FEDERALTRADECOMMISSIONPERFORMANCE REPORTFISCAL YEAR 2000March 31, 2001EXECUTIVE SUMMARYThe Federal Trade Commission (FTC),an independent law enforcement agency,is the only federal agency with both con-sumerprotectionandcompetitionjuris-diction over broad sectors of the economy.We strive to enhance the smooth operationof the marketplace by eliminating acts orpractices that are unfair or deceptive. The FTC protects American consumersin both domestic and world marketplaces.Ourexperiencedemonstratesthatcom-petitionamongproducersandaccurateinformationinthehandsofconsumersyields products at the lowest prices, spursinnovation, and strengthens the economy.OurStrategicPlandefinestheFTCsVision and Mission in two goals:GOAL 1 Preventfraud,deception, andunfair business practices in themarketplace. GOAL 2 Prevent anticompetitive mergersand other anticompetitive busi-nesspracticesinthemarket-place.These goals, with their correspondingobjectivesandperformancemeasures,help us assess our performance.FTCS STRATEGIC PLANVISION: A U.S. economy characterized by vigorous competition among producers and consumeraccess to accurate information, yielding high quality products at low prices and encouragingefficiency, innovation, and consumer choice.MISSION: To prevent business practices that are anticompetitive or deceptive or unfair to consumers; toenhance informed consumer choice and public understanding of the competitive process;and to accomplish these missions without unduly burdening legitimate business activity.GOAL 1 Prevent fraud, deception, andunfair business practices inthe marketplace.OBJ ECTI VE 1.1 Identify fraud, deception, andunfair practices that causethe greatest consumer injury.OBJ ECTI VE 1.2 Stop fraud, deception, andunfair practices through lawenforcement.OBJ ECTI VE 1.3 Prevent consumer injurythrough education.GOAL 2 Prevent anticompetitive mergersand other anticompetitivebusiness practices in themarketplace.OBJ ECTI VE 2.1 Identify anticompetitive mergersand practices that cause thegreatest consumer injury.OBJ ECTI VE 2.2 Stop anticompetitive mergersand practices through lawenforcement.OBJ ECTI VE 2.3 Prevent consumer injury througheducation.2FY 2000 Performance Measures and TargetsGOAL 1 OBJ ECTI VE 1.1Measure 1.1.1:Cumulative number ofconsumer complaints and inquiriesentered into database.Target: 600,000Actual: 833,659 TOBJ ECTI VE 1.2Measure 1.2.1:Dollar savings forconsumers from FTC actions which stopfraud.Target: $250 millionActual: $263 million TMeasure 1.2.2:Percentage of targetedindustry brought into compliance throughlaw enforcement and self-regulation.Target: 50%-75%Actual: 83% TOBJ ECTI VE 1.3Measure 1.3.1:Number of educationpublications distributed to or accessedelectronically by consumers.Target: 8.7 millionActual: 11 million TT met or exceededtargetGOAL 2OBJ ECTI VE 2.1Measure 2.1.1:Average number of days forreview of HSR-reported transactions.Target: 20Actual: 18 TMeasure 2.1.2:Number of nonmergerinvestigations opened per year.Target: 45-70Actual: 25 (see text)OBJ ECTI VE 2.2Measure 2.2.1:Positive outcome of casesbrought by FTC due to alleged violations.Target: 80%Actual: 95%TMeasure 2.2.2:Dollar savings forconsumers resulting from FTC actions.Target: $500 millionActual: $2.98 billion TMeasure 2.2.3:Average time, in months,from proposed consent orders to divestitures.Target: 9Actual: 4 TOBJ ECTI VE 2.3Measure 2.3.1:Identify and survey FTC"customers" in the marketplace.Incorporated stakeholder input TMeasure 2.3.2:Average number of days toissue advisory opinions in health care area.FY 2000 AssessmentTheresultsofourFY2000activitiesreached, and in most cases exceeded, eachof our performance measure targets withtheexceptionofone.Highlightsofourperformance and its effect on consumersand businesses are: Savingconsumersanestimated$3.2billionin2000fromlawenforcementactions to stop fraud and prevent anti-competitive mergers, achieving an esti-matedconsumersavingsofapprox-imately$26forevery$1spentonagencyoperations.Inaddition,theFTCslawenforcementactivitiesandconsumer education efforts deter manyfraudulent activities or anticompetitivemergersthatcouldresultinsub-stantial,thoughunmeasurable,con-sumer savings. Protecting consumers and businessesfromanticompetitivemergerswhichraise prices and harm consumer con-fidence. Merger activity in 2000 reach-edrecordlevelsintermsofboth3numberoftransactionsandtrans-action dollar values. The agencys en-forcement actions protected consumerinterestsinabroadarrayofvitalmarkets,fromhealthcaretofoodtotransportation and energy. Bringing49Internet-relatedfraudenforcement actions in 2000, for a totalof 149 since 1994. These actions havetargetedcorporateandindividualdefendants on behalf of millions of on-line consumers and small businesses.Further,theseactionshavestoppedsomeofthenewest,aswellasthetraditional, types of fraud used on theInternet to con consumers. Receivingandprocessingmorethan833,500 consumer complaints and in-quiries into our Consumer InformationSystemdatabasesince1997,andsharing fraud complaints with over 250law enforcement agencies via Consum-erSentinel,asecureWebsite.ManycomplaintsarereceivedthroughtheInternetandourtoll-freeconsumerhelpline, 1-877-FTC-HELP. We expand-ed our efforts in 2000 by establishing asecondtoll-freenumber,1-877-ID-THEFT,thatconsumerscancalltoreport identity theft and receive guid-ance to resolve credit problems result-ing from the theft. Educating consumers and businessesabout their rights and responsibilities,and alerting them to potential frauds,by distributing 11 million educationalpublicationsinprintandonlineandexpandingourmediaoutreachpro-grams. Additionally, we issued a reporton Marketing Violent Entertainment toChildren, finding that such marketingundermines the credibility of industryparentaladvisorylabelsandratingsandfrustratesparentsattemptstomakeinformeddecisionsabouttheirchildrens exposure to violent content.Chal l engesTwodevelopmentshavegreatlyin-creasedthedemandsontheFTCthecontinuous growth of the Internet and thedramaticincreaseinthesizeandcom-plexity of corporate mergers.UseoftheInternethasgrownexpo-nentially since commercial Web browsersfirstbecameavailablein1994163million Americans now have access to theInternet.Internetpurchasingalsoisboomingandisforecastedtoskyrocketfrom $48 billion in 2000 to $269 billion in2005.TheFTCisworkingtoprotectconsumersandbusinessesagainstnewhigh-tech frauds that use the Internet todefraudconsumers.HaltingcyberfraudandreviewingInternet-relatedissuestoensurecontinuedgrowthofthenewe-commerce medium during the early yearsoftheInternetsexistencealreadyischallenging us and taxing our resources. To meet the challenges of the Internet,wehavepursuedacomprehensivepro-gram consisting of systematic analysis ofthe marketplace, law enforcement ofteninconjunctionwithfederal,state,andlocal partners and consumer and busi-ness education.Similarly, the number of mergers hasmore than tripled in the past decade, andthe dollar value of commerce affected bythese mergers is rising at an even greaterrate,increasingnearlyeighteen-foldintotal value during this period, from $169billion in 1991 to approximately $3 trillion.While restructuring may be necessary forcompanies to compete in the new global,high-tech marketplace, antitrust review isnecessary to identify and stop those com-binations that could diminish competitioninspecificmarketsasrestructuringpro-ceeds.Overall,mergertransactionsareincreasingly larger, involving many differ-entmarkets,bothdomesticandinter-4national, that require examination of pos-sibleantitrustconsequences.Moreover,thesedealscontinuetoincreasesignifi-cantly in complexity, thus requiring muchmore exacting analysis of the competitiveissues.Asaresult,mergerinvestigationandlitigationaresubstantiallymorere-source-intensivethanevenafewyearsago.Tomeetthemergerchallenge,weworked closely during 2000 with businessgroups,membersofthebar,andkeylegislatorstodevelopwaystoimprovemergerinvestigationstoenhancetheefficiency of the process while preservingourabilitytoobtaintheinformationneededtoidentifyandpreventanti-competitivemergers.Thesecooperativediscussionshaveidentifiedapproachesthat will enable us to reduce the burdenonbusiness,toexpeditemergerinvesti-gations, and to provide parties with morecompleteinformationontheissuesthatgive rise to an investigation.Strategi c Pl anni ng Conti nui ng the Process A major part of our Strategic Planningis to continually reevaluate our objectives,performance measures, and performancetargets. In 2000, we reviewed and updatedourStrategicPlanthrough2005.Ourfocusthroughoutthisprocesswastoensure that we measure the most appro-priateindicatorsofourperformanceinenhancingthesmoothoperationofthemarketplace. As a result of this review, werevised and replaced several performancemeasures beginning in 2001.Under Objective 1.1 (Identify practicesthatcauseconsumerinjury),wearechangingthemeasurethatcapturesthenumberofconsumercomplaintsandin-quiries in our database from a cumulativecount to an annual one. Our rationale forthischangeisthatanannualcountrepresents current entries. The