Markets Wired

In testimony before the U.S. Senate Subcommittee on Financial Services and General Government of the Committee on Appropriations, the Federal Trade Commission today described the agency’s continuing work to promote competition and protect American consumers, including initiatives to stop fraud targeting financially distressed consumers, protect privacy, and prevent anticompetitive practices such as “pay-for-delay” in the pharmaceutical industry, which costs consumers $3.5 billion a year in higher drug costs.

FTC Chairman Jon Leibowitz summarized the FTC’s FY 2011 budget request, noting that strong support from Congress has made the agency more effective in its consumer protection efforts. The testimony stated that, in the past year, the FTC has brought almost 40 law enforcement actions to stop scams that prey on consumers suffering from the financial downturn, and the agency is also engaged in rulemaking and consumer education efforts related to financial services. In the financial services area alone, the FTC has filed more than 100 actions over the past five years, and obtained nearly $500 million in redress for consumers in the past 10 years.

The testimony highlighted FTC efforts to protect financially-strapped consumers, including filing 28 lawsuits since 2008 to stop deceptive claims by mortgage loan modification and foreclosure relief scammers, and proposing rules that would stop them from collecting fees before delivering results. The FTC has also led a federal-state crackdown on employment opportunity scams, bogus government grant offers, debt relief and credit repair scams, and get-rich-quick schemes, and reached an $18 million settlement with MoneyGram, resulting in more than 34,000 checks to consumers who were tricked into wiring money regarding fake lotteries, secret shopper scams, and bogus loans.

The testimony also highlighted the FTC’s efforts to protect consumers’ privacy. The FTC has taken 29 actions against companies that failed to protect consumers’ personal information; obtained $11 million for consumer redress from LifeLock, Inc. as part of a settlement preventing false identity theft prevention claims; shut down a rogue Internet Service Provider that helped distribute illegal spam, child pornography, and other harmful content; and settled a lawsuit against Sears for not fully disclosing the scope of consumers’ personal information the company collected. To help consumers check for inaccurate information on their credit reports, the FTC amended the Free Credit Report Rule to help consumers avoid “free” offers that cost money. The FTC is also examining consumer privacy more broadly, especially in light of emerging technologies and business models, including social networking, cloud computing, online behavior advertising, and mobile marketing.

Noting the FTC’s continuing enforcement of the Do Not Call Registry, which protects almost 200 million telephone numbers, the testimony stated that in the past year the FTC filed nine law enforcement actions against “robocallers” making deceptive telemarketing pitches, including one announced today against AMS. DirecTV and Comcast paid $2.3 million and $900,000, respectively, to settle charges that they called consumers who had asked not to be called. Also, today the FTC announced a $500,000 settlement with Diamond Phone Card, Inc. for overstating the number of calling minutes on its prepaid calling cards.

As stated in the testimony, the FTC has worked to protect children by filing more than 14 lawsuits to enforce the Children’s Online Privacy Protection Act, obtaining more than $3.2 million in civil penalties for law violations. The FTC has also continued its efforts to promote marketing of healthier foods to children, educate children about online safety, and help children think critically about advertising.

The testimony also highlighted FTC efforts to promote competition, including its top priority, to stop pay-for-delay drug patent settlements that cost consumers $3.5 billion per year in higher drug costs. The FTC also challenges anticompetitive health care mergers to help reduce costs, improve quality, and encourage innovation.

The FTC also focuses significant resources on protecting competition in technology, energy, and consumer goods and services. Last year, the agency charged Intel Corporation with illegally using its dominant position to stifle competition, strengthen its monopoly, and raise prices to consumers in the computer microchip market. The FTC has also hosted workshops on the future of news to explore how to enhance media competition to protect consumer welfare.

In closing, the testimony requested $314 million to support 1,207 “full-time equivalent” employees (FTEs) to meet the challenges of FY 2011, which represents an increase of $22.3 million and 40 FTEs from FY 2010. The testimony noted that the FTC’s current staff level is considerably lower than it was at its peak in 1979, when the FTC had about 1,800 FTEs to serve a much smaller population.

The Commission vote authorizing the testimony was 5-0.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(SenateBudgetTestimonyFY2011)
(P072104)