January 6, 2000 6:45 PM PST

ReverseAuction agrees to settle FTC case

ReverseAuction.com agreed to a settlement with the Federal Trade Commission over charges that the company violated consumers' privacy and emailed allegedly "deceptive spam" to customers of rival auctioneer eBay.

In a report released today, the FTC said that ReverseAuction has agreed to cease from engaging in unlawful practices, destroy any personal information gathered from eBay customers without their permission and refrain from "making misrepresentations in the future." The agreement did not include any monetary settlement.

eBay filed charges with the FTC in November, claiming ReverseAuction.com had violated its user agreement and privacy policy when it allegedly collected personal information of many eBay users after registering on the site. eBay said it found out about the alleged practices when customers began complaining.

Although ReverseAuction agreed to settle the case, the Washington-based online auction site denied any wrongdoing in a six-page release. The company also said it entered into the consent agreement "in order to complete a pending round of financing."

"ReverseAuction.com did not obtain any confidential personal information from eBay's Web site," the statement read. "Nor was ReverseAuction.com's email message to eBay users deceptive."

Shortly after the government released its findings, eBay said it had filed suit against ReverseAuction, claiming the company was unauthorized to access eBay's Web site, engaged in misleading business practices and damaged eBay's reputation.

"We believe the action taken by the FTC is a very clear signal to anyone or any organization that will attempt to engage in spamming," said eBay spokesman Kevin Pursglove, referring to the practice of sending unsolicited email.

As online auctions grow in popularity, so do the number of sites that auction goods. Although eBay earns about 70 percent of all auction sales online, rivals are slowly chipping away at the leader's market share.

In recent months, eBay has filed several lawsuits to combat what it sees as infringement on its intellectual property. Last month, eBay filed suit to prevent Bidder's Edge from searching and displaying eBay's auction listings on the Bidder's Edge Web site. In November, eBay blocked AuctionWatch, a universal price-searching engine, from accessing eBay.

The dispute with ReverseAuction involves eBay's user agreement, which the company requires of all its customers. It forbids customers from gathering and using personal information, such as email addresses, for purposes of sending unsolicited email. The FTC charged that ReverseAuction used the information to do just that.

According to Jessica Rich, a spokeswoman for the FTC's Bureau of Consumer Protection, ReverseAuction sent email to eBay customers with a message promoting its own online auction site and wrongly informed eBay users in the subject line that his or her eBay user identification number would "expire soon."

"The subject line was an attention grabber," Rich said. "It was false. Then their message was worded in a way that implied eBay had participated in this mailing." ReverseAuction denied this.

As part of the agreement, the FTC will require ReverseAuction to provide notice to consumers who received a ReverseAuction's email and registered with the company, stating that eBay did not know of the email, Rich said. In addition, ReverseAuction must retain documents for five years, such as proof of advertising and marketing techniques and copies of customer complaints regarding promotional activities.

 

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