data glean-ed from current entries helps identify themost recent trends in fraudulent and otherharmful practices so we can target our lawenforcement and education efforts in theareasaffectingthegreatestnumberofconsumers.UnderObjective1.2(Stoppracticesthat cause consumer injury), we have seta goal to save consumers $400 million ayear or $2 billion over five years. We basedthis on savings achieved in 1999 and 2000and the types of fraud we are seeing in themarketplace. Inthenonfraudarea,wehavechangedourperformancemeasure(Measure1.2.2)fromthepercentageoftargetedindustriesbroughtintocom-pliancetothesizeofthedeceptiveorunfair advertising campaigns (measured indollars) that we are able to shut down. Ourannual goal is to stop deceptive or unfairmajor national advertising campaigns thathave combined media expenditures total-ing $300 million. By 2005, our goal is tohavestopped$1.5billioninsuchcam-paigns. This measure captures the broadimpactofpreventingconsumersnation-wide from being taken in by deceptive orunfair national advertising campaigns.Under Objective 2.1 (Identify anticom-petitive mergers and practices that causethe greatest consumer injury), we will con-tinueeffectivescreeningofHart-Scott-Rodino(HSR)Actpremergernotificationfilingstoidentifythosethatmostlikelypresent antitrust concerns, so that at least50% of HSR requests for additional infor-mation(secondrequests)resultinenforcementaction.Successonthismeasure will benefit consumers by target-ingresourcesonthetransactionsmostlikelytohaveharmfulanticompetitiveeffects.ThisnewmeasurewillreplaceMeasure2.1.1,relatingtotheaveragenumber of days for review of HSR-reportedtransactions.5UnderObjective2.2(Stopanticom-petitive mergers and practices through lawenforcement), we will increase our targetfor dollar savings to consumers resultingfrom FTC merger actions from $500 millionto $800 million. In addition, we are addinganewperformancemeasurerelatingtoconsumersavingsresultingfromFTCnonmerger enforcement actions. We expectto achieve $200 million in nonmerger con-sumer savings in 2001. This new measurewillreplaceMeasure2.2.3,relatingtoaverage time from proposed consent ordersto divestitures.Under Objective 2.3 (Prevent consumerinjury through education), we are replac-ing both performance measures (2.3.1, re-lating to a survey of FTC customers and2.3.2, relating to the time needed to issuehealthcareadvisoryopinions).Thenewmeasures, relating to education and out-reach activities by Commission personnel,and the frequency of the publics access toimportant antitrust-related content on theFTCsWebsite,willmoredirectlyreflectour success in preventing consumer injurythrougheducationofthepublic.Wearecurrentlyevaluatingdatafrom2000inordertoestablishreasonabletargetsonthese measures for 2001 and beyond.Although we face mounting challenges especially from the continuing growth oftheInternetandtheincreasingsizeandcomplexityofmergersweareabletoaddress them more effectively because ofStrategic Planning. Through this ongoingprocesswehaveassessed,andwillre-assess, the challenges and opportunitiesfacingtheFTCandwillcontinuetoposition ourselves to be as innovative andaggressiveinprotectingconsumersandbusinesses from unfair or deceptive acts orpractices.6Cumulative Number of Internet Cases Brought by the FTC11422401001491995 1996 1997 1998 1999 2000Cumulative CasesTHE RESULTSGOAL 1 PREVENT FRAUD, DECEPTION, ANDUNFAIR BUSINESS PRACTICES IN THEMARKETPLACETheFTCisthefederalgovernmentsprimaryconsumerprotectionagency.Whilemostfederalagencieshavejuris-dictionoveraspecificmarketsector,wehave broad law enforcement authority overnearly the entire economy, including busi-nessandconsumertransactionsontheInternet. Our goal is to protect consumersby preventing fraud, deception, and unfairbusiness practices in the marketplace. Weimplement three interconnected objectivesto reach this broad-reaching goal. Identify fraud, deception, and unfairpractices that cause the greatestconsumer injury. Stop fraud, deception, and unfairpractices through law enforcement. Prevent consumer injury througheducation.Wefirstidentifypracticesthatcauseconsumerinjurybyanalyzingthecon-sumercomplaintdatacollectedinourConsumerInformationSystemdatabaseand monitoring the marketplace, includingthe Internet. We then use this informationto target law enforcement efforts. Our lawenforcementprogramaimstostopanddeter fraud and deception and to increasecompliance with our consumer protectionstatutestoensurethatconsumershaveaccurateandcompleteinformationfortheir purchasing decisions. We target oureducationeffortstogiveconsumerstheinformationtheyneedtoprotectthem-selves from injury.One of the greatest challenges we faceissafeguardingconsumersinthenewelectronicmarketplacesotheywillhavethe same confidence in this market as theyshould in the traditional marketplace. TheInternet has the potential to deliver tradi-tional goods and services, often more con-veniently, faster, and at lower prices thantraditional media. Online commerce prom-ises enormous benefits to consumers andtheeconomy.Moreover,theInternetisstimulating the development of innovativeproductsandservicesthatwerebarelyconceivable just a few years ago and is en-abling consumers to tap into rich sourcesof information that they can use to makebetter informed purchasing decisions. There is real risk, however, that thesebenefits may not be realized if consumersassociatetheInternetwithfraudopera-tors. Fraud on the Internet is an enormousconcern for the FTC, and it has prompteda vigorous response using all the tools atourdisposal,includinglawenforcementand education.7OBJECTIVE 1.1 IDENTIFY PRACTICES THATCAUSE CONSUMER INJURY To prevent fraud, deception, and unfairbusiness practices in the marketplace, wemust first identify such practices, especial-ly those that cause the greatest consumerinjury,wherewecanmakethegreatestimpact.Strategi esTo keep abreast of consumer protectionproblemsinthemarketplace,theFTCiscollecting and analyzing data from manysources. In 1997, we established the Con-sumerResponseCentertoreceivecon-sumer complaints and inquiries via a toll-free number (1-877-FTC-HELP), mail, andtheInternet.Wearenowrespondingto10,000 inquiries and complaints a week.Partners such as the National Fraud Infor-mation Center of the National ConsumersLeague, Better Business Bureaus, and theCanadian fraud database, PhoneBusters,alsoprovideuswiththeconsumercom-plaint data they collect. The information isenteredintotheConsumerInformationSystemdatabaseandanalyzedbyFTCstaff to identify trends and patterns, newscams, and companies engaging in fraud-ulent,deceptive,andunfairbusinesspractices.ThisinformationisusedtotargetFTClawenforcementandeducationefforts.Also,thefraud complaints collected aresharedwithover250otherlawenforcementagenciesacrosstheUnitedStates,Canada,andAustraliaviaConsumer Sentinel, a secure Web site. Theconstant input and analysis of fresh com-plaint data have allowed the FTC to movequickly in some instances in a matter ofweeks to stop practices before they cando more harm to consumers.In2000,weexpandedoureffortstoassist the public by establishing a toll-freenumber, 1-877-ID-THEFT, that consumerscan call to get information on and reportidentity theft and receive guidance on thesteps they can take to resolve credit andotherproblemsthatmayhaveresultedfromtheidentitytheft.Callstothisnumber, which provides a central point ofcontactinthefederalgovernmentforidentity theft victims, have increased dra-matically, from 400 calls a week a year agoto over 2,200 a week now.In addition to receiving and analyzingconsumercomplaints,wemonitorthegrowingonlinemarketplacebysystem-atically surfing the Internet to identify Websites engaged in questionable practices. Todate,theFTChasledorcoordinatedapproximately25SurfDays,uncoveringsome4,500questionablesites.TheFTCalsohostspublicworkshopstoexplorecutting-edgeissueswithrelevantstake-holders.For example, we recently hostedaworkshopentitledTheMobileWirelessWeb, Data Services and Beyond: EmergingTechnologiesandConsumerIssues.Theworkshop examined the privacy, security,andconsumerprotectionissuesraisedbyemergingwirelessInternetanddatatechnologies. We also hostedTheInformationMarketplace:Merger and Exchange of Con-sumer Information. Its purposewastoeducatetheFTConissuesraised by the creationof detailed consumer profilesthrough the merger or exchange of data,whether offline or online.Performance Measure 1.1.1Cumulative number of consumercomplaints and inquiries enteredinto database.FY 2000 Target: 600,000FY 2000 Actual: 833,659Met or Exceeded: T T8Cumulative Number of Consumer Complaints and Inquiries Entered Into Database1573998341998 1999 2000Cumulative Complaints & Inquiries (in thousands)Performance Measureand Resul tsWeassessedour2000impactbythetotal number of consumer complaints andinquiriesintheConsumerInformationSystemdatabase.Attheendof2000,these entries totaled more than 833,500 approximately39%overourtargetof600,000,whichhadbeenincreasedin1999.Thisgrowthwasduetotheever-increasing number of complaints receivedvia the Internet and our toll-free