Unfairness and the Internet

Date:
By: 
Thomas B. Leary, Former Commissioner

I. Introduction

The theme of this conference and the title of this talk, "Unfairness and the Internet," combines two subjects of more than ordinary interest. Because the Internet is relatively new, however, and precedent is sparse, I will necessarily have to be speculative and subjective.(2) Because the past so often foreshadows the future, the best place to begin is with a brief review of the ways that the concept of unfairness has been applied in the off-line world.

The Federal Trade Commission's unfairness authority derives from Section 5 of the Federal Trade Commission Act which prohibits "unfair or deceptive acts or practices in or affecting commerce."(3) "Unfair" is a particularly imprecise and flexible term, so, not surprisingly, its meaning has evolved over time. We see dramatic changes even if we focus on just the last twenty-five years or so, in an eighty-five year history.(4)

The changes in the Commission's approach to unfairness have in part been mandated by Congress. There are significant semantic differences between the definition of unfairness that informed Commission policy 25 years ago and the statutory definition that the Commission must accommodate today. For example, in the 1970s, the operative tests for finding unfairness were set out in F.T.C. v. Sperry & Hutchinson Co.,(5) as follows:

(1) whether the practice . . . offends public policy as it has been established by statutes, the common law or otherwise--whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; [or] (3) whether it causes substantial injury to consumers (or competitors or other businessmen) ....


Today, unfairness has been defined in Section 5(n) of the Federal Trade Commission Act(6) as follows:

[whether] the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition . . . . [T]he Commission may consider established public policies as evidence . . . . [but] public policy considerations may not serve as a primary basis for such determination.

There are obvious differences in emphasis between the two standards. The earlier one gives primacy to moral and ethical concepts, and to precedent; the later one gives primacy to economic factors, and introduces the notion of consumer responsibility. Yet, it is not just the words themselves that are important--after all, the legislative history of the 1994 statutory definition reflects an intention to "codify," not to modify, existing law.(7) What is most important is the dramatic shift in perceptions about free markets and consumer sovereignty, not only within the Commission but in the nation at large.(8)

Perhaps the best way to illustrate this shift would be to contrast two public statements, separated by about twenty years. Late in 1977, the newly-appointed Chairman of the Federal Trade Commission, Michael Pertschuk, gave a highly publicized speech, in which he said:

". . . no responsive competition policy can neglect the social and environmental harms produced as unwelcome by-products of the marketplace: resource depletion, energy waste, environmental contamination, worker alienation, the psychological and social consequences of producer-stimulated demands."(9)

The speech specifically addressed unfair methods of competition under Section 5, not unfair acts or practices, but it demonstrated a mindset that could be applied to both. These comments aroused a firestorm of criticism for the suggestion that the Commission could appropriately intrude into matters that were of primary concern to other government agencies.(10) And beyond that, the statement suggested that consumers were systematically manipulated to demand things that were bad for them and bad for society. In this view, even honest marketing is potentially harmful.

Contrast former Chairman Michael Pertschuk's views about advertising with the majority opinion of the Commission in California Dental Association,(11) written by current Chairman Robert Pitofsky. The opinion quotes the Supreme Court's opinion in Bates v. State Bar of Arizona, which stated that truthful advertising "performs an indispensable role in the allocation of resources in a free enterprise system,"(12) and goes on to say:

"We believe in the basic premise, as does the Supreme Court, that by providing information advertising serves predominantly to foster and sustain competition, facilitating consumers' efforts to identify the product or provider of their choice and lowering entry barriers for new competitors."(13)

Robert Pitofsky is the first Democrat to chair the Federal Trade Commission since Michael Pertschuk stepped down in 1981, but Pertschuk and the Commission majority in 1996 obviously had profoundly different views about the ability of consumers to evaluate advertising and to make intelligent choices for themselves. I personally believe that a current majority on the Commission would also subscribe to these basic views; I certainly do. This emphasis on the freedom of consumers to make choices--even "bad" ones--colors the Commission's approach to both on-line and off-line regulation.

