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Warning Against COVID-19 Claims and more . . .

On April 24, 2020, the Federal Trade Commission (FTC) announced it had sent warning letters to 10 multi-level marketing companies regarding claims they or their participants (distributors) were making in social media posts and online related to COVID-19.
The claims included supposed health benefits, as well as pitching business opportunities related to the pandemic. You can read the announcement and obtain more detailed information at FTC Sends Warning Letters to Multi-Level Marketers Regarding Health and Earnings Claims They or Their Participants are Making Related to Coronavirus. These new letters come on the heels of letters previously sent to companies about unsupported claims concerning products that can treat or prevent coronavirus (FTC, FDA Send Warning Letters to Seven Companies about Unsupported Claims that Products Can Treat or Prevent Coronavirus).

The FTC and the FDA (Food and Drug Administration) have sent scores of warning letters to companies that may be violating federal law by making deceptive or scientifically unsupported claims about the ability of these products to treat or cure coronavirus. Warning letters have also been sent to voice over Internet protocol (VoIP) service providers and other companies warning against “assisting and facilitating” illegal coronavirus-related telemarketing calls.

You can visit the FTC Coronavirus Warning Letters to Companies web page to see a list of warning letters related to the COVID-19 pandemic.  The FTC also keeps track of consumer complaints related the pandemic and updates the data regularly.  As of yesterday, there were almost 30,000 COVID-19 related consumer complaints, and although less than 50% of all these complaints report a loss, the estimated fraud losses based on those that do is now well over $20,000,000.  For the latest statistics, visit Coronavirus (COVID-19) Consumer Complaint Data, which the FTC updates regularly.

The FTC and the Department of Justice have also issued a joint statement expressing their views on unfair competition and antitrust laws and regulations to make it clear, especially in these extraordinary times of crisis, how firms (including competitors) are permitted to engage in pro-competitive collaboration that does not violate the antitrust laws.  You can read the statement at Joint Antitrust Statement Regarding COVID-19.

Rimon lawyers continue to follow these and related developments applicable to the Paycheck Protection Program and other government initiatives available through the SBA and related to the COVID-19 pandemic. For more information or assistance you can contact me, Joe Rosenbaum or any of the Rimon lawyers with whom you regularly work.  Stay safe!!

 

 

 

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The Antitrust Division Finds the Nails

– By Stephen Díaz Gavin

Just yesterday (Monday, November 20th), as Stephen Diaz-Gavin’s article “For Want of a Nail: The AT&T – Time Warner Merger” was posted on Legal Bytes, the Antitrust Division of the U.S. Department of Justice (“DOJ”) filed a lawsuit opposing the merger in the U.S. District Court for the District of Columbia, asking that the proposed merger and related transactions be permanently enjoined.  The lawsuit is a significant departure from U.S. antitrust policy in recent years, which has generally permitted vertical mergers and, as we pointed out in our original post, highlights the problems in not having availed themselves of the FCC’s  public interest review to address the concerns about the merger, publicly.  AT&T  immediately responded that it will defend the merger, but win or lose, one thing is a sure thing – approval of AT&T’s $85.4 billion entry into the content production business — is no longer a sure thing. You can read the full text of the DOJ Complaint and again, if you have any questions feel free to contact Stephen Díaz Gavin directly. Of course, you can always contact me, Joe Rosenbaum, a Partner at Rimon in New York or any of the lawyers at Rimon with whom you regularly work.

 

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For Want of a Nail: The AT&T – Time Warner Merger

– By Stephen Díaz Gavin

In Poor Richard’s Almanack, Benjamin Franklin included his own version of an old proverb : “For the want of a nail the shoe was lost, For the want of a shoe the horse was lost, For the want of a horse the rider was lost, For the want of a rider the battle was lost, For the want of a battle the kingdom was lost, And all for the want of a horseshoe-nail.” In the case of AT&T’s proposed $85.4 billion purchase of Time Warner Communications, for want of the Federal Communications Commission (“FCC”), the battle might now be lost.

When the merger was announced, AT&T confidently predicted that the deal would get the regulatory “green light”, from the FCC and the Antitrust Division of the U.S. Department of Justice (“DOJ”) portraying the deal as a classic “vertical” merger that removed no competitors from any market. Mindful that AT&T was still smarting from its 2011 failure to convince the FCC to permit its acquisition of T-Mobile in a horizontal merger, AT&T wanted to avoid FCC review, if at all possible.  AT&T and Time Warner maintained this situation was different.  They pointed to the fact that both DOJ and FCC had allowed a large vertical merger to proceed in 2011 when Comcast was permitted to acquire NBC Universal from General Electric.  Just this past February, Time Warner reported to the Securities and Exchange Commission (“SEC”) that it did not plan to transfer any of its licenses to AT&T, so FCC approval would not be necessary. Curiously, few questioned AT&T’s suggestion that there was no role for the FCC because the licenses did not themselves provide service to the public, even though the Communications Act applies to all radio licenses, not just those intended to provide direct service to the public. Apparently a sure thing only weeks ago, the acquisition has  run into significant regulatory difficulties and the DOJ has now raised the prospect that AT&T will have to divest either the Turner Broadcasting unit, which includes CNN and other popular channels, or its DirecTV business.

