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FEDERAL
TRADE
COMMISSION
PERFORMANCE REPORT
FISCAL YEAR 2000
March 31, 2001
EXECUTIVE SUMMARY
The Federal Trade Commission (FTC), s
Our Strategic Plan defines the FTC’
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’ STRATEGIC PLAN
S
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
marketplace.
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 T met or exceeded
target
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.
Target: 45-70
OBJECTIVE 1.2
Actual: 25 (see text)
Measure 1.2.1: Dollar savings for
consumers from FTC actions which stop
OBJECTIVE 2.2
fraud.
Measure 2.2.1: Positive outcome of cases
Target: $250 million
brought by FTC due to alleged violations.
Actual: $265 million T
Target: 80%
Measure 1.2.2: Percentage of targeted
Actual: 95% T
industry brought into compliance through
Measure 2.2.2: Dollar savings for
law enforcement and self-regulation.
consumers resulting from FTC actions.
Target: 50%-75%
Target: $500 million
Actual: 83% T
Actual: $2.98 billion T
Measure 2.2.3: Average time, in months,
from proposed consent orders to divestitures.
OBJECTIVE 1.3 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
Measure 2.3.2: Average number of days to
issue advisory opinions in health care area.
FY 2000 Assessment imately $26 for every $1 spent on
agency operations. In addition, the
s
FTC’ 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-
2
number of transactions and trans- Challenges
action dollar values. The agency’ s
enforcement actions protected con-
Two developments have greatly in-
sumer interests in a broad array of
creased the demands on the FTC – the
vital markets, from health care to
continuous growth of the Internet and the
food to 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
s
of the Internet’ 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-
s
children’ exposure to violent content.
ent markets, both domestic and inter-
3
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.
ago.
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.
4
Under Objective 2.2 (Stop anticom- s
and the frequency of the public’ access to
petitive mergers and practices through law important antitrust-related content on the
enforcement), we will increase our target s
FTC’ 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,
5
THE RESULTS
GOAL 1 PREVENT FRAUD, DECEPTION, AND
UNFAIR BUSINESS PRACTICES IN THE
MARKETPLACE
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-
22
selves from injury. 14
1
One of the greatest challenges we face
is safeguarding consumers in the new 1995 1996 1997 1998 1999 2000
6
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.
7
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)
834
data have proved invaluable in targeting
our enforcement and education efforts on
the most serious problems, among them:
online auction fraud, Internet service pro-
399
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. s
agencies nationwide via the FTC’ 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.
8
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.
9
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 $265 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
10
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: $265 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, such injury. As our expertise in high and new
as invention promotion and computer technologies grows, we will be better able
leasing. By taking law enforcement actions to detect and deter online fraud before
and encouraging self-regulatory programs these schemes take hold. By stopping
across these industries, we were able to fraudulent operators early, measured sav-
achieve an average increase in compliance ings in each case may fall; however, the
of 83%. Although this exceeds our target, quick response results in less injury to
the result does not include all industries consumers. This effort, combined with
targeted in 1998. The reduction in the strategies such as law enforcement
number of industries measured is, in part, sweeps, demonstrates our effectiveness in
a result of the difficulties of collecting preventing consumer injury.
market share data. These difficulties also
led to the elimination of this measure in In addition to fighting fraud, we also
our revised five-year strategic plan. focus on compliance with traditional ad-
vertising law and FTC Rules and Guides.
We work cooperatively with our law en-
forcement partners, industry, and con-
sumer groups to extend the reach of our
11
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 s
ure of the agency’ 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).
12
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-
s
One of the FTC’ 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
today.
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. T
Met or Exceeded: million, due primarily to a
120% increase in the number
13
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- s
of the Internet’ 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’ online
s nation effort. Capitalizing on this trend, we
privacy, online auctions, day trading, s
will increase our use of the FTC’ 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’ education, deterrence, and
s 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
missioners.
14
• 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. s
the nation’ 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
Office.
15
GOAL 2 PREVENT ANTICOMPETITIVE MERGERS
AND OTHER ANTICOMPETITIVE
BUSINESS PRACTICES IN THE
MARKETPLACE
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
16
OBJECTIVE 2.1 IDENTIFY ANTICOMPETITIVE
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.
17
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
$0.68
$0.78
filing, simply by reviewing these analyses, $0.17 $0.17 $0.22
$0.37
based on materials filed with the HSR
s
notification. The agency’ 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.
18
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 s
spices, women’ 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
19
antitrust activity could lead to a more important topics and will help us to
competitive market. In 2000, we conducted determine the circumstances in which
workshops relating to two current anti- enforcement activity may be appropriate.
trust topics, slotting allowances and During 2001, we will work to develop new
business-to-business (“B2B”) electronic ways to identify possibly anticompetitive
marketplaces. The learning derived from mergers that may not be subject to filing
these workshops, as well as from economic under HSR in light of the raised filing
research on various competition issues, thresholds effective this year.
will improve our understanding of these
20
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
necessary.
