Statement of Commissioner Orson Swindle Concurring in Part and Dissenting in Part
in Xpics Publishing, Inc., File No. 982-3541

I support the allegations in the complaint that Xpics Publishing, Inc. and the other defendants engaged in deceptive acts or practices in violation of Section 5 of the FTC Act by representing to visitors to their pornographic web sites that they were requesting the visitors' credit card information only to verify that the visitors were of legal age to view the pornographic materials. In fact, defendants were requesting such information not only for age verification but also in order to charge monthly fees to the visitors' credit cards. I also support the allegations that defendants violated Section 5 by misrepresenting their free trial period, cancellation, and refund policies and violated the Truth in Lending Act by failing to credit consumers' credit card accounts within seven days of forgiving a debt for services.

The stipulated final judgment and order for permanent injunction and consumer redress prohibits defendants from making the same types of misrepresentations as alleged in the complaint and from engaging in unauthorized billing. It also prohibits defendants from requesting any payment information, except for the purpose of age verification, before ensuring that the consumer has accessed and agreed through a check-off procedure to the material terms and conditions of the transaction. I find these requirements reasonably related to the violations alleged in the complaint and therefore support them.

Part II.E. of the stipulated final judgment and order, however, also requires defendants to give consumers an opportunity to indicate whether they authorize defendants to transfer to a third party any payment or billing information provided by the consumer. Defendants must also inform the consumer of what information they are collecting, their intended use of the information, and the third parties to whom defendants will disclose the information. Id. The proviso to Part III. of the order also prohibits defendants from transferring certain information -- the consumer's name, zip code, card number, email address, billing address, and card expiration date -- without obtaining the consumer's consent through the check-off procedure. I do not believe that the complaint allegations support the imposition of these requirements, which are related generally to consumers' privacy rather than specifically to protecting them from unauthorized billing.

At its core, the complaint alleges that defendants made an implied representation that they would use the credit card information only to verify age and that this representation was false because defendants also used their customers' billing information to place unauthorized charges on their credit cards. There is no allegation that defendants transferred consumers' billing information, or other personal information, to third parties.(1) I object to the privacy provisions in the order because they are not reasonably related to the complaint allegations, which do not implicate privacy concerns but merely involve misrepresentations and unauthorized billing violations. In the absence of a transfer of information to a third party, I do not believe that a false claim as to how billing information will be used internally is sufficient to justify imposing privacy requirements.(2) Accordingly, I dissent from Part II.E. and from the proviso to Part III. of the proposed order.

1. Asking the credit card issuer to place a charge on a customer's account is not a disclosure of billing information to a third party. The credit card issuer already has the consumer's name, account number, and other information with the full knowledge and consent of the consumer.

2. In certain exceptional circumstances, a misrepresentation as to how a firm will use personal information internally may warrant limited privacy requirements in an order. See Liberty Financial Cos., Inc., Dkt. No. C-3891 (1999) (misrepresentation that financial information obtained from children would be maintained in an anonymous manner).