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Antitrust

Michigan Attorney General Settles With Natural Gas Driller Over Alleged Bid-Rigging

  • Michigan AG Bill Schuette settled with Chesapeake Energy Corporation over allegations that the energy company conspired with Encana Oil & Gas to allocate the market for oil and gas leases in Michigan in violation of state antitrust laws. AG Schuette also alleged Chesapeake and Encana committed a number of false pretense and racketeering criminal offenses, alleging that the company used landowners' mortgages as an excuse to selectively void lease obligation when the company became aware that a lease would be unprofitable.
  • Chesapeake pleaded no contest to misdemeanor charges of attempted antitrust and false pretenses and received an 11-month delayed sentence, which will be dismissed if it satisfies the terms of the civil settlement. Chesapeake agreed to pay $25 million into a victims' compensation fund, offering repayment of attorneys' fees and lost revenues to victims listed in the state's complaint. Chesapeake also will pay $2.5 million to the Department of Natural Resources and $2.5 million to fund the state's antitrust enforcement division.
  • AG Schuette previously settled with Encana in May 2014 for $5 million. As part of that consent judgment, Encana agreed to adopt enhanced reporting and compliance procedures. Encana also pleaded no contest to the criminal charges, and received a delayed sentence, dependent on satisfying the civil settlement.

Charities

New York Attorney General Brings Action Against Charitable Trustees

  • New York AG Eric Schneiderman settled with trustees of the Victor E. Perley Fund, a charitable trust formed to benefit underprivileged children, for allegedly failing to administer the trust in accordance with the New York's Estates, Powers and Trusts Law.
  • In the Assurance of Discontinuance, AG Schneiderman alleged that the trustees failed to fulfill their legal duty to administer and invest the charitable assets prudently, including a failure to observe basic principles of governance. The AG specifically claimed that "highly speculative" investments "entered into without adequate due diligence" caused the trust assets to dwindle from $3.7 million to a sole property worth approximately $1 million and used for the benefit of the fund chairman.
  • The trustees, while admitting no fault or violations of law, will be held jointly and severally liable to pay more than $1 million to restore the fund, and to resign as trustees. In addition, the trustees are barred, for varying periods of time, from serving as an officer, director, or fiduciary of any nonprofit organization operating or soliciting contributions in New York.

Consumer Financial Protection Bureau

CFPB Takes Action to Enforce "Opt-In" Rule

  • The Consumer Financial Protection Bureau (CFPB) settled with Regions Bank over claims that the retail bank violated the Electronic Fund Transfer Act, the Consumer Financial Protection Act, and the 2010 "Opt-In Rule," when it charged overdraft fees to consumers who had not opted-in for overdraft coverage, and by misrepresenting the use of overdraft and non-sufficient funds fees on its deposit advance products.
  • Regions voluntarily refunded approximately $48 million to customers who had allegedly been charged illegal overdraft fees through 2013. Under the consent order, Regions will hire an independent auditor to identify all other overdraft fees charged in violation of the relevant rules to ensure that all affected customers are fully refunded. Regions is also required to submit a plan for ensuring future compliance and to provide a report to the CFPB on the implementation of that plan.
  • In addition to all refunds provided, Regions must correct any negative credit reporting in connection to the overdraft or non-sufficient fund fees, and will make a $7.5 million payment to the CFPB's Civil Penalty Fund.

Consumer Protection

FTC Seeks Greater Disclosure From Firm Tracking Consumers Through Retail Stores

  • In a 3-2 decision, the Federal Trade Commission (FTC) issued a complaint and proposed consent order to resolve claims that Nomi Technologies, Inc. (Nomi), a retail marketing analytics firm, violated the Federal Trade Commission Act by failing to disclose the use of technology that can identify and track unique mobile communication devices in retail stores.
  • As outlined in the complaint, Nomi collected the following information without, in most cases, providing disclosures to consumers: the percentage of consumers passing versus entering a retail store, the average duration of consumer visits, the types of mobile devices used by consumers who frequent a given location, the percentage of repeat visits within a given time period, and the number of customers that have visited other retail chain locations where Nomi technologies are employed.
  • Although Nomi's privacy policy said that it "pledged to... always allow consumers to opt out of Nomi's service on its website, as well as at any retailer using Nomi's technology," the FTC found that Nomi did not provide onsite disclosure to customers, nor the ability to opt out onsite. Chairwoman Ramirez and Commissioners Brill and McSweeny issued a statement explaining the decision. Commissioners Ohlhausen and Wright issued dissenting opinions, each stressing that Nomi's conduct did not violate the law as it did not collect customers' personally identifying information.

States v. Federal Government

Florida Attorney General Argues Withdrawal of Federal Health Care Funding is Unlawful Coercion

  • Florida AG Pam Bondi filed a lawsuit against the Obama Administration alleging that the government is threatening to withhold federal funding as a means to coerce the state into expanding its Medicaid coverage, in violation of the Administrative Procedures Act and the U.S. Constitution.
  • The dispute centers on the 2015 expiration of the Low Income Pool (LIP), an optional federally-funded program designed to provide incentives to healthcare providers to treat low income and vulnerable populations. As the Centers of Medicare and Medicaid Services (CMS) are trying to phase out LIP, CMS indicated that it will only extend LIP funding as part of a comprehensive package that also expands Medicaid access and controls providers' rates. Florida argues in the complaint that conditioning LIP funding on Medicaid expansion inappropriately coerces the state to implement a federal program.
  • Florida cites the 2012 Supreme Court case, National Federation of Independent Businesses v. Sebelius, which held that Congress cannot force states to expand Medicaid by withholding funding for current Medicaid programs. In response, the Obama Administration argues that the LIP program is optional—only 8 other states use it—and funding for the program is set to expire.

California Attorney General Appeals Swipe Fee Decision to Ninth Circuit

  • California AG Kamala Harris has appealed to the Ninth Circuit, asking it to overturn a district court decision holding that a California law prohibiting retailers from imposing a "surcharge" on credit card purchases, yet permitting merchants to offer discounts to consumers who pay with cash, was "an unconstitutional restriction on plaintiffs' freedom of speech and is void for vagueness."
  • AG Harris defended the California law under a theory of consumer protection, arguing that the law prevents merchants from charging a hidden "swipe fee" at the cash register to an unaware customer paying with credit. The plaintiffs—a restaurant, a gas station, a dry cleaner, an auto repair business, and a web design company—wanted clarity as to how they could frame the discount for cash customers. The case is Italian Colors Restaurant et al. v. Harris, No. 2:14-cv-00604.
  • Prior to 2013, major credit card companies had merchant rules in place that prohibited merchants from imposing surcharges. Now, as a result of nationwide antitrust settlements, credit card companies have agreed to drop the surcharge restrictions, leaving small businesses in multiple states to change the law through the courthouse.

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