telephonenumber, the addition of our identity thefttoll-free number, and the growing numberofpartnerscontributingcomplaints.Thedatahaveprovedinvaluableintargetingour enforcement and education efforts onthe most serious problems, among them:online auction fraud, Internet service pro-vider scams, Web and credit card cram-ming(unauthorizedbilling),pyramidschemes, investment schemes, travel andvacationfraud,pay-per-callsolicitationfrauds, and health care fraud. Using thedata,theFTCleditsfirstgloballawenforcementeffort,andthelargestco-ordinatedeffortinitshistory,targetingtheseInternetscamsover250lawenforcement actions were brought by fiveU.S.agenciesandconsumerprotectionorganizations from nine countries and 23states. Performance Assessmentand Future TrendsNot only does our database enable ustotacklethemostseriousproblems,itinforms us quickly of emerging problemsso that we can move rapidly to stop con-sumerinjury.Inaddition,bycollectingdatafrom,andsharingitwith,ourpartners,weareabletocoordinateandenhance the effectiveness of law enforce-ment agencies across the country and inCanada and Australia. To make the data-base even more valuable, we are pursuingwaystoincreaseourcollectionofinfor-mation from consumer agencies in othercountries.WearecontinuingourworkwiththeInternationalMarketingSuper-visionNetworkandtheEuropeanCom-mission to develop a public Web site whereconsumerscanfilecomplaintstobesharedwithinternationallawenforcersthrough Consumer Sentinel. Building onourexperiencewiththeCanadianandAustralianmembersofConsumerSen-tinel,wearealsoworkingtowarddata-sharing agreements with other countries.In 2000, the FTC created a Data Clear-inghousetotrackthecomplaintsitre-ceives from victims of identity theft. DataClearinghouse information is shared elec-tronicallywithotherlawenforcementagencies nationwide via the FTCs securelaw enforcement Web site, Consumer Sen-tinel.TheClearinghousecontainedover50,000recordsasoftheendofJanuary2001.TheClearinghouseinformationhelps law enforcement and policy makersassess the extent of identity theft and theforms it is taking (for example, credit cardversus phone fraud, the latest scams, etc).AccesstotheClearinghouseinformationalsosupportslawenforcementagencieseffortstocombatidentitytheftbypro-viding a broader range of complaints fromwhichtospotpatternsofillegalactivity.These patterns might not be apparent fromthe more limited number of complaints theagencies receive directly from victims.9Assessingourperformanceusingthenumber of entries in our consumer com-plaint database has proven to be a reason-ableindicatorofourabilitytoidentifyconsumerproblems.Usingthedatatoidentify trends and patterns, new scams,andindividualcompaniesengagedinillegalactivitieshasquicklybecomethebedrock of our ability to effectively targetour law enforcement and education efforts.Also, working with our partners to collectdata in one central location increases thevalue of each batch of data by establishingpatternsandgivingusabroadviewofwhat consumers are facing in the expand-ing, global marketplace. The more data wehave, the better able we are to see trendsandcoordinateactivitieswithotherlawenforcers.Additionally,havingtwocen-tralized, toll-free numbers for consumerstocallwithcomplaintsgivesthemtheopportunity to share their experiences andcontributetolawenforcementeffortstostop wrongdoers. In 2000, we examined the potential forduplicationofcomplaints.Ourbasicapproach to avoid duplication is to collectdataonlyfromorganizationsthathavetheir own source of consumer complaintsand do not duplicate the data of any otherFTCdatacontributor.Eachdatacon-tributor is assigned a unique identificationnumber, and the data is cross-checked totheextentpossible.In-house,telephonecounselorsaskrepeatcallersfortheunique reference number included on FTCconsumercorrespondence.Informationprovidedinarepeatcallisaddedtotheoriginal complaint. Complaints filed via theInternet are subject to quality control pro-cedures to eliminate duplicates. In all, wecontinuetobelievethatduplicationofcomplaints is not a significant problem.In our revised five-year strategic plan,thisperformancemeasureischangedtoan annual count of database entries ver-sus a cumulative one. The use of a cumu-lative count for 2000 continues to be validsince the database has been in existencefor approximately three years, and the vastmajority of data has been entered in thepast two years. However, as the data age,earlier entries will be less useful in iden-tifyingbadpractices;thedatagleanedfrom recent entries will determine the tar-gets of current law enforcement and edu-cation efforts. In 2001, we are expanding our reachbylaunchingapublicinformationcam-paignforthetoll-freenumbersanddevelopingaprogramtoenablemilitarypersonnel across the globe to enter com-plaintsonline.Wearealsoworkingtoexpand international participation in Con-sumer Sentinel.10OBJECTIVE 1.2 STOPPRACTICESTHAT CAUSECONSUMER INJURYOnce we identify fraud, deception, andunfairbusinesspracticesinthemarket-place,wefocusourlawenforcementeffortsonareaswherewecanhavethegreatest impact for consumers.Strategi esTo combat fraud, we select priorities forenforcement by analyzing complaint datafromourConsumerInformationSystemdatabaseandmonitoringthetraditionalandonlinemarketplaces.Telemarketingfraudcontinuestobeapriority,asdoesprotectingconsumersfrommoretradi-tional scams that have found new life ontheInternet,includinghealth-relatedfraud. The FTC also is moving to protectconsumersandbusinessesagainstnewhigh-techfraudsthroughourInternetRapid Response Team. In one such case,FTC v. Verity International, the FTC, withinweeks of seeing a dramatic spike in con-sumercomplaintsaboutlong-distancecharges on their telephone bills, sued thecompanyinfederaldistrictcourt.Thecourtenteredatemporaryrestrainingorder, froze defendants assets, and laterissuedapreliminaryinjunctionagainstfuture violations.One of the most effective tools in thebattleagainstfraudhasbeenthelawenforcement sweep simultaneous law en-forcement actions by federal, state, and/orlocal partners against numerous defend-ants nationwide that focus on a particular,widespreadtypeoffraud.Eachsweepissupported by a creative education programaimedatpreventingfuturelossestothepublic.Since1995,theFTChasjoinedwithpartnersinbringing1,567lawen-forcementactionsin60sweepsagainstfraudulentoperators.Thisincludes376cases by the FTC. In 2000, the FTC led 10sweeps resulting in a total of 245 actions,including75FTCcases.Thesesweepshave had a substantial impact on reducingfraud and raising consumer awareness. In the nonfraud area, we work to en-surethatthereiscompliancewithourconsumerprotectionstatutes.Givenourbroadjurisdictionandlimitedresources,wefocusonthemostseriousproblems,usevariousenforcementtools,anden-courage self-regulation. The overall goal isthegreatestpossiblecompliancewithstatutes,regulations,andorders.Usinginformation from our database and moni-toring national advertising, we are able totarget our law enforcement to areas thatcreatethegreatestriskstoconsumerhealth,safety,andeconomicwell-being.Weoftenworkwithindustryandinter-ested groups to encourage self-regulationand private initiatives, where appropriate,in lieu of regulation or law enforcement. Performance Measuresand Resul tsOurgoalin2000wastosavecon-sumersover$250millionbystoppingfraud. We estimate that we surpassed thistarget, with our actions saving consumersapproximately$263million.Consumersavings are measured on the basis of theestimatedannualfraudulentsalesofdefendants in the 12 months prior to filinga complaint. The law enforcement actionsincludedinthismeasureweretakenagainst fraudulent operators ranging fromindividualsorsmallcompaniestoscamartistsoperatinglargeschemesontheInternet. Our experience in most cases isthatoncewefileacomplaintinfederal11district court and obtain a court order, thedefendants stop their fraudulent practices;if they fail to comply, they are subject tocontempt actions. Thus, in stopping thesefrauds, we stop further consumer losses tothese defendants. By publicizing these lawenforcement actions and distributing con-sumereducationmaterials,weseektoincreaseconsumerconfidenceinthemarketplace. In the nonfraud area, our goal was toincrease compliance with the laws againstdeceptive and unfair practices, and there-byensurethatconsumershavemoreaccurate and complete infor-mationfortheirpurchasingdecisions.Wetargetindus-trieswheremisleadingorunfairpracticesarewide-spread,andworktosig-nificantly improve the level ofcompliancethroughlawen-forcementorself-regulatoryprograms. In 2000, we plan-nedtobring50%to75%ofthenoncomplyingmembersintargetedindustriesintocompliance within a two-yearperiod.Wetargetedindus-trieswhosemajormemberswerenotincompliancewiththelaw,including invention promotion, computerleasing,andIndividualReference(Look-up)Services.Bytakinglawenforcementactionsandencouragingself-regulatoryprograms across these industries, we wereabletoachieveanaverageincreaseincompliance of 83%.Although this exceedsour target, the result does not include allindustries targeted in 1998. The reductionin the number of