FTC Comes Down Hard on Spammers

In the past two days, the Federal Trade Commission has filed two cases that could make spammers think twice about the lists they use and the claims they make.

Earlier today, the FTC slapped a complaint against eHealthylife.com, an international group of companies and individuals that has been using email to market Hoodia as a means of weight loss and Human Growth Hormone (HGH) as a method of reversing the aging process. In both cases, the FTC said the claims are unsubstantiated and ordered the company to stop making them.

The case could be a landmark, because it attacks spammers not only on their methods of delivery -- eHealthylife is charged with violations of the CAN-SPAM Act -- but also on the validity of their claims. The case is also the FTC's first use of the U.S. SAFEWEB Act, which was passed last year to help U.S. law enforcement agencies work more closely with foreign agencies to stop international cybercrime and online fraud.

According to the FTC complaint, the defendants falsely claimed that their supposed "Hoodia" products cause weight loss as high as 25 pounds in a month. The defendants also claimed that their HGH products would reverse the aging process by reducing cellulite, improving hearing and vision, causing new hair growth, improving emotional stability, and increasing muscle mass. The FTC charges that the defendants made all of these claims without evidence to support them.

In a separate complaint filed yesterday, the FTC and the U.S. Postal Inspection Service nailed Practical Marketing Inc. for selling mailing lists containing consumers’ credit card account numbers and security codes, bank account numbers and routing codes. Practical Marketing pleaded guilty to identity theft and was ordered to pay a $10,000 criminal fine and pay $100,000 to the USPIS Fraud Fund. The FTC is pursuing a separate civil suit against the company.

The complaint was the culmination of a sting operation by the FTC and the USPIS, in which undercover agents posed as Canadian telemarketers seeking email lists for an advance-fee credit card offer. Such credit cards violate FTC rules, bringing another charge against the defendants.

The quick arrest and guilty plea could give pause to identity thieves who collect consumers' personal information and then sell it to spammers and direct marketers. The FTC's suit is unusual in that it also holds the list seller responsible for how its downstream "clients" have used its lists. It requires Practical Marketing to evaluate the products and services its clients are offering and the truthfulness of their marketing claims; investigate any complaints it receives about its clients; terminate services to clients who are breaking the law; and report any terminated clients to the FTC.

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