’s QPX software on “fair, reasonable and non-discriminatory terms” into 2016.
While the proposed settlement agreement has alleviated many concerns about Google’s purchase of ITA, consumers, businesses, and lawmakers continue to be troubled by Google’s dominant position in the search market.
“[T]he real problem is Google’s ongoing anticompetitive practices based on its monopolistic control of search,” said John M. Simpson, Director of Consumer Watchdog’s Privacy Project, in a news release.
California consumers would have the opportunity to opt out of online tracking, under the provisions of a proposed bill under consideration in the California Senate.
Senate Bill 761 would call on the Attorney General, in consultation with the California Office of Privacy Protection, to adopt regulations requiring persons or entities doing business in California to provide California consumers with a method to opt out of the collection, use, and storage of their personal information.
Entities would also be required to disclose how they use consumers’ information and to which third parties they transfer the information.
Information covered by the bill would include the online activity of an individual and other personal identifying information, including postal addresses, e-mail addresses, telephone or fax numbers, and government-issued identification numbers.
The measure would not cover business addresses, telephone numbers, or fax numbers, or any information collected from or about an employee by an employer, prospective employer, or former employer that directly relates to the employee-employer relationship.
(4) Do not engage in monitoring or analysis of consumer behavior as the person’s or entity’s primary business.
The bill would make a covered entity that willfully fails to comply with the regulations liable to an affected consumer in a civil action for damages between $100 and $1,000, as well as punitive damages in the court’s discretion.
Originally introduced February 18 as an amendment to California’s coupon law (Business and Professions Code Sec. 17701), the bill was amended on March 24 by its author, Senator Alan S. Lowenthal, to substitute text regulating online tracking.
On April 4, the bill was amended to limit the exemption from coverage to entities that meet all of the four conditions listed above, rather than any one of them.
The Federal Trade Commission released a plan for dealing with a government shutdown that would occur if Congress fails to enact appropriations by a midnight deadline. A shutdown looked likely as budget talks appeared to have broken down early Friday morning.
As part of the FTC’s plan, the Commission’s Premerger Notification Office would remain open with very limited staff to accept new filings under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act).
The Justice Department Antitrust Division’s Premerger Notification Unit will also remain open with limited staff to accept filings.
Elsewhere in the FTC’s Bureau of Competition, all non-merger investigations would be suspended during the pendency of a shutdown. Staff may need to continue working on litigated matters in order to meet upcoming deadlines and protect the Commission’s interests in the litigation pending court action on motions for stays, according to the agency.
The FTC estimates that it would require up to 88 employees to staff excepted competition matters during a shutdown. That number would include staff to accept and review HSR filings, as well as the Bureau of Competition Director and three front office supervisors.
In the event of a shutdown, the Commission intends to seek continuances in all Bureau of Consumer Protection (BCP) cases in which preliminary relief has been obtained.
Attorneys in those cases, or where there is no plan to seek preliminary relief, will notify opposing parties and courts of the government shutdown and request suspensions of dates for hearings and filings, according to the Commission. The Commission intends not to pursue the vast bulk of its consumer protection investigations, it was noted.
The Commission estimates that it may need to except up to 120 employees from the furlough to meet upcoming deadlines and protect the Commission’s interests in consumer protection cases.
The BCP Director and three front office employees will be excepted from furlough to supervise the work. Currently, BCP staff is actively litigating approximately 65-75 cases in federal district courts throughout the country and one or two cases in administrative litigation, according to the agency.
Because Presidential appointees are excepted from furlough as a result of a shutdown, the Commission’s Chairman and its Commissioners can continue to work.
The FTC’s plan also excepts from furlough the Bureau of Economics Director, the FTC General Counsel, the Executive Director, and other high-level personnel, as well as lawyers, economists and support staff necessary to continue law enforcement actions.
An advertising and marketing company’s posts to social networking website Facebook could give rise to liability under the federal CAN-SPAM Act, according to the federal district court in San Jose. The posts constituted “electronic mail messages,” for purposes of the Act.
Facebook alleged that the company, through a network of affiliates, created fake Facebook pages that were intended to divert unsuspecting users to third-party commercial sites. The pages displayed messages indicating that, upon registration, a user would be able to take advantage of a “limited time offer” for a gift or other benefit.
Registration required users to become a “fan” of the page and to invite all of their Facebook friends to join the page. Upon registering, users were not sent the promised item, but instead were directed to a third-party website instructing them to sign up for other “sponsor offers” in order to receive their gift.
Although the company’s messages were not delivered to a traditional e-mail address or an “inbox,” the CAN-SPAM Act should be interpreted expansively, in view of the statute’s purpose of curtaining electronic mail that has overburdened providers’ systems, court said.
The company’s ads were transmitted to such destinations as the user’s “wall,” the “news feed” or “home page” of the user’s friends, the Facebook message inbox of the user’s friends, and users’ external e-mail addresses.
These transmissions required routing activity on the part of Facebook, the court noted, which implicated the infrastructural issues addressed by the Act.
