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FTC Expands Crackdown
On Deceptive Bulk E-Mail

By STACY FORSTER
THE WALL STREET JOURNAL ONLINE

Federal and state law-enforcement officials are stepping up efforts to rein in bulk e-mailers, expanding the types of practices regulators consider fraudulent.

The Federal Trade Commission, the U.S. Postal Inspection Service and several state attorneys general announced Wednesday a new set of law-enforcement actions related to bulk e-mail, or "spam." They also sent more than 100 warning letters to e-mail marketers whose practices appeared to be deceptive.

The enforcement actions open a new front in the FTC's efforts to protect consumers. Past cases involving spam have focused on fraudulent products or schemes, such as sham work-from-home opportunities or pyramid schemes. But in Wednesday's crackdown, one target included a bulk e-mailer who used the logos of large financial institutions to help elicit financial information from recipients, and who falsely claimed that consumers could opt out of future messages.

"The FTC wants to stop all deceptive and unfair practices, not just the content, but the fraudulent and deceptive things about spam itself," said Brian Huseman, staff attorney with the FTC's division of marketing practices.

Still, anti-spam advocates said regulators need more clout to go after spammers and are pushing for legislation banning the practice. Currently, there is no federal law against unsolicited bulk e-mail, though many states have anti-spam statutes.

Consumers are being inundated with spam. Unsolicited messages made up 36% of all e-mail on the Internet in August, up from 8% a year ago, estimates Brightmail, an antispam-software maker.

Ray Everett-Church, chief privacy officer for ePrivacy Group, a Philadelphia-based privacy consulting company, applauded the move but said the FTC could do more to stem the problem by going after more well-known or egregious spammers, or by sending more warning letters.

"While any law enforcement action is an excellent step, there are some bigger fish out there who continue to get away with their deceptive activities," Mr. Everett-Church said.

E-MAIL HARVESTING

FTC and state law-enforcement officials in the Northeast tested how using e-mail addresses in different places on the Internet expose consumers to greater spam.

The investigators posted 250 new e-mail addresses in 175 different online locations, including chat rooms, news groups and message boards, and monitored them for six weeks.

Here is what they learned:

• All of the e-mail addresses posted in chat rooms received spam, including one that received spam only eight minutes after the address was posted.

• Eighty-six percent of the e-mail addresses posted at newsgroups and Web pages received spam; as did 50 percent of addresses at free personal Web page services.

• Twenty-seven percent received spam e-mail after posting to message boards.

• Nine percent received spam after being listed in e-mail service directories.

• The type of spam received was not related to the sites where the e-mail addresses were posted. For example, e-mail addresses posted to children's newsgroups received a large amount of adult content and work-at-home spam.

The FTC said one of the spammers it targeted improperly used the logos of Fannie Mae and Prudential in e-mails offering mortgage financing and refinancing services. The FTC also alleged that these defendants deceived customers by claiming they could opt out of future offers, when in fact e-mail requests to be removed from lists were bounced back. In addition, the headers in the spams were "spoofed," meaning the spammers misrepresented where the e-mails had originated.

The FTC charged the defendants with unfair and deceptive practices and with "pretexting" -- posing as an entity it was not in order to get sensitive financial information. The defendants' names weren't disclosed.

The FTC also charged NetSource One and James R. Haddaway, operating as WorldRemove, for allegedly using spam to sell a service they claimed would reduce or eliminate spam from consumers' e-mail.

The FTC said that by using an undercover account to test the claims, it received more spam after signing up for the service. Representatives from WorldRemove didn't respond to an e-mail sent to its Web site, which was registered in Jeffersonville, Ind. Directory assistance didn't have a number for Mr. Haddaway.

The FTC's Mr. Huseman said the agency is just starting to show results in what will be a long and aggressive agenda targeting deceptive spam. For example, in February, the FTC sent warning letters to people involved in illegal e-mail pyramid schemes. Since issuing those cautions, the number of those pyramid scheme e-mails received by the FTC in its spam database has been reduced by half, he said.

"But with actions like this, we send a message to spammers that certain conduct will not be tolerated," Mr. Huseman said.

Jason Catlett, president of Junkbusters Corp., president of Junkbusters Corp., a consumer and privacy-advocacy firm in Green Brook, N.J., called for an anti-spam law similar to one outlawing junk faxes to empower consumers to go after spammers.

"If you think about the hundreds of thousands of spammers and the billions of pieces of spam delivered every day, [the FTC's sweeps] are simply not going to make a substantial reduction in the amount of spam that we get," Mr. Catlett said.

Write to Stacy Forster at stacy.forster@wsj.com⁴

	URL for this article: http://online.wsj.com/article/0,,SB1037212024547455108.djm,00.html
	Hyperlinks in this Article: (1) http://online.wsj.com/page/0,,2_0833,00.html (2) http://online.wsj.com/page/0,,2_0833,00.html (3) http://discussions.wsj.com/wsjvoices/messages?msg=2402 (4) mailto:stacy.forster@wsj.com (5) http://www.ftc.gov/bcp/conline/edcams/spam/coninfo.htm (6) http://www.ftc.gov/bcp/conline/pubs/alerts/spamalrt.htm

Updated November 13, 2002 6:53 p.m. EST

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