International Law

Sale of Telephone Records to Third Parties is Illegal

In an action by the FTC, a District Court Bars the Sale of Consumers' Telephone Records to Third Parties

"A federal judge has barred the illegal operation of an information broker who advertised and sold confidential consumer telephone records to third parties without the consumers’ knowledge or consent.

In entering summary judgment for the Federal Trade Commission, Judge William F. Downes of the U.S. District Court for the District of Wyoming also required the defendants to give up nearly $200,000 in ill-gotten gains derived from the consumer phone records they sold, and ordered that the individuals whose records were sold be notified.

In May 2006, the FTC charged AccuSearch, Inc., doing business as Abika.com, and its principal, Jay Patel, with violating federal law by selling consumers’ phone records to third parties without the consumers’ knowledge or authorization.

According to the FTC complaint, the defendants advertised on their Web site that they could obtain the confidential phone records of any individual – including details of outgoing and incoming calls – and make that information available to their clients for a fee.

To obtain such information, which is not legally available to the public, the FTC alleged that the defendants caused others to use “false pretenses, fraudulent statements, fraudulent or stolen documents or other misrepresentations, including posing as a customer of a telecommunications carrier,” to induce the telecommunications carriers to disclose the confidential records.

Consumers whose phone records were sold by defendants suffered substantial injury as a result of those sales. The FTC charged that the defendants’ practices were unfair in violation of the FTC Act.

In his ruling, Judge Downes found that the defendants’ obtaining and selling of confidential phone records without consumers’ knowledge or consent was “necessarily accomplished through illegal means,” and that defendants knew that the phone records were being obtained surreptitiously.

The court further found that this practice caused substantial injury to consumers, including: serious health and safety risks experienced by some consumers from stalkers and abusers; economic harm associated with changing telephone carriers and upgrading security on their accounts; and a host of “substantial and real” emotional harms.

The court concluded that consumers had no way to avoid these harms.

“In fact,” Judge Downes wrote, “the evidence presented before the court indicates that confidential consumer phone records were sold through Abika.com despite considerable efforts by consumers to maintain the privacy of those records.”

Finally, the court found no countervailing benefits to consumers or competition that could be derived from defendants’ practice."

The business list brokering, which will be accomplished by affiliate marketers in the future, will see increased litigation from the FTC.

As reported by Shoemoney, ValueClick recently settled a informal investigation into deceptive marketing practices for almost $3 million.

Can illegal harvesting of confidential information be too far behind?

Full post as published by Misleading Advertising Law on February 14, 2008 (boomark / email).