On November 14, the FTC Commissioners, in an opinion authored by Chairman Simons, issued an opinion in an antitrust case involving the online advertising industry that has important implications for online advertisers. Last November, we discussed the initial decision by FTC ALJ Chappell that 1-800 Contacts had violated Section 5 of the FTC Act by coming to agreements with its competitors limiting their abilities—as well as 1-800 Contacts’ ability—to bid on each other’s trademarks and URLs in auctions for placement in search results. In his decision, termed an “Initial Decision” in FTC parlance, Judge Chappell found that those agreements directly harmed competition and consumers in the market for contact lenses sold over the internet, and he rejected the efficiency justifications proposed by 1-800 Contacts.

The full Commission went even further, affirming the ALJ’s decision, albeit on different grounds, and also holding that the agreements also violated the antitrust laws by harming competition in the bidding market for search engine keywords, reducing the prices that search engines like Google received for presenting ads in search results, and reducing the quality of the results delivered to consumers. As a result of the Commission’s decision, 1-800 Contacts is barred from either enforcing the agreements it already has with other online contact lens marketers, or from entering into similar agreements in the future.

Continue Reading The FTC, Contact Lenses, and the Future of Retail?

contact lensUsually this blog focuses on the FTC’s Bureau of Consumer Protection challenging unfair or deceptive advertising. Not so today. Instead, we write about the Bureau of Competition’s challenge to agreements 1-800 Contacts entered with its competitors concerning how they would advertise. The case provides useful insight into the nuts and bolts of Internet advertising as well as important reminders about how not to deal with your competitors, but it isn’t the first time the Commission has gone after competitors who have agreed to advertising restraints. Bottom line: While agreements to limit advertising competition are not per se illegal, if you are thinking of coming to this sort of agreement, you had better have a really good (i.e., pro-competitive) reason for it.

Background

On August 8, 2016, the FTC alleged in an administrative complaint that 1-800 Contacts, one of the largest online retailers of contact lenses, engaged in anti-competitive practices through its agreements with competitors settling trademark suits. The agreements restricted competitors from showing up when consumers searched for 1-800 Contacts. Last week, Chief Administrative Law Judge D. Michael Chappell upheld the FTC’s complaint and ordered 1-800 Contacts to cease and desist enforcing anti-competitive provisions from the settlement agreements, among other remedies.

Continue Reading The FTC Sees Red Over 1-800 Contacts’ Advertising Agreements with Competitors

We know that many of you not only deal with advertising but are also proud to count yourself as among the elite few who wrestle with the intricacies of the Robinson-Patman Act. If that sounds like you, read on as our own Rob Davis analyzes a recent 7th Circuit decision. If not, then stand at ease and remain blissfully ignorant of price discrimination, “like grade and quality,” promotional allowances and other such terms.

The Seventh Circuit’s Robinson-Patman Decision: What Does “Promote” Really Mean?

It might surprise many in the “real world” (which for these purposes means everyone other than antitrust/competition lawyers), but to the antitrust bar, the Robinson-Patman Act is the red-headed stepchild of competition law. Whereas competition law is now focused entirely on consumer welfare and the preservation of competition rather than the profits of competitors—even the small ones—the Robinson-Patman Act is almost obstinately about protecting the little guy. Thus, for years antitrust lawyers and the FTC have been tying themselves into knots to make the Act play well with the other antitrust laws, to varying levels of success.

Enter Clorox Bleach and the Seventh Circuit’s awkward decision in Woodman’s Food Market v. Clorox Company and Clorox Sales Company.

Continue Reading The Seventh Circuit’s Robinson-Patman Decision: What Does “Promote” Really Mean?

So you may be aware by now that the FTC does not like trade or professional associations setting rules limiting the way that association members compete, particularly when those rules limit the ability of the members to provide useful and non-deceptive information to consumers. They really do not like it. Since last Spring alone, there have been nearly a half dozen different complaints by the FTC where the FTC describes the allegedly anticompetitive rules (often termed “ethics rules”) in association industries as far apart as music teaching, legal support professionals in California, electricians who specialize in commercial lighting and electrical sign installation and maintenance and coaches for ice skating.  And now there is even more evidence that the FTC doesn’t like associations setting the rules limiting how its members compete. But this time it has to do with rules limiting the ability of members of an association to do comparative advertising or price based advertising. And also it has to do with AI. That’s right – artificial insemination. 
Continue Reading We Bet You Thought That AI Stood For “Artificial Intelligence”