II. Current Uses of Unfairness

Because there may be some unfounded anxiety, I have emphasized up front what the Commission won't do. Now let us see what we are doing. "Unfairness" can never be defined with precision, but some patterns can be discerned. Appendix A is a chart that contains a sample of unfairness cases roughly over the last twenty years. These cases were selected not entirely at random but to illustrate various factors that seem to have been determinative. The cases are arranged chronologically along the side and the possible decision factors are arrayed in vertical columns. A star in the cell indicates that the particular factor appears to have influenced the decision in that particular case. You will notice that most cases were settled by consent, without extended opinions, and the selection of significant factors necessarily involves some individual judgments. (The uncertainties associated with lawmaking by consent decree is, of course, one of the unintended consequences of an otherwise efficient and increasingly popular process.)

Notwithstanding this shortcoming, it is evident that a few common themes pop up with some consistency. One obvious factor in most of these cases is that the challenged conduct could not be easily attacked through the use of the Commission's deception authority.(14)The cases may include harmful conduct by third parties with whom consumers have no privity, and therefore they cannot be said to involve deception in the usual sense. These cases also often involve practices that prey on particularly vulnerable consumers, coercive or fraudulent conduct, and significant information deficits that cause consumers to be unfairly victimized. Typically, several factors may be present in a given unfairness prosecution and the practices may resemble violations of a variety of other laws--often such basic legal concepts as theft--which provide a firm public policy basis for the initiation of a prosecution.

The overall impression left by this body of law is hardly that policy has been created from whole cloth. Rather, the Commission has sought through its unfairness authority to challenge commercial conduct that under any definition would be considered wrong but which escaped or evaded prosecution by other means. The following discussion will amplify on selected cases that reflect each of these themes.

A. Vulnerable Consumers/Inequity of Information

Some "unfairness" cases seem primarily dependent on the particular vulnerability of a class of consumers. Children are the most conspicuous example. An illustration is In re Audio Communications, Inc..(15) In this consent, the Commission challenged television advertisements that invited children to make 900 number calls to cartoon and other characters, which resulted in expensive phone bills for their parents. Because children were directly targeted through television ads on otherwise innocuous programs, parents had no reasonable way to avoid the charges. There was no claim of misrepresentation and the conduct might well have been entirely legal had the marketing appeals been directed at adults. Moreover, there is no suggestion that it is inherently wrong to advertise these particular services, or any others, in a way that appeals to children(16) unless the services or products are illegal for children to buy. The problem with this particular scheme was that children could directly incur charges without adult supervision, and there was no more specific prohibition that seemed to apply. Unfairness filled the gap until the Commission promulgated the Pay-Per-Call Rule in 1993,(17)pursuant to Congressional direction.(18)

The case of In re R.J. Reynolds Tobacco involved a different problem.(19) The tobacco company was accused of targeting minors in its advertising in an attempt to get them to begin smoking before they were of legal age to buy tobacco products.(20) Again, there were no misrepresentations in the campaign; the cartoon pictures of smoking camels were too silly to deceive anyone. Furthermore, the ads did not invite children to incur charges for which others would be responsible. The theory was, first, that minors would be attracted by the images and, second, that the ads were likely to cause these minors to become addicted to a dangerous and illegal activity. This second "causation" claim, necessary to establish the requisite substantial injury, would presumably have been the most critical factual issue had the case gone to trial.

Another difficult case is In re Beck's North America, Inc.(21) In this case, the theory of potential injury was based on a substantial inequality of information between consumers and the advertiser. The television advertisement pictured young adults enjoying a sailboat ride under the glinting sun, while drinking beer and simultaneously frolicking in precarious positions on the boat.(22) Although it is not illegal for young adults to buy beer or drink it on a boat, some state and Coast Guard regulations make cavorting in this manner illegal. The combination of alcohol and the displayed behavior is particularly dangerous, however, for reasons that may not be obvious. Boaters experience exceptional dehydration, which magnifies the effects of the alcohol. The constant motion of a boat further and significantly impairs the sense of balance, which is obviously necessary while walking around an unstable deck. The Commission's theory was that these ads would cause some consumers to emulate the activities--i.e., drinking in the sun while doing dangerous things on moving boats--while unaware of the synergism of the risks. The question of whether the risk of injury was "reasonably avoidable" within the meaning of the statute would likely have been hotly disputed if the case had not been settled.(23)

