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FEDERAL
TRADE
COMMISSION
PERFORMANCE REPORT
FISCAL YEAR 2001
February 27, 2002
SUMMARY
The Federal Trade Commission (FTC) is terms. The President selects one Com-
charged with protecting consumers from missioner to act as Chairman. No more
fraud, deception, and unfair practices in than three Commissioners can be of the
the marketplace. The agency addresses same political party. The FTC has two
current issues of importance to con- major bureaus, Consumer Protection and
sumers, including identity theft, tele- Competition, supported by the Bureau of
marketing fraud, Internet fraud, and credit Economics and regional and mission
reporting. The FTC uses targeted law support offices.
enforcement actions and consumer and
business education to protect the public. The Bureau of Consumer Protection’s
We work to ensure that consumers have charge is to protect consumers against
accurate information for their purchasing fraudulent, deceptive, or unfair practices.
decisions, and can have confidence in the This Bureau enforces a variety of
traditional and electronic marketplaces. consumer protection and credit laws
enacted by Congress, as well as trade
The FTC also has a long tradition of regulation rules issued by the Com-
maintaining a competitive marketplace for mission. Its actions include individual
both consumers and businesses. We company and industry-wide investigations,
enforce the laws that prohibit anticom- administrative and federal court litigation,
petitive mergers and business practices. rulemaking proceedings, and consumer
Free and open competition is the and business education.
cornerstone of our economy, bringing
consumers the benefits of low prices, high The FTC’s antitrust arm, the Bureau of
quality products and services, and in- Competition, seeks to prevent anti-
novation. We work to remove restrictions c o m p e t i t i ve mergers and o t h er
on the engine of competition so that anticompetitive business practices in the
markets can function at their best. We marketplace. This Bureau promotes con-
focus particularly on market segments that sumers’ freedom to choose goods and
matter most to consumers: health care, services in a competitive marketplace at
prescription drugs, grocery retailing, high price and quality levels that fit their needs.
tech, and energy. By promoting vigorous It also fosters opportunity for businesses
competition in these and other markets, by ensuring competitive markets.
we can help to ensure a strong economy.
The Bureau of Economics helps the two
Our educational materials, as well as mission bureaus evaluate the economic
information about the FTC’s activities, can impact of their actions. To do so, this
be found on our Web site, www.ftc.gov. Bureau provides economic analysis and
support to antitrust and consumer
protection investigations and rulemakings.
About the FTC It also analyzes the impact of government
regulation on competition and consumers
The FTC is an independent agency that
and provides Congress, the Executive
reports to Congress on its actions. It is
Branch, and the public with economic
headed by five Commissioners, nominated
analysis of market processes as they relate
by the President and confirmed by the
to antitrust, consumer protection, and
Senate, each serving staggered seven-year
regulation.
The FTC’s regional offices cover seven The mission support offices consist of
geographic areas. The regional offices work management and administrative functions;
with the Bureaus of Consumer Protection these offices provide needed services to
and Competition to conduct investigations support the operations of the agency.
and litigation; provide advice to state and
local officials on the competitive impli- Strategic Plan
cations of proposed actions; recommend
cases; provide local outreach services to
Our Strategic Plan sets forth the FTC’s
consumers and business persons; and
Vision and Mission with respect to two
coordinate activities with local, state, and
goals. These goals, and their corre-
regional authorities. FTC regional offices
sponding objectives (see Figure 1), are the
frequently sponsor conferences for small
framework for the activities we pursue
businesses, local authorities, and
during the course of each year. Our
consumer groups.
performance measures help us assess the
impact of our annual activities.
FIGURE 1
FTC’S STRATEGIC PLAN
VISION: A U.S. economy characterized by vigorous competition among producers and consumer access to accurate
information, yielding high quality products at low prices and encouraging efficiency, innovation, and
consumer choice.
MISSION: To prevent business practices that are anticompetitive or deceptive or unfair to consumers; to enhance
informed consumer choice and public understanding of the competitive process; and to accomplish these
missions without unduly burdening legitimate business activity.
GOAL 1 Prevent fraud, deception, and GOAL 2 Prevent anticompetitive mergers and
unfair business practices in the other anticompetitive business
marketplace. practices in the marketplace.
OBJECTIVE 1.1 Identify fraud, deception, and OBJECTIVE 2.1 Identify anticompetitive mergers and
unfair practices that cause the practices that cause the greatest
greatest consumer injury. consumer injury.
OBJECTIVE 1.2 Stop fraud, deception, and unfair OBJECTIVE 2.2 Stop anticompetitive mergers and
practices through law enforcement. practices through law enforcement.
OBJECTIVE 1.3 Prevent consumer injury through OBJECTIVE 2.3 Prevent consumer injury through
education. education.
2
C Facilitating consumers’ access to
2001 Highlights important medications - including
taking actions resulting in the pre-
During 2001, the FTC’s activities
servation of ongoing development of
benefitted consumers and businesses. We
new drugs, blocking collusion among
were successful in achieving or exceeding
competitors, and removal impediments
the majority of the performance targets we
to the tim ely availability of lower-cost
use to measure our effectiveness. High-
generic drugs.
lights of our 2001 results include:
C Identifying approximately 200 firms
C Saving consumers an estimated $3.1
engaging in pretexting, a practice
billion1 through law enforcement
through which companies obtain and
actions – a savings of over $21 for each
sell consumers’ asset or bank account
$1 appropriated for FTC operations. In
information to third parties. Firms were
addition, the FTC’s law enforcement
sent letters warning them to dis-
activities and consumer education
continue this privacy-related violation;
efforts deter many fraudulent or
we followed up by filing complaints in
anticompetitive practices that likely
federal court charging some companies
result in substantial, though un-
with continuing this practice despite
measurable, consumer savings.
the warning.
C Using the more than 430,000 con-
C Bringing the first cases enforcing the
sumer complaints we received in 2001
new ly effective Children’s Online
to target our law enforcement and
Privacy Protection Rule that protects
education efforts to the most serious
children under the age of 13; de-
problems affecting consumers, and
fendants paid fines totaling $100,000.
sharing these complaints with over 400
law enforcement partners.
C Securing a settlement to protect com-
petition in the growing broadband
C Providing access to the 131,000
market for Internet services.
identity theft complaints and inquiries
to more than 235 law enforcement
C Expanding outreach to consumers by
mem bers to help them identify and
launching two new Web sites to collect
target the most serious consumer
and share consu me r com plaint
problems in this area.
information: Public Sentinel, to provide
the public with consumer fraud and
C Saving consumers more than $2 billion
iden tity theft trend data and
dollars on fuel and utility bills through
information; and www.econsumer.gov,
merger enforcement actions involving
to enhance consumer protection and
gasoline and other petroleum products,
confidence in global e-commerce. In
and electricity and natural gas trans-
addition, the FTC is in the process of
mission.
launching another Web site, Soldier
Sentinel, to permit military service
mem bers to enter consumer com-
plaints and receive education materials
1
A preliminary consumer savings estimate of online.
$3.3 billion was included in the FY 2003
Congressional Budget Justification materials.
However, after a final reconciliation of the data,
the final consumer savings estimate is $3.1
billion.
3
The FTC’s 2001 performance provided lic. Our internal control review program,
s i g n if ic a n t b e n e f i t s to American along with our Inspector General’s audits
consumers, and the cost of the agency’s and other independent reviews, plays a
operations is a sound investment for significant role in ensuring effective and
consumers and businesses. We effectively responsive agency operations.
manage our resources and serve the pub-
Figure 2
FY 2001 Performance Measures and Targets
G OAL 1 G OAL 2
OBJECTIVE 1.1 OBJECTIVE 2.1
Measure 1.1.1: Annual number of Measure 2.1.1: Percent of HSR second
consumer complaints and inquiries requests resulting in enforcement action.
entered into database. Target: 50%
Target: 350,000 Actual: 68% T
Actual: 430,000 T Measure 2.1.2: Number of nonmerger
investigations opened per year.
Target: 45-70
Actual: 56 T
OBJECTIVE 1.2 OBJECTIVE 2.2
Measure 1.2.1: Dollar savings for Measure 2.2.1: Positive outcome of cases
consumers from FTC actions which stop brought by FTC due to alleged violations.
fraud. Target: 80%
Target: $400 million Actual: 94% T
Actual: $487 million T Measure 2.2.2: Dollar savings for consumers
Measure 1.2.2: Total expenditures of resulting from FTC actions stopping
deceptive or unfair advertising campaigns anticompetitive mergers.
stopped. Target: $800 million
Target: $300 million Actual: $2.5 billion T
Actual: $86 million Measure 2.2.3: Dollar savings for consumers
resulting from FTC actions stopping
anticompetitive nomerger activity.
Target: $200 million
Actual: $157 million
OBJECTIVE 1.3 OBJECTIVE 2.3
Measure 1.3.1: Number of education Measure 2.3.1: Quantify number of
publications distributed to or accessed education and outreach efforts.
electronically by consumers. Determine baseline
Target: 10 million Measure 2.3.2: Quantify number of hits on
Actual: 15 million T antitrust information on FTC Web site.
Determine baseline
T met or exceeded target
4
fraud and one for our other law
2001 Assessment – enforcement or nonfraud efforts. The
Measuring Performance former is our key consumer protection
measure (1.2.1). Our 2001 target was to
Through Results save consumers over $400 million by
stopping fraud. We surpassed this target,
A major feature of our strategic
with our actions saving consumers an
planning process is the continual
estimated $487 million. Our five-year goal
reevaluation of our objectives, performance
for the period 2001-2005 is to save
measures, and performance targets. This
consumers $2 billion, or an average of
process gives us the opportunity to assess
$400 m illion per year.
our impact on the marketplace and
evaluate how well we are doing our job of
Performance measure (1.2.2) addresses
protecting the American consum er. It also
the law enforcement efforts to stop
allows us to determine if our measures are
deceptive or unfair practices. In 2001, a
accurate indicators of the results of our
new measure was used that looks at the
performance (see Figure 2).
value of the deceptive or unfair advertising
campaigns we are able to stop. Our target,
As previously discussed, our Strategic
based on our year 2000 results, was to
Plan is based upon two goals: preventing
reduce consumer injury by stopping
fraud, deception, and unfair business
campaigns that had combined media
practices in the marketplace (Consumer
expenditures totaling $300 million.
