[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]





 
               THE FTC AT 100: WHERE DO WE GO FROM 
                                 HERE?

=======================================================================

                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 3, 2013

                               __________

                           Serial No. 113-104
                           
                           
                           
                           
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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois               BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania        ANNA G. ESHOO, California
GREG WALDEN, Oregon                  ELIOT L. ENGEL, New York
LEE TERRY, Nebraska                  GENE GREEN, Texas
MIKE ROGERS, Michigan                DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania             LOIS CAPPS, California
MICHAEL C. BURGESS, Texas            MICHAEL F. DOYLE, Pennsylvania
MARSHA BLACKBURN, Tennessee          JANICE D. SCHAKOWSKY, Illinois
  Vice Chairman                      JIM MATHESON, Utah
PHIL GINGREY, Georgia                G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana             JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   DONNA M. CHRISTENSEN, Virgin 
GREGG HARPER, Mississippi            Islands
LEONARD LANCE, New Jersey            KATHY CASTOR, Florida
BILL CASSIDY, Louisiana              JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky              JERRY McNERNEY, California
PETE OLSON, Texas                    BRUCE L. BRALEY, Iowa
DAVID B. McKINLEY, West Virginia     PETER WELCH, Vermont
CORY GARDNER, Colorado               BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas                  PAUL TONKO, New York
ADAM KINZINGER, Illinois             JOHN A. YARMUTH, Kentucky
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Ohio
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina

                                 7_____

           Subcommittee on Commerce, Manufacturing, and Trade

                          LEE TERRY, Nebraska
                                 Chairman
LEONARD LANCE, New Jersey            JANICE D. SCHAKOWSKY, Illinois
  Vice Chairman                        Ranking Member
MARSHA BLACKBURN, Tennessee          JOHN P. SARBANES, Maryland
GREGG HARPER, Mississippi            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    JOHN A. YARMUTH, Kentucky
DAVID B. McKINLEY, West Virginia     JOHN D. DINGELL, Michigan
MIKE POMPEO, Kansas                  BOBBY L. RUSH, Illinois
ADAM KINZINGER, Illinois             JIM MATHESON, Utah
GUS M. BILIRAKIS, Florida            JOHN BARROW, Georgia
BILL JOHNSON, Ohio                   DONNA M. CHRISTENSEN, Virgin 
BILLY LONG, Missouri                     Islands
JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex 
FRED UPTON, Michigan (ex officio)        officio)

                                  (ii)
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Lee Terry, a Representative in Congress from the State of 
  Nebraska, opening statement....................................     2
    Prepared statement...........................................     3
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     4
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................     5
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     6
    Prepared statement...........................................     7
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     7

                               Witnesses

Edith Ramirez, Chairwoman, Federal Trade Commission..............     8
    Prepared statement...........................................    10
    Answers to submitted questions...............................    62
Julie Brill, Commissioner, Federal Trade Commission..............    20
    Prepared statement \1\
    Answers to submitted questions...............................    86
Maureen K. Ohlhausen, Commissioner, Federal Trade Commission.....    21
    Prepared statement...........................................    24
    Answers to submitted questions...............................    98
Joshua D. Wright, Commissioner, Federal Trade Commission.........    28
    Prepared statement...........................................    30
    Answers to submitted questions...............................   108

----------
\1\ Ms. Brill did not offer a written statement for the record.


               THE FTC AT 100: WHERE DO WE GO FROM HERE?

                              ----------                              


                       TUESDAY, DECEMBER 3, 2013

                  House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:06 a.m., in 
room 2123, Rayburn House Office Building, Hon. Lee Terry 
(chairman of the subcommittee) presiding.
    Members present: Representatives Terry, Lance, Blackburn, 
Harper, Guthrie, Olson, Pompeo, Kinzinger, Bilirakis, Johnson, 
Long, Barton, Upton (ex officio), Schakowsky, Sarbanes, 
McNerney, Welch, Yarmuth, Dingell, Matheson, Barrow, and 
Christensen.
    Staff present: Charlotte Baker, Press Secretary; Kirby 
Howard, Legislative Clerk; Nick Magallanes, Policy Coordinator, 
Commerce, Manufacturing, and Trade; Gib Mullan, Chief Counsel, 
Commerce, Manufacturing, and Trade; Shannon Taylor, Counsel, 
Commerce, Manufacturing, and Trade; Michelle Ash, Democratic 
Chief Counsel, Commerce, Manufacturing, and Trade; and William 
Wallace, Democratic Professional Staff Member.
    Mr. Terry. All right. We are going to go ahead and get 
started or start this hearing, and I just want to say at the 
beginning before I start my statement that I am just really 
pleased that all of our Commissioners are here today. And we 
have Chairwoman Edith Ramirez, sworn into office as a 
Commissioner in April 2010 and designated Chairwoman in March 
2013. And prior to joining the Commission, Chairwoman Ramirez 
was a partner in the law firm of Quinn Emanuel Urquhart--close 
enough--and Sullivan--as an Irishman, the Sullivan is a lot 
easier to pronounce--LLP in Los Angeles.
    And then we have Commissioner Julie Brill. Thank you. She 
was sworn into office in April 2010. Previously Commissioner 
Brill was the Senior Deputy Attorney General and Chief of 
Consumer Protection and Antitrust for the North Carolina 
Department of Justice. Prior to that she served as Assistant 
Attorney General for Consumer Protection and Antitrust for the 
State of Vermont for more than two decades.
    Thank you for being here.
    Maureen Ohlhausen, Commissioner, sworn into office April 
2012. Commissioner Ohlhausen previously has served for 11 years 
at the Commission and held the position of Director of Policy 
Planning under Chairman Kovacic. She is the most recently a 
partner at Wilkinson Barker and Knauer.
    And then last but not least, our Commissioner Joshua 
Wright, sworn into office January 13th. Commissioner Wright was 
a professor of law at George Mason University School of Law 
focusing on antitrust and competition law. He holds a Ph.D. in 
economics and served at the FTC as its scholar-in-residence at 
the Bureau of Competition from 2007 to 2008.
    And we are glad to have you here, and now we are going to 
start our opening statements. I think a lot of you have been 
through our hearings before. Commissioner Wright, you may be 
the only one that is new to this position as a Commissioner.

   OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEBRASKA

    So good morning, and welcome, everyone here, to this 
hearing, which is aptly titled, ``The FTC at 100: Where Do We 
Go from Here?'' And that is a good question. We all have a 
stake in the FTC's current mission to promote consumer welfare 
by ensuring that business practices in the United States are 
fair and transparent, while also addressing any market 
collusion or anticompetitive activity that could unfairly fix 
prices at a higher level than the market would otherwise 
demand.
    To achieve these goals, the FTC has a wide mix of 
instruments at its disposal, such as administrative 
adjudication, law enforcement, and rulemaking authority. 
However, like all entities in the Government, prioritization of 
goals is critical. Not only are the FTC's resources finite, but 
they also--the sheer breadth of the FTC's jurisdiction makes it 
necessary.
    To that end I am concerned with various issues that the 
FTC, some recent and others long standing, that not only may 
take the Commission away from the scope in which Congress 
legislated, but it also add to the regulatory uncertainty many 
businesses feel already.
    One clear example is the Commission's use of Section 5 
authority under the FTC Act, which allows the Commission to 
address unfair and deceptive trade practices. I understand that 
authorities under this section represents an important 
enforcement tool for the agency, especially in tackling 
entities like patent trolls. However, absent a coherent 
statement of policy on how the Commission plans to enforce 
Section 5, many businesses, large and small, are left to 
examining past decisions to see how they may fit into a certain 
set of facts.
    I think one area under Section 5 that warrants review is 
how the Commission uses its authority to address the use of 
security of data. Commercial entities are finding new ways of 
using data, invaluable ways, that can help bring new products 
to consumers. For example, Google may sell some of our 
information, but we get free cloud-based email service in 
return. The FTC's job is to police the actions of companies in 
its use of personal information. Essentially this means 
enforcing Section 5's requirement that companies don't make any 
misrepresentations to consumers about what the companies do 
with personal information.
    But we wouldn't be doing our job in Congress if we didn't 
examine whether the arrangement continues to work to the 
benefit of consumers and businesses alike. The exchange in 
monetization of data is valuable. According to a recent Harvard 
study and Columbia, the data-driven marketing sector created 
about $156 billion in revenue and contributed to about 675,000 
jobs. But the exchange of our data could only be done with our 
consent, and that consent should be meaningful choice. We 
should examine the other consent decree paradigm, you know, the 
right answer for both consumers, for companies trying to comply 
with FTC policies.
    Now, another example is the recently established Consumer 
Financial Protection Bureau. At first blush it seems that many 
of the actions undertaken by this agency were formerly under 
the purview of the FTC, and I have been vocal with my distrust 
of the CFPB and my concerns with this obscure agency further 
compounded by the possibility that they may be duplicating the 
efforts of the FTC, or hindering your efforts in the FTC. This 
is something that I hope to address during this hearing.
    Lastly, I just want to again thank all of you for being 
here. And who wants a minute 28?
    I yield to the vice chair.
    [The prepared statement of Mr. Terry follows:]