B. Fraud or Coercion

The bulk of the Commission's consumer protection cases involve fraudulent misrepresentations prosecuted in federal courts under Section 13(b) of the Federal Trade Commission Act.(24) Some of these cases involve vulnerable consumers. However, there are other cases where the conduct would be deemed offensive regardless of whether misrepresentations were made. The archetypal example is In re Holland Furnace Co.,(25) where the respondent sold new furnaces by methods found to violate Section 5 of the Federal Trade Commission Act. Holland Furance's salesmen misrepresented themselves as government or utility company inspectors, dismantled consumers' furnaces, falsely stated that reassembling them would pose a risk of fire, and refused to reassemble them until consumers agreed to buy new equipment.(26) The case alleged intimidating sales tactics and misrepresentations, primarily addressed to a group of consumers (the elderly) who are sometimes perceived to be particularly vulnerable. It is likely that, even if there were no false representations, the practice of dismantling furnaces to coerce payments from these consumers would meet today's unfairness standards.

Coercive conduct has been challenged as unfair in several recent Commission settlements. In F.T.C. v. Amkraut,(27) an immigration attorney tried to extort additional fees from clients who had won the U.S. green card lottery by withholding necessary documents he had received from the State Department. The Commission alleged that this practice was unfair. The Commission also challenged as unfair the attorney's submission of multiple lottery entries, a violation of lottery rules which jeopardized his clients' chances of receiving green cards.

In a recent series of settlements,(28) the Commission challenged as unfair a variety of predatory lending tactics used in home equity loans to low income consumers. Most of these practices were specifically prohibited under the Home Ownership and Equity Protection Act of 1994 ("HOEPA"), a statute enacted to protect homeowners with substantial equity, but limited income, from particularly abusive lending practices.(29) In some of the settlements, because of the precise language of the Truth in Lending Act, which HOEPA had amended, and its implementing regulation,(30) the individual responsible for the practices could evade the statute by failing to be named on relevant loan documents.

Some of the practices challenged in the predatory lending settlements--falsification of loan documents and pressuring consumers to waive mandatory waiting periods or alter loan documents to avoid HOEPA's triggers--echo the coercion and fraud present in Amkraut. Both Amkraut and the predatory lending settlements involve particularly vulnerable consumers--in one case, immigrants desperate to enter the U.S. and in the other case, low income consumers in need of credit. The former are unlikely to be familiar with the U.S. legal system and the latter are unlikely to be familiar with financial practices. Both transactions are therefore characterized by the presence of a significant inequity of information, with vulnerable consumers on one side and informed professionals (a lawyer and a lender) on the other. Information inequities of this kind are of course ubiquitous in the commercial world, and it is not easy to draw appropriate lines. As stated, Congress has directed the Commission to avoid prosecutions where the harm is "reasonably avoidable," and people will inevitably differ in close cases.(31) It is clear, however, that the law is no longer interpreted to protect the most gullible.

The Commission has also used its unfairness authority to challenge conduct that is analogous to outright theft, or the facilitation of theft, undertaken in the special context of automated and electronic payments. F.T.C. v. Windward Marketing(32) and F.T.C. v. J.K. Publications(33) are two of the few litigated cases that contain unfairness claims. Both of these cases involved significant unauthorized credit and debit charges against consumers by defendants who were unknown and completely invisible to their victims. In J.K. Publications, the defendants' access to a database of credit card numbers facilitated over $43 million in charges to unsuspecting consumers,(34) while in Windward Marketing, a billing processor, in cooperation with a fraudulent telemarketer, debited unauthorized charges from consumers' bank accounts.(35) In both of these instances, the offensive nature of the conduct seems determinative; it is stealing, plain and simple. It is unlikely that a complex further inquiry into substantiality or avoidability would be required.