Protection), and preventing anticom peti-
However, we stopped only $86 million of
tive mergers and other anticompetitive
expenditures of deceptive or unfair ad-
business practices in the marketplace
vertising campaigns in 2001, or 29% of our
(Maintaining Competition). We have de-
target, which led us to re-examine the
veloped measures for both of our goals and
measure and the target. We found that the
their corresponding objectives.
base year 2000 included final orders
halting several large national advertising
Under Goal 1, the results of our efforts
campaigns. However, in 2001, nearly half
under the first objective are measured by
of our advertising cases with final orders
the number of consumer complaints and
involved companies that used the Internet
inquiries added to the Consumer Informa-
or other low-cost alternatives to conduct
tion System database (Measure 1.1.1). The
advertising campaigns. After studying
more data we have, the better able we can
these results and advertising trends in
effectively spot wide-ranging trends,
general, we have reset our target to $100
quickly identify emerging scams, and
million in 2002. Through our continuous
efficiently coordinate activities with other
self-evaluation process, we will closely
law enforcers. In 2001, we added more
monitor this area and explore whether
than 430,000 entries, exceeding our target
there are other measures that will allow us
of 350,000 by approximately 23%. This
to more effectively evaluate our impact in
growth reflects the increasing interest of
the nonfraud area, including our efforts to
organizations in contributing complaint
protect consum ers’ privacy.
data to our database, which gives us a
broader view of what consumers are
Under the third consumer protection
experiencing.
objective, we measure our impact by track-
ing the number of consumer and business
The second consumer protection ob-
education publications we distributed to
jective has two measures, one for our law
the public (Measure 1.3.1). Tracking the
enforcement efforts related to stopping
distribution of publications in response to
5
consumer requests gives us an approx- met our target, opening 56 investigations,
imate idea of how many consumers believe more than double the 25 investigations
our information will prove useful. In 2001, opened in 2000.
the FTC distributed approximately 15
million publications: 5.4 million print pub- For the second objective, we use three
lications and 9.6 million through the FTC measures to gauge our success in stopping
Web site. This is the second year in which anticompetitive mergers and practices
electronic distribution surpassed print dis- through law enforcement. The first
tribution. We exceeded our goal of 10 (Measure 2.2.1) addresses the percentage
million publications by approximately 5 of anticompetitive mergers and practices in
million, due primarily to an unexpected which we achieved relief through litigation,
increase in the number of publications reached a successful settlement agree-
accessed online. Our reach nationwide was ment, or persuaded parties not to proceed
extended by aggressive outreach and with an anticompetitive acquisition. We
promotion of FTC materials and our toll- seek to obtain a positive result in at least
free num bers. 80% such matters in which we determine
that a merger or a course of conduct is
Under Goal 2, we adopted a new anticompetitive. We were able to exceed
measure under the first Maintaining Com- our goal in 2001, by achieving a positive
petition objective (Measure 2.1.1) that result in approximately 94% of the matters
allows us to evaluate our effectiveness in in which we identified an antitrust
screening HSR premerger notification problem. While we expect to prevail nearly
filings to identify those that most likely all the time in our enforcement actions, we
present antitrust concerns. Success in this remain willing to undertake challenging
measure benefits consumers by targeting cases that may result in losses.
resources toward transactions most likely
to have anticompetitive effects. Our pre- Within the last year, we increased our
liminary target was that at least 50% of annual target for dollar savings to con-
HSR requests for additional information sumers resulting from FTC merger actions
would result in enforcement action. We (Measure 2.2.2) from $500 million to $800
exceeded that figure, with enforcement million. In 2001, we saved consum ers
actions taken in 68% of the HSR in- approximately $2.5 billion, keeping us well
vestigations. We will continue to evaluate on course to achieve our goal of $4 billion
our target for this measure, and will make in direct savings to consumers over the
appropriate adjustments based on our five-year period 2001-2005. In addition, we
ongoing experience. added a new performance m easure in
2001 relating to consumer savings
The second measure under this ob- resulting from FTC nonmerger enforce-
jective (Measure 2.1.2) - the number of ment actions (Measure 2.2.3). Our goal for
nonmerger investigations opened per year this measure is to achieve $1 billion in
- helps us assess our efforts to broaden direct savings to consumers over the five-
our identification of anticompetitive con- year period 2001-2005 by stopping anti-
duct in the market. Our goal has been to competitive practices that would result in
open 45 to 70 nonmerger investigations higher consumer prices if allowed to
over the course of each year, a range continue. Meeting the five-year goal
reflecting the number of nonmerger requires an average of $200 million per
investigations opened in years prior to year in consumer savings. In 2001, we
2000, when we diverted resources away saved consumers $157 million. Although
from nonmerger work to respond to an the 2001 result is somewhat less than the
unprecedented level of merger activity. We yearly average of $200 million needed to
6
achieve the five-year goal, we expect to tinues to be successful in protecting con-
reach the five-year goal by achieving sumers, we face challenges in this
greater savings in subsequent years. complex, high-tech, global marketplace.
Emerging issues such as enforcing the
Together, consumer savings resulting promises made to consumers about the
from merger and nonmerger enforcement privacy of their personal information and
represent our key maintaining competition maintaining competition among companies
measures. Actual results in any given year operating in this expanding marketplace
may vary based on the level of merger have risen to the forefront.
activity taking place, the nature of the
transactions, and the industries in which The FTC currently enforces a number
we identify antitrust concerns. In 2001, of laws that address consumers’ privacy.
our merger and nonmerger enforcement Privacy of personal information is impor-
actions saved consumers a total of about tant and companies that make specific
$2.6 billion, a significant portion of our promises to consum ers about the privacy
combined five-year goal. of their information need to live up to these
promises. Doing so will enhance the con-
Under the third objective we replaced fidence that consumers have in the
both performance measures for 2001. The marketplace. The FTC is concerned with
new measures, relating to education and the misuse of personal inform ation and is
outreach activities by FTC personnel committed to both law enforcement and
(Measure 2.3.1) and the frequency of the education in this area. To meet this
public’s access to important antitrust- challenge, the FTC is increasing the
related content on the FTC’s Web site resources dedicated to privacy protection.
(Measure 2.3.2), more directly reflect our The areas of focus include: telemarketing,
success in preventing consumer injury unsolicited e-mail (spam), ID Theft, and
through education of the public. Because pretexting, as well as enforcement of the
we did not systematically collect this infor- Children’s Online Privacy Protection Act,
mation before 2001, we have not yet set the Gram m-Le ach-B liley A ct, th e
targets for these new measures but we Telemarketing Sales Rule, and Section 5 of
have collected data to use as a baseline for the Federal Trade Commission Act.
evaluating future performance. In 2001,
we completed a total of 141 public A major privacy initiative is the FTC’s
outreach efforts and received more than proposal to establish a national Do-Not-
2.6 million hits on antitrust information on Call list by amending its regulations under
the FTC’s Web site. Through our outreach the Telemarketing and Consumer Fraud
efforts, the FTC publicizes the antitrust and Abuse Prevention Act. The purpose of
law and our enforcement intentions, with a national list is to enhance privacy by
the likely result of deterring future anti- protecting consumers from unwanted and
competitive behavior. often intrusive telema rke ting calls.
Currently, consumers who do not want
telemarketers to call them must rely on a
Ongoing Challenges patchwork of do-not-call lists administered
by states and the private sector. The FTC’s
The FTC is a small agency with a large
national list would enable consumers,
mission. Demands on the agency have in-
through one phone call, to remove their
creased dramatically over the past decade
name from numerous telemarketing lists
as commerce has become increasingly
nationwide.
electronic and the economy has gone high-
tech and global. Although the FTC con-
7
During the past several years, a stag- and Department of Justice (which jointly
gering level of merger activity dominated enforce the antitrust laws), took effect in
our antitrust agenda, with the number, 2001. The amendments raised the dollar
size, and scope of proposed m ergers thresholds determining which mergers are
leaping to new highs year after year. subject to the reporting requirement, but
Although the volume of mergers abated did not change the substantive standard of
somewhat in 2001, the size, scope, and legality under the antitrust laws. As a
complexity of mergers continues to result, fewer mergers are reported to us
increase. For example, just three of the under HSR. Transactions that raise
mergers we investigated in 2001 together antitrust concerns are very likely to be
were worth about a third of a trillion among those reported. Nevertheless, we
dollars. A single large transaction may are increasing our efforts to monitor
involve dozens of overlaps in different marketplace developments and take action
combinations of products and geographic on non-reportable mergers that could still
markets, each of which may require in- harm consumers, and we will not hesitate
vestigation. to challenge an already-consummated
merger where necessary.
In addition, as the economy evolves, we
increasingly encounter mergers involving Although the FTC faces challenges –
h i g h -tech n o l og y ma rke ts, com ple x especially addressing consumer privacy
scientific research and development, and issues and maintaining competition in a
intellectual property. This trend requires a growing global and electronic marketplace
commensurate expansion of our expertise – we are able to address them m ore
in markets involving science and tech- effectively through strategic planning,
nology, along with thoughtful examination performance management, and results
of the intersection of antitrust and intel- measurement. Using these processes, we
lectual property law. Thus, for example, will continue to assess and reassess the
the FTC and Department of Justice Anti- challenges and opportunities facing the
trust Division have begun a series of FTC. Our aim is to continue as a citizen-
hearings focusing on the implications of centered and results-oriented agency
competition and patent law and policy. positioned to be innovative and aggressive
in protecting consumers and businesses
Amendments to the Hart-Scott-Rodino from fraudulent, unfair, deceptive, and
Act (HSR Act), which require companies to anticompetitive acts or practices.
report certain proposed mergers to the FTC
8
THE RESULTS
GOAL 1 P REVENT F RAUD , D ECEPTION , AND
UNFAIR BUSINESS PRACTICES IN THE
MARKETPLACE
Congress has charged the FTC with the consumers the information they need to
broadest legislative mandate of any federal protect themselves from injury.
consumer protection agency. While most
federal consumer protection agencies have One of the greatest challenges we face
jurisdiction over a specific m arket sector, as the nation's leading consumer pro-
we possess broad law enforcement tection agency is safeguarding consumers
authority that encompasses significant in the new electronic marketplace so they
segments of the economy, including busi- will have the same confidence that they
ness and consumer transactions on the enjoy in the traditional marketplace.
