Recent Federal Trade Commission Research Articles

The rise of the apps: FTC and DOJ crack down on provider selling data

The recent Federal Trade Commission (FTC) and Department of Justice (DOJ) action against Monument Inc. for selling patient data, is just the tip of the iceberg. Monument Inc. positions itself as a treatment provider (the website home page says it provides “therapy” for alcoholism) but in its extensive terms of use, it says it is not a treatment provider. And in fact, since the FTC/DOJ action this spring, Monument radically changed its website, removing the offending promise of “confidentiality” which it breached, but still selling services (lowest price $15/month).

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.

Little Things and Big Challenges: Information Privacy and the Internet of Things

IntroductionThe of (IoT) is part of our lives in countless ways- some are welcome and intentional, such as trackable fitness devices, home security alert systems, or cars that can be unlocked and started remotely; others are unintentional and may cause concern to consumers, such as connected toys that can listen to our kids, or technologies capable of tracking our whereabouts or our shopping habits without our knowledge. The rapid growth of IoT has prompted incredible technological advances along with thorny regulatory issues, specifically in area of information privacy. Traditional regulators of privacy, specifically Federal Trade Commission (FTC), have stretched to apply traditional tools to regulate unprecedented technological advances and privacy challenges they bring. An analysis of latest FTC cases and outcomes reveals an independent agency retooling investigative and enforcement methods and priorities to establish new expectations for how fair information practices and principles will be applied to new technologies.The FTC, like technological advances it has stretched to keep pace with, has been increasingly progressive in its recent decision-making terminology. This Article uses recent, seminal FTC cases and outcomes to demonstrate how FTC has developed new information privacy framework, most recently expressed as concept of unfair tracking, by modifying traditional legal concepts. The FTC has significantly expanded its role as primary reviewer of information privacy matters raised by IoT, while attempting to balance philosophy not to impede advance of technology comprising IoT. This Article reviews recent FTC efforts to regulate IoT and provides critical commentary on how FTc might proceed.To best understand genesis of recent FTC actions on IoT data collection, Part i describes what makes up ioT, how pervasive ioT has become in our lives and, perhaps most importantly, how it will continue to innovate at rapid pace. Parts II and III of this Article describe some unprecedented benefits and unprecedented challenges confronting regulators of information privacy in today's IoT age, including how to protect individual privacy rights without undermining innovation and promise connected world of IoT brings.Part IV provides an in-depth critical review of four key FTC cases attempting to strike this sort of balance: In re Nomi Technologies, Inc.,1 United States v. InMobi Pte Ltd..,2 In re Turn, Inc.,5 and FTC v. VlZIOi Initially, FTC applied its traditional section 5 deception jurisprudence in novel way to advance traditional notions of privacy, but it has recently transitioned to new paradigm in form of cause of action for unfair tracking, starting with VIZIO. However, this Article concludes that this new standard could prove either too anemic or, alternatively, overbroad, without proper shepherding by FTC. It is only with proactive guidance to supplement its traditional reactive enforcement that little things of IoT can overcome big information privacy challenges IoT creates.I. IoT: A Big Connection of Little ThingsThe term Internet of Things (IoT) has been defined in variety of ways. In broadest sense, phrase encompasses everything connected to [I]nternet, but it is increasingly being used to define objects that 'talk' to each other.5 A simple definition of IoT is the concept of basically connecting any device with an on and off switch to (and/or to each other).6 Oxford Dictionaries define it as [t] he interconnection via of computing devices embedded in everyday objects, enabling them to send and receive data.7 Others define IoT as the ability of one device to connect to other devices through wireless data infrastructure8 or a system of devices and things that are implanted with sensors, software and electronics to initiate exchange and collection of data and information. …

The Federal Trade Commission and Consumer Protections for Mobile Health Apps.

The Federal Trade Commission (FTC) has an important role to play in the governmental oversight of mobile health apps, ensuring consumer protections from unfair and deceptive trade practices and curtailing anti-competitive methods. The FTC's consumer protection structure and authority is outlined before reviewing the recent FTC enforcement activities taken on behalf of consumers and against developers of mhealth apps. The article concludes with identification of some challenges for the FTC and modest recommendations for strengthening the consumer protections it provides.

Developments in State Action

On March 1, 2016, the ABA Section of Antitrust, Exemptions and Immunities Committee presented a panel with an update on state action immunity since N.C. Dental. After giving a brief refresher on N.C. Dental, the panel discussed the recent Federal Trade Commission guidance on the decision, an update on pending state action cases, and how states have reacted since the N.C. Dental decision.

