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FTC RECEIVES LARGEST COPPA CIVIL PENALTIES EVER
Mrs. Fields Cookies and Hershey Foods Corporation have each agreed to settle FTC charges that their websites violated the Children's Online Privacy Protection Act (COPPA) Rule by collecting personal information from children without first getting the proper parental consent. Mrs. Fields agreed to pay civil penalties of $100,000 and Hershey will pay civil penalties of $85,000. Under the separate settlements, both companies agreed not to violate the Rule in the future. These civil penalties represent the biggest COPPA penalties awarded to date.
The COPPA Rule applies to operators of commercial Web sites and
online services directed to children under the age of 13 and to
general audience Web sites and online services that knowingly collect
personal information from children under 13. Among other things, the
Rule requires that Web site operators obtain verifiable consent from
a parent or guardian before they collect personal information from
According to FTC's complaints, the Mrs. Fields and Hershey sites each
violated the COPPA Rule when they didn't get verifiable parental
consent before collecting personal information from children under
13. Also, FTC claimed that the sites didn't post adequate privacy
policies, provide direct notice to parents about the information they
were collecting and how it would be used, and provide a reasonable
means for parents to review the personal information collected from
their children and to refuse to permit its further use.
FTC's vote to approve the complaints and consent decrees was 5-0. The U.S. Department of Justice filed the Hershey Foods complaint and consent decree in the U.S. District Court for the Middle District of Pennsylvania in Harrisburg, and the Mrs. Fields complaint and consent
decree were filed in the U.S. District Court for the District of Utah, Central Division on February 26, 2003 at FTC's request.
NOTE: A consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the judge.
(Hershey Foods Corporation, Civil Action No. 4:CV03-350, February 27, 2003; Mrs. Fields Cookies, Civil Action No. 2:03 CV205 JTG, February 27, 2003.)
MURIS ISSUES STATEMENT RE DO NOT CALL REGISTRY
FTC Chairman, Timothy J. Muris, issued the following statement in reference to the Do Not Call Registry:
"The President has signed the Omnibus appropriations bill into law,
providing funding to allow the Federal Trade Commission to begin to
develop a national Do Not Call registry. Additional authorizing
legislation for the registry is expected to be signed shortly. I am
delighted that the FTC can now respond to consumers' pleas to end
unwanted telephone intrusions into their homes, and I appreciate the
support and confidence of the Congress and the President and the
efforts of my fellow Commissioners to make the Do Not Call registry a
During the next few days, the Commission will start building the Do
Not Call registry. Consumers will have the opportunity to sign up for
the registry sometime this summer, and the registry should be fully
functional and available to telemarketers by September. By fall,
consumers should begin to notice fewer unwanted telemarketing calls.
Additional details about how consumers can sign up for the registry
and how telemarketers can access the registry will be announced later
this spring. General information about the Do Not Call registry is
available at www.ftc.gov/donotcall."
(Timothy J. Muris Statement Regarding the Do Not Call Registry,
February 21, 2003.)
FTC: FIRM MADE DECEPTIVE "NEGATIVE OPTION" MARKETING AND "UP-SELLING"
FTC filed a complaint in federal district court, charging Preferred Alliance, Inc. and its principal Bruno Faillace, with a range of illegal activities concerning the company's sale of buying club memberships through third-party telemarketers. According to FTC's complaint, defendants' telemarketers didn't tell consumers that a supposedly "free" no obligation trial offer was actually a "negative option" plan, under which defendants would automatically charge purchasers a $99.95 annual fee if they didn't cancel by the end of the trial period and in a prescribed manner.
Variety of Advertised Products
FTC's complaint charged that Preferred Alliance solicited prospective
customers using deceptive telemarketing, followed-up by misleading
direct mail. Defendants allegedly used third-party telemarketers whom
consumers had contacted directly to purchase a variety of advertised
products, including vitamins and diet aids.
According to FTC's complaint, defendants violated Section 5 of the
FTC Act, the Telemarketing Sales Rule, Truth in Lending Act, and
Regulation Z in the following ways:
(1) Either directly or through third-partly telemarketers, defendants
allegedly failed to disclose material information to consumers,
including the negative-option aspects of the upsell.
(2) They allegedly unfairly billed consumers without their knowledge
(3) They allegedly failed to promptly credit consumers for money they
FTC's vote authorizing the staff to file the complaint in federal
district court was 5-0. It was filed in the U.S. District Court for
the Northern District of Georgia, Atlanta Division on February 12,
NOTE: The Commission authorizes the filing of a complaint when it has
"reason to believe" that the law has been or is being violated, and
it appears to the Commission that a proceeding is in the public
interest. The complaint is not a finding or ruling that the defendant
actually has violated the law. The case will be decided by the court.
(Preferred Alliance, Inc., et al., FTC File No.: 022-3072, Civil Action No.: 03-CV-0405, February 14, 2003.)
POP-UP AD LAWSUIT SETTLED
The lawsuit involving pop-up ads on the Internet brought by several large media companies--including the Washington Post Co., The New York Times Co. and Dow Jones & Co.--has been settled. These large news publishers had sued The Gator Corp. for trademark and copyright infringement--among other causes of action--over Gator's pop-up ads. Deatails of the settlement were not made public.
(See: Washingtonpost.Newsweek Interactive Company, LLC, et al. v. The
Gator Corporation, U.S. District Court for the Eastern District of
Virginia, Alexandria Division, Civil Action No. 02-909-A, Filed June
MCGUIRE NAMED CHIEF FTC ADMINISTRATIVE LAW JUDGE
FTC Chairman Timothy J. Muris has appointed Stephen J. McGuire to serve as FTC's Chief Administrative Law Judge (ALJ). McGuire replaces James P. Timony, who retired in late January 2003 after 27 years as an FTC ALJ. McGuire currently serves as an Administrative Law Judge with the Environmental Protection Agency (EPA), as well as Alternative Dispute Resolution (ADR) Neutral in EPA's office of Administrative Law Judges. He will assume his new post on March 3, 2003.
(FTC Release, February 13, 2003.)
FTC COMMEMORATES 100TH ANNIVERSARY OF PREDECESSOR, BUREAU OF CORPORATIONS
On February 14, 1903, Congress created the Bureau of Corporations (BC), FTC's predecessor. The Bureau was created as an investigatory agency within the Department of Commerce and Labor, also created on February 14, 1903. On February 14, 2003, FTC commemorated BC's 100th Anniversary.
(FTC Release, February 14, 2003.)
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