International Monthly: July 2016

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 U.S. Competition, Consumer Protection and Privacy News
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JULY 2016

Consumer Protection and Privacy

Volkswagen To Spend up to $14.7 Billion To Settle Allegations of Cheating Emissions Tests and Deceiving Customers on 2.0 Liter Diesel Vehicles

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In two related settlements, one with the FTC and one with the United States and the State of California, German automaker Volkswagen AG has agreed to spend up to $14.7 billion to settle allegations of cheating emissions tests and deceiving customers. This is the largest false advertising case in FTC history. The FTC sued Volkswagen in March 2016, charging that the company deceived consumers with the advertising campaign it used to promote its supposedly “clean diesel” VWs and Audis. The ads falsely claimed that the cars were environmentally friendly, met emissions standards, and would maintain a high resale value. In addition to partially resolving the FTC’s claims, the settlements resolve certain allegations by the Environmental Protection Agency (EPA) and California state agencies relating to the vehicles’ use of “defeat devices” to cheat emissions tests.

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Under the settlements, Volkswagen will offer consumers a buyback and lease termination for nearly 500,000 model year 2009-2015 2.0 liter diesel vehicles sold or leased in the United States, and spend up to $10 billion to compensate consumers under the program. In addition, the company will spend $4.7 billion to mitigate the pollution from these cars and invest in green vehicle technology. The settlements use the authorities of both the EPA and the FTC as part of a coordinated plan that gets the high-polluting VW diesels off the road, makes the environment whole, and compensates consumers. The settlements do not resolve pending claims for civil penalties or any claims concerning 3.0 liter diesel vehicles. Nor do they address any potential criminal liability. In connection with the settlements, the FTC also has published information for businesses and consumers on its website.

Chairwoman Ramirez Welcomes European Commission Approval of the EU-U.S. Privacy Shield Framework

FTC Chairwoman Edith Ramirez issued the following statement regarding the European Commission’s approval of the EU-U.S. Privacy Shield Framework in Brussels, Belgium on July 12: “I welcome the European Commission’s approval of the EU-U.S. Privacy Shield Framework. The FTC has a strong track record of protecting consumer privacy, and we will remain vigilant as we enforce the new framework. We will also continue to work closely with our European counterparts to provide robust privacy and data security protections for consumers in the United States and Europe.”

FTC Staff Commends Key Principles for Online Reviews and Endorsements from the International Consumer Protection and Enforcement Network

ICPEN

FTC staff took to social media to welcome new guidance from the International Consumer Protection and Enforcement Network (ICPEN) on online reviews and endorsements in a global context. In a blog post and on Twitter, FTC staff joined with other ICPEN members to applaud ICPEN’s three new guidance documents that set forth key principles for online advertising. ICPEN’s three sets of “best practices” are tailored to the categories of participants involved in online reviews and endorsements: (i) review administrators; (ii) traders and marketing professionals; and (iii) digital influencers (such as bloggers, vloggers, tweeters, and contributors to online publications). Like the FTC’s work in this area, the ICPEN guidance reflects basic truth-in-advertising principles, including that endorsements must be truthful and not misleading, and material connections between an endorser and a marketer of a product or service that would affect how people evaluate the endorsement must be disclosed clearly and conspicuously. The FTC is a member of ICPEN.

Warner Bros. Settles FTC Charges It Failed To Adequately Disclose It Paid Online Influencers To Post Gameplay Videos

Warner Bros. Home Entertainment, Inc. has settled FTC charges that it deceived consumers during a marketing campaign for the video game Middle Earth: Shadow of Mordor. According to the FTC complaint, Warner Bros. promoted the game by giving influencers a free advance-release version of the game, telling them how to promote it, and paying them to post positive gameplay videos on You Tube and social media. While the videos were sponsored content, essentially ads, the FTC alleges that Warner Bros. did not require the paid influencers to adequately disclose this fact nor instruct them to include sponsorship disclosures clearly and conspicuously in the video itself, where consumers were likely to see or hear them. Over the course of the campaign, the sponsored videos were viewed more than 5.5 million times.