C. Lack of "Privity"

Another subset of unfairness prosecutions are characterized by an absence of privity between injured consumers and the respondents. The typical deceptive practices case involves explicit or implied material misrepresentations, which cause injury to consumers who are the targets of the misrepresentations. Some cases, however, involve misrepresentations to third parties that ultimately may have an adverse effect on consumers, although no misrepresentation was made directly to these consumers. In these situations, the practice may be attacked as "unfair" in lieu of or in addition to a claim that it is "deceptive." In both the Windward Marketing and J.K. Publications cases, there was no privity between harmed consumers and the defendants.

An interesting recent example of this type of unfairness prosecution is F.T.C. v. Rapp.(36) In this case, an information broker had impersonated customers of financial institutions in order to obtain and sell their financial information.(37) The conduct clearly involved deception but it was the financial institutions that were misled, not the injured consumers. And, although it is conceivable that the banks might suffer some reputational harm, the primary injury was suffered by consumers who were the bank's customers. The proximate cause of this injury was the possible misuse of the information, rather than the deception involved in its collection. In these circumstances, the appeal of an unfairness claim is evident. In addition to a deception count, the Commission charged that the disclosure of private financial information obtained through the deception was unfair.(38)

The unfairness count in Touch Tone also raised interesting questions about whether an invasion of privacy by itself meets the statutory requirement that unfairness cause "substantial injury." Unlike most unfairness prosecutions, there was no concrete monetary harm or obvious and immediate safety or health risks. The defendants' revenue came, not from defrauding consumers, but from the purchasers of the information who received exactly what they had requested.

There were differing views within the Commission on this issue. Commissioner Orson Swindle dissented, saying that the requirements of the 1994 Amendments to the statute were not met, without additional evidence of injury. "Merely to 'posit' that substantial consumer injury 'could' flow from the disclosure of private financial information does not satisfy the statute's requirement that the challenged practice 'cause[] or be likely to cause substantial injury to consumers.'"(39)

A majority of the Commission, however, found a likelihood of injury based on pre-1994 Amendments precedent and a belief that disclosure of private financial information obtained through such dubious methods could easily result in significant harm to consumers.(40) Although the potential harm was not identified, the majority likely had in mind financial fraud or identity theft. This debate over the application of unfairness to privacy violations would be joined again in F.T.C. v. ReverseAuction,(41) a case discussed below in the section that deals with the Internet.

III. Unfairness and the Internet

Having completed the historical tour, what can we now surmise about the Commission's future use of unfairness in cyberspace? The Internet poses significant challenges to its consumer protection mission. The characteristics of cyberspace that create such remarkable potential for economic growth have also made it an incubator for fraud. Low barriers to entry, immediate and global access to innumerable consumers, and the low marginal costs of communications with potential customers make it possible for anonymous con artists with a transitory presence to take advantage of consumers, without the discipline of normal market correctives. Mail order and telemarketing have some of the same characteristics--i.e., transactions between parties who do not know one another--but cyberspace involves another level of separation. In addition, the borderless nature of e-commerce poses significant law enforcement problems which increase the incentives to engage in cross-border fraud.

Any discussion of the Commission's "unfairness" authority in this area has to be placed in context. The Commission is only one of many actors with a role to play in mitigating the potential impact of Internet frauds. The problem will require an unprecedented level of international cooperation by enforcement authorities. I also anticipate that private organizations will assume an expanded role in certifying the reliability and honesty of sellers, and mediating consumer disputes. Consumer education by public and private bodies will become even more imperative. These are topics for entire speeches, all by themselves. The focus on the Commission's unfairness jurisdiction here is not meant to suggest that it is the only, or even the most important, weapon in the battle.

