Listing Towards Privacy

The Federal Trade Commission has begun a “systematic attack” on deceptive spam, bringing scores of cases against e-mail marketers since Howard Beales, director of its Bureau of Consumer Protection, announced plans to target spam last December.

That should put marketers on guard against emerging practices in e-mail campaigns that may provoke FTC action. In its quest to protect consumer privacy, the FTC will scrutinize how marketers obtain and use e-mailing lists.

The FTC has two tacks (in addition to alleging that the e-mail message is deceptive or unfair). First, it can allege that a list of e-mail addresses was collected deceptively. In fact, the FTC recently settled with three list brokers who sold confidential financial information that had allegedly been obtained through pretexting, which is illegal. Beales warns prospective list purchasers to “beware, because knowingly obtaining pretexted information is illegal as well.”

Pretexting — gathering personal financial data without consumers’ knowledge or consent — was outlawed by the 2000 Gramm-Leach-Bliley Act. Since then, the FTC has taken the position that pretexting is also unfair and deceptive, and therefore governed by the FTC Act. But the FTC Act isn’t limited to financial information, and so could use it to challenge the deceptive collection of any personal information.

Second, the FTC can challenge representations in e-mail campaigns that a recipient has consented to receive e-mail from that sender. Such representations as “You are receiving this e-mail because you previously opted in to get these types of offers” are increasingly common. The FTC considers this type of “deceptive door opener” to be illegal.

The FTC can pursue data collectors, list brokers, and advertisers whose databases include information obtained through deception. Just as the FTC has held ad agencies responsible for placing deceptive ads, it could argue that list brokers and renters who “place” e-mail campaigns should know if the e-mail is deceptive or data was illegally obtained.

An Ounce of Prevention

Because list brokers work with marketers and list collectors/renters, they risk vicarious liability in both directions. To protect themselves, list brokers should require marketers to:

• represent in contracts or purchase orders that all claims made in an e-mail campaign are truthful and substantiated, and otherwise in compliance with federal, state and local law;

• indemnify the list broker for any costs (including legal fees) associated with defending a lawsuit.

  List owners should require similar assurances from list brokers.

  On the other side, list brokers should require data collectors to:

• warrant by contract that the information on their lists was collected in accordance with Section 5 of the FTC Act and other applicable laws, such as the Gramm-Leach-Bliley Act or the Children’s Online Privacy Protection Act;

• warrant by contract that all consumers on the list have provided the level of consent advertised by the list owner, and that no consumer listed has opted out of receiving e-mail.

Marketers should require similar assurances from list brokers.

Brokers should be especially careful with e-mails that make weight loss or other health-related claims; advertise business or investment opportunities; or offer free goods. These e-mails are frequently the object of FTC enforcement actions.

Marketers and brokers should be suspicious of any list owner who says consumers have agreed to receive all types of e-mail without any limitations. The FTC is likely to take such an unqualified claim to mean that those consumers have agreed to receive e-mail about any product, service, or opportunity from any advertiser at any time. We have never seen such a sweeping request for consent.

D. Reed Freeman, Jr. is a member and Gonzalo Mon an associate at law firm Collier Shannon Scott, Washington, DC. Reach them at [email protected]. or [email protected].