United States: State AGs In The News - May 28th, 2015

Antitrust

FTC Approves Reynolds Acquisition of Lorillard, With Divestitures

  • The Federal Trade Commission approved Reynolds American's ("Reynolds") acquisition of Lorillard, on the condition that the companies divest four cigarette brands—Winston, Kool, Salem, and Maverick—to Imperial Tobacco Group. Reynolds originally offered to sell these four brands, along with Lorillard's Blu e-cigarettes, as a condition of its $27.4 billion purchase in July 2014. The FTC's Complaint (which it issued alongside its proposed Consent Order and redacted Decision and Order), does not mention Blu.
  • According to the FTC "without the divestiture to Imperial, the proposed merger raises significant competitive concerns by eliminating current and emergent, head-to-head competition between Reynolds and Lorillard in the U.S. market for traditional combustible cigarettes. It also increases the likelihood that the merged firm would unilaterally raise prices, and that coordinated interaction would occur between Reynolds and Altria, the remaining two large competitors in an already concentrated industry."
  • The FTC approved the merger on a 3-2 vote, with Commissioners Brill and Wright voting no.

Charities

Minnesota AG Files Suit Against Savers for Alleged Charity Violations

  • Minnesota AG Lori Swanson filed a lawsuit against Savers, the nation's largest thrift store chain, and its subsidiary Apogee Retail, Inc., alleging that it misled people who donated clothing and household goods about the extent their donations would benefit the intended charities.
  • The lawsuit follows a compliance report AG Swanson issued in November 2014 questioning the relationship between Savers and several Minnesota charities, including Vietnam Veterans of America, the Lupus Foundation of Minnesota, Courage Kenney Foundation, and True Friends.
  • Savers CEO Ken Alterman indicated in a statement that "[Savers was] disappointed by the decision of the Minnesota Attorney General's office to take this action because [it had] made multiple attempts to work collaboratively on a resolution that benefits everyone involved. The money [Savers pays its] charitable partners furthers medical research and supports veterans and their families across Minnesota."

Consumer Protection

States Reach Agreement With Classmates.com, Florists' Transworld Delivery, and FTD.com

  • A group of 22 AGs reached a settlement with Classmates, Inc.; Florists' Transworld Delivery, Inc.; and FTD.com Inc. (the "Defendants") to resolve allegations that the companies engaged in misleading billing and advertising practices. According to the allegations, third-party marketers offered discount buying clubs and travel rewards programs through negative option sales on Defendants' websites, and signed consumers up for the services unless they specifically declined. The Defendants also allegedly shared consumers' personal information, including credit card account numbers, without the consumers' knowledge so they could be billed for the services if they did not affirmatively cancel.
  • The Defendants agreed to settle with the AGs for $8 million, without any admission of wrongdoing. Classmates also is establishing a $3 million restitution fund to provide refunds to consumers who were enrolled into Classmates' subscription service without authorization or who experienced difficulty when trying to cancel their Classmates subscriptions.
  • The Defendants also agreed to injunctive relief, including compliance with the FTC's "Guide Concerning the Use of the Word 'Free' and Similar Representations," as well as a number of terms governing their future contractual relationships with their marketing partners.

Data Privacy

Thirty-Eight States, RadioShack, Reach Agreement to Protect Consumer Privacy

  • A coalition of 38 states, led by Texas Attorney General Ken Paxton, reached an agreement with General Wireless, the proposed purchaser of RadioShack's ecommerce business, regarding General Wireless's ability to retain RadioShack customer data. Under the agreement, the overwhelming bulk of RadioShack's consumer data will be destroyed, and no credit or debit card account numbers, social security numbers, dates of birth, or phone numbers will be transferred.
  • Of the 8.5 million customer email addresses in RadioShack's files, General Wireless will be allowed to retain only the email addresses of those customers who requested product information in the last two years. General Wireless also agreed not to sell or share any of the customer information it obtains with any other entity.
  • According to a statement by AG Paxton, the "settlement is a victory for consumer privacy nationwide...The fact that 38 states joined together in this case reflects a growing understanding of the importance of safeguarding customer information, and we are pleased that General Wireless will continue to be bound by RadioShack's existing privacy policy."

Vermont AG Bill Sorrell Enters Data Breach Settlement Agreements with Embassy Suites and Auburn University

  • Vermont AG Bill Sorrell entered an Assurance of Discontinuance (AOD) with Embassy Suites Management LLC to resolve allegations that Embassy Suites failed to notify Vermont of a data breach in the most expedient time possible. According to the AOD, Embassy Suites San Francisco Airport discovered "keyloggers" on two of its computers in October 2013, but failed to notify the Vermont AG's office or customers until February 2015, constituting a violation of Vermont's Security Breach Notice Act (the "Act"), which requires notice to the AG within 14 business days of a data breach. The AOD requires future compliance with the Act and calls for stipulated penalties of $5,000 per violation for future violations of the injunctive relief contained therein.
  • AG Sorrell also recently announced a similar agreement with Auburn University ("Auburn"), alleging that Auburn failed to notify the AG's office and Vermont consumers of a 2013 data breach until almost four months after the breach was discovered. The agreement with Auburn similarly requires future compliance with the Act, and requires Auburn both to implement policies to ensure compliance with the Act and provide the AG with access to records to monitor Auburn's compliance. It also calls for stipulated penalties of $10,000 per violation for future violations of the injunctive relief contained therein.

FTC Highlights Importance of Cooperation With Law Enforcement After Data Breach

  • The Federal Trade Commission (FTC) recently published a blog post outlining what a company can expect if the FTC targets it for a data privacy-related investigation.
  • According to the FTC, "a company that has reported a breach to the appropriate law enforcers and cooperated with them has taken an important step to reduce the harm from the breach." As a result, it is likely that the FTC would view the company more favorably than one that did not sufficiently cooperate with its investigation.
  • The FTC also highlighted the fact that an investigation is not tantamount to a violation, and closes more cases than it brings because it finds that, on the whole, companies' data security practices are reasonable, despite experiencing a breach.

For-Profit Colleges

FTC Reaches Agreement With For-Profit College

  • The Federal Trade Commission (FTC) settled allegations that Ashworth College ("Ashworth") misrepresented to students that they would receive training and credentials to get a new job or switch careers, and that credits students earned from online courses would transfer to other schools.
  • According to the FTC's Complaint, certain degrees and programs offered by Ashworth failed to meet basic requirements established by state licensing boards for certain jobs, including school teachers, real estate appraisers, home inspectors, and massage therapists. The FTC also alleged that Ashworth lacked the data to support its claims that other institutions would accept credits students earned at Ashworth.
  • Pursuant to the Settlement, Ashworth agreed to stop misrepresenting that:

    • Ashworth's programs qualify students to obtain licenses without any further training or experience;
    • there will be job security or steady employment for consumers who completed its programs; and
    • course credits are generally recognized and accepted by other postsecondary institutions.
  • Ashworth also agreed to an $11 million judgment, which was suspended due to Ashworth's inability to pay.

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