of FTC Commissioner Mozelle W. Thompson
Before the Subcommittee
on Competition, Foreign Commerce, and Infrastructure
Committee on Commerce, Science and Transportation
United States Senate
June 11, 2003
Good afternoon Mr. Chairman and members
of the Committee, and thank you for the opportunity to appear
before you and to offer testimony in support of the FTC's
reauthorization. Last year, when I appeared before the Committee,
I discussed the FTC's work in the area of international consumer
protection. I noted at that time that improvements in communication
and technology have created a global marketplace in which
American consumers and American businesses play an important
and active role. I also noted that these same improvements
left American consumers open to new types of harm and that
these cases were growing at an exponential rate.
Today, I would like to talk about one of
the most significant consumer protection problems in the last
several years - the globalization of fraud and deception -
and the FTC's response. Because not only has the consumer
marketplace become global, so have the purveyors of fraud
and deception. (Exhibit 1). The same technological tools that
have expanded markets across international boundaries have
also allowed fraudsters to act more quickly and efficiently
- and to extend their reach beyond their domestic markets.
The FTC needs new tools to effectively combat cross border
fraud and deception, and we ask you for them today.
There was a time when the biggest challenge
to American consumers was whether they wanted to do business
with a mail order company on the other side of the country.
Most of our consumer protection laws are based on what we
knew then, and they have served us well. Today, however, America
represents the largest and richest consumer marketplace in
the world. Improved technologies have opened world markets
to American consumers and vice versa. So, it is not surprising
that American consumers are bombarded with new opportunities
to spend their money. These opportunities arrive from around
the world via mail, telephone, television, and even spam.
While many of these opportunities may be legitimate, a rapidly
growing number are fraudulent or deceptive. (Exhibit 2).
In response to this dramatic increase, the
FTC has taken a leadership role in reaching a mutual understanding
with our international colleagues that we have to bring down
barriers to prosecuting fraudsters who prey on victims across
borders. Consumer protection law enforcers around the world
now agree that this problem is serious and that international
cooperation is the key to any effort to combat cross border
fraud and deception.
We work in a variety of international fora
to address the problems posed by cross border fraud.
Our efforts have resulted in bilateral memoranda
of understanding, and include our participation in the International
Consumer Protection and Enforcement Network (ICPEN), a group
of consumer protection law enforcement agencies from around
The issue of cross-border fraud and deception
is also at the forefront of our discussions at the Organization
for Economic Cooperation and Development (OECD) Committee
on Consumer Policy (CCP). The CCP has worked to develop guidelines
that provide the thirty OECD governments with a blueprint
for cooperation in combating cross-border fraud. We hope that
the guidelines will be finalized and approved later this month.
But participation in international fora
is not enough.
Criminal law enforcers saw the need for
international cooperation many years ago. They found ways
to permit government authorities to share investigatory information
and to engage in cooperative law enforcement. Later, the Federal
government recognized the negative market impact of such activities
as securities and commodities fraud. Consequently, agencies
such as the SEC and CFTC were given certain powers enabling
them to better prosecute such fraud across national borders.
Unlike our sister agencies, the FTC's tools
to combat fraud and deception have not kept up with the times.
In many instances the statutes under which we operate do not
address the increasingly cross-border nature of fraud and
deception and sometimes even hinder our ability to engage
in strong enforcement activity against those who use international
borders to the detriment of consumers.
The growth of cross-border consumer fraud
demonstrates the pressing need for new tools to protect consumers.
Our statistics show a sharp increase in the number of cross-border
complaints from American consumers about foreign companies,
from 7,609 in calendar year 1998 to 24,213 in calendar year
2002. (Exhibit 3). In fact, from 2001 to 2002, the number
of complaints almost doubled. Even at our recent Spam Forum,
participants noted that unsolicited e-mail increasingly crosses
borders to subject consumers to fraudulent and deceptive offers.
The legislative proposal that we have presented
to you is intended to address some of these problems and improve
the FTC's ability to protect consumers in such cases. Quite
simply, we are asking for the tools to make us more effective
in meeting the challenges posed by cross-border fraud.
I would be happy to answer any questions
that you have on this subject or any other part of the FTC's