Statement of Commissioner Mozelle W. Thompson

in ReverseAuction.com, Inc., File no. 0023046

In the case before us, it is alleged that the defendant, ReverseAuction, engaged in a deception designed to give it unauthorized access to the personal information of customers of eBay, a popular internet auction site. It is further alleged that the defendant then solicited eBay customers to participate in its Web site.

The Commission unanimously agrees that ReverseAuction's conduct, as alleged in the complaint, was unlawful and violative of Section 5 of the Federal Trade Commission Act. We also unanimously agree that the relief contemplated by the consent order will adequately and appropriately address the violations. Count I of the complaint, however, is pled alternatively with both a deception theory and an unfairness theory. I am writing to discuss why I believe that the unfairness, rather than the deception claim is more appropriate at this time.

I believe that ReverseAuction's behavior caused substantial injury to members of the eBay community, that the injury could not have been avoided by those members, and it was not outweighed by countervailing benefits. I believe the harm caused in this case is especially significant because it not only breached the privacy expectation of each and every eBay member, it also undermined consumer confidence in eBay and diminishes the electronic marketplace for all its participants. This injury is exacerbated because consumer concern about privacy and confidence in the electronic marketplace are such critical issues at this time.

In voting for an alternative pleading, the Commission does not here declare that sending unsolicited commercial e-mail ("spamming") is unfair in all circumstances, nor does it suggest that privacy invasions cause substantial injury in all circumstances. Instead, the Commission posits that, under the facts presented here, it is unfair for ReverseAuction to improperly obtain personal information for its use. Accordingly, a majority of the Commission believes that the specific relationship, obligations, and expectations of this electronic community make ReverseAuction's behavior "unfair" under Section 5. Moreover, the injury caused by ReverseAuction's conduct, far from being speculative, is a tangible misappropriation of personal protected information that enabled the company to send personalized deceptive e-mail messages to scores of consumers. In its statement on Touch Tone, a majority of the Commission recognized that, "Section 5 of the FTC Act deliberately incorporates a flexible standard, so that the Commission may react to changes in the marketplace."⁽¹⁾ For these reasons, I believe this action is not an overly expansive view of the unfairness doctrine, but instead represents a reasoned and tailored response to the circumstances presented.

Finally, if industry "self-regulation" is to have meaning and if we seek to create an overall market climate in support of data privacy, industry needs to be encouraged to take direct independent action against those who violate the terms of their privacy agreements. It would be unfortunate if inclusion of a deception count were viewed as preempting industry enforcement efforts by focusing on the contractual relationship between eBay and ReverseAuction rather than the direct effect on consumers. I believe that at this important time, we need to encourage and support and supplement the work of industry in this area - not act as a substitute for its own enforcement activity. I encourage industry to continue its efforts to develop privacy policies consistent with fair information practices.

In my view, the most important message in this case is that the Commission takes seriously its responsibilities to protect consumers from the conduct alleged here. While members of the Commission might have slightly different theories on how that can best be accomplished, we all agree that effective consumer protection in cyberspace not only requires strong enforcement, but also the cooperation of industry and vigilance on the part of consumers themselves.

1. Touch Tone Information, Inc., Civ Action No. 99-WM-783 (D. Co. filed April 21, 1999) (Commissioner Swindle dissenting).