                  Prepared statement of Hon. Lee Terry

    Good morning and welcome to today's hearing, which is aptly 
titled, ``The FTC at 100: Where do we go from here?''
    And that's a good question. Over the past century, the 
commission has seen its authority grow and the industries it 
regulates change dramatically. So on the eve of this 100-year 
milestone, I want to first to take a glimpse into the past and 
better understand what has prompted certain actions by the 
commission.
    Understanding where we've been will provide the roadmap for 
where we go. This will be helpful for Congress, and this 
committee in particular, to know what we can do to ensure that 
the FTC stays focused on its statutory mission while also 
maintaining the necessary nimbleness needed to protect 
consumers and ensure competitive markets at a time when 
business practices are evolving at a remarkable pace.
    We all have a stake in the FTC's current mission to promote 
consumer welfare by ensuring that business practices in the 
United States are fair and transparent-while also addressing 
any market collusion or anti-competitive activity that could 
unfairly fix prices at a higher level than the market would 
otherwise demand. To achieve these goals, the FTC has a wide 
mix of instruments at its disposal, such as administrative 
adjudication, law enforcement, and rulemaking authority.
    However, like all entities in the Government, 
prioritization of goals is critical. Not only are the FTC's 
resources finite, but also the sheer breadth of the FTC's 
jurisdiction makes it necessary.
    To that end, I am concerned with various issues at the FTC-
some recent and others longstanding-that not only may take the 
commission away from the scope in which Congress legislated, 
but also add to the regulatory uncertainty many businesses 
already feel.
    One clear example is the commission's use of its Section 5 
authority under the FTC Act, which allows the commission to 
address ``unfair and deceptive trade practices.'' I understand 
that the authorities under this section represent an important 
enforcement tool for the agency--especially in tackling 
entities like patent trolls. However, absent a coherent 
statement of policy on how the commission plans to enforce 
Section 5, many businesses-large and small-are left to examine 
past decisions to see how they may fit into the specific facts 
of that case.
    I think one area under Section 5 that warrants review is 
how the commission uses its authority to address the use and 
security of data. Commercial entities are finding new ways of 
using data in valuable ways that can help bring new products to 
consumers. For example, Google may sell some of our 
information, but we get free, cloud-based e-mail service in 
return.
    The FTC's job is to police the actions of companies like 
Google in its use of personal information. Essentially, this 
means enforcing Section 5's requirement that companies don't 
make any misrepresentations to consumers about what the 
companies do with personal information. But we wouldn't be 
doing our job in Congress if we didn't examine whether this 
arrangement continues to work for the benefit of consumers and 
businesses alike.
    The exchange and monetization of data is valuable. 
According to a recent study by Harvard and Columbia, the data-
driven marketing sector created about $156 billion in revenue 
and contributed to about 675,000 jobs. But the exchange of our 
data should only be done with our consent, and that consent 
should be a meaningful choice. We should examine whether the 
consent decree paradigm is the right answer for both consumers 
and for companies trying to comply with FTC policies; and if 
so, whether it can be improved upon.
    Another example is the recently established Consumer 
Financial Protection Bureau. At first blush, it seems as though 
many of the actions being undertaken by this agency were 
formerly under the purview of the FTC. I have been vocal with 
my distrust for the CFPB. My concerns with this obscure agency 
are further compounded by the possibility that they may be 
duplicating efforts of the FTC. This is something I hope will 
be addressed in your testimony today or fleshed out by some 
questions.
    Lastly, I would like to thank all of you. I have had the 
opportunity to meet personally with most of you, and hope to 
continue building a positive relationship, particularly because 
this is hopefully the first of many hearings on the FTC that 
our subcommittee will hold in the next few months, as we 
continue looking at the agency and potential legislation to 
modernize the FTC.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman.
    The FTC is turning 100 in less than a year, and I think it 
is wonderful that we are assembling today to explore your 
current role in jurisdiction over protecting consumers and 
competition in what we want to have remain a dynamic 
marketplace. The Federal Government's propensity to constantly 
overreach is a huge concern, and it is important that our 
regulators respect the rule of law. That means making their 
case in courts instead of creating back-door informal 
regulations without judicial oversight.
    Something else we should be mindful of is that if the DC 
Circuit strikes down the FCC's open Internet order, it will 
become clear that the FTC is the de facto arbiter of the Net 
neutrality concerns, which will dramatically increase 
policymakers' attention on this agency. We need to understand 
whether the Commission is as well suited to effectively enforce 
its core mission as it can be? Is the Commission rigorous in 
its analysis of our markets, technologies, and economies? Is it 
prioritizing its resources appropriately? How can Congress and 
the FTC work better together to maximize consumer welfare?
    We welcome you and appreciate your time today.
    I yield back.
    Mr. Terry. Thank you.
    And I now recognize the ranking member of the subcommittee, 
Ms. Schakowsky, for her 5 minutes.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Well, thank you, Mr. Chairman, for holding 
this hearing today on the Federal Trade Commission's nearly 
100th birthday and to discuss the future of the agency. We have 
a real power panel today, and I want to welcome all of them for 
being here.
    The FTC is on the front line of protecting both consumers 
and businesses from unfair, deceptive, fraudulent, or 
anticompetitive practices. Since taking over the head of the 
FTC in March, Chairwoman Ramirez has maintained a strong agency 
and pushed to increase standards in the marketplace to protect 
consumers and strengthen our economy. As a lifelong consumer 
advocate, I appreciate the work that has already been done at 
the FTC, and I look forward to Chairwoman Ramirez's continued 
leadership.
    I am particularly pleased that the Chairwoman has focused 
on access to life-saving drugs, which I believe is one of the 
most important roles of the agency. The FTC has fought for pay-
for-delay agreements in recent years, and the Supreme Court's 
decision in FTC is that Actavis----
    Ms. Ramirez. Actavis.
    Ms. Schakowsky. Actavis--that reversed payment agreements 
can violate antitrust laws was a big win for consumers. The 
Commission's recent filing of an amicus brief in opposition to 
using risk evaluation and mitigation strategies to delay the 
creation of generics is another strong step towards protecting 
consumers. I look forward to the continued progress of the 
Commission in ensuring access to safe, affordable drugs.
    The FTC's role continues to expand as our social networks, 
shopping, banking, and other forms of communication and 
business, move to the Internet. At the same time, as its role 
is expanding, the FTC is struggling with less and less funding 
which has been worsened by the 5 percent sequester cuts. The 
Commission's prepared testimony points to, quote, ``resource 
constraints,'' unquote, and the need to leverage those 
resources through, quote, ``careful case selection,'' unquote.
    We should not be asking one of our country's most important 
agencies to always choose which consumer protections it will be 
able to enforce. Priorities are important, but we don't want to 
shortchange consumers. We should, instead, work to ensure that 
the FTC has the resources it needs to maintain consumer 
protection and a fair marketplace.
    The growth of the Internet has presented us with new 
questions about privacy rights and expectations, and that is 
why Chairman Terry and I decided earlier this year to form a 
Privacy Working Group, which is cochaired by Congress Members 
Blackburn and Welch. The group is tasked with exploring the 
current privacy landscape and considering possible solutions to 
challenges that we find.
    A major concern for me within the privacy framework is the 
issue of privacy agreements. The FTC has the power to hold 
companies to the privacy agreements they offer their companies, 
their customers, visitors, and users, and it does hold bad 
actors accountable. But there is no law requiring online 
businesses to offer specific privacy protections, or even to 
have privacy policies, and the FTC can't enforce what isn't 
promised. And it is also true, I think, that what is promised 
is often in a form not really meaningful to average consumers, 
if you have read any of those privacy agreements or found them, 
and you have the eyesight to actually see them. I look forward 
to hearing from our Commissioners as to whether a minimum 
online privacy standard is needed or would at least be helpful 
to the agency as it continues its important work.
    Again, I look forward to your testimony today and to 
working with all of you Commissioners and my colleagues to 
support the FTC in its mission going forward.
    Mr. Terry. You have got an extra minute. Do you want to 
yield?
    Ms. Schakowsky. Oh, I would be happy to yield a minute. Any 
of the Members?
    Then I yield back, Mr. Chairman.
    Mr. Terry. The gentlelady yields back.
    At this time I recognize the full committee chair, Mr. 
Upton of Michigan.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Thank you, Mr. Chairman. I, too, want to thank 
each of our Commissioners for being here this morning. Today we 
are going to examine the important role of the FTC, its impact 
on jobs in the economy, and what to look forward to in the 
agency's next century.
    The FTC's grasp reaches far and wide, and it is the only 
Federal agency with both consumer protection and competition 
jurisdiction. From the smallest independent corner store to the 
largest industry, from online data collection to multimillion-
dollar merger reviews, the FTC is charged with ensuring 
industry players play fair, competition thrives, and the 
consumers enjoy the fruits of that competition as well as 
protection from fraudsters. Of course, with such great power 
comes equal concern about the appropriate use of that power and 
potential consequences for job creation and economic growth.
    Through a broader lens this committee is taking an agency-
by-agency approach to review the state of Government. How do we 
operate? How can we function better, more efficiently, and more 
effectively? Chairman Terry often puts it best when he calls it 
``clearing the underbrush''; clearing the bog that slows us 
down and makes us less efficient.
    Our duties are twofold: Pursue policies that protect the 
public, while also allowing us to work to ensure job creation, 
innovation, and economic growth are allowed to flourish. The 
FTC can play and does play an important role as we seek to 
improve our economic recovery.
    And I yield to any other Member on our side wishing time.
    Mr. Barton.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Today we will examine the important role of the Federal 
Trade Commission, its impact on jobs and the economy, and what 
to look forward to in the agency's next century.
    The FTC's grasp reaches far and wide, and it is the only 
Federal agency with both consumer protection and competition 
jurisdiction.
    From the smallest, independent corner store to the largest 
industry, from online data collection to multimillion-dollar 
merger reviews, the FTC is charged with ensuring industry 
players play fair, competition thrives, and that consumers 
enjoy the fruits of that competition as well as protection from 
fraudsters. Of course, with such great power comes equal 
concern about the appropriate use of that power and potential 
consequences for job creation and economic growth.
    Through a broader lens, this committee is taking an agency-
by-agency approach to reviewing the state of Government. How do 
we now operate? How can we function better, more efficiently, 
and more effectively? Chairman Terry puts it best when he calls 
it ``clearing the underbrush''--clearing the bog that slows us 
down and makes us less efficient.
    Our duties are twofold--pursue policies that protect the 
public while also working to ensure job creation, innovation, 
and economic growth are allowed to flourish. The FTC can play 
an important role as we seek to recover fully from the Great 
Recession.
    I thank each of the commissioners for being here today and 
I look forward to our discussion. I know a number of my 
colleagues have comments they would like to share so I yield 
the balance of my time.

    Mr. Terry. Mr. Barton.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman.
    Well, first of all, an early happy birthday. As I 
understand, this is the FTC's 100th anniversary next year, so 
happy birthday to the Commissioners.
    I have been on this committee almost 30 years. It is very 
rarely that we have the time and the inclination to study an 
agency in depth, but we do want to take a real look at the FTC 
as it enters its second century of existence. And I will focus 
in my questions on the role of the FTC in protecting privacy of 
American citizens, with a special emphasis on children's 
privacy.
    I have participated with the Commissioners of the FTC over 
the last several years on a number of panels, and we have 
looked at the issue of privacy and what the industry is doing, 
what the standard practices are, and, looking forward, what 
they need to be.
    I look forward to listening to the Commissioners. I look 
forward to participating with the members of the committee in 
this subcommittee hearing, and I hope that very soon we will be 
working with the FTC to implement some new protections for our 
children's privacy, and our general citizens' privacy.
    And with that I would be happy to yield to anybody. 
Anybody? If not, then I yield back to the subcommittee 
chairman.
    Mr. Terry. The gentleman yields back.
    Now the other side has 5 minutes. Mr. Dingell, emeritus, 
would you like any of that time? You are entitled to it.
    Mr. Dingell. Mr. Chairman, I thank you. I will let you 
allocate the time, and I thank you.
    Mr. Terry. All right. Does anyone else on the minority side 
wish the time?
    Seeing none, then all time has been yielded back.
    And I think all of you know how this works. And so, 
Chairwoman Ramirez, you are now recognized, and we will not 
gavel at 5 minutes. We will let you finish.

    STATEMENTS OF EDITH RAMIREZ, CHAIRWOMAN, FEDERAL TRADE 
     COMMISSION; JULIE BRILL, COMMISSIONER, FEDERAL TRADE 
 COMMISSION; MAUREEN K. OHLHAUSEN, COMMISSIONER, FEDERAL TRADE 
 COMMISSION; AND JOSHUA D. WRIGHT, COMMISSIONER, FEDERAL TRADE 
                           COMMISSION

                   STATEMENT OF EDITH RAMIREZ

    Ms. Ramirez. Chairman Terry, Ranking Member Schakowsky, and 
members of the subcommittee, thank you for inviting us to 
testify regarding the Federal Trade Commission's work as we 
approach our 100th year. We appreciate this opportunity to 
discuss the FTC's unique, dual, and complementary role in 
promoting competition and protecting consumers.
    The FTC has a tradition of working at the forefront of the 
most important emerging issues of the day. We do so using a mix 
of law enforcement, advocacy, research, and business and 
consumer education. Changes to the marketplace, like rapid 
technological innovation and globalization, drive much of our 
work. However, over the last century our goals have remained 
fundamentally the same, to prevent fraud and deception, ensure 
that companies keep their promises to consumers, and remove 
barriers to competition, all of which promote an even playing 
field that allows law-abiding businesses to flourish.
    With a staff of approximately 1,200 and a fiscal year 2013 
budget of $296 million, the FTC has delivered results that 
belie its modest size. Over the last 3 years, we have returned 
over $196 million to victims of deceptive and unfair conduct, 
and delivered an additional $117 million in several penalties 
and ill-gotten gains to the U.S. Treasury. We have also saved 
consumers approximately $3 billion in estimated economic injury 
by stopping anticompetitive practices and mergers.
    The hallmark of the FTC's consumer protection work is 
anticipating and tackling new marketplace issues and problems. 
In the 1960s, we were the first Federal agency to act on the 
health threat created by cigarettes, forcing manufacturers to 
implement health warnings in their advertising.
    In the 1980s and 1990s, we used our congressional authority 
to launch a law enforcement program which continues today; 
obtaining Federal Court restraining orders, consumer redress, 
and permanent prohibitions against thousands of consumer 
deception schemes. And in the early 2000s, the agency took 
action against unwanted telemarketing calls by implementing the 
Do Not Call Registry, which kicked off our role as an early 
protector of consumers' privacy both offline and online.
    The FTC continues to combat scams most familiar to 
consumers, such as harassing telemarketers, sham weight-loss 
cures and fraudulent business opportunities, and newer harms 
associated with emerging technologies and business practices.
    As in our consumer protection efforts, we have a long 
history of promoting competition in the marketplace, using 
enforcement, advocacy and research. We have issued the 
influential Horizontal Merger Guidelines along with the 
Department of Justice, advanced merger and monopolization law 
with many important victories in crucial cases, and released 
reports that have helped shape competition policy and 
enforcement in critical areas to consumers and the economy such 
as technology and health care.
    In more recent years we have turned our attention to those 
emerging activities that posed the greatest threat to vigorous 
competition. For example, we have worked to stop drug companies 
from stifling the entry of generic drugs by entering into pay-
for-delay agreements, including obtaining a significant victory 
for consumers at the Supreme Court last term in Actavis. We 
have fought against anticompetitive healthcare provider 
consolidation that threatens higher cost without better care, 
and in doing so we achieved another important victory in the 
Supreme Court in the Phoebe Putney case, clarifying the scope 
of the State action doctrine. And we have acted to protect 
competition and innovation in the technology sector.
    In fiscal year 2013, we brought 27 new competition cases 
and continued to enforce compliance with our existing orders 
and obligations under the Hart-Scott-Rodino Act. Beyond our law 
enforcement, we promote competition and educate stakeholders 
with workshops, reports, and advocacy. For example, our staff 
recently submitted comments to the District of Columbia Taxicab 
Commission, cautioning that rules it has proposed may restrict 
consumers from using new SmartPhone software applications to 
hail cabs. And as businesses become increasingly global, the 
FTC has coordinated closely with international counterparts in 
both our enforcement and policy efforts.
    The Commission has benefited from a culture of 
bipartisanship, collegiality, and consensus in our 
decisionmaking that yields a balanced and consistent approach 
to our work, and we are fortunate to have a truly expert and 
dedicated staff, one that, despite being asked to do more with 
fewer resources, has consistently rated the FTC as among the 
top agencies to work for. Given this rich reservoir of talent, 
commitment, and energy, we are confident that we can meet the 
challenges of our second century.
    And with that background, it is my pleasure to introduce my 
fellow Commissioners. First, Julie Brill, who will be providing 
more details on some of the Commission's current priorities, 
including our efforts to stop scams targeting financially 
distressed consumers, protect privacy and data security, and 
address anticompetitive conduct in the healthcare industry.
    Next, Maureen Ohlhausen, who will describe the FTC's 
efforts to address and adapt to external changes and 
challenges, including technological advances, evolving markets, 
and globalization.
    And Josh Wright, who will discuss our unique research 
capacity, the expertise of our Bureau of Economics, and our 
ongoing efforts to review and update our rules and guides.
    Thank you.
    [The prepared statement of Ms. Ramirez follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Terry. Commissioner Brill.