Internet. Our goal is to protect consumers Online commerce has the potential to
by preventing fraud, deception, and unfair deliver goods and services, often more con-
business practices in the marketplace. We veniently, faster, and at lower prices than
implement three related objectives to traditional bricks and mortar operators.
achieve this broad-reaching goal. Online commerce promises enormous
benefits to consumers and the economy.
1. Identify fraud, deception, and unfair Moreover, the Internet is stimulating the
practices that cause the greatest con- development of innovative products and
sumer injury. services that were barely conceivable just
2. Stop fraud, deception, and unfair prac- a few years ago and is enabling consumers
tices through law enforcement. to tap into rich sources of information that
3. Prevent consumer injury through edu- they can use to make better informed
cation. purchasing decisions.
First, we identify practices that cause There is real risk, however, that these
consumer injury by analyzing the con- benefits may not be realized if consumers
sumer complaint data collected in our associate the Internet with fraud opera-
Consumer Information System database, tors. The boom in e-commerce has opened
holding public discussions, and monitoring up fertile ground for fraud. In the FTC's
the marketplace, including the Internet. experience, fraudulent operators are al-
Next, we use this information to target law ways among the first to appreciate the
enforcement efforts. Our law enforcement potential of a new technology to exploit and
program aims to stop and deter fraud and deceive consumers. Of particular concern
deception, protect consumers’ privacy, and is that Internet health fraud continues to
increase compliance with our consumer plague consumers looking for solutions to
protection statutes to ensure that serious health-related illnesses. In sum,
consumers have accurate information for we are using all the tools at our disposal,
their purchasing decisions. Finally, we such as our consumer complaint database
target our education efforts to give to help us target areas of consumer
problems, and our law enforcement and
9
education efforts to respond quickly and rule violations. The FTC also continued an
vigorously to these problems. extensive education campaign on chil-
dren’s privacy directed to businesses,
Privacy of personal information is parents and educators.
important and companies that make
specific promises to consumers about The FTC’s comprehensive review of the
privacy need also to live up to those Telemarketing Sales Rule revealed wide-
promises. This adds to the confidence con- spread consumer frustration over un-
sumers have in the marketplace. The FTC wanted telephone solicitations, which some
is concerned with the misuse of personal see as a violation of privacy in their home.
information and is fully committed to both To address this concern, the FTC has
enforcement and education in this area. proposed amendments to the Rule to
For example, in the area of children’s establish a National Do-Not-Call Registry.
privacy, the FTC is charged with enforcing If the proposal is adopted, consumers
the Children’s Online Privacy Protection would be able to make one call to register
Act and its implementing Rule which was their preference not to receive numerous
effective in April 2000. In 2001, we telemarketing calls.
brought our first cases challenging alleged
10
OBJECTIVE 1.1 I DENTIFY P RACTICES T HAT
CAUSE CONSUMER INJURY
To prevent fraud, deception, and unfair Sentinel Web site (consumer.gov/sentinel)
business practices in the marketplace, we created in 2001. The constant input and
first must identify such practices, especial- analysis of fresh complaint data have
ly those that cause the greatest consumer allowed the FTC to move quickly – in some
injury, where we can make the greatest instances in a matter of weeks – to stop
impact. illegal practices before they cause more
harm to consumers.
Strategies In 2001, we created a public Web site
for Consumer Sentinel, consumer.gov/
To identify consumer protection prob-
sentinel, that provides consumer fraud
lems, the FTC collects and analyzes data
and identity theft trend data and infor-
from many sources. Our Consumer
mation on how Consumer Sentinel serves
Response Center now receives roughly
the public. We are also working with the
10,000 consumer complaints and inquiries
Department of Defense to launch a new
a week via a toll-free number (1-877-FTC-
site that will allow military service mem-
HELP), mail, and the Internet. Partners
bers to enter complaints online and receive
such as the National Fraud Information
consumer education materials. This
Center of the National Consumers League,
complaint data will be added to our Con-
the Internet Fraud Complaint Center,
sumer Sentinel database and will be
Better Business Bureaus, and
tracked by the Defense De-
the Canadian fraud database,
partment, which will then be
PhoneBusters, also provide Performance Measure 1.1.1
Annual number of consumer able to address the most
us with the consumer com-
complaints and inquiries entered prevalent forms of consumer
plaint data they collect. All of into database. harm affecting its personnel.
this information is entered
into the Consumer Infor- FY 2001 Target: 350,000
FY 2001 Actual: 430,000 Consumers can call our toll-
mation System database and Met or Exceeded: T free number, 1 -877 -ID-
analyzed by FTC staff to
THEFT, to get information on
identify trends and target
and report identity theft and
fraudulent, deceptive, and
receive guidance on the steps they can
unfair business practices. We share the
take to resolve credit and other problems
fraud complaints that we collect with more
that may have resulted from identity theft.
than 400 other law enforcement agencies
By the end of 2001, we received approx-
across the United States, Canada, and
imately 4,000 calls a week, nearly double
Australia via an encrypted Web site called
the amount we received in 2000. The FTC
Consumer Sentinel. Although the FTC is
will use the data it collects from con-
not empowered to act on behalf of
sumers to spot patterns that can help
individual consumers, consumer complaint
criminal law enforcement agencies pro-
data obtained through Consumer Sentinel
secute perpetrators and help businesses
enables the FTC and its other law
avoid the financial consequences of
enforcement partners to coordinate their
identity theft. To further help consum ers
enforcement efforts, and to spot trends
deal with the crime, the FTC released a
and target the most serious consumer
universal ID Theft Affidavit that victims of
problems. Summary and trend data are
identity theft can submit to many
shared with the public on our Public
11
companies, simplifying the process of are to effectively spot wide-ranging trends,
alerting companies when a fraudulent quickly identify emerging scams, and
account has been opened in their name. efficiently coordinate activities with other
Although most ID theft cases are criminal, law enforcers. In 2001, we added more
the FTC staff systematically examines than 430,000 entries, exceeding our target
complaint data for civil cases within its of 350,000 by approximately 23%. This
jurisdiction and will bring those cases reflects the increasing interest of organi-
where appropriate. Criminal cases are zations in contributing complaint data to
identified by our joint FTC/U.S. Secret our database, which gives us a broader
Service Case Referral Program and strong view of what consumers are experiencing.
leads are referred to regional task forces, The database allows us and our law
many led by the Secret Service Financial enforcement partners to identify and
Crimes Division. develop cases against fraudulent operators
and leverages our impact on practices that
Besides receiving and analyzing con- cause the greatest consumer injury. By
sumer complaints, we monitor the growing analyzing consumer complaints, we can
online marketplace through “Surf Days,” identify and refine our enforcement and
when we and partner organizations sys- education efforts to target the most serious
tematically surf the Internet to identify consumer problems. These include: iden-
Web sites engaged in questionable tity theft, online auction fraud, Internet
practices. To date, the FTC has led or service provider scams, unauthorized
coordinated 34 Surf Days. As a result of billing scams, pyramid and other invest-
these Surf Days, more than 4,800 warning ment schemes, travel and vacation fraud,
letters have been sent to Web operators pay-per-call solicitation frauds, high-tech
with questionable business practices. If a Internet-based fraud, and health care
Web operator ignores the warning, we may fraud.
file suit. The FTC also hosts public
workshops to explore cutting-edge issues. Performance Assessment
In 2001, we held 17 such conferences and
workshops on a variety of consumer and and Future Trends
business issues. For example, we hosted a
highly successful Identity Theft victims Not only does our database help us
workshop with more than 170 participants identify the most serious consumer pro-
- victims, consumer advocates, representa- tection problems, it quickly informs us of
tives of the financial services industry and emerging scams so that we can move
credit bureaus, and law enforcement rapidly to stop consumer injury. In
agencies - to discuss key problems faced addition, by collecting data from con-
by identity theft victims and to develop sumers and other sources and sharing it
joint initiatives addressing those problems. with our law enforcement partners, we are
able to coordinate and, thus, augment the
effectiveness of law enforcement agencies
Performance Measure across the country and in Canada and
and Results Australia. To make the database even
more valuable, we continue to pursue
To assess our effectiveness in identify- enhancements to increase our collection of
ing fraudulent and deceptive practices, we information from consumer agencies in
measured the number of consumer other countries. For example, we launched
complaints and inquiries added to the a Web site named econsumer.gov with our
Consumer Information System database. partners in the International Marketing
The more data we have, the better able we Supervision Network, an international
12
group that identifies and shares infor- In FTC’s experience, assessing our
mation about worldwide consumer pro- performance using the number of entries
tection issues. Through econsumer.gov, added to our consumer complaint data-
consumers in the 15 participating coun- base is a reasonable indicator of our ability
tries can file complaints using an online to identify consumer problems. For ex-
form and obtain consumer education ma- ample, we use consumer complaint data in
terials. Law enforcement members can all of our fraud cases to identify, initiate,
access a nonpublic site to obtain specific and develop investigations. In 2001, we
information about the complaints that changed this measure from the cumulative
consumers have filed. number of consumer complaints and in-
quiries to an annual count of entries added
We continue to increase our capacity to to our database. This change was based on
analyze data quickly through database our observation that constantly adding
enhancements that improve our ability to fresh information to the database is critical
respond to frauds and identity theft earlier, to its effectiveness and its value to law
and thus prevent greater consumer injury. enforcement. As described previously, the
For example, Consumer Sentinel, our law more information we have, the better we
enforcement encrypted Web site, contains and our Sentinel partners can do our jobs.
a new “alert” function that flags suspects Collecting data from diverse sources in one
under investigation for other Sentinel central location also increases the value of
members. Other new features provide the data by giving us an even broader view
greate r flexibility in sorting and viewing of what consum ers are experiencing.
search results, and contact information for
domestic financial task forces and inter- In 2002, we will continue to explore
national consumer fraud agencies. We also emerging privacy issues and work with
have enhanced our database to track and industry, consumer groups, and other
analyze privacy-related complaints more stakeholders. We also will enhance our
effectively. These new tools will help law consumer complaint database to track and
enforcers more effectively and successfully analyze privacy-related complaints more
investigate fraud and pursue illegal ac- effectively. In 2002, we will explore cre-
tivity. ating a new performance measure that will
help us evaluate our results in the privacy
arena.
