2000 by qkc14920


             FISCAL YEAR 2000

                       March 31, 2001
                 EXECUTIVE SUMMARY

    The Federal Trade Commission (FTC),                     Our Strategic Plan defines the FTC’s
an independent law enforcement agency,                  Vision and Mission in two goals:
is the only federal agency with both con-
sumer protection and competition juris-                 GOAL 1       Prevent fraud, deception, and
diction over broad sectors of the economy.                           unfair business practices in the
We strive to enhance the smooth operation                            marketplace.
of the marketplace by eliminating acts or
practices that are unfair or deceptive.                 GOAL 2       Prevent anticompetitive mergers
                                                                     and other anticompetitive busi-
    The FTC protects American consumers                              ness practices in the market-
in both domestic and world marketplaces.                             place.
Our experience demonstrates that com-
petition among producers and accurate                      These goals, with their corresponding
information in the hands of consumers                   objectives and performance measures,
yields products at the lowest prices, spurs             help us assess our performance.
innovation, and strengthens the economy.

                                  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
               unfair business practices in                           and other anticompetitive
               the marketplace.                                       business practices in the

OBJECTIVE 1.1 Identify fraud, deception, and         OBJECTIVE 2.1 Identify anticompetitive mergers
              unfair practices that cause                          and practices that cause the
              the greatest consumer injury.                        greatest consumer injury.

OBJECTIVE 1.2 Stop fraud, deception, and             OBJECTIVE 2.2 Stop anticompetitive mergers
              unfair practices through law                         and practices through law
              enforcement.                                         enforcement.

OBJECTIVE 1.3 Prevent consumer injury                OBJECTIVE 2.3 Prevent consumer injury through
              through education.                                   education.
                   FY 2000 Performance Measures and Targets
    GOAL 1

    OBJECTIVE 1.1                                     GOAL 2
       Measure 1.1.1: Cumulative number of
       consumer complaints and inquiries              OBJECTIVE 2.1
       entered into database.                            Measure 2.1.1: Average number of days for
           Target: 600,000                               review of HSR-reported transactions.
           Actual: 833,659 T                                 Target: 20
                                                             Actual: 18 T
                                                         Measure 2.1.2: Number of nonmerger
                                                         investigations opened per year.
    OBJECTIVE 1.2                                            Target: 45-70
       Measure 1.2.1: Dollar savings for                     Actual: 25 (see text)
       consumers from FTC actions which stop
       fraud.                                         OBJECTIVE 2.2
           Target: $250 million                          Measure 2.2.1: Positive outcome of cases
           Actual: $263 million T                        brought by FTC due to alleged violations.
       Measure 1.2.2: Percentage of targeted                 Target: 80%
       industry brought into compliance through              Actual: 95% T
       law enforcement and self-regulation.              Measure 2.2.2: Dollar savings for
           Target: 50%-75%                               consumers resulting from FTC actions.
           Actual: 83% T                                     Target: $500 million
                                                             Actual: $2.98 billion T
                                                         Measure 2.2.3: Average time, in months,
                                                         from proposed consent orders to divestitures.
                                                             Target: 9
       Measure 1.3.1: Number of education
                                                             Actual: 4 T
       publications distributed to or accessed
       electronically by consumers.                   OBJECTIVE 2.3
           Target: 8.7 million                           Measure 2.3.1: Identify and survey FTC
           Actual: 11 million T                          "customers" in the marketplace.
                                                             Incorporated stakeholder input T
             T met or exceeded                           Measure 2.3.2: Average number of days to
             target                                      issue advisory opinions in health care area.

      FY 2000 Assessment                                   imately $26 for every $1 spent on
                                                           agency operations. In addition, the
                                                           FTC’s law enforcement activities and
    The results of our FY 2000 activities
                                                           consumer education efforts deter many
reached, and in most cases exceeded, each
                                                           fraudulent activities or anticompetitive
of our performance measure targets with
                                                           mergers that could result in sub-
the exception of one. Highlights of our
                                                           stantial, though unmeasurable, con-
performance and its effect on consumers
                                                           sumer savings.
and businesses are:
                                                       •   Protecting consumers and businesses
•     Saving consumers an estimated $3.2
                                                           from anticompetitive mergers which
      billion in 2000 from law enforcement
                                                           raise prices and harm consumer con-
      actions to stop fraud and prevent anti-
                                                           fidence. Merger activity in 2000 reach-
      competitive mergers, achieving an esti-
                                                           ed record levels in terms of both
      mated consumer savings of approx-

    number of transactions and trans-                          Challenges
    action dollar values. The agency’s en-
    forcement actions protected consumer
                                                      Two developments have greatly in-
    interests in a broad array of vital
                                                   creased the demands on the FTC – the
    markets, from health care to food to
                                                   continuous growth of the Internet and the
    transportation and energy.
                                                   dramatic increase in the size and com-
                                                   plexity of corporate mergers.
•   Bringing 49 Internet-related fraud
    enforcement actions in 2000, for a total
                                                       Use of the Internet has grown expo-
    of 149 since 1994. These actions have
                                                   nentially since commercial Web browsers
    targeted corporate and individual
                                                   first became available in 1994 – 163
    defendants on behalf of millions of on-
                                                   million Americans now have access to the
    line consumers and small businesses.
                                                   Internet. Internet purchasing also is
    Further, these actions have stopped
                                                   booming and is forecasted to skyrocket
    some of the newest, as well as the
                                                   from $48 billion in 2000 to $269 billion in
    traditional, types of fraud used on the
                                                   2005. The FTC is working to protect
    Internet to con consumers.
                                                   consumers and businesses against new
                                                   high-tech frauds that use the Internet to
•   Receiving and processing more than
                                                   defraud consumers. Halting cyberfraud
    833,500 consumer complaints and in-
                                                   and reviewing Internet-related issues to
    quiries into our Consumer Information
                                                   ensure continued growth of the new e-
    System database since 1997, and
                                                   commerce medium during the early years
    sharing fraud complaints with over 250
                                                   of the Internet’s existence already is
    law enforcement agencies via Consum-
                                                   challenging us and taxing our resources.
    er Sentinel, a secure Web site. Many
    complaints are received through the
                                                       To meet the challenges of the Internet,
    Internet and our toll-free consumer
                                                   we have pursued a comprehensive pro-
    helpline, 1-877-FTC-HELP. We expand-
                                                   gram consisting of systematic analysis of
    ed our efforts in 2000 by establishing a
                                                   the marketplace, law enforcement – often
    second toll-free number, 1-877-ID-
                                                   in conjunction with federal, state, and
    THEFT, that consumers can call to
                                                   local partners – and consumer and busi-
    report identity theft and receive guid-
                                                   ness education.
    ance to resolve credit problems result-
    ing from the theft.
                                                        Similarly, the number of mergers has
                                                   more than tripled in the past decade, and
•   Educating consumers and businesses
                                                   the dollar value of commerce affected by
    about their rights and responsibilities,
                                                   these mergers is rising at an even greater
    and alerting them to potential frauds,
                                                   rate, increasing nearly eighteen-fold in
    by distributing 11 million educational
                                                   total value during this period, from $169
    publications in print and online and
                                                   billion in 1991 to approximately $3 trillion.
    expanding our media outreach pro-
                                                   While restructuring may be necessary for
    grams. Additionally, we issued a report
                                                   companies to compete in the new global,
    on Marketing Violent Entertainment to
                                                   high-tech marketplace, antitrust review is
    Children, finding that such marketing
                                                   necessary to identify and stop those com-
    undermines the credibility of industry
                                                   binations that could diminish competition
    parental advisory labels and ratings
                                                   in specific markets as restructuring pro-
    and frustrates parents’ attempts to
                                                   ceeds. Overall, merger transactions are
    make informed decisions about their
                                                   increasingly larger, involving many differ-
    children’s exposure to violent content.
                                                   ent markets, both domestic and inter-