                    STATEMENT OF JULIE BRILL

    Ms. Brill. Good morning. My name is Julie Brill. I will 
highlight some of the significant substantive work under way at 
the Federal Trade Commission as we approach our 100th 
anniversary.
    Let me begin with our consumer protection mission. The 
Federal Trade Commission is taking effective actions to protect 
consumers in a recovering economy. Aggressive enforcement plays 
a key role, and we actively monitor the marketplace to 
identify, understand, and eliminate financial scams. Recently 
we have focused on putting an end to scams that falsely 
promised to reduce consumers' mortgage payments, prevent 
foreclosure, or ease credit card debts. And we have stopped 
debt collectors who violated the law in their efforts to obtain 
payments from consumers, some of whom did not even owe a debt 
in the first place. We pay particularly close attention to 
schemes that target vulnerable consumers, such as the elderly, 
and military service members and their families.
    The FTC is also the Nation's top cop on the consumer, data 
security, and privacy beat. Our enforcement and policy work in 
these areas helps to ensure that consumers have confidence in 
the dynamic and ever-changing marketplace for personal 
information. We enforce the Fair Credit Reporting Act, and we 
pay particularly close attention to children's online privacy 
as mandated by Congress in the Children's Online Privacy 
Protection Act.
    For over a decade, under both Republican and Democratic 
leadership, we have challenged deceptive and unfair data 
security and privacy practices. In that time period, we have 
brought 47 cases against companies that failed to properly 
secure consumer information, and more than 40 cases relating to 
the privacy of consumer data. Some of these cases involve 
household names such as Google and Facebook, but we have also 
broad myriad cases against less well-known companies that 
spammed consumers, violated commitments in their privacy 
policies, installed spyware on consumers' computers, or 
otherwise crossed the lines of deception or unfairness in their 
data collection and use practices.
    In all our work we recognize the need to stay abreast of 
fast-paced technological changes. As the world has moved to 
mobile, we have focused on the effects of data collection and 
use practices, as well as the variety of mobile payment systems 
in this complex and evolving marketplace. We just held a 
workshop on the Internet of Things to explore data security and 
privacy issues related to connected devices, smart cars, smart 
medical devices, and smart appliances.
    Moving to our competition mission, here are some 
highlights, some recent highlights, from our work to promote 
competition and free markets. In the high-tech marketplace, the 
Commission has examined difficult issues at the intersection of 
antitrust and intellectual property laws; issues related to 
innovation, standards setting, and patents. The Commission's 
policy work in this area is grounded in the recognition that 
intellectual property and competition laws share the 
fundamental goals of promoting innovation and consumer welfare.
    With respect to the healthcare market, the Commission 
devotes significant resources to ensure that competition will 
enable market participants to deliver cost containment, 
excellence, and innovation. Using enforcement as its primary 
tool, the Commission works to prevent anticompetitive mergers 
and conduct that might diminish competition in health care.
    This year, as both Ranking Member Schakowsky and Chairwoman 
Ramirez have noted, the FTC won an important pharmaceutical 
enforcement case in the Supreme Court. The Actavis case 
involved so-called reverse payments between branded and generic 
pharmaceutical firms. These payments had the effect of keeping 
lower-priced generic drugs off the market to the detriment of 
consumers. The Supreme Court ruling that these payments should 
be subject to the antitrust laws was an important win for 
consumers. The Actavis decision vindicated the balanced and 
bipartisan goal of the Hatch-Waxman Act to increase the rewards 
of branded pharmaceutical manufacturers for bringing new drugs 
to market, and increase the incentive of generics to challenge 
invalid drug patents.
    Thank you.
    Mr. Terry. Commissioner Ohlhausen, you are now recognized.

               STATEMENT OF MAUREEN K. OHLHAUSEN

    Ms. Ohlhausen. Chairman Terry, Ranking Member Schakowsky, 
and members of the subcommittee, thank you for the opportunity 
to appear before you today. I am Commissioner Maureen 
Ohlhausen, and my statement will briefly address the FTC's 
ongoing efforts to address technological change, evolving 
markets, and increasing globalization, as well as the agency's 
important international activities.
    I will first highlight some of our recent efforts to stay 
abreast of competition and consumer protection issues in high 
tech and other rapidly evolving areas, which include law 
enforcement as well as other tools. For example, using our 
authority under Section 6(b) of the FTC Act, we can obtain 
information under a compulsory process for market participants 
and pursue a study of a particular competition or consumer 
protection issue.
    As we announced in September, the FTC plans to perform such 
a study of the impact of patent assertion entity, or PAE, 
activity on competition and innovation. This study should 
provide us with a better understanding of the activities of 
PAEs and its various costs and benefits.
    The Commission may also form an internal task force to 
examine the competition or consumer protection implications 
raised by a particular policy proposal. The FTC did this in in 
2007, when former Chairman Majoras formed the Internet Access 
Task Force, which I had the honor of heading. The task force 
issued a set of recommendations regarding network neutrality 
proposals that were being debated at the time, and which 
continue to be debated today.
    Finally, one of the FTC's most effective means of obtaining 
information is holding public workshops, and as Commissioner 
Brill already mentioned, we recently held a workshop on the 
Internet of Things.
    The Commission is also devoting significant resources to 
addressing the mobile phenomena. The FTC has a Mobile 
Technology Unit which conducts research; follows various 
platforms, app stores and applications available to consumers; 
trains FTC staff on mobile technology issues; and develops law 
enforcement cases involving mobile technologies.
    Before concluding my comments on the FTC's efforts in the 
high-tech space, I would like briefly to discuss an area in 
which expanding our existing statutory authority would be in 
the public interest.
    Although the FTC has nearly a century of experience 
protecting consumers across many industries, the exemption from 
our jurisdiction for communications common carriers frustrates 
effective consumer protection with respect to a wide variety of 
activities, including privacy, data security, and billing 
practices. With the convergence of telecom, broadband, and 
other technologies, I urge Congress seriously to consider 
removing this antiquated limitation on our jurisdiction and 
putting these competing technologies on an equal footing. The 
Commission has testified in favor of repealing the 
Communications Common Carrier Exemption in the past, and I 
would like to take this opportunity to express my support for 
such repeal.
    Another key change for consumers and competition is our 
increasingly global economy. Thus, the FTC's international 
efforts are critical to the agency's competition and consumer 
protection missions. I would like to highlight two important 
areas of focus in our bilateral efforts: our use of the U.S. 
SAFE WEB Act and our interactions with the Chinese competition 
agencies.
    The U.S. SAFE WEB Act enables the FTC both to share 
information with foreign law enforcement agencies and to obtain 
information on their behalf. And this is vital to strengthening 
the culture of mutual assistance, but enables law enforcers to 
achieve greater results for consumers. And one example of this 
cooperation is the six cases the FTC filed last year against 
mostly foreign-based operators of a massive tech-support scam. 
I applaud Congress' decision to reauthorize this important law 
enforcement tool last year.
    On the competition side, the FTC has an increasingly 
important bilateral relationship with China and its three 
competition agencies. In July 2011, the FTC and the DOJ signed 
a Memorandum of Understanding with the Chinese agencies, and 
since then we have met on multiple occasions to discuss 
enforcement and policy issues.
    Even before the signing of the MOU, the FTC and the DOJ had 
devoted considerable resources to working with Chinese 
officials on developing the Chinese antimonopoly law which went 
in effect in 2008, and our efforts to convince the Chinese 
agencies to pursue sound competition policies will ultimately 
benefit U.S. businesses and consumers.
    One of the top priorities of the FTC's international 
program is its work with multilateral fora, including in 
particular the International Competition Network, in developing 
best practices for the world's competition agencies. The ICN 
has a chief consensus on recommended practices in several 
areas, including merger review procedures, substantive merger 
analysis, and the criteria for assessing abusive dominance.
    I look forward to working with my colleagues on the 
Commission on the opportunities and challenges our agency will 
face as we enter our second century. Thank you.
    [The prepared statement of Ms. Ohlhausen follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
        
    Mr. Terry. Thank you.
    And now, Mr. Wright, Commissioner Wright, you are 
recognized for 5 minutes.