13
OBJECTIVE 1.2 STOP PRACTICES THAT CAUSE
CONSUMER INJURY
Once we identify fraud, deception, and Registry. If the proposal is adopted,
unfair business practices in the market- consumers would be able to make one call
place, we focus our law enforcement efforts to register their preference not to receive
on areas where we can have the greatest telemarketing calls. Telemarketers would
impact for consumers. be prohibited from calling consumers who
had registered their telephone numbers
with the FTC without specific approval
Strategies from the consumer. A second proposed
amendment to the Telemarketing Sales
The FTC plays a vital role in protecting
Rule would address the use of “pre-
consumers’ privacy, emphasizing both en-
acquired account information.” Account
forcement and education. We focus on
information “pre-acquired” from sources
telemarketing, unsolicited e-mail (SPAM),
other than the consumer can be misused,
identity theft, and pretexting,
causing consumers to incur
as well as enforcement of the
unauthorized charges on
Children’s Online Privacy Performance Measure 1.2.1
Dollar savings for consumers from their accounts.
Protection Act, the Gramm-
FTC actions which stop fraud.
Leach-Bliley Act, and the
Telemarketing fraud con-
Telemarketing Sales Rule as FY 2001 Target: $400 million
FY 2001 Actual: $487 million
tinues to be a law enforce-
well as Section 5 of the
Met or Exceeded: T ment priority, as does pro-
Federal Trade Commission
tecting consumers from more
Act. Obtaining consumers’ Performance Measure 1.2.2
traditional scams that have
private financial information Total expenditures of deceptive or
unfair advertising campaigns moved to the Internet, includ-
under false pretenses - a stopped. ing health-related fraud. In
practice known as “pre-
2002, we also intend to in-
texting” - violates the Gramm- FY 2001 Target: $300 million
FY 2001 Actual: $86 million crease our enforcement ac-
Leach-Bliley Act. In 2001, the
tivities against fraudulent
Commission filed its first
and deceptive spam (un-
actions in U.S. District Courts
solicited e-mail) promoting
to halt the operations of
chain letters, pyramid schemes, or other
information brokers who use false pre-
kinds of “get-rich-quick” schemes that can
tenses, fraudulen t state me nts, o r
cause substantial econom ic injury to
impersonation to illegally obtain con-
consumers.
sumers’ confidential information - such as
bank balances - and sell it. In each of the
One of the most effective tools in the
cases, the court temporarily enjoined the
battle against fraud has been the law
defendant from continuing the illegal
enforcement sweep - simultaneous law en-
practices and imposed an asset freeze
forcement actions by federal, state, and/or
pending final resolution of the cases.
local partners against numerous defend-
ants nationwide that focus on a particular,
In 2002, the FTC will receive and
widespread type of fraud. Each sweep is
review comments on proposed amend-
supported by consumer education aimed
ments to the Telemarketing Sales Rule.
at preventing future losses to the public.
Two of these proposals relate directly to
Since our first sweep in 1995, the FTC and
privacy. First, the FTC has proposed
its partners have brought 1,831 law en-
establishing a National Do-Not-Call
14
forcement actions in 60 sweeps against ing of value in return. The savings cal-
fraudulent operators. This total includes culation actually may underestimate the
410 cases brought by the FTC alone. In FTC’s impact because it assumes that the
2001, the FTC led 5 sweeps resulting in a fraud would have continued for only one
total of 229 actions, including 39 FTC more year; however, it provides a uniform
cases – for every case the FTC brought our method for calculating savings and mini-
partners brought almost 5 more. We will mizes speculation about the likely duration
continue to use sweeps to leverage our of the fraud. The law enforcement actions
resources not only by reducing fraud included in this measure were taken
through additional law enforcement against fraudulent operators ranging from
actions, but by further raising consumer individuals or small companies to scam
awareness by generating more local, artists operating large schemes on the
regional, and international interest. Internet. Our experience in most cases is
that once we file a complaint in federal
In the nonfraud area, we work to en- district court and obtain a court order, the
sure compliance with our consumer pro- defendants stop their fraudulent practices;
tection statutes. Given our broad juris- if they fail to comply, they are subject to
diction and limited resources, we focus on contempt actions. Thus, in stopping these
the most serious problems, using varied frauds, we stop further consumer losses to
enforcement tools and encouraging self- these defendants. By publicizing these law
regulation in appropriate situations. In- enforcement actions and distributing con-
formation obtained from our Consumer sumer education materials, we seek to
Information System database and from increase consumer confidence in the
monitoring national advertising enables us marketplace.
to focus our law enforcement actions on
areas that pose the greatest risks to In the non-fraud area, our goal was to
consumer health, safety, and economic reduce consumer injury by stopping
well-being. In lieu of regulation or law deceptive or unfair advertising campaigns
enforcement, we work with industry and with combined media expenditures totaling
interested groups to support private ini- $300 million. This measure is based on the
tiatives where appropriate. assumption that advertisers seek to in-
crease sales by at least as much as they
spend on advertising, and that the more a
Performance Measures company spends on an advertising cam-
and Results paign, the more widespread the deceptive
or unfair message. We stopped $86
Our goal in 2001 was to save con- million, or 29% of our goal. This is a new
sumers more than $400 million by measure that was first implemented in
stopping fraud. We surpassed this target, 2001 and our target was set using data
with our actions saving consumers an from the previous year. The base year
estimated $487 million. Consumer savings 2000 included final orders halting several
are measured on the basis of the estimated large national advertising campaigns. In
annual fraudulent sales of defendants in 2001, nearly half of our nonfraud cases
the 12 m onths prior to filing a com plaint. with final orders involved companies that
The total dollar value of fraudulent sales is used the Internet or other low-cost
an approximate measure because in the alternatives to conduct advertising cam-
majority of all fraud cases we pursue, the paigns. A proposed change in this
consumer pays money and receives noth- measurement is discussed below.
15
sumer groups to extend the reach of our
Performance Assessment efforts to increase compliance. The scope
and Future Trends of our current and upcoming priorities
spans our broad jurisdiction, and this
Drawing on Consumer Sentinel data, broad jurisdiction makes it difficult to
Internet fraud is significant and growing. measure the overall impact of our non-
We are targeting the most pervasive online fraud activities. We are exploring using
fraud and moving quickly to stop large, new performance measures focusing on
fast-growing Internet scams. In 2001, the our impact in more narrowly defined areas.
Commission brought 50 cases involving Nonetheless, we will continue to use busi-
fraudulent or deceptive marketing prac- ness and consumer education, as well as
tices related to the Internet, bringing the selective enforcement, to ensure broad
total number of Internet cases filed by the compliance with the consumer credit
FTC since 1994 to 200. We expect fraud to statutes, the Mail and Telephone Order
continue to grow as the use of the Internet Rule, and other rules and regulations we
rises and, in response, we will increase our enforce.
efforts to slow online fraud and prevent
consumer injury. As stated, we did not meet our target of
stopping $300 million in deceptive or un-
In our five-year strategic plan, our goal fair advertising campaigns. We stopped
is to save consumers on average $400 $86 million, or 29% of our goal. After
million a year, or $2 billion over five years. studying those results and current in-
We based this on savings achieved in 1999 dustry practices, we have reset our target
and 2000 and the types of fraud we are to $100 million for 2002 and 2003 for the
observing in the marketplace. In par- following reasons. First, since this measure
ticular, online fraud has the potential to was established, the FTC has increased its
reach consumers worldwide and cause emphasis on taking action against decep-
great econom ic injury. As our expertise in tive Internet advertising claims. Internet
high and new technologies develops, we advertising is broadly disseminated, but is
will be better able to detect and deter considerably less expensive than tradi-
online fraud before these schemes take tional advertising. Second, a number of
hold. By stopping fraudulent operators advertisers are now using many alter-
early, measured savings in each case may natives to traditional advertising and it is
fall; however, the quick response results in difficult, if not impossible, for us to mea-
less injury to consum ers. This effort, sure the impact of these efforts. Finally,
combined with strategies such as law better monitoring has increased the FTC’s
enforcement sweeps, demonstrates our effectiveness at stopping some large
effectiveness in preventing consumer advertising campaigns early on. We will
injury. continue to closely monitor this area, and
again, will explore whether there are other
In addition to fighting fraud, we also measures that will allow us to more effec-
focus on compliance with traditional ad- tively evaluate our impact in the nonfraud
vertising law and FTC Rules and Guides. area, including our efforts to protect
We work cooperatively with our law en- consumers’ privacy.
forcement partners, industry, and con-
16
OBJECTIVE 1.3 P REVENT C ONSUMER I NJURY
THROUGH EDUCATION
Consumer and business education is are given the tools they need to spot
the first line of defense against fraud and potentially fraudulent and other illegal
deception and a top priority of the FTC. promotions, and businesses are advised as
to how they can comply with the law. As
with our law enforcement, more of our
Strategies education efforts now involve the Internet.