industries measured is,inpart,aresultofthedifficultiesofcollectingmarketsharedata.Thesedifficultiesalsoledtotheeliminationofthismeasureinourrevisedfive-yearstrategic plan.Performance Assessmentand Future TrendsDrawingonConsumerSentineldata,we are targeting the most pervasive onlinefraudandmovingquicklytostoplarge,fast-growing Internet scams. In 2000, theCommissionbrought49casesinvolvingfraudulentordeceptivemarketingpractices related to the Internet, bringingthetotalnumberofInternetcasesfiledsince 1994 to 149. We expect fraud to con-tinuetogrowastheuseoftheInternetgrows,andinresponse,wewillincreaseoureffortstoslowonlinefraud and prevent consumerinjury.In our revised five-year stra-tegicplan,wesetagoaltosave consumers $400 milliona year or $2 billion over fiveyears. We based this on sav-ingsachievedin1999and2000andthetypesoffraudwe are seeing in the market-place.Inparticular,onlinefraudhasthepotentialtoreachconsumersworldwideandcausegreateconomicinjury. As our expertise in high and newtechnologies grows, we will be better abletodetectanddeteronlinefraudbeforetheseschemestakehold.Bystoppingfraudulent operators early, measured sav-ingsineachcasemayfall;however,thequickresponseresultsinlessinjurytoconsumers.Thiseffort,combinedwithstrategiessuchaslawenforcementsweeps, demonstrates our effectiveness inpreventing consumer injury.Inadditiontofightingfraud,wealsofocusoncompliancewithtraditionalad-vertising law and FTC Rules and Guides.Weworkcooperativelywithourlawen-forcementpartners,industry,andcon-sumer groups to extend the reach of ourPerformance Measure 1.2.1Dollar savings for consumers fromFTC actions which stop fraud.FY 2000 Target: $250 millionFY 2000 Actual: $263 millionMet or Exceeded: T TPerformance Measure 1.2.2Percentage of targeted industrybrought into compliance through lawenforcement or self regulation.FY 2000 Target: 50% - 75%FY 2000 Actual: 83%Met or Exceeded: T T12efforts to increase compliance. The scopeofourcurrentandupcomingprioritiesspans our broad jurisdiction.We will usebusiness and consumer education, as wellas selective enforcement, to ensure broadcompliancewiththeconsumercreditstatutes,theMailandTelephoneOrderRule,andadvertisingregulations.Forexample, in an enforcement effort labeledProject TooLate.com, the FTC addressedwidespreadshippingdelaysbyonlinesellers during the 1999 holiday season.In2000,sevenonlineretailers(e-tailers)settled FTC charges that they violated theMailandTelephoneOrderRulebynotgiving proper or timely notice of shippingdelays.The companies paid civil penaltiestotaling$1.5millionandimplementedprocedurestoensurethattheviolationswould not recur.Before the 2000 holidayseason, FTC staff surfed more than 200 e-tailersitesandsentwarninglettersexplaining Rule obligations to nearly 100businesses that made quick-ship claims.The 2000 season proceeded more smooth-ly, with consumers reporting fewer prob-lems with shipping delays.Themeasureofoureffortstoensurebroad-based protections for consumers inthenonfraudareawaschangedinourrevised five-year strategic plan to a morecomprehensive measure of FTC efforts toreduceharmtoconsumers.Ournewmeasure isEach year, the FTC will re-duce consumer injury by obtaining ordersstopping deceptive or unfair major nationaladvertisingcampaignswithcombinedmedia expenditures totaling $300 million;by2005,$1.5billioninsuchcampaignswillhavebeenstopped.Thismeasurewas chosen because it captures the broadimpact in (1) stopping major misleading adcampaignsanddeterringothers,and(2) preventing consumers nationwide frombeinginjuredbypurchasingproductsorservicespromotedbydeceptiveorunfairnational advertising campaigns. The prem-ise is that the more a company spends onan advertising campaign, the more wide-spreadthedeceptiveorunfairmessage.The new measure is a conservative meas-ureoftheagencysimpactbecauseitincludes only deceptive or unfair ad cam-paignsofmajornationaladvertisers.Itdoesnotcountallthedeceptiveadver-tisingwemaystopforexample,casesinvolving modest advertising expenditures,multi-level marketing, claims made solelyonproductpackaging,andfraud-relatedadvertising (which is captured in perform-ance measure 1.2.1).13OBJECTIVE 1.3 PREVENT CONSUMER INJURYTHROUGH EDUCATIONConsumerandbusinesseducationisthe first line of defense against fraud anddeception and a top priority of the FTC.Strategi esOne of the FTCs operating principles isthateducationandoutreacharecost-effective ways to prevent consumer injury,increase business compliance, and add anextradimensiontoourlawenforcementprogram.VirtuallyeveryConsumerPro-tection effort has an education component,fromcompliancesurfsandlawenforce-ment sweeps to the announcement of newrulesandregulations.Throughreports,publications,Websites,mediaevents,speeches, and collaborative activities withother organizations, the FTC reaches tensof millions of consumers and businessesevery year. Ourdatabasehelpsusfocusoureducationeffortsonareaswherefraud,deception, unfair practices, and informa-tion gaps are causing the greatest injury.Consumers are given the tools they needtospotpotentiallyfraudulentandotherillegalpromotions,andbusinessesareadvised about how to comply with the law.As with our law enforcement, more of oureducation efforts now involve the Internet.We not only address consumer issues in-volvingtheInternet,suchasshoppingonline,butwealsousetheInternetasatooltoreachconsumers,forexample,through our Web sites, onlinebannerpubl i cservi ceannouncements,andonlinedistributionofnewscon-sumers can use. We coordinate with hundreds of privateand public partners to provide informationabout specific promotions, products, andservices. In 2000, the FTC was in the leadinorganizingthesecondNationalCon-sumer Protection Week, which focused ona public/private campaign to provide infor-mation on how to shop safely from home whetherbytelephoneormailorder,oronline.AmongourpartnersweretheNational Association of Consumer AgencyAdministrators, the National Association ofAttorneys General, the National Consum-ersLeague,theAmericanAssociationofRetired Persons (AARP), the Department ofJustice,andtheU.S.PostalInspectionService. The FTC also continues to managewww.consumer.govandtorecruitnewagency members to participate in the site,whichoffersone-stopaccesstofederalconsumerinformation.Inthepastyear,thenumberofmembershasgrownfrom60agenciesattheendof1999to174today.Performance Measureand Resul tsWe gauged our impact in the educationareabytrackingthenumberofpublica-tions we distributed to the public. In 2000,theFTCdistributedapproximately11million publications: 5.4 million print pub-lications and 5.6 million through the con-sumer protection Web page onthe FTC Web site, making thisthefirstyearelectronicdistributionsurpassedprintdistribution. We exceeded ourgoalof8.7millionpubli-cations by approximately 2.3million,dueprimarilytoa120% increase in the numberPerformance Measure 1.3.1Number of education publicationsdistributed to or accessedelectronically by consumers.FY 2000 Target: 8.7 millionFY 2000 Actual: 11 millionMet or Exceeded: T T14of publications accessed online. Our reachnationwide was extended by more aggres-siveoutreachandpromotionofFTCmaterialsandourtoll-freenumbers,includinganextensivemultimediacam-paign on identity theft. We used informa-tionfromourdatabasetotargetoureducationprogramstoproblemareas,suchasInternetfraud,childrensonlineprivacy,onlineauctions,daytrading,dietarysupplementsforchildren,creditreports,andofficesupplyscams.Thegrowing number of telephone calls and theincreased use of our Web site demonstratethatoureffortshavecreatedagreaterawarenessofconsumerissues.Inturn,consumers will, to some extent, be able toprotectthemselvesagainstfraudanddeception in the marketplace.Performance Assessmentand Future TrendsThe FTC seeks to alert as many con-sumers as possible to the telltale signs offraud,deception,andunfairbusinesspractices,andothercriticalconsumerprotectionissues.UseoftheInternettodisseminate information about fraud andtechnology-relatedmattersisintegraltotheFTCseducation,deterrence,andenforcementeffortsandhasallowedtheagencytoreachvastnumbersofcon-sumersandbusinessesquickly,simply,and at low cost. The FTC has been at theforefront of using the Internet to educateand empower consumers. This trend willaccelerate in the future.Our measure of the number of publi-cations distributed is an accurate indicatorofourimpactineducatingconsumers,althoughitdoesnotfullycapturethemillions of FTC publications distributed byour customers, partners, and the public.Asweforecasted,thenumberofprintpublicationswedistributehasdeclinedand the number of publications accessedthroughtheInternethasincreased,asmore consumers and businesses go online.Thedifferenceinthenumberofpub-lications accessed online in 1996 and 2000(140,000 versus 5.6 million) tells the storyoftheInternetscomingofageasamainstreammediumandcertainlyitsimportancetoanylarge-scaledissemi-nation effort. Capitalizing on this trend, wewill increase our use of the FTCs Web site,www.ftc.gov,andthemulti-agencyWebsite, www.consumer.gov, to efficiently andeffectivelyreachconsumers,businesses,law enforcement