                 STATEMENT OF JOSHUA D. WRIGHT

    Mr. Wright. Thank you, Chairman Terry, Ranking Member 
Schakowsky, and distinguished members of the subcommittee, for 
this opportunity to speak to you today about the FTC at 100. I 
want to begin by discussing some of the unique institutional 
advantages and expertise at the Federal Trade Commission.
    As both an economist and a lawyer, I appreciate the unique 
structure of the FTC and how its organization enhances our 
ability to protect consumers. As you know, the FTC has three 
bureaus: Competition, Consumer Protection, and Economics. The 
Bureau of Competition endeavors to promote and protect free 
markets and vigorous competition, and the Bureau of Consumer 
Protection works to prevent fraud, deception, and unfair 
business practices in the marketplace.
    The FTC's dual missions complement each other in promoting 
consumer welfare, encouraging the disclosure of accurate 
information to consumers in the marketplace, which, in turn, 
facilitates free and healthy competition. What is sometimes 
lost in that discussion, however, is the vital role played by 
the Bureau of Economics in achieving both of those missions.
    The Bureau of Economics provides guidance and support to 
the agency's antitrust and consumer protection activities. 
Working with the Bureaus of Competition and Consumer 
Protection, the Bureau of Economics participates in the 
investigation of mergers and alleged anticompetitive, deceptive 
or unfair acts or practices. The Bureaus provide an independent 
recommendation on the merits of antitrust and consumer 
protection matters to the Commission. The Bureau also 
integrates economic analysis into enforcement proceedings and 
works with the Bureaus to divide appropriate remedies.
    The Bureau of Economics also conducts rigorous economic 
analyses of various markets and industries. Some recent 
examples include its consumer fraud survey, which provided 
insight into the frequency of certain types of consumer fraud 
and how the incidence of fraud has changed over time. The 
Bureau of Economics conducts merger retrospectives that help 
the agency assess how a particular transaction affected the 
market, and allows the agency to evaluate enforcement decisions 
to improve future analysis and decisionmaking.
    Finally, the Bureau also analyzes the economic impact of 
Government regulation, and provides Congress, the executive 
branch, and the public with policy recommendations relating to 
competition and consumer protection issues. Recent examples 
include the Bureau's work on children's online privacy and 
protection rule and the endorsement and testimonials guides.
    Analyzing the impact of regulations also is one of the main 
components of the FTC's modernization efforts. To ensure the 
Commission's regulations and compliance advice remain cost-
effective, the agency has engaged in a systematic regulatory 
review program for the last two decades. Pursuant to that 
program, the Commission has rescinded 13 trade rules and 24 
guides, and updated dozens of others since the early 1990s. The 
FTC is committed to continuing its systematic regulatory review 
program in order to reduce burdens on the business community, 
while providing real benefits to consumers.
    As the FTC enters its second century, it is an appropriate 
time to reflect upon whether the agency's enforcement and 
policy tools are being put to the best possible use to help the 
agency fulfill its mission. One of these tools, the 
Commission's authority to protect--to prosecute unfair methods 
of competition as stand-alone violations of Section 5 of the 
FTC Act, is particularly suitable, in my view--is a 
particularly suitable candidate for evaluation. The historical 
record reveals an unfortunate gap between the theoretical 
promise of Section 5 as articulated by Congress and its 
application and practice by the FTC.
    The gap has grown large in part due to the persistent 
absence of any meaningful guidance articulating what 
constitutes an unfair method of competition. For at least the 
past 20 years, Commissioners from both parties have 
acknowledged that a principal standard for application of 
Section 5 would be a welcome improvement and have called for 
formal guidelines. With that goal in mind, I have offered a 
detailed policy statement articulating my own views on how best 
to modernize the agency's Section 5 authority.
    The fundamental problem with the Commission's Section 5 
enforcement in the unfair methods context is caused by a 
combination of the agency's administrative process advantages 
and the vague nature of the Section 5 authority governing 
unfair methods of competition. This combination gives the FTC 
the ability in some cases to elicit a settlement even when the 
conduct in question may benefit consumers. This is because 
firms typically prefer to settle Section 5 claims rather than 
go through the lengthy and costly administrative litigation in 
which they are both shooting at a moving target and may have 
the chips stacked against them.
    Indeed, the empirical evidence documents a near perfect 
rate at which the Commission rules in favor of FTC staff after 
administrative adjudication. The evidence also reveals that the 
FTC's own decisions are reversed by Federal courts of appeal at 
a much greater rate than those of general district court judges 
with little or no antitrust experience.
    Formal guidelines would help the Commission's mission by 
focusing the Commission's unfair methods enforcement upon 
plainly anticompetitive conduct and provide businesses with 
important guidance about what conduct is lawful and what 
conduct is unlawful under Section 5. Indeed, the FTC has issued 
nearly 50 sets of guidelines on a variety of topics, many of 
them much less important to our mission than Section 5. The 
Commission can and should, in my view, provide similar guidance 
for its signature competition statute.
    In closing, the FTC is committed to effectively updating 
and modernizing to achieve its goals of protecting consumers 
through its consumer protection and competition missions.
    I am happy to answer any questions.
    [The prepared statement of Mr. Wright follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Terry. Thank you, Commissioners and Chairwoman. I 
appreciate your testimony. And at this point it is the 
question-and-answer part where we get to do a little deeper 
dive into your testimonies. And as I telegraphed in my opening 
statement, and when we had time to chat beforehand, I am 
concerned about the CFPB having what appears to be 
substantially similar jurisdiction, although without the 
maturity of 100 years of testimony and cases to work from.
    So in regard to the FTC's interpretation and guidance on 
how it interprets unfair and deceptive, are there any 
indications that they will or will not--the CFPB is going to 
follow any of the historical interpretations by the FTC, 
Chairwoman?
    Ms. Ramirez. Chairman, let me say that we have worked very 
closely with the CFPB. We entered into a Memorandum of 
Understanding back in January of 2002--2012, excuse me, in 
which we set out processes and procedures specifying how we 
would coordinate to avoid duplication of effort, and to avoid 
double teaming any one company. I also think that--so we 
consult in connection with enforcement actions as well as 
rulemakings and other policy work.
    The statutory definition of unfairness tracks--that is in 
Dodd-Frank tracks what is in the FTC Act, so I do believe that 
the CFPB will be informed by the relevant case law, as well as 
the relevant work that the FTC has engaged in when it comes to 
its use of its----
    Mr. Terry. Do you have any experiences so far, though, 
whether to determine if CFPB will use or will not use those 
historical precedents from the FTC?
    Ms. Ramirez. At the end of the day, I think the agency will 
do what is appropriate under their statutory----
    Mr. Terry. That is what I am afraid of.
    Ms. Ramirez [continuing]. Authority. However, again, I do 
believe that they will be informed by the work of the FTC. We 
cooperate very closely, and we certainly, you know----
    Mr. Terry. But no evidence of that that you can point to?
    Ms. Ramirez. I haven't seen any evidence that they are 
doing anything inappropriate.
    Mr. Terry. OK. And I want to dive down a little deeper on 
the duplication, because some of the fears of the entities that 
are under--particularly financial institutions where there may 
be an FTC review, let us take mortgages, for example, or debt 
collection, that it could be under both the jurisdictions, and 
there is an FTC pathway, and then there is going to be a 
duplication or maybe even a slightly different standard under 
CFPB.
    You mentioned that you kind of have an agreement on 
jurisdiction. Can you give us more details regarding the--that 
agreement on how you are going to work through those shared 
jurisdictions?
    Ms. Ramirez. I wouldn't call it an agreement on 
jurisdiction, but rather it is an agreement to put in place 
processes and procedures to ensure that there is no 
duplication, and to ensure that we collaborate effectively and 
efficiently. We did--under Dodd-Frank the FTC lost certain 
rulemaking authority relating to the financial sector, which 
now is housed and is under the province of the CFPB. So it is 
really on enforcement matters where we are primarily 
collaborating. And, again, we make a great effort and we are in 
contact with them on a regular basis to ensure that we are both 
effective agencies.
    And let me also just say that we have a very strong history 
and a good track record of working with sister agencies to 
collaborate and have shared jurisdiction.
    Mr. Terry. Well, but CFPB is, A, new, and, B, has been 
given a wide berth without too many regulatory barriers to that 
jurisdiction. And one of the issues that we have discussed is 
on their unfair and deceptive actor or practice guidance that 
seems like it may be different than FTC.
    Have you worked with the CFPB on the issuance of their own 
use of----
    Ms. Ramirez. It is not a topic that I have addressed with 
them directly. We, of course, have our own policy statements 
addressing unfairness and their deception authority.
    Mr. Terry. Right.
    Ms. Ramirez. Again----
    Mr. Terry. You haven't had any conversations----
    Ms. Ramirez. I personally have not engaged on that 
particular issue, but I know that staff is in discussions, and 
this is no doubt a subject that was addressed.
    Mr. Terry. OK, staff are in discussions.
    Any of the other three Commissioners in 29 seconds have any 
concerns with CFPB?
    Ms. Ohlhausen. Chairman Terry, I do think that it is 
important that the FTC and the CFPB try to interpret and apply 
similar authority in a similar way. So I completely agree with 
what Chairwoman Ramirez said.
    The CFPB has not had the enforcement history that the FTC 
has had thus far, but I am concerned that in one of the 
complaints that they did issue, they did seem to apply 
unfairness in a very--possibly in a very broad manner to reach 
pricing in particular. So if that were to be an actual 
representation of their enforcement position, that would create 
concerns for me down the road, because I don't think that is 
consistent with how the FTC is interpreted.
    Mr. Terry. And I appreciate that.
    One last question, Chairman: Do you want to move out of 
your building?
    Ms. Ramirez. No, we do not.
    Mr. Terry. All right. Thank you.
    I now recognize the ranking member for 5 minutes.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    I first want to correct a word in my opening statement. I 
mistakenly said that the FTC has fought for pay-for-delay. It 
has actually fought against pay-for-delay. I wanted to clarify 
that.
    But I did want to ask more questions about pharmaceuticals. 
Pharmacy benefit managers, or PBMs, are middlemen between 
insurers, drug manufacturers and patients, as well as to 
negotiate discounts and rebates with pharmacists and drug 
manufacturers to lower the cost of medicines for patients. In 
2005, the FTC conducted an analysis of competition among PBMs 
and determined the market was competitive.
    In the wake of the 2005 report, there have been a number of 
large PBM mergers, either mergers between PBMs or vertical 
mergers between PBMs and pharmacies. CVS Caremark was created 
by the merger of Caremark Rx with AdvancePCS. Last year the FTC 
allowed the PBM giant Express Scripts and Medco to merge. Now 
the new Express Scripts and CVS Caremark account for more than 
80 percent of the PBM market.
    So, Commissioner Brill, I want to ask you a question. Given 
these recent PBM mergers, is it perhaps time for the FTC to 
revisit the PBM market to ensure that it remains generally 
competitive and free of pervasive anticompetitive behavior?
    Ms. Brill. Thank you, Ranking Member Schakowsky.
    I have had a long history dealing with PBMs at the State 
level, as well as at the Federal Trade Commission, and I have 
been involved with State laws and State efforts to enact laws 
to increase transparency around PBMs. This is an issue where 
some of the States have had an intellectual disagreement with 
the traditional position of the Federal Trade Commission.
    I think that it is important to examine the ways in which 
PBMs do operate and to ensure that they are being as 
transparent as possible, yet still maintaining competition with 
respect to their clients; that is, us, employers, whether large 
or small, or other types of entities that hire PBMs.
    With respect to concentration in the market for PBMs, as 
you know, I dissented in the Commission's decision to allow the 
most recent merger to go forward, and the reason I dissented is 
that I felt the parties said themselves that they did not need 
to merge in order to gain any further economies of scale. And 
as a result, I was looking at their other activity, and I saw 
some evidence of coordination, and I worried a great deal about 
coordination in this market.
    And as a result, at the close of the case, I did suggest 
that it would be appropriate for the Federal Trade Commission, 
given what our resources are, given the other issues that we 
have to examine, for instance, patent assertion entities, 
patent trolls, if you will, and others, that if we do have the 
resources, I think it would be appropriate to take a look at 
concentration in the PBM industry and whether or not some of 
the concerns that I have seen are going to bear fruit. And that 
would be something that would probably--should take place not 
necessarily right now, but maybe in a few years.
    Ms. Schakowsky. In a few years.
    Ms. Brill. A year or two, yes. I think we need to see how 
the market matures, given the now even greater concentration in 
the market.
    Ms. Schakowsky. Chairwoman Ramirez, we have heard from 
experts that there are particular concerns in the area of 
specialty pharmacy where patients are using more expensive 
drugs with more complicated treatment regimens that require 
special attention from pharmacists that are specially trained.
    Do you have any concerns about the impact that the mergers 
will have on patients' choice of specialty pharmacists?
    Ms. Ramirez. We are aware of the concerns that have been 
raised in connection with the merger that you just mentioned, 
Express Scripts and Medco. This was an issue that we looked at 
very closely. We issued a closing statement in which we 
explained that we did not believe that there were any adverse 
impacts on the availability of specialty drugs that would 
result from the merger, and I believe that that is the case. 
However, we are aware of the concerns, and this is going to be 
an area that we will continue to look at closely.
    Ms. Schakowsky. I am going to see if I can get in one more 
question on the privacy front.
    Really quickly, I wanted to ask you, Chairwoman Ramirez, I 
agree with the general conclusion of your November 19th 
workshop that the Internet of Things brings great potential for 
innovative, useful technologies, but also new challenges. At 
the workshop you stressed that companies taking part in the new 
Internet of Things ecosystem have a great responsibility to, 
quote, ``build in consumer privacy protections from the 
outset.''
    Could you please address why you believe that this approach 
to data collection, where privacy is hard-coded into new 
technologies, is the right one?
    Ms. Ramirez. This is an approach that the Commission has 
advocated since we issued a privacy report in March of last 
year. We advocate three broad principles that we believe should 
be--are good best practices for companies to abide by. That 
includes privacy by design, which means that companies ought to 
think about and incorporate privacy protections as they develop 
products. I also think that it is important to provide both 
simplified notice and choice so that consumers can exercise 
greater control over their personal information. And then 
finally, it is also critically important that companies be open 
and transparent about how they collect and use personal 
information from consumers.
    Ms. Schakowsky. Well, we are following up as a committee on 
that as well, so we look forward to working with you.
    Mr. Terry. Appreciate that. And there may even be more 
privacy questions from our gentlelady from Tennessee. You are 
now recognized for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman, and I will stay 
right with that line of questioning.
    Commissioner Brill, let me come to you on the Internet of 
Things issue, and this is something as a committee and a 
working group that we are looking at. And I have to tell you, I 
was a little bit, I guess, befuddled would be the word about 
the FTC's intended approach to the Internet of Things, and I 
would like for you to speak to this.
    You wrote a New York Times piece saying the FTC should 
guide the development of the Internet of Things, and you did 
that 2 months before the FTC's workshop on that topic. And I 
would like to know if you think it was appropriate to write 
