UNITED STATES DISTRICT COURT
DISTRICT OF COLUMBIA

FEDERAL TRADE COMMISSION, 600 Pennsylvania Ave., N.W., Washington, DC 20580, Plaintiff,

v.

REVERSEAUCTION.COM, INC., 2401 Pennsylvania Ave, N.W., Suite 300 Washington, DC 20037, a Delaware corporation, Defendant.

CIVIL ACTION NO.

COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF

Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), by its undersigned attorneys, alleges:

JURISDICTION AND VENUE

1. This Court has subject matter jurisdiction over the FTC's claims pursuant to 15 U.S.C. 45(a) and 53(b) and 28 U.S.C. 1331, 1337(a) and 1345.

2. Venue in this District is proper under 15 U.S.C.  53(b) and 28 U.S.C.  1391(b) and (c).

THE PARTIES

3. Plaintiff, the FTC, is an independent agency of the United States government created by statute. 15 U.S.C. 41 et seq. The Commission enforces Section 5(a) of the FTC Act, 15 U.S.C.  45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission may initiate federal district court proceedings to enjoin violations of the FTC Act and to secure such equitable relief as is appropriate in each case. 15 U.S.C.  53(b).

4. Defendant ReverseAuction.com, Inc. ("ReverseAuction") is a Delaware corporation that has been doing business since at least November 1, 1999. Its principal place of business is located at 2401 Pennsylvania Ave., N.W., Suite 300, Washington, DC 20037. ReverseAuction offers auction services on the Internet, located at www.reverseauction.com. ReverseAuction transacts or has transacted business in this district.

COMMERCE

5. At all times material to this complaint, defendant's course of business, including the acts and practices alleged herein, has been and is in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. 44.

DEFENDANTS' BUSINESS PRACTICES

6. Since at least November 1, 1999, ReverseAuction has advertised, promoted, and offered an auction service on the Internet, located at www.Reverseauction.com. The web site provides an auction forum for the sale and purchase of a wide variety of products. ReverseAuction markets its services throughout the United States and the world via the Internet.

7. ReverseAuction promotes itself as an online "reverse auction," featuring declining prices over time. Among its services, ReverseAuction offers "Declining Price" auctions and "Wanted" auctions. In a "Declining Price" auction, sellers post products or services for sale and offer an opening price. The price decreases incrementally depending on the duration of the auction. Buyers may purchase the item at any time, or submit a sealed bid. Once a purchase is made, the item is sold and the auction is over. In a "Wanted" auction, buyers post detailed descriptions of the products and services they want, and the price they offer, and the sellers underbid each other for the business.

8. In the process of marketing and promoting its new auction web site, ReverseAuction has obtained or caused to be obtained from the web site of a competitor Internet auction company, eBay, Inc. ("eBay"), the e-mail addresses, eBay user identification names ("user IDs"), and eBay "feedback ratings" of eBay customers. ReverseAuction obtained such information after registering as an eBay user and agreeing to comply with and be bound by eBay's User Agreement. After obtaining such information from eBay's web site, ReverseAuction disseminated, or caused to be disseminated, a large number of unsolicited commercial e-mail to the e-mail addresses of registered eBay customers between November 12, 1999 and November 15, 1999. The e-mail from ReverseAuction had the following subject line: "ADV. [eBay User ID] will EXPIRE soon!" The remaining text of the e-mail then promoted ReverseAuction's own new Internet auction site.

9. eBay currently has over seven million registered customers (or "users") who buy and sell on eBay's auction site. In order to trade on eBay's auction site, all eBay registered users have the option of utilizing their e-mail address or a unique user ID of their choice. The user ID operates like an online trading name by which eBay users communicate with other eBay users online. The eBay user ID embodies the reputation and goodwill of each individual trading and otherwise active on the eBay web site. Many eBay customers choose to utilize a user ID, rather than their e-mail address, in their online trading. For such users, the e-mail address of that user can only be accessed by other registered eBay users, and is not otherwise publicly available.

