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FTC Puts an End to Tactics of Online Advertising Company That Deceived Consumers Who Wanted to “Opt Out” from Targeted Ads

The FTC reached a settlement with online advertising company Chitika, Inc. that ends the company’s allegedly deceptive practice of tracking consumers’ online activities even after they have chosen to opt out of online tracking on Chitika’s website.

The FTC investigated Chitika as part of its ongoing efforts to protect consumers’ privacy online. Chitika, whose website states that it delivers three billion ad impressions a month, acts as a go-between for websites and advertisers. According to the FTC complaint, Chitika buys ad space on websites and contracts with advertisers to place small text files called cookies on those websites. Chitika also uses a technique known as behavioral advertising – by placing “cookies” on consumers’ computer browsers, the company tracks consumers’ activities on the web, including searches the consumer has conducted and sites the consumer has visited. Based on consumers’ online activities, the company then displays ads to them that correlate to their interests.

The FTC alleged that in its privacy policy the company says that it collects data about consumers’ preferences, but allows consumers to opt out of having cookies placed on their browsers and receiving targeted ads. The privacy policy includes an “Opt-Out” button. Consumers who click on it activate a message that states, “You are currently opted out.”

According to the FTC complaint, from at least May 2008 through February 2010, Chitika’s opt-out lasted only 10 days. After that time, Chitika placed tracking cookies on browsers of consumers who had opted out and targeted ads to them again. The FTC charged Chitika’s claims about its opt-out mechanism were deceptive and violated federal law.

The settlement bars Chitika from making misleading statements about the extent of data collection about consumers and the extent to which consumers can control the collection, use or sharing of their data. It requires that every targeted ad include a hyperlink that takes consumers to a clear opt-out mechanism that allows a consumer to opt out for at least five years. It also requires that Chitika destroy all identifiable user information collected when the defective opt out was in place. In addition, the settlement requires that Chitika alert consumers who previously tried to opt out that their attempt was not effective, and they should opt out again to avoid targeted ads.

The Commission vote to approve the administrative complaint and proposed consent agreement was 5-0. The FTC will publish an announcement regarding the agreement in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through April 14, 2011, after which the FTC will decide whether to make it final. Consumers can file a public comment online at https://ftcpublic.commentworks.com/ftc/chitika.

Copies of the complaint, the proposed consent agreement, and an analysis of the agreement to aid in public comment are available from both the FTC’s website at http://www.ftc.gov and the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

NOTE: The Commission issues an administrative complaint when it has reason to believe that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the respondent has actually violated the law. The consent agreement is for settlement purposes only and does not constitute admission by the respondent of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.

(chitika)

FTC Accepts Final Settlement with Twitter for Failure to Safeguard Personal Information

The Federal Trade Commission has finalized a proposed settlement that it announced in June 2010 with social networking site Twitter, which resolved charges that Twitter deceived consumers and put their privacy at risk by failing to safeguard their personal information. The FTC alleged that serious lapses in the company’s data security allowed hackers to obtain unauthorized administrative control of Twitter, including both access to non-public user information and tweets that consumers had designated as private, and the ability to send out phony tweets from any account.

The privacy policy posted on Twitter’s website stated that “Twitter is very concerned about safeguarding the confidentiality of your personally identifiable information. We employ administrative, physical, and electronic measures designed to protect your information from unauthorized access.” In addition, Twitter offered its users privacy settings that enabled them to designate their tweets as private.

The FTC’s complaint alleged that between January and May of 2009, hackers were able to gain administrative control of Twitter on two occasions.

Under the terms of the settlement, Twitter will be barred for 20 years from misleading consumers about the extent to which it protects the security, privacy, and confidentiality of nonpublic consumer information, including the measures it takes to prevent unauthorized access to nonpublic information and honor the privacy choices made by consumers. The company also must establish and maintain a comprehensive information security program, which will be assessed by an independent auditor every other year for 10 years.

The Commission vote to accept the settlement as final was 5-0.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics. “Like” the FTC on Facebook and “follow” us on Twitter.

