$200,000 Lawsuit Successful – FTC Shuts Down Databroker Business in US

Selling phone numbers, among other personal data information, has just gotten legally more difficult recently. The FTC (Federal Trade Commission) has successfully sued a website that sells personal information to marketers without the consent of affected consumers.

It seems like such a simple, yet effective scheme. Build a business that collects personal information on people and sell the findings to whoever will shell out a few dollars for it. Advertise as the service as a one-stop shop for tracking any individual and let the profits roll on in. Now, at least in the US, having such a business has become a risky endeavor thanks to AccuSearch, Inc., owner of Abika.com.

In the US, with the Bush administration currently pushing for telecom immunity, it may be easy for some to cast off privacy as a dead concept within the US jurisdiction. It seems that the FTC may have offered a ray of hope for US consumer privacy.

According to the press release,

In May 2006, the FTC charged AccuSearch, Inc., doing business as Abika.com, and its principal, Jay Patel, with violating federal law by selling consumers’ phone records to third parties without the consumers’ knowledge or authorization. According to the FTC complaint, the defendants advertised on their Web site that they could obtain the confidential phone records of any individual – including details of outgoing and incoming calls – and make that information available to their clients for a fee. To obtain such information, which is not legally available to the public, the FTC alleged that the defendants caused others to use “false pretenses, fraudulent statements, fraudulent or stolen documents or other misrepresentations, including posing as a customer of a telecommunications carrier,” to induce the telecommunications carriers to disclose the confidential records. Consumers whose phone records were sold by defendants suffered substantial injury as a result of those sales. The FTC charged that the defendants’ practices were unfair in violation of the FTC Act.

The defendants lost on the summary judgment and are now ordered to pay $200,000, the money earned from their business. The defendants claimed immunity in under Section 230 of the Communications Decency Act, 47 U.S.C. § 230, but Judge William F. Downes rejected the claim, saying that the defendants failed to establish two of the three necessary elements of a CDA defense. The court further authorized the FTC to use the money obtained through the judgement to contact the consumers affected by the websites business. The defendants are appealing the case.

A similar privacy complaint was issued by CIPPIC (Canadian Internet Policy and Public Interest Clinic) in June of 2004. Unfortunately, the privacy commissioner said (PDF) that while the business may be collecting personal information on Canadians, it is located outside of the US jurasdiction, and therefore, outside of the scope of PIPEDA (Personal Information Protection and Electronic Documents Act)

CIPPIC then complained (PDF) to the FTC on December 14, 2004. On December 19, 2004, CIPPIC filed an application for judicial review (PDF) and the court decided on Feb.5, 2007 that the Privacy, in fact, had jurisdiction to investigate under PIPEDA. With Accusearch losing in the courts in the US, it may not be too difficult for the business to be put in legal hot water in Canada as well.

Two years ago, the FTC also sued MP3DownloadCity.com, a P2P scam website for misleading and false advertising among other things.

Of course, it isn’t as simple as shutting down one business engaged in such data mining activities. With the nature of the internet, these types of businesses will likely move off shore to other countries much like P2P websites generally just moving to different countries as a safe haven. While likely not a huge victory in the long run, at least it’s a good start.