FTC, Justice Department Take Aim at Business Opportunity, Employment Scams

This posting was written by Sarah Borchersen-Keto, CCH Washington Correspondent.

The Federal Trade Commission (FTC), the Department of Justice, the Postal Inspection Service, and state law enforcement agencies announced a major law enforcement sweep and education effort aimed at targeting bogus business opportunity employment and money-making services.

At a March 2, 2011 briefing, David Vladeck, Director of the FTC’s Bureau of Consumer Protection, outlined “Operation Empty Promises,” the latest effort in an ongoing crackdown on scams that “exploit the misfortune of those who have seen their jobs disappear or their incomes shrink as a result of the economic downturn.”

Promises of Jobs, Business Opportunities

Vladeck said state and federal law enforcement agencies have brought more than 90 actions against alleged scammers targeting financially-strapped consumers with promises of jobs and opportunities to “be your own boss.”

He described one scheme perpetrated by Ivy Capital, whose telemarketers told consumers they could start their own profitable Internet business with the help of the company’s coaches and consultants.

Ivy Capital persuaded people to max out their credit cards to pay the expensive start-up fees, typically thousands of dollars, while promising that they could make between $3,000 to $10,000 per month, Vladeck explained.

Meanwhile, National Sales Group targeted people looking for work by creating a false impression that the company itself was hiring, or was recruiting or recommending employees on behalf of other companies.

“While they were promising work, they were working over their victims,” Vladeck said. The company not only failed to provide jobs, but also regularly made unauthorized charges to people’s credit cards, driving them deeper in debt, Vladeck added.

Increase in Complaints

North Carolina Attorney General Roy Cooper noted that complaints to his office about business opportunity, work-at-home schemes, and other employment related scams were up 11 percent last year. “We’re looking closely at business opportunities that seem to offer false hopes, and also reaching out to educate consumers on how to recognize and avoid fraud,” he said.

FTC Ends Investigation of Google “Street View” Data Collection Practices

This posting was written by Thomas A. Long, Editor of CCH Privacy Law in Marketing.

The Federal Trade Commission has ended its investigation of Google’s data collection practices related to its “Street View” program, according to a letter sent to Google on October 27 by David Vladeck, the Director of the FTC’s Office of Consumer Protection.

Street View allows users of Google’s mapping service to view ground-level photographs of specific locations, which are taken by cameras attached to cars driven by Google employees.

In 2007, the company installed software on its Street View cars to collect data about wireless network access points for the purpose of improving its location-based services. Earlier this year, Google discovered that the software on the Street View cars had also been collecting some “payload” data contents of communications sent over unsecured wireless networks. Google asserted that the collection of payload data was inadvertent and that it had not used the data.

Vladeck said the FTC’s staff has concerns about the internal policies and procedures that gave rise to this data collection. In the FTC’s view, Google’s internal review processes were inadequate.

Google was urged to develop and implement procedures to ensure that it collects only information necessary to fulfill a business purpose, disposes of information no longer necessary to accomplish that purpose, and maintains the security of information collected.

Because Google had made assurances that it would improve its processes and would delete the payload data, the FTC decided to end its inquiry without assessing a fine or penalty.

Text of Vladeck’s letter appears here on the FTC website.

FTC Addresses Consumer Privacy at Congressional Hearings

This posting was written by Cheryl Beise, Editor of CCH Guide to Computer Law.

The Federal Trade Commission recently appeared before two congressional committees to testify about FTC efforts to protect consumer privacy.

Chairman Jon Leibowitz appeared before the Senate Commerce, Science, and Transportation Committee on July 27 and David Vladeck, Director of the FTC’s Bureau of Consumer Protection, appeared before the Subcommittee on Commerce, Trade, and Consumer Protection of the House Committee on Energy and Commerce on July 22.

The testimonies described the FTC’s actions to hold companies accountable for protecting consumer privacy (focusing on data security, identity theft, and children’s privacy) and protecting consumers from intrusive spam, spyware, and telemarketing.

The FTC has brought 28 actions charging businesses with failing to protect consumers’ personal information, 15 actions charging website operators with collecting information from children without parents’ consent, 15 spyware cases, and dozens of actions challenging illegal spam, including an action against a rogue Internet Service Provider that resulted in a temporary 30 percent drop in spam worldwide.

In addition, the FTC brought 64 actions alleging violations of the Do Not Call Rule, resulting in violators paying almost $40 million in civil penalties and giving up nearly $18 million, including consumer redress.

New Technologies, Business Models

The testimonies also described the FTC’s recent initiatives to examine consumer privacy protection in light of new technologies and business models, including hosting a series of roundtables discussions addressing (1) integrating privacy into everyday business practices; (2) simplifying consumer choices about commercial data practices, and (3) increasing transparency of those practices.

Chairman Leibowitz said that consumers do not understand the extent to which companies are collecting, using, aggregating, storing, and sharing their personal information, particularly with regard to companies’ affiliate information sharing.

Data Use Transparency

The Commission “is considering a number of other ways to increase transparency about commercial data practices,” Leibowitz said. In an upcoming report, the Commission will discuss ways to improve the disclosures in privacy policies. One possible approach is the use of standardized terms or formats, Leibowitz said. The Commission also favors giving consumers the right to opt-in to how their data will be used.

Repeal Common Carrier Exemption

Chairman Leibowitz renewed the FTC’s request for repeal of the telecommunications common carrier exemption from the FTC Act. Currently, the FTC Act exempts common carrier activities from the FTC Act’s prohibitions on unfair and deceptive acts or practices and unfair methods of competition.

House Legislation

David Vladeck expressed the FTC’s general support for two legislative proposals—H.R. 5777 (the “BEST PRACTICES Act”) and a discussion daft of legislation to require consumer notice and consent regarding collection and use of personal information.

H.R. 5777, the Building Effective Strategies To Promote Responsibility Accountability Choice Transparency Innovation Consumer Expectations and Safeguards Act (the "BEST PRACTICES Act"), was introduced by Bobby Rush (D-IL), Chairman of the Subcommittee on Commerce, Trade, and Consumer Protection, on July 19, to foster transparency about the commercial use of personal information. The text of Chairman Rush’s BEST PRACTICES Act can be found here.

The discussion draft of legislation proposed by Rick Boucher (D-VA), Chairman of the Subcommittee on Communications, Technology, and the Internet, would require consumer notice to and consent prior to collection and use of personal information. The text of Chairman Boucher's discussion draft bill can be found here.

The FTC supported overlapping provisions in both proposals’ concerning data security and accuracy, simplification of consumer choice in determining collection and use of personal information, and enhanced FTC rulemaking authority. David Vladeck also urged Congress to (1) require standardized, clear disclosures to enable consumers to compare privacy protections, (2) ensure that disclosures be given at the time of relevant transactions, and (3) not necessarily exempt business affiliates from consent requirements.

Chairman Leibowitz’s Senate testimony is available here. David Vladeck’s House testimony is available here.