national, that require examination of pos-         this change is that an annual count
sible antitrust consequences. Moreover,            represents current entries. The data glean-
these deals continue to increase signifi-          ed from current entries helps identify the
cantly in complexity, thus requiring much          most recent trends in fraudulent and other
more exacting analysis of the competitive          harmful practices so we can target our law
issues. As a result, merger investigation          enforcement and education efforts in the
and litigation are substantially more re-          areas affecting the greatest number of
source-intensive than even a few years             consumers.
                                                       Under Objective 1.2 (Stop practices
    To meet the merger challenge, we               that cause consumer injury), we have set
worked closely during 2000 with business           a goal to save consumers $400 million a
groups, members of the bar, and key                year or $2 billion over five years. We based
legislators to develop ways to improve             this on savings achieved in 1999 and 2000
merger investigations to enhance the               and the types of fraud we are seeing in the
efficiency of the process while preserving         marketplace. In the nonfraud area, we
our ability to obtain the information              have changed our performance measure
needed to identify and prevent anti-               (Measure 1.2.2) from the percentage of
competitive mergers. These cooperative             targeted industries brought into com-
discussions have identified approaches             pliance to the size of the deceptive or
that will enable us to reduce the burden           unfair advertising campaigns (measured in
on business, to expedite merger investi-           dollars) that we are able to shut down. Our
gations, and to provide parties with more          annual goal is to stop deceptive or unfair
complete information on the issues that            major national advertising campaigns that
give rise to an investigation.                     have combined media expenditures total-
                                                   ing $300 million. By 2005, our goal is to
  Strategic Planning –                             have stopped $1.5 billion in such cam-
                                                   paigns. This measure captures the broad
 Continuing the Process                            impact of preventing consumers nation-
                                                   wide from being taken in by deceptive or
    A major part of our Strategic Planning         unfair national advertising campaigns.
is to continually reevaluate our objectives,
performance measures, and performance                   Under Objective 2.1 (Identify anticom-
targets. In 2000, we reviewed and updated          petitive mergers and practices that cause
our Strategic Plan through 2005. Our               the greatest consumer injury), we will con-
focus throughout this process was to               tinue effective screening of Hart-Scott-
ensure that we measure the most appro-             Rodino (HSR) Act premerger notification
priate indicators of our performance in            filings to identify those that most likely
enhancing the smooth operation of the              present antitrust concerns, so that at least
marketplace. As a result of this review, we        50% of HSR requests for additional infor-
revised and replaced several performance           mation (“second requests”) result in
measures beginning in 2001.                        enforcement action. Success on this
                                                   measure will benefit consumers by target-
   Under Objective 1.1 (Identify practices         ing resources on the transactions most
that cause consumer injury), we are                likely to have harmful anticompetitive
changing the measure that captures the             effects. This new measure will replace
number of consumer complaints and in-              Measure 2.1.1, relating to the average
quiries in our database from a cumulative          number of days for review of HSR-reported
count to an annual one. Our rationale for          transactions.

    Under Objective 2.2 (Stop anticom-            and the frequency of the public’s access to
petitive mergers and practices through law        important antitrust-related content on the
enforcement), we will increase our target         FTC’s Web site, will more directly reflect
for dollar savings to consumers resulting         our success in preventing consumer injury
from FTC merger actions from $500 million         through education of the public. We are
to $800 million. In addition, we are adding       currently evaluating data from 2000 in
a new performance measure relating to             order to establish reasonable targets on
consumer savings resulting from FTC               these measures for 2001 and beyond.
nonmerger enforcement actions. We expect
to achieve $200 million in nonmerger con-             Although we face mounting challenges
sumer savings in 2001. This new measure           – especially from the continuing growth of
will replace Measure 2.2.3, relating to           the Internet and the increasing size and
average time from proposed consent orders         complexity of mergers – we are able to
to divestitures.                                  address them more effectively because of
                                                  Strategic Planning. Through this ongoing
    Under Objective 2.3 (Prevent consumer         process we have assessed, and will re-
injury through education), we are replac-         assess, the challenges and opportunities
ing both performance measures (2.3.1, re-         facing the FTC and will continue to
lating to a survey of FTC “customers” and         position ourselves to be as innovative and
2.3.2, relating to the time needed to issue       aggressive in protecting consumers and
health care advisory opinions). The new           businesses from unfair or deceptive acts or
measures, relating to education and out-          practices.
reach activities by Commission personnel,

                           THE RESULTS
    The FTC is the federal government’s           electronic marketplace so they will have
primary consumer protection agency.               the same confidence in this market as they
While most federal agencies have juris-           should in the traditional marketplace. The
diction over a specific market sector, we         Internet has the potential to deliver tradi-
have broad law enforcement authority over         tional goods and services, often more con-
nearly the entire economy, including busi-        veniently, faster, and at lower prices than
ness and consumer transactions on the             traditional media. Online commerce prom-
Internet. Our goal is to protect consumers        ises enormous benefits to consumers and
by preventing fraud, deception, and unfair        the economy. Moreover, the Internet is
business practices in the marketplace. We         stimulating the development of innovative
implement three interconnected objectives         products and services that were barely
to reach this broad-reaching goal.                conceivable just a few years ago and is en-
                                                  abling consumers to tap into rich sources
•   Identify fraud, deception, and unfair         of information that they can use to make
    practices that cause the greatest             better informed purchasing decisions.
    consumer injury.
•   Stop fraud, deception, and unfair                 There is real risk, however, that these
    practices through law enforcement.            benefits may not be realized if consumers
•   Prevent consumer injury through               associate the Internet with fraud opera-
    education.                                    tors. Fraud on the Internet is an enormous
                                                  concern for the FTC, and it has prompted
    We first identify practices that cause        a vigorous response using all the tools at
consumer injury by analyzing the con-             our disposal, including law enforcement
sumer complaint data collected in our             and education.
Consumer Information System database
and monitoring the marketplace, including        Cumulative Number of Internet Cases Brought by the FTC
the Internet. We then use this information
to target law enforcement efforts. Our law                 Cumulative Cases
enforcement program aims to stop and                                                                                   149

deter fraud and deception and to increase
compliance with our consumer protection
statutes to ensure that consumers have                                                                    100

accurate and complete information for
their purchasing decisions. We target our
education efforts to give consumers the                                                       40
information they need to protect them-
selves from injury.                                                   14

   One of the greatest challenges we face
is safeguarding consumers in the new                1995       1996        1997        1998        1999         2000

OBJECTIVE 1.1                          IDENTIFY PRACTICES THAT
                                       CAUSE CONSUMER INJURY
    To prevent fraud, deception, and unfair                In 2000, we expanded our efforts to
business practices in the marketplace, we              assist the public by establishing a toll-free
must first identify such practices, especial-          number, 1-877-ID-THEFT, that consumers
ly those that cause the greatest consumer              can call to get information on and report
injury, where we can make the greatest                 identity theft and receive guidance on the
impact.                                                steps they can take to resolve credit and
                                                       other problems that may have resulted
              Strategies                               from the identity theft. Calls to this
                                                       number, which provides a central point of
                                                       contact in the federal government for
    To keep abreast of consumer protection
                                                       identity theft victims, have increased dra-
problems in the marketplace, the FTC is
                                                       matically, from 400 calls a week a year ago
collecting and analyzing data from many
                                                       to over 2,200 a week now.
sources. In 1997, we established the Con-
sumer Response Center to receive con-
                                                                In addition to receiving and analyzing
sumer complaints and inquiries via a toll-
                                                          consumer complaints, we monitor the
free number (1-877-FTC-HELP), mail, and
                                                          growing online marketplace by system-
the Internet. We are now responding to
                                                          atically surfing the Internet to identify Web
10,000 inquiries and complaints a week.
                                                          sites engaged in questionable practices. To
Partners such as the National Fraud Infor-
                                                          date, the FTC has led or coordinated
mation Center of the National Consumers
                                                          approximately 25 Surf Days, uncovering
League, Better Business Bureaus, and the
                                                          some 4,500 questionable sites. The FTC
Canadian fraud database, PhoneBusters,
                                                          also hosts public workshops to explore
also provide us with the consumer com-
                                                          cutting-edge issues with relevant stake-
plaint data they collect. The information is
                                                          holders. For example, we recently hosted
entered into the Consumer Information
                                                          a workshop entitled The Mobile Wireless
System database and analyzed by FTC
                                                          Web, Data Services and Beyond: Emerging
staff to identify trends and patterns, new
                                                          Technologies and Consumer Issues. The
scams, and companies engaging in fraud-
                                                          workshop examined the privacy, security,
ulent, deceptive, and unfair
                                                                         and consumer protection
business practices. This
                                                                         issues raised by emerging
information is used to target      Performance Measure 1.1.1
                                                                         wireless Internet and data
FTC law enforcement and            Cumulative number of consumer
                                   complaints and inquiries entered      technologies. We also hosted
education efforts. Also, the       into database.                        The Information Marketplace:
fraud complaints collected are                                           Merger and Exchange of Con-
                                   FY 2000 Target:      600,000
shared with over 250 other         FY 2000 Actual:      833,659          sumer Information. Its purpose
law enforcement agencies           Met or Exceeded:     T
                                                                         was to educate the FTC on
across the United States,                                                issues raised by the creation
Canada, and Australia via                                                of detailed consumer profiles
Consumer Sentinel, a secure Web site. The                 through the merger or exchange of data,
constant input and analysis of fresh com-                 whether offline or online.
plaint data have allowed the FTC to move
quickly – in some instances in a matter of
weeks – to stop practices before they can
do more harm to consumers.