So what is happening now and why? Consider the political landscape for one. There has been considerable bipartisan political opposition to AT&T’s acquisition of Time Warner. Both leading Republican and Democratic members of Congress have spoken skeptically of the merger. Indeed, despite some relatively benign requirements (not including any divestitures), the DOJ approved the Comcast/NBC Universal merger with no divestiture obligations on Comcast. It is no coincidence that opposition to the Comcast acquisition was largely from programmers and public interest groups, but not, as is the case here, politicians as well.

Comcast and AT&T already control 62.3% of U.S. high-speed internet broadband capacity – significant market power and the capability, as internet service providers, to engage in strategies intended to block competitors. Public interest groups and content providers have again raised the concern that like Comcast before it, AT&T will now itself be a programmer with an incentive for anti-competitive behavior. On the programming side, “competitors” like Google, Amazon.com Video, Facebook and others are dependent on ISPs like Comcast and AT&T to reach users. Some officials at DOJ are also apparently frustrated with AT&T trying to circumvent the regulatory process by creating a sense of “inevitability” around approvals and although behavioral safeguards were imposed in the Comcast/NBC approval, there has been growing concern these have not been successful in preventing abuses.

If the AT&T/Time Warner merger fails, it may well be for want of the FCC’s involvement at the very outset. For many reasons, this entire situation might well have been avoided if AT&T had bit the bullet and sought review by the FCC, along with DOJ. Not doing so, bypasses the public notice and comment procedures and disregards the “safety valve” provided by same public airing of the issues. Although impossible to know at this point, perhaps the public interest emphasis of the FCC might even had taken some pressure off the DOJ to look at more drastic alternatives, such as divestitures of key assets. Instead of the FCC that would have considered imposing “public interest” conditions on the merger, AT&T must now deal with a DOJ Antitrust Division head who believes only in structural remedies, such as divestitures.  We may never know if want of the FCC, like the want of a nail, will cause the battle to be lost, but it increasingly looks that way.

This posting was adapted and extracted from a more detailed Client Alert written by Stephen Díaz Gavin, a Partner in Rimon’s Washington, D.C. office and coordinator of Rimon’s Affiliation with Studio Legale Palmieri in Rome, Italy. You can read the entire alert, entitled “AT&T’s Multibillion Dollar Purchase of Time Warner Might Fail for Not Involving FCC,” and if you need more information, feel free to contact Stephen Díaz Gavin directly. As always, if you need any assistance you can always contact me, Joe Rosenbaum, a Partner at Rimon in New York or any of the lawyers at Rimon with whom you regularly work.

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FTC Finally Defines ‘Unfair’

According to the FTC: “The basic consumer protection statute enforced by the Commission is Section 5(a) of the FTC Act, which provides that “unfair or deceptive acts or practices in or affecting commerce … are … declared unlawful.” (15 U.S.C. Sec. 45(a)(1)). Safe Web amended Sec. 5(a) “unfair or deceptive acts or practices” to include such acts or practices involving foreign commerce that cause or are likely to cause reasonably foreseeable injury within the United States or involve material conduct occurring within the United States.”

Given that view and the FTC’s traditionally robust enforcement activities in areas of false, deceptive or misleading advertising, it is not surprising that most advertising, marketing and promotional professionals are familiar with section 5.

However, of lesser fame are pronouncements by the FTC in what is “unfair” competition – another segment of the authority vested in the Federal Trade Commission by section 5 of the FTC Act. This is the lesser-known part of section 5 that gives the FTC the authority to take action when it determines that “unfair methods of competition in or affecting commerce” may be deemed illegal – essentially an antitrust concept.

For the first time, the FTC, this past Thursday (August 13, 2015) released a single page “Statement of Enforcement Principles Regarding ‘Unfair Methods of Competition’ Under Section 5 of the FTC Act“. Perhaps indicative of the challenges and internal discussions among the regulators themselves, the principles are short and, to many, appear to be a re-statement of what has already been the enforcement practices of the FTC in recent years concerning this provision of the Act.

The Commission announced it will follow three basic principles. In short, enforcement will be considered: (1) Using the same underlying principles that guide antitrust law – protection of consumer welfare; (2) if the practice causes, or is likely to cause, harm to competition or the competitive process, without any counter-balancing justification; and (3) if enforcement under the Sherman or Clayton Act is insufficient and independent action is considered necessary.

If you want to know more or have questions, please contact me or any Rimon attorney with whom you work.

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Google and the FTC

An Open IMHO Letter to Google

Dear Google:

I’ve heard that the FTC has served you with a civil investigative demand in connection with your search-advertising business. They have raised the question as to whether your search engine technology pushes consumers to your other services in a manner that is unfair to your competition.

