The Eleventh Circuit Limits the FTC’s Authority to Challenge Practices as “Unfair”

06633 - Royall, M. Sean ( Dallas )Featured Expert Column: Antitrust & Competition Policy — Federal Trade Commission

By M. Sean Royall and Richard H. Cunningham, Partners with Gibson, Dunn & Crutcher LLP, and Bennett Rawicki, Associate Attorney, all in the firm’s Dallas, TX office.

The U.S. Court of Appeals for the Eleventh Circuit’s recent LabMD, Inc. v. FTC decision imposes significant limits on the Federal Trade Commission’s freedom to prosecute and settle cases the agency pursues pursuant to the “unfair acts or practices” prong of Section 5 of the FTC Act.

Overview of the FTC’s Case Against LabMD

In 2013, the FTC brought an administrative enforcement action against LabMD alleging a Section 5 violation based on purported unfair data security practices.  Among other alleged deficiencies, LabMD failed to identify that a file-sharing program an employee installed on a company computer had for years been exposing confidential patient information to the public.  Continue reading “The Eleventh Circuit Limits the FTC’s Authority to Challenge Practices as “Unfair””

FTC Enforcement Powers Face Serious Challenge

FTC_Man_Controlling_TradeThe Federal Trade Commission (FTC) has long asserted broad authority to sue businesses for engaging in unfair or deceptive acts or practices.  But a recent federal court decision (Federal Trade Commission v. Shrire Viropharma Inc.) calls that authority into serious question.  If upheld on appeal, the decision could lead to major changes in the way FTC carries out its enforcement responsibilities.

The decision focused on § 13(b) of the Federal Trade Commission Act (FTCA).  That statute authorizes FTC to seek injunctive relief in federal court against anyone who “is violating, or is about to violate” a law enforced by FTC.  FTC has long contended that § 13(b) also authorizes actions against entities based on past violations, even in the absence of evidence that the entity “is about to” commit new violations.  A Delaware federal district judge’s rejection of that contention has thrown a monkey wrench into FTC’s enforcement apparatus. Continue reading “FTC Enforcement Powers Face Serious Challenge”

Tronox/Cristal Merger Fight Highlights the FTC/DOJ Divide in U.S. Merger Control Proceedings

06633 - Royall, M. Sean ( Dallas )Featured Expert Column: Antitrust & Competition Policy — Federal Trade Commission

By M. Sean Royall and Richard H. Cunningham, Partners with Gibson, Dunn & Crutcher LLP, and Justin Epner, an Associate in the firm’s Washington, DC office.  The authors would like to thank Jasper Hicks, who is an Associate in Gibson Dunn’s Denver, CO office, for his substantial contributions to this post.

In early 2017, Mississippi-based titanium dioxide (TiO2) pigment producer Tronox Limited (“Tronox”) agreed to purchase the TiO2 business of one of its rivals, Saudi Arabian producer Cristal (“Cristal”).  Alleging a horizontal competitive effects theory, the Federal Trade Commission (FTC) voted in December 2017 to challenge the deal in its internal administrative court.  Roughly two months after the FTC initiated the administrative challenge, however, the litigation took an interesting and unusual turn—Tronox filed a federal lawsuit of its own against the Commission in the Northern District of Mississippi.  Continue reading “Tronox/Cristal Merger Fight Highlights the FTC/DOJ Divide in U.S. Merger Control Proceedings”

New Slate of Commissioners Should Elevate FTC’s Consideration of the First Amendment

FTC_Man_Controlling_TradeThe U.S. Senate Committee on Commerce, Science, and Transportation has scheduled a hearing for tomorrow, February 14, 2018, on the nominations of a new Chairman and three new Commissioners to the Federal Trade Commission (FTC). In recent years, FTC has become the primary national regulator of consumer data privacy and security, a responsibility that accords the Commission a staggering amount of influence over an American economy increasingly fueled by information.