   Performance Measure                             ways to increase our collection of infor-
                                                   mation from consumer agencies in other
        and Results                                countries. We are continuing our work
                                                   with the International Marketing Super-
    We assessed our 2000 impact by the             vision Network and the European Com-
total number of consumer complaints and            mission to develop a public Web site where
inquiries in the Consumer Information              consumers can file complaints to be
System database. At the end of 2000,               shared with international law enforcers
these entries totaled more than 833,500 –          through Consumer Sentinel. Building on
approximately 39% over our target of               our experience with the Canadian and
600,000, which had been increased in               Australian members of Consumer Sen-
1999. This growth was due to the ever-             tinel, we are also working toward data-
increasing number of complaints received           sharing agreements with other countries.
via the Internet and our toll-free telephone
number, the addition of our identity theft         Cumulative Number of Consumer Complaints
toll-free number, and the growing number              and Inquiries Entered Into Database
of partners contributing complaints. The                   Cumulative Complaints & Inquiries (in thousands)
data have proved invaluable in targeting
our enforcement and education efforts on
the most serious problems, among them:
online auction fraud, Internet service pro-
vider scams, Web and credit card “cram-
ming” (unauthorized billing), pyramid
schemes, investment schemes, travel and                         157

vacation fraud, pay-per-call solicitation
frauds, and health care fraud. Using the
data, the FTC led its first global law
                                                         1998            1999             2000
enforcement effort, and the largest co-
ordinated effort in its history, targeting             In 2000, the FTC created a Data Clear-
these Internet scams – over 250 law                inghouse to track the complaints it re-
enforcement actions were brought by five           ceives from victims of identity theft. Data
U.S. agencies and consumer protection              Clearinghouse information is shared elec-
organizations from nine countries and 23           tronically with other law enforcement
states.                                            agencies nationwide via the FTC’s secure
                                                   law enforcement Web site, Consumer Sen-
Performance Assessment                             tinel. The Clearinghouse contained over
                                                   50,000 records as of the end of January
   and Future Trends                               2001. The Clearinghouse information
                                                   helps law enforcement and policy makers
    Not only does our database enable us           assess the extent of identity theft and the
to tackle the most serious problems, it            forms it is taking (for example, credit card
informs us quickly of emerging problems            versus phone fraud, the latest scams, etc).
so that we can move rapidly to stop con-           Access to the Clearinghouse information
sumer injury. In addition, by collecting           also supports law enforcement agencies’
data from, and sharing it with, our                efforts to combat identity theft by pro-
partners, we are able to coordinate and            viding a broader range of complaints from
enhance the effectiveness of law enforce-          which to spot patterns of illegal activity.
ment agencies across the country and in            These patterns might not be apparent from
Canada and Australia. To make the data-            the more limited number of complaints the
base even more valuable, we are pursuing           agencies receive directly from victims.

    Assessing our performance using the            the extent possible. In-house, telephone
number of entries in our consumer com-             counselors ask repeat callers for the
plaint database has proven to be a reason-         unique reference number included on FTC
able indicator of our ability to identify          consumer correspondence. Information
consumer problems. Using the data to               provided in a repeat call is added to the
identify trends and patterns, new scams,           original complaint. Complaints filed via the
and individual companies engaged in                Internet are subject to quality control pro-
illegal activities has quickly become the          cedures to eliminate duplicates. In all, we
bedrock of our ability to effectively target       continue to believe that duplication of
our law enforcement and education efforts.         complaints is not a significant problem.
Also, working with our partners to collect
data in one central location increases the              In our revised five-year strategic plan,
value of each batch of data by establishing        this performance measure is changed to
patterns and giving us a broad view of             an annual count of database entries ver-
what consumers are facing in the expand-           sus a cumulative one. The use of a cumu-
ing, global marketplace. The more data we          lative count for 2000 continues to be valid
have, the better able we are to see trends         since the database has been in existence
and coordinate activities with other law           for approximately three years, and the vast
enforcers. Additionally, having two cen-           majority of data has been entered in the
tralized, toll-free numbers for consumers          past two years. However, as the data age,
to call with complaints gives them the             earlier entries will be less useful in iden-
opportunity to share their experiences and         tifying bad practices; the data gleaned
contribute to law enforcement efforts to           from recent entries will determine the tar-
stop wrongdoers.                                   gets of current law enforcement and edu-
                                                   cation efforts.
    In 2000, we examined the potential for
duplication of complaints. Our basic                   In 2001, we are expanding our reach
approach to avoid duplication is to collect        by launching a public information cam-
data only from organizations that have             paign for the toll-free numbers and
their own source of consumer complaints            developing a program to enable military
and do not duplicate the data of any other         personnel across the globe to enter com-
FTC data contributor. Each data con-               plaints online. We are also working to
tributor is assigned a unique identification       expand international participation in Con-
number, and the data is cross-checked to           sumer Sentinel.

OBJECTIVE 1.2                        STOP PRACTICES THAT CAUSE
                                     CONSUMER INJURY
    Once we identify fraud, deception, and           cases by the FTC. In 2000, the FTC led 10
unfair business practices in the market-             sweeps resulting in a total of 245 actions,
place, we focus our law enforcement                  including 75 FTC cases. These sweeps
efforts on areas where we can have the               have had a substantial impact on reducing
greatest impact for consumers.                       fraud and raising consumer awareness.

             Strategies                                  In the nonfraud area, we work to en-
                                                     sure that there is compliance with our
                                                     consumer protection statutes. Given our
    To combat fraud, we select priorities for
                                                     broad jurisdiction and limited resources,
enforcement by analyzing complaint data
                                                     we focus on the most serious problems,
from our Consumer Information System
                                                     use various enforcement tools, and en-
database and monitoring the traditional
                                                     courage self-regulation. The overall goal is
and online marketplaces. Telemarketing
                                                     the greatest possible compliance with
fraud continues to be a priority, as does
                                                     statutes, regulations, and orders. Using
protecting consumers from more tradi-
                                                     information from our database and moni-
tional scams that have found new life on
                                                     toring national advertising, we are able to
the Internet, including health-related
                                                     target our law enforcement to areas that
fraud. The FTC also is moving to protect
                                                     create the greatest risks to consumer
consumers and businesses against new
                                                     health, safety, and economic well-being.
high-tech frauds through our Internet
                                                     We often work with industry and inter-
Rapid Response Team. In one such case,
                                                     ested groups to encourage self-regulation
FTC v. Verity International, the FTC, within
                                                     and private initiatives, where appropriate,
weeks of seeing a dramatic spike in con-
                                                     in lieu of regulation or law enforcement.
sumer complaints about long-distance
charges on their telephone bills, sued the
company in federal district court. The                 Performance Measures
court entered a temporary restraining                       and Results
order, froze defendants’ assets, and later
issued a preliminary injunction against
                                                         Our goal in 2000 was to save con-
future violations.
                                                     sumers over $250 million by stopping
                                                     fraud. We estimate that we surpassed this
    One of the most effective tools in the
                                                     target, with our actions saving consumers
battle against fraud has been the law
                                                     approximately $263 million. Consumer
enforcement sweep – simultaneous law en-
                                                     savings are measured on the basis of the
forcement actions by federal, state, and/or
                                                     estimated annual fraudulent sales of
local partners against numerous defend-
                                                     defendants in the 12 months prior to filing
ants nationwide that focus on a particular,
                                                     a complaint. The law enforcement actions
widespread type of fraud. Each sweep is
                                                     included in this measure were taken
supported by a creative education program
                                                     against fraudulent operators ranging from
aimed at preventing future losses to the
                                                     individuals or small companies to scam
public. Since 1995, the FTC has joined
                                                     artists operating large schemes on the
with partners in bringing 1,567 law en-
                                                     Internet. Our experience in most cases is
forcement actions in 60 sweeps against
                                                     that once we file a complaint in federal
fraudulent operators. This includes 376