Now the FTC will try to determine if your market power is dominant because your practices are unfair and whether consumers are harmed, either directly or by not having competitive choices in the marketplace. Of course, the FTC has taken into account the complaints of your competitors. That is significant because I’ve heard a rumor that companies rarely try to incite trouble for their competitors at a regulatory agency.

So what happens next? Senior executives scramble. Lawyers do research and prepare briefs. Finance people set up cost centers and budgets. Evidence is gathered. Experts are retained. Distraction will be pervasive, invasive, consistent and persistent – until a settlement is reached. It won’t be pretty. It won’t be fun. It never is. But it’s here and at least the sword of Damocles is not hovering above. The issues will be confronted and the scope will be expanded – government always uses what it finds as a basis for going farther than originally planned (it’s great leverage). Then the serious business of trying to reach an accord will begin.

This isn’t about winning or losing. It’s about making a point. But it’s de facto, a recognition that you are thriving at what you do and have grown large and successful as a result. True, this action is probably not the recognition you prefer, but when the government wants everyone to believe you might be too big, too dominant, too much in control at the expense of competition and the detriment of consumers, the target is painted on you and it’s just a question of how much pain is inflicted before a settlement is reached.

Now I am not an economist or a market dominance expert, I’m a lawyer and blogger; but I thought I might help out by offering some observations you can bring to the attention of the FTC that might give the government (maybe others in the industry and even your competitors), pause to question whether their analysis, their efforts, their investigation, is correct or necessary. I’ve taken the liberty of including an attachment to this letter (see Attachment A) that provides some tips. Feel free to use them and tell your lawyers to back them up with lots of research and briefs – those are always impressive and useful.

Sincerely,

Joe Rosenbaum at Legal Bytes.

P.S. If your people end up spending hours, days and months with government regulators, working through lunches, late nights pouring over documents, huddled around conference tables, it may give you an opportunity to point the officials to their next target. You know who.

P.P.S. Feel free to use these and other quotes from the FTC if you like:

“And, as the information industry is still emerging, quite dynamic, and not yet well understood, plausible efficiency benefits should, perhaps, weigh heavily in the balance against asserted risks of decreased competition, especially when the technology is changing so fast that adverse effects on competition are likely to be transitory.”

“Antitrust and Technology: What’s On The Horizon?” Prepared Remarks of Federal Trade Commissioner Christine A. Varney, before the American Society of Association Executives, Legal Symposium, Washington, D.C., October 6, 1995

“A less confrontational approach suggests that because of the robust pace of innovation in high-tech industries, government should not intervene ‘unless certain that doing so will benefit consumers and the economy.’ (See, Priest, The Law and Economics of U.S. v. Microsoft, AEI Newsletter, August 1998).” Antitrust Analysis in High-Tech Industries: A 19th Century Discipline Addresses 21st Century Problems, Prepared Remarks of Robert Pitofsky, Chairman, Federal Trade Commission, to the American Bar Association Section of Antitrust Law’s Antitrust Issues in High-Tech Industries Workshop, February 25-26, 1999, Scottsdale, Arizona

You really need to see Attachment “A” so if it isn’t already displayed, point whichever browser you are using and click the “Continue Reading” text on the left below.

Continue reading “Google and the FTC”

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Transcending the Cloud – Tying Up Cloud Antitrust Issues in a Bow

As you know, we have been updating our Cloud Computing initiative with a consistent stream of information – new chapters and white papers intended to provoke thought, stimulate ideas and, most of all, demonstrate the thought leadership Rimon attorneys bring to bear when new and important trends and initiatives in the commercial world give rise to new and interesting legal issues. Often, especially when words like “privacy” and “security” are thrown about, it becomes easy to overlook some of the other issues lurking in the background.

So here, from Jeremy D. Feinstein, is a glimpse at some antitrust issues. This next chapter in Rimon’s on-going series, “Transcending the Cloud: A Legal Guide to the Risks and Rewards of Cloud Computing,” is titled “Tying Up the Cloud,” and seeks to give you some insights into the potential antitrust and competitive issues that even customers should be aware of, if not concerned with, when considering entering the cloud.

As we continue to do, we have updated the entire work so that, along with the single chapter on “Tying Up the Cloud” applicable to antitrust, you can now access and download the PDF of our complete “Transcending the Cloud: A Legal Guide to the Risks and Rewards of Cloud Computing” compendium, up to date and including all the previous chapters in one document.

Feel free to contact Jeremy D. Feinstein directly if you have any questions or require legal counsel or assistance related to competition or antitrust. Make sure you subscribe via email or get the Legal Bytes RSS Feed so you are always in touch with our latest information. Of course, if you ever have questions, you can contact me, Joseph I. (“Joe”) Rosenbaum, or Adam Snukal, or any Rimon attorney with whom you regularly work.