RealTime IT News

ReverseAuction Accepts FTC Settlement on eBay Hijacking

ReverseAuction.com, Inc. this week agreed to settle accusations it spammed and hijacked registered eBay users.

The Federal Trade Commission charged ReverseAuction had violated consumer privacy by collecting registered users' IDs, passwords, e-mail addresses and other information in order to spam the auction fans. According the the complaint, ReverseAuctions.com signed up at eBay, disregarded the privacy agreement posted on the rival auction site, and copied the information from bidders in order to send them a solicitation that was later deemed deceptive by the FTC -- a charge which ReverseAuctions denies.

ReverseAuction.com said it disagrees with the FTC claims, but consented to the settlement in order "to devote its attention to its auction site" and proceed with a pending round of financing. The auctioneer also says that it did not gather any confidential information from the eBay site.

The e-mail allegedly tricked eBay (EBAY) users with a subject line declaring that the users' eBay password was about to expire, but that promised continued use of the password if the eBay member switched to ReverseAuctions.com.

Many of the registered users assumed that the continuation guarantee was the result of a formal agreement between the two auction sites, according to the FTC. However, ReverseAuctions said the marketing e-mail was merely a campaign for its "portability program", which allows auction players the ability to use the same ID and password on multiple sites.

"No reasonable person who read our e-mail message could have been misled," said Ron Johnston, ReverseAuction.com's chief executive officer. "Our e-mail message clearly identified ReverseAuction.com as the sender and used the notation "ADV" in the subject line. It invited recipients to visit our exciting new site. It was not from eBay or sponsored by eBay. Instead, it announced a revolutionary new entrant in the online auction field, of interest to many consumers. No one could have been deceived or harmed by our e-mail."

As part of the settlement, the FTC will require that ReverseAuctions delete harvested information on users who declined to switch their registrations, and the site must also notify transferred users -- those who accepted to solicitation -- of the FTC charges with the option to cancel the new registration. ReverseAuctions also must come clean on the eBay password expiration claim to the spam recipients.

"The FTC takes consumers' online privacy seriously and will act quickly against those who violate privacy policies and other commitments designed to protect consumers' privacy," said Robert Pitofsky, Chairman of the FTC. "Confidence that privacy will be protected is an important element in consumers' decisions where to shop on the Internet.

"Self-regulatory efforts by e-businesses to protect their customers' privacy should be encouraged. But beyond self-regulation, those who violate consumers' privacy should be promptly called to task. Consumers should have confidence that their privacy choices will be protected."

While the commission vote was unanimous, Commissioners Mozelle Thompson, Orson Swindle and Thomas B. Leary each issued statements on the decision. Swindle and Leary voiced concern over the deception of the move, saying it "undermines consumer confidence in the nascent electronic marketplace at a critical point in time and may thereby inhibit its development."

However, the two countered the charge that the act was unfair, saying that the spamming "did not cause substantial enough injury to meet the statutory standard" and should not be a matter of judgment by the FTC. Thompson argued that the solicitation caused substantial and unavoidable injury to eBay members and "undermined consu