such a piece when you were holding an exploratory workshop, 
and, therefore, now some people have come forward and said that 
your workshop was just outcome driven. You were meant to lay 
the groundwork for new regulations, and so is this a good 
approach, or should you all be listening and learning from 
these workshops and those that are participating in that before 
trying to drive policy in the New York Times on very complex 
and dynamic technologies?
    Ms. Brill. Thank you for the question. I appreciate being 
able to respond to that.
    Yes, I think it was very appropriate for me to place that 
piece in the New York Times. I was asked by the New York Times 
to write a very short piece about what some of the issues 
around the Internet of Things were, and I wrote the piece to 
raise questions about the kinds of things that I was 
individually thinking about.
    Mrs. Blackburn. So you did it to raise questions and not to 
drive outcomes?
    Ms. Brill. Absolutely not.
    Mrs. Blackburn. So you did not want to predetermine what 
the outcome from the workshop would be?
    Ms. Brill. Absolutely not. And I think a close and fair 
reading of my piece would show that it is raising questions, 
and it is certainly not----
    Mrs. Blackburn. It has raised questions for some of us, but 
we want to make certain, and this is one of the reasons we are 
looking so closely at the Internet of Things and privacy.
    I want to move on with the time that I have. Commissioner 
Wright, I would like to come to you. Can you tell me why 
antitrust is a better way to address net neutrality concerns 
and why you think the FTC is the appropriate agency to handle 
the so-called net neutrality bucket of issues?
    Mr. Wright. Absolutely, and I appreciate the question.
    With respect to the concerns raised in and around the net 
neutrality space, in general most of these concerns involve 
what antitrust economists and lawyers call vertical agreements 
or vertical contracts, contracts between complement providers. 
And these are the types of contracts which antitrust law and 
antitrust agencies like the FTC have looked at and evaluated 
and developed a framework through the common law under the 
Sherman Act for nearly 100 years; developed a set of tools for 
identifying which of these agreements pose problems and 
actually harm consumers, and which can be beneficial. And quite 
a few can be beneficial to consumers rather than harm.
    So the FTC and the antitrust institutions generally, I 
believe, have a framework that, from an analytical perspective, 
is asking the right questions: Which of these agreements will 
help consumers? Let us allow the consumers to get the benefits 
of those. Which of these will harm? Let us investigate further, 
bringing enforcement action with respect to those agreements. 
That is precisely the framework that we have, and I have argued 
in my personal capacity that it is a better framework.
    Mrs. Blackburn. OK. Let me stop you there. Just a yes or 
no. In your opinion, has the FTC ever really explained what its 
unfair methods of competition covers that antitrust does not?
    Mr. Wright. No.
    Mrs. Blackburn. Thank you.
    Chairwoman Ramirez, if I could come to you. I have got a 
question on Magnuson Moss, that warranty act, and I am about to 
run out of time on this, and I want to be sensitive to the 
clock, but I have some questions on this related to the tying 
prohibition, and I know that it has been nearly 2 years since 
the release of the request for comments and 3 years since the 
first complaint had been filed with the FTC by the aftermarket 
groups and there has been no further comment and no public 
action taken by the FTC. So, since we are about out of time, if 
you would submit to me where you are on that, I would like to 
know if you have an anticipated timeline for the review for 
that, for the complaints and the answers to those from the 
aftermarket groups.
    Ms. Ramirez. Well, let me just say quickly that we do 
anticipate completing that review in the coming year, and I am 
happy to provide you more detail about the status of that.
    Mrs. Blackburn. I appreciate that.
    Thank you so much.
    Mr. Lance [presiding]. Thank you very much.
    The Chair now recognizes the Dean of the Congress, Mr. 
Dingell.
    Mr. Dingell. Mr. Chairman, I thank you for your courtesy.
    I note that the agency is approximately 100 years old, for 
which I extend my congratulations. I want to particularly 
welcome the commissioners, especially Chairwoman Ramirez. I 
have some questions which I hope will be answerable in the yes 
or no.
    To you, Madam Chairman, would consumers and industry 
benefit from having one Federal agency enforcing a uniform set 
of national data breach notification requirements? Yes or no.
    Ms. Ramirez. Yes, I believe so.
    Mr. Dingell. Thank you, Madam Chairman. Now, in your 
opinion, should that agency be the Federal Trade Commission?
    Ms. Ramirez. Yes.
    Mr. Dingell. I happen to concur. Now, Madam Chairman, 
provided they are strong enough, should Federal data breach 
notification requirements supersede State requirements? Yes or 
no.
    Ms. Ramirez. Yes.
    Mr. Dingell. Madam Chairman, should State attorneys general 
be allowed to enforce such requirements? Yes or no.
    Ms. Ramirez. Yes.
    Mr. Dingell. Madam Chairman, does the Commission believe 
that a violation of Federal data breach notification 
requirements should be deemed an unfair or deceptive act or 
practice in commerce, thus subject to the commission's 
authority under section 18(a)(1)(b) of The Federal Trade 
Commission Act? Yes or no.
    Ms. Ramirez. Yes.
    Mr. Dingell. Madam Chairman, would a uniform Federal data 
breach notification law enforced by the Commission as well as 
State attorneys general provide a significantly greater level 
of protection for consumers than that which now exists? Yes or 
no.
    Ms. Ramirez. Yes.
    Mr. Dingell. Madam Chairman, does the Commission believe a 
business should notify consumers of a data breach within a 
reasonable time certain provided the Commission may extend such 
time based on a reasonable demonstration of necessity by a 
business? Yes or no.
    Ms. Ramirez. Yes.
    Mr. Dingell. Madam Chairman, should a data breach occur, do 
you believe a business should be required to notify credit 
reporting agencies without unreasonable delay?
    Ms. Ramirez. Yes, I do, particularly if the breach involved 
Social Security numbers.
    Mr. Dingell. Thank you, Madam Chairman.
    Now, I understand the Commission is currently conducting a 
study on data brokers, including how they collect information 
about consumers and consumers' ability to dispute the veracity 
of such information. Do you anticipate that the Commission will 
complete that study in the near future? Yes or no.
    Ms. Ramirez. Yes.
    Mr. Dingell. Madam Chairman, does the Commission believe 
any uniform Federal data breach notification requirements 
should include a safe harbor for businesses subject to 
mandatory risk assessments to be submitted to the Commission? 
Yes or no.
    Ms. Ramirez. I am a bit unclear as to how the safe harbor 
would work, so I will defer an opinion on that.
    Mr. Dingell. Do you want to submit your further thoughts at 
a later time?
    Ms. Ramirez. That would be terrific. Thank you.
    Mr. Dingell. Madam Chairman, does the Commission believe 
that it would require additional authorization of 
appropriations in order to enforce uniform Federal data breach 
notification requirements?
    Ms. Ramirez. No.
    Mr. Dingell. Now, Madam Chairman, should the Commission be 
permitted to promulgate rules and regulations appropriately 
tailored for the enforcement of any uniform Federal data breach 
notification requirements subject to The Administrative 
Procedure Act, yes or no.
    Ms. Ramirez. Yes.
    Mr. Dingell. Thank you, Madam Chairman. Your responses have 
been most helpful.
    Mr. Chairman, I look forward to working with you and my 
Democratic and Republican colleagues to write a commonsense law 
to establish uniform data breach notification requirements. The 
administration has proposed a sound basis for moving forward in 
this particular regard and I note that similar such legislation 
has been proposed and even considered by this committee in 
successive recent Congresses. I believe we should avail 
ourselves of this opportunity to do thorough bipartisan work 
for which this committee has been traditionally known under the 
leadership of yourself, my old friend Mr. Barton, and, of 
course, our current chairman, Mr. Upton.
    I thank you, and I yield back one second.
    Mr. Lance. Thank you very much, Mr. Dingell.
    The Chair now recognizes the chairman emeritus of the full 
committee, Mr. Barton of Texas.
    Mr. Barton. Thank you, Mr. Chairman.
    The FTC has made numerous revisions to the current law on 
children's online protection, the COPA Act. Most recently, 
about this time last year, the FTC had a rulemaking that 
modified the list of personal information that can't be 
collected without parental notice and consent. It closed a 
loophole that allowed children directed apps and Web sites to 
permit third parties to collect to personal information from 
children through plug-ins without parental notice and consent. 
It extended the COPA rule to cover persistent identifiers that 
recognize users over time from across different Web sites or 
online services. It strengthened some data security protections 
by requiring that covered Web site operators and online service 
providers take reasonable steps to release the children's 
personal information only to companies that are capable of 
keeping it secure and confidential. And it strengthened the 
FTC's oversight of self-regulatory safe harbor programs.
    Having done those things, does the FTC or would the FTC 
support or at least consider supporting additional protections 
such as are included in a proposed piece of legislation that 
myself and Congressman Rush of Chicago have offered, the 
Children's Online Protection Act of 2013?
    In other words, in spite of what the agency has done, do 
you support even more secure privacy for our children? I will 
start with the chairman and then go right down the line.
    Ms. Ramirez. I do support the aim of giving more control to 
teenagers and children over their personal information, so I am 
generally supportive of that, yes.
    Ms. Brill. And I, too, am supportive of the goals of your 
bill and particularly am interested in exploring the 
feasibility of the eraser button concept that you have 
incorporated in that bill.
    Mr. Barton. Thank you.
    Ms. Ohlhausen. To echo my colleagues, I definitely support 
the aims of the bill. I would like to get more deeply into the 
issue of what, given the COPA rule revisions and some of the 
self-regulatory options that are out there, what remains to be 
done in the market to extend those kind of protections.
    Mr. Barton. Thank you.
    Mr. Wright. I echo the sentiments of my colleagues on the 
Commission that I am certainly supportive of the goals of the 
bill and would certainly be open to considering further 
details.
    Mr. Barton. Good. Well, we have, under Chairman Terry's 
leadership, he has created a privacy task force, a bipartisan 
task force, Chairwoman Marsha Blackburn is very active on that, 
as I am, and hopefully, we will be holding a legislative 
hearing on Mr. Rush's and my bill sometime in the spring.
    Another privacy question, and this one is not quite as 
obvious, but we heard yesterday Amazon's efforts to use drones 
to deliver packages. It opens up a whole new realm of privacy 
issues if that does occur. Most of the attention has been 
focused on what the FAA would do. But my question to the FTC, 
if and when companies like Amazon.com want to use drones 
commercially in the public sector, does the FTC have a role to 
play in issuing privacy guidelines? I will start with the 
chairwoman.
    Ms. Ramirez. Yes, thank you. Let me say that, as was 
discussed earlier, I do believe that we have a role to play and 
the agency has been very active, of course, when it comes to 
privacy. But in addition to enforcement work that we have done 
pursuant to our Section 5 authority, we have also engaged in 
extensive policy work in this area. I mentioned earlier the 
policy framework that the Commission issued a year and a half 
ago, and I would say that for any emerging technology, we 
believe that it is an appropriate lens through which companies 
should examine any product or service that implicates 
individual privacy.
    At the same time, let me also note there are limits to what 
the FTC can do under our authority, and I do believe, I 
personally am supportive of baseline Federal privacy 
legislation because we can't do everything when it comes to 
privacy.
    Mr. Barton. Anybody else?
    Ms. Brill. I agree wholeheartedly with what the chairwoman 
just said, and I think in particular our report in 2012 
outlined concepts that are applicable with respect to different 
technologies, privacy by design, transparency, simplified 
notice in choice. These are the kind of concepts that could be 
imported into the drone framework. But, again, it would be 
helpful to have clear lines of authority with respect to that 
issue.
    Ms. Ohlhausen. I think this is a great example of how new 
technologies are surprising us, and it is hard to forecast 
where things will be going. So I think the FTC's approach of 
having clear principles or deception or unfairness authority 
that we have applied very actively in enforcement, coupled with 
using our policy tools to get an idea of what new technologies 
are occurring, what particular risks and benefits they may 
offer and getting a good understanding of that and perhaps 
issuing some sort of guidance based on really having a full 
knowledge of what that new technology is, is a very appropriate 
path, one we have followed in other technologies. And, who 
knows, maybe we will have a workshop on drones sometime in the 
future.
    Mr. Wright. I will note very quickly just that I had not 
had the opportunity to think about drones and packages in this 
job until yesterday, so I don't have much profound to say about 
what our approach might be, but I want to echo my colleagues' 
sentiments here and particularly Commissioner Ohlhausen. One of 
the advantages in our approach, both on the competition and the 
consumer protection side, is these principles coupled with a 
framework and the tools that allow us to get at what the 
consumer welfare implications are, what the cost and benefits 
of various approaches are, is in the intellectual blueprint of 
the agency and I think is very helpful for addressing new and 
sometimes surprising technologies.
    Mr. Terry [presiding]. Thank you.
    And at this time, I recognize the gentleman from Maryland 
for his 5 minutes.
    Mr. Sarbanes. Thank you, Chairman Terry, for pulling this 
hearing together, and I want to thank the panelists. Listening 
to your testimony, it is amazing how broad the jurisdiction of 
the FTC is and your testimony has given me confidence certainly 
that that jurisdiction is being managed in an efficient and 
fair way. So thank you for your testimony today. I have a 
couple of broad questions to ask, but before that, I hope you 
would indulge me in sort of a parochial question.
    Chairman Ramirez, we have exchanged some correspondence 
relating to ongoing review by the FTC of a merger of two large 
funeral home companies, SCI and Stewart Industries, and I have 
gotten a lot of inquiry and communication, as I think the FTC 
has as well, from members of the Jewish community in the 
greater Washington, DC, area who have expressed some concern 
that that merger might reduce the access of the Jewish 
community to certain affordable funeral services that comport 
with rights and rituals of the Jewish faith.
    I just wanted to ask you while I had you here today, can 
you tell me if and how the FTC is taking those concerns into 
account as this merger is being reviewed and evaluated?
    Ms. Ramirez. I appreciate the concerns. Unfortunately, I 
can't comment on an ongoing investigation. But what I can say 
is that we are certainly aware of your concern as well as a 
similar concern that has been expressed by others. And that is 
really all I can say at this time.
    Mr. Sarbanes. I appreciate that. I would urge the 
Commission to give serious attention to the concerns that have 
been expressed. Right now, these special services are available 
on an affordable basis. It would be a shame for that to fall by 
the wayside as a result of the merger. So I thank you for your 
attention to that.
    I wanted to ask, given that this is kind of an overview 
hearing as we come up on the 100th anniversary of the FTC, a 
couple of questions about, and anybody can answer this, one 
relates to the kind of rhythms of your jurisdiction, depending 
on the state of the economy. So I would presume that when times 
are bad, or perhaps maybe that is not the case, maybe it is 
when things are getting better and certain people have 
resources that they didn't otherwise have, that the kinds of 
scams you see increase, the number of scams increase. So I 
would be curious to get some response to that question.
    Also, as you know, there is a demographic wave coming at us 
of seniors and I would imagine as a result of that you are 
seeing obviously many more seniors coming into a certain 
cohort, and I imagine the kinds of scams that are being 
perpetuated against our seniors is increasing as a result of 
that because there is also a tremendous amount of resources 
there. So if you could speak to either or both of those issues, 
those who would feel comfortable responding, that would be 
great.
    Ms. Ramirez. Why don't I lead things off, if I may. 
Unfortunately, fraud flourishes at all times, when the economy 
is distressed as well as in good times, but we do see 
differences in the types of fraud. So, for instance, over the 
last several years, we have seen particular frauds that have 
been targeted at financially distressed consumers, and it does 