district court and obtain a court order, the             Performance Assessment
defendants stop their fraudulent practices;
if they fail to comply, they are subject to                 and Future Trends
contempt actions. Thus, in stopping these
frauds, we stop further consumer losses to                      Drawing on Consumer Sentinel data,
these defendants. By publicizing these law                we are targeting the most pervasive online
enforcement actions and distributing con-                 fraud and moving quickly to stop large,
sumer education materials, we seek to                     fast-growing Internet scams. In 2000, the
increase consumer confidence in the                       Commission brought 49 cases involving
marketplace.                                              fraudulent or deceptive marketing
                                                          practices related to the Internet, bringing
     In the nonfraud area, our goal was to                the total number of Internet cases filed
increase compliance with the laws against                 since 1994 to 149. We expect fraud to con-
deceptive and unfair practices, and there-                tinue to grow as the use of the Internet
by ensure that consumers have more                        grows, and in response, we will increase
accurate and complete infor-                                             our efforts to slow online
mation for their purchasing                                              fraud and prevent consumer
decisions. We target indus-       Performance Measure 1.2.1              injury.
                                  Dollar savings for consumers from
tries where misleading or         FTC actions which stop fraud.
unfair practices are wide-                                                 In our revised five-year stra-
spread, and work to sig-          FY 2000 Target:      $250 million      tegic plan, we set a goal to
                                  FY 2000 Actual:      $263 million
nificantly improve the level of   Met or Exceeded:     T
                                                                         save consumers $400 million
compliance through law en-                                               a year or $2 billion over five
forcement or self-regulatory      Performance Measure 1.2.2              years. We based this on sav-
                                  Percentage of targeted industry
programs. In 2000, we plan-       brought into compliance through law    ings achieved in 1999 and
ned to bring 50% to 75% of        enforcement or self regulation.        2000 and the types of fraud
the noncomplying members          FY 2000 Target:      50% - 75%
                                                                         we are seeing in the market-
in targeted industries into       FY 2000 Actual:      83%               place. In particular, online
compliance within a two-year      Met or Exceeded:     T                 fraud has the potential to
period. We targeted indus-                                               reach consumers worldwide
tries whose major members                                                and cause great economic
were not in compliance with the law,                      injury. As our expertise in high and new
including invention promotion, computer                   technologies grows, we will be better able
leasing, and Individual Reference (Look-                  to detect and deter online fraud before
up) Services. By taking law enforcement                   these schemes take hold. By stopping
actions and encouraging self-regulatory                   fraudulent operators early, measured sav-
programs across these industries, we were                 ings in each case may fall; however, the
able to achieve an average increase in                    quick response results in less injury to
compliance of 83% . Although this exceeds                 consumers. This effort, combined with
our target, the result does not include all               strategies such as law enforcement
industries targeted in 1998. The reduction                sweeps, demonstrates our effectiveness in
in the number of industries measured is,                  preventing consumer injury.
in part, a result of the difficulties of
collecting market share data.         These                     In addition to fighting fraud, we also
difficulties also led to the elimination of               focus on compliance with traditional ad-
this measure in our revised five-year                     vertising law and FTC Rules and Guides.
strategic plan.                                           We work cooperatively with our law en-
                                                          forcement partners, industry, and con-
                                                          sumer groups to extend the reach of our

efforts to increase compliance. The scope         revised five-year strategic plan to a more
of our current and upcoming priorities            comprehensive measure of FTC efforts to
spans our broad jurisdiction. We will use         reduce harm to consumers. Our new
business and consumer education, as well          measure is “Each year, the FTC will re-
as selective enforcement, to ensure broad         duce consumer injury by obtaining orders
compliance with the consumer credit               stopping deceptive or unfair major national
statutes, the Mail and Telephone Order            advertising campaigns with combined
Rule, and advertising regulations. For            media expenditures totaling $300 million;
example, in an enforcement effort labeled         by 2005, $1.5 billion in such campaigns
“Project TooLate.com,” the FTC addressed          will have been stopped.” This measure
widespread shipping delays by online              was chosen because it captures the broad
sellers during the 1999 holiday season. In        impact in (1) stopping major misleading ad
2000, seven online retailers (“e-tailers”)        campaigns and deterring others, and
settled FTC charges that they violated the        (2) preventing consumers nationwide from
Mail and Telephone Order Rule by not              being injured by purchasing products or
giving proper or timely notice of shipping        services promoted by deceptive or unfair
delays. The companies paid civil penalties        national advertising campaigns. The prem-
totaling $1.5 million and implemented             ise is that the more a company spends on
procedures to ensure that the violations          an advertising campaign, the more wide-
would not recur. Before the 2000 holiday          spread the deceptive or unfair message.
season, FTC staff surfed more than 200 e-         The new measure is a conservative meas-
tailer sites and sent warning letters             ure of the agency’s impact because it
explaining Rule obligations to nearly 100         includes only deceptive or unfair ad cam-
businesses that made “quick-ship” claims.         paigns of major national advertisers. It
The 2000 season proceeded more smooth-            does not count all the deceptive adver-
ly, with consumers reporting fewer prob-          tising we may stop – for example, cases
lems with shipping delays.                        involving modest advertising expenditures,
                                                  multi-level marketing, claims made solely
   The measure of our efforts to ensure           on product packaging, and fraud-related
broad-based protections for consumers in          advertising (which is captured in perform-
the nonfraud area was changed in our              ance measure 1.2.1).

OBJECTIVE 1.3                          PREVENT CONSUMER INJURY
                                       THROUGH EDUCATION
   Consumer and business education is                      We coordinate with hundreds of private
the first line of defense against fraud and            and public partners to provide information
deception and a top priority of the FTC.               about specific promotions, products, and
                                                       services. In 2000, the FTC was in the lead
              Strategies                               in organizing the second National Con-
                                                       sumer Protection Week, which focused on
                                                       a public/private campaign to provide infor-
    One of the FTC’s operating principles is
                                                       mation on how to shop safely from home –
that education and outreach are cost-
                                                       whether by telephone or mail order, or
effective ways to prevent consumer injury,
                                                       online. Among our partners were the
increase business compliance, and add an
                                                       National Association of Consumer Agency
extra dimension to our law enforcement
                                                       Administrators, the National Association of
program. Virtually every Consumer Pro-
                                                       Attorneys General, the National Consum-
tection effort has an education component,
                                                       ers League, the American Association of
from compliance surfs and law enforce-
                                                       Retired Persons (AARP), the Department of
ment sweeps to the announcement of new
                                                       Justice, and the U.S. Postal Inspection
rules and regulations. Through reports,
                                                       Service. The FTC also continues to manage
publications, Web sites, media events,
                                                       www.consumer.gov and to recruit new
speeches, and collaborative activities with
                                                       agency members to participate in the site,
other organizations, the FTC reaches tens
                                                       which offers one-stop access to federal
of millions of consumers and businesses
                                                       consumer information. In the past year,
every year.
                                                       the number of members has grown from
                                                       60 agencies at the end of 1999 to 174
    Our database helps us focus our
education efforts on areas where fraud,
deception, unfair practices, and informa-
tion gaps are causing the greatest injury.                     Performance Measure
Consumers are given the tools they need                                and Results
to spot potentially fraudulent and other
illegal promotions, and businesses are
                                                                We gauged our impact in the education
advised about how to comply with the law.
                                                           area by tracking the number of publica-
As with our law enforcement, more of our
                                                           tions we distributed to the public. In 2000,
education efforts now involve the Internet.
                                                           the FTC distributed approximately 11
We not only address consumer issues in-
                                                           million publications: 5.4 million print pub-
volving the Internet, such as shopping
                                                           lications and 5.6 million through the con-
online, but we also use the
                                                                        sumer protection Web page on
Internet as a tool to reach
                                                                        the FTC Web site, making this
consumers, for example,            Performance Measure 1.3.1            the first year electronic
through our Web sites, online      Number of education publications
                                   distributed to or accessed           distribution surpassed print
banner public service              electronically by consumers.         distribution. We exceeded our
announcements, and online
                                                                        goal of 8.7 million publi-
distribution of “news” con-        FY 2000 Target:       8.7 million
                                   FY 2000 Actual:       11 million     cations by approximately 2.3
sumers can use.                    Met or Exceeded:      T              million, due primarily to a
                                                                        120% increase in the number

of publications accessed online. Our reach          through the Internet has increased, as
nationwide was extended by more aggres-             more consumers and businesses go online.
sive outreach and promotion of FTC                  The difference in the number of pub-
materials and our toll-free numbers,                lications accessed online in 1996 and 2000
including an extensive multimedia cam-              (140,000 versus 5.6 million) tells the story
paign on identity theft. We used informa-           of the Internet’s coming of age as a
tion from our database to target our                mainstream medium and certainly its
education programs to problem areas,                importance to any large-scale dissemi-
such as Internet fraud, children’s online           nation effort. Capitalizing on this trend, we
privacy, online auctions, day trading,              will increase our use of the FTC’s Web site,
dietary supplements for children, credit            www.ftc.gov, and the multi-agency Web
reports, and office supply scams. The               site, www.consumer.gov, to efficiently and
growing number of telephone calls and the           effectively reach consumers, businesses,
increased use of our Web site demonstrate           law enforcement officials, and the media.
that our efforts have created a greater
awareness of consumer issues. In turn,                  Additionally, the Commission delivered
consumers will, to some extent, be able to          testimony on consumer protection issues
protect themselves against fraud and                to the United States Senate and the United
deception in the marketplace.                       States House of Representatives 16 times
                                                    during 2000:
Performance Assessment                                 •   Solving the Problem of Scholarship
   and Future Trends                                       Scams: S1465, The College Scholar-
                                                           ship Fraud Prevention Act of 1999,
    The FTC seeks to alert as many con-                    Presented by Sheila Anthony,
sumers as possible to the telltale signs of                Commissioner.
fraud, deception, and unfair business                  •   Unsolicited Commercial Email,
practices, and other critical consumer                     Presented by Eileen Harrington,
protection issues. Use of the Internet to                  Associate Director of Marketing
disseminate information about fraud and                    Practices.
technology-related matters is integral to              •   Identity Theft, Presented by Jodie
the FTC’s education, deterrence, and                       Bernstein, Bureau Director.
enforcement efforts and has allowed the                C   Office Supply Fraud. Presented by
agency to reach vast numbers of con-                       Jodie Bernstein, Bureau Director.
                                                       •   Funeral Industry, Presented by
sumers and businesses quickly, simply,
                                                           Eileen Harrington, Associate Direc-
and at low cost. The FTC has been at the
                                                           tor of Marketing Practices.
forefront of using the Internet to educate
                                                       •   Fair Credit Reporting Amendments of
and empower consumers. This trend will
                                                           1999, Presented by Debra Valen-
accelerate in the future.
                                                           tine, General Counsel.
                                                       •   Online Privacy: Recent Commission
    Our measure of the number of publi-
                                                           Initiatives. Presented by Jodie Bern-
cations distributed is an accurate indicator
                                                           stein, Bureau Director.
of our impact in educating consumers,
                                                       •   Predatory Lending Practices in the
although it does not fully capture the
                                                           Subprime Industry, Presented by
millions of FTC publications distributed by
                                                           David Medine, Associate Director of
our customers, partners, and the public.
                                                           Financial Practices.
As we forecasted, the number of print
                                                       •   Privacy Online, Presented by Robert
publications we distribute has declined
                                                           Pitofsky, Chairman, and all Com-
and the number of publications accessed