The March 28 decision in Facebook, Inc. v. MaxBounty, Inc., will appear in CCH Privacy Law in Marketing.
The FTC was entitled to an order preliminarily enjoining a not-for-profit health care delivery system controlling three hospitals in the area of Toledo, Ohio, from acquiring an additional hospital in the same county, the federal district court in Toledo has ruled.
The proposed combination could be presumed unlawful based on concentration thresholds, the court found. Largely on the strength of that conclusion, the court decided that a balancing of the equities favored injunction.
Because the acquisition had already been consummated when the agency launched its antitrust challenge to the deal in January, the court issued an order requiring the health care system to preserve the acquired hospital as a separate, independent competitor during the FTC's administrative proceeding and any subsequent appeals.
The Herfindahl-Hirschman Index levels--a mathematical/statistical tool used by the federal antitrust enforcement agencies to measure market concentration --and market shares of the parties far exceeded levels found to be unlawful by the U.S. Supreme Court and other courts.
Moreover, a duopoly, as in the inpatient obstetrical services market involved in the case, was presumptively unlawful in and of itself, the court noted.
The defending health care system failed to rebut adequately the presumption of likely harm resulting from the combination. It acknowledged that prices would increase significantly post-merger. No timely, likely, or sufficient entry or expansion in the relevant markets was forthcoming.
The defendant did not meet its burden of proving that its asserted deficiencies were verifiable, not attributable to reduced output of quality, merger-specific, and sufficient to outweigh the transaction's anticompetitive effects.
Rejected by the court were contentions that the hospital it acquired constituted either a failing firm or a flailing firm. Also unavailing were arguments that recent rate negotiations proved that the defendant would seek only reasonable price increases in the future and that the acquired hospital's prices were subcompetitive or otherwise unreasonable in some way.
Preliminary injunctive relief had never been denied in an FTC enforcement action in which the agency demonstrated a likelihood of success on the merits, the court observed. The public interest in effective FTC enforcement was paramount. If the benefits of a merger were available after the trial on the merits, they did not constitute public equities weighing against a preliminary injunction.
Moreover, in a preliminary injunction action under Sec. 13(b) of the FTC Act, the agency was not required to show irreparable harm. Court-ordered relief was necessary to preserve the possibility of meaningful relief and to prevent interim harm, the court concluded.
The court said that it expected the FTC to act expeditiously in completing its action. At the American Bar Association Section of Antitrust Law Spring Meeting in Washington, D.C. on April 1, FTC Bureau of Competition Director Richard Feinstein pointed out that Judge Katz had given the agency a November 30 deadline. He noted that the trial in the matter was set to begin on May 31 but was not certain what actions Judge Katz would take if the matter was not completed by the deadline.
FTC Chairman Jon Leibowitz told attendees of the ABA Antitrust Law Spring Meeting on April 1 that he was very pleased with the decision. Chairman Leibowitz mentioned that Judge Katz cited extensively to the Department of Justice/FTC Horizontal Merger Guidelines (CCH Trade Regulation Reporter ¶13,100).
In addition, Chairman Leibowitz noted that the decision is the first preliminary injunction win in an FTC hospital merger challenge since a federal district court in Missouri temporarily blocked the merger of the only two commercial hospitals in Poplar Bluffs, Missouri (1998-2 Trade Cases ¶72,227). That decision was reversed by the U.S. Court of Appeals in St. Louis (1999-2 Trade Cases ¶72,578), however, and the FTC eventually dismissed that matter.
The March 29 decision is FTC v. Promedica Health System, Inc., 2011-1 Trade Cases ¶77,395.
Attendees of the American Bar Association Section of Antitrust Law 59th Annual Spring Meeting on April 1 heard from the heads of the two federal antitrust agencies on recent enforcement efforts.
FTC Chairman Jon Leibowitz described the past year as another one of “balanced activism.” He suggested that, when viewed in tandem, the FTC’s review of the Google/AdMob transaction and the settlement with Intel Corporation demonstrate this balanced enforcement.
In May 2010, the FTC announced that it would not challenge Google’s proposed acquisition of mobile advertising network company AdMob because the transaction was unlikely to harm competition in the emerging market for mobile advertising networks. The agency’s concerns about the deal were outweighed by Apple’s planned entry into the market (CCH Trade Regulation Reporter ¶16,453).
In August 2010, the agency announced that Intel Corporation agreed to settle FTC charges that it unlawfully maintained its monopoly by stifling competition in the market for computer chips in violation of Sec. 5 of the FTC Act (CCH Trade Regulation Reporter ¶16,483). Chairman Leibowitz cautioned that businesses run the risk of facing a Sec. 5 case if they “compete by sabotaging competitors” instead of using innovation.
The FTC’s recent victory in the federal district court in Toledo, Ohio, in its challenge to ProMedica Health System Inc.’s proposed acquisition of St. Luke’s Hospital was also discussed. Chairman Leibowitz told attendees that he was very pleased with the decision (2011-1 Trade Cases ¶ 77,395). He mentioned that Judge Katz cited extensively to the recently issued Department of Justice/FTC Horizontal Merger Guidelines (CCH Trade Regulation Reporter ¶13,100).