impact seniors and other underserved communities, so we have 
been particularly vigilant when it comes to that and we place 
significant resources in addressing those times of frauds. 
Those continue, but we are seeing them a bit diminished in 
light of the economic recovery. But, unfortunately, there is 
ample fraud, regardless of what the economy looks like, and we 
are vigilant at all times.
    With regard to your question about seniors, we are very 
much attuned to scams that may affect seniors in particular and 
that does include work at home scams, prize and lottery type of 
scams. We are attuned to those issues. We held a workshop 
earlier in the year addressing identity theft as it pertains to 
seniors. So we are working with other enforcement partners as 
well as with members of the community, community organizations, 
AARP, to do what we can both to press forward with enforcement 
efforts as well as to educate seniors with how to avoid fraud.
    Ms. Ohlhausen. Just to augment what the chairwoman said, I 
wanted to mention one of the great strength that I see that we 
have at our disposal at the FTC is how we are able to collect 
and analyze data to help drive our enforcement priorities. And 
your questions brought to mind how we use Consumer Sentinel, 
which is a database that we collect complaints so we find out 
where particular frauds or what types of particular frauds are 
trending, so we can turn our enforcement tools that way. And 
also we did a fraud study last winter that looked at what 
groups were vulnerable to what particular frauds, and this 
included seniors. And these are both great tools for us to 
better target our enforcement efforts to particular groups that 
are experiencing certain problems.
    Mr. Sarbanes. Thank you very much.
    I would love to get a copy of that fraud study if it is 
available. Thank you.
    Mr. Terry. Thank you.
    Now the vice chairman of the subcommittee, Mr. Lance, you 
are recognized for 5 minutes.
    Mr. Lance. Thank you very much, Mr. Chairman.
    As I understand it in the antitrust context regarding 
adjudicative process, first, there is the ALJ, then an appeal 
to the Commission, and then finally to the Federal courts. Is 
it true that the FTC staff has never lost a case before one of 
its ALJs or an appeal to the Commission?
    Ms. Ramirez. I think the statistics I think that have been 
stated in this arena really can be misleading. I think it is a 
much more nuanced picture. There have been times when both the 
ALJ takes a different view than the staff that is prosecuting a 
case. The Commission has also taken a different view on certain 
claims as regards the arguments that are being made by 
complaint counsel.
    Mr. Lance. So you have lost? The staff has lost?
    Ms. Ramirez. With regard to certain claims, yes. But you 
need to look--you can't just look at the case as a whole, but 
you need to look at and evaluate particular claims. Let me just 
also observe that before a matter even gets to the 
administrative process, there is a lengthy and thorough 
investigation that is conducted by staff. Then there is a 
decision by the Commission as to whether or not to move forward 
with a particular complaint. So that ends up really weeding out 
any weak cases.
    Mr. Lance. And this process is different from the process 
at DOJ. Is that accurate?
    Ms. Ramirez. We have the ability to use both the Federal 
court or to use in the alternative the adjudicative process. 
The Department of Justice only has the avenue of the Federal 
court.
    Mr. Lance. Would any of the other commissioners like to 
comment? Yes, Mr. Wright.
    Mr. Wright. I want to make one small correction, but I 
think it is one that will help us focus on the right issue. The 
statistic, it is not whether the staff wins or loses in front 
of the ALJ. The record in front of the ALJ is actually fairly 
similar to what you get in Federal Court, a little bit 
different. But the FTC staff wins and loses cases in front of 
ALJs, either as Chairman Ramirez was saying, on a whole count, 
on some counts, on part of the case, all of the case. The 
statistic that I think raises some questions and that I alluded 
to in my testimony which I think is interesting with respect to 
the process is that when the ALJ decision has been reached, the 
historical trend for the past, at least past couple of decades, 
has been if the ALJ rules in favor of the FTC staff, the 
Commission affirms. If the ALJ rules against the staff, the 
Commission reverses. Now, there are nuances in the data, but 
the rate is near 100 percent.
    So there are potential explanations of the differences, and 
I certainly don't have any qualms to folks raising them. But 
100 percent is an impressive number, and it is a number----
    Mr. Lance. It is indeed.
    Mr. Wright. And it is a number quite different from the 
processes and institutions that folks face when they go into 
Federal Court, and I think there is a question about what to do 
about that.
    Mr. Lance. Thank you. I am sure we will continue to have a 
discussion on that.
    Last week, the Wall Street Journal noted the Commission 
opened an investigation of the Music Teachers National 
Association and found its longstanding code of ethics contained 
a provision that members should not seek to poach other 
members' clients, and I understand this is currently under 
investigation and I am sure you can't comment on the specific 
facts of that situation. But to the Chair, what is the FTC's 
jurisdiction over nonprofits and does that include nonprofit 
membership associations?
    Ms. Ramirez. We do have jurisdiction over nonprofits where 
the membership and the trade association would be organized for 
the purpose of monetary gain and profit for its members, so in 
that circumstance, we would have jurisdiction. And I can't 
comment on the specific----
    Mr. Lance. Yes, I realize that. Does the FTC have any 
evidence that the code of ethics hurts consumers or has raised 
prices?
    Ms. Ramirez. Again, I can't comment on that particular----
    Mr. Lance. I am not asking on that case. Generally 
speaking.
    Ms. Ramirez. Let me just say, generally speaking, the FTC 
is concerned when there are code of ethics that amount to 
agreements not to compete. That would be a fundamental 
violation of the antitrust laws. Our job is to promote vigorous 
competition, and that is what we aim to do.
    Mr. Lance. I see. Any other members like to comment on 
that?
    Thank you. With 10 seconds, let me say when I was in 
college at the fraternities, you were not supposed to poach on 
your fraternity brothers' girlfriend. You were not to ask her 
for a date.
    Mr. Terry. That is a different type of trust.
    Mr. Lance. Thank you very much, Mr. Chairman.
    Mr. Terry. So, with that enlightened statement, I will 
recognize the gentleman from California, Mr. McNerney, for 5 
minutes.
    Mr. McNerney. Thank you, Mr. Chairman.
    I just want to say your presentation was well-crafted and 
coordinated, I appreciate that, and it shows that you are 
working together, which is important in terms of protecting 
consumers and carrying out the tradition of stopping the old--
before the Commission--``let the buyer beware'' philosophy that 
ruled this country. So thank you for carrying on that great 
tradition.
    Commissioner Brill, you mentioned the privacy issue. What 
are one of the things that I am working with Mrs. Blackburn and 
Mr. Welch and other members of our privacy working group was 
that the companies are telling us that if they have specific 
policies that are stated and that they don't follow those 
policies, that the Commission will go after them, and that that 
is the best thing that could happen as opposed to us imposing 
some sort of regulatory framework over privacy. Would you 
comment on that? Do you agree with that?
    Ms. Brill. I think it is important that we police whether 
or not companies are abiding by their commitments to consumers 
that are contained within privacy policies, so I do think that 
is an important part of what we do. However, there is another 
aspect of what we do which is our unfairness jurisdiction, 
which I think is equally important. And we have brought many 
cases, dozens of cases, involving whether or not companies' 
practices, leaving aside what they State what they are going to 
do, whether or not their practices are harmful to consumers and 
should be subject to our jurisdiction.
    I have actually had conversations with companies, tech 
companies, that have said that they think that our unfairness 
jurisdiction is important because it at least has a measure of 
harm in it. If you look at our unfairness statement, there is 
some aspect of harm that we have to demonstrate.
    So I think it is important actually to have both aspects of 
our jurisdiction, not just focusing on whether or not a company 
is abiding by its privacy policies, which is an important 
aspect.
    Mr. McNerney. Thank you.
    Ms. Ohlhausen, I want to talk about patents for a minute. 
You mentioned the word ``patent assertion entity.'' Another 
more derogatory word that has been going around lately is 
``patent troll.'' I am a patent holder, innovations that I 
developed, and I have a suspicion that there is a large company 
that is violating my patent, that is infringing on my patent. I 
talked to another engineer that had a similar situation in the 
past, and he said, well, it is going to cost you about $5 
million to $10 million to go up against the companies that do 
this. And he says, I have some investors I will put you in 
touch with if you want to pursue that.
    Well, obviously, I am not in a position to do that. But I 
think we need a balanced approach in terms of going after 
patent assertion entities to make sure that they have a certain 
amount of protection for patent holders and innovators. Would 
you comment on that, please?
    Ms. Ohlhausen. Yes. Thank you. You raise a very important 
point, which is that our patent system, it is important that 
there are protections for patent holders and that one of the 
things that we need to keep in mind, and I am glad the FTC is 
doing a study on this, is to get a very clear sense of what 
problems are really being created and what isn't a problem. So 
it is important that the patent holder does the have the 
ability to protect its rights, and sometimes to protect the 
small patent holder, they would be able to sell their patent to 
another entity that might be better suited to capitalize on it, 
to enforce it, to create around it.
    So that is one of the reasons why I was very supportive of 
the agency doing our patent assertion entity study, to get a 
better idea of what is really happening in the market and what 
the interests are. Because we do need to proceed very carefully 
in this area to make sure that the rights of particularly small 
patent holders are protected.
    Mr. McNerney. OK. Thank you. Mr. Wright, one of the things 
you mentioned was the analysis of the impact of government 
regulations on business, and that is something that I think on 
both sides of the aisle we are quite interested in. We don't 
want too much regulation, but we want a level playing field for 
good competition.
    What do you see the long-term impact and long-term goal of 
that study and of that work is with the agency?
    Mr. Wright. I think for me the right way to think about 
that study from the FTC's perspective is that it is an ongoing 
commitment. The commitment to continually review our rules and 
regs is something that we do; we do on a regular basis; we have 
done for 20 years. It involves older regulations that are no 
longer relevant that we pared down--I think I gave the numbers 
of 24 rules and 13 regs over just the last 23 years or so--in 
addition to updating rules that we have that are still relevant 
moving forward.
    So what we do, and I think the economic capacity in the 
agency to do, is internal cost-benefit analysis to make sure 
that we are keeping the rules that have a high rate of returns 
for consumers, that we are getting rid of the ones that have 
zero or negative rate for consumers, and that we are 
continually asking those questions. I think that is a long-
standing commitment of the agency, one that will continue and 
one that has been very successful.
    Mr. McNerney. Does that effort apply to other agencies, 
like the EPA or other agencies that are having an impact on 
businesses out there?
    Mr. Wright. If you mean whether we review their regs, no. 
But I am not very familiar with what the other agencies are 
doing in terms of their own review, of course, or how they go 
about conducting any internal evaluation of their rules.
    Mr. McNerney. So this only refers internally to the FTC.
    Mr. Wright. That is the only thing I can speak to with any 
knowledge.
    Mr. McNerney. Thank you.
    Mr. Terry. I think we will step stipulate that the FTC 
probably does a better job with that than any other.
    Mr. Wright. Here, here.
    Mr. Terry. At this time I recognize the gentleman from 
Mississippi, Mr. Harper.
    Mr. Harper. Thank you, Mr. Chairman, and thank you each for 
being here and providing this insight into a lot of important 
issues and responsibilities that you have.
    If I may start with you, Chairwoman Ramirez, and you 
touched on this earlier, at least on the workshop issue and 
some other things that were ongoing, but today it is no secret 
that the Internet has opened up a lot of new doors and provided 
new tools for a lot of fraudulent and predatory businesses to 
prey on consumers. You see it in the form of fraudulent work at 
home programs, which you have mentioned, fraudulent advertising 
of such things as weight loss products, or fraudulent price 
promotions and others and many other scams through the Web that 
are most threatening to the American consumers this year.
    As you mark and approach the 100th anniversary, is the 
Commission taking sufficient action to protect consumers from 
online scams, such as those fraudulent work-at-home programs?
    Ms. Ramirez. I think we are doing an effective job of 
monitoring the marketplace when it comes to both our mission to 
protect consumers against fraud as well as guarding against 
anticompetitive practices. So, yes, we ultimately are 
constrained, of course, by the resources that we have. We are a 
small agency, but I think that we are doing an effective job.
    Mr. Harper. In particular, I guess as a follow-up, what is 
the FTC doing to crack down on the deceptive use of Internet-
based lead generation, in which email addresses are sold to 
people running multilevel marketing distributions at premium 
prices, and in fact, the so-called lead is simply the email 
address of someone who has clicked on to a Web site and maybe 
isn't a bona fide potential customer?
    Ms. Ramirez. I think your question implicates a number of 
things we do. One includes the work that we are doing in 
connection with both privacy and data security. I personally 
have advocated for the implementation of a do-not-track system 
that would allow consumers to opt out of online tracking. I 
think it is just fundamental that consumers ought to have more 
control over their data. We are also, again, vigilant when it 
comes to any other promises that are not maintained and 
fulfilled by companies.
    So, again, I think we are doing an effective job. We are 
paying particular attention to the mobile arena where we see a 
lot of scams as people migrate to increasingly the use of smart 
phones and tablets.
    Mr. Harper. And, of course, it is a challenge to stay ahead 
of a lot of those abusive practices and stay up on the 
technology.
    Ms. Ramirez. It is a challenge, but that is another reason 
why we hold workshops and we are also constantly engaging with 
the business community as well as with consumer advocates, so 
that we make sure that we learn about what is happening on the 
ground and stay attuned to all of those issues.
    Mr. Harper. And if I could shift gears a little bit, 
Chairwoman, and ask you to elaborate on the FTC's expertise and 
experiences with privacy and data security, do you think the 
FTC has unique expertise for protecting information collected 
and/or stored online, and are you satisfied with where you are 
on that?
    Ms. Ramirez. We certainly are the primary law enforcer in 
this arena in the United States. I think we are doing a he 
effective job with the tools that we have under Section 5. But, 
as I mentioned earlier, there are limits to what we can do, and 
I personally believe it would be appropriate for Congress to 
enact baseline Federal legislation in the privacy arena.
    Mr. Harper. Commissioner Brill, if I may ask you, do you 
think the FTC has enhanced companies' data security efforts 
through the agency's enforcement actions and, if so, give us an 
example.
    Ms. Brill. Sure. Thank you for the question. I do believe 
that our enforcement work has raised the issue with respect to 
data security and privacy protection for companies, and I 
think, as a result, companies have really taken up the mantel 
and developed policies. They have put into place chief privacy 
officers, have brought them into the C suite in certain 
circumstances, and I think the privacy and data security issue 
has been enhanced with respect to corporate practices as a 
result of our enforcement work. So, yes, I do think that our 
enforcement work has played a key role in enhancing the issue 
in corporate America.
    Mr. Harper. Thank you, and I yield back, Mr. Chairman.
    Mr. Terry. At this time, we recognize Donna Christensen for 
your 5 minutes.
    Ms. Christensen. Thank you, Mr. Chairman.
    And welcome to the commissioners. It is great to you have 
here for this hearing. I want to ask some questions about 
Reclaim Your Name and data brokers.
    Dozens and dozens of information brokers exist that have 
detailed profiles about each of us; data is collected, 
aggregated, analyzed and used and disseminated for a wide range 
of commercial practices. The Web site NextMark, for example, 
offers 60,000 customer lists for sale on topics that range from 
mundane and innocuous issues to more sensitive topics. There 
