Federal Trade Commission Research Articles

Closing the loopholes on a flavored cigar ban: Anticipated challenges and solutions

For the first time since Congress authorized the U.S. Food and Drug Administration (FDA) to regulate tobacco in 2009, FDA proposed two tobacco product standards on May 4, 2022. After a period of public comment and agency review, if the product standards are finalized in their current form, they will ban menthol cigarettes (U.S. Food and Drug Administration, 2022b), which comprised 37% of the U.S. cigarette market in 2019 and 2020 (Federal Trade Commission, 2021), and flavored cigars (U.S. Food and Drug Administration, 2022a), which have exceeded 50% of cigar sales since 2012 (Delnevo et al., 2021b). This commentary examines potential challenges to banning flavored cigars and highlights issues FDA and Congress should consider.

The Effects of Contextual Cues and Visual Clarity in Sponsorship Disclosures on the Interpretive Process: Processing Fluency

This study explored whether the clarity-enhancing elements and contextual cues in sponsorship disclosures would help (or impede) consumers’ recognition and information processing of native advertising and, if so, which elements would affect them more or less. A lab experiment using an eye-tracking device was conducted. Various features of the sponsorship disclosure were drawn from the Federal Trade Commission’s (FTC) disclosure guidelines (e.g., disclosure language, location, repetition, and prominence, including font style, size, color, effects, and background). Findings implied that clear labeling is strongly related to recognition of the commercial nature of the content, whereas clarity enhancers are related to information processing backed by perceptual fluency. In addition, complying with FTC’s disclosure guidelines may increase pleasant processing fluency and recognition of the sponsorship disclosure. A recommendation is made for advertising practitioners, publishers, and regulators to avoid an unnecessary stigma toward native advertising.

Regulating recommended retail prices

This paper analyses the effects of regulated recommended retail prices (RRPs). Such recommendations by manufacturers are non-binding in nature and thus retailers do not have to adhere to them. We look at regulations, similar to that by the Federal Trade Commission (FTC), requiring at least some sales to take place at RRPs. Such regulations were introduced with the aim of protecting consumers. In the absence of regulation an equilibrium exists where the manufacturer charges the same wholesale prices across retailers. We show that regulating RRPs enables manufacturers to commit to their unobserved contracts, creating an equilibrium with wholesale price discrimination. We find that such an equilibrium increases manufacturer’s profits, but harms retailers and consumers.

Comparative Analysis of Multinomial Naïve Bayes and Logistic Regression Models for Prediction of SMS Spam

This research was conducted based on a report from the United States Federal Trade Commission regarding fraud through electronic text messages via SMS that fraudsters use to manipulate potential victims. Usually, scammers spread SMS spam as an intermediary for the crime. The development of a supervised learning algorithm is applied to predict SMS spam into three categories, such as SMS spam, SMS fraud, and promotional SMS. The prediction system is dividing into several stages in the development process, including data labelling, data preprocessing, modelling, and model validation. The known accuracy based on modelling using Logistic Regression using a test size of 15% is 99%, using a test size of 20% is 99%, and using a test size of 25% is 98%. The Multinomial Naïve Bayes algorithm's accuracy with a test size of 15%, 20%, 25% is 97%. So, the SMS spam prediction approach uses the logistic regression method, which has the highest accuracy.

Time for a New Sherman Act? The Debate on Antitrust Reform in Historical Perspective

The Sherman Antitrust Act (“Sherman Act” or “Act”), the Federal Trade Commission Act of 1914, and the Clayton Antitrust Act represent the core antitrust statutes. While these core statutes have remained largely the same, antitrust law has undergone sea changes since the late nineteenth and early twentieth centuries. To place the contemporary debate in historical context, this Introduction traces the trajectory of the Sherman Act and its diverging interpretations from the Act’s inception to date. This Introduction discusses the state of antitrust law during the early years of the twentieth-century, which featured the judicial development of the rule of reason. It also address the Progressive Era amendments to the antitrust laws, which reflected that era’s increased confidence in the efficacy of governmental and regulatory intervention as reflected in the amendments to the Clayton and FTC Acts. The Introduction then focuses on the state of antitrust law during the middle years of the twentieth century, sometimes characterized as operating according to a “big is bad” principle. It then turns to the modern era and discusses the last great revolution in antitrust thought: the arrival of the consumer welfare standard, which directs courts and practitioners to view antitrust law through the prism of how a given practice affects the consumer. This standard often, though not exclusively, focuses on a practice’s impact on prices and output. The Introduction discusses what may be the next revolution in antitrust thought, which some characterize as “the New Brandeis Movement.” It largely addresses the impact of increased concentration on economic as well as social and political issues. Finally, the Introduction concludes by discussing the various legislative proposals, from both Democrats and Republicans, to reform antitrust law, either through modest alterations or thorough overhauls.