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
FY 2000 Actual: $2.98 billion legal challenges to specific
of a merger that could not be 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
21
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 thor-
practices we challenged, but also whether ough analysis of company documents and
we are effectively utilizing the limited re- detailed 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.
22
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” s
well as the agency’ 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
23
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.
24
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
Met or Exceeded: T request, and we exceeded
with the likely result of deter-
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
25
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 s
Guides designed to assist the public’
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-
26
ciation. These events provided a by Robert Pitofsky, Chairman.
forum for staff and HSR • Midwest Gasoline Prices. Pre-
practitioners to discuss sented by Richard G. Parker, Bureau
interpretations of the rules and Director.
potential improvements to the filing • Midwest Gasoline Prices. Pre-
process. Interested persons were sented by Robert Pitofsky, Chairman.
invited to send in white papers to • Antitrust Enforcement Activities.
give their views on rules changes, Presented by Robert Pitofsky, Chair-
including changes necessary for man.
HSR reform. Several members of • Solutions to Competitive Problems
the bar voluntarily submitted in the Oil Industry. Presented by
language for proposed rules. Richard G. Parker, Bureau Director.
• Antitrust Issues. Presented by
! After soliciting public comment, the Robert Pitofsky, Chairman.
Commission and the Department of • Oil Product Prices. Presented by
Justice jointly issues new Antitrust Richard G. Parker, Bureau Director.
Guidelines for Collaborations among • Mergers in the Telecommunica-
Competitors, and area of antitrust law tions Industry. Presented by Robert
in which there had previously been no Pitofsky, Chairman.
agency guidelines • Slotting Allowances and the Anti-
trust Laws. Presented by Willard K.
! The Commission and the Department Tom, Deputy Director.
of Justice promoted federal and state
cooperation by issuing a joint protocol ! The Commission continued to maintain
concerning joint and coordinated merg- effective international outreach and
er investigations by federal and state coordination efforts with foreign com-
antitrust agencies. petition authorities.
! Commissioners and senior staff mem- ! The Bureau of Economics circulated
bers presented a number of speeches economic papers on competition issues
before bar and business groups on providing its scholarly input to the
current enforcement topics. public.
! The Commission published press • Transformation and Continuity:
releases, complaints and other materi- The U.S. Carbonated Soft Drink Bottling
als through its Web site, providing up- Industry and Antitrust Policy Since
to-date information on enforcement 1980. This report analyzes the U.S.
actions taken. carbonated soft drink industry, with its
primary focus on the 1980s and early
! Commission staff delivered testimony 1990s, a period of rapid structural
on antitrust issues to the United States change that transformed the industry.
Senate and the United States House of In addition to documenting these
Representatives nine times during the changes, an empirical model is devel-
year. oped to evaluate the antitrust merger
policies that were pursued by the Com-
• Antitrust Implications of Enter- mission during this period.
tainment Industry Self-Regulation to • Economic Perspectives on the
Curb the Marketing of Violent Entertain- Internet. This report provides an intro-
ment Products to Children. Presented duction to Internet technology and
27
history and addresses (1) different years.
methods of pricing user access,
(2) the pricing of goods and services Finally, because the Commission and
sold via the Internet, (3) network its staff have a great deal of expertise
effects and firm behavior, and (4) about competition and about the com-
taxation of electronic commerce. petitive effect of proposed laws, rules or
regulations of other governmental bodies,
! Because the Commission and its staff they are often invited to comment on such
have a great deal of expertise about proposals. For instance, we provided
competition and about the competitive advice to the Federal Energy Regulatory
effect of proposed laws, rules or Commission, state utility commissions,
regulations of other governmental and a committee of the House of Repre-
bodies, they are often invited to com- sentatives about how best to promote
ment on such proposals. For instance, competition and protect consumers in the
the Bureau of Competition filed com- context of the deregulation of electricity
ments before the Food and Drug transmission and generation. In July
Administration in two instances in 2000, the Commission issued a staff
2000: report, Competition and Consumer
Protection Perspectives on Electric Power
• 180-Day Generic Drug Exclu- Regulatory Reform, that suggest an
sivity for Abbreviated New Drug Appli- analytical framework that federal and state
cations, November 4, 1999. policymakers may wish to employ to
• Citizen Petitions; Actions That ensure that consumers and businesses
Can Be Requested by Petition; Denials, benefit from electric power industry
Withdrawals, and Referrals for Other restructuring. Recently, members of
Administration Action, March 2, 2000. Congress have asked the Commission to
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
28
Appendix
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 $265 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
marketplace.
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.
29
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