10. All visitors to the eBay web site who want to become sellers or bidders on eBay's auctions must register with eBay and agree to comply with eBay's User Agreement and Privacy Policy. Each eBay user expressly agrees to comply with eBay's User Agreement by clicking an "I Agree" button at the time he or she registers for eBay's service. The eBay User Agreement incorporates by reference eBay's Privacy Policy, which prohibits any registered eBay user from, among other things, using any personal identifying information of any eBay user obtained through the web site for purposes of sending unsolicited commercial e-mail. In agreeing to become registered eBay users and entrusting eBay with their e-mail addresses, user IDs, and feedback ratings, eBay's customers reasonably expect, and rely upon, the agreement of all other eBay registered users to comply with the terms and conditions of eBay's User Agreement.

11. By using the eBay user IDs, e-mail addresses, and feedback ratings of eBay customers obtained from eBay's web site for the purposes of sending unsolicited commercial e-mail to such users, ReverseAuction failed to comply with the eBay User Agreement and Privacy Policy.

12. The unsolicited commercial e-mail sent by or on behalf of ReverseAuction contained a subject line informing eBay users that their "[eBay user ID] will EXPIRE soon!," when in fact the user IDs such eBay users utilize on eBay were not about to expire on eBay. The subject line personally targeted each recipient of the e-mail message by making specific reference to the recipient's private eBay user ID. The message then proceeded to state:

"We know how important your eBay(R) user ID is to you! You have spent a lot of time and effort developing a reputation in the on-line auction trading community. That is why ReverseAuction.com has placed your eBay user ID "[recipient's eBay user ID]" on reserve in our system for you and only you for a short period of time. As long as you visit us now and claim your ID, no one else can get it! Then, when you decide to trade on our site, you will be able to use your carefully built reputation by trading as "[recipient's eBay user ID]."
 
Attached hereto as Exhibit 1 is a true and correct copy of a sample e-mail sent to an eBay user.

13. As a result of ReverseAuction's e-mailing campaign, many eBay customers were led to believe that the user ID they utilize on eBay was about to expire, and/or that eBay, directly or indirectly, had provided their e-mail addresses and user IDs to ReverseAuction, or otherwise knew of, or authorized, ReverseAuction's dissemination of the e-mail.

VIOLATIONS OF SECTION 5 OF THE FTC ACT

COUNT I

14. Section 5(a) of the FTC Act, 15 U.S.C. 45(a), prohibits "unfair or deceptive acts or practices in or affecting commerce."

15. Defendant ReverseAuction, directly or through its employees and agents, by registering as an eBay user, represented to eBay, expressly or by implication, that it would comply with the terms and conditions of eBay's User Agreement, including the agreement to refrain from using any personal identifying information of any eBay user obtained through the eBay web site for the purposes of sending unsolicited commercial e-mail.

16. In truth and in fact, ReverseAuction violated the terms and conditions of eBay's User Agreement by using the e-mail addresses, eBay user IDs, and feedback ratings of eBay registered users for the purposes of sending unsolicited commercial e-mail to such registered eBay users. Therefore, the representation set forth in Paragraph 15 was, and is, a deceptive practice.

17. In the alternative, ReverseAuction's use of the e-mail addresses, eBay user IDs, and feedback ratings of eBay registered users for the purposes of sending unsolicited commercial e-mail, in violation of its agreement to comply with eBay's User Agreement, is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers and not outweighed by countervailing benefits to consumers or competition, and therefore was, and is, an unfair practice.

COUNT II

18. In unsolicited commercial e-mail messages sent directly to eBay users at their e-mail addresses, by or on behalf of ReverseAuction, defendant ReverseAuction represented, expressly or by implication, that the user IDs utilized by such users to trade on eBay were about to expire.

19. In truth and in fact, the user IDs utilized by such users to trade on eBay were not about to expire. Therefore, the representation set forth in Paragraph 18 was, and is, a deceptive practice.

COUNT III

20. By sending the deceptive unsolicited commercial e-mail to eBay registered users, as set forth in Paragraph 18, ReverseAuction falsely represented, directly or by implication, that eBay directly or indirectly provided ReverseAuction with the e-mail addresses and user IDs of eBay's registered users, or otherwise knew of, or authorized, ReverseAuction's dissemination of the unsolicited commercial e-mail to eBay registered users.

