A Report From the

Federal Trade Commission Staff

December 1999

The FTC’s First Five Years

Protecting
Consumers
Online

www.ftc.gov
FEDERAL TRADE COMMISSION, 1999
ROBERT PITOFSKY, Chairman

SHEILA F. ANTHONY, Commissioner

MOZELLE W. THOMPSON, Commissioner

ORSON SWINDLE, Commissioner

THOMAS B. LEARY, Commissioner

TABLE OF CONTENTS

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

In the Beginning... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A Blueprint for the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Rapid Changes in the Marketplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Stopping Fraud, Deception and Unfair Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Technology as a Tool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consumer Sentinel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Internet Lab . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Surf Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Law Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Technology-Based Scams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Traditional Scams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Traditional Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Rules and Guides . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
For Consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
For Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Protecting Consumers’ Privacy Online . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Globalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Law Enforcement Across Borders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Developing Policies for E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Appendix 1: Growth of Internet-related Cases, 1995 to 1999

Appendix 2: Forty-fold Increase in Online Distribution of
FTC Consumer Information, FY-95 to FY-99
Appendix 3: Chronology of FTC Internet Initiatives
 Executive Summary
In September 1994, the Federal Trade Commission brought its first law enforcement
action against a fraudulent online operator. In September 1999, it brought its 100th case to stop
an Internet scam. During these five years, the Internet came of age, taking consumers,
businesses, and law enforcement officials into a marketplace that offers unprecedented
challenges and opportunities.
The Commission’s experience in bringing consumer protection to cyberspace began with
self-education and discussion. Through a series of workshops and hearings, the FTC explored the
remarkable benefits of the new medium, the emerging consumer protection issues, and the art of
the possible: that is, how to address the issues in the most practical and effective ways. There
was considerable agreement on the broad issues, namely that basic consumer protection
principles should apply online, that government should tailor its efforts to avoid unnecessary
burdens that could hinder the development of the new marketplace, and that the public and
private sectors should partner where possible.
From this foundation, the Commission drafted the blueprint for its role in the nascent
marketplace. The overall goal: to protect consumers in an atmosphere that promotes the growth
of e-commerce. The tools: traditional law enforcement under existing statutes and rules;
consumer and business education; support of self-regulation; and the development of policy in
areas that raise new consumer protection concerns, such as online privacy and global electronic
commerce.
The FTC has targeted its online law enforcement efforts at fraud and deception. To
maximize its resources, it pioneered the use of the Internet as a law enforcement tool, and it has
shared its technology-based initiatives with law enforcers both across the nation and across our
borders. For example, it created Consumer Sentinel, now the largest database of consumer fraud
complaints in North America. Over 200 law enforcement partners in the U.S. and Canada have
free access to the data through a secure, searchable Web site, enabling more coordinated and
comprehensive law enforcement efforts aimed at the most prevalent frauds. In addition, the
Commission’s use of the “Surf Day” to find online scams has led to the identification of over

i
4,000 Web sites with dubious claims. First used by the FTC in 1996, “Surf Days” are de rigueur
at the Commission and other law enforcement agencies. Indeed, in the last three years, the
Commission has conducted 18 surfs with over 150 partners around the world.
With data from Consumer Sentinel, Surf Days, and other sources, the Commission has
successfully targeted its law enforcement efforts at the most egregious scams. Not surprisingly,
the Internet has been a fertile ground for fraud: it allows fraud promoters to mimic legitimate
business more convincingly -- and reach potential victims more efficiently and at far less cost --
than any other medium. The Commission’s cases reflect the broad range of illegal activity
online, from traditional scams like pyramids, medical quackery, and bogus investments to high-
tech frauds like “modem-jacking,” “page-jacking” and “mouse-trapping.” In addition, the
Commission has pursued online practices that violate traditional advertising principles, such as
the requirement for clear and conspicuous disclosures of material information. The goal of the
Commission’s law enforcement efforts is to ensure that existing consumer protection principles
apply to evolving forms of online advertising.
To date, the Commission’s 100-plus Internet-related cases have involved actions against
nearly 300 businesses and individuals on behalf of millions of consumers online. Each case was
supported by an active and creative consumer and business education program. For many
consumers, the Web continues to be an unfamiliar place, which makes practical, plain English
information on how to navigate safely especially important. Among the “products” the
Commission has spearheaded are “teaser” sites – Web sites that mimic scam sites but also alert
consumers to the telltale signs of fraud as they browse for products and services online. The
Commission also led the effort to establish consumer.gov, a one-stop Internet site that provides
access to consumer information from over 60 federal agencies. The FTC’s consumer and
business education publications have been online since February 1995, and have racked up over
five million page views since then.
The Commission also has extended its business guidance program to online marketers.
Many entrepreneurs, new to the Internet and to marketing, are unfamiliar with consumer
protection laws. And more experienced businesses face some novel issues in applying traditional
consumer protection laws in the online environment. The Commission made it a priority to

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provide business guidance to online entrepreneurs and has used a variety of approaches to get the
word out, including brochures (all downloadable), speeches, and email messages.
A major Commission policy initiative has been to address consumer concerns about
privacy online. After holding six public forums, conducting a major survey of online information
collection practices, and researching and writing four reports on the subject, the Commission has
become a credible source of information and a participant in task forces, working groups, and
international forums. In 1998, the Commission recommended legislation to protect the privacy
of children online; Congress responded by enacting the Children’s Online Privacy Protection
Act. The Commission has continued to support self-regulation to protect online consumer
privacy generally, and continues to monitor the progress of self-regulatory efforts.
The increasing globalization of e-commerce presents one of the next major challenges in
consumer protection. With respect to cross-border Internet fraud, the Commission has built on its
international experience in telemarketing fraud to improve information-sharing and coordination
among nations. The Commission also is playing an active role in fostering dialogue and
formulating policies needed to protect consumer transactions in the global marketplace.
A sage once said that predictions are difficult to make, especially when they are about the
future. Nevertheless, the Commission expects that as technology thrives and e-commerce
flourishes, consumer protection will be even more critical. Building on its five years of
experience, the FTC will continue to work with public and private sector partners to anticipate
and meet the challenges of the online marketplace.

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 In the Beginning . . .
Given the rapid pace of change, the window of opportunity to prepare for [the]
emerging challenges may be narrow. Government, consumer, and business
leaders need to move quickly. If they do, there is some chance to get ahead of
the problems. Global Hearing Report1

A Blueprint for the Commission

In the spring of 1995, the Internet was in its infancy as a commercial medium. Still, it
seemed likely that it would bring about revolutionary changes. When the staff of the FTC’s
Bureau of Consumer Protection held an informal workshop to learn more about the Internet, the
Commission’s efforts to educate itself about the online world were underway.2
In the fall of 1995, the Commission held extensive hearings on the implications of
globalization and technological innovation for both competition and consumer protection. In
four days of hearings on consumer protection, the Commission heard from members of the
information industry and online business community, privacy and consumer advocates,
government representatives, and experts in interactive technology. Consensus emerged on
several broad issues:
• basic consumer protection principles should apply in the electronic marketplace;
• government should tailor its efforts to avoid undue burdens on business and
technology;
• effective self-regulation should be encouraged; and
• the public and private sectors should work together where possible.
These hearings, as summarized in the staff report, Consumer Protection Policy in the
New High-Tech, Global Marketplace,3 provided a guide for the Commission in drafting its
approach to commerce in the new medium.

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 Rapid Changes in the Marketplace
Unique in many respects, the new marketplace is complicated by the astonishing pace of
growth and change. When the Commission brought its first Internet case in 1994, the electronic
marketplace was minuscule. Today, more than a third of all U.S. households are online,4 and
more than 80 million American consumers -- 40 percent of U.S. adults -- are accessing the
Internet.5 Children and seniors, two of the demographic groups most vulnerable to fraud, also are
going online in increasing numbers.6
The online medium has changed since 1994 and the advent of commercially-available
Web browsers, evolving from a source of unadorned information used mainly by scientists and
the military to a rich, slick, interactive environment with music, video, 3D, voice, cameras, and
animation. An explosion in online advertising has accompanied these changes: online ad
revenues in the U.S. grew from $300 million in 1996 to almost $2 billion in 1998.7 Industry
observers expect that global online advertising will expand at a similar pace.8 Online advertising
revenues exclusive of the U.S., estimated at slightly over $500 million for 1999, are expected to
reach $11 billion by 2004.9
The speed at which U.S. consumers have embraced the new technology has been nothing
short of extraordinary. To reach audiences of 50 million Americans, radio took 38 years,
network television took 13 years, and cable television took 10 years.10 Yet, once the first Web
browser became widely available, it was a mere three years before the Internet counted 50
million domestic users.11 The growth in Internet users worldwide also has been explosive. An
estimated 171 million people use the Internet worldwide, up from 121 million only a year ago.12
An estimated 46 percent of Internet users reside outside North America, up from 35 percent in
1998.13
The reasons for the boom are well-documented. Hardware and software are more
powerful, less expensive, and easier to use. The 24-hour nature of the Internet has revolutionized
the way consumers seek and obtain information, goods and services. The result: consumers are
online at their convenience, searching for entertainment, information, and advice on everything
from health and investments to vacation destinations and automobiles. Shopping has become a
major online activity. More than two-thirds of online consumers are using the Internet to

2
research products or services that they buy offline, but more than a quarter have purchased goods
or services online.14 Consumer online sales, estimated at over $7 billion for 1998, are projected
to reach $12 billion to $18 billion this year.15
Still, the marketplace poses new risks for consumers. It is just as attractive to the
fraudster as it is to the legitimate business. It is cheap and easy to enter, and it enables a
worldwide reach. It offers anonymity and easy exit, often before authorities have the chance to
detect wrongdoing. The challenge for law enforcement is to identify and stop wrongdoers before
they can harm individual consumers and undermine confidence in the marketplace.