FTC To Host Consumer Debt Collection Technology Workshop

On April 28, 2011, the Federal Trade Commission will host a public workshop to examine how debt collectors are using new technologies and how this affects consumers. The workshop, titled “Debt Collection 2.0: Protecting Consumers as Technologies Change,” will feature consumer advocates, industry representatives, technologists, academics, and government officials.

As noted in the FTC’s Federal Register notice, these new technologies available to debt collectors include mobile telephones, e-mail, social media, information gathering tools, and the software platforms that collectors use, such as dialers, databases, and payment portals. The discussion will focus on how collectors use these technologies, consumer protection concerns that arise, and how policymakers should respond to those concerns.

The workshop is free and open to the public and will be held from 8:30 a.m. to 5:30 p.m. in the FTC’s Satellite Building Conference Center, 601 New Jersey Avenue, N.W., Washington, D.C. Those who attend must present government-issued photo identification. More information, including an agenda and panelist biographies, will be posted on the FTC’s website at http://www.ftc.gov/bcp/workshops/debtcollectiontech/index.shtml.

The FTC will identify and invite persons with relevant expertise to serve as panelists. Those who would like to be panelists should submit a request in response to the Federal Register notice. Requests should be sent to [email protected] and must be received on or before 5 p.m. EST, Tuesday, March 22, 2011.

Interested parties are welcomed to submit relevant written comments or data, which will be placed on the public record. The Commission strongly encourages submissions in electronic format. Comments in electronic form should be submitted by using the following Web link: https://ftcpublic.commentworks.com/ftc/debtcollecttechworkshop (and following the instructions on the Web-based form). Please consult the Federal Register notice for further information, including details on topics to be covered and instructions for submitting comments. To be considered in preparation for the workshop, comments must be received by April 7, 2011, although the Commission will accept comments through May 27, 2011.

(debt collection technology workshop)

FTC Roundtables Will Address Consumer Issues in Motor Vehicle Financing and Leasing

Starting next month, the Federal Trade Commission will host a series of roundtables around the country to gather information on consumers’ experiences when buying or leasing motor vehicles. The roundtables will explore consumer protection issues related to the sale, financing, and leasing of the consumer vehicles consumers most often use – cars, SUVs, and light trucks.

For many consumers, buying or leasing a car is their most expensive financial transaction aside from owning a home. With prices averaging more than $28,000 for a new vehicle and $14,000 for a used vehicle from a dealer, most consumers seek to lease or finance the purchase of a new or used car. Financing obtained at a dealership may provide benefits for many consumers, such as convenience, special manufacturer-sponsored programs, access to a variety of banks and financial entities, or access to credit otherwise unavailable to a buyer. Dealer-arranged financing, however, can be a complicated, opaque process and could potentially involve unfair or deceptive practices.

The roundtable events will be free and open to the public. The first roundtable will be on April 12 at Wayne State University Law School in Detroit, which is co-hosting the event. FTC staff will identify and invite people with relevant expertise, including representatives from the industry and consumer advocates, to participate as panelists, and may invite others who submit requests in response to the Federal Register notice. Those who want to be panelists at any of the roundtables may e-mail their name and affiliation to [email protected]. Those who wish to submit comments on roundtable topics may file comments at https://ftcpublic.commentworks.com/ftc/motorvehicleroundtables1. Both requests to participate as panelists and comments must be received by March 28 using instructions in the Federal Register notice.

More information, including roundtable topics, will be posted at http://www.ftc.gov. Those who plan to attend a roundtable are encouraged to preregister by e-mailing their name and affiliation to [email protected]. (FTC File No. P104811; staff contacts are Katherine Worthman and Carole Reynolds, Division of Financial Practices, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580, 202-326-3224.)

Reasonable accommodations for people with disabilities are available upon request. If you need an accommodation related to a disability, please call Katherine Worthman or Carole Reynolds at 202-326-3224. Your request should include a detailed description of the accommodations you need and a way to contact you if we need more information. Please provide advance notice.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics. “Like” the FTC on Facebook and “follow” us on Twitter.