When utilizing that authority over how businesses treat consumer data, the Commission has accorded little or no regard to the First Amendment. Data is speech, a reality that the incoming Chairman and Commissioners must incorporate into consumer-protection enforcement under § 5 of the Federal Trade Commission Act. Continue reading “New Slate of Commissioners Should Elevate FTC’s Consideration of the First Amendment”

With “LabMD” Decision Looming, FTC Workshop Delves into Privacy & Data Security Harms

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Guest Commentary

By Douglas H. Meal, Michelle Visser, and David T. Cohen, Partners with Ropes & Gray LLP.

For years, the Federal Trade Commission (FTC), the primary consumer protection agency in the United States, has brought enforcement actions against companies on the basis that their alleged failure to use specified privacy and data security measures was purportedly an “unfair” business practice prohibited by § 5 of the Federal Trade Commission Act.  But FTC in fact has no authority under § 5 to declare a practice “unfair” unless, among other things, it causes or is likely to cause substantial, unavoidable injury to consumers that is not outweighed by countervailing benefits.

What (if anything), then, is a “substantial” injury in the privacy and data security context, how should its likelihood be measured, and how should one measure the benefits and costs of particular practices? Continue reading “With “LabMD” Decision Looming, FTC Workshop Delves into Privacy & Data Security Harms”

Federal Court’s Embrace of FTC Data-Breach Settlements as “Common Law” Treads on Due Process

d of washingtonThe Federal Trade Commission (FTC) has developed a well-known penchant for using individually negotiated settlement agreements and consent decrees to announce for the first time what qualifies as “unfair” or “deceptive” conduct under the FTC Act. In the data-privacy arena, FTC views these enforcement actions (and the resulting consent decrees) as a source of “common law” that places the business community on sufficient notice of what data-security practices § 5 of the FTC Act requires.

The U.S. District Court for the Western District of Washington recently ratified that view in a controversial ruling, Veridian Credit Union v. Eddie Bauer. The case arose following a 2016 cyberattack on Eddie Bauer’s network that compromised customers’ payment-card data. Veridian Credit Union, whose cardholders had their data stolen after shopping at Eddie Bauer, brought suit under Washington’s Consumer Protection Act (CPA), which like § 5 of the FTC Act also allows courts to award treble damages to private plaintiffs who are injured by “unfair” or “deceptive” acts. Veridian alleged that Eddie Bauer’s failure to adopt data-security measures that FTC has required in other cases constitutes an “unfair” practice under the Washington CPA. Continue reading “Federal Court’s Embrace of FTC Data-Breach Settlements as “Common Law” Treads on Due Process”

FTC Pharma Workshop Focuses on Supply Chain Issues and “Gamesmanship” of FDA Regulation

Featured Expert Column: Antitrust & Competition Policy — Federal Trade Commission

06633 - Royall, M. Sean ( Dallas )By M. Sean Royall, a Partner with Gibson, Dunn & Crutcher LLP, with Richard H. Cunningham, Of Counsel in the firm’s Denver, CO office, and Abiel Garcia, an Associate Attorney in the firm’s Los Angeles, CA office.

On November 8, 2017, the Federal Trade Commission hosted a workshop examining competitive dynamics in the pharmaceutical sector.  Participants in the workshop included professors Michael A. Carrier, Aaron Kesselheim, Stephen Schondelmeyer, Neeraj Sood, Erin Fox, and Rena Conti; representatives from industry interest groups Mark Merritt and Todd Ebert; consumer advocate David Mitchell; economists Adam Fein and Hal Singer; FDA Commissioner Dr. Scott Gottlieb; and FTC Acting Chairman Maureen Ohlhausen.

While FTC workshops are informal and have no binding effect on the policies of the agency, they frequently foreshadow areas of future investigative or enforcement focus.  Participants’ comments generally affirmed that areas of long-standing FTC activity in the pharmaceutical sector, including reverse payments and merger enforcement, are likely to remain areas of ongoing focus.  Two notable new issues also emerged:  scrutiny of the industry’s distribution system and potential abuse of FDA regulatory processes to inhibit generic entry.  In addition, Dr. Gottlieb announced three new FDA initiatives to facilitate generic entry into pharmaceutical markets. Continue reading “FTC Pharma Workshop Focuses on Supply Chain Issues and “Gamesmanship” of FDA Regulation”