3
 Stopping Fraud, Deception and
Unfair Practices
There is no sign that low-tech scams will go away, and strong evidence
that “next tech” scams will increase and be more difficult to detect and
track across international borders. Global Hearing Report16

Technology as a Tool
In the electronic marketplace, frauds can appear suddenly, spread rapidly, and disappear
without notice or warning. Law enforcement has to be just as fast. The FTC uses technology-
based tools -- some of which it pioneered -- to protect consumers. Among these tools are
Consumer Sentinel, Internet “Surf Days,” and the Internet Lab.

Consumer Sentinel
In 1997, the Commission established Consumer Sentinel, a consumer fraud complaint
database available online to law enforcement officials across the U.S. and Canada. Consumer
Sentinel is a “first” in the use of technology to achieve consumer protection.17 Through a secure
Web site, law enforcement officials can access data that provide information about particular
wrongdoers and show trends at the local, national and international levels. The site also offers
members access to a wealth of other information,18 a secure way to communicate with one
another online, and automatic updates.19 The data and services are upgraded as technology and
resources allow, and are provided free to Consumer Sentinel members.
With over 200,000 complaints, Consumer Sentinel is the largest North American
consumer fraud database. It is likely to maintain that position. During the first nine months of
1999, for example, the number of complaints in the database increased on average by 6,000 a
month. Most fraud data are supplied by consumers who call the FTC’s toll-free telephone
number or use its online complaint form,20 and by law enforcement agencies and consumer
organizations such as the National Fraud Information Center, a project of the National
Consumers League, members of the Better Business Bureau, and Canada’s PhoneBusters. The
number of organizations contributing data -- and the number of law enforcement agencies

4
retrieving data -- continue to grow.21 More than 210 officials are members, including State
Attorneys General, U.S. Attorneys, local district attorneys and sheriffs, the FBI, the U.S. Postal
Inspection Service, and the Royal Canadian Mounted Police.
Consumer Sentinel demonstrates how Internet technology is changing the way law
enforcement is done. It enables a fast and well-coordinated response to the most serious fraud
problems across North America, and it has the potential to allow us to meet some of the most
vexing challenges of the increasingly global marketplace. Two recent initiatives are noteworthy:
• Rapid Response: To pursue the most pernicious schemes, the Commission
created an Internet Fraud Rapid Response Team. It monitors the complaint
database, spots emerging frauds, and puts matters on a fast track for litigation or
settlement. In FTC v. Benoit, the team’s first case, the FTC obtained an
injunction to stop a scheme dealing with deceptive spam within three weeks of
identifying it on the Internet.22
• Global Information Sharing: To address the increasing problem of “borderless”
Internet fraud that can quickly affect consumers in every corner of the globe, the
Commission has begun to share information from its database when requested by
enforcement officials around the world. Such information sharing among
countries is essential to the success of efforts to coordinate law enforcement.

Internet Lab
To keep pace with rapidly changing Internet-related technology, the Commission
established an Internet Lab in 1999. Equipped with state-of-the-art personal computers, the Lab
is a resource for ongoing efforts to educate ourselves about the new media and to search for fraud
and deception in a secure environment. It provides the necessary equipment and software to
capture Web sites and preserve them as evidence for presentation in court.
The Lab also provides the latest tools for staff to track how technology is changing the
way commercial information is transmitted to consumers. Unlike advertising in traditional
media, advertising in electronic media may vary in content and appearance depending on the
appliance and Web browser used by the consumer. Commission staff analyze these

5
developments as they attempt to ensure that traditional consumer protection principles are
applied in this ever changing medium.

Surf Days
The Commission devised the Internet “Surf Day” in 1996 as an efficient way to look for
pyramid schemes online. Since then, the law enforcement Surf Day has become a popular tool
for the Commission and other agencies to identify online scams of all kinds. In the past three
years, the Commission has participated in some 18 Surf Days with over 150 agencies in the U.S.
and 25 other countries, identifying an estimated 4,000 commercial Web sites making apparently
false or misleading claims. The Commission also has used Surf Days to get a snapshot of other
online practices, such as the posting of privacy policies and the nature of information about Y2K
compliance. FTC Surf Days have focused on:
• Health Claims. In 1997 and 1998, the Commission participated in two Surf Days
with officials from 25 countries to learn about Web sites promoting products to
treat six major diseases.23 In just a few hours, law enforcement agents were able
to identify approximately 800 Web sites and Usenet newsgroup messages making
questionable claims.
• Pyramids. In 1996 and 1999, two Surf Days with dozens of states, the SEC, and
the U.S. Postal Inspection Service found over 1,000 Web sites promoting
apparently unlawful pyramid schemes.
• Business and Investment Opportunities. In 1997 and 1998, Surf Days with
participation by more than 50 federal and state agencies identified over 600 Web
sites making questionable business and investment opportunity claims.
• Junk Email. The FTC browsed its own enormous database of unsolicited email --
which the Commission had invited consumers to forward -- and found over 1,000
of them problematic.
An efficient tool, the law enforcement surf accomplishes two objectives: it provides a
window for law enforcement to learn about online practices,24 and it provides an opportunity for
the FTC to alert Web site operators -- some of whom are new entrepreneurs unaware of existing

6
laws -- if their sites appear to violate the law. This is done by emailing messages to the operators
of sites with problems, explaining why their sites may violate the law and providing a link to the
FTC Web site, where more information is available. Follow-up visits reveal that of the operators
who are notified that their sites may violate the law, 20 to 70 percent improve or remove their
sites. Web site operators who continue questionable practices may become the subjects of FTC
law enforcement efforts.

Law Enforcement
Since September 1994, the Commission has used its law enforcement authority to bring
over 100 Internet-related cases. (See Appendix 1.) In every case, the Commission stopped the
illegal conduct. Where possible, assets were recovered to redress consumer losses.
Many of the Commission’s Internet cases are characterized as old wine in new bottles.
They involve traditional scams that simply changed venues -- for example, bogus investments,
sure-fire cures, and “guaranteed” money-making opportunities. Increasingly, however, scams
involve the use of technology to create devious new ways to cheat consumers. Whether
traditional or new, scams using the Internet spread quickly and can do enormous damage. For
this reason, the Commission has placed identifying and stopping online fraud on its list of top
law enforcement priorities.
Legitimate companies, of course, also run afoul of consumer protection laws, and as the
Web becomes a mainstream market, the number and types of online violations increase. The
FTC has brought cases that establish that traditional consumer protection principles, as well as
the Commission’s Rules and Guides, apply to advertising and marketing on the Internet. Where
unique features of online advertising raise new legal issues, the Commission has provided
important guidance.
The FTC’s authority to challenge online practices of both fraudulent actors and
mainstream advertisers stems from its broad jurisdiction under the FTC Act, which prohibits
unfair and deceptive acts or practices.25 To stop scams, the Commission seeks injunctions and
other equitable relief in federal court.26 Often, the Commission first obtains a temporary
restraining order that freezes the company’s assets and appoints a “receiver” to temporarily take

7
over the business. As the case proceeds, the Commission seeks preliminary and permanent
injunctions that bar the challenged practices and may require refunds to consumers injured by
defendants. Many cases are settled early in the litigation.
Depending on the nature of the alleged law violation and in cases where immediate
injunctive relief is not needed, the Commission proceeds under its administrative authority.27
Commission staff typically contact the subjects of an investigation to obtain information and
often attempt to settle the case before the Commission formally issues an administrative
complaint.
Some of the Commission’s most significant Internet-related law enforcement initiatives
follow.

Technology-Based Scams
Technology-based scams not only cheat consumers, but also undermine confidence in e-
commerce.
Hijacking. Scams involving hijacking modems and Web sites, which are unique to the
Internet, exploit its special features to trick consumers.
• FTC v. Carlos Pereira Defendants in Portugal and Australia “captured”
unauthorized copies of U.S.-based Web sites and produced look-alike versions
that were indexed by major search engines. This process diverted unsuspecting
consumers to a sequence of pornography sites from which they could not exit,
essentially “trapping” them at the site. The FTC obtained a court order stopping
the scheme and suspending the defendants’ Web site registrations.
• FTC v. Audiotex Connections; Beylen Telecom The defendants used software on
their sites that silently hijacked consumers’ modems as they downloaded
information from the sites; the consumers were disconnected from their local
Internet service providers without their knowledge and connected to another
provider at costly international telephone rates to Moldova. The defendants made
their money through “kickbacks” from foreign telephone companies. The FTC
obtained full redress of $2.1 million for over 25,000 consumers.

