The FTC has been active despite being in the midst of the holiday season. The Commission and the DOJ released its 2023 Merger Guidelines as well as a FY 2022 report detailing data on the HSR Premerger Notification Program. The Bureau of Consumer Protection was also active this week. It announced a new report summarizing key takeaways from an October 2023 roundtable examining the impact of generative artificial intelligence. The Commission also announced a new notice of proposed rulemaking and an extension to an existing proposed rulemaking related to consumer protection issues. These stories and more after the jump.

Monday, December 18, 2023

FTC Bureau of Competition: 2023 Merger Guidelines

  • The FTC, together with the U.S. Justice Department, issued the 2023 Merger Guidelines, which describe factors and frameworks the agencies utilize when reviewing mergers and acquisitions. Since 1968, the agencies have issued merger guidelines in an effort to enhance transparency and promote awareness of how the agencies undertake merger analysis before deciding whether or not to challenge an acquisition. Over the years, the agencies have worked collaboratively to update the merger guidelines periodically to reflect changes in the law and market realities, including in 1982, 1984, 1992, 1997, 2010, and 2020. As detailed in a recent Crowell client alert, the guidelines reflect both significant and subtle changes for companies to consider when assessing certain antitrust risk.

FTC Bureau of Consumer Protection: Artificial Intelligence

  • The FTC announced a new report detailing key takeaways from an October 2023 virtual roundtable that examined how generative artificial intelligence is being used and is affecting professionals in music, filmmaking, software development, and other creative fields. Some of the key concerns summarized in the report include the following: (1) collection without consent; (2) nondisclosure; (3) competing for work with AI; (4) style mimicry; and (5) fake endorsements. The report stated that the FTC will continue to closely monitor generative AI industry developments and will remain vigilant and ready to use its law enforcement and policy tools to foster fair competition, protect consumers, and help ensure that the public benefits from this transformative technology.

Tuesday, December 19, 2023

FTC Bureau of Consumer Protection: Franchises, Business Opportunities, and Investments

  • The FTC announced that a federal judge in the Eastern District of Pennsylvania has temporarily halted the business operation schemes of Business Revolution Group Inc., which operated schemes since at least 2018 that targeted consumers looking to build their own businesses. According to the complaint filed on December 8, 2023 consumers were charged at least $3,000 and as much as $21,000, plus additional hundreds of dollars in “administrative fees,” for membership in the scheme, which nominally promises its members turnkey online businesses that would be operated on the members’ behalf. The complaint further alleges that the scheme utilized false marketing claims about potential profits. In addition to injunctive relief, the complaint seeks monetary relief under Section 19 of the FTC Act for alleged violations of the Telemarketing Sales Rule, which allows the FTC to provide refunds to harmed consumers.

FTC Bureau of Consumer Protection: Retail Privacy and Security; Artificial Intelligence.

  • The FTC announced that Rite Aid has been prohibited from using facial recognition technology for surveillance purposes for five years, resolving allegations that the retailer failed to implement reasonable procedures and prevent harm to consumers in its use of facial recognition technology in hundreds of stores. According to the complaint, from 2012 to 2020, Rite Aid deployed artificial intelligence-based facial recognition technology in order to identify customers who may have been engaged in shoplifting or other problematic behavior. The complaint, however, charges that the company failed to take reasonable measures to prevent harm to consumers, who, as a result, were erroneously accused by employees of wrongdoing because facial recognition technology falsely flagged the consumers as matching someone who had previously been identified as a shoplifter or other troublemaker. The proposed order will require Rite Aid to implement safeguards to prevent these types of harm to consumers when deploying automated systems that use biometric information to track them or flag them as security risks. It also will require Rite Aid to discontinue using any such technology if it cannot control potential risks to consumers. To settle charges it violated a 2010 Commission data security order by failing to adequately oversee its service providers, Rite Aid will also be required to implement a robust information security program, which must be overseen by the company’s top executives. Commissioner Alvaro M. Bedoya’s statement on the FTC v. Rite Aid Corporation matter can be found here.