officials, and the media.Additionally, the Commission deliveredtestimony on consumer protection issuesto the United States Senate and the UnitedStates House of Representatives 16 timesduring 2000: SolvingtheProblemofScholarshipScams:S1465, The College Scholar-ship Fraud Prevention Act of 1999,PresentedbySheilaAnthony,Commissioner. UnsolicitedCommercialEmail,PresentedbyEileenHarrington,AssociateDirectorofMarketingPractices. IdentityTheft,PresentedbyJodieBernstein, Bureau Director.C OfficeSupplyFraud.PresentedbyJodie Bernstein, Bureau Director. FuneralIndustry,PresentedbyEileen Harrington, Associate Direc-tor of Marketing Practices. Fair Credit Reporting Amendments of1999,PresentedbyDebraValen-tine, General Counsel. Online Privacy:Recent CommissionInitiatives. Presented by Jodie Bern-stein, Bureau Director. PredatoryLendingPracticesintheSubprimeIndustry,PresentedbyDavid Medine, Associate Director ofFinancial Practices. Privacy Online, Presented by RobertPitofsky,Chairman,andallCom-missioners.15 OnlineProfiling:BenefitsandConcerns.PresentedbyJodieBernstein, Bureau Director. Proposed Legislation:The Telemar-ketingVictimsProtectionAct(HR3180) and The Know Your Caller Act(HR3100),PresentedbyEileenHarrington,AssociateDirectorofMarketing Practices. LivingTrustScams,PresentedbyElaine Kolish, Associate Director ofEnforcement. IdentityTheft,PresentedbyJodieBernstein, Bureau Director. Fraud Against Seniors, Presented byRolandoBerrelez,AssistantRe-gionalDirector,MidwestRegionalOffice. Identity Theft, Presented by JeffreyKlurfeld,RegionalDirector,West-ern Regional Office. IdentityTheft,PresentedbyBetsyBroder, Assistant Director, Divisionof Planning and Information.Increasing the visibility of the FTC asthenationsconsumerprotectioncham-pionnotonlyhelpsconsumersbetterprotectthemselves,butalsoencouragesconsumers to provide the FTC with moreand better complaint data. That, in turn,will make our law enforcement and edu-cation efforts more effective.16GOAL 2 PREVENT ANTICOMPETITIVE MERGERSAND OTHER ANTICOMPETITIVEBUSINESS PRACTICES IN THEMARKETPLACECompetition among sellers in an openmarketplaceresultsinlowerpricesforconsumers, leads to high quality productsand services, maximizes consumer choice,and spurs the discovery and developmentofbeneficialnewproductsandservices.Anticompetitive mergers, and other prac-ticesthatdiminishcompetition,denyconsumers these benefits. Thus, the FTCsgoal is to promote vigorous competition bypreventinganticompetitivepracticesandmergers that would diminish competition.We apply three objectives to achieve thisgoal. Identify anticompetitive mergers andpractices that cause the greatestconsumer injury. Stop anticompetitive mergers andpractices through law enforcement. Prevent consumer injury througheducation.First, we identify anticompetitive merg-ersandbusinesspracticesbyapplyingsophisticated economic analysis and con-ducting thorough factual investigation todistinguish between actions that threatenthe operation of free markets and behaviorthatpromotesvigorouscompetitionandadvances their operation. This step is criti-cal because in any given circumstance theactivity in question, such as a merger, maybe either beneficial by enabling sellers tobe more efficient and pass those savingsalongtoconsumersorharmfulbyenablingsellerstoreducetheoutputoftheirproductandraisethepricetoconsumers.Thus,indiscriminateorill-consideredinterventionintothemarket-place may do more harm than good.Second,onceweidentifyananti-competitivemergerorbusinesspractice,wetakeenforcementactionundertheantitrust laws to stop it, either through anadministrativechallengeorinfederalcourt.Inmanyinstancesweareabletoreach a consent agreement with the affect-ed parties that stops the anticompetitiveactivity while avoiding litigation.Third,weseektopreventanticom-petitive activity by educating business andconsumersabouttheantitrustlaws.In-creased knowledge and understanding onthepartofbusinessesfacilitatetheirefforts to comply with the law. Increasedknowledge and understanding on the partofconsumersenablethemtoidentifyanticompetitive activity more readily andto bring such activity to our attention forpossible enforcement action.17OBJECTIVE 2.1 IDENTIFY ANTICOMPETITIVEMERGERS AND PRACTICES THATCAUSE CONSUMER INJURYTo prevent anticompetitive mergers andanticompetitivebusinessconduct,wemustfirstdeterminewhichmergersandbusiness practices are anticompetitive.Strategi esToachievethisobjective,theFTC(1)identifiesthemergersandbusinesspracticesthatshouldbeexaminedforantitrust consequences, and (2) conductsaninquiryappropriatetothecircum-stancesofeachmattertodeterminewhether to pursue enforcement action. Asa collateral, but important, aspect of thisobjective, we try to conduct our inquiry inawaythatminimizesanycostorincon-venience to businesses.Thepremergernotificationrequire-mentsoftheHart-Scott-Rodino(HSR)Actprovideustheprimarymeansforiden-tifyingpotentiallyanticom-petitivemergers.TheFTCsPremergerNotificationOfficereviewsallfilingsmadeforproposedmergers,acqui-sitions,andjointventuresandperformspreliminaryantitrustreviewforeverytransactionthatisfiledwiththe FTC. We work to completethese reviews as quickly andas efficiently as possible, bothtoconserveouravailableresourcestodevotetootherwork,andtominimizethedelay imposed on businesses as a result ofthe HSR requirements.Wealsousetradepressandothernewsarticles,consumerandcompetitorcomplaints,hearings,economicstudies,andothermeanstoidentifypotentiallyanticompetitiveconductthatmayharmconsumers.Inparticular,wefocusonemergingtrendsintheeconomy,tech-nology, and the marketplace.Performance Measuresand Resul tsWe measure our success in identifyinganticompetitivemergersbytheaveragenumberofdayswedevotetoreviewingactions reported to us under the HSR pre-merger notification program. This measureisimportantbecauseitreflectstheefficiencywithwhichweconductthesereviews.Whenthereviewofreportedactionsiscompletedquicklyandeffi-ciently,weconserveavailableresourcesthatcanbedevotedtootherimportantactivities.Inaddition,apromptreviewbetterserveseconomicgrowth,becauseitallowsbusinessestoproceedwithmergers and acquisitions thatpose no antitrust issues withminimal delay.Despiteahighvolumeofreported transactions, we con-tinued our emphasis on expe-diting our preliminary reviews.Weestablishedasagoalanaverage review time of 20 daysfortransactionsreportedunderHSR,eventhoughthestatute generally permits 30 days for ourreview. We were able to exceed that goal in2000,completingourreviewofHSR-reported actions in an average of 18 days,an improvement of one day over 1999.Performance Measure 2.1.1Average number of days for reviewof HSR-reported transactions.FY 2000 Target: 20 daysFY 2000 Actual: 18 daysMet or Exceeded: T TPerformance Measure 2.1.2Number of nonmergerinvestigations opened per year.FY 2000 Target: 45 - 70FY 2000 Actual: 2518Dollar Value of Merger Transactions$0.17 $0.17$0.22$0.37$0.51$0.68$0.78$1.44$1.83$2.991991 1992 1993 1994 1995 1996 1997 1998 1999 2000Dollar Value (in trillions)In2000,wereceivednotificationof4,926 proposed transactions in accordancewiththeHSRnotificationandfilingre-quirements, an increase of approximately6% over 1999. This volume of transactionsreflects the increasing merger activity thathasbeentakingplaceoverthepastdecade.Thenumberofreportedtrans-actionsin2000representsamorethanthreefoldincreaseoverthenumberofreported merger transactions in 1991.Inaddition, the total dollar value of mergersreported in 2000 was $2.99 trillion, repre-senting an increase of 63% over 1999, andan increase of 1769% since 1991.MergersreportedundertheHSRActvary tremendously in their complexity andpotentialanticompetitiveeffect.Wecon-tinue to review and prepare an analyticalsummary of each reported transaction. Inmostcases,theagencycanmakeareasonablejudgmentaboutwhetheramergerhasthepotentialtobeanti-competitiveornotwithinafewdaysoffiling, simply by reviewing these analyses,basedonmaterialsfiledwiththeHSRnotification. The agencys Merger Screen-ing Committee, comprising senior officialsoftheBureausofCompetitionandEco-nomics,reviewsthosetransactionsthatraise more difficult questions. If the Com-mittee determines that more information isneededinamatter,itcallsforamoreextensive investigation, often including theissuance of a request for additional infor-mation (second request) from the parties.In 2000, the Antitrust agencies allowedmorethan97%ofthereportedtrans-actions to proceed by the end of the stat-utory30-daywaitingperiod,withmorethan 70% having been granted early ter-minationofthestatutorywaitingperiod.Of the 4,926 transactions, we opened 211investigations and issued second requestsin43toobtaininformationtoassisttheattorneysandeconomistsinconductingtheir investigations.Wealsomeasureoursuccessinidentifyinganticompetitivepracticesthatcauseconsumerinjurybycountingthenumber of nonmerger investigations open-ed during the year. This measure directlyreflects our enforcement activity. While wedonottakeenforcementactionineverymatterweinvestigate,becauseweoftenconclude that the practice in question isnot anticompetitive, it is axiomatic that