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 Spam. Unsolicited commercial email is a cheap and anonymous way to reach huge
numbers of consumers quickly. In the past two years, the Commission has targeted cases
involving deceptive spam, including:
• FTC v. Benoit (originally FTC v. One or More Unnamed Parties) The defendants
sent consumers emails stating that their “order” had been received, that their credit
card had been charged $250 to $899, and that to cancel the order, they could call a
specified number. The email was a ploy to dupe consumers into making an
expensive international call. The fraudsters got a “kickback” on each
international call. The Commission obtained preliminary relief; the case
continues in litigation.
• FTC v. Internet Business Broadcasting; LS Enterprises The defendants in these
two cases used spam to sell work-at-home and business opportunity schemes.
The Commission obtained orders barring the conduct in the future and providing
additional equitable relief, including $613,000 in consumer redress in the Internet
Business Broadcasting case.
• FTC v. Dixie Cooley; U.S. v. A. James Black The defendants used spam to
promote bogus services to repair credit reports that contain negative, but accurate,
information. Injunctions and consumer redress were obtained in both cases.
“Web Cramming.” The practice of billing for unauthorized services, cramming first
emerged in connection with billing for telephone services. The Commission successfully
brought a number of cases to stop the practice. When fradusters began billing for unauthorized
Internet-related services, the Commission acted again:
• FTC v. J.K. Publications Eleven defendants were charged with billing
consumers’ credit or debit cards for Internet services they had never heard of, let
alone ordered. The Commission obtained an order enjoining the practices and
contempt orders against several defendants for failing to disclose or repatriate
assets of over $8 million. One defendant was incarcerated. Litigation continues.
• FTC v. U.S. Republic Defendants were charged with billing small businesses for
Web site services after promising a “free trial period” during which no charges

9
 would be billed without affirmative authorization. The settlement prohibits the
defendants from cramming and misrepresenting Web site services and requires
U.S. Republic to notify and offer refunds to as many as 124,000 small business
and organizations. As security for victims, the order requires U.S. Republic to
maintain a $1.8 million letter of credit payable to the FTC during the redress
process.
• Small Business Sweep In four separate cases, the FTC charged 19 defendants with
defrauding small businesses by billing for services the defendants had promoted
as “free.” The services involved creating Web sites. Litigation is ongoing.

Traditional Scams
Many scams with long histories offline have moved online, where they spread quickly
across the U.S. and around the world.
Pyramid Schemes. The Internet has become an especially fertile ground for pyramid
schemes. To stop these schemes, the Commission is leading a coordinated effort with the states
to continue the crackdown. Cases and initiatives include:
• FTC v. Fortuna Alliance The defendants used a high-tech chain letter scheme to
recruit at least 25,000 consumers around the world. The FTC obtained an order
for $5.5 million in refunds for over 15,500 consumers in the U.S. and 70 foreign
countries.
• FTC v. FutureNet The defendants ran a multi-level marketing operation. The
FTC obtained an order requiring the defendants to pay $1 million in consumer
redress and to post a sizeable bond before they engage in any future multi-level
marketing operation.
• FTC v. Nia Cano The defendants used live sales presentations to recruit new
members, who in turn used the Internet to try to recruit other members downline.
The FTC obtained an order requiring $2 million for consumer redress.

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 • FTC v. Equinox International and FTC v. Five Star Auto Club In these recent
cases involving multi-million dollar pyramid operations, the courts ordered
preliminary relief with asset freezes and appointment of receivers pending trial.
• The Rolling Internet Pyramid Sweep This FTC-led initiative with state and
federal partners has produced 33 law enforcement actions against 67 defendants in
1999 alone. Joint law enforcement efforts will continue.
Credit scams. Perpetrated mostly by small operators, credit scams also have proliferated
on the Internet. The FTC has brought over 25 cases, including:
• FTC v. Corizine The Commission’s first Internet case, brought in September
1994, involved a defendant who promoted credit repair kits online. After the FTC
obtained preliminary relief, the case settled.
• Operation New ID/Bad Idea I & II These FTC-led law enforcement sweeps,
involving more than a dozen federal, state, and local law enforcement agencies,
produced 59 cases which involved false claims that consumers could clean up
their credit histories by obtaining a new identification number, such as a taxpayer
I.D. number.
Auctions. Complaints to the Commission about online auctions soared in 1999 --
increasing from an average of 50 a month to 1,000 a month.28 Most complaints involve failure to
deliver the merchandise: consumers “win” the auction, send their money, but never receive the
goods. The sellers often are individuals or small operators located across the country. The
Commission has tailored its initiatives to fit these circumstances.
• FTC v. Hare The Commission’s first online auction case involved a defendant
who used various Internet auction houses to sell computers and computer-related
equipment that he did not have. The Commission obtained an order banning the
defendant from selling online and referred the case to the U.S. Department of
Justice for criminal prosecution. The defendant pled guilty to wire fraud, was
sentenced, and has been ordered to pay consumer redress.
• Operation Safebid In 1999, the Commission initiated a law enforcement program
with local, state, and federal agencies to prosecute Internet auction fraud where

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 the wrongdoers are located. The Commission has conducted four training
sessions involving over 100 enforcement officials, and shared complaint data
from Consumer Sentinel. To date, these efforts have resulted in two civil and
three criminal prosecutions; a number of cases are under investigation.
Business and Investment Opportunity Scams. Amid the daily news reports about the
Internet’s astonishing growth and the potential of startup “dot com” companies, consumers are
especially susceptible to scams involving technology and Internet-related business and
investment opportunities. The Commission has stopped a number of such scams through law
enforcement actions:
• FTC v. Intellicom Services The Commission charged the defendants with
deceptively promoting partnership interests in hi-tech ventures involving Internet
access and Internet shopping malls. Settlements involving 27 defendants included
over $24 million in monetary judgments.
• Project NetOpp The Commission brought five cases involving false earnings
claims in selling business opportunities for hi-tech products and services such as
computer kiosks, Web site design and development, and Internet access. The
cases, which involved 27 defendants, resulted in over $3.5 million in redress.
Many of the defendants are banned from marketing any business opportunities in
the future or required to post substantial bonds before doing so.
• FTC v. iMall The defendants were charged with making false earning claims in
promoting opportunities to sell Web sites on the iMall site and advertising in its
Internet Yellow Pages. Three respondents agreed to pay $4 million in redress.
• FTC v. Infinity Multimedia In promoting a CD-ROM display rack business, the
defendants made unsubstantiated earnings claims. In the first case to apply the
FTC’s Franchise Rule to online marketing, the Commission obtained an order
requiring $340,000 in consumer redress.
• FTC v. World Interactive Gaming Corp. The defendants were charged with
making false investment claims in marketing shares in an Internet gambling

12
 casino. About 200 consumers invested $2 million in the venture. Litigation is
ongoing.
Health Claims. Consumer online searches for health information are increasing
dramatically; it is predicted that 30 million Americans will seek health information online by
2001. The Commission has made the burgeoning number of false or unsubstantiated health
claims online a law enforcement priority.
• Operation Cure.All The Commission brought four cases against the marketers of
products such as magnetic therapy devices, shark cartilage, and CMO
(cetymyristoleate) for their claims that these products could cure a host of serious
diseases, including cancer, HIV/AIDS, multiple sclerosis, and arthritis. All the
companies, which used Web sites to market the products and recruit distributors,
entered into settlements with the Commission.
• FTC v. Slim America, Inc. The defendants were charged with falsely advertising
that their weight loss product would produce dramatic weight loss results. After a
trial, the Court ordered the defendants to pay $8.3 million in consumer redress and
ordered the individual defendants to post multi-million dollar bonds before
engaging in the marketing of weight loss or other products and services.
• FTC v. American Urological Clinic The defendants touted “Vaegra,” a sham
“Viagra” and other impotence treatment products, claiming that the products had
been developed by legitimate medical enterprises and proven effective. The
Commission obtained an $18.5 million judgment that requires the defendants to
post a $6 million bond before they promote any impotence treatment in the future.
• FTC v. Rose Creek Health Products The Commission charged the defendants
with making false claims that its “Vitamin O” added oxygen to the bloodstream
and could cure or prevent cancer, heart disease, and lung disease. The
Commission obtained preliminary relief, and litigation continues.

13
Traditional Advertising
While fighting fraud is a major law enforcement priority, the Commission also has
focused resources on the application of traditional advertising law and its Rules and Guides to
online marketing by national advertisers. It has brought a number of law enforcement actions
and reviewed a number of Rules and Guides to clarify the fact that the fundamental principles of
consumer protection apply online. The cases involve an array of practices, including the alleged
deceptive promotion of online services, hidden contract terms, and deception in the collection
and use of personal information.
• America Online; CompuServe; Prodigy In 1997, the Commission challenged the
leading Internet service providers for using misleading promotions to recruit
consumers going online. Among the practices alleged were the deceptive use of
the term “free trial,” inadequate disclosures about cancellations, and the
unauthorized debiting of consumer accounts. The companies agreed to consent
orders that prohibit misrepresentations about the terms of trial offers and require
clear disclosures about electronic fund transfers from consumers’ accounts.
• Dell Computer; Micron Electronics In advertising their computer leasing plans
online, these companies placed material cost information in inconspicuous areas,
or omitted the information altogether. The Commission obtained consent orders
requiring the companies to clearly and conspicuously disclose all material leasing
terms in their Internet and other advertising.
• GeoCities In its first Internet privacy case, the Commission charged the company
with misrepresenting the purpose for which it was collecting information from
children and adults. Under a settlement, the company agreed to post a prominent
privacy notice and obtain parental consent before collecting information from
children under age 13.
• Liberty Financial The FTC charged the company with falsely representing that
personal information collected from children on its Young Investor Web site
would be maintained anonymously. Under a settlement, the company agreed to

14
 post its privacy policy on its Web sites and get verifiable parental consent before
collecting information from children under age 13.