Wednesday, December 20, 2023

FTC Bureau of Consumer Protection: Children’s Privacy and Security

  • The FTC announced a notice of proposed rulemaking to update Children’s Online Privacy Protection Rule (COPPA Rule). The FTC’s proposed changes would place new restrictions on the use and disclosure of children’s personal information and further limit the ability of companies to condition access to services on monetizing children’s data. The COPPA Rule first went into effect in 2000 and requires certain websites and other online services that collect personal information from children under the age of 13 to provide notice to parents and obtain verifiable parental consent before collecting, using, or disclosing personal information from these children. The rule also limits the personal data that websites and other online services can collect from children, limits how long they can retain such data, and requires them to secure the data. The FTC last made changes to the COPPA Rule in 2013 and initiated the latest review of the rule in 2019. The FTC has proposed several changes to the rule including the following: (1) requiring separate opt-in for targeted advertising; (2) a prohibition against conditioning a child’s participation on collection of personal information; (3) limits on the support for the internal operations exception; (4) limits on nudging kids to stay online; (5) changes related to Ed Tech; (6) increasing accountability for Safe Harbor programs; (7) strengthening data security requirements; and (8) limits on data retention. Additionally, the FTC has proposed expanding the definition of “personal information” to include biometric identifiers. The Commission has also proposed numerous additional features to consider when determining whether a website or online service is directed at children. The public will have 60 days to submit comments on the proposed changes to the COPPA Rule after the notice is published in the Federal Register. Commissioner Alvaro M. Bedoya’s statement on the issuance of the Notice of Proposed Rulemaking can be found here.

FTC Bureau of Consumer Protection: Advertising and Marketing Junk Fees

  • The FTC announced that it has extended the deadline to provide public comment on a new proposed rule to prohibit junk fees to February 2, 2024. On October 11, 2023, the Federal Trade Commission announced that it was seeking public comments on a new proposed rule to prohibit junk fees, which are hidden fees that can harm consumers and undercut honest businesses. The public comment period originally was set to expire on January 8, 2024.

Thursday, December 21, 2023

FTC Bureau of Competition: Hart-Scott-Rodino Act (HSR)

  • The FTC and the U.S. Department of Justice’s Antitrust Division released their annual report detailing fiscal year 2022 data on the HSR Premerger Notification Program, which alerts the agencies to transactions that may substantially lessen competition in violation of federal law. The report includes statistical tables profiling HSR filings and investigations during fiscal year 2022. The report notes that 2022 saw the second-highest number of transactions reported under the HSR Act in the past 10 years. 1.6% of the HSR reportable transactions were subject to a second request, which is consistent with the average number of second requests issued across the last decade. The FTC and DOJ together filed 50 merger enforcement actions in fiscal year 2022, representing the highest level of enforcement activity in over 20 years. The Commission brought 24 merger enforcement challenges in fiscal year 2022; 11 in which it issued final consent orders after a public comment period; seven in which the transaction was abandoned or restructured as a result of antitrust concerns raised during the investigation; and six in which the Commission initiated administrative or federal court litigation.  Chair Lina M. Khan and Commissioners Rebecca Kelly Slaughter and Alvaro M. Bedoya issued a joint statement regarding the 2022 HSR annual report to Congress. The statement points out some HSR-related challenges that the agency faces and its commitment to enforcing the antitrust laws.  

Wednesday, December 27, 2023

Bureau of Consumer Protection: Education

  • The FTC filed suit against Grand Canyon Education (GCE), Inc., Grand Canyon University (GCU), and the CEO of GCE and president of GCU Brian Mueller. The complaint alleges that GCU’s advertising of the cost of its accelerated doctoral program misleads prospective students since most students must take additional courses, which increase the cost of the program. Second, the FTC states that GCU advertising itself as a non-profit university is deceptive because GCU has been operated for the profit of GCE and its stockholders and pays revenue to GCE. Additionally, the FTC states that  telemarketing calls urged prospective students to submit their information online, which GCE used to contact people who had requested not to be called.