Internet Privacy

E - Commerce tax Policy Project

Internet Privacy

Project Genesis

In May, 2005, 33 telemarketing firms sought a decision from the FCC that the Telephone Consumer Protection Act (TCPA) preempts state do not call regulations.
Petition focuses on state “existing business relationship” exceptions (or lack thereof) to do not call mandates.
FTC regulations instituting federal do not call list expressly permit continued state regulation. FCC conformed its regs. under TCPA to FTC do not call system.
FCC petition still pending.

Federal CAN-SPAM Act

Controlling the Assault of Non-Solicited Pornography and Marketing Act (despite “porn” reference, the Act applies to all commercial email).
Mandates notice for consumers to opt-out.
Prohibits false subject headings and transmission paths.
Provides for blocking and private actions by internet service providers.
No private cause of action for harm to recipients.
Enforced by FTC.
Preempts state laws with stricter mandates (e.g. ADV vs. “clear and conspicuous” header). Widely criticized.
Retains state claims for false, deceptive and misleading messages.
Permits state tort claims.
Uncertain status for state claims for truthful, but unwanted messages (e.g. after opting out).

State Anti-Spam Actions

Maryland CLE v. First Choice Internet; Beyond Systems, Inc. v. Keynetics, Inc. (MD Statute); Asis Internet v. Optin Global (CA statute); Gordon v. Impulse Marketing (individual recipient, not ISP, WA statute); State v.Heckel (WA statute, pre-CAN-SPAM).
All rejected defense claims of implied preemption/undue burdens on interstate commerce.
All upheld courts’ jurisdiction over out-of-state defendants.

White Buffalo v. U of Texas

UT blocked truthful emails to any UT email holder from White Buffalo based on University anti-solicitation rule.
Is the rule a state anti-spam law that CAN-SPAM preempts?
Yes, but UT is an ISP and CAN-SPAM permits ISP blocking.
Presumption AGAINST preemption applied to uphold UT action.
Once state is blocking truthful ads, free speech issues arise.
Commercial speech Regulation must serve a substantial state interest : email user and system efficiency.
Email blocking must be directly related to accomplishing the state interests.

Effect of CAN-SPAM & Preemption?

CAN-SPAM targets deceptive and misleading email ads. All state claims (individual recipients’ and ISP’s) remain intact and state courts can get jurisdiction.
CAN-SPAM permits truthful unwanted email ads with little constraint.
ISPs are empowered to block, including state-operated systems.

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An Analysis of Spyware Enforcement Actions in Pursuit of Sound Internet Advertising Policy

Marketing Model using “Spyware”

Clients seeking to advertise on the internet (or their ad agencies) hire Claria, WhenU, 180Solutions (adware vendors).
Adware vendors use numerous “affiliates” to place clients’ ad in free downloads such as games, toolbars, cursors, clip art, screensavers. (Chien 2005).
Affiliates are paid per “impression.”
Exposure frequency enhances brand (Briggs and Hollis 1997; Broussard 2000; Drèze and Hussherr 2003).
Click through is not the only objective of internet ads (Chun-Yao and Chen-Shun 2006).
Ads make desired software cheap or free for public.

Problems with Spyware

Background

Considerable debate on what constitutes “spyware” versus “adware.” (Sun 2007; Boldt and Carlsson 2006; FTC Public Workshop 2004).
Many mainstream US companies advertise using downloaded ad-generating software (Edelman 2007).
US companies profit on the sale of advertising using downloaded software, despite intense regulatory scrutiny. (Elgin 2004; Newitz 2005; Cheng, 2005).

Behaviors Prosecuted in Spyware Cases

	Fraudulent statements	Fraudulent Omissions	Drive-By & Uninstall/Reinstall	Downloaded Anti-Spyware Programs
FTC	•Enternet Media, et al., (2005) ($2M fine in 2006) •ERG Ventures (2007).	•Enternet Media. •Odysseus Marketing, Inc., (2005) •ERG Ventures (2007).	•Seismic Entertainment (2006) •Odysseus Marketing •ERG Ventures (2007).	Trustsoft, Inc. 2005 (“Spykiller”) $1.9M MaxTheater, Inc. (“Spyware Assassin”) $76K
NY	•Direct Revenue 2006 (“100% Spyware Free”)	•Intermix Media, Inc. (2005) $7.5M fine 2006. CEO = $750K	•Direct Revenue 2007. •Intermix Media
Washington				Secure Computer 2006, $1M.

Movieland.com

Federal and Washington prosecution.
Downloaded subscription service.
Download Manager provided access to news, sports, games, adult content.
“Anonymous Negative Option.”
Download Manager also included billing software.
Billing program made false statements about customers’ obligation to pay and legal consequences.
Harassing 40-second video played hourly.

Movieland.com Outcome

Conclusions & Recommendations

Federal legislation should define spyware based on harms reflected in cases
Federal law should establish a meaningful notice protocol. (Edelman 2004; Good 2006).
State enforcement of consistent rules should be permitted.
FTC should have authority to keep create rules that keep up with changing tech. harms.

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