Rules and Guides

As part of a systematic review of its Rules and Guides to determine whether they are still
relevant or should be modified or rescinded, the Commission has analyzed them one-by-one to
consider their applicability to online marketing. Where appropriate, the Commission has
amended a Rule or Guide to clarify that the scope reaches electronic media, including the
Internet.29 The Commission also has taken steps to ensure compliance with its Rules and Guides
so that consumers who shop online are afforded the same protections they enjoy offline.
Examples include:
• FTC v. Brandzel In its first case involving promotions in Usenet newsgroup
messages and online bulletin boards, the Commission charged the defendants with
violating the Mail Order Rule for failing to deliver computer memory chips it sold
consumers. The Commission obtained a permanent injunction.
• U.S. v. Iomega Corp. The Commission charged this large manufacturer of data
storage products such as the “Zip Drive” with failing to deliver cash rebates and
product premiums advertised online. In the settlement, the defendant agreed to
pay $900,000 in civil penalties, the highest penalty the FTC has ever obtained for
non-fraudulent violations of the Mail Order Rule.
• Wal-Mart; Burlington Coat Factory Warehouse; Delia’s; Woolrich; Gottschalks;
Bugle Boy Industries The FTC alleged that these apparel sellers violated the
origin disclosure requirements of the revised Textile and Wool rules in their
online catalogs. The companies entered into consent agreements, ensuring that
consumers will receive the same information no matter how they do their
shopping.
Some aspects of the electronic medium -- hyperlinking, scrolling, banners, and animation
-- raise novel questions about the interpretation of common legal terms, such as requirements that
disclosures be “clear and conspicuous” and that information be “written,” “in writing,” or

15
“printed.” To seek guidance in this area, the Commission held a Public Workshop on the
Interpretation of Rules and Guides for Electronic Media.30 Representatives of the advertising
industry, online businesses, and consumer groups and technology experts discussed the
application of particular legal requirements in the online environment in light of technological
developments, the way that consumers use the Internet to shop online, and the practical
implications of various approaches. A staff report on the Workshop is forthcoming.

Education
For Consumers
Acting on the belief that the most effective consumer protection is education, the FTC
seeks to alert as many consumers as possible to the telltale signs of fraud, the importance of
privacy in the information age, and other critical consumer protection issues. Use of the Internet
to develop and disseminate information about fraud and technology-related matters is integral to
the FTC’s education, deterrence, and enforcement efforts and has allowed the agency to reach
vast numbers of consumers and businesses quickly, simply and at low cost. Indeed, using links,
“teaser” Web sites and tutorials, the Commission has been at the forefront of using the Internet to
educate and empower consumers.
Dissemination. More than 200 of the consumer and business publications produced by
the FTC’s Bureau of Consumer Protection are available on the agency’s Web site. Indeed, the
difference in the number of publications viewed online in 1995 and 1999 (62,783 page views vs.
2.5 million page views) tells the story of the Internet’s coming of age as a mainstream medium
and its importance to any large-scale dissemination effort. (See Appendix 2.)31 The Commission
also has developed interactive puzzles and games to reinforce the concepts spelled out in its
brochures, one-page “news you can use” consumer alerts, and graphics. In addition, to support
the first National Consumer Protection Week, the Commission created a newsletter featuring an
online crossword puzzle, a true-false quiz and a word find that focused on credit terms. It was
distributed electronically to consumer agencies, law enforcement officials and corporations.
Teaser Sites. Among the education challenges the Commission faces is how to reach
consumers before they fall victim to a fraudulent scheme. Knowing that many consumers use the

16
Internet to shop for information, agency staff have developed “teaser” sites that mimic the
characteristics that make a site fraudulent. Metatags embedded in the FTC sites make them
instantly accessible to consumers who are using major search engines and indexing services as
they look for products, services, and business opportunities. Within three clicks, the “teaser”
sites link back to the FTC’s site. There, consumers can find the practical, plain English
information they need to learn to recognize fraudulent claims. The agency has developed 13
such “teaser” sites on topics ranging from health care products to scholarship services to vacation
deals and investments, and feedback from the public has been overwhelmingly positive. Many
visitors express appreciation -- not only for the information, but for the novel, hassle-free and
anonymous way it is offered.32
Partnerships. The Commission actively encourages partners – government agencies,
associations, organizations, and corporations with an interest in a particular subject – to link to
FTC information from their sites and to use the banner public service announcements the
Commission makes available. Links from the banners allow visitors to click through to the FTC
site quickly to get the information they are looking for exactly when they want it. Among the
varied organizations that have helped drive traffic to the consumer information on www.ftc.gov
are Yahoo!, American Express, Circuit City, AARP, North American Securities Administrators
Association, the Alliance for Investor Education, the Better Business Bureau, CBS, the Motley
Fool, the U.S. Patent and Trademark Office, Shape Up America!, the National Institutes of
Health, and the Arthritis Foundation.
Consumer.gov. Armed with a vision of the Internet as a powerful tool for consumer
education and empowerment, the Commission convened a group of five small federal agencies in
1997 to develop and launch a Web site that would offer one-stop access to the incredible array of
federal consumer information. On the theory that consumers may not know one federal agency
from another, the information is arranged topically. Federal agencies and consumers have
responded well to www.consumer.gov. The site now includes contributions from more than 60
federal agencies, and racks up some 50,000 user sessions a month that last an average of over 4
minutes each. The site also houses special initiatives: a Y2K consumer information site on
behalf of The President’s Council on Y2K Conversion; a site on health care quality on behalf of

17
the Quality Interagency Coordination Task Force; and a site supporting the kNOw Fraud
initiative, the public-private campaign that involves sending postcards about telemarketing fraud
to 115 million American households. The original www.consumer.gov team received the
Hammer Award for its efforts, and the Commission continues to maintain the site.

For Business
As part of its mission, the Commision provides guidelines to online marketers on how to
assure that basic consumer protection principles apply in cyberspace. Many of these Internet
entrepreneurs are new to marketing in general and may be unfamiliar with consumer protection
laws. With even experienced marketers raising novel issues in their efforts to apply traditional
consumer protection laws to the online environment, the Commission has used a variety of
approaches to get its consumer protection messages out to the business community, including
compliance guides, brochures, speeches at industry and academic meetings and conferences,
emails and Web-based public service announcements, staff advisory letters on www.ftc.gov, the
trade press, and posting the transcripts of workshops.

18
 Protecting Consumers’ Privacy Online
New technologies are pushing some new issues - - such as privacy, security and
marketing to children - - to the forefront of public debate. Global Hearing
Report33

One of the Commission’s major policy initiatives has been to address online privacy -- an
area of considerable concern to consumers. Technology has made it possible to collect, store,
and market personal information on an unprecedented scale.34 Indeed, it is possible to collect
information in ways that may not be evident to the average consumer35 and to collect it from
children in ways that circumvent the traditional gatekeeping role of parents.36
One recent survey found that 87 percent of experienced Internet users were somewhat or
very concerned about threats to their privacy online.37 Another revealed that consumers who do
not use the Internet ranked concerns about privacy as the top reason for not going online.38 And
when it comes to children, privacy concerns are greater still: 97 percent of parents whose
children are online believe that sites should not sell or rent personal information relating to
children, while 72 percent object to any collection of the names and addresses of children, even if
the information is only to be used internally.39 Online privacy concerns businesses, too: If the
new marketplace doesn’t have the confidence of consumers, it will not develop to its fullest
potential.
The Commission has explored the need for new policies and legal principles that will
address consumer concerns and support the development of e-commerce. Activities include:
• Public Forums Since 1995, when online commerce was just taking off, the
Commission has held six public forums exploring privacy issues.
Representatives of a wide range of interests discussed how – and how much –
information is being collected, the level of consumer concern, the special case of
children’s privacy, the proliferation of spam, individual reference or “look-up”
services, the role of self-regulation, and technology-based solutions, among other
topics.

19
• Web Survey In March 1998, the Commission staff surveyed more than 1,400 Web
sites, including over 200 sites directed to children, to learn about online
information practices. Among the findings: the vast majority of sites collected
personal information;40 a small percentage provided a privacy policy notice;41 and
only a small fraction of children’s sites provided for parental consent prior to the
collection or disclosure of children’s information.42
• Legislative Recommendations In its June 1998 report, Privacy Online: A Report
to Congress, the Commission concluded that self-regulation had not yet taken
hold and that legislation to protect the online privacy of children was warranted.
It deferred judgment on the need for broader privacy legislation. Four months
later, Congress passed the Children’s Online Privacy Protection Act (COPPA),43
which requires operators of Web sites directed to children to give parents notice
of their information practices and get verifiable consent to collect and use their
children’s personal information, among other provisions. The law’s “safe harbor”
provision allows industry groups to follow self-regulatory programs that meet the
standards of the statute and have the approval of the Commission.
• Rulemaking COPPA mandated that the Commission issue a rule to implement the
statute within one year of its enactment. The Commission published a proposed
rule for comment in April 1999, and three months later, held a workshop to
discuss some of the more challenging issues, such as how to implement the Act’s
requirement for verifiable parental consent. The final rule was issued on October
20, 1999 and becomes effective on April 21, 2000.
• Policy Recommendations In 1999, industry funded two surveys of Web sites.
Both showed that the number of sites giving notice to consumers about
information practices had increased substantially since the Commission’s survey a
year earlier. On the basis of the industry surveys and in light of other self-
regulatory efforts, a majority of the Commission concluded that while much
remained to be done, industry leaders were demonstrating effort and a
commitment to fair information practices and that legislation was inappropriate at

20
 the time.44 In July 1999, the Commission published Self Regulation and Privacy
Online: A Report to Congress, renewing its call for vigorous industry efforts to
expand and improve self-regulatory programs and its commitment to monitoring
self-regulatory programs.45
• Next Steps In congressional testimony in the summer of 1999, the Commission
outlined its privacy agenda for the next year. Among the initiatives is a
Commission survey to reassess progress in Web sites’ implementation of fair
information practices, the results of which will be reported to Congress.

