Dissenting Statement of Commissioner Orson Swindle

In the Matter of

Touch Tone Information, File No. 982-3619

In this case, the Commission voted to file a complaint in federal district court alleging that the defendants engaged in deceptive acts or practices in or affecting commerce in violation of Section 5 of the FTC Act by pretending to be individual depositors in order to obtain information from banks about the accounts of those depositors -- a practice called "pretexting." The complaint further alleged that defendants engaged in unfair acts or practices by selling information obtained in this fashion. I voted against the complaint, not from any belief that pretexting is an acceptable way to gather information, but because the facts presented by this case did not give me reason to believe that these defendants violated the Commission's long-standing deception standard(1) or the unfairness standard established by Congress in Section 5(n) of the FTC Act.(4) Fortunately, Congress took up the issue of pretexting shortly thereafter and, in Section 521 of the Gramm-Leach-Bliley Act of 1999, prohibited pretexting under certain circumstances.(5) However, because the Commission's complaint was based solely on alleged violations of the Federal Trade Commission Act, and because the Gramm-Leach-Bliley Act does not apply retroactively, I dissent from the settlement for the same reasons that led me to dissent from the complaint.(6)

I voted against filing this complaint with great reluctance because I believed that the government should take steps to prevent the defendants' acts and practices. Although I was unwilling to permit this hard case to make bad law, I am pleased that Congress acted to restrict pretexting. The Gramm-Leach-Bliley Act gives the Commission authority, independent of Section 5, to proceed against pretexting in the future. There will be no need to distort our long-standing interpretation of deception in an attempt to stop a practice that falls outside the reach of the FTC Act. Notably, the Gramm-Leach-Bliley Act does not bar pretexting in all circumstances; it expressly permits private investigators to engage in pretexting as an aid to collecting child support payments. This provision represents the type of policy choice that Congress must make.

I dissent.


1. In 1983, the Commission issued its Deception Statement, which set forth a three-part standard for deception under Section 5. This standard requires 1) a representation, omission, or practice that is likely to mislead the consumer; 2) that the representation, omission, or practice be likely to mislead a reasonable consumer under the circumstances; and 3) that the representation, omission, or practice be material (meaning that it is likely to affect a consumer's choice or conduct regarding a product or service). Cliffdale Associates, Inc., 103 F.T.C. 110, 175-84 (1984). If one applies the deception standard consistently to either the depositor or the bank, the facts of this case do not satisfy the three-part test. If the depositor is the "consumer" for purposes of the test, there is no representation to the depositor, either direct or through the bank.(2)

2. While the Deception Statement has been applied to misrepresentations to third parties who pass on misrepresentations to consumers who are thereby misled and injured, that is not this case. In fact, if the intermediary banks had passed on the misrepresentations to their depositors before releasing their account numbers and balances, the scheme probably would have been thwarted. "" -- -- (3)

3. Notably, the complaint does not articulate under what fiduciary, agency, or contractual theory the bank acts as the "consumer" on behalf of its depositors.

4. The FTC Act states that the Commission has no authority to declare an act or practice unfair unless it "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." 15 U.S.C.  45(n) (emphasis added). There was no indication that consumers had suffered substantial injury -- i.e., economic harm or a threat to health or safety -- from defendants' actions. Merely to theorize 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.

5. The Gramm-Leach-Bliley Act does not alter the fact that the practices simply were not shown to meet the FTC Act's primary requirement of causing substantial injury. See 15 U.S.C.  45(n) ("In determining whether an act or practice is unfair, the Commission may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination.") (emphasis added).

6. Even if I had supported the complaint, I would still object to  VI of the consent agreement, which requires defendants to post a privacy policy on their web site for the benefit of their customers. The complaint did not allege that defendants misused their own customers' personal information, much less that they disclosed their customers' personal information to a third party. I therefore do not believe this requirement is reasonably related to their pretexting activities.