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
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
mer confidence in eBay and diminishes the
electronic marketplace for all its participants.”
ReverseAuction pointed to eBay’s anti-spam policy, which it says
acknowledges possible unsolicited e-mail from third parties, as a defense
against its solicitation of eBay users. The site also argued that its e-mail
was not spam because it identified specific recipients by name, and
counter-charged eBay’s complaint to the FTC as anti-competitive.