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The subject today is unsolicited commercial e-mail, better known as "spam" (with apologies to Hormel). Spam is a problem for practically everyone with a computer. It’s annoying, it slows down the e-mail system, and a lot of it is fraudulent.

Today, the FTC is pleased to receive a report on unsolicited commercial e-mail from a group of industry leaders, privacy advocates, and online consumers. In a moment, we’ll be hearing from Deirdre Mulligan of the Center for Democracy and Technology who will briefly describe and summarize this report. I just want to emphasize that the Commission greatly appreciates the hard and thoughtful work that has gone into this report. After we’ve had some time to review its findings and recommendations, we will be in a position to comment.

Thank you, Deirdre. Now we at the FTC also have some news today: we are releasing our "dirty dozen" list of spam scams most likely to show up in consumers’ electronic mailboxes. This "dirty dozen" list is a tip-off to a rip off. Here’s how we came up with our list: Last fall, the FTC set up a special electronic mailbox, " uce@ftc.gov ," for consumers to send us spam that they had received. We advertised this mailbox through our website, our Consumer Response Center, and by "word of mouth" on the Internet. We invited consumers to forward their unwanted UCE. As of the end of last week, consumers had forwarded well over 250,000 pieces of spam to uce@ftc.gov , and they continue to do so at a rate of between 1,000 and 1,500 spams per day.

What have we done with all of that spam? First, we put all of it into a searchable database so that we could study the spam and identify possible targets for law enforcement actions. To date the Commission has brought five such actions.

In one action, the Commission sued Internet Business Broadcasting, a company that sold opportunities to lease "billboards" or "banners" that would run on their Internet newspaper sites. In spam sent to would-be investors, the defendants claimed that investors in the billboards could sublease advertising space and earn a guaranteed return on their investment. Their spam messages claimed that purchasers could reasonably expect earnings of $240 - $800 per month, a return of 100.8 percent of their investment within the first year, and a full refund if the promised levels were not reached. In fact, the FTC alleged, few purchasers achieved the levels of earnings claimed and the defendants did not provide a full refund. Consumers' investments ranged from $5,000 to $7,500.

In a second enforcement action, the Commission sued the promoters of a pyramid scheme that promised investors would earn up to $18,000 a month and receive an unsecured credit card with a high credit limit. Participants in the pyramid scheme disseminated their promotional materials though bulk e-mail messages, as well as in newsgroup postings and via Web sites. As with all pyramids, the earnings claims were simply insupportable. The defendants entered into a settlement order that requires them to pay nearly $2 million in consumer redress.

Having reviewed the spam in our database, we quickly realized that many spammers who make deceptive claims in their e-mail simply imitate what they see others doing, and do not necessarily know that there are federal and state laws that prohibit deceptive advertising claims in all media, including e-mail. To make certain that these spammers understand what the law requires, and to let them know that the FTC is on the beat, we sent letters to over 1,000 spammers identified through our database. These spammers most frequently sent "chain-letters" by e-mail. Some have expressed appreciation that the FTC took time to warn them that they were treading on legally shaky ground.

The best use we can make of our spam database is to warn consumers about frauds that may be lurking in their e-mail boxes. Our "dirty dozen" list reflects the frequency with which certain kinds of scams arrived in the FTC’s spam mailbox. Let me describe the dirty dozen:

  • Business Opportunity Scams -- Most of these scams promise a lot of income for a small investment of time and money. Some are actually old fashioned pyramid schemes camouflaged to look like something else. Consumers should be careful of money-making schemes that sound too good to be true. They usually are.
  • Making Money By Sending Bulk E-Mailings -- These schemes claim that you can make money sending your own solicitations via bulk e-mail. They offer to sell you lists of e-mail addresses or software to allow you to make the mailings. What they don’t mention is that the lists are of poor quality; sending bulk e-mail violates the terms of service of most Internet service providers; virtually no legitimate businesses engage in bulk e-mailings; and several states have laws regulating the sending of bulk e-mail.
  • Chain Letters -- These electronic versions of the old fashioned chain letters usually arrive with claims like, "You are about to make $50,000 in less than 90 days!" But you don’t, and these electronic chain letters are every bit as illegal as the old fashioned paper versions.
  • Work-At-Home Schemes -- E-mail messages offer the chance to earn money in the comfort of your own home. Two popular versions pitch envelope stuffing and craft assembly. But nobody will really pay you for stuffing envelopes and craft assembly promoters usually refuse to buy the crafts claiming the work does not meet their "quality standards."
  • Health And Diet Scams -- These offer "scientific breakthroughs," "miraculous cures," "exclusive products," "secret formulas," and "ancient ingredients." Some come with testimonials from "cured" consumers or endorsements from "famous medical experts" no one’s ever heard of. These bogus cure-alls are just electronic snake oil.
  • Easy Money -- Offers such as "Learn how to make $4,000 in one day," or "Make unlimited profits exchanging money on world currency markets," appeal to the desire to "Get-Rich-Quick." If making money was that easy, we’d all be millionaires.
  • Get Something Free -- The lure of valuable, free items -- like computers or long- distance phone cards -- gets consumers to pay membership fees to sign up with these scams. After they pay the fee, consumers learn that they don’t qualify for the "free" gift until they recruit other "members." These scams are just low down, high tech pyramid schemes.
  • Investment Opportunities -- These scams may tout outrageously high rates of return with no risk. Glib, resourceful promoters suggest they have high-level financial connections; that they’re privy to inside information; or that they guarantee the investment. To close the deal, they may serve up phony statistics, misrepresent the significance of a current event or stress the unique quality of their offering. But they are not unique. They’re just like the other scams.
  • Cable Descrambler Kits -- For a small initial investment you can buy a cable descrambler kit so you can receive cable without paying the subscription fees. There are two small problems with these schemes, the kits usually don’t work and stealing cable service is illegal.
  • Guaranteed Loans or Credit, On Easy Terms -- Some offer home-equity loans, even if you don’t have any equity in your home. Others offer guaranteed, unsecured credit cards, regardless of your credit history. The "loans" turn out to be lists of lending institutions and the credit cards never arrive.
  • Credit Repair Scams -- These scams target consumers with poor credit records. For an up-front fee, they offer to clear up a bad credit record -- for a fee -- or give you a completely clean credit slate by showing you how to get an Employer Identification Number. No one can erase a bad credit record if it’s accurate and using an Employer Identification Number to set up a new credit identity is against the law.
  • Vacation Prize Promotions -- Like their snail mail counterparts, these e-mail "Prize Promotions" tell consumers they’ve been selected to receive a "luxury" vacation at a bargain-basement price. But the accommodations aren’t deluxe and upgrades are expensive.

In short, consumers need to be just as cautious about responding to unsolicited pitches that arrive in their e-mail boxes as they are when responding to unsolicited postal mail, telemarketing, or door-to-door solicitations. When you get unsolicited e-mail, feel free to forward it to us at the FTC -- uce@ftc.gov . We may be the only people in town who actually want your spam. We will continue to monitor the spam we receive for use in law enforcement and consumer education. Thank you.

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