(FYI Auto Dealers)
(FTC File No. P104811)

FTC Seeks Public Comment on Proposed Information Requests to Alcohol Beverage Manufacturers

The Federal Trade Commission plans to begin a study of the self-regulatory efforts of the alcoholic beverage industry. This will serve as the basis for the FTC’s fourth major report on the effectiveness of voluntary industry guidelines for reducing advertising and marketing to underage audiences by beer, wine, and distilled spirits manufacturers. The first report was published in 1999.

The FTC is seeking clearance from the Office of Management and Budget (OMB) to collect information from the alcohol companies, which is the first step toward conducting the study. It has published a Federal Register notice seeking public comment on the proposed collection of data from these companies. The topics the FTC seeks comment on include:

the companies’ compliance with voluntary advertising placement provisions, sales, and marketing expenditures;
the status of third-party review of complaints regarding compliance with voluntary advertising codes; and
alcohol industry data-collection practices.

The comments will be considered before the FTC submits a request for OMB review of the proposal under the Paperwork Reduction Act. Comments must be received on or before April 26, 2011.

The Commission vote approving publication of the Federal Register notice was 5-0. A copy of the notice can be found as a link to this press release and on the FTC’s website. (FTC File No. P114503; the staff contacts in the Bureau of Consumer Protection are Janet M. Evans, 202-326-2125, and Carolyn L. Hann, 202-326-2745.)

Copies of the document mentioned in this release are available from the FTC’s website at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

FTC Releases List of Top Consumer Complaints in 2010 Identity Theft Tops the List Again

The Federal Trade Commission today released the list of top consumer complaints received by the agency in 2010. The list showed that for the 11th year in a row, identity theft was the number one consumer complaint category. Of 1,339,265 complaints received in 2010, 250,854 – or 19 percent – were related to identity theft. Debt collection complaints were in second place, with 144,159 complaints.

The report breaks out complaint data on a state-by-state basis and also contains data about the 50 metropolitan areas reporting the highest per capita incidence of fraud and other complaints. In addition, the 50 metropolitan areas reporting the highest incidence of identity theft are noted.

For the first time, “imposter scams” – where imposters posed as friends, family, respected companies or government agencies to get consumers to send them money – made the top 10. The FTC also has issued a new consumer alert, “Spotting an Imposter”, to help consumers avoid imposter scams.

The top consumer complaints were:

Rank	Category	Number of Complaints	Percentage
1	Identity Theft	250,854	19%
2	Debt Collection	144,159	11%
3	Internet Services	65,565	5%
4	Prizes, Sweepstakes and Lotteries	64,085	5%
5	Shop-at-Home and Catalog Sales	60,205	4%
6	Imposter Scams	60,158	4%
7	Internet Auctions	56,107	4%
8	Foreign Money/Counterfeit Check Scams	43,866	3%
9	Telephone and Mobile Services	37,388	3%
10	Credit Cards	33,258	2%

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics. “Like” the FTC on Facebook and “follow” us on Twitter.

(Top complaints 2011)

FTC Charges Mortgage Relief Operation with Deceiving Distressed Homeowners

As part of the Federal Trade Commission’s continuing crackdown on scams that target homeowners behind in their mortgage payments or facing foreclosure, the FTC has charged a national operation with marketing bogus loan modification services. The FTC seeks to stop the illegal practices and make the defendants pay refunds to consumers.

According to the FTC’s complaint, the defendants target financially distressed consumers using direct mail, the Internet, and telemarketing, and falsely promise they will get loan modifications to make consumers’ mortgages much more affordable, or fully refund their money if they fail. They make these promises even to homeowners whose lenders have denied them modifications or who have been sent foreclosure notices. The defendants charge up to $2,600 for their supposed services and typically ask for half of the fee up-front, claiming a success rate of up to 100 percent.

As alleged in the complaint, the defendants claim expertise that enables them to prevent foreclosure, and often mislead consumers to believe they are affiliated with, or approved by, consumers’ lenders. They tell consumers not to contact their lenders and to stop making mortgage payments, claiming that falling behind on payments will demonstrate the consumers’ hardship to lenders.