•   Online Profiling:    Benefits and              •   Identity Theft, Presented by Jeffrey
    Concerns. Presented by Jodie                       Klurfeld, Regional Director, West-
    Bernstein, Bureau Director.                        ern Regional Office.
•   Proposed Legislation: The Telemar-             •   Identity Theft, Presented by Betsy
    keting Victims Protection Act (HR                  Broder, Assistant Director, Division
    3180) and The Know Your Caller Act                 of Planning and Information.
    (HR 3100), Presented by Eileen
    Harrington, Associate Director of               Increasing the visibility of the FTC as
    Marketing Practices.                        the nation’s consumer protection cham-
•   Living Trust Scams, Presented by            pion not only helps consumers better
    Elaine Kolish, Associate Director of        protect themselves, but also encourages
    Enforcement.                                consumers to provide the FTC with more
•   Identity Theft, Presented by Jodie          and better complaint data. That, in turn,
    Bernstein, Bureau Director.                 will make our law enforcement and edu-
•   Fraud Against Seniors, Presented by         cation efforts more effective.
    Rolando Berrelez, Assistant Re-
    gional Director, Midwest Regional

                      AND OTHER ANTICOMPETITIVE
                      BUSINESS PRACTICES IN THE
    Competition among sellers in an open             activity in question, such as a merger, may
marketplace results in lower prices for              be either beneficial – by enabling sellers to
consumers, leads to high quality products            be more efficient and pass those savings
and services, maximizes consumer choice,             along to consumers – or harmful – by
and spurs the discovery and development              enabling sellers to reduce the output of
of beneficial new products and services.             their product and raise the price to
Anticompetitive mergers, and other prac-             consumers. Thus, indiscriminate or ill-
tices that diminish competition, deny                considered intervention into the market-
consumers these benefits. Thus, the FTC’s            place may do more harm than good.
goal is to promote vigorous competition by
preventing anticompetitive practices and                 Second, once we identify an anti-
mergers that would diminish competition.             competitive merger or business practice,
We apply three objectives to achieve this            we take enforcement action under the
goal.                                                antitrust laws to stop it, either through an
                                                     administrative challenge or in federal
•   Identify anticompetitive mergers and             court. In many instances we are able to
    practices that cause the greatest                reach a consent agreement with the affect-
    consumer injury.                                 ed parties that stops the anticompetitive
•   Stop anticompetitive mergers and                 activity while avoiding litigation.
    practices through law enforcement.
•   Prevent consumer injury through                      Third, we seek to prevent anticom-
    education.                                       petitive activity by educating business and
                                                     consumers about the antitrust laws. In-
    First, we identify anticompetitive merg-         creased knowledge and understanding on
ers and business practices by applying               the part of businesses facilitate their
sophisticated economic analysis and con-             efforts to comply with the law. Increased
ducting thorough factual investigation to            knowledge and understanding on the part
distinguish between actions that threaten            of consumers enable them to identify
the operation of free markets and behavior           anticompetitive activity more readily and
that promotes vigorous competition and               to bring such activity to our attention for
advances their operation. This step is criti-        possible enforcement action.
cal because in any given circumstance the

                                      MERGERS AND PRACTICES THAT
                                      CAUSE CONSUMER INJURY
   To prevent anticompetitive mergers and            complaints, hearings, economic studies,
anticompetitive business conduct, we                 and other means to identify potentially
must first determine which mergers and               anticompetitive conduct that may harm
business practices are anticompetitive.              consumers. In particular, we focus on
                                                     emerging trends in the economy, tech-
             Strategies                              nology, and the marketplace.

    To achieve this objective, the FTC                  Performance Measures
(1) identifies the mergers and business                      and Results
practices that should be examined for
antitrust consequences, and (2) conducts
                                                              We measure our success in identifying
an inquiry appropriate to the circum-
                                                        anticompetitive mergers by the average
stances of each matter to determine
                                                        number of days we devote to reviewing
whether to pursue enforcement action. As
                                                        actions reported to us under the HSR pre-
a collateral, but important, aspect of this
                                                        merger notification program. This measure
objective, we try to conduct our inquiry in
                                                        is important because it reflects the
a way that minimizes any cost or incon-
                                                        efficiency with which we conduct these
venience to businesses.
                                                        reviews. When the review of reported
                                                        actions is completed quickly and effi-
     The premerger notification require-
                                                        ciently, we conserve available resources
ments of the Hart-Scott-Rodino (HSR) Act
                                                        that can be devoted to other important
provide us the primary means for iden-
                                                        activities. In addition, a prompt review
tifying potentially anticom-
                                                                     better serves economic
petitive mergers. The FTC’s
                                                                     growth, because it allows
Premerger Notification Office    Performance Measure 2.1.1
                                 Average number of days for review   businesses to proceed with
reviews all filings made for     of HSR-reported transactions.       mergers and acquisitions that
proposed mergers, acqui-
                                 FY 2000 Target:      20 days        pose no antitrust issues with
sitions, and joint ventures      FY 2000 Actual:      18 days        minimal delay.
and performs preliminary         Met or Exceeded:     T
antitrust review for every
                                 Performance Measure 2.1.2             Despite a high volume of
transaction that is filed with   Number of nonmerger                 reported transactions, we con-
the FTC. We work to complete     investigations opened per year.
                                                                     tinued our emphasis on expe-
these reviews as quickly and
                                 FY 2000 Target:      45 - 70        diting our preliminary reviews.
as efficiently as possible, both FY 2000 Actual:      25             We established as a goal an
to conserve our available
                                                                     average review time of 20 days
resources to devote to other
                                                                     for transactions reported
work, and to minimize the
                                                                     under HSR, even though the
delay imposed on businesses as a result of
                                                        statute generally permits 30 days for our
the HSR requirements.
                                                        review. We were able to exceed that goal in
                                                        2000, completing our review of HSR-
     We also use trade press and other
                                                        reported actions in an average of 18 days,
news articles, consumer and competitor
                                                        an improvement of one day over 1999.

    In 2000, we received notification of                We also measure our success in
4,926 proposed transactions in accordance           identifying anticompetitive practices that
with the HSR notification and filing re-            cause consumer injury by counting the
quirements, an increase of approximately            number of nonmerger investigations open-
6% over 1999. This volume of transactions           ed during the year. This measure directly
reflects the increasing merger activity that        reflects our enforcement activity. While we
has been taking place over the past                 do not take enforcement action in every
decade. The number of reported trans-               matter we investigate, because we often
actions in 2000 represents a more than              conclude that the practice in question is
threefold increase over the number of               not anticompetitive, it is axiomatic that a
reported merger transactions in 1991. In            thorough investigation always precedes
addition, the total dollar value of mergers         any order to a business that it must “cease
reported in 2000 was $2.99 trillion, repre-         and desist” a particular anticompetitive
senting an increase of 63% over 1999, and           activity.
an increase of 1769% since 1991.
                                                    Dollar Value of Merger Transactions
     Mergers reported under the HSR Act
vary tremendously in their complexity and
potential anticompetitive effect. We con-                       Dollar Value (in trillions)                                     $2.99

tinue to review and prepare an analytical
summary of each reported transaction. In
most cases, the agency can make a                                                                                       $1.83

reasonable judgment about whether a                                                                             $1.44

merger has the potential to be anti-
competitive or not within a few days of                                                 $0.51

filing, simply by reviewing these analyses,             $0.17   $0.17   $0.22

based on materials filed with the HSR
notification. The agency’s Merger Screen-
ing Committee, comprising senior officials          1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

of the Bureaus of Competition and Eco-
nomics, reviews those transactions that                 We established a goal of opening 45 to
raise more difficult questions. If the Com-         70 nonmerger investigations over the
mittee determines that more information is          course of the year. While we continue to
needed in a matter, it calls for a more             believe that this goal is ordinarily a
extensive investigation, often including the        reasonable one, extraordinary circum-
issuance of a request for additional infor-         stances – that is, the overwhelming crush
mation (“second request”) from the parties.         of merger activity during the year –
                                                    required us to reallocate resources in such
    In 2000, the Antitrust agencies allowed         a way that this goal could not be met in
more than 97% of the reported trans-                2000. As noted, our merger review must
actions to proceed by the end of the stat-          take place within statutorily mandated
utory 30-day waiting period, with more              time periods, permitting no discretion to
than 70% having been granted early ter-             balance the workload with other priorities.
mination of the statutory waiting period.           Despite the necessity of moving substan-
Of the 4,926 transactions, we opened 211            tial resources from nonmerger to merger
investigations and issued second requests           activity to meet and exceed statutory
in 43 to obtain information to assist the           merger review deadlines, we were able to
attorneys and economists in conducting              open 25 nonmerger investigations in 2000.
their investigations.