We not only address consumer issues in-
The FTC is committed to using
volving the Internet, such as shopping
education and outreach as cost-effective
online, but we also use the Internet as a
methods of preventing consumer injury,
tool to reach consum ers, for example,
increasing business compliance, and add-
through our Web sites, online banner
ing an extra dimension to our law en-
public service announcements, and online
forcement program. Virtually every con-
distribution of “news” consumers can use.
sumer protection effort contains an educa-
tional component, from compliance surfs
We coordinate with hundreds of private
and law enforcement sweeps to the
and public partners to provide information
announcement of new rules and regu-
about specific promotions, products, and
lations. Through reports, publications,
services. The F TC a lso
Web sites, media events,
continues to manage the
speeches, and collaborative
Performance Measure 1.3.1 consumer.gov Web site and to
activities with other organi- Number of education publications recruit new agency members
zations, the FTC reaches tens distributed to or accessed
to participate in the site,
of millions of consumers and electronically by consumers.
which offers one-stop access
businesses every year. In FY 2001 Target: 10 million to federal consum er infor-
2001, we conducted approx- FY 2001 Actual: 15 million mation. In 2001, the FTC took
imately 40 educational cam- Met or Exceeded: T
the lead for the third con-
paigns covering traditional
secutive year in organizing
subjects such as credit card
National Consumer Protection
protection, care labeling, direct mail,
Week. This year’s theme campaign was
pyramid schemes, and scholarship scams;
abusive lending practices. Our partner
high-tech subjects such as online
organizers were the National Association of
shopping, day trading, domain name
Consumer Agency Administrators, AARP,
registration, free PC offers, Internet service
the National Consum ers League, the
providers, and international modem
Council of Better Business Bureaus, the
dialing; and timely subjects such as cross-
Consumer Federation of America, the U.S.
border fraud, virtual health treatments,
Postal Service, the U.S. Postal Inspection
predatory lending, energy efficiency,
Service, the National Association of
disaster plans, and charitable giving
th Attorneys General, and the Department of
following the September 11 terrorist
Justice. The FTC also continued to
attacks.
increase its federal agency partnership
base for consumer.gov, with a total of 179
Our Consumer Information System
agencies now participating. In 2001, the
database helps us tailor our education
Web site received more than 986,000
efforts to areas where fraud, deception,
“unique visits” and nearly 2,050,000 “page
unfair practices, and information gaps are
views;” it also became the portal for
causing the greatest injury. Consumers
17
consumer information provided by the gral role in the FTC’s education,
federal government through FirstGov, a deterrence, and enforcement efforts, per-
public-private partnership. mitting the agency to reach vast numbers
of consumers and businesses quickly,
simply, and at low cost. As demonstrated
Performance Measure by our online distribution total, the FTC
and Results has successfully promoted and led the use
of the Internet to educate and empower
We gauge our impact under this objec- consumers, a trend that we expect to
tive by tracking the number of consumer accelerate in the future.
and business education publications we
distributed to the public. Ideally, we would Our measure of the number of publi-
like to measure the extent to which our cations distributed by the FTC indicates
educational materials improve consumer our impact in educating consumers,
understanding and help them get better although it does not fully capture the
value for their money. This would be millions of FTC publications that are
extremely difficult to measure, but track- distributed to consum ers by others. While
ing the distributions of publications in the num ber of print publications we dis-
response to consumer requests gives us a tribute remained relatively static, the
rough idea of how many consumers believe number of publications accessed through
our information will prove useful. In 2001, the Internet has soared as more con-
the FTC distributed approximately 15 sumers and businesses go online. In 1996,
million publications: 5.4 million print pub- we distributed only 140,000 publications
lications and 9.6 million through the con- online. In 2001, we distributed 9.6 million
sumer protection Web page on the FTC through our the Internet Web site alone.
Web site. This is the second year in which These statistics illustrate the Internet’s
electronic distribution surpassed print dis- coming of age as a mainstream medium
tribution. We exceeded our goal of 10 and highlight its usefulness in any large-
million publications by approximately 5 scale educational effort. Consequently, we
million, due primarily to an increase of 4 will increase our use of the FTC’s Web site,
million or 71% in the number of publi- ftc.gov, and the multi-agency Web site,
cations accessed online. Our reach nation- consumer.gov, to reach consum ers, busi-
wide was extended by more aggressive out- nesses, law enforcement officials, and the
reach and promotion of FTC materials and media more efficiently and effectively.
our toll-free numbers. We used informa-
tion from our database to target our In the next year, we will continue to
education campaigns to serious consumer focus consumer and business education
problems. efforts on areas identified by our consumer
complaint databases where information
gaps cause the greatest injury, such as
Performance Assessment globalization, Internet scams, fraudulent
and Future Trends schemes, and identity theft. In the privacy
area, we will use an approach that has
The FTC seeks to alert as many con- proven successful in the past by
sumers as possible to the telltale signs of establishing an outreach program to
fraud, deception, and unfair business increase consumer awareness of and
practices, and other critical consumer business compliance with the privacy
protection issues. Use of the Internet to information required by the Gramm-
disseminate information about fraud and Leach-Bliley Act. We will continue to
technology-related matters plays an inte- creatively use technology, including new
18
interactive media, to extend the reach of tion would be most beneficial to them, and
consumer and business education. identify topics where Spanish language
materials are not already provided by other
Finally, Census data shows that the government agencies.
United States has a large and growing
Spanish-speaking population. Because Increasing the visibility of the FTC as
these consumers may not speak English or the nation’s consumer protection cham-
are non-native speakers of the language, pion not only helps consumers better
they may be more susceptible to the protect themselves, but also encourages
nuances and complexities of disclosures, consumers to provide the FTC with more
advertisements, or other aspects of con- and better complaint data. That, in turn,
sumer transactions. In order to meet the will make our law enforcement and edu-
needs of this vulnerable group, the FTC cation efforts even more effective.
will assess what areas of consumer educa-
19
GOAL 2 PREVENT ANTICOMPETITIVE MERGERS
AND OTHER ANTICOMPETITIVE BUSINESS
PRACTICES IN THE MARKETPLACE
Competition among sellers in an open those that are benign or procompetitive.
marketplace results in lower prices for This step is critical because a merger or
consumers, leads to high quality products business practice may be either neutral,
and services, maximizes consumer choice, beneficial (by enabling sellers to be m ore
and spurs the discovery and development efficient and pass those savings along to
of beneficial new products and services. consumers), or harmful (by enabling sel-
Anticompetitive mergers, and other prac- lers to reduce the output of their product
tices that diminish competition, deny and raise the price to consum ers). Thus,
consumers these benefits, and are illegal indiscriminate or ill-considered interven-
under the antitrust laws. Thus, the FTC’s tion into the marketplace may do more
goal is to promote vigorous competition by harm than good.
applying the antitrust laws to (1) prevent
anticompetitive mergers and (2) stop Second, once we identify a potentially
business practi ce s th a t d im inish or actually anticompetitive merger or
competition, such as agreements among business practice, we take enforcement
competitors about prices or other aspects action under the antitrust laws to stop it,
of competition. We refer to these two types either through an administrative challenge
of law enforcement as merger and or in federal court. In many instances, we
nonmerger enforcement, respectively. We are able to reach a consent agreement that
apply three related objectives to achieve remedies our competitive concerns while
this broad-reaching goal. avoiding litigation.
1. Identify anticompetitive mergers and Third, we seek to prevent anticom-
practices that cause the greatest con- petitive activity by educating businesses
sumer injury. and consumers about the antitrust laws
2. Stop anticompetitive mergers and prac- and the FTC’s efforts to ensure competitive
tices through law enforcement. markets. Increased knowledge and under-
3. Prevent consumer injury through edu- standing on the part of businesses
cation. facilitate their efforts to comply with the
law. Increased knowledge and under-
First, we identify potentially or actually standing on the part of consumers enable
anticompetitive mergers and business them to identify anticom petitive activity
practices by conducting thorough factual more readily and to bring such activity to
investigation and applying economic analy- our attention for possible enforcement
sis to distinguish between actions that action.
threaten the operation of free markets and
20
OBJECTIVE 2.1 I DENTIFY A NTI C O MPETITIVE
MERGERS AND PRACTICES THAT
CAUSE CONSUMER INJURY
To prevent anticompetitive mergers and the HSR Act, effective in 2001, raised the
anticompetitive business conduct, we must thresholds that determine whether a
first determine which mergers and busi- transaction is subject to the notification
ness practices are anticompetitive. requirement. This change, along with a
slower pace of economic activity, signifi-
cantly reduced the number of HSR filings,
Strategies from an all-time high of 4,926 in 2000 to
2,376 in 2001.
To achieve this objective, the FTC
identifies the mergers and business prac-
The change in HSR filing thresholds did
tices that should be examined as poten-
not change the standard of legality under
tially anticompetitive, and conducts an
the antitrust laws, however. While the vast
inquiry to determine whether to pursue
majority of potentially problematic mergers
enfo r c e m e n t action. A
continue to be subject to the
collateral, but important, con-
revised HSR filing require-
sideration is that we conduct Performance Measure 2.1.1
Percent of HSR second requests ments, smaller merger trans-
our inquiry in a way that resulting in enforcement action. actions may still be anti-
minimizes the cost or incon-
competitive. After the increase
venience to businesses. FY 2001 Target: 50%
FY 2001 Actual: 68% in reporting thresholds, we
Met or Exceeded: T began to devote more effort to
The premerger notification
identifying non-reportable
requirements of the Hart- Performance Measure 2.1.2
Number of nonmerger mergers that may harm (or
Scott-Rodino (HSR) Act are our
investigations opened per year. have harmed) competition. We
primary means for identifying
do this by monitoring the
potentially anticompetitive FY 2001 Target: 45 - 70
FY 2001 Actual: 56 trade press and Internet re-
mergers, acquisitions, and
Met or Exceeded: T sources to stay informed of
joint ventures (which we refer
industry developments, follow-
to collectively as mergers).
ing up on case leads from
The H SR Act require s
Congressional offices, other
companies to report certain proposed
Executive branch agencies, and state and
mergers to the FTC and Department of
local governments, and encouraging con-
Justice (which jointly enforce the antitrust
sumers, businesses, and the bar to notify
laws), and wait for a specified period
the FTC of possibly anticompetitive mer-
(usually 30 days) to allow antitrust review.
gers. Despite the change in reporting
We examine each transaction reported
thresholds, the number of proposed
under this requirement. We use various
mergers requiring investigation did not fall
other means to identify potentially anti-
appreciably. We opened 195 merger in-
competitive mergers that are not subject to
vestigations in 2001, a decrease of less
the HSR reporting requirements.
than eight percent from 2000.