21
 Globalization
Business and consumer groups have encouraged the Commission to be more
pro-active on the international scene in promoting both its consumer protection
standards and its market-based approach to regulation. The Global Hearing
Report46

Still another major challenge for consumer protection stems from the increasing
globalization of the electronic marketplace. Globalization offers businesses a bigger market and
consumers more choice, but it also presents more risk. Cross border fraud is harder to discover
and stop, redress for consumers is more difficult to achieve, and legitimate companies face
uncertainty about the legal standards that apply to global transactions. As e-commerce goes
global, the Commission is involved on two fronts: law enforcement and policy development.

Law Enforcement Across Borders

Increasingly, Internet fraud involves operators located in distant places. The FTC’s
pagejacking case, for instance,47 involving defendants in Australia and Portugal, may become
more typical.48 To address this phenomenon, the Commission is developing new ways to share
information and cooperate in law enforcement initiatives:
• International Web Site The Commission led the development of imsnricc.org, a
Web site for the International Marketing Supervision Network. The IMSN is a
membership organization of the trade practices law enforcement authorities of
more than two dozen countries, most of which are members of the Organization
for Economic Cooperation and Development (OECD). The Web site, portions of
which are accessible only to members, provides information about Internet
developments affecting consumers, legal issues, and investigations. The
Commission assumes the presidency of the IMSN in the fall of 2000.
• International Surf Days The FTC has participated with over 25 countries in surfs
of the Internet. These activities have uncovered fraud that is worldwide in nature.
Such joint efforts will continue with even more countries.

22
 • Consumer Sentinel Complaint data, currently shared with Canadian officials, now
is being provided to other countries on a case-by-case basis.
• Case Cooperation More and more, the Commission is assisting and receiving
help from law enforcement agencies around the world. Cooperation ranges from
complaint sharing to coordinated law enforcement actions.
• International Consumer Redress When scams occur, the Commission seeks
redress for all injured consumers, no matter where they live. Thus far, five
Internet-related Commission cases have involved redress for foreign consumers in
over 70 countries.49 No doubt, this number will grow as the volume of
international consumer transactions skyrockets.

Developing Policies for E-Commerce

Increasingly, the Commission is active in the public policy debate on the international
consumer protection principles that should govern the new global marketplace.
• International Guidelines The Commission heads the U.S. delegation to the
OECD’s Consumer Policy Committee, which is developing international
guidelines for consumer protection in electronic commerce.
• International Workshop The Commission held a workshop in July 1999 to further
the dialogue on issues raised by the guidelines. Over a hundred participants
attended and explored questions of jurisdiction, conflicts of laws and the roles of
the private sector and international bodies in addressing consumer protection
issues.
• International Forums The Commission is participating in a broad range of
forums examining issues affecting e-commerce, including the Transatlantic
Business Dialogue, the Transatlantic Consumer Dialogue, the Global Business
Dialogue on e-Commerce, the Free Trade Area of the Americas, the Asian Pacific
Economic Conference, and the European Commission.

23
 Conclusion
With the rapid growth and change in online technology, the need for consumer protection
online continues. Indeed, consumer protection is the cornerstone for consumer confidence in the
e-marketplace. Building on its long history of protecting consumers offline and its recent
experiences protecting consumers in cyberspace, the Commission looks forward to continuing its
efforts with public and private sector partners to meet the challenges of the online marketplace.

24
 Endnotes

1. FTC Staff Report, Anticipating the 21st Century: Consumer Protection Policy in the
New High-Tech, Global Marketplace (May 1996) at 45 [hereinafter “Global Hearing
Report”] (available on the Commission’s Web site at http://www.ftc.gov/opp/global.htm).

2. Since the spring of 1995, there have been seven workshops and hearings related to the
Internet. They focused on a range of issues including online privacy, global e-commerce,
and the application of existing rules to online transactions. These discussions have
proved invaluable to the Commission as it has carried out its mission under the Federal
Trade Commission Act to protect consumers in the electronic marketplace from unfair or
deceptive acts or practices.

3. See supra note 1.

4. Nielsen//Net Ratings (Nielsen Media Research and Net Ratings, Inc.), March 22, 1999
press release (available at http://www.nielsenmedia.com).

5. Intelliquest Information Group, Inc., Worldwide Internet/Online Tracking Service 1st

Quarter 1999 Report (available at http://www.intelliquest.com).

6. Almost 9 million children age five through twelve are estimated to be online. Jupiter
Communications, Inc./NFO Interactive, Consumer Survey (June 7, 1999). Seniors are
among the most active purchasers of goods online according to a recent study. Greenfield
Online, Surfin Seniors Study (Aug. 1999). The study found that 78% of online seniors
had bought online, and that the number of seniors purchasing books, computer hardware
and software, and clothing was about twice that of all Internet users. Id.

7. Internet Advertising Bureau, Internet Advertising Revenue Report (May 1999); Jupiter
Communications, Inc., 1998 Online Advertising Report (available at
http://www.jup.com/jupiter/press/releases).

8. Throughout the world, almost 11 million domain names were active as of September
1999, of which almost 7 million were for the .com domain (figures are from data
automatically generated on a daily basis from NameCrawler database operated by
NetNames International Ltd.). Over 56 million “hosts,” or uniquely reachable computers,
were hooked into the Internet, representing an astonishing growth of over 800% from the
6 million “hosts” connected to the Internet in 1995. Internet Software
Consortium/Network Wizards, Internet Domain Survey (July 1999 and January 1995).

9. See Forrester Research, Inc., Internet Advertising Skyrockets (Aug. 1999).

25
10. Morgan Stanley Dean Witter, The Internet Company Handbook at 205 (June 1999)
(available at http://www.msdw.com/techresearch/netcomhdbook/info.html).

11. Intelliquest Information Group, Inc., Worldwide Internet/Online Tracking Service 4th
Quarter 1997 Report (available at http://www.intelliquest.com).

12. CommerceNet and CommerceNet Global Partners, World Wide Statistics. Europe and
Asia account for the largest increases outside the U.S. and Canada.

13. Id.

14. Intelliquest Information Group, Inc., Worldwide Internet/Online Tracking Service 1st
Quarter 1999 (results available at http://www.intelliquest.com).

15. Jupiter Communications, Inc., 1999 Online Shopping Report (available at

http://www.jup.com/jupiter/press/releases); Forrester Research, Inc., Report: Retail’s
Growth Spiral (Nov. 1998).

16. Global Hearing Report, supra note 1, at ii..

17. In 1998, this initiative was awarded the Interagency Resources Management Conference
Award.

18. Among other things, Consumer Sentinel gives members the ability to search the National
Tape Library, a clearinghouse of undercover tape recordings of telemarketing sales calls,
and to obtain a tape request form online; it also provides an Internet resource bookmark
list, a library of pleadings, newsletters, and other information of value to law enforcement
officials.

19. Consumer Sentinel allows members to submit an “Auto Query” on scams or possible
targets and to get emailed reports whenever relevant new complaints are entered in the
database.

20. In the fall of 1998, Congress appropriated funds for a toll-free number. The number, 1-
877-FTC-HELP (1-877-382-4357), was announced on July 7, 1999. In 1998, the
Commission began accepting complaints electronically. The online complaints now are
averaging 1,000 a week, which also is the number of letters the Commission receives in a
week; telephone calls are averaging 6,000 a week.

21. Other complaint data contributors have included, the AARP, Xerox Corporation, Yellow
Pages Publishers Association, federal, state and local agencies, and others.

22. This case is described more fully at p.9. Since it began operation in the spring of 1999,
the Rapid Response Team has brought five federal court cases.

26
23. The Surf Days focused on products for treating heart disease, cancer, AIDS/HIV,
diabetes, arthritis, and multiple sclerosis.

24. To surf, the FTC identifies a type of deceptive practice that warrants investigation. It
then recruits law enforcement partners to search the Web for a specific period of time
using a protocol tailored to the Surf Day’s subject matter. Sites with troubling claims are
identified, preserved, and forwarded to the FTC for review.

25. 15 U.S.C. § 45(a). It is under this broad mandate, which covers entities engaged in or
whose business affects commerce, that the Commission has authority over consumer
protection online. There are some entities that are wholly or partially exempt from
Commission jurisdiction, e.g., banks, savings and loan associations, and common
carriers, as well as the business of insurance. See Section 5(a)(2) of the FTC Act, 15
U.S.C. § 45(a)(2), and the McCarran-Ferguson Act, 15 U.S.C. § 1012(b).

26. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b) states that "in proper cases the
Commission may seek, and after proper proof the court may issue, a permanent
injunction.” Routine fraud cases qualify as a "proper case" for injunctive relief under
Section 13(b). FTC v. H.N. Singer, 668 F.2d 1107, 1113 (9th Cir. 1982); FTC v. Gem
Merchandising Corp., 87 F.3d 466, 469 (11th Cir. 1996); FTC v. World Travel Vacation
Brokers, Inc., 861 F.2d 1020, 1028 (7th Cir. 1988); FTC v. Evans Products Co., 775 F.2d
1084, 1086 (9th Cir. 1985).

27. Under Section 5(b) of the FTC Act, 15 U.S.C. § 45(b), the Commission can issue a
complaint when it has reason to believe an unfair or deceptive act or practice, in violation
of Section 5(a) of the FTC Act, has occurred.