Performance Assessment                                  We continue to be concerned with the
                                                    importance of identifying anticompetitive
   and Future Trends                                conduct in the marketplace. Although we
                                                    did not meet our goal on this performance
    We were able to exceed our goal on the          measure, two factors limited our ability to
average review time for HSR-reported                do so. First, the record-setting pace of
transactions, improving on our perform-             corporate mergers and acquisitions accel-
ance from 1999. While our performance in            erated further in 2000, both quantitatively
this area remains important, we are                 (number of filings) and qualitatively
replacing this performance measure                  (complexity of transactions). The agency
beginning in 2001 with a measure that               investigated many mergers that raised
more directly relates to the core objective.        anticompetitive issues in multiple product
Prompt review of HSR filings is important           and geographic markets and involved
in that it helps to reduce the burden on            highly technical or specialized goods and
businesses that are required to delay               services. This merger activity demanded a
merger transactions pending antitrust               disproportionate share of the resources
review. We believe that the structured              available to our Maintaining Competition
review process we have put in place to              Mission and necessarily diverted resources
assess transactions will enable us to               from nonmerger enforcement. Second, of
continue to do so as quickly and efficiently        the resources remaining for nonmerger
as possible, and this will remain among             investigation and enforcement, we devoted
our highest priorities. However, because a          a substantial proportion to the ad-
primary focus of Objective 2.1 is to deter-         vancement and conclusion of cases that
mine which of the many merger trans-                were already underway. Our resulting
actions we encounter is likely to cause             accomplishments, not reflected in the
consumer injury – and therefore warrants            number of new investigations opened,
investigation – we have developed a more            included 14 consent orders involving a
targeted performance measure.                       broad range of consumer goods markets,
                                                    including pharmaceuticals, compact discs,
    Beginning in 2001, we will measure the          spices, women’s shoes, and health care.
percentage of matters involving a second            Moreover, we devoted significant resources
request that result in enforcement action,          to pretrial litigation in the Mylan Labora-
with a goal of approximately 50%. A                 tories matter, which led to a settlement
percentage significantly below that level           after the close of 2000 resulting in $100
may suggest that we are targeting enforce-          million in consumer redress – a direct,
ment resources ineffectively by investi-            tangible return to consumers that sub-
gating too many competitively benign                stantially exceeds the entire annual cost of
transactions (and unduly burdening busi-            our Maintaining Competition Mission. In
nesses as a result), while a percentage             the future, we expect to reestablish the
significantly above that level may suggest          balance in merger and nonmerger activity,
that we are focusing too narrowly and thus          which we believe will result in a return to
potentially allowing problematic trans-             historic levels of nonmerger investigation
actions to go forward without sufficient            initiations.
review. Success on this measure will
benefit consumers by targeting resources                In addition to achieving these specific
on the transactions most likely to have             performance goals, we continue our work
harmful anticompetitive effects.                    to accomplish this objective through
                                                    activities designed to improve our under-
                                                    standing of those market situations where

antitrust activity could lead to a more          will provide a foundation for future
competitive market. In 2000, we conducted        enforcement initiatives. During 2001, we
workshops relating to two current anti-          will work to develop new ways to identify
trust topics, slotting allowances and            possibly anticompetitive mergers that may
business-to-business (“B2B”) electronic          not be subject to filing under HSR in light
marketplaces. The learning derived from          of the raised filing thresholds effective this
these workshops, as well as from economic        year.
research on various competition issues,

OBJECTIVE 2.2                           STOP ANTICOMPETITIVE
                                        MERGERS AND PRACTICES
                                        THROUGH LAW ENFORCEMENT
    Law enforcement represents the most                  assessment of the illegality of the activity
direct method by which the Commission                    in question, and (2) comprehensive prep-
pursues its goal of preventing anticom-                  aration for litigation before an Admin-
petitive mergers and anticompetitive busi-               istrative Law Judge or in federal court.
ness practices.                                          While we frequently resolve matters
                                                         through settlement (or, in the case of
              Strategies                                 mergers, through the parties’ abandon-
                                                         ment of the anticompetitive transaction),
                                                         our ability to do so depends in large
    To stop suspect mergers and practices
                                                         measure on our preparedness to achieve
through law enforcement, our preferred
                                                         the needed result thorough litigation, if
strategy – that is, the most effective and
cost-efficient strategy – is to prevent such
mergers before they occur. We implement
                                                                  In addition, when resolving anti-
this strategy primarily through our auth-
                                                            competitive mergers and practices through
ority to seek injunctive relief under Sec-
                                                            settlement, we place increasing emphasis
tion 13(b) of the Federal
                                                                           on crafting remedies that will
Trade Commission Act. Often
                                                                           successfully eliminate the
we are able to resolve a com-      Performance Measure 2.2.1               anticompetitive effects of the
petitive problem through           Positive outcome of cases brought by
                                                                           activity in question, and do so
consent proceedings without        FTC due to alleged violations.
                                                                           in a timely fashion.
having to seek such an             FY 2000 Target:      80%
injunction. Where injunctive       FY 2000 Actual:      95%
                                   Met or Exceeded:     T                    We employ our law en-
relief is inappropriate or
                                                                           forcement authority to stop
unavailable, we may rely on        Performance Measure 2.2.2
                                                                           anticompetitive mergers and
our administrative remedial        Dollar savings for consumers
                                   resulting from FTC actions.             practices both directly and
powers to seek to restore
                                                                           indirectly. Through direct
competition lost as a result       FY 2000 Target:      $500 million
                                                                           legal challenges to specific
of a merger that could not be      FY 2000 Actual:      $2.98 billion
                                   Met or Exceeded:     T                  anticompetitive transactions,
prevented. Whether achieved
                                                                           we save consumers millions of
by consent or in an admin-         Performance Measure 2.2.3
                                   Average time, in months, from           dollars annually by preventing
istrative proceeding, the          proposed consent orders to              such transactions from taking
principal remedy is the            divestitures.
                                                                           place or by arranging for
divestiture of assets
                                   FY 2000 Target:      9 months           restructuring of the trans-
sufficient to preserve or          FY 2000 Actual:      4 months
                                                                           action to eliminate the anti-
restore competition. We have       Met or Exceeded:     T
                                                                           competitive effects.
also employed conduct reme-
dies where appropriate.
                                                                             In addition, such challenges
                                                            indirectly serve our objective by serving as
    To accomplish this objective, we em-
                                                            legal precedent and establishing an
phasize (1) thorough investigation, as well
                                                            effective, visible law enforcement presence.
as sophisticated legal and economic anal-
                                                            This deterrent effect prevents many anti-
ysis to ensure we reach an accurate

competitive mergers and acquisitions from           we are unsuccessful in obtaining relief
even being proposed.                                through the courts. We were able to sig-
                                                    nificantly exceed our goal in 2000,
   Another part of our strategy is to study         reaching a successful settlement agree-
and evaluate the remedies used in anti-             ment or persuading parties not to proceed
trust cases, particularly divestiture orders        with an anticompetitive acquisition in
used to resolve merger cases. This ongoing          approximately 95% of the matters we
process focuses in particular on what               challenged. The Commission approved 32
makes divestiture orders most effective in          proposed consent orders in 2000. In
preserving or restoring competition, and            addition, parties to proposed mergers
on how to expedite the completion of                abandoned their transactions in nine
curative divestitures.                              instances following our investigation.