After a decade of rapid growth, overall
The abatement in the pace of merger
merger activity slowed somewhat during
activity in 2001 was more than offset by
2001, but the FTC’s merger review work-
the continuing increase in the size, scope,
load remained very high. Amendm ents to
21
and complexity of merger transactions. of negotiations on second request
Large, multifaceted transactions - the ones modifications. These measures were re-
that remain subject to HSR - are m ore ported by the FTC to Congress on June 19,
likely to raise antitrust issues, and those 2001.
issues may involve a number of separate
product and geographic markets, each Because of the typical complexity of the
requiring separate analysis. second request issues, and the fact that
the statute contemplates only one such
We work to complete the review of each request per filing, an investigation ex-
filing as quickly and as efficiently as tended by the issuance of a second request
possible, both to conserve our available almost always requires significantly more
resources to devote to other work, and to investment of resources, by both the
minimize the delay imposed on businesses agency and the parties. Thus, we seek to
by the HSR requirements. In most cases, identify as many of the competitively
we can make a reasonable judgment about harmless transactions as possible within
whether a merger has the potential to be the initial waiting period. In 2001, the FTC
anticompetitive or not within a few days of and the Department of Justice permitted
a filing, based on materials filed with the more than 95% of the reported trans-
HSR notification. The staff further actions to proceed by the end of the initial
examines transactions that raise more waiting period.
difficult questions, and may present the
matter to the FTC’s Merger Screening Performance Measures
Committee, comprising senior officials of
the Bureaus of Competition and Eco- and Results
nomics. If the Committee determines that
more information is needed in a matter, it We used two performance measures to
authorizes a more extensive investigation, gauge how well we achieved this objective
generally including the issuance of a in 2001, one of which - the percentage of
formal request under the HSR Act for matters involving a second request that
additional information from the parties (a resulted in enforcement action - was new
“second request”). this year. Previously, we measured our
success in identifying anticompetitive
The issuance of a second request ex- mergers in terms of the average number of
tends the parties’ waiting period, usually days we devoted to reviewing actions
until 30 days after they com ply with the reported to us under the HSR premerger
request for information. Following an notification program. This measure re-
internal review of the agency’s second flected the efficiency with which we
request process, called for by the amend- conduct these reviews, but not our
ments to the HSR Act, the Commission effectiveness. While efficiency is important
adopted measures to reduce burden and - quick completion of our reviews of
delays in second request matters. The new reported transactions helps to conserve
measures include a process for seeking FTC resources, reduces associated burden
modifications or clarifications of second on businesses, and allows beneficial
requests, and expedited senior-level mergers to proceed sooner - we sought a
internal review of disagreements between measure that would relate more directly to
merging parties and agency staff; stream- the core objective.
lined internal procedures to eliminate
unnecessary burdens and undue delays; We strive to determine which of the
and implementation of a systematic many merger transactions we encounter
management status-check on the progress are likely to cause consumer injury – and
22
therefore warrant full investigation. When counting the number of nonmerger
we issue second requests and investigate investigations opened. While, the mere
thoroughly, we can determine the effect of opening of a formal investigation does not
a transaction on competition with greater signal the presence of anticompetitive
confidence. But given the level of FTC conduct, we do require preliminary evi-
resources necessary for such an investiga- dence and a viable legal/econom ic theory
tion, and the cost and delay imposed on of consumer harm as a prerequisite to
businesses, we must select the trans- opening an investigation. We screen
actions to review with great care. If we do hundreds of allegations of illegal conduct
this successfully, the resulting outcome each year, but few present sufficient
will be enforcement action (consent agree- grounds for formal investigation. There-
ment, preliminary injunction, or the fore, the number of investigations we open
parties’ abandonment of the transaction in reflects our ability to identify conduct that
light of antitrust concerns) in a significant may be anticompetitive, along with the
percentage of the m erger investigations in level of resources we are able to devote to
which we issue a second request. At the this area.
same time, we recognize that too narrow a
focus – pursuing only those transactions in The year 2001 was successful in terms
which an antitrust problem is relatively of identifying anticompetitive conduct in
obvious – could allow other transactions the market. Our goal has been to open 45
that may be similarly harmful, but in more to 70 nonmerger investigations over the
subtle ways, to proceed unchallenged. course of each year, a range reflecting the
number of new nonm erger investigations
Thus, our aim is to achieve balance. To opened in recent years. We met this goal,
make the best use of our resources, we opening 56 nonmerger investigations (more
seek to limit the issuance of second than double the 25 investigations opened
requests only to those few transactions in 2000).
that we believe are likely candidates for
enforcement action. To gauge our success, Performance Assessment
we measured the percentage of matters
involving a second request that ultimately and Future Trends
resulted in enforcement action. A per-
centage of at least 50% indicates that we Our initial experience with our new
succeeded in identifying problematic performance measures revealed some
transactions without casting our net too methodological issues. For example,
widely. At the same time, a very high second request investigations often extend
percentage of second requests resulting in beyond fiscal year boundaries - invest-
enforcement action might suggest that we igations of about half of the 27 second
need to review our policies and practices requests issued during 2001 were still
to ensure that we are not applying too pending at the end of the year. In addition,
restrictive a standard. In 2001, we believe counting only those investigations in which
we achieved the desired balance. We a second request was issued and the
issued second requests in 34 merger matter was concluded within the same
transactions, and 23 of those 34 matters, year could skew the results, because
or 68%, resulted in enforcement action. matters ultimately resulting in enforce-
ment action frequently require a more
In addition to mergers, the FTC focuses lengthy investigation. We believe that
on anticompetitive practices that cause basing the measure on the universe of
consumer injury. We measure our success investigations completed during a fiscal
in identifying possibly illegal conduct by
23
year, regardless of when the second a more proactive approach to identify
request was issued, is most logical. possible source of anticompetitive conduct
in 2001. As in the past, we focused our
In 2001, the FTC took enforcement efforts on sectors of the economy that most
action in 68% of the second request affect consumers. Thus, we focused on
merger investigations concluded during likely anticompetitive patent extension
the year. We initially set a target of at least strategies in the pharmaceutical industry,
50%, which we exceeded by a significant a practice that can deny consumers
margin. Since our goal, however, is to significant cost savings from generic drugs.
balance the need to identify all potentially We also began to look m ore systematically
anticompetitive mergers, while also mini- at the possibility of restraints on com-
mizing the burdens that the second petition among groups of professionals
request imposes on businesses, a resulting from practices of professional
percentage approaching 100% would be associations. Possible anticompetitive
cause for concern because that would abuse of the standard setting process in
suggest the possibility of our having failed the computer technology and other sectors
to pursue illegal mergers. was an additional priority area. Finally, the
agency established two task forces to
Upon review, we have realized that examine the scope of exemptions to the
merger matters concluded in 2001 antitrust laws to identity possible cate-
included many that were very difficult and gories of harmful conduct that may
complex. Thus, we do not believe that our purportedly be, but are not in fact, exempt
having taken enforcement action in 68% of from the antitrust laws.
the matters involving a second request is
the result of having selected only simple More generally, we improve our ability
cases to pursue. It is more likely that our to identify anticompetitive mergers and
initial target was too cautious. We make practices that harm consumers by expand-
significant efforts to “clear” mergers, where ing our knowledge and understanding of
possible, during the preliminary waiting new and evolving antitrust policy issues.
period, to avoid encumbering businesses As the economy evolves - with new
with costs and delays associated with a products and services, as well as new
second request in competitively benign methods of conducting commercial activity
transactions. We will continue to assess - so must antitrust. In 2001, for example,
our performance target under this the FTC conducted a second public
measure during 2002. workshop to explore competition policy
issues related to business-to-business
Following 2000, a year with an un- (B2B) and business-to-consumer (B2C)
precedented level of merger activity, 2001 electronic commerce, continuing the dialog
marked the restoration of our historic begun at a prior workshop. The agency
balance of resource allocations between also held a conference in August 2001,
merger and nonmerger activity. The 56 focusing on factor that affect the price of
new nonmerger investigations opened in refined petroleum products. We also held
2001 are particularly significant when a roundtable with prominent Industrial
compared to the 25 new nonmerger Organization econom ists to identify
investigations opened in 2000. The empirical economic research that could be
restoration of resources that had been done to help us better protect consumers
diverted to merger work allowed us to take and competition.
24
OBJECTIVE 2.2 STOP ANTICOMPETITIVE
M ERGERS AND P RACTICES
THROUGH LAW ENFORCEMENT
Law enforcement represents the most In nonmerger matters, we seek to stop
direct method by which the Commission ongoing activity that harms competition.
pursues its goal of preventing anticom- To do so, we may ask the Commission to
petitive mergers and anticompetitive busi- initiate administrative proceedings before
ness practices. an Administrative Law Judge to challenge
the conduct and establish a basis for an
order that the respondents (the parties to
Strategies the proceeding) “cease and desist” the
conduct. The Commission
To stop potentially anti-
also has authority to seek
competitive mergers and Performance Measure 2.2.1
Positive outcome of cases brought by
relief in federal courts,
practices through law en-
FTC due to alleged violations. though this is rarely used in
forcement, we seek legal
nonmerger matters. Again,
remedies under the antitrust FY 2001 Target: 80%
FY 2001 Actual: 94%
we are often able to negotiate
laws, through federal court
Met or Exceeded: T a consent agreement with the
action, administrative pro-
respondents that remedies
ceedings, or negotiated settle- Performance Measure 2.2.2
the problem without resort to
ments. For mergers, our Dollar savings for consumers
resulting from FTC actions stopping litigation.
preferred strategy - that is, anticompetitive mergers.
the most effective and cost-
In both merger and non-
efficient strategy - is to pre- FY 2001 Target: $800 million
FY 2001 Actual: $2.5 billion merger matters, we em-
vent such mergers before they
Met or Exceeded: T phasize thorough investi-
occur. We implement this
gation, as well as sophisti-
strategy primarily through Performance Measure 2.2.3
Dollar savings for consumers cated legal and economic
our authority to seek a federal
resulting from FTC actions stopping analysis, to ensure we
court injunction preventing anticompetitive nonmerger activity. accurately assess the po-
the transaction. In many
FY 2001 Target: $200 million tential for competitive harm
cases, we are able to resolve a
FY 2001 Actual: $157 million resulting from the trans-
com pe titive c o n c e r n by
a c tio n or co ndu ct in
n e g o t ia t in g a c o n se n t
question. When the Com-
agreement before having to
mission concludes that the
seek an injunction. In some instances,
likelihood of such harm indicates a law
such as when a merger has already been
violation, and no settlement is possible,
consummated, we can rely on the FTC’s
the Comm ission authorizes the staff to
internal administrative remedial powers to
litigate the matter. We prepare thoroughly
restore competition lost as a result of the
for litigation, whether before an Admin-
merger. In many cases, the competitive
istrative Law Judge or in federal court. The
problem relates to only a portion of the
high percentage of settlements in FTC
transaction, so a divestiture of assets
antitrust cases (or, in the case of mergers,
sufficient to preserve or restore com-
the parties’ abandonment of the
petition, which will allow other, com-
anticompetitive transaction) results, in
petitively neutral or beneficial aspects of
large measure, from our readiness to
the merger to go forward, is frequently a
successful remedy.