U.S. Mortgage Funding Inc., Debt Remedy Partners Inc., Lower My Debts.com LLC, David Mahler, Jamen Lachs, and John Incandela, Jr., also known as Jonathan Incandela, Jr., allegedly violated the FTC Act and the FTC’s Telemarketing Sales Rule by falsely claiming they would obtain mortgage modifications that would make consumers’ loan payments substantially more affordable. They also allegedly misrepresented affiliation with, or approval by, consumers’ lenders, and falsely claimed they would fully refund consumers’ money if they failed to deliver promised services. In addition, the defendants allegedly violated the Rule by calling numbers listed on the National Do Not Call Registry, and not paying the required annual fee for accessing numbers on the Registry.

The FTC recently issued the Mortgage Assistance Relief Services Rule, which bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable. Because the defendants’ ads predated the Rule, the FTC did not allege any violations of the Rule in this case.

The Commission vote to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Southern District of Florida.

Click here for facts about how consumers can help save their home from foreclosure and avoid scams

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics. “Like” the FTC on Facebook and “follow” us on Twitter.

(U.S. Mortgage Funding)
(FTC File No. 1023146)

FTC Report Recommends Improvements in Patent System to Promote Innovation and Benefit Consumers

A new Federal Trade Commission report recommends improvements to two areas of patent law: policies affecting how well a patent gives notice to the public of what technology is protected and remedies for patent infringement. The report, The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition, emphasizes that the patent system and competition policy share the goal of promoting innovation that benefits consumers.

“When the patent system incorporates the principles of competition policy, the patent and antitrust laws work together to achieve their common goal. The recommended changes would benefit consumers by encouraging investments in innovation and promoting competition among patented technologies,” said FTC Commissioner Edith Ramirez.

The report continues the Commission’s policy engagement with the patent system that began with its 2003 report, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy by highlighting the role of courts and the U.S. Patent and Trademark Office in notice and remedies issues.

“This new report provides valuable insights on how courts can reform the patent system to best serve consumers, and it complements the Commission’s 2003 report on improving patent quality. These reports, combined with the hard work by many leaders in Congress to improve a troubled system, will help ensure that patents continue to serve America’s innovators and consumers,” said FTC Chairman Jon Leibowitz.

The new report recognizes that patents play a critical role in encouraging innovation. At the same time, it observes that some strategies by patent holders risk distorting competition and deterring innovation. This is especially true, the report concludes, for activity driven by poor patent notice, and by remedies that do not align the compensation received by patent holders for infringement with the economic value of their patented inventions.

To address these issues, the report first recommends improving policies relevant to the patent notice function through actions by the courts and the Patent and Trademark Office. Clear notice of what a patent covers promotes innovation by encouraging collaboration, technology transfer, and design-around. But poor notice undermines these benefits if potential licensees cannot find relevant patents, or if companies hesitate to invest in technology because the scope of others’ patents are unclear. Poor patent notice also can distort competition by forcing firms to design products and make investments with incomplete knowledge of the cost and availability of different technologies. The report suggests mechanisms to improve the public’s ability to identify relevant patents, to understand the scope of patent claims, and to predict the breadth of claims that are likely to emerge from patent applications.

The FTC’s recommendations to improve patent notice include:

making patent claims more definite and improving the utility of descriptions in patents for delineating their boundaries;
enhancing the patent examination record as a source for interpreting claim scope; and
more fully incorporating consideration of third parties’ ability to predict the potential breadth of evolving claims into the administrative and judicial review of the written descriptions of patent applications.

The report also explains that patent remedies that align compensation of patent holders with the economic value of their patented inventions are important for both innovation and competition. Patent damages that under-compensate patentees for infringement can deter innovation. But overcompensation can lead to higher prices and encourage speculation in patent rights, which also deters innovation.

The report makes recommendations to courts that would ground damages calculations and injunction analysis in economic principles that recognize competition among patented technologies.

The FTC’s recommendations to courts to improve patent remedies law include:

capping reasonable royalty damages at the amount a willing licensee would pay, which may be determined by the value of the invention over alternative technologies;
increasing the role of district courts in excluding unreliable expert testimony on damages from trial; and
incorporating concerns into the injunction analysis about the leverage that an injunction may give a patentee to obtain royalties exceeding the economic value of an invention.