are consumer lists for sale that target people with addictions, 
mental illnesses, reproductive concerns, weight loss issues and 
dozens of other physical and mental health conditions. The list 
is categorized by past purchase history, including so-called 
impulse purchases.
    So, Chairwoman Ramirez, should there be categories of 
information, such as health conditions or sexual preferences, 
that should not be collected?
    Ms. Ramirez. Thank you for your question. This is an issue 
that we addressed in our privacy report that we issued last 
year, and I believe that when it comes to sensitive 
information, health information would be among information that 
I would consider sensitive. I believe that consumers ought to 
have greater control and I think there ought to be an opt-ion 
these numbers, it is not surprising that most Internet users 
express that having control over their personal information 
online was important to them.
    Commissioner Brill, can you elaborate on your Reclaim Your 
Name program and why it is so important for consumers and also 
for those who hold the data?n mechanism when it comes to 
sensitive information.
    Ms. Christensen. Thanks. Can you also clarify why purchases 
of over-the-counter medicines at stores such as target and CVS 
are not protected by HIPAA?
    Ms. Ramirez. HIPAA only provides limited protection and is 
only aimed at healthcare providers. So that is why we are 
particularly concerned about both online and offline collection 
of health information. We do think that it is sensitive 
information that ought to be especially protected.
    Ms. Christensen. I agree. And often data collection is done 
without consumers' knowledge. For example, you might think you 
are sharing information with only your favorite store when you 
agree to carry a customer loyalty card, but that store often 
sells your purchasing habits to other stores and data brokers, 
and some data brokers have taken steps toward opening their 
data bases to the public. However, in most cases, data brokers 
do not share their stockpile of information.
    A recent Pew Research report showed that 68 percent of 
Internet users believe that current privacy laws do not provide 
adequate protection and 50 percent of users were concerned 
about the amount of personal information about them or us that 
is online. Based
    Ms. Brill. Sure. Thank you for your question. One of my 
chief concerns with respect to data brokers is that their 
practices are largely invisible to consumers. Consumers don't 
understand that when they go to WebMD or when they go to other 
online sites and provide sensitive health information, that 
that information may be culled and provided to others and may 
become part of a profile that then characterizes them as they 
move through the Web and, frankly, as they move through other 
transactions, whether online or offline.
    This is an issue where I think much more transparency needs 
to provided to consumers. I would like to see data brokers 
provide to consumers information about the types of information 
that they collect and to give to consumers information about 
the choices that consumers may have with respect to the data.
    Chairman Ramirez referred to our 2012 report, and in that 
report, we talked about the need for giving consumers some kind 
of choice with respect to data that is used for eligibility 
decisions and whether or not consumers ought to be given the 
right to suppress information that is used for marketing 
decisions. The information won't go away, but at least to give 
consumers some kind of choice as to whether their data that is 
collected online and offline is used for marketing purposes.
    I just believe that much more transparency needs to be 
brought to this issue, and I encourage and am working with the 
industry so they can provide these tools to consumers.
    Ms. Christensen. Thank you, Mr. Chairman.
    I yield back.
    Mr. Terry. Thank you.
    Now the Chair recognizes the gentleman from Texas, Mr. 
Olson, for 5 minutes.
    Mr. Olson. I thank the Chair.
    And welcome to all the witnesses. The topic of this hearing 
is ``The FTC at 100: Where Do We Go From Here?'' But before we 
determine where we go, let's take a look at where we have been.
    The FTC was created on September 26, 1914, with one sole 
mission, to promote fair competition. It was a very different 
world in 1914. A couple of examples. Interstate commerce 
industry took a huge blow on September 7th when the last 
passenger pigeon, Martha, died in Cincinnati. Market access was 
changing dramatically. The Panama Canal was opening. The first 
steam vessel came through on the 7th of January, and the first 
ship coming from the East Coast to San Francisco came through 
on August 7th. And the most important invention for the 
prosperity of my State, the patent for W.H. Carrier, who 
patented the air conditioner, happened on April 29, 1914. In 
1938, the consumer protection mission was added to FTC's 
jurisdiction, but since that time, I have concerns that the 
enforcement actions are going beyond those congressional 
limitations.
    I want follow up on some of the questions from the vice 
chair about the actions that the FTC has taken about the 
company that promotes--a nonprofit that promotes music 
competition, the Music Teachers National Association, in the 
Wall Street Journal article. That raised a bright red flag for 
me.
    I am looking at their Web site right now and per the Web 
site, it looks pretty innocuous. They have two missions: To 
provide guidelines for music performance competition and music 
composition competitions. They start out in the States. They 
have seven divisions across the Nation and finals in five 
categories: piano, string, chamber music string, chamber music 
wind, and woodwind.
    Chairman Ramirez, in your written testimony, you state that 
one of the challenges facing the FTC is constrained resources 
and a growing workload, less money, growing workload. You also 
say that one way to mitigate this challenge is to, quote, 
``leverage resources through careful case selection.''
    Do you think that the action against the Music Teachers 
National Association, a nonprofit with 12 employees and a $2 
million budget, is that ``careful case selection?''
    Ms. Ramirez. I can't address the particular matter that you 
have mentioned because it is a nonpublic investigation, but 
what I can tell you is that we will address it at an 
appropriate time. And I will say that I believe we do use our 
resources effectively. There are certain investigations that we 
are as efficient as we can with investigations when it is 
appropriate, and when parties also feel it is in their 
interests, we end up revolving them through consent orders and 
not having to litigate. But I do believe that we have used our 
authority quite effectively. We examine evolving markets every 
single day, and we are well equipped and well positioned to do 
so, and I think we do an effective job at promoting 
competition.
    Mr. Olson. Commissioner Brill, Ms. Ohlhausen, Mr. Wright, 
do you have any comments about what the chairwoman said?
    Ms. Brill. I agree with the chairman.
    Mr. Olson. Surprise.
    Ms. Ohlhausen. I would just also like to mention, not 
commenting on any particular investigation, but the FTC has 
brought a series of these kinds of cases going back to the 
1970s, and it has been across administrations, and one of our 
functions I think is to give guidance to the broader industry. 
So a particular case might be useful in that it gives guidance 
to a lot of other different associations across a variety of 
industries.
    Mr. Olson. Thank you.
    Commissioner Wright?
    Mr. Wright. I concur with the chairwoman's comments. In 
general, I will say, with respect to, again not commenting on 
any particular case, but with respect to trade association 
guidelines and codes of ethics, the history of the Sherman Act, 
going back beyond the history of the FTC is replete with 
examples of price fixing arrangements that harm consumers 
dressed up in the guise of codes of ethics or trade 
associations. They are not uncommon cases in that sense and can 
establish an important principle in cases small or large that 
harm to consumers arising from price fixing, whether written 
down in a document or verbally committed to between 
competitors, are worthy of the agency's attention.
    Mr. Olson. I am out of time. I yield back balance of my 
time. Thank you.
    Mr. Terry. Thank you. At this time, let's see, oh, Mr. 
Welch.
    Mr. Welch, you are recognized, cochair of the privacy 
working group. You are recognized for your 5 minutes.
    Mr. Welch. Thank you, Mr. Chairman.
    First of all, I want to thank all of you. The FTC, it is so 
important, as my colleague from Texas went through the history, 
100 years and things have really changed. But it is a tough 
world out there for consumers. They really don't have an 
advocate. With I think computerization and with information, 
there is a lot of opportunities, but there is also an immense 
amount of power that can be consolidated in the marketers and 
in the market where in order to have competition that is fair, 
we need a very strong and a very cooperative FTC. So I just 
want to thank each and every one of you for your service.
    You are entrusted with this extraordinary responsibility to 
provide for fair competition, but that means that consumers 
have to be, obviously, their interests have to be respected. 
And it is really tough where technology has changed so many 
things and where, in this privacy working group that several of 
us are on, there is an enormous desire to maintain the benefits 
that come from technology, the choice and the opportunity and 
the ease of access and the market opportunities, but on the 
other hand balance that with protecting consumers who have no 
say over how they are treated frequently. So, I understand the 
incredible importance of your job, each and every one of you, 
and I am glad to see how well you work together.
    One of the issues that has come up in the Privacy Working 
Group has been about the impact with the European Union and 
their reaction to reports about the acquisition of information 
through our own intelligence efforts. And one of the concerns 
that has been expressed to me by some of our companies that are 
major companies that are very important players in our economy 
is that some of these EU issues on the privacy question may 
actually start to interfere with their ability to have market 
penetration in the EU.
    So I would actually be interested in hearing a little bit 
about your thoughts on that and what suggestions you would make 
for Congress to make certain there is a level playing field for 
our Internet providers. I want to get both sides of on this, 
but I would start with Commissioner Ohlhausen. Could you speak 
to that?
    Ms. Ohlhausen. Certainly. It is an issue that has certainly 
been in the news a lot and the FTC through our Office of 
International Affairs in particular has tried to engage the 
Europeans quite actively on that. In fact, Commissioner Brill 
and I went to the Data Protection Authority Conference in 
Warsaw together just this past fall, and we got an earful on 
these issues.
    One of the things that I think we have been able to do is 
to sort of make the case about we have the safe harbor 
provision, which really focus on interoperability between the 
European system and the U.S. system, and that has worked fairly 
effectively for a number of years. And I know personally I 
would be concerned if Europe were to depart from that because I 
think it could hurt competition. I think it ultimately could 
hurt consumers. So we have tried to engage with them to address 
some of their concerns, but also to maintain some of these 
important principles.
    One of the things we have done over time at the FTC is for 
companies that have claimed that they are adhering to this safe 
harbor principle, we have brought enforcement actions against 
companies that claim they were adhering and haven't, and so we 
provide some important enforcement backstop to that.
    Mr. Welch. Let me just ask Commissioner Brill--thank you 
very much. I only have a minute.
    But Commissioner Brill, a Vermonter, I am very proud of 
having a good Vermonter. I worked with you when you were in the 
Attorney General's Office, and you were good there, and you are 
doing a great job here. If you could comment.
    Ms. Brill. Thank you. So I have been working very hard to 
express to my European counterparts as well as Vice President 
Reding and others in the European Commission that the national 
security issues need to be separated from the commercial 
privacy issues. And I have been a very strong advocate of 
maintaining safe harbor, which is one of the tools, as 
Commissioner Ohlhausen mentioned, one the tools that companies 
in the United States use in order to transfer data across the 
pond.
    I have said to my European counterparts that safe harbor is 
one of the tools that we at the Federal Trade Commission use to 
protect, not only U.S. citizens but also European citizens. 
When we bring an enforcement action against Google and Facebook 
and we find out they have been violating the safe harbor, we 
can incorporate provisions that deal with these kind of safe 
harbor principles, and we have done so. So not only are we 
looking at the enforcement work that Commissioner Ohlhausen 
mentioned where people are falsely claiming to be members of 
the safe harbor, but in fact our entire privacy and data 
security agenda focuses on enhancing privacy and data security 
for citizens all around the world.
    So I have been a very strong advocate of maintaining safe 
harbor. Having said, that as Chairwoman Ramirez said in a 
letter recently to Vice President Reding, there is always room 
for improvement. It is a good program. It works very well. 
There is room for improvement, and we will be having 
discussions about that.
    Mr. Welch. Thank you. I have to yield back, but I think all 
of us would be interested in continuing to work with you on 
those issues. Thank you.
    Mr. Terry. Yes, we would.
    At this time, I recognize the gentleman from Kansas, Mr. 
Pompeo, for 5 minutes.
    Mr. Pompeo. Thank you, Mr. Chairman.
    Commissioner Ohlhausen, you recently delivered a speech, it 
was back in June, focused on the impacts and ramifications of 
potential privacy legislation. You said, quote, ``I believe 
however that a voluntary self-regulatory process should operate 
without undue Government involvement. Otherwise, industry may 
lose the incentive to participate and instead would take a 
wait-and-see attitude to see whether Congress would ever impose 
such requirements through legislation,'' end of quote.
    A couple other folks have mentioned they are on the Working 
Group on Privacy. I am participating in that as well. I would 
be interested in your thoughts on how industry reacts when we 
even begin to discuss putting in place a top-down Washington-
centered set of privacy rules on top of what is already out 
there today?
    Ms. Ohlhausen. Thank you for your question. I think it 
certainly gets their attention when Congress starts to pay 
attention to these issues. I think that, you know, the FTC's 
approach of bringing our enforcement actions, brining guidance, 
having discussions is helpful, but one of the things that I 
personally think we need too look at is also what is happening 
in the marketplace, and are there options out there for 
consumers that would give them the choices that they are 
seeking in things like interstate advertising or targeting?
    So I do have some concerns though that if, in particular, 
my agency were to play too forceful a role in what is supposed 
to be a self-regulatory process, that it interfere with the 
incentives of the different participants to come to an 
agreement on their own. So that is what I was expressing in 
that speech.
    Mr. Pompeo. I appreciate that and I share your concerns. My 
observation, as I watch consumers, and I hear from them when 
they call our office. I run into them at church, at the PTA 
meetings, all of those wonderful places; they are very focused 
in privacy. In fact, we see it with the Affordable Care Act, 
right? We see customers very aware of the risk to their data 
when they put into this thing they call a computer on their 
desk.
    I think private sector companies will compete, just like 
they compete on value and price and delivery and all of those 
things, I think they will compete on privacy as well, trying to 
match exactly what it is consumers want and deliver that to 
them in a way that they are deeply aware that that privacy is 
provided them. Otherwise, these folks will go someplace else. 
So I think that is self-regulatory system has an enormous 
opportunity to work and do a great good for consumers.
    Chairwoman Ramirez, I wanted to ask you about an unrelated 
issue. The FTC recently released its draft strategic plan for 
fiscal years 2014 to 2018. However, the draft strategic plan 
section on consumer protection did not mention weighing burdens 
on business or competition or assessing economic analysis or 
avoiding unnecessary burdens on innovation. In contrast to 
that, the strategic plan for the Commission's work on 
competition did address those issues. In fact, while the plan 
for the Bureau of Competition described its coordinated work 
with the FTC's Bureau of Economics, the plan's consumer 
protection section didn't even mention the Bureau of Economics.
    Can you tell me going forward what steps have been taken 
and will be taken by the Bureau of Consumer Protection to 
analyze the impact of regulatory activities on businesses and 
competition, including greater integration and cooperation with 
the FTC's Bureau of Economics?
    Ms. Ramirez. I appreciate the opportunity to address that 
question. It is something that we take into account in all of 
the work that we do, and Commissioner Wright touched on this in 
his opening remarks. We do have a Bureau of Economics that 
supports both our competition mission as well as our consumer 