The flexibility and adaptability of unfairness make it suitable to combat the new permutations of fraudulent behavior that the Internet is likely to spawn. Even here, however, I doubt that it is necessary to break new ground--historically, unfairness has been used to combat "new high-tech" frauds, sometimes as a gap-filler until a specific regulatory scheme is adopted.(42) Experience to date suggests that unfair conduct in cyberspace will bear striking similarities to unfair conduct in the past; so-called high-tech frauds are usually traditional frauds facilitated by high-tech means. Recent unfairness determinations specific to the Internet illustrate this point.

In F.T.C. v. Pereira,(43) the Commission challenged two Internet technology frauds, "pagejacking" and "mousetrapping." The defendants, located in Portugal and Australia, had captured unauthorized copies of U.S.-based websites, including those of Paine Webber and the Harvard Law Review. They produced look-alike versions that were indexed by major search engines. Consumers, expecting to visit these or others sites, found themselves at one of the defendants' pornographic sites. This "pagejacking" part of the scheme was challenged as a deceptive misrepresentation of the true identity of the defendants' web sites. Once there, consumers either were prevented from leaving the site or were diverted to a sequence of pornography sites which also could not be exited. This is the "mousetrapping" part of the scheme, which was attacked as unfair.

The consequent coercion of consumers is really not unlike the coercion in the 1958 Holland Furnace case.(44) Holland was high-tech, too, in the sense that most consumers had no better idea about how to put their dismantled furnaces back together than they had about how to back out of the unwanted porn sites. The monetary injury, in Pereira, was probably substantially less than the injury in Holland, even if some potential harm accrues to the third party sites that were mimicked and used as bait. There was also some indication that employees who engaged in legitimate web surfing had been diverted to these sites, with consequent embarrassment or discipline for the apparent violation of employer policies. The most serious injury may have been the potential entrapment of children. There would probably be general public consensus that these pornographic web sites had perpetrated a "wrong," yet, it was unclear if any specific statute prohibiting fraud would apply. Unfairness fits the bill.

Another area where the Commission has asserted its unfairness authority involved the collection and use of children's information by web sites. Before enactment of the Children's Online Privacy Protection Act in 1998,(45) the Bureau of Consumer Protection took the position that a web site's collection and sale of children's information without adequate parental controls was unfair.(46) The potential injury from the release of such information to third parties--particularly in the context of an online chat room--is obvious. As with television advertisers who targeted children for pay-per call entertainment services,(47) a key factor was that the practice undermined the role of parents as their children's guardians.

ReverseAuction was a particularly interesting Internet case, in which a Commission majority voted to include an unfairness count.(48)The respondent, a competitor of the Internet auction site eBay, had become a member of eBay's auction site and, in the process, had agreed to abide by the same rules that applied to all members of the eBay community. As part of this agreement, eBay members agreed not to send unsolicited commercial e-mail to other members. This, however, was exactly ReverseAuction's intention, and it proceeded to solicit eBay members to join its competing auction site.

The ReverseAuction complaint alleged deception as an alternative to unfairness. Both the unfairness and deception theories raised novel questions for a number of reasons.

First the Commission unanimously voted to support a "deception" count based on ReverseAuction's failure to honor its agreement with eBay.(49) Every breach of contract involves a "deception" in this sense, but surely not all contract breaches are violations of Section 5. What made this case different for me is the context of the breach: a pattern of broken promises in circumstances that suggested the respondent never intended to keep them, which had an impact on a large number of people and businesses, in a new market medium that could itself be damaged by lack of trust.(50)

A second problem with a deception theory was the fact that this broken promise was made to the auction house, eBay, rather than to the consumers who received unwanted solicitations. eBay itself suffered damage to its reputation, and it prosecuted and settled a breach of contract action against ReverseAuction. It could be argued, however, that consumers had also been deceived by ReverseAuction because they made the same promises that others did, in the expectation that similar promises would be honored by other participants on the auction site. Like the organizer of a club or other association, eBay was the "hub" of a wheel of interconnecting agreements by people on the rim, who did not make direct promises to each other.(51) This would have been, perhaps, an appealing deception theory, if the case had been litigated.