25
obtain the needed relief through litigation, promotes competition in the specific
if necessary. market(s) at issue, but also serves to
comm unicate to the business and legal
We place increasing emphasis on communities that the FTC can and will
crafting remedies that will successfully move successfully to challenge the type of
eliminate the anticompetitive effects of the merger transaction or conduct at issue.
activity in question, and do so in a timely We explain the relevant facts and issues in
fashion. As part of this strategy, we study detail in settled cases in published
and evaluate the remedies used in past “Analyses to Aid Public Comment” so the
antitrust cases, particularly divestiture nature of the problem is clear. In addition,
orders used to resolve merger cases. This litigated decisions serve as legal precedent,
ongoing process focuses on what makes upon which we can rely in future
divestiture orders most effective in pre- enforcement actions. This deterrent effect
serving or restoring competition, and on prevents many anticompetitive mergers
how to expedite the completion of curative and acquisitions from even being pro-
divestitures. posed.
We also study current or emerging Performance Measures
topics involving possible antitrust en-
forcement to develop policy positions. For and Results
example, in early 2001 the FTC issued
reports summarizing the results of work- We use three measures to gauge our
shops held in 2000 relating to two current success in stopping potentially anti-
antitrust topics, slotting allowances and competitive mergers and practices through
business-to-business (B2B) electronic law enforcement. These measures include
marketplaces. A second workshop to (1) the percentage of successful outcomes
explore competition policy issues related to when we challenge anticom petitive
B2B and business-to-consumer (B2C) mergers and practices, (2) the amount of
electronic commerce took place in May savings to consumers resulting from our
2001. Additional work relating to slotting merger enforcement efforts, and (3) the
allowances is also underway. The learning amount of savings to consumers resulting
derived from these workshops, as well as from our nonmerger enforcement efforts, a
from economic research on various new performance measure for 2001.
competition issues, will provide a founda-
tion for future enforcement initiatives. Economic theory and evidence demon-
strate that competition results in lower
Other strategies include ongoing prices, better quality, and more innovation
training programs for our attorneys to in markets. Thus, we produce beneficial
develop their skills and m aximize their outcomes when we preserve competition
effectiveness in litigation, negotiation, and by obtaining positive results. We seek to
other areas. We also work to ensure that obtain a positive result in at least 80% of
administrative litigation and adjudication the matters in which we determine that a
reach a timely resolution, so that chal- merger or a course of conduct is anti-
lenged restrictions on competition are competitive. Positive results include the
rem oved without undue delay. parties’ abandonment of an anticom-
petitive transaction after we identify
Finally, we make our law enforcement antitrust concerns, a consent agreement to
presence visible in order to serve our resolve antitrust concerns, or a successful
objective through deterrence. Each suc- challenge in court. A negative result occurs
cessful enforcement action not only when parties refuse to settle antitrust
26
concerns raised by the agency and we are year period 2001-2005 through prevention
unsuccessful in obtaining relief through of anticompetitive mergers. Meeting the
the courts. five-year goal requires an average of $800
million per year in consumer savings.
Because positive results lead to bene- Merger enforcement saves consumers
ficial outcomes, it is im portant that we money by preventing price increases that
usually succeed when we challenge likely would have occurred due to the loss
anticompetitive mergers and practices. We of competition if the merger had gone
do not help consumers if we do not forward unchallenged. In calculating these
succeed in persuading a court to block savings, we take into consideration the size
merger, for example, either because we of the markets involved, the percentage
failed to present our case adequately or increase in price that would likely have
because the merger turns out not to be resulted from the merger, and the likely
anticompetitive. This is not to say that the duration of the price increase.2 We ex-
FTC, or any law enforcement agency, ceeded our goal by a wide margin in 2001,
should win every case. Some cases involve saving consumers $2.5 billion by stopping
very close questions, on which reasonable anticompetitive mergers or requiring
minds can and do differ. Other cases may divestitures to preserve competition.
be very difficult from a litigation stand-
point, and all of the FTC’s antitrust We have decided to stop formally
challenges are defended by highly com- measuring the average time needed to
petent and well-financed counsel. The complete divestitures required by consent
agency should not shy away from orders. Timely completion of divestitures
challenging cases that may result in helps to ensure that the competition that
occasional losses, as long as the overall existed before the merger continues, by
record is successful.
We far exceeded our goal in 2001, 2
We derive these estimates from a thorough
achieving relief through litigation, reaching analysis of company documents and detailed
a successful settlement agreement, or pricing data, which FTC attorneys and economists
persuading parties not to proceed with an routinely conduct as part of their investigations.
anticompetitive acquisition in approxi- In some cases, the available information allows us
to estimate with specificity the extent to which
mately 94% of the matters we challenged.
prices would rise as a result of an anticompetitive
The Commission approved 20 proposed merger. Where we do not have such specific
administrative consent agreements and we information, we conservatively estimate that an
obtained federal court approval of one anticompetitive merger would lead to a price
additional settlement. We also obtained increase of at least 1%, absent enforcement
sought-after relief in four of six litigated action, lasting for two years. The methodology
matters, all of which were concluded in used is based on the analytical guidelines used by
2001. In addition, parties to proposed the FTC and the Department of Justice for the
analysis of horizontal mergers. See U.S. Dept. of
mergers abandoned their transactions in
Justice and Federal Trade Commission, Horizontal
four instances following our investigation.
Merger Guidelines §§ 1.1, 1.2. While we cannot
Thus, we were able to obtain a positive predict price increases following a merger with
result in 29 of the 31 instances in which absolute certainty, the data and analytical
we sought to stop or prevent adverse framework are the same as those that courts rely
effects on competition in the marketplace. upon in deciding merger cases. Moreover, price
increases greater than the conservative one
In 2001, we stayed on course to percent estimate, in at least some cases (a highly
achieve our goal of $4 billion in direct likely scenario), would offset the occasional
instance in which at least a one percent price
dollar savings to consumers over the five-
increase would not have materialized.
27
avoiding delays that might deplete the Our goal is to achieve $1 billion in
viability of the assets to be divested. direct dollar savings to consumers over the
Policies and practices put in place in five-year period 2001-2005 by stopping
recent years to expedite divestitures have anticompetitive practices that would cost
become accepted and well-established, consumers at least that much if allowed to
however, so we believe that timely continue. Meeting the five-year goal re-
divestitures will continue to be the norm. quires an average of $200 million per year
in consumer savings. In calculating these
In 2001, to focus our renewed attention savings, we take into consideration the size
to nonmerger enforcement, we began to of the markets involved, the percentage
measure consumer savings resulting from increase in price that would likely have
nonmerger enforcement activities. The resulted from the m erger, and the likely
tracking of nonmerger consumer savings duration of the price increase. In 2001, we
underscores the importance of our non- obtained consumer savings of approx-
merger enforcement work, which has been imately $157 million in nonmerger actions.
overshadowed somewhat by merger ac-
tivity in recent years. Performance Assessment
We base our nonmerger consumer and Future Trends
savings estimates on industry and com-
pany data obtained in our investigations. In 2001, we achieved a positive
Because the types of activity involved in outcome in approximately 94% of the
nonmerger cases vary considerably, no one challenges initiated by the agency (e.g.,
methodology represents an ideal way to court orders in litigated cases and
compute consumer savings. Instead, we negotiated settlements), exceeding by a
seek to develop a conservative estimate significant margin our goal of an 80%
based on the specific facts and cir- success rate. This level of success was
cumstances involved in each case. Each due, in part, to the high percentage of our
estimate is reviewed by at least one senior cases that were resolved through consent
attorney and economist to ensure agreement. This does not diminish the
consistency, reasonableness, and accu- accomplishment, however, because we are
racy. In cases where it is not possible to more likely to obtain settlements when the
measure directly the amount of consumer parties see that our case would likely
savings resulting from enforcement action, prevail in court. We realistically do not
we conservatively use a “default” estimate expect to succeed in every litigated case,
of 1% of the amount of sales (i.e., a 1% however. A law enforcement agency that
price increase multiplied by sales) in the prevails in every litigated matter may do so
affected market(s) for one year. Most often, because it pursues only the cases that are
the cost to consumers from anticompetitive easiest to win. Particularly given the FTC’s
activity exceeds 1% of the amount of sales, responsibility to aid in antitrust policy
and the anticompetitive effect may con- development, we will sometimes undertake
tinue well beyond one year in the absence difficult cases with no clear precedent.
of enforcement action.3 The FTC will continue to bring law enforce-
ment actions where it has reason to believe
3
For mergers, the default estimate is that an
anticompetitive price increase would also amount
to 1%, but would last for two years instead of one. reflects our cautious approach in measuring
While it would probably be defensible to use the consumer savings, as well as the absence of an
two year standard for nonmerger matters, the authority comparable to the Horizontal Merger
decision to use only one year, at least initially, Guidelines in the nonmerger area.
