FTC Assesses Reward System for Catching Spammers

The FTC today issued a report assessing whether and how a system that rewards members of the public for tracking down spammers would or could help improve enforcement of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act.) That Act, which became effective on January 1, 2004, required the FTC to conduct a study and provide a report to Congress on a CAN-SPAM “bounty system.”

Based on the FTC’s experience in more than 60 cases that targeted spam, the report notes that there are three hurdles for the FTC and other law enforcers in anti-spam investigations: identifying and locating the spammer; developing sufficient evidence to prove the spammer is legally responsible for sending the spam; and obtaining a monetary award. If a reward system could be designed so that it would generate information that helps clear those hurdles, it might improve the effectiveness of CAN-SPAM enforcement, according to the report. The report examines how this might be achieved and analyzes the issues the FTC believes Congress should consider in determining whether to go forward with such an informant reward system, and if so, the features it should include.

Most notably, the report states that persons most likely to identify a spammer and provide evidence – what it terms “high-value” information – would be “whistleblowers” or “insiders” – personal or business associates of the spammers themselves. Some have suggested that so-called “cybersleuths” – persons with above-average technical skill and knowledge of computers and the Internet – could track down spammers, but the FTC concludes that is not likely. According to the report, cybersleuths may be able to employ their sometimes considerable talents and expertise to construct educated guesses linking seemingly unrelated spam to a common source. For example, it is sometimes possible for these individuals to identify similarities in factual patterns found in spam messages, Web sites, and header information. However, much of this sleuthing is based on intuition or other inadmissible perceptions, does not definitively identity the spammer, and would not constitute admissible evidence in an enforcement action. The report further explains that because cybersleuths do not have the power to issue or enforce subpoenas, in most instances they cannot legally obtain and supply to the Commission admissible evidence of a spammer’s identity, whereabouts, or level of illegal activity. Many of the critical pieces of information necessary to prove these issues are in the possession of third parties – banks, payment processors, Internet service providers, and others – that will not or cannot provide them to private citizens like cybersleuths who have no subpoena power. Insiders, however, are often privy to this kind of evidence and would not need compulsory process to obtain it.

According to the report, potential whistleblowers would weigh the possibility of a reward against a number of opposing considerations: the likelihood of information they submitted actually being used, and whether the use would result in a successful legal proceeding; whether they would lose their own income; whether they would incur personal legal liability for their own part in the scheme; whether they would lose their anonymity; and whether they would become a target of retaliation by the spammer. “The Commission is unable to establish with any degree of certainty the dollar amount that might be high enough to overcome these countervailing considerations, but believes that reward amounts in the range of $100,000, and in some cases as much as $250,000 are reasonable estimates,” the report says.

The report says that even with high-dollar rewards, whistleblowers may be reluctant to come forward. “To the extent an insider has ‘unclean hands’ and faces potential legal liability, it is questionable whether such a person would be willing to assume the significant personal risk of coming forward. Thus, the benefits of a reward system remain unclear.”

According to the report, the Commission recommends that if Congress establishes a reward system, it should:

• tie eligibility to imposition of a final court order, rather than to collection of civil penalties;
• fund reward payments through appropriations, rather than collected civil penalties;
• restrict eligibility to insiders with high-value information;
• minimize eligibility disputes and associated costs by exempting the FTC’s decisions on reward eligibility from judicial or administrative review; and
• establish reward amounts high enough to attract insiders to provide high-value information.

The Commission vote to issue the report to Congress was 4-0-1 with Commissioner Jonathan Leibowitz not participating.

Copies of the report are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No. P04 4405)