Less than two weeks after it forced a marketing company to pony up more than a million dollars for purchasing fraudulently transacted consumer lists, the New York State Attorney General’s office sued Gratis Internet, the operator that sold the data (see Email Mining Firm Pays $1.1M).
In what he is calling the Internet’s largest-ever breach of consumer privacy, New York Attorney General Eliot Spitzer followed the money from Datran Media, an online marketing firm that purchased information on millions of consumers from Washington, D.C.-based Gratis.
Datran, which claimed it was unaware of any fraud committed by Gratis, agreed to pay $1.1 million in penalties and costs.
Now the investigation switches to the other end of the transaction. Gratis does business through a number of web sites, such as FreeCDs.com, FreeiPods.com, FreeVideoGames.com, and FreeDVDs.com, which offer attractive enticements to consumers.
In its privacy pledge, Gratis, which also does business as iPods.FreePay.com, promises to “never give out, sell, or lend” consumers’ names, email addresses, or other personal information to anyone.
Pattern of Deception
In an extensive investigation, the New York AG’s office said it found that Gratis violated its privacy pledge on numerous occasions. The company is accused of selling its marketing lists, which included information on millions of consumers, to three independent email marketers.
The companies purchasing the lists in turn distributed hundreds of millions of email solicitations to those unsuspecting consumers, in the name of customers who ran the gamut from Cingular and America Online to British Airways and AARP.
Cingular and
America Online to British Airways and AARP.
The lawsuit details a pattern of deception by Gratis during the AG’s investigation. While the company stonewalled, the New York AG’s office said it investigated Gratis’ customers, such as Datran, and built its case around Gratis.
Datran worked with the AG’s office in its six-month investigation. Spokesperson Mark Naples said the company discontinued using the files supplied by Gratis in the first half of 2005 and updated its own privacy policy at that time.
The Gratis lawsuit was filed under New York’s consumer fraud statutes. It seeks penalties and injunctive relief against Gratis and its principals.
Mushrooming Privacy Problem
The business of consumer protection in the digital age is spiraling out of control, said Mark Cooper, director of research at the Consumer Federation of America. He believes the institutions charged with consumer protections are failing to respond to the new realities of the digital revolution.
director of research at the Consumer Federation of America. He believes t
“Consumers have to step up and start behaving in a more careful fashion, but the people providing services on the Internet have responsibilities also,” he said. “But in a case like this, even if consumers did everything right, this company would still violate their rights.”
According to Mr. Cooper, the federal government should be embarrassed that consumer protection in the United States is now in the hands of consumer advocates and Mr. Spitzer, who is running for governor of New York.
“We are doing more and more of our business online, and the legal and governmental infrastructure are way behind the curve as to where they have to be to protect the public,” he said.