21. In truth and in fact, eBay did not directly or indirectly provide ReverseAuction with the e-mail addresses and user IDs of eBay's registered users, and did not know of, or authorize, ReverseAuction's dissemination of the unsolicited commercial e-mail to eBay registered users. Therefore, the representation set forth in Paragraph 20 was, and is, a deceptive practice.

CONSUMER INJURY

22. ReverseAuction's conduct, as set forth in Paragraphs 8, 11, 12, 15, 17, 18, and 20 has injured consumers throughout the United States by invading their privacy; using their e-mail addresses, eBay user IDs, and feedback ratings for purposes other than those consented to or relied upon by such consumers, including the purpose of sending them unsolicited commercial e-mail solicitations; causing them to believe, falsely, that their eBay user IDs were about to expire; and undermining their ability to avail themselves of the privacy protections promised by online companies. In agreeing to become registered eBay users and entrusting eBay with their e-mail addresses, user IDs, and feedback ratings, eBay's customers reasonably expected and relied upon the compliance of all eBay registered users, including ReverseAuction, with the terms and conditions of eBay's User Agreement. The User Agreement specifically protects the privacy of eBay users by prohibiting the unauthorized collection and use of their e-mail addresses, user IDs, and feedback ratings for the purposes of disseminating unwanted commercial e-mail solicitations.

23. Absent injunctive relief by this Court, the defendant is likely to continue to injure consumers and harm the public interest.

THIS COURT'S POWER TO GRANT RELIEF

24. This Court is empowered by Section 13(b) of the FTC Act, 15 U.S.C.  53(b), to grant injunctive and other ancillary relief, to prevent and remedy any violations of any provision of law enforced by the Commission.

PRAYER FOR RELIEF

WHEREFORE plaintiff Federal Trade Commission pursuant to Section 13(b) of the FTC Act, 15 U.S.C. 53(b) and the Court's own equitable powers, request that this Court:

1. Permanently enjoin defendant from violating the FTC Act, as alleged herein; and
 
2. Award such other relief as the Court finds necessary to redress injury to consumers resulting from defendant's violations of the FTC Act.

Respectfully submitted,

DEBRA A. VALENTINE
General Counsel

_______________________
Michelle Chua
Bar No. 441990
Attorney
Federal Trade Commission
601 Pennsylvania Ave., NW
Washington, DC 20580
(202) 326-3248

Date: _____________________

EXHIBIT 1:

"Message from: UserID@ReverseAuctionPromo.com Date: To: [e-mail address of recipient] (eBay user ID) Subject: Adv: [eBay user ID] will EXPIRE soon!

"We know how important your eBay(R) user ID is to you! You have spent a lot of time and effort developing a reputation in the on-line auction trading community. That is why ReverseAuction.com has placed your eBay user ID "[eBay user ID]" on reserve in our system for you and only you for a short period of time. As long as you visit us now and claim your ID, no one else can get it! Then, when you decide to trade on our site, you will be able to use your carefully built reputation by trading as "[eBay user ID]".

Register today at http://ReverseAuction.com

Trading on ReverseAuction.com provides unique benefits:

Sniping is not possible on ReverseAuction.com, so when you make an offer on an item, it's yours immediately!

On ReverseAuction.com, prices go Down - not Up!

"Wanted Auctions" allows sellers to underbid each other to supply items or services.

In a recently completed national survey, the majority (69%) of respondents indicated that the ability to use their identifying information such as user ID, email address, billing data, and feedback results across multiple sites was an important need that was not being met by today's trading sites. This service helps satisfy that need.

Please let other eBay users know about us; we may have their ID saved for them also!

Please visit us now to claim your User ID. We look forward to your visit.

Sincerely,

The ReverseAuction.com Team
http://ReverseAuction.com
2401 Pennsylvania Avenue, NW
Suite 300, Washington, DC 20037
(202) 478-5075

If you wish to allow another user to use your ID, "[eBay user ID]", or you want to be removed from this list, please reply with a subject of "remove" OR send a message to remove@reverseauctionpromo.com and put "remove" in the subject line of the message.

(eBay is a registered trademark owned by eBay, Inc., which does not authorize or endorse ReverseAuction.com)"