athoroughinvestigationalwaysprecedesany order to a business that it must ceaseanddesistaparticularanticompetitiveactivity.We established a goal of opening 45 to70nonmergerinvestigationsoverthecourse of the year. While we continue tobelievethatthisgoalisordinarilyareasonableone,extraordinarycircum-stances that is, the overwhelming crushofmergeractivityduringtheyearrequired us to reallocate resources in sucha way that this goal could not be met in2000.Asnoted,ourmergerreviewmusttakeplacewithinstatutorilymandatedtimeperiods,permittingnodiscretiontobalance the workload with other priorities.Despite the necessity of moving substan-tialresourcesfromnonmergertomergeractivitytomeetandexceedstatutorymerger review deadlines, we were able toopen 25 nonmerger investigations in 2000.19Performance Assessmentand Future TrendsWe were able to exceed our goal on theaveragereviewtimeforHSR-reportedtransactions,improvingonourperform-ance from 1999. While our performance inthisarearemainsimportant,wearereplacingthisperformancemeasurebeginningin2001withameasurethatmore directly relates to the core objective.Prompt review of HSR filings is importantinthatithelpstoreducetheburdenonbusinessesthatarerequiredtodelaymergertransactionspendingantitrustreview.Webelievethatthestructuredreviewprocesswehaveputinplacetoassesstransactionswillenableustocontinue to do so as quickly and efficientlyaspossible,andthiswillremainamongour highest priorities. However, because aprimary focus of Objective 2.1 is to deter-minewhichofthemanymergertrans-actionsweencounterislikelytocauseconsumer injury and therefore warrantsinvestigation we have developed a moretargeted performance measure. Beginning in 2001, we will measure thepercentage of matters involving a secondrequestthat result in enforcement action,withagoalofapproximately50%.Apercentagesignificantlybelowthatlevelmay suggest that we are targeting enforce-mentresourcesineffectivelybyinvesti-gatingtoomanycompetitivelybenigntransactions (and unduly burdening busi-nessesasaresult),whileapercentagesignificantly above that level may suggestthat we are focusing too narrowly and thuspotentiallyallowingproblematictrans-actionstogoforwardwithoutsufficientreview.Successonthismeasurewillbenefit consumers by targeting resourcesonthetransactionsmostlikelytohaveharmful anticompetitive effects.We continue to be concerned with theimportanceofidentifyinganticompetitiveconduct in the marketplace. Although wedid not meet our goal on this performancemeasure, two factors limited our ability todoso.First,therecord-settingpaceofcorporate mergers and acquisitions accel-erated further in 2000, both quantitatively(numberoffilings)andqualitatively(complexityoftransactions).Theagencyinvestigatedmanymergersthatraisedanticompetitive issues in multiple productandgeographicmarketsandinvolvedhighly technical or specialized goods andservices. This merger activity demanded adisproportionateshareoftheresourcesavailable to our Maintaining CompetitionMission and necessarily diverted resourcesfrom nonmerger enforcement. Second, oftheresourcesremainingfornonmergerinvestigation and enforcement, we devotedasubstantialproportiontothead-vancementandconclusionofcasesthatwerealreadyunderway.Ourresultingaccomplishments,notreflectedinthenumberofnewinvestigationsopened,included14consentordersinvolvingabroad range of consumer goods markets,including pharmaceuticals, compact discs,spices,womensshoes,andhealthcare.Moreover, we devoted significant resourcesto pretrial litigation in the Mylan Labora-toriesmatter,whichledtoasettlementafterthecloseof2000resultingin$100millioninconsumerredressadirect,tangiblereturntoconsumersthatsub-stantially exceeds the entire annual cost ofourMaintainingCompetitionMission.Inthefuture,weexpecttoreestablishthebalance in merger and nonmerger activity,which we believe will result in a return tohistoric levels of nonmerger investigationinitiations.In addition to achieving these specificperformance goals, we continue our worktoaccomplishthisobjectivethroughactivities designed to improve our under-standing of those market situations where20antitrustactivitycouldleadtoamorecompetitive market. In 2000, we conductedworkshopsrelatingtotwocurrentanti-trusttopics,slottingallowancesandbusiness-to-business(B2B)electronicmarketplaces.Thelearningderivedfromthese workshops, as well as from economicresearchonvariouscompetitionissues,willprovideafoundationforfutureenforcementinitiatives.During2001,wewill work to develop new ways to identifypossibly anticompetitive mergers that maynot be subject to filing under HSR in lightof the raised filing thresholds effective thisyear.21OBJECTIVE 2.2 STOP ANTICOMPETITIVEMERGERS AND PRACTICESTHROUGH LAW ENFORCEMENTLaw enforcement represents the mostdirectmethodbywhichtheCommissionpursuesitsgoalofpreventinganticom-petitive mergers and anticompetitive busi-ness practices.Strategi esTo stop suspect mergers and practicesthroughlawenforcement,ourpreferredstrategy that is, the most effective andcost-efficient strategy is to prevent suchmergers before they occur. We implementthis strategy primarily through our auth-oritytoseekinjunctivereliefunderSec-tion13(b)oftheFederalTrade Commission Act. Oftenwe are able to resolve a com-petitiveproblemthroughconsent proceedings withouthavingtoseeksuchaninjunction. Where injunctivereliefisinappropriateorunavailable, we may rely onouradministrativeremedialpowerstoseektorestorecompetitionlostasaresultof a merger that could not beprevented. Whether achievedby consent or in an admin-istrativeproceeding,theprincipalremedyisthedi vesti tureof assetssufficienttopreserveorrestore competition. We havealso employed conduct reme-dies where appropriate.Toaccomplishthisobjective,weem-phasize (1) thorough investigation, as wellas sophisticated legal and economic anal-ysistoensurewereachanaccurateassessment of the illegality of the activityin question, and (2) comprehensive prep-arationforlitigationbeforeanAdmin-istrativeLawJudgeorinfederalcourt.Whilewefrequentlyresolvemattersthroughsettlement(or,inthecaseofmergers,throughthepartiesabandon-ment of the anticompetitive transaction),ourabilitytodosodependsinlargemeasure on our preparedness to achievetheneededresultthoroughlitigation,ifnecessary.Inaddition,whenresolvinganti-competitive mergers and practices throughsettlement, we place increasing emphasison crafting remedies that willsuccessfullyeliminatetheanticompetitive effects of theactivity in question, and do soin a timely fashion.Weemployourlawen-forcementauthoritytostopanticompetitivemergersandpracticesbothdirectlyandindirectly.Throughdirectlegalchallengestospecificanticompetitivetransactions,we save consumers millions ofdollars annually by preventingsuch transactions from takingplaceorbyarrangingforrestructuringofthetrans-actiontoeliminatetheanti-competitive effects.In addition, such challengesindirectly serve our objective by serving aslegalprecedentandestablishinganeffective, visible law enforcement presence.This deterrent effect prevents many anti-Performance Measure 2.2.1Positive outcome of cases brought byFTC due to alleged violations.FY 2000 Target: 80%FY 2000 Actual: 95%Met or Exceeded: T TPerformance Measure 2.2.2Dollar savings for consumersresulting from FTC actions.FY 2000 Target: $500 millionFY 2000 Actual: $2.98 billionMet or Exceeded: T TPerformance Measure 2.2.3Average time, in months, fromproposed consent orders todivestitures.FY 2000 Target: 9 monthsFY 2000 Actual: 4 monthsMet or Exceeded: T T22competitive mergers and acquisitions fromeven being proposed.Another part of our strategy is to studyandevaluatetheremediesusedinanti-trust cases, particularly divestiture ordersused to resolve merger cases. This ongoingprocessfocusesinparticularonwhatmakes divestiture orders most effective inpreservingorrestoringcompetition,andonhowtoexpeditethecompletionofcurative divestitures.Wearecontinuingtorefineandim-proveourskillsinlitigation,economicanalysis, and negotiation through ongoingtraining for staff.Finally, we try to ensure that admin-istrative litigation and adjudication reacha timely resolution.Performance Measuresand Resul tsWemeasureoursuccessinstoppinganticompetitivemergersandpracticesthroughlawenforcementbytheper-centageofsuccessfuloutcomesinen-forcementactions.Thismeasureisimportantnotonlybecauseitdirectlyreflectswhetherwestopped,orfailedtostop,theanticompetitivemergersandpractices we challenged, but also whetherwe are effectively utilizing the limited re-sources available to the agency.Weestablishedasagoalapositiveoutcomein80%oftheenforcementactions brought by the agency to challengeanticompetitivemergersorpractices.Positive outcomes include abandonment ofan anticompetitive transaction following anFTCchallenge,aconsentagreementtoresolve antitrust concerns, or a successfulchallengeincourt.Anegativeoutcomeoccurs when parties refuse to settle anti-trustconcernsraisedbytheagencyandweareunsuccessfulinobtainingreliefthrough the courts. We were able to sig-nificantlyexceedourgoalin2000,reachingasuccessfulsettlementagree-ment or persuading parties not to