    We are continuing to refine and im-                 We established as another goal direct
prove our skills in litigation, economic            dollar savings to consumers of at least
analysis, and negotiation through ongoing           $500 million as a result of our prevention
training for staff.                                 of anticompetitive mergers that would have
                                                    raised prices by that amount. In calcu-
    Finally, we try to ensure that admin-           lating these savings, we take into con-
istrative litigation and adjudication reach         sideration the size of the markets involved,
a timely resolution.                                the percentage increase in price that
                                                    would likely have resulted from the
  Performance Measures                              merger, and the likely duration of the price
                                                    increase.1 We exceeded our goal by a wide
       and Results                                  margin in 2000, preventing mergers that
                                                    would have cost consumers $2.98 billion
    We measure our success in stopping              had they been allowed to proceed.
anticompetitive mergers and practices
through law enforcement by the per-                     We also established as a goal a reduc-
centage of successful outcomes in en-               tion of the average time needed to
forcement actions. This measure is                  complete divestitures required by consent
important not only because it directly
reflects whether we stopped, or failed to
stop, the anticompetitive mergers and                   1
                                                          We derive these estimates from a thorough
practices we challenged, but also whether           analysis of company documents and detailed
we are effectively utilizing the limited re-        pricing data, which FTC attorneys and
sources available to the agency.                    economists routinely conduct as part of their
                                                    investigations. In some cases, the available
    We established as a goal a positive             information allows us to estimate with speci-
                                                    ficity the extent to which prices would rise as a
outcome in 80% of the enforcement
                                                    result of an anticompetitive merger. Where we
actions brought by the agency to challenge
                                                    do not have such definitive information, we
anticompetitive mergers or practices.               conservatively estimate that an anticompetitive
Positive outcomes include abandonment of            merger would lead to a price increase of at least
an anticompetitive transaction following an         one percent absent enforcement action, lasting
FTC challenge, a consent agreement to               for two years. The methodology used is
resolve antitrust concerns, or a successful         explained in the analytical guidelines used by
challenge in court. A negative outcome              the FTC and the Department of Justice for the
                                                    analysis of horizontal mergers. See U.S. Dept.
occurs when parties refuse to settle anti-
                                                    of Justice and Federal Trade Commission,
trust concerns raised by the agency and
                                                    Horizontal Merger Guidelines §§ 1.1, 1.2.

orders, down from an average of 15                       We exceeded our performance goal of
months in 1996 to nine months in 2000,               $500 million in consumer savings through
from approval of a proposed consent order            the prevention of anticompetitive mergers
to completion of the divestiture. This               by a factor of six, achieving savings of an
measure is important because delay in the            estimated $2.98 billion in 2000. Because
divestiture of assets that are the subject of        the amount of consumer savings achieved
a consent decree often results in a decline          in any one year is dependent on the size
in the competitive viability of the assets.          and nature of transactions proposed as
To avoid delay, we seek either “up-front”            well as the agency’s performance in en-
purchase and sales agreements or dives-              forcing the antitrust laws, the amount of
titure orders that limit the time in which           savings in 2000 may not be typical (due to
divestiture relief is accomplished to the            the size and scope of several major merg-
minimum necessary. As a result, we ex-               ers that we reviewed). However, based on
ceeded our goal, ensuring the completion             our first year of measuring consumer
of needed divestitures in an average of four         savings for GPRA, we expect the amount of
months in 2000.                                      consumer savings resulting from the FTC’s
                                                     antitrust enforcement activity to remain
Performance Assessment                               high. Therefore, we believe it is appropriate
                                                     to raise our merger goal to an average of
  and Future Trends                                  $800 million in consumer savings per year
                                                     for the years beginning in 2001. We
     In 2000, we achieved a positive                 caution, however, that changes in the
out-come in approximately 95% of the                 pattern of corporate merger activity may
challenges initiated by the agency (e.g.,            result in different outcomes on this
court orders in litigated cases and                  performance measure, notwithstanding
negotiated settlements), exceeding by a              continued strong agency performance.
significant margin our goal of an 80%
success rate. This level of success was                  We also substantially exceeded our
due, in part, to the high percentage of our          performance goal by accomplishing dives-
cases that were resolved through consent             titures within an average of four months,
agreement in 2000. However, we real-                 compared to the goal of nine months.
istically do not expect to succeed in every          Based on our increased knowledge of the
litigated case. A law enforcement agency             importance of accomplishing divestitures
that prevails in every litigated matter may          quickly and policy changes aimed at
do so because it pursues only the cases              achieving that result, we expect that the
that are easiest to win. Enforcement                 average time required to complete divesti-
authorities such as the FTC should not               tures will continue to be substantially less
shy away from difficult cases, which are             than nine months.
not uncommon in antitrust law. The FTC
will continue to bring law enforcement                  While our performance in achieving
actions where it has reason to believe that          divestitures in a timely fashion remains
the merger or practice in question is illegal        important, we are replacing this perform-
and harms consumers, even where                      ance measure beginning in 2001 with a
litigation risks may exist. Thus, in years           measure relating to our performance on
in which litigated cases make up a larger            nonmerger enforcement. We believe that
proportion of the total number of resolved           the policies and practices put in place in
cases, our success rate may be closer to             recent years to expedite divestitures are
the target of 80% .                                  now well-established and accepted, and
                                                     that divestitures will thus continue to

occur in a timely fashion. This will con-         competitive activity exceeds 1% of the
tinue as a priority. To assist in focusing        amount of sales, and the anticompetitive
our attention on nonmerger enforcement,           effect may continue well beyond one year
we will begin in 2001 to measure con-             in the absence of enforcement action.
sumer savings resulting from nonmerger            Based on recent years’ activity, we believe
enforcement activities. We will base the          it is appropriate to set a nonmerger goal at
savings estimates on industry and com-            an average of $200 million in consumer
pany data obtained in our investigations.         savings per year for the years beginning in
In cases where it is not possible to              2001. Again, we caution that differences in
measure directly the amount of consumer           available opportunities presented, par-
savings resulting from enforcement action,        ticularly those relating to the size of the
we will conservatively use a “default”            affected markets, may result in different
estimate of 1% of the amount of sales in          outcomes on this performance measure,
the affected market(s) for one year. Most         notwithstanding continued strong agency
often, the cost to consumers from anti-           performance.

OBJECTIVE 2.3                           PREVENT CONSUMER INJURY
                                        THROUGH EDUCATION
    In addition to its law enforcement                       Performance Measures
activity, the FTC seeks to enhance under-
standing of the operation of the market-                          and Results
place by educating the business com-
munity about the antitrust laws.                                  Our success in educating the business
                                                             community about the antitrust laws is also
                                                             determined in part by the timeliness with
              Strategies                                     which we provided needed advice. Accord-
                                                             ingly, one measure in accomplishing this
     We pursue this objective through guid-
                                                             objective is the length of time required to
ance to the business community; outreach
                                                             provide advisory opinions related to issues
efforts to Federal, state and local agencies,
                                                             in the health care industry, an industry
business groups and consumers; develop-
                                                                            that has experienced fun-
ment and publication of
                                                                            damental changes in the way
antitrust guidelines and poli-
                                    Performance Measure 2.3.1               it delivers services to con-
cy statements; and speeches         Identify and survey FTC “customers”     sumers over the past decade.
and publications. Through           in the marketplace.
                                                                            We set a goal of providing
these mechanisms, we pub-
                                    FY 2000 Target:       incorporate input such advisory opinions with-
licize the antitrust law and        FY 2000 Actual:       incorporated      in 90 days of our receipt of a
our enforcement intentions,                               input
                                                          T                 request, and we exceeded
with the likely result of deter-    Met or Exceeded:
                                                                            that goal by providing
ring future anticompetitive         Performance Measure 2.3.2
                                                                            advisory opinions in an
behavior.                           Average number of days to issue
                                    advisory opinions in health care area.  average of 84 days.
    Our enforcement program     FY 2000 Target:         90 days
is made more effective by       FY 2000 Actual:         84 days            Performance
                                Met or Exceeded:        T
public awareness of what                                                 Assessment and
factors are likely to be
challenged as law violations.                                             Future Trends
Through public releases of
Commission decisions in various media                         We were able to meet one performance
such as press releases, Web page                          goal – receiving and incorporating stake-
publications, and speeches, the public                    holder comments on a proposed customer
facts underlying Commission actions pro-                  survey – and to exceed the other perform-
vide bases for companies to evaluate the                  ance goal – providing advisory opinions
likelihood that other transactions would                  relating to health care within 90 days of
likely face challenge.                                    receipt of a request. Based on our experi-
                                                          ence in working with these performance
    As a complement to our enforcement                    goals, we believe that somewhat different
activity, we also advise other state and                  measures of our performance would better
federal government officials about the                    reflect our efforts in this area. While it
possible effect that various regulatory                   remains important to render advisory
proposals may have on competition in the                  opinions in a timely fashion, we currently
relevant marketplace.                                     receive relatively few requests for such
                                                          opinions. In addition, we have concluded

