ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors

Customer Reviews: Five-Star Enforcement and the Expanding Regulations

By and on Feb 28, 2023
Posted In , ,

Does your company sell to consumers or businesses that can leave reviews or rate your products? Whether your customers can leave reviews on your website or another public-facing review platform, companies should be aware of new developments in the consumer review enforcement space that may impact how you publicize and conduct your product rating and review system.  If you are not aware of the expanding consumer review regulations, it could cost your company millions or even land you in jail.

CUSTOMER REVIEWS AND PROPOSED REVISIONS

Section 5 of the Federal Trade Commission (FTC) Act (the Act) prohibits unfair and deceptive acts and practices. Specifically, as the Act relates to customer reviews: negative customer reviews and ratings cannot be suppressed or hidden; any incentives for reviews must be disclosed; material connections between a reviewer and the reviewed product must be disclosed; and review gating is prohibited. The FTC has heightened its focus on consumer reviews as of late and proposed revisions to the Endorsement Guides for advertisers that would tighten enforcement against posting false positive reviews or manipulating consumer perception by suppressing negative reviews, among other things. The proposed guideline revisions would state that “in procuring, suppressing, boosting, organizing, or editing consumer reviews of their products, advertisers should not take actions that have the effect of distorting or otherwise misrepresenting what consumers think of their products.” See Federal Register, Guides Concerning the Use of Endorsements and Testimonials in Advertising, Section IV (C) (July 26, 2022), https://www.federalregister.gov/documents/2022/07/26/2022-12327/guides-concerning-the-use-of-endorsements-and-testimonials-in-advertising. In addition to broadening its Endorsement Guides, the FTC has already demonstrated a significant increase in consumer review enforcement—including pursuing increased penalties and new priorities like review hijacking.

CONSULTANT RECEIVES PRISON SENTENCE FOR BRIBED REMOVAL OF NEGATIVE REVIEWS

In February 2023, Hadis Nuhanovic, a merchant consultant, was sentenced to 20 months in prison for taking part in a global scheme in which he bribed employees of a technology platform to remove negative online reviews on his clients’ products and reinstate suspended accounts, among other illegal activities such as stealing sensitive company information related to product-review rankings and targeting his clients’ competitors on the platform. Nuhanovic, together with a co-defendant, reached out to platform employees in India and bribed them to obtain unfair advantages for his own business’ gain. For example, Nuhanovic admitted that he paid a platform employee to remove negative reviews and further admitted that he operated multiple sham accounts—created using false information—to purchase products from merchants and submit negative reviews about them, with the intention of deceiving consumers and harming the targeted accounts. Additionally, Nuhanovic used his sham accounts to leave positive reviews for his preferred accounts, further deceiving consumers and improving the placement of certain favored products in searches.

In addition to the review bribes, Nuhanovic was investigated for other related crimes to which he ultimately pled guilty. He was sentenced to three years of supervised release on top of the 20 months in prison and forced to forfeit $100,000 and pay $160,000 in unreported taxes.

COMPANY FORCED TO PAY FOR “REVIEW HIJACKING”

[...]

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DOJ Signals Heightened Scrutiny on Information Exchanges and Competitor Collaborations

By , , and on Feb 15, 2023
Posted In ,

WHAT HAPPENED

On February 3, 2023, the US Department of Justice’s (DOJ) Antitrust Division announced the withdrawal of three policy statements related to antitrust enforcement in healthcare. Although the withdrawn statements focus on healthcare, DOJ’s decision to withdraw these statements will have broad impacts across industries.

The three policy statements, issued in 1993, 1996, and 2011, relate to competitor collaboration and information sharing, and established “safety zones” of activities shielded from antitrust scrutiny. The 1996 Statements of Antitrust Enforcement in Health Care (1996 Statements) were revised and expanded upon the 1993 Statements. Though ostensibly related to healthcare, the guidance has been relied upon by all industries and understood to cover all manner of competitively sensitive information. Two of the safety zones most often relied on by companies relate to competitor exchanges of price and cost information, and competitor joint purchasing arrangements.

Information Exchanges

The safety zone on information exchanges (Statement 6 of the 1996 Statements) stated that, in general, the agencies would not challenge an exchange of price or cost information (e.g., employee compensation) if the following three conditions were met:

  1. The exchange is managed by a third party (e.g., a trade association or consultant).
  2. The information is more than three months old.
  3. The exchange has five or more participants contributing data, and no individual participant’s data represents more than 25% of any statistic; and no individual participant’s data can be identified.