Insuring hedged bets with lobbying

Much of the research on organized interests concludes that lobbying has little influence on lawmaking. We argue that businesses often need only small actions from politicians in order to secure profitable outcomes in the marketplace. Case studies show how lobbyists affected the Air Cargo Deregulation Act in the 1970s, the Data Quality Act in the 2000s, and the recent Federal Trade Commission investigation of Herbalife. Hedge funds are particularly well situated to profit from small actions by lawmakers, as those political actions affect market values. As a largely unregulated sector, hedge funds are ideal for testing the idea that businesses lobby for directly profitable actions. Our time series analysis demonstrates that spending on lobbying coincides with the value of assets under management in hedge funds and with increases in the federal budget. Although the time series work cannot directly test our theory, our results do fit with the notion that businesses and financial firms treat spending on lobbying as an investment to protect their interests.

Doctoring up Cybersecurity Standards

In today’s technological world, it is common for corporations and individuals alike to enjoy and exploit the benefits of cloud computing. These advancements, however, come with a price as the modern technological age continues to grow. By its very nature, the normal course of business has changed drastically. From private entrepreneurial websites to conglomerates like Amazon, Inc., making purchases online has never been easier. Rather than traveling to your products, consumers today simply create an account with a certain business, enter personal credentials, provide a credit or debit card number for the transaction, and give an address for the shipment of their newly owned product. As a way to facilitate this course of business, it is normal for online venders to utilize their consumer’s information and store it for future use in the event that the consumer would like to purchase again. Due to the storing of valuable information onto the cloud, an increasing number of online security breaches via hacking from unauthorized individuals has occurred. This has led to multiple areas of contention between state laws and regulations, the businesses found therein, along with their valuable stored information and the use of the cloud itself. This Note aims to fill the gaps between the legal and the constantly changing technological world. Since valuable personal property is at stake when consumer information is stored in online databases, it is imperative that laws offering protection provide adequate safeguards to those most at risk. In filling these gaps, this Note first explains the use of cloud computing, including cloud variations and the essential components to these online databases. Second, this Note delves into an in-depth analysis of Federal Trade Commission v. Wyndham Worldwide Corporation, a recent FTC (Federal Trade Commission) case that has provided uncertainty in the cybersecurity world. Third, this Note identifies the gray areas from Wyndham that remain in question as well as provides a foundation of existing case law to shed light on the topic. Fourth, this Note proposes a change in the FTC’s current proceedings to provide a rule that identifies specific cybersecurity measures to obtain adequate protections in the event of cyber attacks.

The perils of excessive discretion: the elusive meaning of unfairness in Section 5 of the FTC Act

Section 5 of the Federal Trade Commission (FTC) Act gives the FTC an undefined mandate to prosecute ‘unfair methods of competition’. For nearly 100 years, the FTC has searched tirelessly for the meaning of this amorphous concept. Since 1992, the FTC has continued to define Section 5 through a series of consent decrees. Absent any external constraint, the FTC appears to have broad discretion to define the reach of Section 5 beyond the Sherman Act. This discretion causes uncertainty, which is likely to deter beneficial conduct. It also creates incentives to divert resources from productive to redistributional purposes. The recent FTC investigation of Google illustrates the FTC’s discretion to define the reach of Section 5. This article suggests several reforms, including making Section 5 coterminous with the Sherman Act, or having the FTC issue guidelines that limit Section 5 to conduct that clearly harms consumers through adverse effects on competition, and that would not otherwise fall under the antitrust laws.

The Perils of Excessive Discretion: The Elusive Meaning of Unfairness in Section 5 of the FTC Act

Section 5 of the Federal Trade Commission (FTC) Act gives the FTC an undefined mandate to prosecute "unfair methods of competition." For nearly 100 years, the Commission has searched tirelessly for the meaning of this amorphous concept. Since 1992, the FTC has continued to define Section 5 through a series of consent decrees. Absent any external constraint, the FTC appears to have broad discretion to define the reach of Section 5 beyond the Sherman Act. This discretion causes uncertainty, which is likely to deter beneficial conduct. It also creates incentives to divert resources from productive to redistributional purposes. The recent FTC investigation of Google illustrates the FTC’s discretion to define the reach of Section 5. This paper suggests that the FTC issue a binding statement making Section 5 coterminous with the Sherman Act or limiting Section 5 to conduct that clearly harms consumers through adverse effects on competition, and that would not otherwise fall under the antitrust laws.