that the consumer survey we have been                   a framework for understanding how to
working to develop would not likely be a                answer traditional antitrust questions
powerful instrument to determine the                    in the context of new B2B technology.
effectiveness of our outreach efforts,                  The Commission also completed its
particularly in the absence of baseline                 review of the Covisint joint venture
data.                                                   among five automotive manufacturers
                                                        – General Motors Corp., Ford Motor
     Our new measures for this Objective                Co., DaimlerChrysler AG, Renault SA,
will more directly reflect our impact on                and Nissan – and two information tech-
preventing consumer injury through                      nology firms – Commerce One, Inc. and
education and outreach to the public. The               Oracle Corporation – to operate an
Commission increases awareness of                       Internet-based B2B providing services
antitrust law through guidance to the                   to firms in the automotive industry
business community; outreach efforts to                 supply chain.
Federal, state and local agencies, business
groups and consumers; development and               !   The FTC, in an effort for staff to better
publication of antitrust guidelines and                 assess the competitive impact of
policy statements; and speeches and                     slotting allowances, held two work-
publications. Through these mechanisms,                 shops for interested parties to ex-
the Commission publicizes the antitrust                 change views on this subject. Slotting
law and our enforcement intentions, with                allowances are lump-sum, up-front
the likely result of deterring future anti-             payments from a manufacturer or
competitive behavior. We believe that                   producer to a retailer to have a new
measuring these efforts would more                      product carried by the retailer and
directly reflect our success in educating               placed on its shelf. The agency
our major constituent groups. In addition,              continues to study this subject.
the extent to which the public is aware of
our mission and our policies – as reflected         !   Our Premerger staff handled approx-
by “hits” on relevant material on the FTC’s             imately 41,000 telephone inquiries
Web site – will effectively capture our                 from the public, primarily concerning
success in preventing consumer injury                   interpretation of the statute and the
through education. We are currently                     HSR rules. Staff estimates that at least
evaluating the relevant data for 2000 to                half of these inquiries related to issues
establish appropriate performance goals                 of reportability.
for the years beginning with 2001. For
example, in 2000, we worked to educate              !   The Commission assisted the public
the public in the following ways:                       through written guidance, such as the
                                                        Premerger Rules, formal interpre-
!   The FTC conducted a workshop on                     tations, the Premerger Notification
    business to business (“B2B”) electronic             Source Book, and the three Premerger
    marketplaces, which use the Internet                Guides designed to assist the public’s
    to electronically connect businesses                understanding and compliance under
    with each other, primarily for purposes             the HSR Act.
    of buying and selling a wide variety of
    goods and services. The agency also             !   The Premerger Notification Office con-
    issued a report on this subject that                ducted a series of Brown Bag Lunches,
    includes a description of various facets            both in Washington and in other cities
    of B2B marketplaces and the effi-                   around the country, with interested
    ciencies they may provide, and outlines             members of the American Bar Asso-

    ciation. These events provided a forum                  • Midwest Gasoline Prices. Pre-
    for staff and HSR practitioners to                  sented by Richard G. Parker, Bureau
    discuss interpretations of the rules and            Director.
    potential improvements to the filing                    • Midwest Gasoline Prices. Pre-
    process. Interested persons were in-                sented by Robert Pitofsky, Chairman.
    vited to send in white papers to give                   • Antitrust Enforcement Activities.
    their views on rules changes, including             Presented by Robert Pitofsky, Chair-
    changes necessary for HSR reform.                   man.
    Several members of the bar voluntarily                  • Solutions to Competitive Problems
    submitted language for proposed rules.              in the Oil Industry.     Presented by
                                                        Richard G. Parker, Bureau Director.
!   After soliciting public comment, the                    • Antitrust Issues. Presented by
    Commission and the Department of                    Robert Pitofsky, Chairman.
    Justice jointly issues new Antitrust                    • Oil Product Prices. Presented by
    Guidelines for Collaborations among                 Richard G. Parker, Bureau Director.
    Competitors, and area of antitrust law                  • Mergers in the Telecommunica-
    in which there had previously been no               tions Industry. Presented by Robert
    agency guidelines                                   Pitofsky, Chairman.
                                                            • Slotting Allowances and the Anti-
!   The Commission and the Department                   trust Laws. Presented by Willard K.
    of Justice promoted federal and state               Tom, Deputy Director.
    cooperation by issuing a joint protocol
    concerning joint and coordinated merg-          !   The Commission continued to maintain
    er investigations by federal and state              effective international outreach and
    antitrust agencies.                                 coordination efforts with foreign com-
                                                        petition authorities.
!   Commissioners and senior staff mem-
    bers presented a number of speeches             !   The Bureau of Economics circulated
    before bar and business groups on                   economic papers on competition issues
    current enforcement topics.                         providing its scholarly input to the
!   The Commission published press
    releases, complaints and other materi-                  • Transformation and Continuity:
    als through its Web site, providing up-             The U.S. Carbonated Soft Drink Bottling
    to-date information on enforcement                  Industry and Antitrust Policy Since
    actions taken.                                      1980. This report analyzes the U.S.
                                                        carbonated soft drink industry, with its
!   Commission staff delivered testimony                primary focus on the 1980s and early
    on antitrust issues to the United States            1990s, a period of rapid structural
    Senate and the United States House of               change that transformed the industry.
    Representatives nine times during the               In addition to documenting these
    year.                                               changes, an empirical model is devel-
                                                        oped to evaluate the antitrust merger
        • Antitrust Implications of Enter-              policies that were pursued by the Com-
    tainment Industry Self-Regulation to                mission during this period.
    Curb the Marketing of Violent Entertain-                • Economic Perspectives on the
    ment Products to Children. Presented                Internet. This report provides an intro-
    by Robert Pitofsky, Chairman.                       duction to Internet technology and
                                                        history and addresses (1) different

    methods of pricing user access, (2) the             Finally, because the Commission and
    pricing of goods and services sold via          its staff have a great deal of expertise
    the Internet, (3) network effects and           about competition and about the com-
    firm behavior, and (4) taxation of elec-        petitive effect of proposed laws, rules or
    tronic commerce.                                regulations of other governmental bodies,
                                                    they are often invited to comment on such
!   Because the Commission and its staff            proposals. For instance, we provided
    have a great deal of expertise about            advice to the Federal Energy Regulatory
    competition and about the competitive           Commission, state utility commissions,
    effect of proposed laws, rules or               and a committee of the House of Repre-
    regulations of other governmental               sentatives about how best to promote
    bodies, they are often invited to com-          competition and protect consumers in the
    ment on such proposals. For instance,           context of the deregulation of electricity
    the Bureau of Competition filed com-            transmission and generation. In July
    ments before the Food and Drug                  2000, the Commission issued a staff
    Administration in two instances in              report, Competition and Consumer
    2000:                                           Protection Perspectives on Electric Power
                                                    Regulatory Reform, that suggest an
        • 180-Day Generic Drug Exclu-               analytical framework that federal and state
    sivity for Abbreviated New Drug Appli-          policymakers may wish to employ to
    cations, November 4, 1999.                      ensure that consumers and businesses
        • Citizen Petitions; Actions That           benefit from electric power industry
    Can Be Requested by Petition; Denials,          restructuring. Recently, members of
    Withdrawals, and Referrals for Other            Congress have asked the Commission to
    Administration Action, March 2, 2000.           update that report and extend its analysis.

We strongly believe in the importance of
these outreach activities and will continue
to place emphasis in this area in future

                        FY 2000 Performance Measures
                                                                     FY 2000         FY 2000       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 greatest consumer injury:
  Measure 1.1.1: Cumulative number of consumer complaints             600,000        833,659             T
  and 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                $250            $263               T
  actions which stop fraud.                                           million         million
  Measure 1.2.2: Percentage of targeted industry brought into       50% -75%           83%               T
  compliance through law enforcement and self regulation.
Objective 1.3–Prevent consumer injury through education:
  Measure 1.3.1: Number of education publications                      8.7             11                T
  distributed to or accessed electronically by consumers.             million         million
Goal 2: Prevent anticompetitive mergers and other anticompetitive business practices in the
Objective 2.1–Identify anticompetitive mergers and practices that cause the greatest consumer injury:
  Measure 2.1.1: Average number of days for review of HSR-              20              18               T
  reported transactions.
  Measure 2.1.2: Number of nonmerger investigations opened            45 to 70          25         see text
  per year.
Objective 2.2–Stop anticompetitive mergers and practices through law enforcement:
  Measure 2.2.1: Positive outcome of cases brought by FTC               80%            95%               T
  due to alleged violations.
  Measure 2.2.2: Dollar savings for consumers resulting from          $500            $2.98              T
  FTC actions.                                                        million         billion
  Measure 2.2.3: Average time, in months, from proposed                  9               4               T
  consent orders to divestitures.
Objective 2.3–Prevent consumer injury through education:
  Measure 2.3.1: Identify and survey FTC "customers" in the         incorporate    incorporated          T
  marketplace.                                                      stakeholder     stakeholder
                                                                       input           input
  Measure 2.3.2: Average number of days to issue advisory               90              84               T
  opinions in health care area.


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