Current Topics in Health Care Law

Current Topics in Health Care Law

Platforms as phish farms: Deceptive social engineering at scale

Phishing is a method of social engineering—it attempts to influence behavior and/or beliefs—in which a party either “imitates a trusted source” (Felix & Hauck, 1987) or induces another party to trust or place more or a different kind of trust in it. I argue that by their very nature, social platforms such as Facebook, Twitter, and others are large-scale phishing operations designed to collect information about users surreptitiously. Although providing terms of service and privacy policies, an individual has no way of knowing the extent of the platform’s personal data collection. This article reconsiders platforms as organizational phishing, and just as harmful as that done by hackers or others seeking unjust enrichment. To do this, this article identifies the significant elements of platform phishing by examining the descriptions of platform conduct provided in regulatory actions taken by the US Federal Trade Commission.

A Suggested Revision of the 2020 Vertical Merger Guidelines (Version: April 30, 2022)

The Department of Justice (DOJ)/Federal Trade Commission (FTC) Vertical Merger Guidelines (VMGs) were adopted by the FTC in June 2020 by a party-line 3-2 party line over the dissent of the Acting Chair. They were withdrawn by the FTC in September 2021. Withdrawal was appropriate because the VMGs are both incomplete and overly permissible. At this writing, the Guidelines are currently under revision, This draft is designed to aid that process and act as a supplement to the Guidelines that are adopted.

The 2020 Vertical Merger Guidelines: Some Suggestions for Revision

In 2020, the Department of Justice and the Federal Trade Commission (FTC) published their Vertical Merger Guidelines (VM Guidelines). The Guidelines were intended to reveal the principal analytical techniques, practices, and enforcement policies employed by the two Agencies, but they were short-lived at the FTC. In 2021, the VM Guidelines were rescinded by the FTC. Even before they were rescinded, their general language and some of the illustrative examples were not fully specified, which made them misleading. As work begins on reconstructing the VM Guidelines, we illustrate some of the weaknesses of the 2020 version and offer some suggestions for their revision. In this article, we will demonstrate why the incomplete specification can lead to some analytical difficulties. In addition, we will offer some clarifications and corrections. Our goal is to suggest refinements to the 2020 VM Guidelines so that they will be more useful in developing future guidelines for antitrust enforcement policy.

Negative Advertising and Competitive Positioning

Negative advertising provides information about the weaknesses of a competitor’s product. We study negative advertising with a focus on how its regulation impacts product positioning for profit-maximizing firms. We build a model of informative advertising competition, where product positioning is endogenous, and consumers have rational expectations. We show that despite the informational benefits of negative advertising, permitting it (as the Federal Trade Commission in the United States does) may lead to reduced product differentiation and lower consumer welfare, even in markets where firms do not use negative advertising in equilibrium. We then extend our model to political competition, where a candidate’s objective is to obtain a larger share of votes than the competitor. We show that political competition supports higher positional differentiation, along with more negative advertising than product competition, in line with observed high use of negative advertising in political races and their rarer use in product competition. This paper was accepted by Dmitri Kuksov, marketing. Funding: P. Yildirim thanks Mack Institute and the Dean’s Research Funds of the Wharton School for their generous funding of this study. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2022.4439 .

Would an FTC Ban on Non-Compete Agreements Lead to Higher Wages for American Workers?

There has been a potentially significant new development in the field of employee compensation, specifically as it relates to the use of non-compete agreements and their effect on wages for the average American worker. The Biden Administration issued an Executive Order in July 2021, urging the Federal Trade Commission to consider banning most non-competes; especially those acting as a restriction on job mobility and wage growth for low and moderate wage workers. Non-competes have become a widely-discussed issue due to the significant increase in their use by employers for a lower-wage employees. This article discusses the recent expansion in the use of non-competes, and examines the effect of their expanded use on wages for the average rank and file worker, including a discussion of the Biden Executive Order, and the possibility of federal action regulating the use of non-competes for the average American worker.