proceedwithananticompetitiveacquisitioninapproximately95%ofthematterswechallenged. The Commission approved 32proposedconsentordersin2000.Inaddition,partiestoproposedmergersabandonedtheirtransactionsinnineinstances following our investigation.We established as another goal directdollarsavingstoconsumersofatleast$500 million as a result of our preventionof anticompetitive mergers that would haveraisedpricesbythatamount.Incalcu-latingthesesavings,wetakeintocon-sideration the size of the markets involved,thepercentageincreaseinpricethatwouldlikelyhaveresultedfromthemerger, and the likely duration of the priceincrease.1We exceeded our goal by a widemargin in 2000, preventing mergers thatwould have cost consumers $2.98 billionhad they been allowed to proceed.We also established as a goal a reduc-tionoftheaveragetimeneededtocomplete divestitures required by consent1We derive these estimates from a thoroughanalysis of company documents and detailedpricing data, which FTC attorneys andeconomists routinely conduct as part of theirinvestigations.In some cases, the availableinformation allows us to estimate with speci-ficity the extent to which prices would rise as aresult of an anticompetitive merger.Where wedo not have such definitive information, weconservatively estimate that an anticompetitivemerger would lead to a price increase of at leastone percent absent enforcement action, lastingfor two years.The methodology used isexplained in the analytical guidelines used bythe FTC and the Department of Justice for theanalysis of horizontal mergers.See U.S. Dept.of Justice and Federal Trade Commission,Horizontal Merger Guidelines 1.1, 1.2.23orders,downfromanaverageof15months in 1996 to nine months in 2000,from approval of a proposed consent ordertocompletionofthedivestiture.Thismeasure is important because delay in thedivestiture of assets that are the subject ofa consent decree often results in a declinein the competitive viability of the assets.To avoid delay, we seek either up-frontpurchase and sales agreements or dives-titure orders that limit the time in whichdivestiturereliefisaccomplishedtotheminimumnecessary.Asaresult,weex-ceeded our goal, ensuring the completionof needed divestitures in an average of fourmonths in 2000.Performance Assessmentand Future Trends In2000,weachievedapositiveout-comeinapproximately95%ofthechallengesinitiatedbytheagency(e.g.,courtordersinlitigatedcasesandnegotiatedsettlements),exceedingbyasignificantmarginourgoalofan80%successrate.Thislevelofsuccesswasdue, in part, to the high percentage of ourcases that were resolved through consentagreementin2000.However,wereal-istically do not expect to succeed in everylitigated case. A law enforcement agencythat prevails in every litigated matter maydosobecauseitpursuesonlythecasesthatareeasiesttowin.EnforcementauthoritiessuchastheFTCshouldnotshyawayfromdifficultcases,whicharenot uncommon in antitrust law. The FTCwillcontinuetobringlawenforcementactions where it has reason to believe thatthe merger or practice in question is illegalandharmsconsumers,evenwherelitigation risks may exist.Thus, in yearsin which litigated cases make up a largerproportion of the total number of resolvedcases, our success rate may be closer tothe target of 80%.We exceeded our performance goal of$500 million in consumer savings throughthe prevention of anticompetitive mergersby a factor of six, achieving savings of anestimated $2.98 billion in 2000. Becausethe amount of consumer savings achievedin any one year is dependent on the sizeandnatureoftransactionsproposedaswellastheagencysperformanceinen-forcing the antitrust laws, the amount ofsavings in 2000 may not be typical (due tothe size and scope of several major merg-ers that we reviewed). However, based onourfirstyearofmeasuringconsumersavings for GPRA, we expect the amount ofconsumer savings resulting from the FTCsantitrustenforcementactivitytoremainhigh. Therefore, we believe it is appropriateto raise our merger goal to an average of$800 million in consumer savings per yearfortheyearsbeginningin2001.Wecaution,however,thatchangesinthepatternofcorporatemergeractivitymayresultindifferentoutcomesonthisperformancemeasure,notwithstandingcontinued strong agency performance.Wealsosubstantiallyexceededourperformance goal by accomplishing dives-titures within an average of four months,comparedtothegoalofninemonths.Based on our increased knowledge of theimportance of accomplishing divestituresquicklyandpolicychangesaimedatachieving that result, we expect that theaverage time required to complete divesti-tures will continue to be substantially lessthan nine months.Whileourperformanceinachievingdivestituresinatimelyfashionremainsimportant, we are replacing this perform-ance measure beginning in2001 with ameasurerelatingtoourperformanceonnonmergerenforcement.Webelievethatthe policies and practices put in place inrecentyearstoexpeditedivestituresarenowwell-establishedandaccepted,andthatdivestitureswillthuscontinueto24occurinatimelyfashion.Thiswillcon-tinueasapriority.Toassistinfocusingour attention on nonmerger enforcement,wewillbeginin2001tomeasurecon-sumersavingsresultingfromnonmergerenforcementactivities.Wewillbasethesavingsestimatesonindustryandcom-pany data obtained in our investigations.Incaseswhereitisnotpossibletomeasure directly the amount of consumersavings resulting from enforcement action,wewillconservativelyuseadefaultestimate of 1% of the amount of sales inthe affected market(s) for one year. Mostoften,thecosttoconsumersfromanti-competitiveactivityexceeds1%oftheamount of sales, and the anticompetitiveeffect may continue well beyond one yearintheabsenceofenforcementaction.Based on recent years activity, we believeit is appropriate to set a nonmerger goal atanaverageof$200millioninconsumersavings per year for the years beginning in2001. Again, we caution that differences inavailableopportunitiespresented,par-ticularlythoserelatingtothesizeoftheaffectedmarkets,mayresultindifferentoutcomesonthisperformancemeasure,notwithstanding continued strong agencyperformance.25OBJECTIVE 2.3 PREVENT CONSUMER INJURYTHROUGH EDUCATION Inadditiontoitslawenforcementactivity, the FTC seeks to enhance under-standingoftheoperationofthemarket-placebyeducatingthebusinesscom-munity about the antitrust laws.Strategi esWe pursue this objective through guid-ance to the business community; outreachefforts to Federal, state and local agencies,business groups and consumers; develop-mentandpublicationofantitrust guidelines and poli-cy statements; and speechesandpublications.Throughthesemechanisms,wepub-licizetheantitrustlawandourenforcementintentions,with the likely result of deter-ringfutureanticompetitivebehavior.Our enforcement programismademoreeffectivebypublicawarenessofwhatfactorsarelikelytobechallenged as law violations.ThroughpublicreleasesofCommissiondecisionsinvariousmediasuchaspressreleases,Webpagepublications,andspeeches,thepublicfacts underlying Commission actions pro-vide bases for companies to evaluate thelikelihoodthatothertransactionswouldlikely face challenge. Asacomplementtoourenforcementactivity,wealsoadviseotherstateandfederalgovernmentofficialsaboutthepossibleeffectthatvariousregulatoryproposals may have on competition in therelevant marketplace.Performance Measuresand Resul tsOur success in educating the businesscommunity about the antitrust laws is alsodetermined in part by the timeliness withwhich we provided needed advice. Accord-ingly, one measure in accomplishing thisobjective is the length of time required toprovide advisory opinions related to issuesinthehealthcareindustry,anindustrythathasexperiencedfun-damental changes in the wayitdeliversservicestocon-sumers over the past decade.Wesetagoalofprovidingsuch advisory opinions with-in 90 days of our receipt of arequest,andweexceededthatgoalbyprovidingadvisoryopinionsinanaverage of 84 days.PerformanceAssessment andFuture TrendsWe were able to meet one performancegoal receiving and incorporating stake-holder comments on a proposed customersurvey and to exceed the other perform-ancegoalprovidingadvisoryopinionsrelatingtohealthcarewithin90daysofreceipt of a request. Based on our experi-enceinworkingwiththeseperformancegoals, we believe that somewhat differentmeasures of our performance would betterreflectoureffortsinthisarea.Whileitremainsimportanttorenderadvisoryopinions in a timely fashion, we currentlyreceiverelativelyfewrequestsforsuchopinions. In addition, we have concludedPerformance Measure 2.3.1Identify and survey FTC customersin the marketplace.FY 2000 Target: incorporate inputFY 2000 Actual: incorporatedinputMet or Exceeded: T TPerformance Measure 2.3.2Average number of days to issueadvisory opinions in health care area.FY 2000 Target: 90 daysFY 2000 Actual: 84 daysMet or Exceeded: T T26thattheconsumersurveywehavebeenworkingtodevelopwouldnotlikelybeapowerfulinstrumenttodeterminetheeffectivenessofouroutreachefforts,particularlyintheabsenceofbaselinedata. Our new measures for this Objectivewillmoredirectlyreflectourimpactonpreventingconsumerinjurythrougheducation and outreach to the