Third, as with the unfairness allegation in Touch Tone, the issue that divided the Commission's majority from the minority (which included me) was whether the privacy invasion involved in ReverseAuction was sufficiently "substantial" to support an unfairness theory.(52) The conflicting views are set out in separate statements.(53) The extent of the disagreement should not be exaggerated, however. The majority did not suggest that all privacy infractions are sufficiently serious to be unfair and the minority did not suggest that none of them are. The boundaries of unfairness, as applied to Internet privacy violations, remain an open question.

IV. Conclusion

The Commission has so far used its unfairness authority in relatively few cases that involve the Internet. These cases, however, suggest that future application of unfairness will be entirely consistent with recent history. Internet technology is new, but we have addressed new technology before. I believe that the Commission will do what it can to prevent the Internet from becoming a lawless frontier, but it will also continue to avoid excesses of paternalism.

The lessons of the past continue to be relevant because the basic patterns of dishonest behavior continue to be the same. Human beings evolve much more slowly than their artifacts.

Endnotes:

1. †Thomas B. Leary is a Commissioner with the Federal Trade Commission in Washington, D.C.

2. These individual speculations are not necessarily shared by any other Commissioners. I would like to acknowledge the contributions of two attorney advisors--Lisa Kopchik and Jonathan Smollen--for their ideas and help as this talk has evolved.

3. 15 U.S.C. § 45(a)(1)(1994).

4. The Federal Trade Commission Act was enacted on Sept. 26, 1914.

5. 405 U.S. 233, 244 n.5 (1972).

6. 15 U.S.C. § 45(n)(1994).

7. See S. Rep. No. 103-130, at 12 (1993); H. Rep. No. 103-617, at 12 (1994).

8. See, e.g., Daniel Yergin and Joseph Stanislaw, The Commanding Heights: The Battle Between Government and the Marketplace (1998) (discussing the development, throughout the world, of increased confidence in market forces).

9. Michael Pertschuk, Remarks before the Annual Meeting of the Section on Antitrust and Economic Regulation, Association of American Law Schools, Atlanta, Ga. (Dec. 27, 1977) (unpublished speech on file with the Wayne Law Review) (emphasis added).

10. See Timothy J. Muris and J. Howard Beales, III, The Limits of Unfairness Under the Federal Trade Commission Act, Association of National Advertisers, Inc., at 14-15 (1991) (manuscript on file with the Wayne Law Review).

11. In re California Dental Ass'n, 121 F.T.C. 284 (1996), aff'd, 128 F.3d 720 (9th Cir. 1997), aff'd in part, rev'd in part, 526 U.S. 756 (1999), vacated, 221 F.3d 942 (9th Cir. 2000).

12. California Dental Ass'n, 121 F.T.C. at 296 (quoting Bates v. State Bar of Ariz., 433 U.S. 350, 364 (1977)).

13. California Dental Ass'n, 121 F.T.C. at 296 (1996). Although both the Supreme Court and the Ninth Circuit differed with the Commission on the facts of this case, neither opinion undercuts the broad premise quoted here.

14. See Deception Policy Statement, In re Cliffdale Associates, Inc., 103 F.T.C., 110, 174 (1984); Letter from James C. Miller III, Chairman, Federal Trade Commission, to Hon. John D. Dingell, Chairman, Committee on Energy and Commerce (October 14, 1983). According to the Commission's 1983 Deception Statement, for a practice to be deceptive, it must involve a material misrepresentation or omission that is likely to mislead a consumer acting reasonably under the circumstances.

15. In re Audio Communications, Inc., 114 F.T.C. 414 (1991).

16. Specifically, there is no endorsement of sentiments in the Pertschuk speech quoted above. See supra note 8.

17. 16 C.F.R. Part 308.

18. Telephone Disclosure and Dispute Resolution Act, 15 U.S.C. §§ 5701 et seq.

19. In re R.J. Reynolds Tobacco Co., D. 9285, 1997 F.T.C. LEXIS 118, (May 28, 1997) (complaint issued) (dismissed without prejudice, Jan. 26, 1999).

