Cyber sheriffs and Net scams
What's your motto regarding Net policy?
My main policy idea is don't fix it if it's not broken. Keep the
government out of it until we really understand where the market will fail without
We have two missions here at the FTC: One is consumer
protection and the other is antitrust.
In the antitrust arena we're really not yet at the point where we
understand what the new strategic business alliances mean for competition
in the United States. So, for example, we once thought that browsers were
what we call a "separate and distinct market" from operating systems. And so if two companies that had browsers wanted to merge, we might have had a problem with that.
Now we're beginning to see that browsers are migrating and possibly becoming part of operating systems
or operating systems are becoming part of browsers. It's a constantly evolving
environment that we really are trying to understand on a daily basis.
On the consumer protection side we see a lot going on in the Internet that
you see in terrestrial space. We have telephone fraud: well, you have
Internet fraud. We have truth in advertising requirements that
have to be met when you advertise on television: Well, the same requirements
will probably have to be met in the Internet. So we're seeing a lot of the
We're trying to figure out how all the traditional deception and fraud and
truth in advertising issues apply on the Internet. We're spending a lot of
time on that. I think we're coming to conclude that deception is deception.
When we find it on the Net, we prosecute it. Fraud is fraud. When we find that on the Net,
But one of the marvelous things about the Net is that you have
the opportunity to do a lot of education. People can talk to each other
on the Net in ways that were not possible before. So when someone gets
ripped off by a company on the Net, they can immediately let it be known
that they got ripped off. And that's sometimes the best deterrent.
The FTC is one agency on Capitol Hill that has found a way to
enforce laws on the Net. What's the FTC's secret?
What we've been doing is we have the statute which created the
FTC, called the Federal Trade Commission Act. And it directs the FTC to prosecute fraud
and deception and unfairness in commerce. So we have this
huge authority to bring actions against anyone that we think is
perpetrating fraud, deception, or an unfair act or practice in commerce.
That clearly extends to the Internet, so we really have not had a
problem bringing cases against people who are running pyramids on the Net
or travel scams or misleading advertising on the Web. We're able to bring
all those cases in court and win.
How does your investigative team operate? Are you looking for
fraud on the Net or do people just report it?
We do both. Everybody here in the FTC is on the Net and has access
to the Net. We use it for our own research, but occasionally I'll just type in
something like "get rich" or "cheap travel" and see what comes up. But all of our investigators
here do that. So we find things on the Net and then we get consumer complaints. We get
complaints from state attorneys general and we follow them up.
Does the FTC have jurisdiction over, for example, Web sites that
sell or advertise alcohol?
One thing is that we probably don't have jurisdiction over the question of
whether or not alcohol can be advertised to adults on the Internet. That is
something that is not in our jurisdiction. I'm not sure it's in anybody's
jurisdiction. I'm not sure that even that's been defined yet. Simply having
a presence on the Web may be advertising.
But what we do have jurisdiction over is deceptive acts or unfair acts. Now
one of the questions that we're always pondering and wrestling with is
advertising directed at children, whether it's tobacco advertising
or alcohol advertising. Whether it's on the Internet or in other places, it
is illegal to sell cigarettes or alcohol to minors. So we're always
watching advertising that may or may not be directed to children because
there is an element of deception there or an element of unfairness there
potentially. And that is something that we will be watching on the Net. We
haven't reached any conclusions about those issues on the Internet yet.
Do you think law enforcement will have be done at the federal
level when it comes to the Net?
Or global. I think that's an open question. I can tell you though
that if your Web page is accessible in Minnesota, the Minnesota attorney general
believes he has jurisdiction. So you'd better not be violating his
laws. The Tennessee attorney general believes the same thing. So it's a
question yet to be resolved. Indeed whether the Internet has its own
culture and its own citizens and its own standards and whether there should
be some sort of virtual magistrate to settle those disputes are all
questions that we're still looking forward to finding out the answers.
You were the only dissenting vote on the FTC taking action to
stop an operation known as the "Moldova sex site
scheme," which allegedly bilked consumers out of hundred of thousands of dollars. Why did you vote
Well I had mixed feelings about the Moldova case. I think with the
Moldova case you have to keep in mind a couple of things. The technology that was
used was reprehensible. It is a program that they tell you when you
visit the site: "In order to view these sexy girls, you must download our viewer."
Well in fact what you're doing is downloading their computer program that
turns down the volume on your computer, disconnects you from your local
service provider, reconnects you to a long distance provider, and dials you
into Canada or Moldova or whatever. And you stay connected even
after you leave their site. That is very dangerous, insidious
technology, absolutely designed to be deceptive. And that's what they were
Now, what they were also doing in this instance is they were telling
you, they were disclosing that what was going to happen was you would be
disconnected, you'd be redialed, long distance rates would apply, check
with the operator for rates to Moldova, and in order to exit the connection,
you had to turn your computer off. So they did tell you that.
I felt that because they were disclaiming what they were doing, because there was
no deception about where you were--these were hardcore sex sites--you didn't
happen onto them, you weren't being deceived that you were going to a
cartoon site or a children's site or anything else.
There's a lot of disagreement about the disclaimer, whether it went up
mid-December or late December of last year. We know that as of January 10 there were complete
My view is that people knew exactly what they were doing. I just felt that
what was going on
was you had a lot of consumers who visited these sites, who got their phone
bills--$600 or $700 phone bills--and said "Oh my goodness, what's this
about? I'm not going to pay this" and called AT&T and said "I'm refusing to
pay." And AT&T came to the FTC.
When consumers are being deceived and they're being harmed it is absolutely
legitimate for us to step in. The fact that these were very clear in what
kind of sites they were and the fact that they did tell you--as
reprehensible as it is--what they were going to do, I didn't think it was
an appropriate use of government resources. If you go back and press
AT&T, ask them if there was fraud involved, they will tell you no
because they're still holding the people responsible for the bills. So it's
not all that clear-cut.
NEXT: Privacy, security, commerce