FTC and Florida Charge International Tech Support Operation with Tricking Consumers into Paying Millions for Bogus Services

The FTC and State of Florida have taken action against defendants who ran an international tech support operation and allegedly misrepresented to consumers that malware or hackers had compromised their computers. The defendants also allegedly misrepresented that their operation was associated with or certified by Microsoft and Apple to fix their computers. A federal court has temporarily shut down the defendants’ operation, frozen their assets, and placed control of the businesses with a court-appointed receiver. According to the complaint, the defendants caused consumers’ computers to display advertisements designed to resemble security alerts from Microsoft or Apple, which lured consumers to the defendants’ call center. The FTC has extensive consumer education materials about tech support scams, including a new video.

Singapore-Based Mobile Advertising Network Settles FTC Charges It Tracked Hundreds of Millions of Consumers’ Locations Without Permission

Singapore-based mobile advertising company InMobi agreed to pay $950,000 in civil penalties and implement a comprehensive privacy program to settle FTC charges it deceptively tracked the locations of hundreds of millions of consumers, including children, without their knowledge or consent in order to serve them geo-targeted advertising. According to the FTC complaint, InMobi mispresented that its advertising software would only track consumers’ locations when they opted in and in a manner consistent with their device’s privacy settings. The FTC alleges that InMobi also violated the Children’s Online Privacy Protection Act by collecting information from apps that were clearly directed at children, in spite of promising that it did not do so.

Competition

FTC Challenges Proposed Merger of Canadian Chemical Companies

The FTC filed an administrative complaint charging that the proposed $982 million merger of Canadian chemical suppliers Superior Plus Corp. and Canexus Corp. would violate the antitrust laws by significantly reducing competition in the North American market for sodium chlorate. Sodium chlorate is a commodity chemical used to bleach wood pulp that is then processed into paper, tissue, diaper liners, and other products. Following the FTC’s complaint, Superior Plus announced that it would abandon plans to acquire Canexus. The FTC and the Canadian Competition Bureau collaborated in this investigation, although Canada declined to challenge the transaction because of its unique efficiencies defense, which differs from that in the United States (FTC Requires Ball To Divest Aluminum Can Plants as a Condition of Acquiring Rexam

Ball Corporation agreed to sell eight U.S. aluminum can plants and associated assets to settle FTC charges that its proposed $8.4 billion acquisition of Rexam PLC would likely harm competition. According to the complaint, the acquisition would eliminate direct competition in the United States between U.S.-based Ball and U.K.-based Rexam, which are the two largest manufacturers of aluminum beverage cans in both the United States and the world, thereby substantially lessening competition.? The FTC also charged that the acquisition would increase the likelihood of anticompetitive coordination between the two remaining independent U.S. beverage can suppliers. The FTC cooperated with the competition authorities of the European Union, Mexico, and Brazil during the investigation.

FTC Requires Cement Manufacturers To Divest U.S. Assets as a Condition of Merger

German cement producer HeidelbergCement AG and Italian producer Italcementi S.p.A. agreed to divest a cement plant in West Virginia and up to 11 cement distribution terminals in six other states to settle FTC charges that their proposed $4.2 billion merger would likely harm competition. Heidelberg and Italcementi are the second and fourth largest producers of cement in the world, according to the complaint. In the United States, the two companies compete through their U.S. subsidiaries, Lehigh Hanson and Essroc Cement Corp., to sell portland cement, an essential ingredient of concrete. According to the complaint, the merger as proposed would have reduced the number of competitively significant suppliers from three to two and harmed competition for portland cement in five metropolitan areas.

In Other News

FTC Raises Civil Penalty Maximums To Adjust for Inflation

The FTC has approved a rule change that adjusts the maximum civil penalty for violations of provisions of law that allow the FTC to seek civil penalties, as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. The new maximum civil penalty amounts will take effect on August 1. The maximum civil penalty amount has increased from $16,000 to $40,000 for violations listed in the Federal Register Notice. The Commission has a civil penalty leniency program for small businesses that establishes criteria the Commission will consider when determining the propriety of a penalty waiver or reduction for small businesses that are not in compliance with the law.

U.S. and Japanese Antitrust Heads Meet

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The heads of the antitrust agencies of the United States and Japan met on July 14 to discuss a wide range of topics, including recent enforcement developments, antitrust policy and enforcement involving intellectual property, and international enforcement cooperation. The purpose of the meeting between FTC Chairwoman Ramirez, Principal Deputy Assistant Attorney General Renata Hesse, and Japan Fair Trade Commission Chairman Kazuyuki Sugimoto is to reinforce ties of cooperation and share knowledge in light of the increasing internationalization of antitrust enforcement.

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