It used to be that when you went to the movies you would try to get there a little early to catch all the trailers. But if you got there too early there would be that awkward time in a half-lit movie theatre with the folks you were with (and maybe your cellphone) waiting for everything to start. In recent years the movie theatres have helped us out by having content on the screen all the time. Of course that content was mostly advertising, and it turns out that someone was making that content. Actually, according to a recent complaint filed by the Antitrust Division of the Department of Justice, just two firms accounted for this content on nearly 88% of all movie screens in the country: National CineMedia, which is majority owned by the three largest exhibitors in the US, and Screenvision, which is partially owned by the fourth largest exhibitor. This past spring, NCM, which is on 51% of all movie screens in the US agreed to buy Screenvision. The Department of Justice was not amused, and filed a complaint this past week to block the deal.
Continue Reading In a World Where Advertising is Shown in Movie Theatres…

TrollsYes, we’re a tease.  The Bureau Director and Commissioners do not have cameos in next month’s final installment of the Hobbit (and no, this is not strategically placed native advertising #notanad).  The Commission has taken a starring role in battling trolls of a much more human sort.

The agency last week announced a settlement

In late November 2012, the FTC issued a notice that it was considering how to update its “Fred Meyer Guides.” Also at issue in that notice was whether the Guides were necessary at all. All of these questions were raised by the Commission as a result of changes in law (like the Supreme Court’s decision in Volvo Trucks v. Reeder-Simco), and in the economy (like, well, the Internet) since the last update to the Guides in 1990. We discussed the notice when it came out in December of 2012, so take a look at that for a trip down memory lane, a brief discussion of Sections 2(d) and 2(e) of the Robinson-Patman Act, and a nice picture of Mr. Fred Meyer himself. But, by way of background, those sections of the Act apply when suppliers, like manufacturers, provide different promotional payments or services to different resellers. In contrast, the main section of the Act, Section 2(a), relates to differences in prices to those resellers.

As a result of the notice, the Commission received seven sets of comments from a fairly wide range of organizations and practitioners including the Antitrust Section of the ABA, the American Antitrust Institute, the Food Marketing Institute, and the National Automobile Dealers Association among others. The easiest question turned out to be whether the Guides were needed at all – all of the commenters agreed that there was a continuing need for the Guides. Also, none recommended that the Guides be overhauled as a result of changes in the law or the economy. As a result, the Commission concluded that the Guides should remain substantially the same.

Continue Reading The Fred Meyer Guides: It Turns Out That Things Haven’t Changed Much From 1990 After All

For those that have adjusted to the fact that the FTC and the Antitrust Division of the Department of Justice really do care if you agree with your competitors to not recruit each other’s employees (for which, see this recent reminder from DOJ involving E-Bay’s alleged involvement in the scheme among high-tech companies to avoid “poaching” each other’s employees), the FTC just settled an investigation of two ski manufacturers that allegedly agreed not to solicit each other’s endorsers along with an agreement not to solicit each other’s employees.

On May 19th the FTC settled charges against two companies, Marker Völkl, which makes Völkl skis, and Tecnica, which makes Blizzard skis, alleging that, despite being direct competitors, they operated for many years with an agreement not to poach each other’s endorsers and employees. The FTC alleged that this conduct was anticompetitive, and the companies settled by agreeing to consent orders that prohibit them from re-engaging in any such conduct in the future.

Continue Reading The Other Ski Boot Drops – You Shouldn’t Collude Over Endorsers Either

What do music teachers, process servers, dentists, store planners, arbitrators, engineers, social workers and psychologists have in common? Answer: at one time or another each of these groups have gotten together in trade or professional associations and set up rules limiting the ability of members of the association to advertise or engage in competitive solicitation for customers. And also: in each case, the FTC has taken the association to court over those restrictions. The FTC’s recent announcement of settlements with a pair of relatively small associations, the Music Teachers National Association and the California Association of Legal Support Professionals serves as a reminder of this agenda, and that the agency is still watching the rules and regulations set up by associations (or really any group of competitors, including state regulatory boards and standard-setting organizations) to ensure that they don’t limit the ability of their members to compete against each other for business.

The cases, announced together by the Commission on December 16, illustrate the sorts of ethical rules that the Commission has found problematic over the years. In the music teachers case, the national board had an ethical rule prohibiting teachers from “actively recruiting students” from other studios and some local chapters had rules that restricted members from advertising prices or other terms of teaching services, and from competing on price-related terms (for good measure, some of the local associations also had rules prohibiting music teachers from poaching students). Regarding the legal professionals, the FTC’s CALSPro complaint alleges that association had a code of ethics that prohibited its members from “offering discounted rates to rivals’ clients, engaging in certain comparative advertising, and recruiting employees of competitors without first notifying the competitor.”
Continue Reading Newsflash: The FTC still doesn’t like associations to restrict member advertising