S1608DEC8

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Week Ending December 8, 2006

S.1608 A bill to enhance Federal Trade Commission enforcement against illegal spam, spyware, and cross-border fraud and deception, and for other purposes.

This bill attacks the growing problem of computer Spam by giving the Federal Trade Commission the necessary ability to improve a timely and effective international consumer protection campaign. It is the mandate of the FTC to protect American consumers from unfair or deceptive commerce and competition.

Congress finds that cross-border fraud affects American consumers and businesses as well as foreign consumers

Cross-border consumer complaints has risen from 11% of all complaints to 16% in 2004 largely due to the Internet. This bill gives the FTC a focus on protecting against spyware, spam, cross-border fraud and deception and other consumer concerns. Under this bill the FTC can share information and cooperate with foreign law enforcement since spam in particular is becoming and international undertaking.

The bill also allows the FTC to accept reimbursement payment from domestic and foreign law enforcement when the FTC performs an investigation on behalf of those forces.

The bill specifically allows the FTC to share information involving cross-border information from foreign consumer protection agencies, take fraud-based legal action in foreign jurisdictions, seek redress on behalf of foreign consumers victimized by US based wrongdoers make criminal referrals fro cross-border criminal activity, strengthen its relationship with foreign consumer protection agencies, provide investigative and other services to requesting agencies and accept reimbursement and receive gifts of other items that would be useful to the FTC as long as acceptance does not create conflict of interest.

The FTC may share domestic and foreign evidence with the Attorney General that is relevant to a Federal crime and may hire foreign counsel to try cases in foreign countries. The law that currently prohibits the FTC from sharing investigative results with foreign governments is changed to allow the disclosure.

The FTC may also share appropriate information with financial and market regulators. The relevance of that provision is evident in the recent discovery that computer spammers buy cheap stocks then send out messages about it being a good deal, wait for the consumer force to buy and drive the price up and then the spammers sell. Under the 1978 Financial Privacy Act the FTC must show that transfer of financial records requires certification that there is reason to believe the records are relevant to a legitimate law enforcement inquiry, an intelligence of counterintelligence activity, investigation or analysis related to international terrorism.

Serving process is simplified to allow that leaving a subpoena at a place of business or residence or showing a mail receipt that the papers were delivered to the proper address is sufficient to prove process.

Cooperation with foreign entities would be restricted somewhat if there is no evidence that the law the foreign agency is trying to enforce with FTC help is not considered ‘substantially similar’ to a US law that the FTC would normally enforce. The bill gave as an example of a not meeting the substantially similar standard as a foreign law against non-misleading and substantiated comparative advertising or a restriction on freedom of expression in a foreign law that would be a protected expression under the First Amendment of the US Constitution. The FTC is also banned from providing investigative assistance to any foreign state that has supported acts of international terrorism.

Any person, partnership or corporation who violates an order of the Commission after it has become final and while such order is in effect shall forfeit and pay to the US a civil penalty of not more than $10,000 for each violation which shall accrue to the US and may be recovered in a civil action brought by the Attorney General. Each separate violation is a separate offense. Each day of ignoring the Commission’s order is a separate offense.

The FTC is further empowered to gather and compile information and investigate from time to time the organization, business, conduct, practices and management of any person, partnership, or corporation engaged in or whose business affects commerce, except banks, savings and loan institutions. Documents and other tangible confidential information may not be examined by anyone other than the duly authorized officer or Commission employee without the consent of the person who produced the material but disclosure to the Congress can be done by simply notifying the producer of the material of the act. The person providing the information may mark it confidential but the FTC may conclude that the information is not a trade secret or commercial or financial information which is privileged or confidential and must notify the producer of that decision. Information given voluntarily to the FTC will not incur a liability for the provider if the information is believed to be evidence of the type of deceptive practices this law will address.

Sponsor: Senator Gordon H Smith (OR)

Vote: Passed the Senate by Unanimous Consent March 16, 2006. Passed the House by voice vote December 7, 2006. Cleared for the President.

Cost to the taxpayers: The bill provides $100,000 per year to do the job but “CBO estimates that implementing S. 1608 would cost $1 million in 2006 and $9 million over the 2006-2011 period, assuming appropriation of the amounts specified and estimated to be necessary”

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MORE INFORMATION

The Congress finds the following:

(1) The Federal Trade Commission protects consumers from fraud and deception. Cross-border fraud and deception are growing international problems that affect American consumers and businesses.

(2) The development of the Internet and improvements in telecommunications technologies have brought significant benefits to consumers. At the same time, they have also provided unprecedented opportunities for those engaged in fraud and deception to establish operations in one country and victimize a large number of consumers in other countries.

(3) An increasing number of consumer complaints collected in the Consumer Sentinel database maintained by the Commission, and an increasing number of cases brought by the Commission, involve foreign consumers, foreign businesses or individuals, or assets or evidence located outside the United States.

(4) The Commission has legal authority to remedy law violations involving domestic and foreign wrongdoers, pursuant to the Federal Trade Commission Act. The Commission's ability to obtain effective relief using this authority, however, may face practical impediments when wrongdoers, victims, other witnesses, documents, money and third parties involved in the transaction are widely dispersed in many different jurisdictions. Such circumstances make it difficult for the Commission to gather all the information necessary to detect injurious practices, to recover offshore assets for consumer redress, and to reach conduct occurring outside the United States that affects United States consumers.

(5) Improving the ability of the Commission and its foreign counterparts to share information about cross-border fraud and deception, to conduct joint and parallel investigations, and to assist each other is critical to achieve more timely and effective enforcement in cross-border cases.

(c) PURPOSE- The purpose of this Act is to enhance the ability of the Federal Trade Commission to protect consumers from illegal spam, spyware, and cross-border fraud and deception and other consumer protection law violations.

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