Materiality, settlements and the FTC'S Ad substantiation program: Why wonder bread Lost No Dough

Previous studies (e.g. by Peltzman and Mathios-Plummer) reveal powerful share-value effects of Federal Trade Commission (FTC) actions against firms for their advertising. Curiously, however, Mathios-Plummer finds that when the FTC announces an investigation but simultaneous settlement of the case with the advertiser, no adverse impact results, an empirical finding thus far unexplained. This article adds to the literature in two ways. First, we analyze statistically more recent cases, and show that the Mathios-Plummer results—no impact when the FTC issues simultaneously a complaint and settlement—have been robust over time. More important, the article uses a recent FTC action, in which the accused advertiser suffered no adverse equity impact, to explain lack of impact when complaint and settlement are announced simultaneously. The article focuses empirically on the issue of materiality. Many advertising messages challenged by the FTC are not material to consumers. If not—and especially when, as in the case discussed here, the advertiser had much earlier discontinued the advertising challenged—the advertiser predictably would not suffer. Econometric evidence strongly indicates that the messages the FTC challenged were immaterial to consumers. Copyright © 2010 John Wiley & Sons, Ltd.

Managing The Legal Risks Related to Information Security

Information security has become a critical issue. The risks of computer hackers, computer viruses ana worms, identity theft, denial of service attacks, theft, terrorist attacks, sabotage, surveillance and intrusion by competitors and malicious acts by disgruntled employees, among other vulnerabilities, are increasing at an alarming exponential rate. Managing the risks from these unprecedented threats to the enterprise has become a vital risk management concern for the company's board of directors and top management, with the result that effective security programs have become a necessity. Prudent risk management and due care with respect to security programs are necessary to avoid potential liability. Information security is a risk management process to protect the confidentiality, integrity and availability of systems and content. The federal Information Security Act of 2002 (44 U.S.C. § 3542) defines Security as ... protecting and systems from unauthorized access, use, disclosure, disruption, modification, or destruction in order to provide - (A) integrity, which means guarding against improper modification or destruction and includes ensuring nonrepudiation and authenticity; (B) confidentiality, which means preserving authorized restrictions on access and disclosure, including means for protecting personal privacy and proprietary information; and (C) availability, which means ensuring timely and reliable access to and use of information. This article examines the evolving standard in the United States to provide reasonable security requiring a risk-based process to develop and maintain a comprehensive security program. This process is based upon recent Federal Trade Commission (FTC) consent orders relating to security. The FTC has significantly broadened the scope of its enforcement actions by asserting that a failure to provide appropriate security was, itself, an unfair trade practice in violation of Section 5 of the FTC Act. These information security FTC cases are very instructive in defining the scope and extent of a company's legal obligation to implement security measures. These cases point to the emergence of a standard respecting security. They demonstrate that security is no longer just good business practice. Information security has become a obligation.

Why Wonder Bread Lost No Dough: Materiality, Settlements and the FTC's Ad Substantiation Program

Previous studies (e.g., by Sam Peltzman) demonstrate the powerful share-value effects of Federal Trade Commission (FTC) actions against firms whose advertising the FTC claims violate the law. Curiously, however, when the FTC announces an investigation but simultaneous settlement of the case with the advertiser, no adverse impact results, an empirical finding thus far unexplained. This article uses a recent FTC action, in which the accused advertiser suffered no adverse equity impact, to explain that result. Many advertising messages challenged by the FTC are not material to consumers. If not - and especially when, as in the case discussed here, the advertiser had much earlier discontinued the advertising challenged - the advertiser predictably would not suffer. Econometric evidence supports the findings of no adverse impact, and of lack of materiality in the messages the FTC challenged.

Comparative Advertising in the European Union

More than 20 years after the measure was first proposed, the European Union has finally succeeded in adopting a directive designed to harmonise disparate national laws relating to the use of comparative advertising in the single market.1 In this article the authors examine the background, rationale and substance of the new legislation, before considering its impact on the current UK law. With a view to the possibility that implementation may contribute to the transatlantic harmonisation of advertising law, the new regime is measured against the liberal benchmark of US case law and recent Federal Trade Commission policy.