The report is based on eight days of hearings, public comments, and independent research.

The Commission vote approving the report was 5-0. It can be found here on the FTC website.

FTC Staff Submits Comments to FERC on More Efficient Ways To Integrate Alternative Energy Sources Into the Nations Power Generation System

The Federal Trade Commission’s staff submitted a comment as part of a Federal Energy Regulatory Commission (FERC) rulemaking on the integration of alternative sources of energy – such as wind farms, solar cells, and solar thermal installations – into the nation’s electric power grid. The staff comment suggested ways to integrate such alternative sources into the grid more efficiently, to improve the reliability of electric service, and to foster innovation that can lower the costs of meeting environmental policy goals.

According to the comment by the Office of the General Counsel and the Bureau of Economics, certain alternative energy sources differ from traditional sources such as fossil fuels and nuclear power because they are not consistently available. This variable availability adds to the uncertainty of balancing the supply and demand for electricity provided by alternate energy sources. FERC seeks to improve the integration of these energy sources into the power system, while maintaining competition and protecting consumers from higher prices.

The FTC staff’s comment responds to current FERC proposals in three areas:

The use of shorter time increments to predict energy demand and schedule supply in the power system;
Improved accuracy in using weather forecasting to estimate real-time power generation by alternative energy sources; and
Ways for alternative energy sources to supply their own regulation service (a form of transmission service) instead of having to obtain that service from public utility transmission providers.

The comment urges FERC to explain more thoroughly how alternative energy sources can supply generation reserves on their own. According to the comment, such a discussion will support competition in the supply of those reserves. The comment concludes by urging FERC to protect against proposals that would discriminate against alternative energy providers when allocating regulation service costs. Such discriminatory allocations, the staff states, could raise rivals’ costs and lessen competition in the industry.

The Commission vote approving the comment was 5-0. It can be found on the FTC’s website and as a link to this press release. (FTC File No. V100009; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel, 202-326-2702; see related press release dated April 16, 2010.)

Copies of the document mentioned in this release are available from the FTC’s website at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

(FYI 10.2011.wpd)

National Consumer Protection Week 2011 Kicks Off Sunday March 6

The Federal Trade Commission and nearly 30 other federal agencies, consumer groups and national advocacy organizations, in conjunction with state, county, and local government agencies, will hold more than 120 events in 25 states and the District of Columbia during National Consumer Protection Week, March 6-12, 2011. National Consumer Protection Week is a coordinated campaign to focus attention on the importance of consumer information and steer people to free resources about their rights in the marketplace.

The website for the week-long series of events has information about consumer rights, protecting privacy online and off, managing credit and debt, avoiding identity theft, understanding mortgages, and recognizing and reporting frauds and scams, among other timely topics. Visitors can download and print materials and share them with friends and neighbors, or use the National Consumer Protection Week Toolkit to plan a larger community event. A blog has practical tips by consumer protection experts and invites readers to share their experiences. Information on both websites is available in English and Spanish.

Details of events during National Consumer Protection Week are at ncpw.gov/events. The chief executives of several states, cities, and counties across the nation have issued proclamations noting the importance of consumer protection to individual financial health, and urging citizens to use the resources available from participating organizations. These organizations are holding information fairs as well as events where people can shred documents with sensitive data that they no longer need.

Joining the FTC in the 13th annual celebration of consumer protection and consumer education are: The AARP, the Better Business Bureau, the Consumer Federation of America, the Federal Citizen Information Center, the Federal Communications Commission, the Federal Deposit Insurance Corporation, the Federal Reserve System, the Internal Revenue Service, the League of United Latin American Citizens, the NAACP, the National Association of Attorneys General, the National Consumers League, the National Council of La Raza, the National Futures Association, the National Urban League, NeighborWorks America, the North American Securities Administrators Association, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Social Security Administration, the U.S. Consumer Product Safety Commission, the U.S. Department of Housing and Urban Development, the U.S. Securities and Exchange Commission, the U.S. Postal Inspection Service, and the U.S. Postal Service.

The FTC works 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 or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a new video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad.

(FYI NCPW2)

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