public. TheCommissionincreasesawarenessofantitrustlawthroughguidancetothebusinesscommunity;outreacheffortstoFederal, state and local agencies, businessgroups and consumers; development andpublicationofantitrustguidelinesandpolicystatements;andspeechesandpublications. Through these mechanisms,theCommissionpublicizestheantitrustlaw and our enforcement intentions, withthelikelyresultofdeterringfutureanti-competitivebehavior.Webelievethatmeasuringtheseeffortswouldmoredirectlyreflectoursuccessineducatingour major constituent groups. In addition,the extent to which the public is aware ofour mission and our policies as reflectedby hits on relevant material on the FTCsWebsitewilleffectivelycaptureoursuccessinpreventingconsumerinjurythrougheducation.Wearecurrentlyevaluating the relevant data for2000 toestablishappropriateperformancegoalsfortheyearsbeginningwith2001.Forexample,in2000,weworkedtoeducatethe public in the following ways:! TheFTCconductedaworkshoponbusiness to business (B2B) electronicmarketplaces, which use the Internettoelectronicallyconnectbusinesseswith each other, primarily for purposesof buying and selling a wide variety ofgoodsandservices.Theagencyalsoissuedareportonthissubjectthatincludes a description of various facetsofB2Bmarketplacesandtheeffi-ciencies they may provide, and outlinesa framework for understanding how toanswer traditional antitrust questionsin the context of new B2B technology.TheCommissionalsocompleteditsreviewoftheCovisintjointventureamong five automotive manufacturersGeneralMotorsCorp.,FordMotorCo., DaimlerChrysler AG, Renault SA,and Nissan and two information tech-nology firms Commerce One, Inc. andOracleCorporationtooperateanInternet-based B2B providing servicestofirmsintheautomotiveindustrysupply chain.! The FTC, in an effort for staff to betterassessthecompetitiveimpactofslottingallowances,heldtwowork-shopsforinterestedpartiestoex-change views on this subject. Slottingallowancesarelump-sum,up-frontpaymentsfromamanufacturerorproducertoaretailertohaveanewproductcarriedbytheretailerandplacedonitsshelf.Theagencycontinues to study this subject.! OurPremergerstaffhandledapprox-imately41,000telephoneinquiriesfromthepublic,primarilyconcerninginterpretationofthestatuteandtheHSR rules. Staff estimates that at leasthalf of these inquiries related to issuesof reportability.! TheCommissionassistedthepublicthrough written guidance, such as thePremergerRules,formalinterpre-tations,thePremergerNotificationSource Book, and the three PremergerGuides designed to assist the publicsunderstanding and compliance underthe HSR Act. ! The Premerger Notification Office con-ducted a series of Brown Bag Lunches,both in Washington and in other citiesaroundthecountry,withinterestedmembersoftheAmericanBarAsso-27ciation. These events provided a forumforstaffandHSRpractitionerstodiscuss interpretations of the rules andpotentialimprovementstothefilingprocess.Interestedpersonswerein-vitedtosendinwhitepaperstogivetheir views on rules changes, includingchangesnecessaryforHSRreform.Several members of the bar voluntarilysubmitted language for proposed rules.! Aftersolicitingpubliccomment,theCommissionandtheDepartmentofJusticejointlyissuesnewAntitrustGuidelinesforCollaborationsamongCompetitors, and area of antitrust lawin which there had previously been noagency guidelines! The Commission and the Departmentof Justice promoted federal and statecooperation by issuing a joint protocolconcerning joint and coordinated merg-erinvestigationsbyfederalandstateantitrust agencies.! Commissioners and senior staff mem-bers presented a number of speechesbeforebarandbusinessgroupsoncurrent enforcement topics.! TheCommissionpublishedpressreleases, complaints and other materi-als through its Web site, providing up-to-dateinformationonenforcementactions taken.! Commissionstaffdeliveredtestimonyon antitrust issues to the United StatesSenate and the United States House ofRepresentatives nine times during theyear. AntitrustImplicationsofEnter-tainmentIndustrySelf-RegulationtoCurb the Marketing of Violent Entertain-mentProductstoChildren.Presentedby Robert Pitofsky, Chairman. MidwestGasolinePrices.Pre-sented by Richard G. Parker, BureauDirector. MidwestGasolinePrices.Pre-sented by Robert Pitofsky, Chairman. Antitrust Enforcement Activities.PresentedbyRobertPitofsky,Chair-man.Solutions to Competitive ProblemsintheOilIndustry.PresentedbyRichard G. Parker, Bureau Director. AntitrustIssues.PresentedbyRobert Pitofsky, Chairman. Oil Product Prices. Presented byRichard G. Parker, Bureau Director. Mergersinthe Telecommunica-tionsIndustry.PresentedbyRobertPitofsky, Chairman. Slotting Allowances and the Anti-trustLaws.PresentedbyWillardK.Tom, Deputy Director.! The Commission continued to maintaineffectiveinternationaloutreachandcoordination efforts with foreign com-petition authorities.! TheBureauofEconomicscirculatedeconomic papers on competition issuesprovidingitsscholarlyinputtothepublic. TransformationandContinuity:The U.S. Carbonated Soft Drink BottlingIndustryandAntitrustPolicySince1980.ThisreportanalyzestheU.S.carbonated soft drink industry, with itsprimary focus on the 1980s and early1990s,aperiodofrapidstructuralchange that transformed the industry.Inadditiontodocumentingthesechanges, an empirical model is devel-oped to evaluate the antitrust mergerpolicies that were pursued by the Com-mission during this period. EconomicPerspectivesontheInternet. This report provides an intro-ductiontoInternettechnologyandhistoryandaddresses(1)different28methods of pricing user access, (2) thepricing of goods and services sold viatheInternet,(3)networkeffectsandfirm behavior, and (4) taxation of elec-tronic commerce.! Because the Commission and its staffhaveagreatdealofexpertiseaboutcompetition and about the competitiveeffectofproposedlaws,rulesorregulationsofothergovernmentalbodies, they are often invited to com-ment on such proposals. For instance,the Bureau of Competition filed com-mentsbeforetheFoodandDrugAdministrationintwoinstancesin2000: 180-DayGenericDrugExclu-sivity for Abbreviated New Drug Appli-cations, November 4, 1999. CitizenPetitions;ActionsThatCan Be Requested by Petition; Denials,Withdrawals,andReferralsforOtherAdministration Action, March 2, 2000.Westronglybelieveintheimportanceofthese outreach activities and will continuetoplaceemphasisinthisareainfutureyears.Finally, because the Commission anditsstaffhaveagreatdealofexpertiseaboutcompetitionandaboutthecom-petitiveeffectofproposedlaws,rulesorregulations of other governmental bodies,they are often invited to comment on suchproposals.Forinstance,weprovidedadvicetotheFederalEnergyRegulatoryCommission,stateutilitycommissions,andacommitteeoftheHouseofRepre-sentativesabouthowbesttopromotecompetition and protect consumers in thecontextofthederegulationofelectricitytransmissionandgeneration.InJuly2000,theCommissionissuedastaffreport,CompetitionandConsumerProtectionPerspectivesonElectricPowerRegulatoryReform,thatsuggestananalytical framework that federal and statepolicymakersmaywishtoemploytoensurethatconsumersandbusinessesbenefitfromelectricpowerindustryrestructuring.Recently,membersofCongress have asked the Commission toupdate that report and extend its analysis.29AppendixFY 2000 Performance MeasuresFY 2000TargetFY 2000ActualMet orExceededGoal 1:Prevent fraud, deception, and unfair business practices in the marketplace.Objective 1.1Identify fraud, deception, and unfair practices that cause the greatest consumer injury:Measure 1.1.1:Cumulative number of consumer complaintsand inquiries entered into database.600,000 833,659 T TObjective 1.2Stop fraud, deception and unfair practices through law enforcement:Measure 1.2.1:Dollar savings for consumers from FTCactions which stop fraud.$250million$263millionT TMeasure 1.2.2:Percentage of targeted industry brought intocompliance through law enforcement and self regulation.50% -75% 83% T TObjective 1.3Prevent consumer injury through education:Measure 1.3.1:Number of education publicationsdistributed to or accessed electronically by consumers.8.7million11millionT TGoal 2:Prevent anticompetitive mergers and other anticompetitive business practices in themarketplace.Objective 2.1Identify anticompetitive mergers and practices that cause the greatest consumer injury:Measure 2.1.1:Average number of days for review of HSR-reported transactions.20 18 T TMeasure 2.1.2:Number of nonmerger investigations openedper year.45 to 70 25 see textObjective 2.2Stop anticompetitive mergers and practices through law enforcement:Measure 2.2.1:Positive outcome of cases brought by FTCdue to alleged violations.80% 95% T TMeasure 2.2.2:Dollar savings for consumers resulting fromFTC actions.$500million$2.98billionT TMeasure 2.2.3:Average time, in months, from proposedconsent orders to divestitures.9 4 T TObjective 2.3Prevent consumer injury through education:Measure 2.3.1:Identify and survey FTC "customers" in themarketplace.incorporatestakeholderinputincorporatedstakeholderinputT TMeasure 2.3.2:Average number of days to issue advisoryopinions in health care area.90 84 T T