Chairman Leibowitz noted that the decision is the first preliminary injunction win in an FTC hospital merger challenge since a federal district court in Missouri temporarily blocked the merger of the only two commercial hospitals in Poplar Bluffs, Missouri (1998-2 Trade Cases¶72,227). That decision was reversed by the U.S. Court of Appeals in St. Louis (1999-2 Trade Cases ¶72,578), however, and the FTC eventually dismissed that matter.
On the consumer protection front, the FTC’s efforts to combat “last dollar fraud” were highlighted. According to Chairman Leibowitz, the agency is focusing on loan modification, foreclosure rescue, and other scams that are taking the last dollar from consumers suffering from the economic downturn.
In the criminal area, the antitrust chief said that, while the air cargo price fixing inquiry was entering its last chapter, attendees should continue to pay attention to the ongoing municipal bonds industry investigation. The Justice Department has already obtained nine guilty pleas as a result of this investigation. Additionally, a number of former executives at financial service companies and financial institutions have been indicted and are awaiting trial.
AAG Varney also noted Bank of America’s December 2010 agreement to pay a total of $137.3 million in restitution to federal and state agencies as a condition of admission into the Department of Justice's antitrust corporate leniency program for its role in the conspiracy.
James A. Donahue III, Pennsylvania Chief Deputy Attorney General and Chair of the National Association of Attorneys General Antitrust Task Force, discussed the states’ efforts to ensure that their citizens were “getting the benefits of competition.” Donahue noted the states’ cooperation with the U.S. Justice Department in the municipal bonds investigation.
He also highlighted state actions targeting resale price maintenance. In particular, Donahue noted two settlements between the California attorney general’s office and cosmetics firms in the last year (2010-1 Trade Cases ¶76,922 and 2011-1 Trade Cases ¶77,306).
Donahue also pointed out that the State of New York was appealing a state court’s denial of an order enjoining mattress manufacturer Tempur-Pedic International, Inc. from restricting discounting by its authorized retailers (2011-1 Trade Cases ¶77,311).
The annual International Franchise Association Legal Symposium and the International Bar Association/International Franchise Association Joint Conference on international franchising are scheduled for mid-May in Washington, D.C.
The 44th annual IFA Legal Symposium—featuring three general sessions, 21 concurrent workshops, and a six-part Basics Track—will be held on May 15-17 at the J.W. Marriott Hotel in Washington, D.C.
Topics and speakers for the general sessions include: (1) embracing change before your franchise gets left behind, Jack Uldrich; (2) a panel discussion on adapting to change, Brian Schnell, Jack Earle, Steve Joyce, Victoria Blackwell, and Rochelle B. Spandorf; and (3) a judicial update, David Beyer and Nina Greene.
Twenty-one concurrent workshops will feature presentations on state regulation, pitfalls for start-up franchisors, mass franchise disputes, changing technology in franchising; key ethics issues; enforcing international agreements; data security and privacy laws; disclosure, exemption, and registration issues; mistakes in the pre-sale disclosure process; arbitration; pricing programs after Leegin; enforcing social media policies around the world; defaults in international agreements; and implementing system upgrades and enhancements.
Further information on the symposium can be found here on the IFA website. Information on online registration appears here.
The 27th annual IBA/IFA joint conference (entitled “New Approaches and Challenges in International Franchising”) will follow the IFA Legal Symposium on May 17-18 at the J.W. Marriott.
The conference will start with a reception and dinner on May 17 at the Occidental Grill in the Willard Hotel. The next day’s program will feature three plenary sessions, three workshops, and a luncheon panel discussion.
Introduced by John R.F. Baer, Chair of the IBA International Franchising Committee, the program will include the following plenary sessions: (1) selecting the appropriate vehicle for international expansion, Philip Zeidman, Daniella Canale, Ned Lyerly, John Pratt, and Will Woods; (2) news from around the world, Mr. Baer, Andrew Wiseman, Stephen J. Caldeira, Rafael Escalera, Peter Snell, Fabio Bortolotti, and Jorge Mondragon; and (3) vicarious and franchisor liability, Larry Weinberg, Penny Ward, Gregg Rubenstein, and Francesca R. Turitto.
A luncheon panel discussion—“International Franchise Development: How Do You Pick Your Franchisees?”—will feature Mr. Baer, Yoshino Nakajima, Melissa Rothring, and Luiz do Amaral.
The workshops will feature the following topics and speakers: (1) control of premises in international franchising, Marco Hero and Carl Zwisler; (2) advertising funds in international agreements, Pascal Hollander, Daniel Waddell, and Oliver Binder; and (3) franchising in regulated industries, Rocio Belda, Frank Zaid, and Mark Kirsch.
Details regarding the session and program registration are available here on the IFA website.

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