20. See id. at *2.

21. File No. C-3859, 1999 F.T.C. LEXIS 40, (Mar. 25, 1999) (complaint and final order).

22. See id. at *2-*3.

23. See Statement of Commissioner Orson Swindle, In re Beck's North America, Inc., File No. C-3859, 1999 F.T.C. LEXIS 40 (Mar. 25, 1999) (finding dangerous activity in Beck's ads reasonably avoidable).

24. 15 U.S.C. § 53(b) (West 2000).

25. 55 F.T.C. 55 (1958), aff'd, 295 F.2d 302 (7th Cir. 1961).

26. See id. at 57-58.

27. No. 97-0354 RSWL (BQRx) (C.D. Cal. complaint and stipulated final judgment filed Jan. 17, 1997) (available at/os/1997/9701/amkrautc.htm   and /os/1997/9701/amkrauto.htm ).

28. See Granite Mortgage, LLC, et al., File No. 982-3167 (July 29, 1999) (available at /os/1999/9907/granitecmp.htm   and/os/1999/9907/graniteorder.htm ); LAP Financial Services, Inc., et al., File No. 982-3169 (July 29, 1999) (available at/os/1999/9907/lapcmp.htm and /os/1999/9907/laporder.htm); CLS Mortgage Inc., et al., File No. 982-3171 (July 29, 1999) (available at/os/1999/9907/clscmp.htm   and /os/1999/9907/clsconsent.htm ; Wasatch Credit Corp., et al., File No. 982-3191 (July 29, 1999) (available at /os/1999/9907/hoepawasatchcmp.htm   and /os/1999/9907/hoepawasatchconsent.htm ); Barry Cooper Properties, Inc., File No. 982-3200 (July 29, 1999) (available at /os/1999/9907/hoepabarrycoopercmp.htm     and /os/1999/9907/bccondec.htm ) and Capitol Mortgage Corp., et al., File No. 982-3203 (July 29, 1999) (available at /os/1999/9907/capmortcom.htm and/os/1999/9907/capmortcd.htm).

29. See 15 U.S.C. § 1639. HOEPA mandates specific disclosures and prohibits certain practices for a narrow slice of high rate and high fee loans. The unfair practices in these settlements involved the use of certain loan terms and the practice of asset based lending, all prohibited under HOEPA, as well coercive conduct intended to deprive consumers of HOEPA's protections.

30. See 15 U.S.C. § 1602(f); 12 C.F.R. § 226.2(a)(17) (West 2000).

31. See Statement of Commissioner Orson Swindle, In re Barry Cooper Properties, Inc., File No. 982-3200 and Capitol Mortgage Corporation, File No. 982-3203 (July 29, 1999) (available at /os/1999/9907/swindlestatebarry.htm); and Statement of Commissioner Orson Swindle, Concurring in Part And Dissenting in Part, In re Granite Mortgage, LLC, File No. 982-3167 (July 29, 1999); LAP Financial Services, Inc., File No. 982-3169 (July 29, 1999); CLS Mortgage Incorporated, File No. 982-3171 (July 29, 1999); and Wasatch Credit Corporation, File No. 982-3191 (July 29, 1999) (available at /os/1999/9907/swindlestategranite.htm). (Commissioner Swindle believed that the consequences of these practices could have been avoided by simply walking away from the loans. He also raised an interesting question of whether it is proper to rely on HOEPA's public policy to challenge the conduct of individuals who were not covered under the statute. Is the fact that Congress deemed the conduct reprehensible more important than the fact that Congress limited the coverage of the law to certain categories of people? While the facts of any case obviously vary, the key inquiry seems to be whether legislative action in a particular area suggested an intent to preempt the Commission's use of its authority).

32. 1997 U.S. Dist. LEXIS 17114 (N.D. Ga. Sept. 30, 1997).

33. 99 F. Supp. 2d 1176 (C.D. Ca. 2000).