28. Consumer Sentinel data showed 300 complaints in the first half of 1998, and 6000 in the
first half of 1999.

29. For example, in 1994, the Commission amended the Mail and Telephone Order Rule to
include transactions completed through a modem, thus covering Internet purchases. 16
C.F.R. Part 435.

30. The transcript of the Workshop and other related materials are available at
http://www.ftc.gov/bcp/rulemaking/elecmedia/index.htm.

31. The 2.5 million page views are in addition to the 6 million print publications distributed
each year to organizations that disseminate them on the FTC’s behalf.

32. The titles of the teaser sites are: Looking for Financial Freedom?; The Ultimate
Prosperity Page; Nordicalite Weight Loss Product; A+ Fast Ca$$h for College; EZTravel:
Be an Independent agent; EZTravel: Certificate of Notification; EZToyz Investment
Opportunity; HUD Tracer Association; CreditMenders Credit Repair; NetOpportunities:
Internet is a Gold Mine; National Business Trainers Seminars; VirilityPlus: Natural

27
 Alternative to Viagra; ArthritiCure: Be Pain-Free Forever.

33. Global Hearing Report, supra note 1, at ii.

34. FTC Staff Report: Public Workshop on Consumer Privacy on the Global Information
Infrastructure, December 1996, at 1 (available at
http://www.ftc.gov/reports/privacy/privacy1.htm).

35. Self Regulation and Privacy Online: A Report to Congress (July 1999) at 2 [hereinafter
1999 Privacy Report] (available at http://www.ftc.gov/os/1999/9907/index.htm#13).

36. Privacy Online: A Report to Congress (June 1998) at 5-6 [hereinafter 1998 Privacy
Report] (available at http://www.ftc.gov/reports/privacy3/index.htm).

37. 1999 Privacy Report, supra note 35, at 2 (citing Lorrie Faith Cranor, et al., Beyond
Concern: Understanding Net Users’ Attitudes About Online Privacy, 1999).

38. Id. at 3 (citing Business Week/Harris Poll: Online Insecurity, Business Week, March 16,
1998).

39. 1998 Privacy Report, supra note 36, at 6 (citing testimony of Alan Westin’s testimony at
the Commission’s Public Workshop on Consumer Information Privacy, June 10-13,
1997).

40. The survey found that 92% in the Comprehensive Sample collected personal information.
Id. at 23. The survey found 89% of the children’s sites collected personal information.
Id. at 31.

41. Only about 2% of the sites collecting personal information in the Comprehensive Survey
had such a notice. Id. at 27. Among the children’s sites, the figure was 24%. Id. at 35.

42. Only 1% of the children’s sites required parental consent before the information was
collected. Id. at 38.

43. 15 U.S.C. §§ 6501-6506.

44. Commissioner Sheila F. Anthony agreed with the Report’s conclusions that self-
regulation should continue to be encouraged, but disagreed with the majority’s decision
not to recommend legislation. Commissioner Anthony’s Statement Concurring in Part
and Dissenting in Part is included in the 1999 Privacy Report, supra note 35. Also
included is The Separate Statement of Commissioner Orson Swindle expressing his view
that the Report did not present a clear and complete picture of the substantial progress
industry had made in the previous year.

45. Id. at 13-14.

28
46. The Global Hearing Report, supra note 1, at 44.

47. See FTC v. Carlos Pereira, described at p.8.

48. Fortunately, authorities in both Australia and Portugal provided invaluable assistance in
the case. Thus far, seven of the Commission’s Internet cases have involved foreign
countries.

49. In addition to these five Internet-related cases, the Commission has obtained redress
benefitting foreign consumers in 45 other cases. The Commission’s international law
enforcement efforts are not limited to foreign defendants and foreign consumers. The
Commission also has succeeded in repatriating foreign assets for consumer redress. For
example, in FTC v. Fortuna Alliance, the FTC froze $2.8 million in ill-gotten gains that
had been laundered in Antigua, West Indies, and returned those funds to victims of
Fortuna’s online pyramid scheme.

29
 Appendix 1

Growth of Internet-related Cases,

1995 to 1999
50

40
Number of Cases

30

20

10

1995 1996 1997 1998 1999

www.ftc.gov
 Appendix 2

Forty-fold Increase in Online Distribution of FTC

Consumer Information, FY-95 to FY-99
3.0
2,554,593
2.5
Number in Millions

web distribution
2.0 (page views)

1.5

1.0

62,783
.5

FY 1995 FY 1996 FY 1997 FY 1998 FY 1999

www.ftc.gov
 Appendix 3

CHRONOLOGY OF FTC INTERNET INITIATIVES

1994 • Robert Serviss, d/b/a Excel Communications,
Docket No. C-3669
• Sherman G. Smith, d/b/a Starr Communications,
September Docket No. C-3668
FTC v. Corzine, Case No. CIV-S-94-1446 (E.D. • Randolf D. Albertson, d/b/a Wolverine Capital,
Cal. filed Sept. 12, 1994) Docket No. C-3670
• credit repair kits advertised online • FTC v. Brandzel, Case No. 96 C. 1440 (N.D. Ill. filed
• injunction; consumer redress Mar. 13, 1996)

FTC v. Consumer Credit Advocates, Case No.

1995 96 Civ. 1990 (S.D.N.Y. filed Mar. 19, 1996)
• credit repair promotion posted in thousands of Usenet
groups
March • injunction; consumer redress
Web Site: www.ftc.gov launched
Consumer Education Publication: Online
April Scams: Potholes on the Information Highway
Public Workshop: Consumer Protection and the
Global Information Infrastructure April
Zygon International, Docket No. C-3686
August • health claims made on Web site
Consumer Education Publication: Online • consent order; consumer redress
Scams: Road Hazards on the Information Super-
highway May
Staff Report: Consumer Protection in the New
November High-Tech Global Marketplace reporting on the
Commission Hearings: Consumer Protection in November 1995 hearings
the New High-Tech, Global Marketplace
FTC v. Fortuna Alliance, Case No. C96-799M
(W.D. Wash. filed May 23, 1996)
• pyramid investment scheme
1996 • injunction; $5.5 million in consumer redress to over
15,000 consumers in the U.S. and 70 foreign countries
March
First Sweep of Online Marketers: June
• Nine small marketers charged with credit repair, FTC v. Infinity Multimedia, Case No. 96-6671-
business opportunity and equipment supply scams - all CIV-Gonzalez (S.D. Fla. filed June 24, 1996)
advertised on Web sites • business opportunity advertised on Web site
• Consent orders or injunctions • injunction; consumer redress

• Martha Clark d/b/a Simplex Services, Docket

Public Workshop: Consumer Privacy on the
No. C-3667
• Brian Coryat d/b/a Enterprising Solutions, Docket Global Information Infrastructure
No. C-3666
• Lyle R. Larson d/b/a Momentum, Docket No. C-3672 Consumer Education Publication:
• Rick A. Rahim d/b/a NBDC Credit Resource Publishing, Cybershopping: Protecting Yourself When
Docket No. C-3671
Buying Online (produced jointly with American
• Timothy R. Bean, d/b/a D.C. Publishing Group,
Docket No. C-3665 Express)

1
November May
The First “Surf Day”: a search for illegal FTC v. America Online, Inc., Docket No.
pyramid schemes C-3787
FTC v. Compuserv, Inc., Docket No. C-3789
FTC v. The Mentor Network, Inc., Case No. FTC v. Prodigy Services, Corp., Docket No.
SACV96-1104 LHM (EEx) (C.D. Cal. filed Nov. C-3788
5, 1996) • “free trial” offers for online services
• pyramid investment scheme marketed on Web sites • consent orders
• injunction; consumer redress
June
FTC v. Global Assistance Network for Chari- “Field of Schemes” Investment Fraud Sweep
ties, Case No. 96-02494 PHX RCB (D. Ariz. • FTC v. Intellicom Services, Inc., Case No. 97-4572
filed Nov. 5, 1996) TJH (Mcx)(C.D. Cal. filed June 23, 1997)
• investment partnerships in Internet shopping malls
• pyramid scheme marketed on Web site purporting to
and Internet access providers
raise money for charities
• injunctions; consumer redress in excess of $24 million
• injunction; consumer redress
• FTC v. JewelWay Int’l, Inc., Case No. CV97-383 TUC
December
JMR (D. Ariz. filed June 24, 1997)
Staff Report: Public Workshop on Consumer • pyramid scheme marketed on the Internet
Privacy on the Global Information Infrastructure • injunction; $5 million in redress
reporting on the Commission’s June privacy
workshop • FTC v. Dayton Family Productions, Inc., Case No.
CV-S-97-00750-PMP (LRL) (D. Nev. filed June 20,
1997)
• investment in low-budget, family films touted through
1997 telemarketing, Web site and other promotions with
promise of lucrative returns
• consent orders against defendants with injunctions
January and bans from engaging in telemarketing
FTC v. Slim America, Inc., Case No. 97-6072
(S.D. Fla. filed Jan. 27, 1997) • FTC v. Rocky Mountain Int’l Silver and Gold, Inc.,
• products marketed via Internet and magazines touting Case No. 97-WY-1296 (D. Colo. filed June 23, 1997)
rapid weight loss • pyramid scheme marketed on the Internet
• $8.3 in consumer redress ordered after trial; defendants • injunction; defendants banned from pyramid schemes
must post multi-million dollar bond before selling
weight loss and other products and services July
Global World Media Corp. and Sean Shayan,
Docket No. C-3772
February • dietary supplement claims made on Internet and targeted
FTC v. Audiotex Connections, Inc., Case No. to youth
CV-97-0726 (E.D.N.Y. filed Feb. 13, 1997) • consent order
• hijacked Internet connection modems to rack up
expensive, international calls August
• injunction; redress of over $2.1 million to more than Coupon Surf Day: a search for coupon-related
25,000 consumers business opportunity scams
March
“Internic” copycat
Business Opportunity Surf Day: search for sites • Joint efforts of Australian officials and the FTC to stop a
making exaggerated earning claims false Internet domain name registry.
• Refunds for as many as 13,000 consumers in at least
Credit Repair Surf Day: search for sites making nine countries
false promises to clean up consumer credit
reports
2
October Web Site: www.consumer.gov established in
Kids’ Privacy Surf Day: survey of information partnership with other federal agencies, provid-
practices of child-oriented sites ing a gateway to consumer information from
FTC v. Nia Cano, Case No. 97-7947 CAS over 60 agencies.
(AJWx) (C.D. Cal. filed Oct. 29, 1997)
• pyramid scheme promoted through spam
• injunction; $2 million in redress
1998
North American Health Claims Surf Day:
search for sites making deceptive claims about January
treatments for six serious diseases Consumer Education Publications: Trouble @
the In-Box and How to be Web Ready
November
Beylen Telecom, Ltd., Docket No. C-3782 February
• hijacked Internet connection modems to rack up “Project Net Opp” Sweep of Internet-related
expensive, international calls business opportunity schemes
• consent order • FTC v. Hart Marketing Enterprises Ltd., Inc., Case
No. 98-222-CIV-T-23E (M.D. Fla. filed Feb. 2, 1998)
HUD Tracer Surf Day: a search for sites mak- • computer kiosk offering Internet access
ing misrepresentations related to a refund pro- • injunctions; consumer redress
gram of the Department of Housing and Urban
• FTC v. TouchNet, Inc., Case No. 98-0176 R (W.D.
Development
Wash. filed Feb. 11, 1999)
• business opportunity to design Web pages for
Consumer Education Publication: Virtual businesses
Treatments Can Be Real World Deceptions • injunction; recision of contracts

