Online Pharmacies Settle FTC Charges

Operators of a group of Online pharmacies that promoted themselves touting medical and pharmaceutical facilities they didn't actually have and making privacy and confidentiality assurances they didn't keep, have agreed to settle Federal Trade Commission charges that their promotional claims were false and violated federal laws. The settlement with the promoters prohibits the deceptive claims; requires disclosures about medical and pharmaceutical relationships; bars the billing of charge cards without consumer authorization; prohibits disclosure of the information collected from consumers without the consumers' authorization; and, requires them to notify consumers of their practices regarding the collection and use of consumers' personal identifying information.

The FTC alleged that Worldwidemedicine.com, Focusmedical.com and a group of other Web sites, individuals and corporations made claims such as "Focus Medical Group is a full service clinic with a full time staff dealing with the treatment of sexual dysfunction. The clinic's licensed medical physicians network with an organization of physicians throughout the United States and Internationally." The FTC alleged there was no clinic, and that the "network of physicians throughout the United States and Internationally," consisted of one physician in a distant state. Consumers who requested prescription drugs for the first time were asked to provide billing and shipping information and to answer questions about their medical history on a form titled, "Secure Viagra Order Form Personal and Payment Information." They were charged $75.00 for a "medical consultation."

According to the FTC, the medical information was faxed to an out-of-state physician who reviewed it and approved or denied prescription requests. The physician was paid $10.00 per review, but only if he approved the prescription request.

The sites also claimed "All of our prescriptions are filled on premises," touting their on-site pharmacy. The FTC alleged they have no on-site pharmacy; their prescriptions are filled by a local drug store. The complaint alleges that the sites misrepresented the security and encryption used to protect consumers' information. It also alleges that the defendants used information in a manner contrary to their stated purpose. Finally, the complaint alleges that the defendants sent "spam" to 11,000 customers informing them that their credit cards would be billed $50 for "Y2K Remediation." The FTC charged that the spam misrepresented that the defendants had the legal authority to debit consumers' credit cards without prior authorization violated federal law.

Settlement of the charges bars the defendants from misrepresenting medical and pharmaceutical arrangements; prohibits misrepresentations about their use of credit card information and bars misrepresentations about any other material fact about the scope or nature of defendants' goods, services or facilities. The settlements bar the defendants or anyone who works for them from operating any Online pharmacy unless they disclose the name, business address and phone number for the pharmacy that will dispense the drugs; the physician who will prescribe them - including the state or states where he is licensed to practice - and the company offering the drugs for sale. They also require the defendants to post a notice on any Web site they operate that offers prescription drugs stating, "Dispensing a prescription drug without a valid prescription is a violation of Federal law. More information on purchasing prescription drugs Online is available at www.fda.gov "

The settlements also prohibit the defendants from "selling, renting, leasing, transferring or disclosing the personal information that was collected from their customers without express authorization from the customer." Finally, the settlements require that the defendants post a privacy policy that discloses the types of personal identifying information they are collecting either actively or passively, through such technologies as computer cookies; the uses that will be made of the data; the means by which a consumer may access and review his or her personal information; and, a means by which a consumer may modify or delete personal information on file. The defendants also are required to establish and maintain reasonable procedures to protect the confidentiality, security and integrity of personal information collected from consumers. The settlements also contain record keeping provisions to allow the FTC to monitor compliance with its order.

The defendants named in the FTC's complaints are: Sandra L. Rennert and Philip Rennert of Las Vegas, Nevada; International Outsourcing Group, Inc.; Focus Medical Group, Inc.; Trimline, Inc.; Affordable Accents, Inc.; Worldwide RX, Inc.; WorldWide Medicine, Inc.; PSRenn, Inc., and; Doctors A.S.A.P., Inc.

An additional defendant, Lyle Mortensen, was not active in the Online pharmacy, but participated in the unauthorized credit card billing scheme. The settlement with Mortensen bars material misrepresentations, prohibits unauthorized billing of credit cards and contains the same Online privacy and security provisions as the other settlement.

The Commission vote to approve the settlements was 4-1, with Commissioner Orson Swindle dissenting and Chairman Robert Pitofsky and Commissioner Mozelle W. Thompson issuing a separate statement.

Commissioner Swindle said that he dissented from the privacy requirements imposed in Parts III, IV and V of the order. The defendants falsely claimed that they would use the personal information of their customers only for medical consultations and billing, and Commissioner Swindle supported the provisions in Parts I and II of the order prohibiting them from making the same or similar misrepresentations. Although the defendants allegedly misused the personal information of their customers, they never actually transferred the information to any third party. Commissioner Swindle concluded that "[w]ithout an actual privacy violation, rather than a mere misuse of consumer information, I do not think that imposing privacy requirements is justified." He further emphasized that "[w]e should not transform every case involving a false claim as to how personal information will be used into a case warranting the imposition of privacy requirements."

In their separate statement, Chairman Pitofsky and Commissioner Thompson said, "We disagree with our colleague that the scope of the injunctive relief is unwarranted because the complaint does not allege that an actual transfer of personal information to a third party occurred. Certainly, the egregiousness of the alleged behavior would be more severe if a third-party disclosure had occurred. But, we do not think this missing piece means there was no likely injury to consumers' privacy interests. The receipt of an unsolicited e-mail indicating consumers' personal information (presumably at a minimum their name, credit card number and existence of a relationship with an online pharmacy) had been disclosed to a third party, in contravention of a prior express representation that no such disclosure would occur, within the context of an alleged Y2K billing scam, raises significant concerns about the misuse of personal information. Further, these concerns are significantly heightened where medical and financial information is implicated."

The complaint and settlements were filed in U. S. District Court for the District of Nevada, in Las Vegas on July 6, 2000.

NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Orders have the force of law when signed by the judge.

Copies of the stipulated final judgments and orders 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; toll free at 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261.

Media Contact:

Claudia Bourne

Farrell Office of Public Affairs

202-326-2181

Heather Hippsley

Bureau of Consumer Protection

202-326-3285

(FTC File No. 992 3245)
(Civil Action No. CV-S-00-0861-JBR)