28
that the merger or practice in question is 2001 is consistent with the necessary shift
unlawful and harms consumers, even in focus toward mergers in recent years
where litigation risks may exist. Thus, in due the record-setting number and dollar
years in which litigated cases make up a value of proposed transactions. With the
larger proportion of the total number of merger/nonmerger balance shifting back
resolved cases, our success rate may be toward historical norms, we expect greater
closer to the target of 80%. nonmerger savings in 2002 and beyond.
As explained elsewhere, the level of merger
Our consumer savings of $2.5 billion in activity in 2000 resulted in the opening of
merger cases exceeded by a substantial only 25 nonm erger investigations that
margin the $800 million in average annual year. We record consumer savings only
savings needed to reach our five-year goal when a final result is achieved. Since
of $4 billion. We raised the annual target nonmerger antitrust matters typically take
from $500 million to $800 million last as much as a year or more to complete
year, and this year’s performance suggests (more if litigation is involved), fewer
that a further increase may be in order. investigations begun in Year 1 will likely
As noted in our last performance report, result in fewer completed cases in Years 2
however, the amount of consumer savings and 3. Thus, the nonmerger consumer
achieved in any one year is highly depen- savings achieved in 2001 resulted from
dent on the pattern of corporate merger only five cases, an unusually low number.
activity, including the size and nature of With more investigations “in the pipeline,”
transactions proposed in that year.4 For we anticipate a larger number of con-
example, a single case accounted for more cluded nonmerger cases (and associated
than half of the consumer savings figure in consumer savings) in 2002. We will
2001. Accordingly, we do not anticipate reevaluate our target as our experience
further raising the annual average per- with this new performance measure grows.
formance target on this measure at this
time. Overall, we obtained a total of $2.65
billion in combined merger and nonmerger
We obtained $157 million in consumer savings, a figure that places the FTC w ell
savings in nonmerger matters in 2001. on track to achieve the combined five-year
Again, we cautioned last year that dif- goal of $5 billion. While shifting patterns of
ferences in opportunities from year to year merger activity may affect how FTC
would likely result in variable results on antitrust resources are utilized, and
this measure.5 Although the 2001 result is consequently the output according to
somewhat less than the yearly average of merger and nonmerger measures, what
$200 million needed to achieve the five- remains unchanged is that the FTC’s
year goal, we will still reach that goal with antitrust enforcement program returns to
a slightly higher average savings rate over consumers many dollars in savings for
the remaining four years. The result for every dollar in agency operations.
4
See Federal Trade Commission Performance
Report for Fiscal Year 2000 at 23 (Mar. 31, 2001).
5
Id. at 24.
29
OBJECTIVE 2.3 P REVENT C ONSUMER I NJURY
THROUGH EDUCATION
In addition to its law enforcement ceu tical marketplace); conferences,
activity, the FTC provides substantial in- hearings, and workshops (such as the
formation to the business community and August 2001 conference on factors
consumers about the role of antitrust laws, affecting the price of refined petroleum
and businesses’ obligations under those products); advisory opinions (such as a
laws. December 2000 letter to a hospital group
advising on the applicability of the
Robinson-Patman Act to hospital sales of
Strategies pharmaceuticals to their retired em-
ployees); economic research papers (such
The FTC uses education and outreach
as a January 2001 study of geographic
to help prevent consumer injury, increase
markets in hospital merger cases); and
business compliance, and augment our
reports (such as a September 2001 report
law enforcement efforts. We pursue this
on competition and consumer protection
strategy through guidance to the business
i s su e s arisin g from ele ctricity
community; outreach efforts
deregulation).
to federal, state and local
agencies, business groups Performance Measure 2.3.1
Quantify number of education and As a complement to our
and consumers; development outreach efforts. enforcement activity, we
and publication of antitrust
also advise other federal
guidelines and policy state- FY 2001 Target: Determine baseline
FY 2001 Actual: 141 and state government offi-
ments; and speeches and
cials about the possible
publications. Through these Performance Measure 2.3.2 effect that various regula-
mechanisms, we publicize the Quantify number of hits on antitrust
information on FTC web site. tory proposals may have
antitrust law and our enforce-
on competition (such as a
ment intentions, with the FY 2001 Target: Determine baseline recent letter commenting
likely result of deterring FY 2001 Actual: 2.6 million
on the effect of restricting
future anticompetitive be-
non-attorneys from par-
havior.
ticipation in real estate
closings). This approach is broader than
Our law enforcement efforts are also
antitrust because it involves persuasion on
made more effective by public awareness
policy issues where competition is
of what types of conduct are likely to be
involved, but the antitrust laws may not
challenged as law violations. Through
necessarily reach.
press releases of FTC actions and publi-
cation of related materials on the agency
Web site, the public facts underlying FTC Performance Measures
actions provide bases for companies to and Results
evaluate the likelihood that other trans-
actions would likely face challenge.
In 2001, we used two new performance
measures to more directly reflect our effec-
In addition, the FTC educates the
tiveness in preventing consumer injury
public through Congressional testimony
through education and outreach to the
(such as the Commission’s May 2001
public. Education serves to leverage the
testimony on the effect of patent settle-
FTC’s enforcement resources by explaining
ments on competition in the pharma-
30
the scope of the antitrust laws, demon- Internet to disseminate information about
strating that the FTC is active in bringing antitrust and other competition-related
enforcement actions against certain types matters plays an integral role in the FTC’s
of mergers and practices, and signaling education and deterrence efforts, per-
future enforcement intentions – all of mitting the agency to convey a wealth of
which serve to deter harmful marketplace information quickly, simply, and in-
activity. Just as citizens benefit from the expensively to the business and legal
effect of the local “cop on the beat” in communities, and to consum ers. This
deterring crime, consumers ultimately measure more directly reflects our effec-
benefit when the FTC makes its presence tiveness because it is not based on FTC
visible. actions, but on the actions of our
constituencies. That is, the level of activity
We measured our effectiveness in edu- on our Web site depends to a large degree
cating the public about the antitrust laws on the scope, utility, and reliability of the
and the FTC’s enforcement activities, information made available there. People
policies, and priorities by tracking the will revisit the site to the extent that what
number of public outreach efforts in they find there is of value. But if the
written (e.g., guidelines and policy material presented were irrelevant, difficult
statements) or oral (e.g., speeches and to understand, or misleading, then interest
testimony) form. Although this measure of in the site inevitably would diminish.
activity does not directly relate to out- Because we did not systematically collect
comes in the marketplace, there is this information before 2001 we have not
evidence that success in communicating set a performance target yet, but we have
enforcement priorities has a strong impact collected data to use as a baseline in
on the level of anticompetitive activity evaluating future performance. In 2001,
taking place.6 Because we did not sys- we recorded more than 2.6 million hits on
tematically collect this information before antitrust information on the FTC’s Web
2001, we have not set a target yet but have site.
collected data to use as a baseline in eval-
uating future performance. In 2001, we Performance Assessment
completed a total of 141 separate public
outreach efforts. and Future Trends
Second, with the importance of the We will compare future performance on
Internet as a vital source of inform ation in the two new measures against the perfor-
today’s society, we believe that the number mance in 2001. Based on experience, we
of “hits” on antitrust education and may refine one or both measures to
outreach material on the FTC’s Web site is increase their utility in measuring and
an important indicium of our success in motivating our performance. As described
educating the public and in stimulating above, our public education efforts take
public interest in our work. Use of the many different forms, and thus are not
fully revealed by the summary statistics.
The FTC is strongly committed to the
6
See American Bar Association Section of importance of education and outreach and
Antitrust Law, The State of Federal Antitrust will continue to place emphasis on and
Enforcement - 2001, 11 (Jan. 2001) (“. . . private expand our activities in this area in future
compliance efforts are a critical prophylactic years.
against anticompetitive behavior, and the
effectiveness of private compliance efforts is
directly affected by the nature and clarity of the
communication of enforcement priorities.”).
31
Appendix
FY 2001 Performance Measures
FY 2001 FY 2001 Met or
Target Actual Exceeded
Goal 1: Prevent fraud, deception, and unfair business practices in the marketplace.
Objective 1.1–Identify fraud, deception, and unfair practices that cause the grea test consum er injury:
Measure 1.1.1: Annual number of consumer com plaints and 350,000 430,000 T
inquiries entered into database.
Objective 1.2–Stop fraud, deception and unfair practices through law enforcement:
Measure 1.2.1: Dollar savings for consumers from FTC $400 $487 T
actions which stop fraud. m illion m illion
Measure 1.2.2: T ota l expenditures of d eceptive or u nfair $300 $86 see text
advertising campaigns stopped. m illion m illion
Objective 1.3–Prevent consumer injury through education:
Measure 1.3.1: Number of education publications 10 15 T
distributed to or accessed electronically by consumers. m illion m illion
Goal 2: Prevent anticompetitive mergers and other anticompetitive business practices in the
marketplace.
Objective 2.1–Identify anticompetitive mergers a nd practices that caus e the greatest cons ume r injury:
Measure 2.1.1: P ercent of HSR second req uests res ulting in 50% 68% T
enforcement action.
Measure 2.1.2: Number of nonmerger investigations opened 45 to 70 56 T
per year.
Ob jective 2.2–Stop antico mp etitive m erge rs an d pra ctices thro ugh law e nforc em ent:
Measure 2.2.1: Positive outcome of cases brought by FTC 80% 94% T
due to alleged violations.
Measure 2.2.2: Dollar savings for consumers resulting from $800 $2.5 T
FTC actions stopping anticompetitive mergers. m illion billion
Measure 2.2.3: Dollar savings for consumers resulting from $200 $157 see text
FT C actions stopping antico m petitive nonm erge r activity. m illion m illion
Objective 2.3–Prevent consumer injury through education:
Measure 2.3.1: Quantify number of education and outreach determine 141 T
efforts. baseline
Measure 2.3.2: Quantify number of hits on antitrust determine 2.6 million T
information on FTC W eb site. baseline
32
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