Network Marketing from an Islamic Economic Perspective

This study discusses network marketing from an Islamic perspective. The study aims to analyze the sharia opinions about the legality of network marketing and its ruling in Islamic law by reviewing the opinions and their evidences. The study reaches several results and recommendations, the most important of which are: Some laws have created standards separating the permissible and impermissible network marketing, and that one of the legal standards that separate legal network marketing from others is the US Federal Trade Commission standard. Another result is that Western laws have not succeeded in controlling fraud and scam companies in the field of network marketing, and therefore their dire economic consequences are greater than their benefits. So, it is necessary to activate the role of Islamic Sharia and strengthen the role of psychological scruples in combating frauds and deceits. To achieve the objective of the study, the researcher adopts the qualitative approach and its tools: analysis, comparison, induction, and observation. The importance of the research lies in its discussion of network marketing, which is one of the most important pillars of the modern era, especially in terms of activating trade exchange that challenged the spatio-temporal conditions through information and communication technology.

Does Regulating Dietary Supplements as Food in a World of Social Media Influencers Promote Public Safety?

Social media influencers promote a wide variety of products, including dietary supplements. Dietary supplements are regulated as foods, not drugs, by the US Food and Drug Administration and the Federal Trade Commission. This article details weaknesses in administrative and common law regulatory approaches to addressing some influencers' negligent misrepresentation claims about dietary supplements.

Is My Patient Taking an Unsafe Dietary Supplement?

Dietary supplements do not require premarket approval by the US Food and Drug Administration (FDA), yet they can have side effects; interact with medications, food, or other supplements; or be unsafe, so it is important for clinicians to discuss dietary supplement use with patients. This article provides an overview of dietary supplement requirements related to safety, manufacturing, labeling, advertising, and adverse event reporting; discusses tainted supplements and the FDA's and Federal Trade Commission's enforcement actions against dietary supplements; and offers recommendations to clinicians on matters of key clinical and ethical importance during clinical encounters.

Degraded Rationality and Suboptimal Decision-Making in Old Age: A Silent Epidemic With Major Economic and Public Health Implications.

Sound decision-making is important for success and well-being in all stages of life but is critical in old age, when many complex and influential decisions are made and opportunities to correct mistakes are limited. Decisions related to financial and health matters are of utmost importance for older adults and have far-reaching implications. Older adults control most household wealth in the United States and face a host of difficult financial decisions related to Social Security distributions, asset decumulation, intergenerational transfers of wealth, and more. Older adults also suffer a disproportionate burden of disease and face complex medical decisions related to chronic disease management and end-of-life care. Adding to the complexity of late-life decision-making, many choices older adults face involve novel considerations and inherent uncertainty; for example, effective management of limited retirement funds requires an estimation of one’s own life expectancy. Despite a lifetime of experience with decision-making, accumulating evidence suggests that many older adults struggle with financial and health decision-making. Older adults often take Social Security distributions too early (resulting in a significant long-term financial disadvantage), engage in unsound investments and risky credit/spending behaviors, and fail to take advantage of financial and health-care benefits. Perhaps even more alarming, older adults are highly vulnerable to financial exploitation and lose more than $30 billion annually in the United States alone. Further, recent Federal Trade Commission survey data suggest a disturbing increase in losses, with adults >60 years losing more than younger adults and considerably higher dollar amounts than their peers in prior years. Losses nearly doubled from 2019 to 2020 among individuals >80, the fastest-growing segment of the population. Further compounding the economic challenge is a looming public health crisis. Financial exploitation is associated with a range of adverse health outcomes, including depression, hospitalization, and early mortality. Indeed, the National Council on Aging dubbed scams against the elderly the “crime of the 21st century” and the Centers for Disease Control and Prevention and other federal agencies have called for immediate and intense efforts to address financial exploitation among older adults.

FEDERAL TRADE COMMISSION V. FACEBOOK

On December 9, 2020, the United States (U.S.) Federal Trade Commission (FTC) filed an antitrust lawsuit against Facebook. The lawsuit is an attempt by the U.S. government to regulate big-tech companies using antitrust laws after noticing the growing concerns of consumers’ data privacy breaches. The use of antitrust laws to regulate consumers’ data protection has been debated extensively by legal scholars; however, the debate focuses too much on theory and ignores the effectiveness of antitrust remedies. This paper looks at Federal Trade Commission v. Facebook, Inc. from both viewpoints of legal theory and practicality. It concludes that even though U.S. antitrust laws have possible jurisdiction over consumers' data privacy protection issues, their available legal remedies are not qualified to ensure consumers' data privacy protection.

On the Benefits of Scale Economies in Asset Management

Scale economies in asset management, coupled with strong competitive forces, have benefitted investors through greater market access and lower costs. The authors quantify these scale economies using data on 27,643 US open-end funds comprising $28.7 trillion in assets. Scale economies are pervasive and are experienced by both index and active managers. The authors develop a framework based on fund size and expense ratios to show that economies of scale in index management have led to significant reductions in costs for both index and, via competition, active investors. Using this framework, they evaluate a proposal by the Federal Trade Commission to amend antitrust regulations in a way that would significantly affect the ordinary course of investment activities of US asset managers and could reverse nearly three decades of cost reduction.