• FTC v. FutureNet, Inc., Case No. 98-1113 GHK (AIJx)

International Surf Day: a search for pyramids
(C.D. Cal. filed Feb. 17, 1998)
and business opportunity scams. • Internet access business opportunity
• injunctions; consumer redress
December
Commission Report: Individual Reference • FTC v. Inetintl.Com, Inc., Case No. CV 98-2140 CAS
Services: A Report to Congress on industry (CWx) (C.D. Cal. filed Mar. 25, 1998)
principles to protect privacy and limit distribu- • Internet access and computer-related business
opportunities
tion of sensitive information
• injunction; consumer redress

RN database (containing registered identifica- FTC v. Internet Business Broadcasting, Inc.,

tion numbers on textile labels) placed on FTC’s Case No. WMN-98-495 (D. Md. filed Feb. 19,
Web site and linked to Canadian RN database, 1998)
making information instantly available to busi- • business opportunity claims involving Internet newspa-
nesses and consumers per sites marketed via spam and Web sites
• injunction; consumer redress
Junk Email Harvest: a surf of the FTC’s
database of unsolicited commercial email, Consumer Education Publication: Net-Based
finding 1,000 to be problematic Business Opportunities: Are Some Flop-
Portunities?
Consumer database: Consumer Sentinel is
made accessible to U.S. and Canadian law March
enforcement partners on a secure Internet site FTC v. Dixie Cooley, d/b/a DWC, Case No.
created by the FTC. CIV-98-0373-PHX-RGS (D. Ariz. filed Mar. 4,
1998)
3
• credit repair service marketed via spam TrendMark International, Inc., Docket No.
• injunction; consumer redress C-3829
• weight loss programs marketed via Web site and spam
FTC v. Craig Hare, Case No. 98-8194 CIV • consent order
HURLEY (M.D. Fla. filed Mar. 30, 1998)
• failure to deliver goods purchased in online auctions July
• injunction banning defendants from online commerce Consumer Education Publications:
FTC names its Dirty Dozen: 12 Scams Most
Privacy Surf: a survey of 1,400 sites to assess Likely to Arrive Via Bulk E-Mail and
fair information practices. Shop Safely Online

Consumer Education Publication: Online Kalvin P. Schmidt, Docket No. C-3834

Auctions: Going, Going, Gone • pyramid and chain marketing schemes via Web sites and
spam
April • consent order
Commission Report: Fighting Consumer
Fraud: New Tools of the Trade on use of the August
Internet by fraud artists and the FTC’s law FTC v. American Urological Clinic, Case No.
enforcement and education efforts 1:98-CV-2199 (JOS) (N.D. Ga. filed Aug. 6,
1998)
May • impotence treatments marketed via the Internet
• injunction; consumer redress
FTC v. GreenHorse Communications, Inc.,
Case No. CV-98-245-M (D. N.H. filed May 4,
FTC v. World Interactive Gaming Corp., Case
1998)
• Web site development business opportunity
No. CV 98 5115 (E.D.N.Y. filed Aug. 11, 1998)
• injunction; refunds and contract cancellations • investment in gambling Web site
• injunction; litigation ongoing
June
Commission Report: Privacy Online: A Report GeoCities, Docket No. C-3849
• collection of personal information from children and
To Congress on results of FTC online privacy
adults by Web site
surf, and recommending legislation to protect • consent order requiring privacy notice and parental
children’s online privacy consent before collecting information from children

FTC v. U.S. Consumer Protection Agency, Case Textile and Wool Labeling Surf: survey to
No. 5:98cv00160 (N.D. Fla. filed June 8, 1998) assess online compliance with FTC Rules under
• promotion via the Internet of franchise as a government Textile and Wool Acts
consumer agency
• injunction
September
United States v. PVI, Inc., Case No. 98-6935
Consumer Education Publication (with the
(S.D. Fla., filed Sept. 1, 1998)
National Association of Attorneys General):
• business opportunities involving digital photo sticker
Site-Seeing on the Internet vending machines marketed via email
• consent order and civil penalty
Business Education Publication: Advertising
and Marketing on the Internet: The Rules of the Web Site: www.imsnricc.org established by
Road FTC for the International Marketing Supervision
Network, a organization of trade practices law
enforcement authorities in 25 countries, to foster
information-sharing among members

4
Y2K Surf Day: a survey of Y2K compliance • settlements obtained in 11 cases; litigation ongoing in
information on sites marketing consumer remaining cases
electronic products and other appliances
• FTC v. Mehmet Akca a/k/a Matt Akca also d/b/a
AKCA, Case No. 99-S-204 (D. Colo. filed Feb. 1,
October 1999)
International Health Claims Surf Day: a • FTC v. All About Communications USA, Inc., Case
search for deceptive advertising of health No. 99-6122-CIV-FERGUSON, (S.D. Fla. filed Feb. 1,
products and services 1999)
• FTC v. Cliff Cross and d/b/a Build-It-Fast, Case No.
M099CA018 (W.D. Tex. filed Feb. 1, 1999)
November
• FTC v. Kevin Drake d/b/a New Credit ‘98, Case No. 3-
Investment Opportunity Surf Day: a search for 99 CVO213-R (N.D. Tex., filed Feb. 2, 1999)
phony claims about investments • FTC v. David E. Dunn d/b/a Pro Se Publications, Case
No. 3-99 CVO 211-G (N.D. Tex., filed Feb. 1, 1999)
December • FTC v. Edward Lane d/b/a Edward Lane & Associates,
Consumer Education Publication: Online Case No. CY-99-3005-WFN (E.D. Wash. filed Jan. 29,
1999)
Investment Opportunities: ‘Net Profit’ or ‘Net
• FTC v. Ross Sanford Leiss, d/b/a RLeiss & Associates,
Gloss’ Case No. 99-102-A (E.D. Va. filed Jan. 29, 1999)
• FTC v. Michael Lyons d/b/a Lyons Publishing, Case
United States v. Iomega Corp., Case No. No. 99 CV 6049 (W.D.N.Y. filed Jan. 29, 1999)
1:98CV00141C (D. Utah filed Dec. 9, 1998) • FTC v. Ralph Lewis Mitchell, Jr., Case No. CV 99-984
• cash rebate and merchandise premium marketed online TJH (BQRx) (C.D. Cal., filed Jan. 29, 1999)
• consent order; $900,000 civil penalty • FTC v. Frank Muniz, Case No. 4:99-CV-34-RD (N.D.
Fla. filed Feb. 1, 1999)
• FTC v. Philip D. Miller d/b/a New Start, Case No.
American College for Advancement in Medi- WMN 99-251 (D. Md., filed Jan. 29, 1999)
cine, Docket No. C-3882 • FTC v. Patrick R. Kelly d/b/a Patrick R. Kelly Enter-
• chelation therapy for disease treatment marketed via prises and P.R.K. Enterprises, Case No. 99 CIV 562
Web site (E.D.N.Y. filed Jan. 29, 1999)
• consent order • FTC v. Steve Neizianya d/b/a Standard Business
Services, Case No. 3-99 CV0214-L (N.D. Tex. filed
Jewelry Guides Surf Day: a survey to assess Feb. 2, 1999)
• United States v. A. James Black, Case No. 99-113
online compliance with the FTC’s Jewelry
(M.D. Fla. filed Feb. 2, 1999)
Guides
Business Education Publication: Selling on the
Internet: Prompt Delivery Rules
1999
March
January Hammer Award: sixteen government employees
FTC v. J.K. Publications, Inc., Case No. CV- from the FTC and four other agencies recognized
990004 ABC (AJWx)(C.D. Cal. filed Jan. 5, for www.consumer.gov
1999)
• “cramming” Internet services on credit/debit cards FTC v. Five Star Auto Club, Inc., Case No. 99-
• preliminary injunction; asset freeze and receiver 1693 (S.D.N.Y. filed Mar. 8, 1999)
• individual defendant held in contempt and incarcerated • pyramid scheme promoting free auto ownership
over failure to repatriate assets, including $6.2 million marketed via Internet
held in Cayman Islands • preliminary injunction; asset freeze; litigation ongoing