Companies have relied on this safety zone in conducting surveys and benchmarking related to pricing, supply costs, and salaries. These surveys have served as critical compliance tools. Organizations exempt from federal income tax often use surveys to demonstrate fair market value compensation to safeguard against claims of private inurement and private benefit. Similarly, healthcare companies routinely use benchmarking studies to demonstrate fair market value compensation for compliance with fraud and abuse laws.

Group Purchasing Organizations

The safety zone on joint purchasing arrangements (Statement 7 of the 1996 Statements) stated that, in general, the agencies would not challenge joint purchasing arrangements (e.g., group purchasing organizations (GPOs)) if the following two conditions were met:

  1. The purchases account for less than 35% of the total sales of the purchased product or service.
  2. The cost of the products or services purchased jointly accounts for less than 20% of the participants’ revenues.

DOJ cited changes in the healthcare landscape as the rationale for withdrawing these policy statements, specifically indicating that the statements were “overly permissive” on information sharing. In a speech the day before DOJ’s announcement, Principal Deputy Assistant Attorney General (DAAG) Doha Mekki stated that the safety zone factors “do not consider the realities of a transformed industry” and “understate the antitrust risks of competitors sharing competitively sensitive information.” DAAG Mekki explained that:

  • Information exchanges managed by third parties can have the same anticompetitive effects—and the use of a third party enhances anticompetitive effects.
  • New algorithms and AI learning increase the competitive value of historical information (more [...]

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European Competition Review 2022

By , , , , , , , , and on Feb 6, 2023
Posted In , , , ,

This Review provides legal counsel and their teams easy reference guidance on essential EU competition law developments covering key areas of law and policy. Topics covered include:

  • Cartels & Restrictive Agreements
  • Abuse of Dominant Position
  • Merger Control
  • State Aid
  • Legislative and Policy Developments

Access the special report.



Merger Notification Thresholds and Filing Fees to Increase

By , and on Jan 24, 2023
Posted In , , ,

The Federal Trade Commission (FTC) announced on January 23, 2023, the implementation of increased thresholds for merger notifications under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) as well as increased filing fees for reportable transactions.

Notification Threshold Increases

Pursuant to the HSR Act, all transactions which meet or exceed the jurisdictional thresholds, and which do not satisfy an exemption, must be notified to the FTC and US Department of Justice (DOJ) through an HSR filing. The newly announced thresholds will apply to all transactions that close on or after the effective date. The effective date is 30 days after the notice is published in the Federal Register; the notice is currently scheduled to be published on January 26, 2023, making the effective date February 27, 2023.

The threshold changes are tied to changes in the gross national product (GNP).

  • The base statutory size-of-transaction threshold, the lowest threshold requiring notification, will increase to $111.4 million.
  • The upper statutory size-of-transaction test, encompassing all transactions valued above a certain size (regardless of the size-of-person test being met), will increase to $445.5 million.
  • The statutory size-of-person lower and upper thresholds (which apply to deals valued above $111.4 million but not above $445.5) will increase to $22.3 million and $222.7 million, respectively.

Merger Filing Fee Increases

The passage of the Merger Filing Fee Modernization Act on December 29, 2022, altered the filing fee thresholds as well as significantly increased the fees imposed on transacting parties when making an HSR filing in excess of $1 billion. Like the notification threshold increase, these filing fee adjustments will also take effect 30 days after publication in the Federal Register, meaning the increased fees will also go into effect on February 27, 2023.

The new transaction thresholds and accompanying fees are provided in the table below:

As with the notification thresholds, the filing fee thresholds and fee amounts will now be subject to annual adjustment at the start of each year based on GNP for thresholds and consumer price index (CPI) for fee amounts.



Antitrust M&A Snapshot | Q4 2022

By , , and on Jan 19, 2023
Posted In , , , ,

Topics covered in this edition:

• DOJ Sees First Merger Win After String of Losses
• FTC Brings Suit Against Microsoft/Activision
• Updated Merger Guidelines Expected Soon
• Merger Fees Changing
• The EC Launches a Consultation on Its Draft Revised Market Definition Notice
• UK Orders a Chinese Firm to Divest Its 83% Controlling Stake in a Welsh Semiconductor Wafer Factory Based on National Security Concerns

Access the full issue.

McDermott Will & Emery Juriste Nabil Lakhal contributed to this newsletter. 



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