The Regulation of Green Marketing

In 1990, the National Association of Attorneys General (NAAG, 1990) drew a parallel between the extensive use of health and nutrition claims during the 1980s and the escalating use of environmental claims (what has come to be known as marketing) during the 1990s. While clear potential benefits from the use of such claims in the area of consumer education have been noted (Ippolito and Mathios, 1989; Levy and Stokes, 1987), the NAAG, based on its experience with nutrition claims, is also concerned about potential confusion and harm that may result from the unrestrained use of claims. The NAAG recommended that the Federal Trade Commission (FTC) and the Environmental Pro tection Agency (EPA) work jointly with the states to develop national standards for environmental marketing claims. In July 1992, the FTC responded by issuing an initial set of guidelines developed in close cooperation with the EPA and the U.S. Office of Consumer Affairs. The guidelines are not legally enforceable and deal primarily with a limited number of environmental terms such as recyclable, degradable and environmentally friendly used in the advertising and labeling of a variety of products. Nonetheless, the guidelines are an attempt to provide federal guidance to marketers wishing to make environmental claims. The FTC plans to seek com ments on how the guidelines are working after they have been in place for three years. The recent FTC guidelines will most certainly stimulate debate over the appropriate role of federal agencies in regulating green

Information on tar and nicotine yields on cigarette packages.

We examined information on tar and nicotine yields on the packages of 160 cigarette brands, 58 percent of the 275 brands for which tar and nicotine yields were listed in a recent Federal Trade Commission report. The tar yield was indicated on 14 percent, the nicotine yield was indicated on 11 percent. As tar yield increased among brands, the yield was progressively less likely to be shown on the package and was not disclosed on the package of any cigarette yielding 11 mg or more of tar.

The Price and Profit Effects of Horizontal Merger: A Case Study

THE economic rationale behind antitrust concern for horizontal mergers rests primarily on the familiar structure-performance paradigm that links market concentration with supra-competitive profits and, implicitly, with higher prices. A vast empirical literature has demonstrated a positive statistical relationship between measures of industry structure, such as entry barriers and concentration, and average industry profit using cross section data. A small number of cross section studies, most dealing with banking services, have claimed to find a positive relationship between concentrated market structure and price measures (Aspinwall [1970], Bell and Murphy [I969], Heggestak and Mingo [1976], Hester [I979], Lamm [I98I], Landon [I97I], Marion et al. [1979] and Marvel [1978]), but we are unaware of any study that traces the effect of an actual change in market structure on prices or profits. In this paper we exploit an unusual opportunity to test for price effects and estimate profit consequences of two acquisitions that resulted in substantial increases in the market share of the acquiring firm. The evidence we examine arises from a recent Federal Trade Commission antitrust suit against Xidex corporation, the world's largest producer of duplicating microfilm. The Xidex case is unusual in three respects. (I) Although the size of the market is small (sales under $ioo million), the acquisitions involved greater changes in market shares than are usual in antitrust actions. (2) The suit was brought five years after the first acquisition and two years after the second; so a post-acquisition record of price behavior exists for this example. Furthermore, the price data used in this study are actual transaction prices. (3) Special characteristics of the products allow a relatively straightforward test for price effects of the acquisitions. The next section provides background information concerning the firms and products involved. Following that, we describe the data and methodology used to estimate the price effects of the acquisitions, and present results which indicate significant price increases traceable to the acquisitions. We then offer estimates of the incremental profits attributable to those price increases. A final section provides a summary. * The analysis and conclusions set forth in this study are those of the authors and do not necessarily reflect the views of Federal Trade Commission Staff or the Commission itself. All data and other information used in the study are in the public domain This includes information obtained by the Commission which has become part of the public record. For helpful comments we thank Allan Fisher, Ron Lafferty, Paul Pautler and Rich Sciacca of the Bureau of Economics, Federal Trade Commission.

Consumer Protection: More Information or More Regulation?

T HE legal aspects of marketing have been a continuing concern of marketing scholars and practitioners. This is evidenced by the appearance in the business literature of a large number of articles dealing with recent Federal Trade Commission rulings, Supreme Court rulings, and new areas of federal and state legislation affecting marketing activities.' The few empirical studies in this area have investigated important but rather narrow issues, such as the effectiveness of corrective advertising,2 nutrition labeling of canhed foods,3 retailers' reactions to laws limiting interest rates,4 and consumers' attitudes toward and knowledge of one state's cooling-off law.5 The scope of the present research is broader than that of the previous studies. Its objective was to determine how much individuals in various sectors of society know about the consumer protection laws and their rights as consumers.