February
Operation New ID – Bad IDea
• online promotion of new credit identity

5
FTC v. Rose Creek Health Products, Inc., Case • FTC v. Donna Payne, d/b/a Strategic Information
No. CS-99-0063-EFS (E.D. Wa. filed Mar. 11, Services, Case No. 1:99 CV 936 (N.D. Ohio filed Apr.
21, 1999)
1999) • FTC v. Frederick P. Ray, d/b/a F.P.R., Case No. 99-
• “Vitamin O” supplement marketed as serious disease 04703 SVW (RNBx)(C.D. Cal. filed Apr. 30, 1999)
cure on Web site • FTC v. James Fite, d/b/a Internet Publications, Case
• preliminary injunction; litigation ongoing No. 99-04706 JSL (BQRx)(C.D. Cal. filed Apr. 30,
1999)
Mislabeled Clothes Marketed Via Online • United States v. David Story, d/b/a Network Publica-
Catalogs tions, Case No. 3-99CV-0968-L (N.D. Tex. filed Apr.
• alleged failure to state country of origin of items 29, 1999)
advertised online, as required under Textile and Wool • FTC v. John Williams, d/b/a Speed Credit, Case No.
Acts H-991325 (S.D. Tex. filed Apr. 30, 1999)
• six consent orders • FTC v. Eric Volkert and Cynthia Volkert, d/b/a Fresh
Start Publication, Case No. H-99-1326 (S.D. Tex. filed
• Wal-Mart Stores, Inc., Docket No. C-3870 Apr. 30, 1999)
• Burlington Coat Factory Warehouse Corp., Docket • FTC v. West Coast Publications, LLC, Case No. 99-
No. C-3872 04705 GHK (RZx)(C.D. Cal. filed Apr. 30, 1999)
• Delia’s Inc., Docket No. C-3875
• Woolrich, Inc., Docket No. C-3873 May
• Bugle Boy Industries, Inc., Docket No. C-3871 FTC v. Benoit (originally FTC v. One or More
• Gottschalks, Inc., Docket No. C-3878 Unnamed Parties), Case No. 3:99 CV 181
(W.D.N.C. filed May 11, 1999)
April • anonymous emails sent to consumers designed to get
FTC v. iMall, Case No. 99-3650 HLH (C.D. Cal. them to call an expensive, international telephone
filed Apr. 8, 1999) number
• business opportunity selling Web sites and advertising • injunction
space on iMall Web site
• injunction; $4 million consumer redress Public Workshop: Interpretation of Rules and
Guides for Electronic Media
FTC v. TradeNet Marketing, Inc., Case No. 99-
944-CIV-T-24B (M.D. Fla. filed Apr. 21, 1999) Liberty Financial Companies, Inc., File No.
• laundry products marketed via Internet 982-3522
• stipulated injunctions; monetary judgment • personal information collected from children visiting
Young Investor Web site
FTC v. James J. Rapp and Regana L. Rapp, d/ • consent order requires privacy notice and parental
b/a Touch Tone Information, Inc., Case No. 99- consent
WM-783 (D. Colo. filed Apr. 21, 1999)
• alleged deception by information broker to obtain and FTC v. Screen Test U.S.A., Inc., Case No. 99-
sell consumers’ personal financial information, and 2371 (WGB)(D. N.J. filed May 24, 1999)
market it through Web site • screen test for children marketed via extensive Web site
• preliminary injunction; litigation ongoing • preliminary injunction; asset freeze; litigation ongoing

LS Enterprises, LLC, Docket No. C-3884 Coupon Surf Day II: a search for coupon-
• work-at-home businesses, including bulk-email pro- related business opportunity scams
grams, marketed through spam
• consent order
Fitness Quest, Inc., Docket No. C-3886
• fitness equipment and weight loss claims marketed via
Operation New ID – Bad IDea Part II the Internet, infomercials and retailers
• seven follow-up credit repair cases offering “new credit • consent order
identity”
• settlements obtained in four cases; litigation ongoing in
remaining cases Consumer Education Publication (with
America Online): Guide to Online Payments

6
Dell Computer Corporation, Docket No. C-3888 FTC v. David Martinelli, Jr., Case No. 3:99 CV
Micron Electronics, Inc., Docket No. C-3887 1272 (CFD)(D. Conn. filed July 7, 1999)
• computer leasing ads on Internet • pyramid work-at-home scheme promoted via spam
• consent orders requiring clear information about leasing • preliminary injunction; litigation ongoing
terms
Commission Report: Self-Regulation and
June Privacy Online: A Federal Trade Commission
Small Business Sweep: Web Site Cramming Report to Congress assessing self-regulatory
Cases efforts since the Commission’s 1998 Web survey
• promotion of “free” Web site services to small busi-
nesses
• preliminary injunctions; litigation ongoing
Public Workshop: On proposed regulations to
implement the Children’s Online Privacy Protec-
• FTC v. Shared Network Services, LLC, Case No. CIV. tion Act
S-99-1087 WBS JFM (E.D. Cal. filed June 2, 1999)
• FTC v. WebViper, LLC, Case No. 99-T-589-N (M.D. Operation Trip Trap - Online travel scams
Ala. filed June 9, 1999)
• vacation packages touted on Internet
• FTC v. Wazzu Corporation, Case No. SACV-99-762-
• litigation ongoing
AHS (C.D. Cal. filed June 7, 1999)
• FTC v. American Int’l Travel Services, Inc., Case No.
Public Workshop: U.S. Perspectives on Con- CIV-99-6943 (S.D. Fla. filed July 27, 1999)
sumer Protection in the Global Electronic • FTC v. Cerkvenik-Anderson Travel, Inc., Case No. 99-
Marketplace CV-1374 RGF (D. Ariz. filed July 29, 1999)

August
Business Education Publication: Web Site
FTC v. Equinox Int’l Corp., Case No. CV-S-99-
Woes: Avoiding Web Service Scams
0969-JBR-RLJ (D. Nev. filed Aug. 3, 1999)
• large-scale pyramid scheme marketed on Internet
Operation Cure.All • joint action with five states; preliminary injunction;
• health claims for varied products, from shark cartilage to asset freeze; litigation ongoing
magnets touted on the Internet
• consent orders
FTC v. Credit Nat’l, Inc., Case No. CV 99-
• Magnetic Therapeutic Technologies, Inc., Docket No. 07989 GHK (CTx)(C.D. Cal. filed Aug. 5, 1999)
C-3897 • advance fee loan and credit card scheme
• Pain Stops Here!, Inc., Docket No. C-3898 • preliminary injunction; litigation ongoing
• Melinda R. Sneed and John L. Sneed d/b/a Arthritis
Pain Care Center, Docket No. C-3896 September
• Body Systems Technology, Inc., Docket No. C-3895 FTC’s 100th Internet-related case: FTC v.
Carlos Pereria, W.T.F.R.C. Pty Ltd., and
July Guiseppe Nirta, Case No. 99-1367-A (E.D. Va.
FTC v. OneSource Worldwide Network, Inc., filed Sept. 14, 1999)
Case No. 3-99 CV 1494-L (N.D. Tex. filed July • Web page “hijacking” and “mouse trapping” to divert
1, 1999) consumers from legitimate sites to defendants’ porno-
• laundry product marketed on Internet graphic sites
• injunction; monetary relief • injunction and order suspending defendants’ domain
registrations; litigation ongoing
FTC v. Web Valley, Inc., Case No. 99-1071 DSD/
JMM (D. Minn. filed July 14, 1999) Internet Lab: public announcement of FTC
• cramming of Internet Web site design and hosting laboratory designed to support training and law
services marketed as “free” enforcement
• preliminary injunction; litigation ongoing

7
October FTC v. MET-Rx USA, Inc., Case No. SACV-
Children’s Online Privacy Protection Rule 99-1407-DOC (Anx) (C.D. Cal. filed Nov. 15,
• final rule implementing the Children’s Online Privacy
Protection Act 1999)
• effective date April 21, 1999 • Dietary supplements containing androgen steroids and,
in some cases, ephedra and caffeine stimulants, mar-
keted via Internet and promoted as able to increase
FTC v. U.S. Republic Communications, Inc., strength and muscle mass safely and with minimal or no
Case No. 4:99-CV-3657 (S.D. Tex. filed Oct. 21, side effects
1999) • Consent orders requiring disclosure of possible side
• Web site services marketed to small businesses effects resulting from use of androgen supplements
• injunction; defendants will offer refunds to 124,000
small businesses FTC v. Cyberlinx Marketing, Inc., Case No.
CV-S-99-1564-PMP-LRL (D. Nev. filed Nov. 6,
November
1999)
Public Workshop: FTC and Department of • Marketing via Internet of HIV test kits for home use
Commerce workshop on “online profiling” which gave inaccurate results
• Consent order banning defendants from marketing HIV
FTC v. AST Nutritional Concepts, Case No. 99- home test kits and requiring refunds to consumers who
WY-2197 (D. Colo. filed Nov. 15, 1999) and purchased their kits

8
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