protection mission, and I can assure you that in every matter 
we look at, enforcement, rulemaking, we are always--I am 
getting the advice of our economists, and we are absolutely 
looking at both how to most effectively protect consumers but 
also looking at the costs that would be imposed on the business 
consumer.
    Mr. Pompeo. Maybe, Mr. Wright, maybe you can tell me then 
why wasn't it even mentioned, why in the consumer protection 
provisions was the Bureau of Economics not even mentioned? It 
was expressly done so in the others. That can't be an accident.
    Mr. Wright. I think it can be. I can't say much about how 
or why the asymmetry and the treatment of incorporated 
economics on the Bureau of Competition side and the Bureau of 
Consumer Protection side resulted in the draft. I can say from 
my experience at the agency and as somebody who cares very 
deeply about integrating economics into everything we do that 
it is certainly the case that on the Bureau of Consumer 
Protection side, we do in fact, with respect to law enforcement 
matters, with respect to rules and regulations, take the work 
of BE very seriously, the Bureau of Economics, very seriously, 
and I suspect that the asymmetry in the draft will be resolved 
upon the next opportunity.
    Mr. Pompeo. That is great. Thank you.
    Ms. Brill, go ahead.
    Ms. Brill. I was just going to add it is an absolute 
oversight and that our strategic plan is out for comment, and 
we will make sure that we correct it.
    Mr. Pompeo. Thank you very much. I appreciate those 
answers.
    Mr. Terry. Thank you, Mr. Pompeo.
    Now the Chair recognizes the full committee ranking member. 
The gentleman from California is recognized for 5 minutes.
    Mr. Waxman. Thank you very much, Mr. Chairman, and I 
welcome the members of the Federal Trade Commission that are 
here today to make a presentation to us on the hundredth 
anniversary of the FTC.
    I, in my opening statement, which I made part of the 
record, I acknowledged the fact that FTC has a dual mission, 
and it is a very important one for our economy, prevent 
business practices that are anticompetitive and also to protect 
consumers from unfair or deceptive actions. I want to ask you 
about an issue that is important to me because it involves a 
law that I helped write in 1984, the Hatch-Waxman Act, which 
created the generic drug system.
    And Chairwoman Ramirez, in 2007, the law was changed so 
that the Food and Drug Administration made several landmark 
improvements to our post-marketing drug safety system. And one 
of the most important new tools that that law provided was a 
so-called risk evaluation and mitigation strategies, or REMS. 
One condition of a REMS that FDA could impose might include 
restrictions on how a brand manufacturer will distribute and 
sell a particular product. For example, FDA could require that 
a brand manufacturer only provide a particularly risky drug to 
patients via certain qualified physicians or pharmacies, and 
that makes a lot of sense from a patient safety perspective.
    But even back in 2007, when we were working on this 
legislation, we were concerned about the possibility that brand 
name companies could use this kind of restrictive distribution 
REMS program as a tool for delaying generic competition. In 
fact, the House passed a version of the legislation containing 
some very strong language that could have gone a long way to 
preventing these kinds of abuses. But after we conferenced the 
bill with the Senate, that strong language was watered down and 
was not as effective as I would have hoped. And I understand 
the FTC shares my concerns about these abusive practices.
    Chairwoman Ramirez, I would like to ask you to briefly 
explain in more detail how the practice has been used to delay 
generic competition and discuss potential effects on the 
ability of consumers to get access to generic drugs. Has the 
FTC witnessed a proliferation of these kinds of abuses over the 
years?
    Ms. Ramirez. Thank you for the question.
    This is an area, as you noted, in which we have been--that 
we have been looking at very closely, and we are concerned. I 
can't discuss any particular companies, but I will say that we 
are all worried that branded companies may use--as a way of 
impeding the generic from getting on the--and what I can tell 
you is that we are looking at it very closely, and if we find a 
violation of the antitrust laws and if we find that these 
restrictions are being used in an anticompetitive manner, we do 
intend to take action.
    Mr. Waxman. Well, I appreciate that. I think part of the 
problem is the differences of the two agencies, the FDA, and 
the FTC. FDA has indicated that absent a specific legislative 
directive, it can't prevent brand companies from abusing these 
REMS protocols to restrict access of generic developers, and 
the agencies noted that the FTC is the more appropriate agency 
to ensure, quote, ``that the marketplace actions are fair and 
do not block competition.''
    Chairwoman Ramirez, can you explain why the language of the 
2007 act that attempted to give FDA the ability to prevent 
these abusive practices has not been sufficient to curb these 
kinds of behaviors?
    Ms. Ramirez. I can't speak to what is happening at the FDA, 
and I don't have in mind the particular language, but again, 
what I can assure you is that we take these issues very 
seriously. As you know, the agency has been very active when it 
comes to trying to ensure that generic drugs enter the market 
in order to provide low-cost drugs for consumers.
    Mr. Waxman. Do you agree--yes, excuse me.
    Ms. Ramirez. I can assure that you we will be looking 
closely at the issue, and we will take action, but I can't say 
what is happening----
    Mr. Waxman. Do you agree with the FDA that the FTC is the 
more appropriate agency to oversee anticompetitive practices 
like these, and would the FTC need additional tools or 
resources to help enforce the current statute?
    Ms. Ramirez. Given our long history as a law enforcer, I 
believe that we are very well positioned to address these 
issues. I don't believe that we need new authority. I believe 
that we have authority under Section 5 to take action against 
these types of practices if they are found to be violative of 
the antitrust laws.
    Mr. Waxman. Thank you very much. I look forward to working 
with you on this.
    Mr. Terry. Thank you. Good questions.
    I will now recognize the gentleman from Ohio, Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman.
    And I want to thank our witnesses for being here today 
also. I come from a region of the country where trade is 
critically important. Appalachia, Ohio, is the home to many, 
many small family-owned manufacturing companies and their 
ability to play on a level playing field is extremely 
important. So I applaud the Commission for its advocacy 
efforts, especially in the area of pro-competition or against 
anticompetitive policies that emerge, such as, for example, the 
recent attempts by States and localities to create Government-
imposed obstacles to new technology-delivered services, such as 
the Uber car service. Consumers benefit from more choices and 
more competition, and the FTC should continue this practice.
    What is on the Commission's current advocacy agenda? And 
more broadly, how is the agenda established, and how does the 
office's activities compare to years past? I will just open it 
up from left to right.
    Ms. Ramirez.
    Ms. Ramirez. Yes, and as you noted, we do have an active 
staff that is engaged in advocacy work, and this is an 
important part.
    Mr. Johnson. What's on the agenda?
    Ms. Ramirez. We focus on a number of different issues we 
are looking at, and frankly, some of the issues may come to our 
attention just merely by staff.
    Mr. Johnson. Do you have any specifics? I don't want to use 
the whole 5 minutes.
    Ms. Ramirez. We are paying particular attention to scope of 
practice issues in the healthcare arena. For instance, there 
may be paraprofessionals, nurses, dental hygienists, who might 
be able to help lower costs, improve access to health services, 
so we pay attention to what is happening at the local level. 
There sometimes may be proposals that are aimed to restrict 
activities of these type of professionals. And we opine and we 
submit comments asking legislators to----
    Mr. Johnson. How is the agenda established?
    Ms. Ramirez. Health care is a priority for us, so we are 
looking at that primarily, but we also welcome comments from 
stakeholders. If they become aware of an issue that they 
believe we should be commenting on, we are open to suggestions 
because oftentimes we don't have the resources to be examining 
everything that takes place at a local level.
    Mr. Johnson. Commissioner Ohlhausen, previously in your 
career, you were director of the Office of Policy Planning. How 
many policy planning offices does the FTC currently have, and 
is it accurate that there are now three different policy 
offices--if my understanding is correct, a Commission level 
Office of Policy Planning, a General Council Office of Policy 
Studies, and the Bureau of Competition Office of Policy and 
Evaluation--so is it necessary to have more than one?
    Ms. Ohlhausen. Thank you for your question. Yes, I did run 
the FTC's Office of Policy Planning from 2004 to 2008. And some 
of the functions that were previously in the Office of General 
Counsel and in the Bureau of Competition have been consolidated 
into a bigger Office of Policy Planning that was done under 
previous Chairman Leibowitz' tenure, which I think was a good 
development. There are still some staff in the Office of 
General Counsel and in the Bureau of Competition, but they play 
somewhat of a different role. The FTC's Office of Policy 
Planning, one of its primary missions is overseeing the 
Competition Advocacy Program, as you mentioned. And the focus 
has been on things like health care, and new technologies, and 
reaching some underserved communities. One of the things that 
drives our responses also is foreign advocacy. The FTC needs an 
invitation from a policymaker to comment. So that also helps 
shape what we are able to comment on.
    The other policy staff that are in the Bureau of 
Competition, they help consult on cases, on enforcement work, 
and in the General Counsel's Office, they do a little bit more 
of like sort of very deep studies, things like the patent 
issues. So there is a separation of functions that makes sense.
    Mr. Johnson. OK, I have time for one more question. The FTC 
has seen its budget authorization and resources double over the 
past decade, and by most accounts, a budget that has more than 
doubled in the last decade would not garner much sympathy for 
being resource constrained. If you had to explain to the 
American taxpayers what they have received for their money, how 
would you respond to that? Ms. Ramirez?
    Ms. Ramirez. I think the American taxpayer receives quite a 
bit for their money. We are a small agency. We have 
approximately 1,200 employees. Our budget is under $300 
million.
    Mr. Johnson. But it doubled over the last decade. How do 
you justify that?
    Ms. Ramirez. There was a point in time when the agency's 
staff did expand. We are now at a lower number than we have 
been in the past. I think that we do quite a bit for consumers. 
In my opening remarks, I noted some of the monetary savings 
that consumers receive just by--in enforcing our competition 
mission alone, we have saved consumers approximately $3 billion 
over the course of the last few years. So I think that the 
American taxpayer gets quite a bit.
    Mr. Johnson. Mr. Chairman, I yield back.
    Mr. Terry. Thank you.
    At this time, I recognize the gentleman from Illinois Mr. 
Kinzinger for 5 minutes.
    Mr. Kinzinger. Thank you, Mr. Chairman.
    And thank you all for being here. I appreciate it. I was 
pleased to see that the Securities and Exchange Commission 
issued in October an investor alert warning investors to beware 
of pyramid schemes posing as multilevel marketing programs. As 
the investor alert notes, investors should be aware of 
companies that do not show revenue from retail sales, that 
offer easy money, that have complex commission structures or 
require buy-in to participate.
    In fact, the three most common types of fraud were 7.6 
million incidents, I believe, of fraudulent weight-loss 
products; fraudulent prize promotions, 2.9 million incidents of 
that; and fraudulent work-at-home programs, 2.8 million 
incidents.
    We will start with you, Chairwoman Ramirez. Do you 
coordinate with informal working groups formally on enforcement 
actions or otherwise with the FCC on investigating and stopping 
pyramid schemes?
    Ms. Ramirez. We do coordinate and work with other agencies, 
certainly. On any specific matters, I can't talk about 
particular companies or matters.
    Mr. Kinzinger. Sure.
    Ms. Ramirez. But I will say that we work very effectively 
with a number of different sister agencies as appropriate.
    Mr. Kinzinger. Does anybody else on the panel have anything 
to add to that?
    Just throw it out there. What has the FTC done lately to 
combat these pyramid schemes?
    Ms. Ramirez. It is an issue that we looked at and have 
looked at closely in the past and what I can tell you is that 
we continue to be vigilant in looking at and monitoring the 
marketplace to ensure and guard against----
    Mr. Kinzinger. Can you give me something beyond just I am 
continuing to be vigilant? I mean, what has been done lately? I 
know you can't name names.
    Ms. Ramirez. I apologize, I can't give you particular 
companies.
    Mr. Kinzinger. I am not asking for names.
    Ms. Ramirez. But I think our most recent case, I can't 
remember. I am happy to provide that detail to you.
    Mr. Kinzinger. OK, hopefully, we can get that done.
    Ms. Ramirez. Yes.
    Mr. Kinzinger. Maybe you can give me this answer without 
answering names. How many cases have you brought within the 
last year against pyramid schemes?
    Ms. Ramirez. Within the last year, we have not brought any 
enforcement actions against pyramid schemes, but I will provide 
you the prior activity that the----
    Mr. Kinzinger. How come not in the last year?
    Ms. Ramirez. I may be mistaken about that. My colleagues 
are correcting me. There may be one enforcement action against 
a pyramid scheme. But we can provide you further accurate 
information about that.
    Mr. Kinzinger. All right, because I am--yes, I am looking 
at, as I mentioned in the beginning, something like 13 million 
incidents, and so we have maybe one case you said that is 
going?
    Ms. Ramirez. I can provide you----
    Mr. Kinzinger. You can provide me the information, but I 
just want to--but I think it is important to----
    Ms. Brill. Can I just mention? So sorry for interrupting.
    Mr. Kinzinger. No, please.
    Ms. Brill. Just to augment what the chairman has said, 
pyramid cases are incredibly complex. I actually began my 
career at the State AG's officedoing a pyramid case, and they 
are very resource intensive. So although we might have only 
done one case--and we will get you those details--it is a 
tremendous amount of work, and each one of those cases is very 
important in sending appropriate messages to the community, 
both the investor community and consumer community.
    Mr. Kinzinger. OK, and I will go to a bit of a different 
subject here. Some have raised concerns because the FTC faces a 
lesser burden in obtaining a preliminary injunction from a 
Federal judge than does the Department of Justice Antitrust 
Division. Merging parties can reasonably anticipate the 
possibility of different substantive outcomes depending on 
which agency has jurisdiction to review the matter. To avoid 
the potential for these different outcomes, why shouldn't 
Congress require the FTC to litigate merger challenges in 
Federal Court, just as the DOJ is required to?
    Ms. Ramirez. So the FTC, when it seeks as preliminary 
injunction, it does go to Federal Court. The standard for 
obtaining a preliminary injunction is differently stated as 
between the Department of Justice and the FTC.
    In my view, however, as a practical matter, the standards 
end up being about the same. I don't see a material difference, 
and I don't believe that the difference in words have led to 
any disparate outcomes. So that is between the two agencies.
    Mr. Kinzinger. OK. Well, thank you all for serving your 
country.
    Mr. Chairman, I yield back.
    Mr. Terry. Well, thank you for your service to our country.
    Well, that concludes all of the question and answer period, 
so that it brings us to the end of this hearing. But I just 
want to tell you that I think it is a really tribute to the FTC 
and your importance that we had 22 members show up at this 
hearing. Lots of interest, as I mentioned before the hearing, 
from our outside folks, and so I look forward to working with 
you, continuing to work with you over the next year to ensure 
that you will have equally or even a better 100 years at the 
FTC.
    So, also, as you probably know, we have the ability, or 
right to submit written questions to you. And I am going to 
guarantee you, you will get written questions. In fact, I am 
going to send one that is a generic question that just says 
looking back, as Mr. Olson did, and now looking forward, what 
is the underbrush that needs to be cleaned out? I am sure that 
is something every agency could and should do.
    So I will telegraph that is one of my questions to you. 
What I would appreciate is when we receive all of the questions 
from the members, we will send them to you and if you could, in 
a timely manner, I have asked others to--timely, means to me, 
14 days-ish; 14 days to get those back to us. I would greatly 
appreciate that.
    With that, Mr. McNerney, anything for you to close?
    Mr. McNerney. No.
    Mr. Terry. All right, then we are adjourned. Thank you.
    [Whereupon, at 12:14 p.m., the subcommittee was adjourned.]
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