34. See J.K. Publications, 99 F. Supp.2d at 1195.

35. See Windward Marketing, 1997 U.S. Dist. LEXIS 17114 at *2-*16.

36. No. 99-WM-783, 1999 F.T.C. LEXIS 112 (D.Colo. filed Apr. 21, 1999) (stipulated consent agreement and final order entered June 23, 2000) [hereinafter Touch Tone].

37. See id. at *3-*4.

38. See id.

39. Id. at *22 (quoting 15 U.S.C. § 45(n)). Commissioner Swindle's views on this issue may have been influenced by the Commission's policy statement on unfairness, issued in 1980 and largely codified by the 1994 Amendments, which suggests that privacy invasions that merely cause some discomfort or embarrassment may not be actionable. See Unfairness Policy Statement, In re International Harvester Co., 104 F.T.C. 949, 1070 (1984); Letter from the Commission to Senators Wendell Ford and John Danforth (December 17, 1980). Id. at 1070-1076; see also Statement of Commissioners Orson Swindle and Thomas B. Leary, Concurring in Part and Dissenting in Part, ReverseAuction.com Inc., No. 00-0032 (D.D.C. filed Jan. 6, 2000) (citing this aspect of the unfairness policy statement) (available at /os/2000/01/reversesl.htm).

40. Touch Tone, 1999 F.T.C. LEXIS 112, at *10-*11.

41. No. 00-0032 (D.D.C. filed Jan. 6, 2000)(available at /os/2000/01/reversecmp.htm).

42. See, e.g., Telephone Disclosure and Dispute Resolution Act, 15 U.S.C. §§ 5701-5724 (1994) (Supp. II 1996); Audio Communications, Inc., 114 F.T.C. 414 (1991); and 16 C.F.R. Part 308.

43. No. 99-1367-A (E.D. Va. filed Sept. 14, 1999) (available at /os/1999/9909/atarizfcomplaint.htm and /os/1999/9909/atarizmemo.htm).

44. See supra notes 24-25 and accompanying text.

45. 15 U.S.C. §§ 6501 et seq. (West 2000).

46. See Letter from Jodie Bernstein, Director, Bureau of Consumer Protection, Federal Trade Commission, to Kathryn C. Montgomery, President and Jeffrey A. Chester, Executive Director, Center for Media Education (July 15, 1997) (available at/os/1997/9707/cenmed.htm).

47. See, e.g., Audio Communications, Inc., 114 F.T.C. 414 (1991).

48. See ReverseAuction.com Inc., No. 00-0032 (D.D.C. filed Jan. 6, 2000) (available at /os/2000/01/reversecmp.htm).

49. See ReverseAuction.com Inc., No. 00-0032 (D.D.C. filed Jan. 6, 2000) (available at /os/2000/01/reversecmp.htm); Statement of Commissioners Orson Swindle and Thomas B. Leary, Concurring in Part and Dissenting in Part, ReverseAuction.com Inc., No. 00-0032 (D.D.C. filed Jan. 6, 2000) (available at /os/2000/01/reversesl.htm); and Statement of Commissioner Mozelle W. Thompson in ReverseAuction.com, Inc., No. 00-0032 (D.D.C. filed Jan. 6, 2000) (available at /os/2000/01/reversemt.htm).

50. Because this case was settled, I cannot be sure that the other Commissioners agreed with this rationale.

51. Cf. Toys "R" Us, Inc. v. F.T.C., 221 F.3d 928, 934-36 (7th Cir. 2000) (an antitrust case, decided in part on the theory of an illegal hub-of-the wheel conspiracy).

52. Statement of Commissioners Orson Swindle and Thomas B. Leary, Concurring in Part and Dissenting in Part, ReverseAuction.com Inc., No. 00-0032 (D.D.C. filed Jan. 6, 2000) (available at /os/2000/01/reversesl.htm); and Statement of Commissioner Mozelle W. Thompson in ReverseAuction.com, Inc., No. 00-0032 (D.D.C. filed Jan. 6, 2000) (available at  /os/2000/01/reversemt.htm).

53. See id.