DISSENTING STATEMENT OF COMMISSIONER ORSON SWINDLE
In the Matters of
I reluctantly have voted against the filing of these three Section 13(b) complaints for several reasons. First, I do not have reason to believe that the proposed defendants have violated the Commission's binding deception standard adopted in the Deception Statement.(1) As I explained in my dissents from the complaint and settlement in Touch Tone Information Systems, Inc., I would have preferred to have proceeded administratively so that the Commission could address in the first instance whether pretexting is deceptive under Section 5.(2)
Second, I do not have reason to believe that the proposed defendants have violated the unfairness standard established by Congress in Section 5(n) of the FTC Act. As in Touch Tone, there is an insufficient basis to allege that the defendants' actions have caused or are likely to cause "substantial injury" to consumers. Merely positing that privacy is a property right and that depriving consumers of a property right is substantial injury would read the word "substantial" right out of the statute: all misappropriation or theft of any property would become "unfair," regardless of the amount of economic harm or whether the loss posed a threat to health or safety. Similarly, merely asserting that the kind of information that can be obtained through pretexting is information that can be used to facilitate identity theft does not lead to the conclusion that pretexting causes or is likely to cause identity theft.
Third, although I believe that the defendants either have violated or likely will attempt to violate Section 521 of the Gramm-Leach-Bliley Act, I do not believe there is sufficient support at the present time to make all the allegations in Count One of the complaints. In particular, I am not comfortable alleging that false representations to persons "believed to be" representatives of financial institutions violate the GLB Act. Finally, based on the information currently available, I do not think we should be seeking an ex parte asset freeze in any of these cases.
1. The Deception Statement sets forth three elements that "undergird all deception cases":
First, there must be a representation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances. . . . Second, we examine the practice from the perspective of a consumer acting reasonably under the circumstances. . . . Third, the representation, omission, or practice must be a "material" one. The basic question is whether the act or practice is likely to affect the consumer's conduct or decision with regard to a product or service.
Cliffdale Associates, Inc., 103 F.T.C. 110, 175-83 (1984). The Commission issued the Deception Statement in 1983 as a letter providing "a single definitive statement of the Commission's view of its authority," but in 1984 adopted it as part of an adjudicative opinion in Cliffdale Associates. It thus "became the legal standard which the Commission had to apply in all future deception cases." Amrep Corp. v. FTC, 768 F.2d 1171, 1178 (10th Cir. 1985) (emphasis added), cert. denied, 475 U.S. 1034 (1986); see also Southwest Sunsites, Inc. v. FTC, 785 F.2d 1431, 1435 n.2 (9th Cir.) ("The new standard became binding on the FTC when it was adopted in Cliffdale Associates, Inc."), cert. denied, 479 U.S. 828 (1986).
2. See F.T.C. v. Rapp, et al., No. 99-WM-783 (D. Col. filed Apr. 21, 1999) (stipulated consent agreement and final order entered June 23, 2000); Statement of Commissioner Orson Swindle in the Matter of Touch Tone Information Systems, Inc., available at http://www.ftc.gov/os/1999/9904/touchtoneswindlestatement.htm; Dissenting Statement of Commissioner Swindle in the Matter of Touch Tone Information Systems, Inc., available at http://www.ftc.gov/os/2000/06/touchtoneswindle.htm.