TCS Daily


The FTC's Internet Power Grab

By James Freeman - April 17, 2000 12:00 AM

Have you ever wondered why reporters choose to cover a certain story at a certain time? What is it that makes something newsworthy? And where do stories come from? I've been wondering about a recent story on NBC's "Dateline." The story was about "cramming" - companies putting charges on your phone bill that you never authorized.

"Dateline" featured the case of a company called Webvalley, which allegedly billed businesses for various Internet services without their consent. The NBC story also noted that the Federal Trade Commission (FTC) has filed suit against Webvalley, "one of several cramming cases the commission has filed against Internet companies."

Why am I wondering about the timing of this report? Well, most of this information is not exactly news. The FTC sued Webvalley ten months ago and got an injunction against the company last July. A Senate subcommittee investigating "cramming" wrapped up its work almost a year ago.

It's true that a new measure passed last year - the "Truth in Billing" law - is just now taking effect. But of course if you believe this is a serious problem and that the new law will actually solve it, then consumers have less need for a warning now than during all the years when they weren't "protected" by anti-cramming legislation.

So why is this the time to cover Internet-related scams? Maybe it's just a coincidence that right now the Chairman of the FTC is seeking new authority from Congress to regulate the Internet. Specifically, FTC Chairman Robert Pitofsky wants new privacy regulations on the people who run websites. Is the Internet in need of more regulation? You might think so, considering the many press releases issued by the FTC regarding shady operators on the Web.

To be fair, the agency is doing more than just talking to the press -- the FTC has brought more than a hundred cases against Internet firms. But when you read through the FTC docket you realize that the alleged infractions don't really have anything to do with the Internet. They're all old-fashioned consumer frauds or deceptive sales practices.

You have snake-oil salesmen offering wonder vitamins, companies refusing to send promised rebates, bogus investment schemes, unfulfilled offers of free products and self-appointed fitness gurus making exaggerated claims about exercise machines. 150 years ago, such operators might have sold their wares from the back of a covered wagon. More recently, they might have used the mails and the telephone. Today scam artists still use the postal system and the telephone, of course, but now they also use the Internet, just like the rest of us.

There's nothing in the entire FTC case history that represents a threat specific to the Internet. And the fact that the agency is bringing lots of cases means that online deceptions are illegal right now. We don't need a new law to make fraud on the Internet a crime. Fraud is fraud whether you use the Net or the back of a truck.

As you read through the FTC's Internet docket you also notice that, most of the time, the FTC succeeds in its prosecutions. The agency usually gets a court to issue an injunction or authorize the freezing of assets, and then the defendants settle with the FTC. In other words, even if you believe that we need a Federal agency to police the Internet, the system is working. The agency is successfully investigating and prosecuting the bad guys.

So what's the problem? Well, the FTC uses all these "Internet cases" to show how much the Net needs to be regulated. What these cases really show, of course, is that the FTC already has plenty of authority to fight online crimes. What the FTC wants now is new authority to punish websites for things that have never been crimes, online or off. In the name of privacy, the FTC wants to regulate the collection of information. And this represents a real threat to our liberty.

We live in a free and open society. Sometimes it's unsettling when companies or neighbors know a lot about us, but that's the price of an open society. There are also huge benefits to this kind of society, like the ability to get on the Internet or go to the library and learn everything there is to know about almost anything.

Before you sign on to laws allegedly protecting your right to privacy, ask yourself if you really want the Federal government regulating the flow of information in this country. Should Uncle Sam decide what you're allowed to know? What kind of records you're free to keep? What notes you can make after a meeting with which person? History says that our system has worked pretty well. In general, people have benefited when there is more information available, not less. So let's tell the FTC to stick to cramming cases.
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