Typology of Fraudulent and Deceptive Commercial Practices Cases in

E-commerce - Economic Crisis Focus

OECD – ICPEN Joint Meeting1 April 2009

Stacy Feuer

Assistant Director for

International Consumer Protection

US Federal Trade Commission

Shop-at-Home\

Catalog Sales

50%

Others

6%Credit Cards

3%

Internet Auction

7%

Computers:

Equipment\Software

7%

Clothing

5%

Foreign Money Offers

5%

Lotteries

5%

Cars

3%

Internet Access Services

3%

Travel\Vacations

3%

Banks

3%

Econsumer Complaints

Top Products or Services by Complaint Count1

January 1 – December 31, 2008

Federal Trade Commission

Released March 20091Percentages are based on the 10,308 econsumer complaints received from January 1 to December 31, 2008.

Econsumer Complaints

Top Violations1

January 1 – December 31, 2008

1Percentages are based on the 14,124 econsumer law violations reported from January 1 to December 31, 2008,

NOT the total number of econsumer complaints. One complaint may have multiple law violations.

Merchandise or Service

Never Received

21%

Undisclosed or

Unsubstantiated Charges

3%

Merchandise or Service

Not in Conformity with

Order

4%

Defective/Poor Quality

5%

Billed for Unordered

Merchandise or Service

5%

Unauthorized Use of

Identity/Account

Information

5%

Other Misrepresentation

15%

Cannot Contact Merchant

10%Failure to Honor

Refund Policy

8%

Failure to Honor Warranty

or Guarantee

3%

Other Violations

21%

Federal Trade Commission

Released March 2009

Rank Category

No. of

Complaints Percentages1

1 Identity Theft 313,982 26%

2 Third Party and Creditor Debt Collection 104,642 9%

3 Shop-at-Home and Catalog Sales 52,615 4%

4 Internet Services 52,102 4%

5 Foreign Money Offers and Counterfeit Check Scams 38,505 3%

6 Credit Bureaus, Information Furnishers and Report Users 34,940 3%

7 Prizes, Sweepstakes and Lotteries 33,340 3%

8 Television and Electronic Media 25,930 2%

9 Banks and Lenders 22,890 2%

10 Telecom Equipment and Mobile Services 22,387 2%

11 Computer Equipment and Software 21,442 2%

12 Business Opportunities, Employment Agencies and Work-at-Home Plans 20,286 2%

13 Internet Auction 17,294 1%

14 Advance-Fee Loans and Credit Protection/Repair 17,263 1%

15 Health Care 16,275 1%

16 Auto Related Complaints 14,278 1%

17 Travel, Vacations and Timeshare Plans 13,200 1%

18 Credit Cards 13,196 1%

19 Magazines and Buyers Clubs 10,188 1%

20 Telephone Services 9,300 1%

21 Office Supplies and Services 9,091 1%

22 Investment Related Complaints 7,980 1%

23 Home Repair, Improvement and Products 7,635 1%

24 Debt Management and Credit Counseling 6,718 1%

25 Real Estate 6,573 1%

26 Grants 2,634 <1%

27 Charitable Solicitations 1,889 <1%

28 Multi-Level Marketing, Pyramids and Chain Letters 1,788 <1%

29 Clothing, Textiles and Jewelry 1,662 <1%

30 Video Games 1,068 <1%

Top 25 Complaint Categories 2008

Typology of E-commerce Cases

Category 1: Fraudulent practices that exploit capabilities of Internet and e-commerce to victimize consumers, e.g., spam, spyware, phishing

Category 2: Traditional fraudulent and deceptive commercial practices using the Internet and e-commerce as advertising and marketing tool, e.g., “free offers” that aren’t really free

Category 3: Cases that fall in more than one category, e.g., spam emails selling bogus weight loss products

Category 1: Internet-Based Scams

FTC Asks Court to Hold Internet Pagejacking Defendants in Contempt (Jan. 31, 2008)

Judgment Entered Against Spyware Scammer (Mar. 10, 2008)

FTC Halts Illegal Spam Operation: Adult Site Violated CAN-SPAM Act (May 6, 2008)

Court Halts Bogus Computer [“Scareware”] Scams (Dec. 10, 2008)

Category 2 – “Traditional” Scams on Internet

Online Advertiser Settles FTC Charges. “Free Products

Weren‟t Free” (Jan. 30, 2008)

ValueClick to Pay $2.9 Million to Settle FTC Charges (Mar.

17, 2008)

“Free Software CD” Internet Operation Settles FTC

Charges (June 11, 2008)

FTC Targets [Online] Weight-Loss Marketers‟ Allegedly

Bogus „Free‟ Sample Offers (Feb. 9, 2009)

Category 3 – Hybrid Cases

Judge Agrees with FTC, Orders Spammers to Pay More

Than $2.5 Million and Stop Selling Bogus Weight-Loss

and Anti-Aging Products (Feb. 4, 2008)

FTC Shuts Down, Freezes Assets of Vast International

Spam E-Mail Network (Oct. 14, 2008)

FTC Charges Marketers of Kinoki Foot Pads With

Deceptive Advertising; Seeks Funds for Consumer Redress (Jan. 28, 2009)

Economic Crisis Scams

Mostly “Category 2” scams:

Online Marketers of Prepaid Debit Cards to Subprime Consumers Will Pay More than $2.3 Million to Settle FTC Charges (Jan. 24, 2008)

FTC Obtains Court Order Halting Internet Payday Lenders Who Failed to Disclose Key Loan Terms and Used Abusive and Deceptive Collection Tactics (Feb. 23, 2009)

Also “Category 1” scams, e.g., phishing:

Consumers Warned to Avoid Fake E-mails Tied to Bank Mergers (Oct. 9. 2008)

Types of Scams

Employment scams Work-at-Home

Business opportunities

Economic stimulus package scamsGovernment grants and payment schemes

• Collateral “negative option” schemes, unauthorized billing, spyware

Credit repair scams

Debt settlement scams

Mortgage loan modification and foreclosure recovery schemes

Employment: Work-At-Home Scams

FTC Acts Against Scammers Who Marketed Envelope

Stuffing Schemes to Spanish-Speaking Consumers Across

The Nation (Aug. 21, 2008)

News Flash! FTC Warns Consumers

About Economic Stimulus ScamsMarch 4, 2009. The FTC is warning

consumers to stay away from websites that claim the stimulus package gives out easy-to-get grants for almost anyone that applies. These ads, which feature photos of President Obama and Vice President Biden, show up on social networking sites, streaming video sites, search engines and more. Any site that says you have to pay money to get free money is a scam.

PRESIDENTOBAMAGRANTS.COM

Credit Repair

FTC Charges Seven Credit Repair Companies with Deceiving Consumers Throughout the U.S. (Mar. 17, 2009)

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Stacy Feuer

Assistant Director for

International Consumer

Protection

The views expressed in this presentation are my own and do not reflect the views

of the Commission or any individual Commissioner.