Cigar Warning Noticing and Demographic and Usage Correlates: Analysis from the United States Population Assessment of Tobacco and Health Study, Wave 5.

Although cigars pose health risks similar to cigarettes, their packaging/marketing is not subject to commensurate regulation in the US. In a 2000 agreement with the Federal Trade Commission, seven major manufacturers agreed to use some form of cigar warning. In 2016, the Food and Drug Administration passed a rule requiring larger standardized warnings, but the requirement was successfully challenged in court. Here, we examined U.S. population-level trends in noticing existing cigarillo, traditional and filtered cigar warnings. We analyzed Wave 5 Population Assessment of Tobacco and Health adult data to assess prevalence of past-30 day warning noticing and associations with socio-demographic and tobacco use variables. Noticing was higher among current users of cigarillos (27%), filtered (34%) and traditional cigars (21%), than non-users (8% for each product, p < 0.0001), and among every-day vs. some-day users, established vs. experimental users, and past-30 day users vs. those without past-30 day use. Results varied by product, but generally indicated lower noticing among non-Hispanic Whites and dual cigarette users, but higher noticing among those purchasing cigars by the box/pack (vs. not purchasing for themselves). Low overall noticing but higher prevalence among frequent users underscores a need for a stronger, uniform cigar warning label policy in the US.

Food and Beverage Product Appearances in Educational, Child-Targeted YouTube Videos.

Background: Food advertisement exposure is associated with children's increased caloric intake, but little is known about food/beverage placements in child-oriented educational YouTube videos. We aimed to quantify the prevalence of food/beverages in these videos and assess their nutritional quality. Methods: Researchers identified child-oriented educational YouTube videos from 2020, using keyword searches. We coded the names of featured food/beverages, coded how the food/beverages were interacted with, quantified the number of minutes the food/beverages appeared, and assessed the nutritional quality of the food/beverages. Results: A sample of 400 videos with the highest number of views was identified, 165 of which featured food/beverages. These 165 videos were collectively viewed over 1.1 billion times. Among these videos, 108 (67.4%) featured unhealthy foods and 86 (52.1%) featured branded products. Most food/beverages were used in experiment/tutorials (n = 143, 86.7%). Of the 165 videos featuring food/beverages, 91 (55.2%) did not depict food/beverages in their video thumbnail. Conclusions: While unhealthy food/beverages appear frequently in child-oriented educational YouTube videos, parents and teachers may not be aware of the presence of branded food/beverage products in these videos that could influence their children's food and brand preferences. The Federal Trade Commission should collect data on food and beverage company sponsorship of educational videos aimed at children and adolescents.

The Price Tag of "Pay-for-Delay"

In a landmark decision nearly a decade ago, the U.S. Supreme Court opened the door for antitrust suits against brand and generic pharmaceutical companies who engage in collusive settlements to delay the time for the generic to come to market. With these “pay-for-delay” agreements, brand-name companies offer prospective generics some form of compensation in exchange for the generic’s promise not to enter the market until an agreed-upon date. Laying the groundwork for the lawsuit that would eventually lead to the Actavis decision, the Federal Trade Commission (“FTC”) published a study estimating that pay-for-delay agreements cost American consumers $3.5 billion annually, a figure that has been cited repeatedly by scholars and policymakers alike.&#x0D; To understand the state of pay-for-delay agreements, this Article presents an in-depth examination of the burden that pay-for-delay imposes, both on society at large and on individual patients, and explores the modern legal landscape that has emerged since the Supreme Court’s historic pronouncement. Part I describes pay- for-delay agreements, exploring the literature on the potential harm of such agreements among pharmaceutical competitors. Part II presents a new analysis demonstrating that the cost of pay-for-delay to American consumers is far greater than anyone has recognized, and well beyond the $3.5 billion figure cited by the FTC in 2010. We applied six different methodologies to provide as fair and broad a view as possible. The range of methodologies show that at a minimum, the cost of pay-for-delay settlements on the U.S. population between 2006 and 2017 is $6.2 billion per year—almost double that of the FTC’s estimate. The methodology with the largest result suggests that the cost could be as high as $37.1 billion per year— ten times higher. Part III argues that courts are allowing this costly problem to flourish unchecked. This part reviews pay-for-delay decisions since Actavis, arguing that the courts have failed to properly analyze such cases from the perspective of all three notions inherent in the words “pay,” “for,” and “delay.” Finally, Part IV offers a path forward through the doctrinal haze.